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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-------
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For fiscal year ended August 31, 1995.
OR
------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to______________.
Commission File Number: 0-15881
MYCOGEN CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3802654
(State or other jurisdiction (I.R.S. Employer
or incorporation or Identification No.)
organization)
5501 Oberlin Drive, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 453-8030
Securities registered pursuant to Section 12(b) of
the Act: None
Securities registered pursuant to Section 12(g)
of the Act: Common Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of September 30, 1995 was approximately $138,070,000. For the
purposes of this calculation, shares owned by officers, directors, and 5%
stockholders known to the registrant have been deemed to be owned by affiliates.
The number of shares outstanding of the registrant's Common Stock as of
September 30, 1995 was 19,425,421.
Documents Incorporated by Reference
- -----------------------------------
Portions of Registrant's Proxy Statement (the "Proxy Statement") for the
Annual Meeting of Stockholders scheduled to be held on December 14, 1995, are
incorporated by reference in Part III.
PART I
ITEM 1. BUSINESS
Mycogen Corporation (the "Company") is a diversified agricultural
biotechnology company that develops and markets technology-based products and
provides crop protection services to control agricultural pests and improve food
and fiber production. The Company has two business units: Agrigenetics, Inc., a
majority-owned subsidiary doing business as Mycogen Plant Sciences ("Mycogen
Plant Sciences" or "MPS"), and Mycogen Crop Protection, Inc. ("Mycogen Crop
Protection" or "MCP"). MPS produces and markets seeds for major agricultural
crops and uses biotechnology and traditional and marker-assisted breeding
techniques to develop improved crop varieties with genetically enhanced pest-
resistance and other value-added characteristics. MCP develops, manufactures
and markets microbial and fatty acid based biopesticide products and operates
Soilserv, Inc. ("Soilserv"), a wholly-owned subsidiary of the Company that
provides crop protection services to growers of high value crops in California
and Arizona.
Mycogen was incorporated in California in December 1982. In November 1986,
the Company reincorporated in Delaware. In October 1995, it again
reincorporated in California. Mycogen's headquarters are located at 5501
Oberlin Drive, San Diego, California 92121-1718; its telephone number is (619)
453-8030. Unless otherwise indicated by the context, "Mycogen" and the "Company"
refer to Mycogen Corporation and its consolidated subsidiaries.
Mycogen Corporation(R), M(R) and design, CellCap(R), CocciprobeTM,
Control Without Compromise(TM), DeMoss(TM), Mattch(TM), M-One(R), M-Pede(R), M-
Peril(R), M-Press(TM), M-Trak(R), MVP(R), Parashoot(TM), Parasitix(TM),
ParaVet(TM), SaFarm(TM), Scythe(R), Thinex(TM), XCP(TM) and XPO(TM) are
trademarks of Mycogen Corporation.
Agrigenetics(R), Chieftan(R), Field and Future(TM), G&A(R) and design,
Golden Acres(R), GroAgri(R), Growers(R), Jacques(R), Kow Kandy(R),
McCurdy(R), Mycogen(TM), Naturepel(TM), NatureGard(TM), ORO(R), Sigco(R),
Surgro(R), Totally Managed Forages(R) and Totally Managed Feedstuffs(TM) are
trademarks of Agrigenetics, Inc., a majority-owned subsidiary of Mycogen.
Soilserv(R) is a registered trademark of Soilserv, Inc., a wholly-owned
subsidiary of Mycogen. Paradyme(TM) and Safecide(R) are trademarks of
Parasitix Corporation, a wholly-owned subsidiary of Mycogen.
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BUSINESS STRATEGY
The Company's strategy is to continue using biotechnology and other
advanced techniques to develop new and improved products for its seed and crop
protection businesses, and to leverage its technology for strategic transactions
to strengthen and expand those businesses. Mycogen is using its proprietary
Bacillus thuringiensis ("Bt") biotoxin gene technology both to develop
transgenic crop varieties with built-in insect resistance and to expand its
portfolio of biopesticide products. The Company also is using other advanced
plant science technology to develop crop varieties with improved oil,
nutritional, fiber and agronomic characteristics. Mycogen believes that it has a
strong proprietary position for its Bt and plant science technology. As of
August 31, 1995, the Company had 147 U.S. patents and approximately 246 foreign
patents. Approximately 113 additional U.S. patent applications are pending, and
corresponding applications are pending in other agriculturally important
jurisdictions around the world.
Mycogen uses traditional and marker-assisted plant breeding to obtain pest
resistance and other value-added characteristics from native plant sources, and
is breeding those characteristics into elite plant parent lines for its seed
products. Seed products incorporating pest resistance and other value-added
characteristics are being commercialized through MPS.
Mycogen's primary near-term seed product development focus is on corn,
cotton, soybean, sunflower, canola, sorghum and alfalfa, all of which generate
significant seed and/or pesticide sales. In August 1995, the Company received
U.S. Environmental Protection Agency (the "EPA") approval to commercialize corn
hybrids genetically engineered with a Bt gene that causes the plants to produce
a protein that makes them resistant to European corn borer, a major pest in the
U.S., Europe and Argentina.
In 1993, the Company entered into a cross-license agreement and research
collaboration with the Ciba Seeds division of Ciba-Geigy Corporation for
development of corn hybrids with Bt-based insect resistance. In September 1995,
the Company signed a letter of intent for a technology and development
collaboration with Pioneer Hi-Bred International, Inc. ("Pioneer") to develop
multiple transgenic crops with Bt-based pest resistance. The Company also is
pursuing opportunities to use its intellectual property, technology and
expertise to establish collaborative development programs with third parties for
additional crops.
Biopesticide products embodying Mycogen's core technology are sold to crop
protection and, to a lesser extent, certain animal health markets through
Mycogen Crop Protection. Mycogen intends to broaden its participation in the
crop protection industry by continuing to refine and apply its technology to
better meet the needs of the market and by pursuing strategic transactions and
acquisitions.
INDUSTRY BACKGROUND
Agricultural biotechnology is creating differentiated products with value-
added characteristics, including: improved crop production; extended product
shelf life; enhanced protein, starch and other nutritional properties; improved
yield of compounds such as waxes, esters and oils for industrial applications
and reduced production costs and risks. Mycogen believes that biological crop
protection will focus on genetically engineered, pest-resistant crop varieties
for large acreage crops such as corn, cotton, soybean, sunflower, canola and
alfalfa, and on spray-on biopesticide products for smaller acreage crops such as
fruits, vegetables and vines.
Crop varieties with pest resistance incorporated into the planting seed
reduce or eliminate the need for pesticide applications, thereby significantly
reducing production input and labor costs. Mycogen believes that farmers will
use both pest-resistant crop varieties and spray-on pesticides, including
biopesticides, as part of
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integrated pest management programs to control pests and to avoid or delay the
development of pest tolerance to any single pest control mechanism.
The Company estimates that U.S. farmers annually purchase approximately
$3.5 billion of planting seed, including approximately $1.5 billion of hybrid
seed corn, $400 million of soybean seed, $400 million of alfalfa seed, $90
million of cotton seed, $67 million of hybrid sorghum seed and $25 million of
hybrid sunflower seed. In addition to the $3.5 billion they spend each year for
planting seeds, U.S. farmers annually spend over $6 billion on pesticides to
protect their crops. Over $600 million is spent annually on insecticides to
protect corn and cotton crops alone. Despite these pesticide expenditures,
destructive pests cost U.S. farmers billions of dollars each year in lost
yields.
Many chemical pesticides have efficacy, environmental or regulatory
disadvantages. Over 500 insect species have developed tolerance to one or more
classes of chemical insecticides that previously were effective in controlling
them. In addition, chemical pesticides often suppress beneficial insect
populations. As pest populations develop pesticide tolerance, and as beneficial
insect populations are reduced, farmers must use escalating dosages and more
frequent applications of chemical pesticides. This raises environmental and food
and worker safety concerns and ultimately renders the pesticides obsolete.
The Company believes that the use of genetically engineered pest-resistant
crop varieties and biopesticides will continue to increase because they offer
four major advantages over chemical pesticides: 1) they do not contaminate the
environment, soil or ground water; 2) they do not harm beneficial insects that
naturally suppress pest populations; 3) they have unique modes of action that
make them effective against pests that have developed tolerance to chemical
pesticides and 4) they do not leave undesirable residues in food crops.
Concerns over the safety of chemical pesticides and their impact on the
food supply, environment and agricultural workers have led the EPA to prohibit
or restrict the use of many chemical pesticides. This has created opportunities
for replacement products, including pest-resistant plants and biopesticides.
SEED BUSINESS
Mycogen Plant Sciences is the seventh largest producer and marketer of
planting seeds in the U.S. Hybrid seed corn accounts for the majority of MPS's
planting seed sales. Other key seed products include soybean, hybrid sunflower,
hybrid sorghum and alfalfa. Most of the Company's seed is produced by an
established network of contract growers under specified planting conditions.
MPS contracts with these independent growers annually. The seed is dried and
treated at Company-owned production facilities, packaged and sold through an
extensive seed sales organization. In North America and in certain other
regions of the world, the Company markets its seeds under the single brand of
"Mycogen(TM)".
RESEARCH, PRODUCTION AND MARKETING - Mycogen Plant Sciences maintains research
and production facilities in California, Georgia, Indiana, Iowa, Michigan,
Minnesota, Nebraska, Puerto Rico, Texas and Wisconsin. These facilities, along
with contract growing arrangements in the U.S. and Canada, give the Company the
geographic dispersion required to produce and market crop varieties suitable for
virtually all important North American agricultural regions. MPS markets its
seed products in North America through a network of more than 100 sales managers
and approximately 4,000 farmer/sales representatives and professional
agricultural retail outlets. In September 1995, the Company entered into an
agreement through which Cargill Hybrid Seeds will distribute Mycogen's hybrid
seed corn products with Bt-based insect resistance in 1996 under the Mycogen(TM)
label. Outside North America, the Company markets seeds primarily through local
distributors. In France, Italy and Argentina, MPS also produces and markets its
products through wholly-owned seed companies.
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PRODUCT DEVELOPMENT AND APPLIED TECHNOLOGY - The Company's business strategy is
to develop differentiated, value-added seed products to meet the needs of the
agriculture and food industries. Special emphasis will be placed on development
of pest-resistant corn, cotton, soybean, sunflower, canola and alfalfa
varieties. Mycogen believes that by providing seed products with pest-
resistance and other value-added characteristics, it can expand its market
share. The Company also develops oilseed products for the food and chemical
industries for a subsidiary of the Lubrizol Corporation ("Lubrizol").
In addition to extensive plant breeding programs in corn, soybeans, cotton,
sorghum and sunflower to improve yield and other agronomic characteristics, the
Company is pursuing numerous plant product development and applied technology
opportunities as follows:
<TABLE>
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PROGRAM COMMERCIAL OPPORTUNITY TARGET CROPS
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<S> <C> <C>
Pest Resistance Via Plant Yield improvement and displacement corn, cotton, soybean,
Transformation of certain chemical pesticides sunflower, alfalfa,
canola, sorghum
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Pest Resistance Via Yield improvement and displacement corn, cotton, alfalfa
Marker Assisted Breeding of certain chemical pesticides
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Oilseed Program Specialty food and industrial oils program sunflower, corn,
funded by Lubrizol safflower, canola
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</TABLE>
PEST RESISTANCE VIA PLANT TRANSFORMATION - This program uses advanced plant
science and gene technology to transform genetic material from bacteria, plants
and other sources into the genomes of target crops. Mycogen's primary current
focus is on genes isolated from strains of Bt that cause transformed plants to
produce proteins that are toxic to insects. Bt genes that produce proteins
toxic to certain insects, including Lepidoptera (worms and moths) and Coleoptera
(beetles), have been isolated, restructured for efficient plant expression and
inserted into several crop varieties. The first product of this development
effort is hybrid seed corn with Bt-based resistance to European corn borer, a
pest that costs farmers in the U.S., Europe and South America hundreds of
millions of dollars in yield losses each year. MPS has produced an introductory
quantity of these seeds and is introducing them commercially in the U.S. for the
1996 growing season. Mycogen also has isolated and restructured Bt genes that
produce proteins toxic to corn rootworm, another pest that causes substantial
economic loss. The Bt gene sequences that produce these insecticidal proteins
are covered by issued or pending patents.
CORN BORER AND CORN ROOTWORM RESISTANCE VIA MARKER ASSISTED BREEDING - The
Company also is developing and marketing products with pest resistance derived
from native plant sources. Using licensed marker-assisted breeding ("MAB")
technology and DNA mapping and analysis, Mycogen has identified and tracked
separate multigenetic resistance traits for European corn borer and corn
rootworm. The Company has bred the multigenetic trait for European corn borer
into its elite commercial corn parent lines, and resulting resistant corn
hybrids were sold commercially in 1994 and 1995. The genetic trait for corn
rootworm is being bred into the Company's elite commercial parent lines, and
resulting resistant corn hybrids are being field tested. Mycogen also is using
MAB technology to identify certain pest-resistance traits in cotton and alfalfa.
VIRAL RESISTANCE - Plant viruses also cause considerable economic loss each
year. Plant varieties with native resistance to viral diseases that cause
significant economic losses have been identified, but the number of genes
involved often make it difficult to breed these resistance traits into
productive crop varieties. One such case is Maize Dwarf Mosaic Virus ("MDMV"),
a corn virus. Mycogen has completed a research program using MAB technology to
locate genes responsible for resistance to MDMV on the corn chromosome. The
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Company has bred the multigenetic trait for MDMV resistance into its elite
commercial corn parent lines and is field testing the resulting resistant corn
hybrids.
OILSEED PROGRAM - MPS is developing genetically enhanced oilseed crops for a
Lubrizol subsidiary. This research and development activity, relating primarily
to specialty oils from sunflower, rape (canola) and corn, is funded primarily by
Lubrizol. Lubrizol markets the specialty oils and related byproducts resulting
from this program. Mycogen is Lubrizol's exclusive supplier of planting seed
for these crops and manages the production of crops from the seed for Lubrizol.
Lubrizol has agreed to provide funding to support this oilseed program through
1998.
CROP PROTECTION BUSINESS
BIOPESTICIDE PRODUCTS - The Company currently markets eight environmentally
compatible biopesticide products. These products are based on natural agents
such as microorganisms and fatty acid compounds that, in general, have specific
toxic activity on target pests and are not harmful to mammals, fish, birds and
beneficial insects. In addition, because biopesticides have unique modes of
action, they often are effective in controlling pest populations that have
developed tolerance to chemical pesticides.
The Company's Bt-based biopesticides are derived from varietal strains of
Bt that produce proteins that are toxic to specific pests when ingested.
Mycogen's Bt based biopesticides utilize the Company's proprietary CellCap(R)
technology, which encapsulates Bt toxin crystals inside cells of genetically
engineered bacteria. The Company believes that its CellCap(R) encapsulation
technology offers two important advantages over conventional Bt products: 1) it
prolongs insecticidal activity resulting in superior crop protection and 2) it
allows for development of superior product formulations that facilitate
production and application.
The Company's fatty acid based biopesticides are derived from a wide
variety of generally inexpensive natural sources, such as coconut, palm,
sunflower and tall oil and tallow from animal fats. Fatty acid pesticides
disrupt or destroy membranes of soft-bodied insects, weeds and microbial plant
pathogens.
BIOPESTICIDE MARKETING AND COMMERCIAL DEVELOPMENT - Mycogen Crop Protection's
marketing and commercial development staff is responsible for commercializing
Mycogen's biopesticides in commercial and specialty markets worldwide, and for
cooperative development and marketing efforts in Far East Asia through
collaborations with Kubota Corporation and Japan Tobacco, Inc. Biopesticide
products are sold through established agricultural product distributors in the
U.S. and certain other countries worldwide.
PRODUCT DEVELOPMENT AND APPLIED TECHNOLOGY - Mycogen conducts active discovery
and product development programs for new biopesticides and to improve existing
products. The Company primarily uses two different technologies to develop its
biopesticides.
MICROBIAL BIOPESTICIDE TECHNOLOGY - Mycogen's microbial bioinsecticide products
and technology are based on two key components: 1) discovery, selection and
enhancement of biotoxins that are active against commercially important pests
and 2) the Company's proprietary CellCap/(R)/ encapsulation delivery system.
Certain naturally occurring microorganisms produce biotoxins that are toxic
to specific pests when ingested. The primary current source of such biotoxins is
varietal strains of Bt. Mycogen researchers have found Bt strains with
pesticidal activity against a broad range of pests. Several Bt strains
discovered by Mycogen and others are active ingredients for commercial pesticide
products.
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Bt biotoxins have a different mode of action than chemical pesticides and
are active only when consumed by the target pest. Field experience has
demonstrated that these products are effective in controlling some pest
populations that have developed tolerance to certain chemical pesticides and
extensive toxicology testing has shown that Bt biotoxins are nontoxic to
mammals, wildlife and other non-target species, including certain beneficial
insects.
Biotoxins generally degrade rapidly, leaving little or no residue in food,
ground water or soil. While this makes them environmentally compatible,
historically it has limited their practical use as commercial pesticides. To
prolong biotoxin activity in the field, Mycogen developed technology that uses a
microorganism as a protective delivery system. This patented CellCap(R)
delivery system employs cells that have been killed and stabilized to serve as
microcapsules to protect fragile biotoxin crystals that have been produced by
and accumulated within the cells.
Mycogen has identified Bt strains with pesticidal activity against
caterpillars, beetles, weevils, parasitic plant and animal nematodes, protozoan
pathogens, grubs, mites, liver flukes and adult houseflies. The Company believes
that Bt strains with activity against non-insect pests could extend the use of
Bt-based biopesticides beyond current crop protection markets.
FATTY ACID TECHNOLOGY - Fatty acids disrupt or destroy cellular membranes of
soft-bodied insects, plants and microbial plant pathogens such as fungi. The
pesticidal benefits of fatty acids are based on four key properties: 1) they act
rapidly on contact, 2) they have a unique mode of action, 3) they use naturally
occurring active ingredients and 4) treated areas require limited worker safety
re-entry restrictions. These characteristics make fatty acid pesticides useful
in targeted markets. For example, the contact activity of fatty acids has been
shown to enhance the efficacy of certain synthetic chemical pesticides. By
using tank mixes of fatty acids and other chemicals, growers can reduce
treatment costs, lower the synthetic chemical load on the environment and
prolong the usefulness of their pest control tools by managing resistance.
MICROBIAL BIOPESTICIDE MANUFACTURING - Mycogen's microbial biopesticide products
are manufactured through a large-scale fermentation process. After
fermentation, the mass-produced microorganisms are harvested for product
formulation. These products use virtually the entire fermentation biomass, so
little, if any, purification is required. The concentrated microorganisms are
processed differently, depending on whether a liquid or dry product formulation
is to be produced.
Mycogen develops final product formulations and the related fermentation
manufacturing processes for all its microbial biopesticides at its San Diego
research facility. Once the basic process is developed, it is scaled up in the
Company's pilot plant. This facility has sufficient capacity to produce
quantities of material required for small scale field trials. Once a process is
proven at the pilot plant scale it is available for transfer to Mycogen's
manufacturing facility for commercial scale-up. To implement a high-yield
fermentation process, Mycogen entered into a long-term exclusive manufacturing
agreement with Enzyme Bio-Systems, Ltd. ("EB"), a wholly-owned subsidiary of CPC
International, Inc. Under the manufacturing agreement, EB added dedicated
fermentation capacity and certain equipment at its Beloit, Wisconsin, facility
to support the production, recovery, formulation and packaging of Mycogen's
microbial products. Capital funding of $10.9 million was provided by Mycogen.
EB is responsible for the manufacture of Mycogen's microbial biopesticide
products and Mycogen pays EB the actual costs of manufacturing plus a fee based
on the number of units produced. Manufacturing began at EB in 1995.
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BIOPESTICIDE PRODUCTS REGISTERED BY THE EPA FOR COMMERCIAL USE
<TABLE>
<CAPTION>
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PRODUCT AND BIOTOXIN TARGET PEST MARKET
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MVP (Bt) Leaf-eating caterpillar pests cotton, tree fruits, vines, corn
MVPII (Bt concentrate)/1/
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M-Pede (Fatty acid) Soft-bodied insects Fruits, vegetables, grapes and
Powdery mildew ornamentals
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M-Trak (Bt) Colorado potato beetle Potato, tomato and eggplant
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M-Peril (Bt) European corn borer Corn
(solid granules)
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Mattch (Bt) Leaf-eating caterpillar pests Vegetables and nursery crops
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Scythe Herbicide Broad spectrum of weeds Horticulture and landscape
(fatty acid) management
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DeMoss (Fatty acid) Moss, algae, lichens Roofs, buildings, sidewalks
and greenhouses
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Thinex (fatty acid)/1/ Blossom Thinner Apples, pears, stone fruits
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/1/ EPA registration pending.
</TABLE>
FATTY ACID PRODUCT MANUFACTURING - Mycogen manufactures its fatty acid based
biopesticide products under short-term toll manufacturing agreements.
MANUFACTURING CAPACITY - The Company believes that its current manufacturers
have adequate capacity to meet Mycogen's product needs for the foreseeable
future, and that the required raw materials for all its biopesticides are
readily available. The Company does not anticipate shortages of these raw
materials that would materially affect availability or cost.
BIOPESTICIDE PRODUCTS FOR POULTRY AND LIVESTOCK MARKETS - Under a 1994 agreement
between Mycogen and Schering-Plough Animal Health ("SPAH"), a division of
Schering-Plough Corporation, Mycogen is leveraging its Bt and fatty acid
technology by developing biopesticide products for commercialization by SPAH in
the poultry industry. Under the agreement, the Company granted a license to SPAH
to market Mycogen's SafeCide(R) line of boric acid products to poultry operators
in the U.S. and Canada.
SPAH also licensed commercial rights in the U.S. and Canada for additional
poultry pest control products being developed by Mycogen, including a protein
biotoxin product to control filth flies. SPAH is currently marketing a fatty
acid product to control northern fowl mites licensed from Mycogen.
SOILSERV - CROP PROTECTION SERVICES - Soilserv, founded in 1945 and acquired by
Mycogen in 1991, provides customized crop protection services to growers of high
value crops in California and Arizona. Soilserv monitors fields, recommends and
supplies pest control products and applies such products, principally in the
Salinas Valley, California, and Yuma, Arizona, regions.
Soilserv has developed customized spray rigs and other application
equipment for specific vegetable crops, and uses a proprietary database system
to verify that pesticide recommendations made by its licensed pest control
advisors to its grower customers comply with EPA, state and local government
regulations. As a further service to its customers, Soilserv provides
notifications and files documents regarding pesticide applications with state
and local agencies.
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PATENTS AND PROPRIETARY TECHNOLOGY
As of August 31, 1995, Mycogen held approximately 147 U.S. patents and
approximately 246 foreign patents. The Company has filed and is pursuing
approximately 113 additional patent applications in the U.S., with corresponding
applications pending in other countries. In addition to patents, the Company
relies on trade secrets and proprietary information to protect its technology.
PLANT SCIENCE PATENTS - As a result of research conducted by Agrigenetics
Corporation, a Delaware corporation (now Mycogen Plant Sciences) in the 1980s,
the Company has applied for, and in some cases been granted, fundamental patents
in key technical areas. Patents and patent applications include claims to a
number of plant science inventions and discoveries, such as insect-resistant
plants utilizing Bt genes, plant transformation systems and the synthesis of Bt
genes to optimize expression of pesticidal proteins in plants.
In January 1995, Mycogen received a broad U.S. patent covering its method
of modifying Bt gene sequences to make them resemble those of the plants into
which they are to be inserted. Such modifications improve Bt genes' efficiency
in producing pesticidal proteins. In June 1995, the Company received a Notice of
Allowance from the European Patent Office covering Mycogen's method of modifying
Bt genes to resemble plant genes, and to modified genes and transgenic plant
cells developed by using that method. Several major crop plants, including corn,
cotton, canola, potatoes and tomatoes, have been transformed with synthetic Bt
genes by Mycogen and other companies, and seeds for some will be introduced
commercially in 1996.
BIOPESTICIDE PATENTS - A number of the Company's issued U.S. patents relate to
its CellCap(R) encapsulation technology. Mycogen's issued patents and patent
applications also include claims to more than 30 specific protein biotoxins and
associated genes, certain insecticidal and nematicidal microorganisms, plant
colonizing microbial delivery systems and certain bioherbicides and related
technology. The Company has a number of issued patents and patent applications
covering certain pesticidal uses of fatty acids by themselves and in combination
with certain chemical pesticides. The Company has licensed certain rights to
its patents and technology in specific fields to corporate partners. Mycogen
has exclusive licenses to a number of issued patents and patent applications in
the U.S. and other countries, and certain trade secret technology relating to
fatty acid pesticides and their use.
PROPRIETARY SEED PRODUCTS - Mycogen's seed products are either hybrid seeds
resulting from a cross of inbred parent lines or varieties produced from a
single parent line. In the case of hybrids, the Company can maintain a
proprietary position because hybrid seeds progressively lose their agronomic
advantage from generation to generation, and the inbred parent lines from which
hybrids are produced generally are not sold to growers. In the case of crops
that are not produced as hybrids, the Company sells varieties that breed true
from generation to generation. For these crops, the Company relies on Plant
Variety Protection certificates granted by the U.S. government pursuant to the
Plant Variety Protection Act (the "PVPA"), or similar rights granted by foreign
governments. These certificates give the holder certain exclusive rights for a
period of time (18 years under the PVPA) to reproduce the covered variety and
sell it for planting.
Mycogen has filed applications for utility patent protection for certain of
its crop varieties and plant materials to obtain broader utility patent
protection for unique plants that the Company has developed or bioengineered.
UNCERTAINTY OF BIOTECHNOLOGY PATENTS - The status of biotechnology patents is
highly uncertain. A substantial number of patent applications have been filed.
Some issued and pending patents claim basic aspects of genetic engineering
technology related to transformed plants, biopesticides and other areas of
agriculture. Mycogen has royalty-bearing nonexclusive licenses relating to the
use of certain processes employed in
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recombinant DNA technology, plant transformation, microbial biopesticide
production and other aspects of the Company's business. If the broad claims of
existing and future genetic engineering patents are upheld, the holders of such
patents may be in a position to require other companies to obtain licenses.
There can be no assurance that licenses the Company may need for its processes
or products will be available on reasonable terms, if at all.
GOVERNMENTAL REGULATION AND PRODUCT REGISTRATION
Agricultural biotechnology comes under the jurisdiction of three federal
regulatory agencies: the Food and Drug Administration ("FDA"), the EPA, and the
United States Department of Agriculture ("USDA"). Agency jurisdiction generally
is a function of three factors: 1) the particular substances or products
involved (for example, grains), 2) the uses and other purposes of such products
and 3) the commercial activities involved (for example, research, field testing,
production and distribution).
FDA review of biotechnology products focuses on their intended uses, and is
conducted on a case-by-case basis. Unless a food product or food additive is
generally recognized as safe, based on scientific evaluation by qualified
experts, under the conditions of its intended use, FDA must approve a petition
for the product's intended use before it can be introduced into commerce. FDA's
approval generally includes specified conditions under which the product may be
used.
Field testing, production and marketing of pesticide products are regulated
by federal, state, local and foreign governments. The EPA regulates pesticides
in the U.S. under the Federal Insecticide, Fungicide and Rodenticide Act, as
amended ("FIFRA"). Pesticides also are regulated by the states. Field testing of
nonindigenous microbial biopesticides requires approval of both the EPA and the
USDA's Animal and Plant Health Inspection Service.
The Federal Seed Act defines USDA's regulatory authority over importation
and interstate shipment of agricultural and vegetable seeds. In general, seeds
may not be imported or shipped interstate if they are deemed by USDA to be
"noxious weed" seeds or to contain "noxious weed" seeds above levels prescribed
by USDA or individual states. Thus, to the extent that a seed resulting from a
biotechnology process is adulterated with a "noxious weed" seed, it would be
subject to these regulations. In addition, USDA regulates importation and
interstate movement of "plant pests" and plants that may be or contain "plant
pests" under the Plant Quarantine Act and the Federal Plant Pest Act. Shipment
and field release of a plant that is genetically engineered to contain a "plant
pest" is subject to the regulatory oversight of USDA and of individual states.
USDA and various states also regulate production and distribution of crop
seeds under the Federal Seed Act and state seed acts, which require that
commercial seed products meet certain purity and labeling requirements.
Similarly, plant inoculants are subject to regulation under various state acts
that establish labeling and effectiveness standards.
Genetically altered plants that have pesticidal traits, such as the ability
to produce pesticidal proteins, are regulated by the EPA under FIFRA with
respect to their pesticidal properties. The EPA requires completion of certain
tests prior to registration of a pesticidal plant to ensure that such plants
pose no risk to human health or the environment.
10
<PAGE>
SEASONALITY OF BUSINESS
Due to the seasonal nature of its planting seed and crop protection
businesses, Mycogen's operating revenues are higher during the second and third
quarters of the fiscal year, thus causing variations in quarter to quarter
financial results. Working capital needs also are seasonal. Weather conditions
also cause year-to-year fluctuations in operating revenues. For example,
temperature, precipitation and other factors influence pest populations and the
effectiveness of pesticides. Weather also affects seed production yields,
planting decisions by farmers and seed commodity prices.
BACKLOG
Mycogen's distribution and marketing practices do not require an
extraordinary amount of working capital. The Company maintains inventory to meet
customer requirements. Mycogen Crop Protection does not manufacture biopesticide
products against a backlog of firm orders; inventory levels are geared primarily
to projections of future demand. Except with respect to planting seed produced
under an exclusive arrangement with a subsidiary of Lubrizol, Mycogen Plant
Sciences does not produce planting seed against a backlog of firm orders;
inventory levels are geared primarily to projections of future demand. The
Company generally is not dependent upon one customer or a group of customers and
has no material contracts with the U.S. government or with any state, local or
foreign government.
RESEARCH AND DEVELOPMENT
Mycogen's product development programs involve a significant level of
research and development activity. Company sponsored research and development
expenses totaled $18.2 million for Mycogen's fiscal year ended August 31, 1995.
For the two comparable fiscal years ended August 31, the Company-sponsored
research and development expenses were $13.5 million in 1994, and $16.1 million
in 1993. Lubrizol is obligated by contract to provide a minimum of $4.6 million
of funding to the Company through 1998 to support development of planting seeds
for crops yielding special oils. In exchange, Lubrizol has exclusive rights to
planting seeds for plants that produce certain special oils. Under a separate
agreement, the Company is the exclusive supplier of such planting seeds to a
subsidiary of Lubrizol.
COMPETITION
The Company faces intense competition. Competition in planting seeds is
based primarily on price, crop yields, other crop performance characteristics
including crop resistance to disease and pests, and customer service.
Competition in biopesticides is based primarily on efficacy, price, ease of
application and safety.
COMPETITION IN SEEDS - Mycogen believes that it has three categories of
competitors in planting seeds: large, multinational seed companies, smaller
regional seed companies and agricultural biotechnology companies engaged in the
development of new, genetically engineered crop varieties.
The planting seed industry is dominated by large multinational companies
located in the U.S. and Europe. These include Pioneer, the world's largest seed
company, DeKalb Genetics Corporation, Sandoz Holding AG, Ciba-Geigy Corporation,
Cargill, Inc., Limagrain and others. These firms generally operate throughout
the world and have substantial financial and marketing resources, as well as
extensive research, plant breeding and production facilities and expertise.
Some of these companies and a number of others have significant plant
biotechnology research programs to develop new crop varieties that are
genetically enhanced for increase yield, pest- or disease-resistance and other
value-added characteristics.
11
<PAGE>
COMPETITION IN BIOPESTICIDES - Mycogen believes that it has three categories of
competitors in biopesticides: large chemical pesticide companies, established
companies with biopesticide product lines and other companies developing new
biopesticide products. The pesticide industry is dominated by large chemical
companies located in the U.S. and Europe. These firms generally operate
throughout the world and have extensive financial and marketing resources as
well as extensive product registration experience and highly efficient
manufacturing capabilities. Some chemical pesticide companies have added
biopesticide products to their product lines. These include Abbott Laboratories,
Sandoz A.G. and Ciba-Geigy Corporation all of which are large multinational
firms with substantial financial resources and, in certain cases, large-scale
fermentation manufacturing capabilities and extensive experience in formulating
biopesticide products.
HUMAN RESOURCES
As of August 31, 1995, the Company had approximately 757 employees. The
Company's management believes that it maintains positive relations with its
employees.
ITEM 2. PROPERTIES
The Company owns its principal executive and administrative facilities
located in San Diego, California. In addition, Mycogen owns its principal
biopesticide research and development facilities located in San Diego, and
leases greenhouse space near its headquarters. The Company also owns office,
warehouse and formulation facilities located in Salinas, California, as well as
several smaller satellite facilities in the Salinas area, that are used by
Soilserv.
Mycogen's seed production, conditioning and storage facilities are located
in the U.S., Argentina, France and Italy. The Company maintains seed research,
production, warehouse, distribution or administrative space at the following
principal locations: Lincoln, Illinois; Lynnville, Schaller and Vinton, Iowa;
Breckenridge and Hastings, Minnesota; York, Nebraska; Dumas and Tulia, Texas and
Prescott, Wisconsin. The Company also has a plant research facility in Madison,
Wisconsin. All of the foregoing facilities are owned by the Company. In
addition, Mycogen leases field plant research and storage facilities in
Woodland, California; Griffin, Georgia; Huxley, Iowa; Leland, Mississippi;
Plainview, Texas and DeForest, Wisconsin. The Company believes that its present
facilities are adequate to maintain its businesses.
ITEM 3. LEGAL PROCEEDINGS
MPS filed suit against Monsanto Company ("Monsanto") for patent
infringement on May 19, 1995, in Federal District Court in San Diego,
California. The patent infringement action claims that Monsanto's use of
synthetic Bt genes to develop and sell plants and seeds for insect-resistant
crops infringes Mycogen's patent covering the process used to synthesize Bt
genes. The suit also contains state law claims relating to Monsanto's published
statements disparaging Mycogen's patents and technology. The patent infringement
claim seeks an injunction to halt Monsanto's development and commercialization
of plants and seeds using the process covered by Mycogen's patent. The state law
claims seek unspecified damages. This litigation is not expected to have a
material adverse effect on the Company's business or consolidated financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of fiscal year 1995.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of Mycogen Corporation trades on The Nasdaq Stock Market
under the symbol "MYCO." Following are high and low trade prices for Mycogen
Corporation Common Stock, as reported by Nasdaq.
<TABLE>
<CAPTION>
Year ended August 31, 1995 High Low
<S> <C> <C>
4th Quarter..................... 11 1/4 7 3/4
3rd Quarter..................... 10 3/4 8
2nd Quarter..................... 12 7 7/8
1st Quarter..................... 10 1/2 9 1/4
Year ended August 31, 1994 High Low
4th Quarter..................... 12 9 1/2
3rd Quarter..................... 11 3/4 9 1/4
2nd Quarter..................... 12 9 1/2
1st Quarter..................... 13 1/2 9 3/4
</TABLE>
At September 30, 1995, there are approximately 3,300 holders of record of
the Company's Common Stock. No dividends have been declared or paid on the
Common Stock. The Company has no intention of paying dividends on Common Stock
in the foreseeable future.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR SELECTED FINANCIAL DATA
(In thousands except per share data)
<TABLE>
<CAPTION>
EIGHT
MONTHS
ENDED YEARS ENDED
YEARS ENDED AUGUST 31,/1/ AUGUST 31, DECEMBER 31,
------------------------------------------------------ ------------------------------------------
1995 1994/2/ 1993/2/ 1992/2/ 1991/2/ 1990/2/
---- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
Net Operating Revenues $106,169 $104,383 $12,583 $ 23,427 $13,218 $2,512
Total Revenue 113,218 112,760 118,011 24,630 18,312 10,724
Net Loss Applicable to (15,946) (33,234)/3/ (27,514)/4/ (3,030)/5/ (3,305) (4,492)/6/
Common Shares
Net Loss Per Common Share (.83) (1.81)/3/ (1.69)/4/ (.21)/5/ (.27) (.44)/6/
Cash, Cash Equivalents and
Securities Available-for-Sale 17,600 37,887 66,314 66,456 75,835 8,578
Total Assets 159,608 165,726 201,533 112,714 114,540 79,747
Long-term Liabilities 3,291 1,207 1,141 1,256 1,041 ---
Redeemable Preferred Stock --- --- 40,897 --- --- ---
Stockholders' Equity 113,703 125,406 107,885 105,207 107,011 76,750
</TABLE>
/1/ In May 1995, Mycogen Corporation changed its fiscal year end from December
31 to August 31 and has elected to report the three years ended August 31,
1995.
/2/ The acquisitions of MPS in 1993 and 1994 and Soilserv, Inc. in 1991 affect
the comparability of the Selected Financial Data.
/3/ Net loss in 1994 includes charges of $26.6 million for the write-off of
acquired in-process technology and $9.8 million for restructuring.
/4/ Net loss in 1993 includes charges of $21.6 million for the write-off of
acquired in-process technology and $2.1 million for restructuring.
/5/ Net loss in 1992 includes charges of $2.1 million for a patent litigation
settlement.
/6/ Net loss in 1990 includes a charge of $2.6 million for the write-down of an
investment.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY
Mycogen develops and markets value-added planting seeds for major
agricultural crops and environmentally compatible biopesticide products and
provides crop protection services to control pests and improve food and fiber
production. The Company is organized into two business units, Seed and Crop
Protection.
Mycogen's Seed business, MPS, the seventh largest seed company in the U.S.,
markets a complete line of planting seeds for corn, soybean, sunflower, sorghum
and other crops. Using both traditional breeding and advanced biotechnology
techniques, the Company is moving rapidly to augment and improve the genetic
makeup of major crops to produce seed products that give growers value-added
performance characteristics.
Mycogen's Crop Protection business, Mycogen Crop Protection, develops,
manufactures and markets biopesticide products and provides crop protection
services to growers of high value crops in California and Arizona.
In May 1995, the Company decided to change its fiscal year-end from
December 31 to August 31 to better match financial reporting with the Company's
business cycle.
The Company's businesses are highly seasonal. Seed operating revenues are
concentrated mainly in the second and third fiscal quarters which end in
February and May and Crop Protection operating revenues are concentrated mainly
in the third and fourth quarters which end in May and August. However, varying
climatic conditions can shift revenues between quarters. Operating revenues and
seed costs are impacted by weather. Weather can influence pest populations, the
effectiveness of pesticides and seeds, seed production yields, commodity prices,
growers' planting decisions and other factors affecting revenues and costs.
Operating revenues also depend on a number of other factors, including market
acceptance of products, competition and U.S. and foreign government policies
that affect crop acreage and farm income. Planted acreage is a key factor in
determining volumes of seed, crop protection services and biopesticide products
purchased by growers.
In December 1982, Mycogen was formed to use genetic engineering to develop
environmentally compatible biological alternatives to chemical pesticides. In
January 1990, the Company acquired a line of fatty acid based pesticides to
complement its line of microbial products. In August 1991, it acquired
Soilserv, a provider of crop protection services to growers in California and
Arizona, to establish a revenue base and to gain experience in crop protection
practices. During this time, Mycogen continued to develop a library of Bt gene
sequences that code for production of protein biotoxins with pesticidal
activity.
In December 1992, Mycogen acquired 51% of the Agrigenetics division of
Lubrizol, which currently is doing business as Mycogen Plant Sciences. The
acquisition was driven by the opportunity to pool Mycogen's and Lubrizol's
respective plant science and Bt gene technology patent estates and technological
expertise to develop pest resistant crops. Such crops are developed by
inserting synthetic Bt genes into plant tissue, causing plants to produce
proteins that protect them from damage by certain pests. Once fixed in plant
parent lines, this pest-resistance trait is carried in planting seeds that are
produced and marketed as value-added products.
15
<PAGE>
In December 1993, the Company acquired an additional 29.5% of MPS and
agreed to purchase Lubrizol's remaining 19.5% ownership over time. As a result
of these transactions, Mycogen expensed, as special charges, certain acquired
in-process technologies which totaled $26.6 million and $21.6 million for the
fiscal years ended August 1994 and 1993, respectively.
In August 1993, the Company decided to combine certain biopesticide
discovery and plant science research programs to accelerate development of pest-
resistant crops. The Company also decided to completely restructure MPS. When
Mycogen acquired Agrigenetics, Agrigenetics consisted of four independent seed
companies selling products under ten different brand names. In some areas,
these companies competed against each other with the same products. Their
businesses were based mainly on marketing seed products developed from publicly
available parent lines as lower priced alternatives to premium priced seed
products sold by other companies. Volumes and margins had declined each year
and inventory was increasing and aging. Mycogen decided to consolidate these
separate companies into one, MPS. The Company consolidated administration,
production, sales, marketing and general management at the headquarters of the
largest of the four companies in Prescott, Wisconsin. Mycogen also decided to
eliminate all of the existing brand names and commercialize all seed products
under the Mycogen(TM) brand, to eliminate overlapping sales territories and to
replace older, lower value generic products with new, proprietary, value-added
products. These changes resulted in restructuring charges totaling $9.8 million
and $2.1 million for the fiscal years ended August 1994 and 1993, respectively.
This consolidation has improved efficiency and reduced expenses. The number
of separate seed corn products has been reduced from 270 to approximately 90,
and the number of farmer/dealers has been reduced from more than 5,000 to
approximately 2,600. However, the elimination of familiar brands, heavy turnover
in the sales force and repositioning of MPS from a discounter to a marketer of
proprietary, value-added products under a new brand name has created significant
disruption in the business, and seed volumes and market share have declined.
Additionally, MPS' 1995 sales performance was adversely affected by a reduction
in planted acres in many key territories and crops. All of these negative
factors contributed to lower sales in 1995.
Despite these disappointing 1995 results, the Company believes that its
progress in commercializing new, proprietary, value-added corn hybrids and other
products will enable it to reverse declining volumes and margins in 1996. MPS'
new NatureGard(TM) seed corn with genetically enhanced insect-resistance and
Totally Managed Feedstuffs(TM) silage hybrids were well received by growers.
Limited quantities of these products virtually sold out, accounting for 20% of
total seed corn volumes for 1995, and the Company has produced significantly
larger quantities of both for 1996 planting.
Additionally, Mycogen Crop Protection brought on-line a new microbial
biopesticide production and packaging facility and implemented a higher-yielding
fermentation process that has reduced variable production costs and assures
future production capacity. The Company intends to take advantage of this
improved biopesticide cost position and production capacity to rapidly increase
sales of its microbial based biopesticide products.
However, as noted earlier, weather, competition, regulation and other
external factors may affect Mycogen's ability to increase operating revenues and
achieve profitability. The Company also must continue to invest in
commercializing existing products and in discovery and development of new
products, so the trend in losses from operations may continue if revenues do not
increase. The Company will continue to pursue an aggressive acquisition and
joint venture strategy to complement existing technologies and to expand
distribution.
16
<PAGE>
SEGMENT OPERATING REVENUES AND OPERATING LOSS
<TABLE>
<CAPTION>
Years ended August 31,
(In thousands) 1995 1994 1993
------------ ------------- -------------
<S> <C> <C> <C>
Operating Revenues
Seed
Corn $ 28,537 $ 32,020 $ 36,764
Soybean 8,794 10,386 11,364
Sunflower 10,376 9,888 8,920
Other 7,548 9,494 11,906
International 10,074 8,541 10,911
------------ ------------ -----------
65,329 70,329 79,865
------------ ------------ -----------
Crop Protection
Soilserv 32,887 29,139 29,310
Biopesticides 7,953 4,915 3,408
------------ ------------ -----------
40,840 34,054 32,718
------------ ------------ -----------
Total Operating Revenues $ 106,169 $ 104,383 $ 112,583
============ ============ ===========
Operating Loss
Seed (11,922) (45,052)* (19,266)*
Crop Protection (2,336) (859) (6,268)
Corporate (1,259) (2,894) (2,461)
------------ ------------- ------------
Total Operating Loss $ (15,517) $ (48,805) $ (27,995)
============ ============= ============
</TABLE>
*The net operating loss for the Seed segment includes special charges of
$36.4 million and $23.7 million in 1994 and 1993, respectively. The net
operating loss for 1993 for the Seed segment includes only nine months of
operating expenses incurred from the date of acquisition in December 1992 and
affects the comparability of the net operating losses.
SEED SEGMENT
FISCAL YEAR ENDED AUGUST 1995 COMPARED TO 1994
OPERATING REVENUES: Seed operating revenues for the fiscal year ended August
1995 were $65.3 million compared to $70.3 million for the fiscal year ended
August 1994. The net $5.0 million decrease in revenues is attributable mainly
to lower volumes:
. Corn acres planted industry-wide decreased 10% from last year due to a
cool, wet spring which caused growers to either not plant or to shift to
other crops. However, the Company's corn volumes decreased 12%. Although
soybean acres industry-wide are estimated to have been flat from 1994 to
1995, the Company's soybean volumes were down 15%. Corn and soybeans were
the seed products most impacted by the reduction in hybrids, trade names
and farmer/dealers.
. Sunflower revenues increased a net 5%, or $.5 million. Higher sales of
confection sunflower and hi-oleic sunflower to a related party more than
offset a 13% decline in oil
17
<PAGE>
sunflower volume. This decline in oil sunflower was due to disease and
government programs which caused acres in certain territories where the
Company has a strong market share to be shifted to wheat and canola.
. Other seed sales, comprised mainly of sorghum and alfalfa, also had lower
sales volumes. Sorghum acreages continue to decline and shift to other
crops, such as cotton. The Company believes that, as a result of the
relatively mild winter, an unusual amount of pasture survived the normal
winter kill, which resulted in lower alfalfa sales.
. International revenues increased 18%, or $1.5 million, due to higher corn
and sunflower sales, mainly in France.
OPERATING LOSS: Seed operating loss for the fiscal year ended August 1995 was
$11.9 million compared to $8.7 million (excluding special charges of $36.4
million) for the fiscal year ended August 1994. Gross profit is $4.3 million
lower due mainly to lower sales volumes and higher cost of operating revenues as
a percent of sales. Cost of operating revenues are higher due mainly to
obsolescence as a result of repositioning corn inventory from non-proprietary
hybrids to new value-added hybrids. Lower sales volumes are also responsible for
increasing unit fixed costs and costs incurred to dispose of excess and poor
quality inventory. Expenses were slightly lower. Higher research and development
expenses were partially offset by lower selling, marketing, general and
administrative expenses resulting from the completion of the company-wide
restructuring and lower provisions for doubtful accounts.
FISCAL YEAR ENDED AUGUST 1994 COMPARED TO 1993
OPERATING REVENUES: Seed operating revenues for the fiscal year ended August
1994 which totaled $70.3 million were $9.5 million less than the fiscal year
ended August 1993. North American sales of planting seeds decreased $7.2
million. Although acreage was higher in 1994 than in 1993 industry-wide, sales
volume of certain of the Company's products declined due to the consolidation of
separate seed divisions and a number of overlapping sales territories in
addition to the elimination of certain brand names and hybrids. These volume
declines were partially offset by $1.3 million in price gains due to a favorable
product mix and fewer discounts. International sales declined $2.4 million due
mainly to the one-time sale of sunflower oil in 1993.
OPERATING INCOME AND LOSS: Excluding special charges of $36.4 million and $23.7
million in 1994 and 1993, respectively, Seed operating income of $4.4 million
for the fiscal year ended August 1993 decreased $13.1 million to a $8.7 million
loss for the fiscal year ended August 1994. This decrease is due to the
inclusion of MPS for a full year in 1994 as compared to nine months in 1993
which resulted in higher operating expenses of $6.7 million. Also contributing
to the decrease were higher provisions for doubtful accounts of $1.3 million and
lower margins of $7.7 million resulting mainly from provisions for excess and
obsolete seed. These decreases were offset by higher contract revenues of $2.0
million.
CROP PROTECTION SEGMENT
FISCAL YEAR ENDED AUGUST 1995 COMPARED TO 1994
OPERATING REVENUES: Crop Protection operating revenues for the fiscal year ended
August 1995 were $40.8 million compared to $34.1 million for the fiscal year
ended August 1994.
. Soilserv operating revenues were $3.7 million higher than last year due to
the flooding in California's Salinas Valley during the second quarter of
this year which created higher insect and disease pressure that increased
the demand for Soilserv's air applications of pesticides.
18
<PAGE>
. Biopesticide operating revenues were up 62%, or $3.0 million, due to the
introduction of Scythe(R) herbicide and increases in MVP(R) for control
of heliothis in cotton and M-Peril(R) for control of European corn borer
in corn. International sales of biopesticides were ahead of last year due
to expanded sales of MVP(R) liquid in Asia and MVP(R) powder to Kubota
Corporation.
OPERATING LOSS: Crop Protection recorded operating losses for the fiscal year
ended August 1995 of $2.3 million compared to an operating loss of $.9 million
for the fiscal year ended August 1994. The decline is due mainly to a $1.6
million write-down of crop protection technology resulting from the
discontinuation of a certain product development program. Contract and other
revenues declined $1.5 million. These decreases were partially offset by higher
margins. Soilserv margins improved in total and as a percent of sales due to
higher volumes.
FISCAL YEAR ENDED AUGUST 1994 COMPARED TO 1993
OPERATING REVENUES: Crop Protection operating revenues increased by $1.3 million
from 1993 to 1994 due mainly to the introduction of M-Peril(R) for the control
of European corn borer in corn and MVP(R) for control of heliothis in cotton.
However, this increase was less than anticipated due to lower insect pressures
in these markets, and was partially offset by the discontinuance of certain
other products. International operating revenues increased due to introductory
sales of MVP(R) liquid to Europe and Asia. Soilserv operating revenues
remained relatively flat during the fiscal year ended 1994 compared to the same
period in 1993.
OPERATING LOSS: Crop Protection operating loss improved $5.4 million during
fiscal year 1994 due primarily to lower operating expenses of $4.3 million
resulting mainly from the consolidation of certain research and administrative
functions with the Seed segment. Contract and other revenues increased $1.0
million due to the receipt of $2.6 million in one-time license fees for certain
herbicide technology and products for control of pests in poultry markets offset
by revenues under other arrangements that declined in 1994 as existing funding
requirements concluded and a one-time license fee received in 1993.
CORPORATE
FISCAL YEAR ENDED AUGUST 1995 COMPARED TO 1994
The reduction of $1.6 million in the Corporate operating loss from $2.9
million in 1994 to $1.3 million in 1995 is due to lower general and
administrative expenses resulting from the consolidation and allocation of
Corporate general and administrative resources to the Seed business during the
1993 restructuring of MPS' operations.
FISCAL YEAR ENDED AUGUST 1994 COMPARED TO 1993
Corporate operating loss increased $.4 million from $2.5 million in 1993 to
$2.9 million in 1994. The higher general and administrative expenses reflect the
full year effect of MPS' operations in fiscal year 1994 and increased efforts
required at the Corporate level.
NON-OPERATING ITEMS
INTEREST INCOME AND EXPENSE, NET
Interest income and expense, net, decreased $1.4 million to $.9 million in
1995. The decrease is due mainly to less cash available for investment and
higher levels of borrowing under the Company's line of credit during the year.
Interest income and expense, net, decreased $.8 million to $2.3 million in 1994
due primarily to lower cash balances available for investment.
19
<PAGE>
MINORITY INTEREST
Effective December 31, 1993, the Company agreed to purchase the remaining
19.46% ownership interest in MPS from Lubrizol. Lubrizol's minority interest in
MPS is recorded at the minimum agreed upon purchase price and the earnings from
MPS have been recognized as if the Company owned 100% of MPS. Therefore, no
minority interest has been recognized for periods after December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and securities available-for-sale
decreased by $20.3 million to $17.6 million during the fiscal year ended August
31, 1995. This decrease was due primarily to prepaid contract manufacturing
costs of $8.8 million, the purchase of land and buildings for $2.5 million,
other capital expenditures which totaled $4.1 million, patent expenditures of
$1.8 million and cash used in operations of $6.5 million. Cash used in
operations resulted primarily from higher trade accounts receivable and
inventory balances. These cash outflows were offset by cash proceeds of $2.5
million from a seven-year note payable to a bank to fund the purchase of the
land and buildings.
In September 1995, the Company signed a letter of intent for a technology
and development collaboration with Pioneer. Under the agreement, Pioneer will
purchase three million shares of the Company's common stock for $30 million and
provide $21 million in research and development funding over the next five
years. The transaction is subject to completion of definitive agreements.
Dividends on the Series A preferred stock are cumulative and are payable
quarterly to Lubrizol in additional shares of preferred stock. Starting in
December 1997 and thereafter, the dividends are payable in cash. Also, the
Company has agreed to purchase the remaining ownership interest of MPS from
Lubrizol for additional Common Stock or, after November 2000, for cash at a
price between $21.4 million and $26.3 million. The Company plans to pursue an
acquisition strategy to complement existing technologies. It is anticipated that
any acquisitions would be financed with existing cash, stock or debt. The
Company has a $25 million bank line of credit facility which expires November
30, 1995, to fund portions of its seasonal working capital needs, all of which
was unused at August 31, 1995.
The Company anticipates that its current cash position, and revenue from
operations and contract and other revenues will be sufficient to finance working
capital and capital requirements for the immediate future. However, the
Company's capital requirements may vary as a result of competitive and
technological developments, the timing of regulatory approval for new products
and the terms and conditions of any future strategic transactions. If such
requirements change, the Company may need to raise additional capital.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements appearing after the signature page of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
20
<PAGE>
PART III
Certain information required by Part III is omitted from this report in
that the Company will file the Proxy Statement pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this report, and
certain information included therein is incorporated herein by reference. Only
those sections of the Proxy Statement which specifically address the items set
forth herein are incorporated by reference. Such incorporation does not include
the Compensation Committee Report or the Performance Graph included in the Proxy
Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors. The information under the caption
"Election of Directors," appearing in the Proxy Statement, is incorporated
herein by reference.
(b) Identification of Executive Officers. The information under the
headings "Executive Officers" and "Responsibilities and Business Experience of
Executive Officers," appearing in the Proxy Statement, is incorporated herein by
reference.
(c) Compliance with Section 16(a) of the Exchange Act. Based solely upon a
review of Forms 3, 4 and 5 and amendments thereto furnished to the Registrant
and upon written representations of all individuals required to file forms
pursuant to Section 16(a), the Registrant knows of no such individual that
failed to file Forms 3, 4 and 5 on a timely basis during the last fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation" appearing in the
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the headings "Principal Stockholders" and "Executive
Compensation-Security Ownership of Directors and Management as of September 30,
1995," appearing in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the headings "Election of Directors," "Executive
Compensation" and "Certain Relationships and Related Transactions" appearing in
the Proxy Statement is incorporated herein by reference.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Report of Ernst and Young LLP, Independent
Auditors. See Index to Financial Statements at page 31 of this Form 10-K.
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report on Form 10-K.
(c) Exhibits:
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
<S> <C> <C>
3.1 Certificate of Incorporation of the Company. Incorporated by --
reference from Exhibit 3.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-13846, filed on
April 29, 1987.
3.2 Certificate of Amendment of Certificate of Incorporation of --
the Company. Incorporated by reference from Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Registration No.
33-13846, filed on April 29, 1987.
3.3 Certificate of Retirement. Incorporated by reference from --
Exhibit 3.3 to the Company's Form 10-K for the fiscal year
ended September 30, 1988, filed on December 23, 1988.
3.4 Certificate of Amendment. Incorporated by reference from --
Exhibit 3.4 to the Company's Form 10-K for the fiscal year
ended December 31, 1991, filed on March 19, 1992.
3.5 Amended Certificate of Designation, Powers, Preferences and --
Rights of the Senior Redeemable convertible Preferred Stock,
Series A. Incorporated by reference from Exhibit 3.5 to the
Company's Form 8-K, filed on January 13, 1994.
3.6 Bylaws of the Company. Incorporated by reference from Exhibit --
3.3 to the Company's Registration Statement on Form S-1,
Registration No. 33-13846, filed on April 29, 1987.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 --
above.
4.2 Specimen Common Stock Certificate, $0.001 par value. --
Incorporated by reference from Exhibit 4.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-13846,
filed on April 29, 1987.
4.3 Rights Agreement. Incorporated by reference from Exhibit 1 to --
the Company's Form 8-K, filed on February 21, 1992.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
4.4 Amendment to the Rights Agreement. Incorporated by reference --
from Exhibit 4.5 to the Company's form 8-K, filed on January
13, 1994.
4.5 Amendment to the Rights Agreement. Incorporated by reference --
from Exhibit 4.5 to the Company's Form 10-K for the year ended
December 31, 1994, filed on March 3, 1995.
10.1 Registration Rights Agreement under Stock Purchase Agreement --
dated March 6, 1989. Incorporated by reference from Exhibit
10.2 to the Company's Form 10-K for the year ended September
30, 1989, filed on December 28, 1989.
10.2 Bioherbicide/Biotoxin Research and Development Agreement, --
dated March 6, 1989, between JT Biotech USA Inc. ("JT") and
Mycogen Corporation (with certain confidential portions
omitted). Incorporated by reference from Exhibit 10.3 to the
Company's Form 10-K for the year ended September 30, 1989,
filed on December 28, 1989.
10.3 Bioherbicide Commercialization License Agreement (Japan). --
Incorporated by reference from Exhibit 10.4 to the Company's
Form 10-K for the year ended September 30, 1989, filed on
December 28, 1989.
10.4 Mycogen Version - Technology License Agreement BH/BT between --
Mycogen and MJT BH/BT Partnership, L.P. (with certain
confidential portions omitted). Incorporated by reference from
Exhibit 10.5 to the Company's Form 10-K for the year ended
September 30, 1989, filed on December 28, 1989.
10.5 JT Version - Technology License Agreement BH/BT between JT and --
MJT BH/BT Partnership, L.P. (with certain confidential
portions omitted). Incorporated by reference from Exhibit 10.6
to the Company's Form 10-K for the year ended September 30,
1989, filed on December 28, 1989.
10.6 Guarantee and Undertakings of Japan Tobacco Inc. --
(Bioherbicide/Biotoxin), including Technology License
Agreement (BH/BT), delivered pursuant to Section 8(j) of the
Research and Development Agreement (with certain confidential
portions omitted). Incorporated by reference from Exhibit 10.7
to the Company's Form 10-K for the year ended September 30,
1989, filed on December 28, 1989.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
10.7 Guarantee and Undertakings of Mycogen Corporation --
(Bioherbicide/Biotoxin), delivered pursuant to Section 8(j) of
the Research and Development Agreement (with certain
confidential portions omitted). Incorporated by reference from
Exhibit 10.8 to the Company's Form 10-K for the year ended
September 30, 1989, filed on December 28, 1989.
10.8 Limited Partnership Agreement of MJT BH/BT Partnership, L.P., --
dated March 6, 1989, between Mycosub/BH, Inc. and JT Biotech
USA, Inc. (with certain confidential portions omitted).
Incorporated by reference from Exhibit 10.9 to the Company's
Form 10-K for the year ended September 30, 1989, filed on
December 28, 1989.
10.9 Bioadjuvant Research and Development Agreement, dated March 6, --
1989, between Mycogen Corporation and JT Biotech USA Inc.
(with certain confidential portions omitted). Incorporated by
reference from Exhibit 10.10 to the Company's Form 10-K for
the year ended September 30, 1989, filed on December 28, 1989.
10.10 Mycogen Version - Technology Licensing Agreement (BA) between --
Mycogen and MJT BA Partnership, L.P. (with certain
confidential portions omitted). Incorporated by reference from
Exhibit 10.11 to the Company's Form 10-K for the year ended
September 30, 1989, filed on December 28, 1989.
10.11 JT Version - Technology Licensing Agreement (BA) between JT --
and MJT BA Partnership, L.P. (with certain confidential
portions omitted). Incorporated by reference from Exhibit
10.12 to the Company's Form 10-K for the year ended September
30, 1989, filed on December 28, 1989.
10.12 Guarantee and Undertakings of Japan Tobacco (Bioadjuvant), --
including Technology License Agreement (BA), delivered
pursuant to Section 8 (i) of the Research and Development
Agreement (with certain confidential portions omitted).
Incorporated by reference from Exhibit 10.13 to the Company's
Form 10-K for the year ended September 30, 1989, filed on
December 28, 1989.
10.13 Guarantee and Undertakings of Mycogen Corporation, delivered --
pursuant to Section 9(i) of the Research and Development
Agreement. Incorporated by reference from Exhibit 10.14 to the
Company's Form 10-K for the year ended September 30, 1989,
filed on December 28, 1989.
10.14 Limited Partnership Agreement of MJT BA Partnership, L.P., --
dated March 6, 1989, between Mycosub/BA, Inc. and JT Biotech
USA Inc. (with certain confidential portions omitted).
Incorporated by reference from Exhibit 10.15 to the Company's
Form 10-K for the year ended September 30, 1989, filed on
December 28, 1989.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
10.15 Registrant's 1988 Stock Purchase Plan. Incorporated by --
reference from Exhibit 10.19 to the Company's Form 10-K for
the fiscal year ended December 31, 1991, filed on March 19,
1992.
10.16 Registrant's 401(k) Plan. Incorporated by reference from --
Exhibit 10.4 to the Company's form 10-K for the fiscal year
ended September 30, 1988, filed on December 23, 1988.
10.17 Amendment No. 1 to Registrant's 401(k) Plan. Incorporated by --
reference from Exhibit 10.21 to the Company's Form 10-K for
the year ended December 31, 1990, filed on March 29, 1991.
10.18 Amendment to Registrant's 401(k) Plan dated January 1, 1994. --
Incorporated by reference from Exhibit 10.18 to the Company's
Form 10-K for the year ended December 31, 1994, filed on March
3, 1995.
10.19 Registrant's Restricted Stock Issuance Plan. Incorporated by --
reference from Exhibit 28.1 to the Company's Registration
Statement on Form S-8, Registration No. 33-40349, filed on May
3, 1991.
10.20 Form of Agreements pertaining to Restricted Stock Issuance --
Plan. Incorporated by reference from exhibit 28.2 to the
Company's Registration Statement on form S-8, Registration No.
33-40349, filed on May 3, 1991.
10.21 Form of Indemnity Agreement between the Company and each of --
its directors. Incorporated by reference from Exhibit 10.28 to
the Company's Form 10-K for the year ended December 31, 1991,
filed on March 19, 1992.
10.22 Manufacturing Agreement dated September 15, 1988 between the --
Company and International Bio-Synthetics Inc. (with certain
confidential portions omitted). Incorporated by reference from
Exhibit 10.19 to the Company's Form 10-K for the year ended
September 30, 1988, filed on December 23, 1988.
10.23 Agreement for Purchase and Sale of Assets by and between --
Mycogen Corporation, Safer, Inc. and Safer Ltd., dated January
4, 1990. Incorporated by reference from Exhibit 10.30 to the
Company's Registration Statement on Form S-1, Registration No.
33-34591, filed on April 27, 1990.
10.24 Commercial License Agreement by and between Mycogen --
Corporation and Safer, Inc., dated January 4, 1990.
Incorporated by reference from Exhibit 10.32 to the Company's
Registration Statement on Form S-1, Registration No. 33-34591,
filed on April 27, 1990.
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C>
10.25 Stock Purchase Agreement, dated as of July 31, 1991, among the --
Company, Griffin Corporation of Valdosta, Georgia, Kocide
Chemical Corporation, A.J. Larronde and D.J. Sites,
individually and under power of attorney for other
shareholders of Soilserv, Inc. Incorporated by reference from
Exhibit 2.1 to the Company's Form 8-K, filed on August 14,
1991.
10.26 Covenant Not to Compete dated as of August 1, 1991, among the --
Company, Griffin Corporation of Valdosta, Georgia, Kocide
Chemical Corporation. Incorporated by reference from exhibit
28.1 to the Company's Form 8-K, filed on August 14, 1991.
10.27 Representations, Warranties and Indemnification Agreement --
dated August 25, 1992, among Registrant, Lubrizol Corporation
("Lubrizol") and Agrigenetics L.P. Incorporated by reference
from Exhibit 10.44 to the Company's Form 8-K, filed on
December 14, 1992.
10.28 Stock Exchange Agreement dated August 25, 1992, between --
Registrant and Lubrizol. Incorporated by reference from
Exhibit 10.45 to the Company's Form 8-K, filed on December 14,
1992.
10.29 Agreement of Limited Partnership dated August 25, 1992, among --
Registrant, AGC Holdings, Inc. (a wholly owned subsidiary of
Lubrizol) and Lubrizol Genetics, Inc. (subsequently renamed
Mycogen Plant Science, Inc.). Incorporated by reference from
Exhibit 10.47 to the Company's Form 8-K, filed on December 14,
1992.
10.30 License Agreement dated December 1, 1992, between Registrant --
and Agrigenetics L.P. Incorporated by reference from Exhibit
10.48 to the Company's Form 8-K, filed on December 14, 1992.
10.31 Mycogen 1992 Stock Option Plan. Incorporated by reference from --
Exhibit 28.1 to the Company's Registration Statement on Form
S-8, Registration Statement No. 33-55508, filed on December 9,
1992.
10.32 Form of Agreements pertaining to 1992 Stock Option Plan. --
Incorporated by reference from Exhibits 28.2, 28.3, 28.4 and
28.5 to the Company's Registration Statement on Form S-8,
Registration No. 33-55508, filed on December 9, 1992.
10.33 Technology and Development Agreement dated December 1, 1991, --
between SVO Specialty Products, Inc. (a wholly owned
subsidiary of Lubrizol) and Agrigenetics, L.P. Incorporated by
reference from Exhibit 28.1 to the Company's Form 8-K, filed
on December 14, 1992.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
10.34 Revolving Credit Note of Mycogen Corporation to Harris Trust --
and Savings Bank ("Harris Bank") dated August 5, 1994.
Incorporated by reference from Exhibit 10.34 to the Company's
Form 10-K for the year ended December 31, 1994, filed on March
3, 1995.
10.35 Revolving Credit Agreement between Mycogen Corporation and --
Harris Bank dated August 5, 1994. Incorporated by reference
from Exhibit 10.35 to the Company's Form 10-K for the year
ended December 31, 1994, filed on March 3, 1995.
10.36 Guaranty Agreement from the Company to Harris Bank dated --
August 5, 1994. Incorporated by reference from Exhibit 10.36
to the Company's Form 10-K for the year ended December 31,
1994, filed on March 3, 1995.
10.37 Form of Employment/Severance Agreement between the Company and --
certain executive officers of the Company. Incorporated by
reference from Exhibit 10.55 to the Company's Form 10-K for
the year ended December 31, 1992, filed on March 20, 1993.
10.38 Partnership Interest Purchase Agreement dated December 31, --
1993, between Registrant and Lubrizol. Incorporated by
reference from Exhibit 10.59 to the Company's Form 8-K, filed
on January 13, 1994.
10.39 Contribution Agreement dated December 31, 1993, between the --
Registrant and Mycogen Plant Science, Inc. Incorporated by
reference from Exhibit 10.60 to the Company's Form 8-K, filed
on January 13, 1994.
10.40 Contribution and Liquidation Agreement dated December 31, --
1993, among Agrigenetics, L.P., Mycogen Plant Science, Inc.,
Lubrizol and Agrigenetics, Inc. Incorporated by reference from
Exhibit 10.61 to the Company's Form 8-K, filed on January 13,
1994.
10.41 Termination Agreement dated December 31, 1993, between Mycogen --
and Lubrizol. Incorporated by reference from Exhibit 10.62 to
the Company's Form 8-K, filed on January 13, 1994.
10.42 Amended and Restated Equity Investment Agreement dated --
December 31, 1993, among Registrant, Mycogen Plant Science,
Inc., Agrigenetics, Inc. and Lubrizol. Incorporated by
reference from Exhibit 10.63 to the Company's Form 8-K, filed
on January 13, 1994.
10.43 Amended and Restated Registration Rights Agreement dated --
December 31, 1993, between the Registrant and Lubrizol.
Incorporated by reference from Exhibit 10.64 to the Company's
Form 8-K, filed on January 13, 1994.
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
10.44 Manufacturing Agreement dated December 1, 1993, between the --
Registrant and Enzyme Bio Systems. Confidential treatment has
been requested regarding certain portions of the agreement.
Incorporated by reference from Exhibit 10.44 to the Company's
Form 10-K for the year ended December 31, 1994, filed on March
3, 1995.
10.45 Agreement for Exchange of Insect Control Technology and Patent --
Rights dated July 14, 1993, between the Registrant and Ciba
Seeds. Confidential treatment has been requested regarding
certain portions of the agreement. Incorporated by reference
from Exhibit 10.45 to the Company's Form 10-K for the year
ended December 31, 1994, filed on March 3, 1995.
10.46 Commercial Promissory Note dated January 31, 1995, between the --
Company and Union Bank. Incorporated by reference from Exhibit
10.48 to the Company's Form 10-K for the year ended December
31, 1994, filed on March 3, 1995.
10.47 Term Loan Agreement dated January 31, 1995 between the Company --
and Union Bank. Incorporated by reference from Exhibit 10.49
to the Company's Form 10-K for the year ended December 31,
1994, filed on March 3, 1995.
21.1 Mycosub BH/BT, a Delaware corporation. Incorporated by --
reference from Exhibit 22.1 to the Company's Form 10-K for the
year ended September 30, 1989, filed on December 28, 1989.
21.2 Mycosub BA, a Delaware corporation. Incorporated by reference --
from Exhibit 22.2 to the Company's Form 10-K for the year
ended September 30, 1989, filed on December 28, 1989.
21.3 Soilserv, Inc., a California corporation. Incorporated by --
reference from Exhibit 22.3 to the Company's Form 10-K for the
year ended December 31, 1991, filed on March 19, 1992.
21.4 Parasitix Corporation, a California corporation. Incorporated --
by reference from Exhibit 22.4 to the Company's Form 10-K for
the year ended December 31, 1991, filed on March 19, 1992.
21.5 Mycogen Plant Science, Inc., a Delaware corporation. --
Incorporated by reference from Exhibit 10.55 to the Company's
Form 10-K filed on March 20, 1993.
21.6 Agrigenetics, Inc. (d/b/a/ Mycogen Plant Sciences), a Delaware --
corporation. Incorporated by reference from Exhibit 22.6 to
the Company's Form 10-K for the year ended December 31, 1993,
filed on March 4, 1994.
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
21.7 Mycogen Far East Asia, a California corporation. Incorporated --
by reference from Exhibit 22.7 to the Company's Form 10-K for
the year ended December 31, 1994, filed on March 3, 1995.
21.8 Mycogen Crop Protection, Inc., a California corporation. 54
21.9 Mycogen California, Inc., a California corporation 75
* The Company's Notice of Annual Meeting and Proxy Statement --
dated on or about November 15, 1995.
23.1 Consent of Ernst & Young LLP, Independent Auditors. 113
24.1 Power of Attorney. 114
99.1 Purchase Agreement dated February 15, --1995, among --
Registrant, Agrigenetics, Inc. and Delta and Pine Land
Company. Incorporated by reference from Exhibit 99.1 to the
Company's Form 8-K, filed on April 20, 1995.
</TABLE>
* Supplemental Information: Copies of the Registrant's Proxy Statement for the
Annual Meeting of Stockholders and copies of the form of proxy to be used at
such Annual Meeting will be furnished to the Securities and Exchange Commission
prior to the time they are distributed to the stockholders.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MYCOGEN CORPORATION
Date: November 3, 1995 By: /s/ JERRY CAULDER
-------------------------------
Jerry Caulder
Chairman and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ JERRY CAULDER Chairman, Chief November 3, 1995
- ---------------------------------------- Executive Officer and Director
(Jerry Caulder) (Principal Executive Officer)
/s/ THOMAS J. CABLE Director November 3, 1995
- ----------------------------------------
(Thomas J. Cable*)
/s/ GEORGE R. HILL Director November 3, 1995
- ----------------------------------------
(George R. Hill*)
/s/ KENNETH H. HOPPING Director November 3, 1995
- ----------------------------------------
(Kenneth H. Hopping*)
/s/ DAVID H. RAMMLER Director November 3, 1995
- ----------------------------------------
(David H. Rammler*)
/s/ A. JOHN SPEZIALE Director November 3, 1995
- ----------------------------------------
(A. John Speziale*)
/s/ JAMES A. BAUMKER Vice President and Chief November 3, 1995
- ---------------------------------------- Financial Officer
(James A. Baumker) (Principal Financial and
Accounting Officer)
</TABLE>
*By James A. Baumker under power of attorney.
30
<PAGE>
MYCOGEN CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Statements of Operations for the years ended
August 31, 1995, 1994 and 1993......................................................32
Consolidated Balance Sheets as of August 31, 1995, 1994 and 1993.......................33
Consolidated Statements of Stockholders' Equity for the years ended
August 31, 1995, 1994 and 1993......................................................34
Consolidated Statements of Cash Flows for the years ended
August 31, 1995, 1994 and 1993......................................................35
Notes to Consolidated Financial Statements.............................................36
Schedule II - Valuation and Qualifying Accounts for the years ended
August 31, 1995 and 1994............................................................49
Report of Ernst & Young LLP, Independent Auditors......................................50
Exhibit 27 - Financial Data Schedule for the year ended August 31, 1995................51
Quarterly Financial Data for the year ended August 31, 1995............................52
</TABLE>
All other schedules required by this item have been omitted due to full
disclosure in the Financial Statements or related footnotes or due to
inapplicability of the item.
31
<PAGE>
MYCOGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-------------------------------------------------
1995 1994 1993
----------- ----------- ----------
Net operating revenues:
<S> <C> <C> <C>
Unrelated parties..................... $ 103,701 $ 102,449 $ 108,039
Related party......................... 2,468 1,934 4,544
Contract and other revenues:
Unrelated parties..................... 4,334 4,888 2,345
Related parties....................... 2,715 3,489 3,083
------------ ----------- ----------
Total revenues...................... 113,218 112,760 118,011
------------ ----------- ----------
Costs and expenses:
Cost of operating revenues............ 70,985 66,809 67,555
Selling and marketing................. 18,502 20,360 16,885
General and administrative............ 14,213 17,675 16,203
Research and development.............. 21,181 18,171 19,645
Amortization of intangible assets..... 3,854 2,172 2,042
Special charges....................... --- 36,378 23,676
------------ ----------- ----------
Total costs and expenses............ 128,735 161,565 146,006
------------ ----------- ----------
Operating loss.......................... (15,517) (48,805) (27,995)
Interest income and expense, net...... 914 2,328 3,175
Exchange gain (loss).................. 160 215 (471)
Minority interest..................... --- 14,632 (726)
------------ ----------- ----------
Net loss................................ (14,443) (31,630) (26,017)
Dividends on preferred stock............ (1,503) (1,604) (1,497)
------------ ----------- ----------
Net loss applicable to common shares.... $ (15,946) $ (33,234) $ (27,514)
============ =========== ==========
Net loss per common share............... $ (.83) $ (1.81) $ (1.69)
============ =========== ==========
Weighted average number of shares....... 19,225 18,377 16,318
============ =========== ==========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
32
<PAGE>
MYCOGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)
<TABLE>
<CAPTION>
AUGUST 31,
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 5,687 $ 8,681
Securities available-for-sale......................................... 11,913 29,206
Accounts and notes receivable, net of allowances...................... 27,402 24,402
Inventories........................................................... 33,633 31,714
Prepaid expenses...................................................... 1,267 1,121
------------ ------------
Total current assets................................................ 79,902 95,124
Net property, plant and equipment....................................... 49,646 48,537
Net intangible assets................................................... 17,759 18,091
Other assets............................................................ 12,301 3,974
------------ ------------
Total assets............................................................ $ 159,608 $ 165,726
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 6,760 $ 3,746
Accrued compensation and related taxes................................ 3,553 3,355
Deferred revenues..................................................... 5,670 4,681
Other current liabilities............................................. 5,225 5,925
------------ ------------
Total current liabilities........................................... 21,208 17,707
Long-term liabilities................................................... 3,291 1,207
Minority interest....................................................... 21,406 21,406
Commitments
Stockholders' equity:
Senior convertible cumulative preferred stock:
Series A preferred stock, $.001 par value, 3,940 shares authorized;
3,100 and 2,950 shares issued to a related party and outstanding at
August 31, 1995 and 1994, respectively; aggregate liquidation
preference, $31,004 and $29,501, respectively........................ ---
Common stock, $.001 par value, 40,000,000 shares authorized;
19,400,764 and 19,098,891 shares issued and outstanding at 19 19
August 31, 1995 and 1994 respectively.................................
Additional paid in capital............................................. 216,436 213,696
Deficit................................................................ (102,752) (88,309)
------------ ------------
Total stockholders' equity.......................................... 113,703 125,406
------------ ------------
Total liabilities and stockholders' equity.............................. $ 159,608 $ 165,726
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
33
<PAGE>
MYCOGEN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
----------------
SERIES A NUMBER ADDITIONAL TOTAL
PREFERRED OF PAID IN STOCKHOLDERS'
STOCK SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- -------- ------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1992 --- 14,456 $ 14 $135,848 $ (30,662) $105,200
Issuance of common stock under:
Employee stock plans................. --- 253 1 1,703 --- 1,704
Formation of partnership............. --- 2,295 2 28,107 --- 28,109
Receipt of stock to satisfy note
receivable........................... --- (9) --- (129) --- (129)
Compensation related to employee
stock plans.......................... --- --- --- 521 --- 521
Preferred stock dividend accrual........ --- --- --- (1,497) --- (1,497)
Net loss................................ --- --- --- --- (26,017) (26,017)
Cumulative translation adjustment....... --- --- --- (6) --- (6)
--------- -------- ------ ---------- ----------- ---------------
Balance at August 31, 1993 --- 16,995 17 164,547 (56,679) 107,885
Issuance of common stock under:
Employee stock plans................. --- 104 --- 939 --- 939
Additional interest acquired in MPS. --- 2,000 2 20,498 --- 20,500
Compensation related to employee
stock plans.......................... --- --- --- 396 --- 396
Preferred stock dividend accrual........ --- --- --- (642) --- (642)
Reclassification of preferred stock..... 3 --- --- 28,539 --- 28,539
Cumulative effect of change in
accounting for investments in
debt and equity securities........... --- --- --- 559 --- 559
Change in unrealized gains and
losses on available-for-sale
securities........................... --- --- --- (1,174) --- (1,174)
Net loss................................ --- --- --- --- (31,630) (31,630)
Cumulative translation adjustment....... --- --- --- 34 --- 34
--------- -------- ------ ---------- ----------- ---------------
Balance at August 31, 1994 3 19,099 19 213,696 (88,309) 125,406
Issuance of common stock under
employee stock plans................ --- 148 --- 436 --- 436
Compensation related to employee
stock plans......................... --- --- --- 148 --- 148
Issuance of common stock for
business acquisition................ --- 154 --- 1,350 --- 1,350
Change in unrealized gains and
losses on available-for-sale
securities.......................... --- --- --- 478 --- 478
Net loss............................... --- --- --- --- (14,443) (14,443)
Cumulative translation adjustment...... --- --- --- 328 --- 328
--------- -------- ------ ---------- ----------- ---------------
Balance at August 31, 1995 3 19,401 $ 19 $216,436 $(102,752) $113,703
========= ======== ====== ========== =========== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE>
MYCOGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-----------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................. $(14,443) $(31,630) $(26,017)
Items which did not use cash:
Depreciation........................ 4,851 4,329 3,750
Amortization of intangible assets... 3,854 2,172 2,042
Amortization of prepaid contract
manufacturing...................... 284 -- --
Compensation related to employee
stock plans........................ 148 396 521
Special charges..................... -- 26,636 23,676
Minority interest................... -- (14,632) 726
Provision for doubtful accounts..... 292 3,179 --
Loss on disposal of assets.......... 693 344 659
Changes in operating assets and
liabilities:
Accounts and notes receivable....... (3,293) (2,180) (11,103)
Inventories......................... (1,834) 6,368 17,805
Prepaid expenses.................... (346) 430 (210)
Accounts payable.................... 3,014 (1,366) (13,126)
Deferred revenues................... 989 2,298 (1,390)
Other liabilities................... (669) (310) (573)
----------- ----------- -----------
Cash used in operating
activities....................... (6,460) (3,966) (3,240)
----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales of
available-for-sale securities....... 8,972 33,258 25,190
Proceeds from maturities of
available-for-sale securities....... 21,049 29,483 59,394
Purchases of available-for-sale
securities.......................... (12,250) (34,753) (87,175)
Capital expenditures................. (6,566) (4,259) (4,827)
Payment from related party in
conjunction with the
formation of MPS.................... -- -- 5,719
Net cash acquired from (paid for)
business combinations............... -- (7,000) 1,711
Prepaid contract manufacturing....... (8,825) (2,079) --
Change in intangibles and other
assets.............................. (1,842) (2,578) (1,002)
----------- ----------- -----------
Cash provided by (used in)
investing activities............. 538 12,072 (990)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt......... 2,500 -- --
Payments on long-term debt........... (248) (10) (201)
Redemption of preferred stock........ -- (10,000) --
Proceeds from sale of common stock... 435 939 1,703
----------- ----------- -----------
Cash provided by (used in)
financing activities............. 2,687 (9,071) 1,502
----------- ----------- -----------
Effect of exchange rate changes
on cash and cash equivalents........ 241 96 (6)
----------- ----------- -----------
Decrease in cash and cash
equivalents......................... (2,994) (869) (2,734)
Cash and cash equivalents at
beginning of year................... 8,681 9,550 12,284
----------- ----------- -----------
Cash and cash equivalents at end
of year............................. $ 5,687 $ 8,681 $ 9,550
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE>
MYCOGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are contained in brakets in
the following Notes to Consolidated Financial Statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
BASIS OF CONSOLIDATION
[The accompanying financial statements include the accounts of Mycogen
Corporation and its wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.]
CHANGE IN FISCAL YEAR-END AND RECLASSIFICATIONS
The Company changed its fiscal year-end from December 31 to August 31 and
has restated the results for the three years ended August 31, 1995. Certain
amounts in the 1994 and 1993 consolidated financial statements have been
reclassified to conform to the 1995 presentation.
FORMATION OF MPS
The initial formation of MPS in December 1992, which resulted in a 51%
ownership by the Company and a 49% ownership by Lubrizol, a related party,
involved (i) the exchange of $39.4 million in the Company's Series A preferred
stock and 156,981 shares of the Company's common stock for certain assets of
Agrigenetics Company; (ii) the exchange of 2,137,609 shares of the Company's
common stock for substantially all of the shares of capital stock of Lubrizol
Genetics, Inc., which was renamed Mycogen Plant Science, Inc. and (iii)
contributions by the Company, Lubrizol, and Mycogen Plant Science, Inc., of the
assets of Agrigenetics Company to MPS. On December 31, 1993 the Company
exchanged $7.0 million in cash and 2.0 million shares of the Company's common
stock for an additional 29.5% ownership of MPS and Lubrizol agreed to eliminate
the mandatory redemption provision of the Series A preferred stock. Also, as of
December 31, 1993, the partnership was reorganized as a corporation. As of
August 31, 1995, MPS is owned 80.54% by the Company and 19.46% by Lubrizol. The
consolidated financial statements of the Company include the operations of MPS
from December 1, 1992.
The Company has agreed to purchase Lubrizol's remaining 19.46% ownership in
MPS over time for additional Mycogen common stock or, after November 30, 2000,
for cash. Lubrizol's minority interest in MPS is recorded at the minimum agreed
upon purchase price. Lubrizol has agreed not to acquire additional shares of
the Company's common stock except (i) upon conversion of Series A preferred
stock, (ii) in exchange for Lubrizol's remaining interest in MPS, (iii) upon
approval by the Company's board of directors or (iv) in an amount so as to
enable Lubrizol to maintain ownership of at least 20% of the Company's
outstanding common stock.
The principal seed products of MPS are corn, soybean, sorghum, sunflower,
alfalfa and rape. [The acquisition of MPS was accounted for as a purchase.]
The following consolidated, pro forma, unaudited
36
<PAGE>
summary of operations data assumes that the exchange for an additional ownership
interest in MPS occurred on September 1, 1993 and 1992 and that the formation of
MPS occurred on September 1, 1992.
<TABLE>
<CAPTION>
Years ended August 31,
---------------------------
(In thousands except for share data) 1994 1993
-------------------------------------- ---------- ----------
<S> <C> <C>
Total revenues $ 112,760 $ 119,411
Net loss applicable to common shares $ (18,567) $ (8,350)
Net loss per common share $ (.97) $ (.44)
</TABLE>
These pro forma results may not be indicative of the results of operations
that would have been reported if the transactions had occurred on the date
indicated, or which may be reported in the future. These results do not include
the nonrecurring special charges of $26.6 million in 1994 and $21.6 million in
1993 related to write-off amounts assigned to acquire MPS in-process technology.
SUPPLEMENTAL CASH FLOW INFORMATION
In conjunction with an acquisition in 1995, the exchange for an additional
ownership interest in MPS in 1994, adjustments to the 1993 purchase price of MPS
in 1994 and the formation of MPS in 1993, cash and noncash investing and
financing activities were allocated as follows:
<TABLE>
<CAPTION>
Years ended August 31,
--------------------------------------
(In thousands) 1995 1994 1993
---------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
Business acquisitions:
Fair value of assets acquired, other
than cash $ 1,350 $ 26,188 $ 124,055
Liabilities assumed -- -- (23,383)
Acquisition related costs -- -- (1,148)
Note payable issued -- -- (100)
Minority interest -- (1,688) (33,626)
Common stock issued (1,350) (20,500) (28,109)
Preferred stock returned (issued) -- 3,000 (39,400)
Net cash paid for (acquired from)
--------- ---------- ----------
acquisitions $ -- $ 7,000 $ (1,711)
========= ========== ==========
</TABLE>
Other cash and noncash investing and financing activities were as follows:
<TABLE>
<CAPTION>
Years ended August 31,
----------------------------------
(In thousands) 1995 1994 1993
----------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Dividends on preferred stock $ 1,503 $ 1,604 $ 1,497
========= ========= =========
Cash payments for interest $ 389 $ 254 $ 217
========= ========= =========
</TABLE>
INDUSTRY SEGMENTS AND FOREIGN OPERATIONS
The Company has reorganized its five operating units into two major
segments, Seed and Crop Protection. This change is a result of management's
intention to develop separate strategies to maximize the assets and technologies
in these two business segments. For comparative purposes, the Company has
presented segment and disclosures for the years ended August 31, 1995, 1994 and
1993.
Seed segment revenues are derived mainly from sales of planting seeds in
North America and Europe. The five principal product lines are corn, soybean,
sunflower, other and international. Crop Protection
37
<PAGE>
segment revenues are derived from customized crop protection services provided
by Soilserv in California and Arizona and sales of biopesticide products mainly
in North America and Far East Asia. Operating revenues and seed costs are
impacted by weather. Weather can influence pest populations, the effectiveness
of pesticides and seeds, seed production yields, commodity prices, growers'
planting decisions and other factors impacting revenues and costs. Operating
revenues are also dependent on a number of other factors, including the degree
of market acceptance of products, the strength of competition in the marketplace
and U.S. and foreign government policies which can affect crop acreage and
farmer income. Acres planted determine quantities of planting seed, crop
protection services and biopesticide products purchased by growers.
Financial information by segment is as follows:
<TABLE>
<CAPTION>
Years ended August 31,
-----------------------------------
(In thousands) 1995 1994 1993
------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Operating Revenues
Seed $ 65,329 $ 70,329 $ 79,865
Crop Protection 40,840 34,054 32,718
--------- --------- ---------
Total $ 106,169 $ 104,383 $ 112,583
========= ========= =========
Contract and Other Revenues
Seed $ 5,606 $ 5,486 $ 3,458
Crop Protection 1,363 2,891 1,970
Corporate 80 -- --
--------- --------- ---------
Total $ 7,049 $ 8,377 $ 5,428
========= ========= =========
Research and Development Expenses
Seed $ 14,827 $ 12,156 $ 11,953
Crop Protection 6,354 6,015 7,692
--------- --------- ---------
Total $ 21,181 $ 18,171 $ 19,645
========= ========= =========
Operating Loss
Seed $ (11,922) $ (45,052) $ (19,266)
Crop Protection (2,336) (859) (6,268)
Corporate (1,259) (2,894) (2,461)
--------- --------- ---------
Total $ (15,517) $ (48,805) $ (27,995)
========= ========= =========
Identifiable Assets
Seed $ 87,238 $ 79,439 $ 90,615
Crop Protection 41,994 38,202 33,006
Corporate 30,376 48,085 77,912
--------- --------- ---------
Total $ 159,608 $ 165,726 $ 201,533
========= ========= =========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
(In thousands) Years ended August 31,
------------------------------- ------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Depreciation and Amortization
Seed $ 4,199 $ 3,789 $ 2,257
Crop Protection 3,381 1,815 2,625
Corporate 1,125 897 910
-------- -------- --------
Total $ 8,705 $ 6,501 $ 5,792
======== ======== ========
Capital Expenditures
Seed $ 3,263 $ 2,776 $ 2,658
Crop Protection 213 955 1,292
Corporate 3,090 528 877
-------- -------- --------
Total $ 6,566 $ 4,259 $ 4,827
======== ======== ========
</TABLE>
[Operating revenues, net of estimated returns, are recognized when the
product is shipped to the customer or the service is provided.]
[The assets and liabilities of non-U.S. subsidiaries are translated into
U.S. dollars at exchange rates in effect at the balance sheet date. Operating
results are translated at weighted average exchange rates in effect during the
period. Net unrealized translation adjustments are recorded as a separate
component of stockholders' equity. Foreign currency exchange gains and losses
are included in the determination of net loss.] Foreign operations and export
sales were not significant for the years ended August 31, 1995, 1994 and 1993.
CASH, CASH EQUIVALENTS AND SECURITIES AVAILABLE-FOR-SALE
The Company invests its excess cash in U.S. Government securities,
certificates of deposit and debt instruments of financial institutions and
corporations with strong credit ratings. The Company has established guidelines
that maintain safety and liquidity and match maturities to anticipated cash
requirements. These guidelines are periodically reviewed and modified to take
advantage of trends in yields and interest rates.
[All debt securities are classified as available-for-sale and are carried
at fair value, with unrealized gains and losses reported in a separate component
of stockholders' equity. The cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. The
amortization, along with realized gains and losses, interest and dividends are
included in interest income. The cost of securities sold is based on the
specific identification method.]
Gross realized gains on sales of available-for-sale securities totaled
$10,000 and $162,000 and gross realized losses totaled $110,000 and $15,000 for
the years ended August 31, 1995 and 1994, respectively. Available-for-sale
securities are summarized as follows:
<TABLE>
<CAPTION>
August 31, 1995
----------------------------------------------------------------
Gross Gross
unrealized unrealized Estimated
(In thousands) Cost gains losses fair value
------------------------------ ---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Securities of the U.S.
government and its
agencies $ 11,046 $ -- $ (128) $ 10,918
Corporate debt securities 1,004 -- (9) 995
---------- ------------- -------------- --------------
Total $ 12,050 $ -- $ (137) $ 11,913
========== ============= ============== ==============
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
August 31, 1994
----------------------------------------------------------------
Gross Gross
unrealized unrealized Estimated
(In thousands) Cost gains losses fair value
------------------------------ ---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Securities of the U.S.
government and its
agencies $ 23,659 $ 5 $ (581) $ 23,083
Corporate debt securities 6,162 -- (39) 6,123
---------- ------------- -------------- --------------
Total $ 29,821 $ 5 $ (620) $ 29,206
========== ============= ============== ==============
</TABLE>
There were no available-for-sale securities with original maturities of three
months or less that were classified as cash equivalents at August 31, 1995 or
1994. The amortized cost and estimated fair value of available-for-sale
securities, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
August 31, 1995
-------------------------
Estimated
(In thousands) Cost fair value
---------------------------- ---------- ------------
<S> <C> <C>
Due in one year or less $ 3,004 $ 2,987
Due after one year through
five years 4,013 3,981
Mortgage-backed securities 5,033 4,945
---------- ------------
Total $ 12,050 $ 11,913
========== ============
</TABLE>
Based upon management's intention to hold these securities as available for
sale at any time for use in operations, all available-for-sale securities are
classified as current even though the actual maturity may extend beyond one
year.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable at August 31 are comprised of:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
---------------------------------- -------- --------
<S> <C> <C>
Trade accounts receivable $ 27,902 $ 26,854
Notes and other receivables 2,085 1,275
Receivables from related parties -- 188
-------- --------
29,987 28,317
Allowance for doubtful accounts (2,585) (3,915)
-------- --------
$ 27,402 $ 24,402
======== ========
</TABLE>
At August 31, 1995, the significant concentration of the Company's trade
receivables were from farmers located in the United States and various foreign
countries whose ability to pay is dependent upon the agribusiness economics
prevailing in that specific area of the world. As a result, no significant
geographic concentration of credit risk exists.
INVENTORIES
[Seed inventories, which comprise 86% and 79% of total inventories at
August 31, 1995 and 1994, respectively, are stated at the lower of average cost
or market. All other inventories are stated at the lower of first-in first-out
cost, or market.]
40
<PAGE>
Inventories at August 31 are comprised of:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
-------------------------------- -------- --------
<S> <C> <C>
Raw materials and supplies $ 5,895 $ 6,564
Work in process 3,578 3,908
Finished goods 24,160 21,242
-------- --------
$ 33,633 $ 31,714
======== ========
</TABLE>
Planting seed is produced by independent growers who contract specific
acreage for the production of seed for the Company. The compensation of the
independent growers is determined based on yield, contracted acreage and
commodity prices. The commitment for grower compensation is accrued as seed is
delivered to the Company. The Company's growers select market prices throughout
the year to establish selling prices for seed crops grown for the Company. The
Company follows a policy, common in the industry, of hedging certain of these
seed inventory purchase commitments to minimize risk due to market price
fluctuations. [Gains and losses on these contracts are recorded as adjustments
to inventory cost when the contracts are closed.] At August 31, 1995, the
Company had short-term futures contracts totaling $5.3 million for the purchase
of commodities (principally soybean and corn) at various dates during 1996. The
fair value of these contracts at August 31, 1995 is $5.7 million.
Production of hybrid seed involves various environmental risks. The
parental inbred lines which are used in production are more sensitive to adverse
conditions than are commercial hybrids grown by farmers. Weather is the most
significant variable. Unfavorable weather can adversely affect seed supplies
and unit costs. To protect against these risks, the Seed segment maintains
multiple production locations spread geographically in addition to maintaining
certain levels of inventory that are available for sale during the subsequent
planting season. While the Company believes that its inventory values are
realizable, risks exist that may render portions of the Company's inventory
obsolete or excess. The risk factors include weather and poor planting
conditions that may delay, prevent or change the planting of certain crops, U.S.
and foreign government policies which can affect crop acreage and farmer income
and the introduction of hybrids by competitors that may render the Company's
hybrids obsolete.
PROPERTY, PLANT AND EQUIPMENT
[Property, plant and equipment is recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives, ranging
from 15 to 30 years for buildings and improvements and 3 to 15 years for
machinery and equipment. Amortization of leasehold improvements is provided
using the straight-line method over the shorter of the life of the respective
lease or estimated useful life of the asset.] Property, plant and equipment at
August 31 is comprised of:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
------------------------------ ---------- ----------
<S> <C> <C>
Land and improvements $ 5,173 $ 5,334
Buildings and improvements 24,385 21,422
Machinery and equipment 33,627 30,632
Leasehold improvements 646 606
Construction in progress 2,519 2,578
---------- ----------
66,350 60,572
Accumulated depreciation and
amortization (16,704) (12,035)
---------- ----------
$ 49,646 $ 48,537
========== ==========
</TABLE>
41
<PAGE>
INTANGIBLE ASSETS
Intangible assets are amortized [using the straight-line method over each
asset's estimated useful life ranging from three to twenty-five years.]
Intangible assets at August 31 are comprised of:
<TABLE>
<CAPTION>
Useful 1995
----------------------------------------
Life Accumulated
(In thousands) in years Cost Amortization Net Value
--------------------------------- -------- -------------- -----------
<S> <C> <C> <C> <C>
Goodwill 25 $ 10,342 $ (1,638) $ 8,704
Purchased technology 3-15 5,584 (2,832) 2,752
Patents 10 5,909 (649) 5,260
Non-compete agreement 5-7 2,732 (1,689) 1,043
-------- -------------- -----------
$ 24,567 $ (6,808) $ 17,759
======== ============== ===========
<CAPTION>
Useful 1994
----------------------------------------
Life Accumulated
(In thousands) in years Cost Amortization Net Value
--------------------------------- -------- -------------- -----------
<S> <C> <C> <C> <C>
Goodwill 25 $ 9,769 $ (1,221) $ 8,548
Purchased technology 15 7,315 (2,334) 4,981
Patents 10 4,101 (342) 3,759
Non-compete agreement 5 2,050 (1,247) 803
-------- -------------- -----------
$ 23,235 $ (5,144) $ 18,091
======== ============== ===========
</TABLE>
Effective in 1995, the Company elected the early adoption of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." In accordance with the Statement,
prior period financial statements have not been restated to reflect the change
in accounting principle. An impairment loss of $1.6 million was recognized by
the Crop Protection segment during 1995, reducing the carrying amount of a paid-
up, royalty-free, non-exclusive license included in purchased technology to its
fair value as a result of the discontinuation of a certain product development
program. The fair value was determined using discounted cash flow projections
for this product. The impairment loss is included in amortization expense in
the Statement of Operations.
[The carrying value of intangible assets are reviewed upon a change in
market conditions or business strategy. If the projected net cash flows from
product revenues, royalty or license income at that time are less than the
carrying value of the intangible asset, a charge for impairment is recognized to
reduce the carrying value of the intangible asset to its fair value.]
OTHER ASSETS
The Company has an exclusive manufacturing agreement through 2010 for
certain of its biopesticide products. Under the terms of the agreement, the
Company will pay for the actual cost of manufacturing, excluding depreciation,
plus a fee based on the actual number of units produced. Additionally, the
Company has paid $10.9 million to the manufacturer to fund the construction of a
manufacturing facility. This payment has been classified as an other asset which
is being amortized over the life of the agreement. Accumulated amortization at
August 31, 1995 and amortization expense in 1995 both totaled $284,000.
42
<PAGE>
LINE OF CREDIT
The Company has available a $25 million unsecured revolving bank line of
credit, of which no amounts were outstanding at August 31, 1995 and 1994. This
line, which expires November 30, 1995, provides for short-term borrowings in
U.S. dollars at the bank's prime rate (8.75% at August 31, 1995) plus .5% or in
Eurodollars at an adjusted Eurodollar rate (5.875% at August 31, 1995) plus 2%.
On an annual basis, the Company is required to pay a fee of .1% of the total
commitment and a commitment fee of .25% on the unused portion. The credit
agreement contains certain covenants which include the maintenance of a minimum
consolidated net worth, maintenance of certain financial ratios, certain
limitations on the incurrence of indebtedness or liens on the Company's assets
and maintenance of a minimum cash, cash equivalent and securities available-for-
sale balance of $10 million.
LONG-TERM LIABILITIES
Long-term liabilities (amounts due after one year) at August 31 are as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
---------------------------------------- -------- --------
<S> <C> <C>
Unsecured note payable to bank,
variable interest at bank's daily
reference rate (8.75% at August 31,
1995), due in monthly installments
through 2001 $ 2,262 $ --
Pension and other liabilities 1,767 2,547
-------- --------
4,029 2,547
Less current portion included in other (738) (1,340)
current liabilities -------- --------
Total long-term liabilities $ 3,291 $ 1,207
======== ========
</TABLE>
The note payable matures $357,000 per year through 2001. The note contains
covenants which include certain limitations on the incurrence of indebtedness or
liens on the Company's assets and the maintenance of a minimum consolidated net
worth, cash flow and profitability. The Company is also required to maintain a
minimum cash, cash equivalents and securities available-for-sale balance of $10
million.
RETIREMENT PLANS
The Company has a tax deferred retirement and savings plan under Section
401(k) of the Internal Revenue Code whereby eligible employees may defer up to
20% of their gross pay through payroll deductions and contribute it to the plan.
The Company has the option to match a portion of the savings contributions as
prescribed in the plan not to exceed 3% of gross pay. The Company's Board of
Directors has authorized matching contributions through December 1995 not to
exceed 3% of gross pay. Matching contributions during the years ended August
31, 1995 and 1994 totaled $531,000 and $489,000, respectively. No matching
contributions were made during the year ended August 31, 1993. Effective
January 1, 1994, MPS' 401(k) plan was combined with the Company's 401(k) plan.
During 1993 the Company's matching contributions to the MPS plan totaled
$267,000.
COMMITMENTS
At August 31, 1995, the Company had operating lease commitments on certain
premises, machinery and office equipment which expire at various dates through
2010. Minimum future commitments under non-cancelable lease agreements having
terms in excess of one year total: 1996, $428,000; 1997, $345,000; 1998,
$242,000; 1999, $228,000; 2000, $203,000 and thereafter, $640,000. The Company
also leases equipment and other facilities on a month-to-month basis. Rent
expense under operating leases totaled $2.0 million, $1.8 million, and $1.4
million for years ended 1995, 1994 and 1993, respectively.
43
<PAGE>
The Company maintains an unsecured irrevocable standby letter of credit
which secures the Company's workers compensation self insurance retention. At
August 31, 1995 the outstanding obligation was $281,000.
NET LOSS PER COMMON SHARE
[Net loss per common share is determined by deducting dividends on
preferred stock from net loss and dividing the net result by the weighted
average number of common shares outstanding during the year. Common shares
issuable under common stock equivalents and convertible preferred stock are not
included in the computation of net loss per common share because their effect
was not dilutive.]
STOCK INCENTIVE PLANS
Directors and key employees have been issued Mycogen stock options under
the Company's 1992 and 1983 Stock Option Plans, as amended. Information about
the status of the plans is presented below:
<TABLE>
<CAPTION>
Shares Average Price
----------------------------
<S> <C> <C>
Balance at August 31, 1992 1,837,729 $ 11.47
Granted 1,254,500 $ 12.04
Exercised (163,397) $ 7.52
Canceled (60,012) $ 13.76
--------------
Balance at August 31, 1993 2,868,820 $ 11.90
Granted 158,500 $ 10.66
Exercised (51,037) $ 9.28
Canceled (175,164) $ 12.95
--------------
Balance at August 31, 1994 2,801,119 $ 11.81
Granted 3,208,103 $ 8.63
Exercised (14,193) $ 7.92
Canceled (2,687,843) $ 12.00
--------------
Balance at August 31, 1995 3,307,186 $ 8.59
==============
</TABLE>
In December 1994 the Company, at the election of the option holder,
repriced 2,209,603 outstanding options through cancellation of options with an
average exercise price of $12.62 and a regrant of new options at an exercise
price of $8.50. The new options vest in equal monthly installments over a new
36-month period measured from December 1994. Of the 3,307,186 outstanding
options, 876,710 were exercisable at August 31, 1995. As of August 31, 1995, a
total of 4,413,441 shares of common stock were reserved for future issuance
under the plans and 1,106,255 shares of common stock were available for future
grants.
Pursuant to the Company's 1990 Restricted Stock Issuance Plan, officers
were awarded a total of 96,500 and 35,000 shares of restricted stock in 1995 and
1993, respectively. As of August 31, 1995, a total of 123,500 shares of common
stock were reserved for future issuance under the plan. Compensation expense
related to these stock plans was $148,000, $396,000 and $521,000 in 1995, 1994
and 1993, respectively. Unamortized deferred compensation expense with respect
to restricted stock issued aggregated $837,000 and $143,000 at August 31, 1995
and 1994, respectively.
Pursuant to the Company's 1988 Employee Stock Purchase Plan, employees
purchased 42,334 shares at an average price of $7.65 per share, 53,264 shares at
an average price of $8.74 per share and 44,220 shares at an average price of
$10.75 per share in 1995, 1994 and 1993, respectively. As of August 31, 1995,
there were 187,761 shares of common stock reserved for future issuance under the
Plan.
44
<PAGE>
STOCKHOLDER RIGHTS PLAN
In February 1992, the Company adopted a Stockholder Rights Plan, which has
been amended since 1992. The Plan provides for the distribution of a preferred
stock purchase right (a "Right") as a dividend for each share of the Company's
common stock held of record immediately prior to a third party tendering to
purchase 25% or more of the Company's common stock. Under certain conditions
involving an acquisition by any person or group of 25% or more of the Company's
common stock, the Rights permit the holders (other than the 25% holder) to
purchase the Company's common stock at a 50% discount upon payment of an
exercise price per Right. In addition, in the event of certain business
combinations, the Rights permit the purchase of the common stock of an acquirer
at a 50% discount. Special provisions permit Lubrizol to maintain its equity
interest in the Company and to convert the shares of Series A preferred stock
and Lubrizol's remaining interest in MPS into the Company's common stock without
triggering the Rights. Under certain conditions, the Rights may be redeemed by
the Board of Directors at a price of $.01 per Right. The Rights have no voting
privileges and are attached to and automatically trade with the Company's common
stock. Unless extended, the Rights will expire on March 6, 2002.
SENIOR CONVERTIBLE CUMULATIVE PREFERRED STOCK, SERIES A
In connection with the formation of MPS in 1992, the Company issued shares
of Series A preferred stock with a par value of $.001 per share to Lubrizol. At
August 31, 1995 Lubrizol owned 3,100 shares of Series A preferred stock. The
Series A preferred stock has a liquidation preference over the Company's common
stock of $10,000 per share plus all accrued but unpaid dividends. Dividends are
cumulative and are payable quarterly at the rate of 5% through November 1996,
8.5% from November 1996 through November 2000 and the higher of 10% or prime
plus 3% per annum thereafter. The dividends are payable in additional shares of
Series A preferred stock through November 1997 and, thereafter, in cash. Each
share of preferred stock is convertible into the Company's common stock at the
lower of $17.96 per share (or approximately 557 shares) or 25% over the average
closing price of the Company's common stock for the 60 days prior to conversion.
The Company has reserved up to 1,998,301 shares of common stock, which
represents the maximum number of shares that could be issued upon conversion.
The Series A preferred stock does not have voting privileges.
During 1994 the Company redeemed $10 million of the Series A preferred
stock under a mandatory redemption feature. Effective December 31, 1993 all
future mandatory redemptions have been eliminated and the preferred stock was
reclassified and reported as a component of Stockholders' Equity. The Company
is required to maintain certain leverage and liquidity ratios. The changes in
the number of shares of preferred stock issued and the aggregate liquidation
preference are as follows:
<TABLE>
<CAPTION>
Aggregate
Number of Liquidation
(In thousands except share data) Shares Preference
----------------------------------- ------------- -----------------
<S> <C> <C>
Balance at August 31, 1993 4,089 $ 40,897
Preferred stock dividend accrual 161 1,604
Redemption (1,000) (10,000)
Preferred stock returned (300) (3,000)
------------- -----------------
Balance at August 31, 1994 2,950 29,501
Preferred stock dividend accrual 150 1,503
------------- -----------------
Balance at August 31, 1995 3,100 $ 31,004
============= =================
</TABLE>
45
<PAGE>
CONTRACT AND OTHER REVENUES
[Research and other contract revenues are recorded as earned based on the
percentage of completion basis or on the performance requirements of the
contracts. Payments in excess of amounts earned are deferred. Research costs
are expensed as incurred.] Costs and expenses related to research contracts
totaled $3.0 million, $4.7 million and $3.5 million in 1995, 1994 and 1993,
respectively.
RELATED PARTY TRANSACTIONS
At August 31, 1995, Lubrizol owned 6,134,067 shares, or 31.6%, of the
Company's outstanding common stock, as well as shares of preferred stock which,
at August 31, 1995 were convertible into 1,726,295 shares of the Company's
common stock. In December 1992, MPS entered into a Technology and Development
Agreement, as amended and restated, with Lubrizol pursuant to which Lubrizol
will provide to MPS a minimum of $4.6 million of funding from September 1995
through December 1998 for research and development projects related to planting
seeds that yield plants capable of producing oils with special characteristics.
In exchange, MPS has granted to Lubrizol an exclusive, perpetual, worldwide,
royalty-free license to such planting seeds developed or acquired by MPS.
Lubrizol is free to commercialize such plants and byproducts for any purpose
other than as pesticides and human and animal pharmaceuticals, which restriction
will remain in place for a period of ten years after Lubrizol ceases to provide
at least $1 million of annual funding to MPS. Related party research revenues
under these agreements totaled $2.6 million, $3.3 million and $2.8 million in
1995, 1994 and 1993, respectively. MPS is the exclusive supplier of specified
planting seed to a division of Lubrizol and manages the production of crops from
such planting seed. Related party operating revenues recognized under this
arrangement totaled $2.5 million, $1.9 million and $4.5 million in 1995, 1994
and 1993, respectively.
SPECIAL CHARGES
In connection with the acquisitions of ownership interests in MPS in 1994
and 1993, $26.6 million and $21.6 million, respectively, of the purchase price
was allocated to certain technologies not yet completed and, therefore, was
written-off as in-process technology as of the respective acquisition dates.
In August 1993, the Company restructured certain functional areas. Four
separate seed divisions were merged, consolidating a number of overlapping sales
territories. Also, biopesticide development and plant science and breeding
programs were combined to focus on new, technology-based products. This
restructuring resulted in charges totaling $2.1 million during 1993 which
principally related to severance and relocation. In December 1993, the Company
also decided to consolidate certain manufacturing locations and eliminate
certain brand names and hybrids. This resulted in additional restructuring
charges during 1994 of $9.8 million for excess and obsolete inventories, plant
shut-down and the termination of MPS's pension plan.
INCOME TAXES
The Company accounts for income taxes under the liability method required
by FASB Statement No. 109, "Accounting for Income Taxes." For federal and state
income tax purposes, the Company changed its year-end from December 31 to August
31 to conform with the consolidated financial statements. Certain 1994 and 1993
tax amounts have been restated to conform with the 1995 presentation.
At August 31, 1995, the Company has a federal tax net operating loss
carryforward of approximately $51 million and a California net operating loss
carryforward of approximately $13 million. The Company has federal and state
research tax credit carryforwards totaling approximately $2.9 million and $.5
million, respectively. The federal tax loss and credit carryforwards will expire
in years 1997 through 2011 unless previously utilized. California tax loss and
credit carryforwards, if not utilized, will expire in years 1997 through 2000.
46
<PAGE>
Foreign taxable income has been eliminated through the use of net operating
losses in the countries where the income was generated.
The Company incurred a change in ownership, as defined by Internal Revenue
Code Section 382, during 1992. Such change of ownership could limit the use in
any one year of the full amount of the net operating loss and tax credit
carryforwards previously described. However, the Company believes that the
limitation will not have a material impact upon the utilization of its
carryforwards. The Company's use of its net operating loss and tax credit
carryforwards could be further limited in the event of future cumulative changes
in stock ownership.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of August 31 are as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
---------------------------------------- --------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 18,761 $ 10,933
Research credit carryforwards 3,418 3,408
Tax basis of inventory greater than 2,787 3,026
book
Capitalized research expenditures 2,571 4,031
Tax basis of receivables greater than 1,177 1,320
book
Other items with tax basis greater 2,382 1,769
than book
--------- ---------
Total deferred tax assets 31,096 24,487
Less: Valuation allowance (30,499) (23,641)
--------- ---------
Net deferred tax assets 597 846
Net deferred tax liabilities (597) (846)
--------- ---------
Net deferred taxes $ -- $ --
========= =========
</TABLE>
Due to the uncertainty surrounding the future realization of the deferred
tax assets, a valuation allowance of $30.5 million was recorded at August 31,
1995 against deferred tax assets.
For financial reporting purposes, net income (loss) before dividends on
preferred stock for the years ended August 31 includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
----------------------- --------- --------- ---------
<S> <C> <C> <C>
Pretax income (loss):
United States $ (17,785) $ (29,474) $ (25,549)
Foreign 3,342 (2,156) (468)
--------- --------- ---------
$ (14,443) $ (31,630) $ (26,017)
========= ========= =========
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense for the
years ended August 31 is:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Tax at U.S. statutory rate 35% 35% 35%
Effect of net operating losses (35%) (35%) (35%)
---------- ---------- ----------
0% 0% 0%
========== ========== ==========
</TABLE>
47
<PAGE>
SUBSEQUENT EVENT
In September 1995, the Company signed a letter of intent for a technology
and development collaboration with Pioneer to develop transgenic crops with
built-in insect resistance. Under the agreement, Pioneer will provide $30
million to purchase three million shares of the Company's common stock and $21
million in research and development funding over the next five years. Pioneer
will receive non-exclusive rights to all Bt crop protection technology and
associated technologies owned or developed by the Company during the next 10
years. The Company and Pioneer will be able to market their own products
resulting from the collaboration, royalty-free, in North America. Pioneer will
pay a royalty to Mycogen for jointly developed products that it markets outside
of North America. The Company will have exclusive worldwide rights to license
jointly developed technology to third parties. No proprietary seed lines will be
shared by the companies. The transaction is subject to completion of definitive
agreements.
48
<PAGE>
MYCOGEN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED AUGUST 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts Deductions period
- ----------------------------------------------------------------------------------------------------
Year ended August 31, 1995
- --------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 3,915 $ 292 $ -- $ (1,622)/1/ $ 2,585
Inventory allowances $ 2,099 $ 4,602 $ -- $ (2,413)/2/ $ 4,288
Year ended August 31, 1994
- --------------------------
Allowance for doubtful accounts $ 915 $ 3,179 $ -- $ (179)/1/ $ 3,915
Inventory allowances $ 3,108 $14,679 $ -- $(15,688)/2/ $ 2,099
</TABLE>
/1/ Amount relates to account receivable written off.
/2/ Amount relates to inventory that was written off.
49
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Mycogen Corporation
We have audited the accompanying consolidated balance sheets of Mycogen
Corporation as of August 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended August 31, 1995. Our audit also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mycogen
Corporation at August 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
August 31, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth herein.
Ernst & Young LLP
San Diego, California
October 17, 1995
50
<PAGE>
COPIES OF FORM 10-K
Shareowners may reach Mycogen's Investor Relations group by calling (800) 745-
7475. To obtain a copy of Mycogen Corporation's Form 10-K filed with the
Securities and Exchange Commission or other company information, please call
between the hours of 7:30 a.m. and 4:30 p.m., PST/PDT, or write:
Investor Relations
Mycogen Corporation
5501 Oberlin Drive
San Diego, CA 92121
or send a telefax message to:
(619) 453-5494
ANNUAL MEETING
The Annual Meeting of Mycogen Corporation will be held at 10 a.m. on December
14, 1995, in the Corn Conference room at the Company's headquarters located at
5501 Oberlin Drive, San Diego, CA. All shareowners are cordially invited to
attend.
53
<PAGE>
MYCOGEN CORPORATION
QUARTERLY FINANCIAL DATA
(UNAUDITED)
The Company has elected to report quarterly financial data for fiscal year
1995 as a result of the change in fiscal year end. The new fiscal quarters end
in November, February, May and August.
<TABLE>
<CAPTION>
(In thousands, except per share data) Quarter
-------------------------------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C>
1995:
Net operating revenues $ 9,509 $27,661 $55,869 $ 13,130
Contract and other revenues 1,896 1,715 1,971 1,467
Cost of operating expenses 6,245 16,997 36,529 11,214
Operating expenses 12,704 13,589 14,035 17,422
Operating income (loss) (7,544) (1,210) 7,276 (14,039)
Non-operating income 529 371 63 111
Dividends on preferred stock 369 373 378 383
Net income (loss) (7,384) (1,212) 6,961 (14,311)
Net income (loss) per common share (.39) (.06) .36 (.74)
</TABLE>
52
<PAGE>
EXHIBIT 21.8
MYCOGEN CROP PROTECTION, INC.,
A CALIFORNIA CORPORATION
54
<PAGE>
ARTICLES OF INCORPORATION
OF
MYCOGEN CROP PROTECTION, INC.
The undersigned Incorporator hereby executes, acknowledges and files the
following ARTICLES OF INCORPORATION for the purpose of forming a corporation
(the "Corporation") under the General Corporation Law of the State of
California.
ARTICLE I
---------
The name of the Corporation is Mycogen Crop Protection, Inc.
ARTICLE II
----------
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
-----------
The name and address in the State of California of the Corporation's
initial agent for service of process in accordance with Section 202(c) of the
General Corporation Law is:
Carlton J. Eibl
5501 Oberlin Drive
San Diego, CA 92121
ARTICLE IV
----------
The Corporation is authorized to issue only one class of shares, and the
total number of shares which the Corporation is authorized to issue is
1,000,000.
ARTICLE V
---------
(a) The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) The Corporation is authorized to indemnify the directors and
officers of the Corporation to the fullest extent permissible under California
law.
55
<PAGE>
(c) The Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) with respect to
actions for breach of duty to the Corporation and its shareholders through bylaw
provisions, vote of Stockholders or disinterested directors or otherwise, in
excess of the indemnification otherwise permitted by Section 317 of the
California Corporations Code, subject only to the applicable limits on such
excess indemnification set forth in Section 204 of the California Corporations
Code.
IN WITNESS WHEREOF, the undersigned Incorporator of the Corporation has
executed these Articles of Incorporation on July 5, 1995.
/s/ LOREEN P. COLLINS
-------------------------------
Loreen P. Collins, Incorporator
ACKNOWLEDGMENT
--------------
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my own act and deed.
Executed on July 5, 1995.
/s/ LOREEN P. COLLINS
---------------------------------
Loreen P. Collins, Incorporator
56
<PAGE>
BYLAWS
OF
MYCOGEN CROP PROTECTION, INC.
ARTICLE I - OFFICES
-------------------
1.1 PRINCIPAL EXECUTIVE OFFICE. The principal executive offices of Mycogen
--------------------------
Crop Protection, Inc., a California corporation (the "Corporation"), shall be at
such place, inside or outside, the State of California as the Board of Directors
of the Corporation (the "Board") may determine from time to time.
1.2 OTHER OFFICES. The Corporation may also have offices at such other
-------------
places as the Board may from time to time designate, or as the business of the
Corporation may require .
ARTICLE II - SHAREHOLDERS' MEETINGS
-----------------------------------
2.1 ANNUAL MEETINGS. The annual meeting of the Shareholders of the
---------------
Corporation (the "Shareholders", or individually a "Shareholder") for the
election of Directors of the Corporation (the "Directors", or individually a
"Director") to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting shall be held between
thirty (30) and one hundred, twenty (120) days following the end of the fiscal
year of the Corporation (the first such meeting to be held after the end of
fiscal year 1995 of the Corporation) and at such place as may be determined by
the Board. If the annual meeting of the Shareholders is not held as herein
prescribed, the election of Directors may is held at any meeting thereafter
called pursuant to these Bylaws of the Corporation (the "Bylaws").
57
<PAGE>
2.2 SPECIAL MEETINGS. Special meetings of the Shareholders, for any purpose
----------------
whatsoever, unless otherwise prescribed by statute, may be called at any time by
the chairman of the board of the Corporation (the "Chairman"), the president of
the Corporation (the "President"), or by the Board, or by one or more
Shareholders holding not less than ten percent (10%) of the voting power of the
Corporation.
2.3 PLACE. All meetings of the Shareholders shall be at any place within or
-----
without the State of California designated either by the Board or by written
consent of the holders of a majority of the shares entitled to vote thereat,
given either before or after the meeting. In the absence of any such
designation, Shareholders' meetings shall be held at the principal executive
office of the Corporation.
2.4 NOTICE. Notice of meetings of the Shareholders shall be given in writing
------
to each Shareholder entitled to vote, either personally or by first-class mail
(unless the Corporation has five hundred (500) or more Shareholders determined
as provided by the California Corporations Code on the record date for the
meeting, in which case notice may be sent by third-class mail) or other means of
written communication, charges prepaid, addressed to the Shareholder at the
Shareholder's address appearing on the books of the Corporation or given by the
Shareholder to the Corporation for the purpose of notice. Notice of any such
meeting of Shareholders shall be sent to each Shareholder entitled thereto not
less than ten (10) (or, if sent by third-class mail, thirty (30)) nor more than
sixty (60) days before the meeting. Said notice shall state the place, date and
hour of the meeting and, (a) in the case of special meetings, the general nature
of the business to be transacted, and no other business may be transacted, or
(b) in the case of annual meetings,
58
<PAGE>
those matters which the Board, at the time of the mailing of the notice, intends
to present for action by the Shareholders, but subject to Section 601(f) of the
California Corporations Code, any proper matter may be presented at the meeting
for Shareholder action, and (c) in the case of any meeting at which Directors
are to be elected, the names of the nominees intended at the time of the mailing
of the notice to be presented by management for election.
2.5 ADJOURNED MEETINGS. Any Shareholders' meeting may be adjourned from time
------------------
to time by the vote of the holders of a majority of the voting shares present at
the meeting either in person or by proxy. Notice of any adjourned meeting need
not be given unless a meeting is adjourned for forty-five (45) days or more from
the date set for the original meeting.
2.6 QUORUM. The presence in person or by proxy of the persons entitled to
------
vote a majority of the shares entitled to vote at any meeting constitutes a
quorum for the transaction of business. The Shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough Shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
In the absence of a quorum, any meeting of Shareholders may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but no other
business may be transacted, except as provided above.
59
<PAGE>
2.7 CONSENT TO SHAREHOLDER ACTION. Any action which may be taken at any
-----------------------------
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted; provided,
however, that (a) unless the consents of all Shareholders entitled to vote have
been solicited in writing, notice of any Shareholder approval without a meeting
by less than unanimous written consent shall be given as required by the
California Corporations Code, and (b) Directors may not be elected by written
consent except by unanimous written consent of all shares entitled to vote for
the election of Directors. Any written consent may be revoked by a writing
received by the Secretary of the Corporation (the "Secretary") prior to the time
that written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
2.8 WAIVER OF NOTICE. The transactions of any meeting of Shareholders,
----------------
however called and noticed, and whenever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
of the persons entitled to vote, not present in person or by proxy, signs a
written waiver of notice, or a consent to the holding of the meeting, or an
approval of the minutes thereof. All such waivers, consents, or approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
2.9 VOTING. The voting at all meetings of Shareholders need not be by
------
ballot, but any qualified Shareholder before the voting begins may demand a
stock vote whereupon such
60
<PAGE>
stock vote shall be taken by ballot, each of which shall state the name of the
Shareholder voting and the number of shares voted by such Shareholder, and if
such ballot be cast by a proxy, it shall also state the name of any such proxy.
At any meeting of the Shareholders, every Shareholder having the right to
vote shall be entitled to vote in person, or by proxy appointed in a writing
subscribed by such Shareholder and bearing a date not more than eleven (11)
months prior to said meeting, unless the writing states that it is irrevocable
and satisfies Section 705(e) of the California Corporations Code, in which event
it is irrevocable for the period specified in said writing and said Section
705(e).
2.10 RECORD DATES. In the event the Board fixes a day for the determination
------------
of Shareholders of record entitled to vote as provided in Section 5.1 of Article
V of these Bylaws, then, subject to the provisions of the General Corporation
Law of the State of California only persons in whose name shares entitled to
vote stand on the stock records of the Corporation at the close of business on
such day shall be entitled to vote.
If no record date is fixed, (a) the record date for determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders shall
be at the close of business on the business day next preceding the day notice is
given or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (b) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (c) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which
61
<PAGE>
the Board adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of Shareholders of record entitled to notice of or to
vote at a meeting of Shareholders shall apply to any adjournment of the meeting
unless the Board fixes a new record date for the adjourned meeting, but the
Board shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days.
2.11 CUMULATIVE VOTING FOR ELECTION OF DIRECTORS. Provided the candidate's
-------------------------------------------
name has been placed in nomination prior to the voting and one or more
Shareholders has given notice at the meeting prior to the voting of the
Shareholder's intent to cumulate the Shareholder's votes, every Shareholder
entitled to vote at any election for Directors shall have the right to cumulate
such Shareholder's votes and give one candidate a number of votes equal to the
number of Directors to be elected multiplied by the number of votes to which the
Shareholder's shares are normally entitled, or distribute the Shareholder's
votes on the same principle among as many candidates as the Shareholder shall
think fit. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of Directors to be elected by
such shares are elected.
ARTICLE III - DIRECTORS
-----------------------
3.1 POWERS. Subject to any limitations in the Articles of Incorporation of
------
the Corporation dated July 5, 1995 (the "Articles of Incorporation") or these
Bylaws and to any provision of the California Corporations Code requiring
Shareholder authorization or approval for a particular action, the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised by, or under the direction of, the
62
<PAGE>
Board. The Board may delegate the management of the day-to-day operation of the
business of the Corporation to a management company or other person provided
that the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised, under the ultimate direction of the Board.
3.2 NUMBER, TENURE AND QUALIFICATIONS. The authorized number of Directors of
---------------------------------
this Corporation shall be two (2) until changed by a duly adopted resolution of
the Board or the Shareholders. Directors shall hold office until the next
annual meeting of Shareholders and until their respective successors are
elected. If any such annual meeting is not held, or the Directors are not
elected thereat, the Directors may be elected at any special meeting of
Shareholders held for that purpose. Directors need not be Shareholders.
3.3 REGULAR MEETINGS. A regular annual meeting of the Board shall be held
----------------
without other notice than this Bylaw immediately after, and at the same place
as, the annual meeting of Shareholders. The Board may provide for other regular
meetings from time to time by resolution.
3.4 SPECIAL MEETINGS. Special meetings of the Board may be called at any
----------------
time by the Chairman, the President, any Vice President, the Secretary, or both
Directors. Written notice of the time and place of all special meetings of the
Board shall be delivered personally or by telephone or telegraph to each
Director at least forty-eight (48) hours before the meeting, or sent to each
Director by first-class mail, postage prepaid, at least four (4) days before the
meeting. Such notice need not specify the purpose of the meeting. Notice of any
meeting of the Board need not be given to any Director who signs
63
<PAGE>
a waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting prior thereto, or at its commencement, the lack of
notice to such Director.
3.5 PLACE OF MEETINGS. Meetings of the Board may be held at any place within
-----------------
or without the State of California, which has been designated in the notice, or
if not stated in the notice or there is no notice, the principal executive
office of the Corporation or as designated by the resolution duly adopted by the
Board.
3.6 PARTICIPATION BY TELEPHONE. Members of the Board may participate in a
--------------------------
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another.
3.7 QUORUM. A majority of the Directors, or both Directors, if there are
------
only two Directors, or one Director, if there is only one Director, shall
constitute a quorum. In the absence of a quorum, a majority of the Directors
present may adjourn any meeting to another time and place. If a meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place shall be given prior to the time of the reconvened meeting
to the Directors who were not present at the time of adjournment.
3.8 ACTION AT MEETING. Every act or decision done or made by a majority of
-----------------
the Directors present at a meeting duly held at which a quorum is present is the
act of the Board. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of Directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
64
<PAGE>
3.9 WAIVER OF NOTICE. The transactions of any meeting of the Board, however
----------------
called and noticed or wherever held, are as valid as though had at a meeting
duly held after regular call and notice if a quorum is present and if, either
before or after the meeting, each of the Directors not present signs a written
waiver of notice, a consent to holding the meeting, or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
3.10 ACTION WITHOUT MEETING. Any action required or permitted to be taken by
----------------------
the Board may be taken without a meeting, if all members of the Board
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such Directors.
3.11 REMOVAL. The Board may declare vacant the office of a Director who has
-------
been declared of unsound mind by an order of court or who has been convicted of
a felony. The entire Board or any individual Director may be removed from
office without cause by a vote of Shareholders holding a majority of the
outstanding shares entitled to vote at an election of Directors; provided,
however, that unless the entire Board is removed, no individual Director may be
removed when the votes cast against removal, or not consenting in writing to
such removal, would be sufficient to elect such Director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled to vote were voted)
and the entire number of Directors authorized at the time of the Director's most
recent election were then being elected. In the event an office of a Director
is so declared vacant or in
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case the Board or any one or more Directors be so removed, new Directors may be
elected at the same meeting.
3.12 RESIGNATIONS. Any Director may resign effective upon giving written
------------
notice to the Chairman, the President, the Secretary or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
3.13 VACANCIES. Except for a vacancy created by the removal of a Director,
---------
all vacancies in the Board, whether caused by resignation, death or otherwise,
may be filled by a majority of the remaining Directors, though less than a
quorum, or by a sole remaining Director, and each Director so elected shall hold
office until his successor is elected at an annual, regular or special meeting
of the Shareholders. Vacancies created by the removal of a Director may be
filled only by approval of the Shareholders. The Shareholders may elect a
Director at any time to fill any vacancy not filled by the Directors. Any such
election by written consent requires the consent of a majority of the
outstanding shares entitled to vote.
3.14 COMPENSATION. No stated salary shall be paid Directors, as such, for
------------
their services, but, by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of such Board; provided that nothing herein contained shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
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3.15 COMMITTEES. The Board may, by resolution adopted by a majority of the
----------
authorized number of Directors, designate one or more committees, each
consisting of two (2) or more Directors, to serve at the pleasure of the Board.
The Board may designate one or more Directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of Directors. Any such committee, to the
extent provided in the resolution of the Board, shall have all the authority of
the Board in the management of the business and affairs of the Corporation,
except with respect to (a) the approval of any action requiring Shareholders'
approval or approval of the outstanding shares, (b) the filling of vacancies on
the Board or any committee, (c) the fixing of compensation of Directors for
serving on the Board or a committee, (d) the adoption, amendment or repeal of
Bylaws, (e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable, (f) a distribution to
Shareholders, except at a rate or in a periodic amount or within a price range
determined by the Board, and (g) the appointment of other committees of the
Board or the members thereof.
ARTICLE IV - OFFICERS
---------------------
4.1 NUMBER AND TERM. The officers of the Corporation shall be a President, a
---------------
Secretary, an Assistant Secretary and a Chief Financial Officer, all of which
shall be chosen by the Board. In addition, the Board may appoint a Chairman of
the Board, one or more Vice Presidents and such other officers as may be deemed
expedient for the proper conduct of the business of the Corporation, each of
whom shall have such authority and
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perform such duties as the Board may from time to time determine. The officers
to be appointed by the Board shall be chosen annually at the regular meeting of
the Board held after the annual meeting of Shareholders and shall serve at the
pleasure of the Board. If officers are not chosen at such meeting of the Board,
they shall be chosen as soon thereafter as shall be convenient. Each officer
shall hold office until his successor shall have been duly chosen or until his
removal or resignation.
4.2 INABILITY TO ACT. In the case of absence or inability to act of any
----------------
officer of the Corporation and of any person herein authorized to act in his
place, the Board may from time to time delegate the powers or duties of such
officer to any other officer, or any Director or other person whom it may
select.
4.3 REMOVAL AND RESIGNATION. Any officer chosen by the Board may be removed
-----------------------
at any time, with or without cause, by the affirmative vote of a majority of all
the members of the Board. Any officer chosen by the Board may resign at any time
by giving written notice of said resignation to the Corporation. Unless a
different time is specified therein, such resignation shall be effective upon
its receipt by the Chairman, the President, the Secretary or the Board.
4.4 VACANCIES. A vacancy in any office for any cause may be filled by the
---------
Board for the unexpired portion of the term.
4.5 CHAIRMAN OF THE BOARD. The Chairman shall preside at all meetings of the
---------------------
Board.
4.6 PRESIDENT. The President shall be the general manager and chief
---------
executive officer of the Corporation, subject to the control of the Board, and
as such shall preside at all meetings of Shareholders, shall have general
supervision of the affairs of the Corporation,
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shall sign or countersign or authorize another officer to sign all certificates,
contracts, and other instruments of the Corporation as authorized by the Board,
shall make reports to the Board and Shareholders, and shall perform all such
other duties as are incident to such office or are properly required by the
Board.
4.7 VICE PRESIDENT. In the absence of the President, or in the event of such
--------------
officer's death, disability or refusal to act, the Vice President, or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their selection, or in the absence of any such
designation, then in the order of their selection, shall perform the duties of
President, and when so acting, shall have all the powers and be subject to all
restrictions upon the President. Each Vice President shall have such powers and
discharge such duties as may be assigned from time to time by the President or
by the Board.
4.8 SECRETARY. The Secretary shall see that notices for all meetings are
---------
given in accordance with the provisions of these Bylaws and as required by law,
shall keep minutes of all meetings, shall have charge of the seal and the
corporate books, and shall make such reports and perform such other duties as
are incident to such office, or as are properly required by the President or by
the Board.
The Assistant Secretary or the Assistant Secretaries, in the order of
their seniority, shall, in the absence or disability of the Secretary, or in the
event of such officer's refusal to act, perform the duties and exercise the
powers and discharge such duties as may be assigned from time to time by the
President or by the Board.
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4.9 CHIEF FINANCIAL OFFICER. The Chief Financial Officer may also be
-----------------------
designated by the alternate title of "Treasurer." The Chief Financial Officer
shall have custody of all moneys and securities of the Corporation and shall
keep regular books of account. Such officer shall disburse the funds of the
Corporation in payment of the just demands against the Corporation, or as may be
ordered by the Board, taking proper vouchers for such disbursements, and shall
render to the Board from time to time as may be required of such officer, an
account of all transactions as Chief Financial Officer and of the financial
condition of the Corporation. Such officer shall perform all duties incident to
such office or which are properly required by the President or by the Board.
The Assistant Chief Financial Officer or the Assistant Chief Financial
Officers, in the order of their seniority, shall, in the absence or disability
of the Chief Financial Officer, or in the event of such officer's refusal to
act, perform the duties and exercise the powers of the Chief Financial Officer,
and shall have such powers and discharge such duties as may be assigned from
time to time by the President or by the Board.
4.10 SALARIES. The salaries of the officers shall be fixed from time to time
--------
by the Board and no officer shall be prevented from receiving such salary by
reason of the fact that such officer is also a Director of the Corporation.
4.11 OFFICERS HOLDING MORE THAN ONE OFFICE. Any two or more offices may be
-------------------------------------
held by the same person.
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ARTICLE V - MISCELLANEOUS
-------------------------
5.1 RECORD DATE AND CLOSING OF STOCK BONDS. The Board may fix a time in the
--------------------------------------
future as a record date for the determination of the Shareholders entitled to
notice of and to vote at any meeting of Shareholders or entitled to receive
payment of any dividend or distribution, or any allotment of rights, or to
exercise rights in respect to any other lawful action. The record date so fixed
shall not be more than sixty (60) nor less than ten (10) days prior to the date
of the meeting or event for the purposes of which it is fixed. When a record
date is so fixed, only Shareholders of record at the close of business on that
date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the record date.
The Board may close the books of the Corporation against transfers of
shares during the whole or any part of a period of not more than sixty (60) days
prior to the date of a Shareholders' meeting, the date when the right to any
dividend, distribution, or allotment of rights vests, or the effective date of
any change, conversion or exchange of shares.
5.2 CERTIFICATES. Certificates of stock shall be issued in numerical order
------------
and each Shareholder shall be entitled to a certificate signed in the name of
the Corporation by the Chairman or the President or a Vice President, and the
Chief Financial Officer, the Secretary or an Assistant Secretary, certifying to
the number of shares owned by such Shareholder. Any or all of the signatures on
the certificate may be facsimile. Prior to the due presentment for registration
of transfer in the stock transfer book of the Corporation,
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the registered owner shall be treated as the person exclusively entitled to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner, except as expressly provided otherwise by the laws of the
State of California.
5.3 REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
----------------------------------------------
corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
Corporation by the Chairman, the President or any Vice President and the Chief
Financial Officer or the Secretary or an Assistant Secretary.
5.4 ANNUAL REPORTS. The Annual Report to Shareholders, described in the
--------------
California Corporations Code, is expressly waived and dispensed with.
5.5 AMENDMENTS. Bylaws may be adopted, amended, or repealed by the vote or
----------
the written consent of Shareholders entitled to exercise a majority of the
voting power of the Corporation. Subject to the right of Shareholders to adopt,
amend, or repeal Bylaws, Bylaws may be adopted, amended, or repealed by the
Board, except that a Bylaw amendment thereof changing the authorized number of
Directors may be adopted by the Board only if these Bylaws permit an indefinite
number of Directors and the Bylaw or amendment thereof adopted by the Board
changes the authorized number of Directors within the limits specified in these
Bylaws.
5.6 INDEMNIFICATION OF CORPORATE AGENTS. The Corporation shall indemnify
-----------------------------------
each of its agents against expenses, judgments, fines, settlements and other
amounts, actually and reasonably incurred by such person by reason of such
person's having been made or having threatened to be made a party to a
proceeding to the fullest extent permissible by the
72
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provisions of Section 317 of the California Corporations Code. The
indemnification provided by this section shall not be deemed exclusive of any
rights to which those seeking indemnification may be entitled under any bylaw,
agreement, vote of Shareholders or disinterested Directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office, to the extent such additional rights to indemnification are
authorized in the Articles of Incorporation of the Corporation. The rights to
indemnity hereunder shall continue as to a person who has ceased to be a
Director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of the person.
Expenses incurred by a Director in defending a civil or criminal action,
suit or proceeding by reason of the fact that he is or was a Director of the
Corporation (or was serving at the Corporation's request as a Director or
officer of another corporation) shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized by relevant sections of the California Corporations
Code.
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I, Loreen P. Collins, Assistant Secretary of Mycogen Crop Protection,
Inc., a California corporation, do hereby certify that the foregoing Bylaws of
Mycogen Crop Protection, Inc. are the duly adopted Bylaws of said Corporation as
they are in effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 5th day of
July, 1995.
/s/ LOREEN P. COLLINS
--------------------------------------
Loreen P. Collins, Assistant Secretary
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<PAGE>
EXHIBIT 21.9
MYCOGEN CALIFORNIA, INC.
A CALIFORNIA CORPORATION
75
<PAGE>
ARTICLES OF INCORPORATION
OF
MYCOGEN CALIFORNIA, INC.
The undersigned Incorporator hereby executes, acknowledges and files the
following ARTICLES OF INCORPORATION for the purpose of forming a corporation
(the "Corporation") under the General Corporation Law of the State of
California.
ARTICLE I
---------
The name of the Corporation is "Mycogen California, Inc."
ARTICLE II
----------
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
-----------
The name and address in the State of California of the Corporation's
initial agent for service of process is:
Carlton J. Eibl
5501 Oberlin Drive
San Diego, California 92121
ARTICLE IV
----------
(A) Classes of Stock. The Corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which this Corporation is authorized to issue is
forty-five million (45,000,000) shares. Forty million (40,000,000) shares shall
be Common Stock and five million (5,000,000) shares shall be Preferred Stock.
The Common Stock shall have a par value of $.001 per share and the Preferred
Stock shall have a par value of $.001 per share.
(B) Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by these Articles of Incorporation may be issued from
time to time in series. The rights, preferences, privileges, restrictions
granted to and imposed on the Senior Redeemable Convertible Preferred Stock,
Series A (the "Series A Preferred Stock"),
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which series consists of Three Thousand Nine Hundred and Forty (3,940) shares,
are set forth below in this Article IV(B). Except as to the Series A Preferred
Stock, and except as otherwise provided in these Articles of Incorporation, the
Board of Directors of the Corporation (the "Board of Directors") is hereby
authorized to fix or alter the rights, preferences, privileges and restrictions
granted to or imposed upon such additional series of Preferred Stock, and the
number of shares constituting any such series and the designation thereof, or
any of them. The Board of Directors is also authorized to increase or decrease
the number of shares of any series of Preferred Stock, subsequent to the issue
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred Stock are as follows:
1. Designation. The Series A Preferred Stock shall be perpetual, but may
-----------
be redeemed in accordance with the provisions hereof. Shares of Series A
Preferred Stock redeemed, purchased, converted or otherwise acquired by the
Corporation or any Wholly-Owned Subsidiary (as defined below) shall be cancelled
and shall revert to the status of authorized but unissued Preferred Stock of the
Corporation undesignated as to series.
2. Dividends.
---------
(a) Holders of shares of Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors or a duly authorized
committee thereof, out of funds legally available for the payment of dividends
(after taking into account any increase therein resulting from any permitted
revaluation of the assets of the Corporation), cumulative preferential dividends
at a rate per annum, per share of (i) five percent (5%) of the Liquidation
Amount during the period commencing on the Original Issuance Date and
terminating on December 1, 1996, and (ii) eight and one-half percent (8.5%) of
the Liquidation Amount during the period from December 1, 1996, until December
1, 2000, and (iii) the greater of ten percent (10%) or the Prime Rate plus three
percent (3%) of the Liquidation Amount during the period from December 1, 2000
until the date on which all shares of Series A Preferred Stock shall be redeemed
in full; provided, that during the period beginning with the date on which any
--------
Default exists or occurs, and so long as any Default continues, the dividend
rate otherwise applicable to the Series A Preferred Stock pursuant to the
foregoing clause (i), (ii) or (iii), as the case may be, shall be increased in
an amount equal to an additional four percent (4%) per annum.
(b) All dividends payable on the Series A Preferred Stock in
accordance with Section 2(a) shall be payable quarterly on the first business
day immediately following the final days of March, June, September, and December
in each year, beginning with September 30, 1995 (each such date a "Dividend
Payment Date"), shall accrue and cumulate, in the case of each share, from the
date of issuance of such
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share, and any accrued dividends on the Series A Preferred Stock that are unpaid
in cash or, as provided herein, in P-I-K Shares, shall accrue additional
dividends in respect thereof ("Additional Dividends"), compounded quarterly, at
the dividend rate then applicable to the Series A Preferred Stock. Dividends
payable on the Series A Preferred Stock for any period less than a full
quarterly dividend period shall be computed and paid as a pro rata portion of
the full quarterly dividend amount then in effect, on the basis of the total
number of days in such quarter and the actual number of days elapsed in such
quarter to and including the date on which payment is to be made.
(c) If at any time Full Cumulative Dividends on the outstanding shares
of Series A Preferred Stock to the end of the then current dividend period shall
not have been paid in cash or declared and a sum sufficient for the payment
thereof set aside for such payment, the amount or the deficiency shall be fully
paid, or dividends in such amount declared and a sum sufficient for the payment
thereof set aside for such payment, before (i) any sum or sums shall be set
aside by the Corporation for, or applied to, the purchase, redemption or other
acquisition of any shares of the Corporation's capital stock, (ii) the
Corporation will cause or permit any Controlled Affiliate to purchase or
otherwise acquire any shares of the Corporation's capital stock or (iii) any
dividends shall be declared or paid upon, or any other distribution shall be
ordered or made in respect of, any shares of the Corporation's capital stock,
other than dividends or distributions required to be paid or made on or in
respect of shares of Senior Stock in accordance with the terms thereof, unless
such dividend or distribution is payable solely in shares of Junior Stock.
Notwithstanding the prior sentence, no failure to pay in cash or set aside a sum
in respect of the foregoing dividends shall restrict the Corporation from
effecting any Permitted Purchase.
(d) The amount of the dividend declared and paid on each share of
Series A Preferred Stock shall equal the amount declared and paid on each other
share thereof. In any case when Full Cumulative Dividends are not declared and
paid on the outstanding shares of Series A Preferred Stock, any dividends
declared and paid on the Series A Preferred Stock shall be declared and paid
ratably in accordance with the sums which would be payable on the Series A
Preferred Stock if all such Full Cumulative Dividends were declared and paid in
full. Dividends shall be declared and paid in cash, provided, that, except as
-------- ----
otherwise provided upon a Default in Section 4, during the period commencing on
the Original Issuance Date and terminating on December 1, 1997, at the option of
the Corporation, dividends may be paid in additional shares of Series A
Preferred Stock ("P-I-K Shares"). If a dividend is declared and paid in P-I-K
Shares, such P-I-K Shares shall be issued to the holder of the Series A
Preferred Stock entitled to receive such dividend payment on the relevant
Dividend Payment Date, with such P-I-K Shares issued at the rate of $10,000 in
Liquidation Amount of such P-I-K Shares for each $10,000 of the dollar amount of
such dividend. Dividends paid in cash or in P-I-K Shares shall be paid to the
holders of record of shares of the Series A Preferred Stock as they appear on
the stock register of the Corporation on the record date established for such
dividend, which shall be not more than 30 days nor less than 10 days preceding
the
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<PAGE>
relevant Dividend Payment Date, as shall be fixed by the Board of Directors or a
duly authorized committee thereof.
(e) The Corporation will use its diligent efforts to ensure that
dividends declared on the Series A Preferred Stock are treated as "dividends"
within the meaning of Section 316(a) of the Code (or any successor provision)
and to ensure that distributions made on or in respect of the Series A Preferred
Stock shall not be treated as "extraordinary dividends" within the meaning of
Section 1059 of the Code (or any successor provision). The Corporation will not
claim as an expense reducing gross income any dividends paid on the Series A
Preferred Stock or any other shares of its preferred stock in any Federal income
tax return, claim for refund, or other statement, report or submission made to
the Internal Revenue Service (except to the extent that there is no basis in law
to do otherwise). The Corporation will reasonably cooperate with any holder of
Series A Preferred Stock (at the expense of such holder) in connection with any
litigation, appeal or other proceeding (including any request for a revenue
ruling) relating to the characterization of any distribution on or in respect of
the Series A Preferred Stock as a dividend or to the eligibility for the
dividends received deduction under Section 243(a)(1) of the Code (or any
successor provision). To the extent possible, the principles of this Section
2(e) shall also apply with respect to State and local taxes.
3. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders, whether from capital,
surplus or earnings, the Liquidation Amount, plus Full Cumulative Dividends
thereon to the date of final distribution to the holders of the shares of the
Series A Preferred Stock, before any distribution may be made to the holders of
shares of Junior Stock.
(b) After the payment of Full Cumulative Dividends, the amount
distributed upon any liquidation, dissolution or winding up of the Corporation
on each share of Series A Preferred Stock shall equal the amount distributed on
each other share thereof. If in any such distribution the funds of the
Corporation shall be insufficient to pay the holders of the outstanding shares
of the Series A Preferred Stock the full amounts to which they shall be
entitled, such holders shall share ratably in any distribution of assets in
accordance with the sums which would be payable on such distribution if all sums
payable thereon were paid in full.
(c) The holder of the shares of Series A Preferred Stock shall not be
entitled to receive any amounts with respect to any liquidation, dissolution or
winding up of the Corporation other than the amounts provided for in this
Section 3. Neither a merger nor consolidation of the Corporation into or with
another corporation nor a merger or consolidation of any other corporation into
or with the Corporation, nor a sale, transfer, mortgage, pledge or lease of all
or any part of the assets of the Corporation shall
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be deemed to be a liquidation, dissolution or winding up of the Corporation for
the purposes of this Section 3; provided, that this sentence shall not operate
--------
to release or relieve the Corporation of any obligation to redeem or to
repurchase shares of Series A Preferred Stock by reason of the occurrence of any
such merger, consolidation, sale or other transaction.
4. Dividend Provisions on Default. From and after the occurrence of a
------------------------------
Default and until Full Cumulative Dividends to the date of payment shall have
been paid to the holders of shares of Series A Preferred Stock or such Default
shall otherwise be cured or waived, (i) no dividends shall be declared or paid
upon, or any other distribution shall be ordered or made in respect of, any
shares of the capital stock of the Corporation, other than dividends or
distributions required to be paid or made on or in respect of Senior Stock in
accordance with its terms, nor shall the Corporation purchase, redeem or
otherwise acquire, or cause or permit any Controlled Affiliate to purchase or
acquire, except for Permitted Purchases, any shares of the capital stock of the
Corporation, other than purchases or acquisitions of Senior Stock required to be
made in accordance with the terms thereof; and (ii) if such Default is not cured
with any applicable grace period or, if a Financial Default, within ninety (90)
days of its occurrence, the dividend rate as of the date the Default occurred
shall be increased in accordance with Article IV(B), Section 2(a) and, anything
foregoing to the contrary notwithstanding, the Corporation may not pay dividends
in P-I-K Shares but shall pay all dividends in cash.
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5. Optional Redemption. Out of cash funds legally available therefor,
-------------------
the Corporation may redeem, at its option expressed by resolution of its Board
of Directors or a duly authorized committee thereof, from time to time and at
any time, any or all shares of the Series A Preferred Stock at the Liquidation
Amount, plus, in each case, Full Cumulative Dividends on each share so to be
redeemed to the applicable Redemption Date; provided that the Corporation shall
--------
not be required, either prior to or contemporaneously with or as a result of
such an optional redemption of any shares of Series A Preferred Stock, to
satisfy by payment in cash of any amount representing Full Cumulative Dividends
on any shares of Series A Preferred Stock other than those that are the subject
of such optional redemption. Any redemption pursuant to this Section 5 shall be
accomplished in the manner and with the effect as set forth in Section 6.
6. Redemption Procedure.
--------------------
(a) Notice of every redemption of Series A Preferred Stock shall be
given by mailing the same to every holder of record, any of whose shares are to
be redeemed, not less than 10 nor more than 30 days prior to the applicable
Redemption Date, at his or her respective address as the same shall appear on
the stock register of the Corporation, but no defect in such mailed notice or in
the mailing thereof or the failure by any holder to receive any notice of
redemption shall affect the validity of the proceedings for the redemption of
any share so to be redeemed. The notice shall state that the shares specified
will be redeemed by the Corporation at their aggregate Liquidation Amount plus
Full Cumulative Dividends thereon to the applicable Redemption Date and at the
applicable Redemption Date upon the surrender for cancellation, at the place
designated in the notice, of the certificates representing the shares (including
any P-I-K Shares constituting all or any portion of Full Cumulative Dividends
thereon) so to be redeemed (or, in the event such shares are represented by
certificates that are lost, stolen, destroyed or mutilated, delivery of an
affidavit to that effect and an indemnification agreement, each in form and
substance reasonably acceptable to the Corporation, from the holder of such
shares), properly endorsed for transfer or accompanied by proper instruments of
assignment and transfer in blank and bearing all necessary transfer tax stamps.
(b) In the case of a redemption of less than all the outstanding
shares of Series A Preferred Stock, the shares to be redeemed shall be selected
pro rata on the basis of the relative number of shares held of record on the
applicable Redemption Date by each record holder thereof.
(c) If such notice of redemption shall have been duly given as
provided above, and if on or before the applicable Redemption Date the funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for or otherwise subject to redemption, so
as to be, and continue to be, available therefor, then, notwithstanding that any
certificate for shares so called for or otherwise subject to redemption shall
not have been surrendered for cancellation, all shares of the Series A Preferred
Stock so called for or otherwise subject to redemption shall no longer be
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deemed to be outstanding on and after such Redemption Date, and all rights with
respect to such shares shall forthwith on such Redemption Date cease and
terminate, except only the right of the holders thereof to receive, out of the
funds so set aside in trust, the amount payable on redemption thereof, without
interest.
(d) In the alternative, if such notice of redemption shall have been
duly given as provided above, or if the Corporation shall have given to the bank
or trust company hereinafter referred to irrevocable authorization to give or
complete such notice of redemption, and if prior to the applicable Redemption
Date the funds necessary for such redemption shall have been deposited by the
Corporation with a bank or trust company in good standing (and shall have
identified such bank or trust company in a written notice given to the holders
whose shares are to be redeemed), organized under the laws of the United States
of America or a State thereof, having a capital surplus and undivided profits
aggregating at least $100,000,000 according to its last published statement of
condition, in trust for the pro rata benefit of the holders of the shares so
called for or otherwise subject to redemption, so as to be, and to continue to
be, available therefor, then, notwithstanding that any certificate for shares so
called for or otherwise subject to redemption shall not have been surrendered
for cancellation, all shares of Series A Preferred Stock so called for or
otherwise subject to redemption shall no longer be deemed to be outstanding on
and after such Redemption Date, and all rights with respect to such shares shall
forthwith cease and terminate at such time, except only the right of the holders
thereof to receive, out of the funds so set aside in trust, the amount payable
on redemption thereof, without interest. Any interest accrued on any funds so
deposited shall be the property of the Corporation and shall be paid to the
Corporation from time to time.
(e) Any funds so set aside or deposited, as the case may be, and
unclaimed at the end of one year from the applicable Redemption Date shall be
released or repaid to the Corporation, after which the holders of the shares so
called for redemption shall look only to the Corporation for payment thereof,
without interest, subject to the applicable law of escheat.
(f) If the funds of the Corporation legally available, after taking
into account any increase therein resulting from any permitted revaluation of
the assets of the Corporation, to effect any mandatory redemption of shares of
the Series A Preferred Stock are insufficient to redeem the total number of
shares of Series A Preferred Stock required to be redeemed, the Corporation
shall (i) use the maximum available amount of such funds and assets to redeem a
smaller number of shares of Series A Preferred Stock ratably from each holder
thereof whose shares are to be redeemed (based upon the number of shares of
Series A Preferred Stock held by each such holder), at the Liquidation Amount
per share plus Full Cumulative Dividends thereon to the date such redemption is
effected, and thereafter shall remain obligated to redeem the remaining portion
of the shares to be redeemed (without being required to deliver a new notice) as
promptly as practicable as the funds or assets of the Corporation become legally
available (including, without limitation, by reason of permitted revaluations of
such assets) to effect such redemptions, and (ii) take any and all action,
permitted by applicable law and determined
82
<PAGE>
by the Board of Directors to be in the best interests of the Corporation and
fair to its shareholders, necessary to increase its legally available funds to
an amount sufficient therefor, including without limitation, a recapitalization
or a sale of its assets.
(g) If fewer than all the shares of Series A Preferred Stock evidenced
by any certificate submitted to the Corporation for redemption pursuant to this
Section 6 are to be redeemed, the Corporation will issue new certificate(s) for
the remainder of the shares of Series A Preferred Stock that were evidenced by
the old certificate(s).
7. Conversion.
----------
(a) Each holder of shares of Series A Preferred Stock may (prior to
the date such shares are redeemed, or are considered to be redeemed, for payment
in full of all amounts due upon such redemption), at such holder's options at
any time and from time to time, convert some or all of such holder's shares of
Series A Preferred Stock into fully paid and nonassessable shares of Common
Stock at the then applicable Conversion Price, with the number of shares of
Common Stock so issuable to be equal to the aggregate Liquidation Amount of such
shares of Series A Preferred Stock to be so converted, divided by such
Conversion Price.
(b) Shares of Series A Preferred Stock may be converted by
surrendering the certificates representing such shares together with written
notice of conversion and a proper assignment of such certificates to the
Corporation or in blank. The notice of conversion shall state the name(s) and
address(es) in which the certificates representing the Common Stock issuable
(and any cash payment instead of fractional shares due) upon such conversion
shall be issued, delivered or paid. As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver, as specified in the
notice of conversion, certificates for the number of full shares of Common Stock
issuable upon such conversion together with any cash instead of fractional
shares as provided below. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at such
time all rights of the converted shares of Series A Preferred Stock shall cease
and terminate and the Person(s) in whose name(s) any certificate(s) for Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder(s) of the record of the Common Stock represented thereby. At the
Corporation's option, not later than the second business day after the
Conversion Date, Full Cumulative Dividends with respect to the converted shares
of Series A Preferred Stock may be paid in full and in cash to the converting
holder; provided, that if such payment is not so made for any reason, including
--------
without limitation the Corporation's lack of legally available funds sufficient
to make such payment, then shares of Common Stock shall be issued, effective
immediately prior to the close of business on the Conversion Date, in
satisfaction of such Full Cumulative Dividends, with the number of shares of
Common Stock so issuable to be equal to the amount of such Full Cumulative
Dividends divided by the then applicable Conversion Price.
83
<PAGE>
(c) No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of any shares of Series A
Preferred Stock (or Full Cumulative Dividends thereon). Instead, the
Corporation shall pay a cash adjustment in an amount equal to the applicable
fraction multiplied by the then applicable Conversion Price.
(d) The Corporation shall at all times reserve and keep available and
free of preemptive rights out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the outstanding shares,
such number of shares of its Common Stock as shall from time to time be
sufficient to effect the conversion (at the then applicable Conversion Price) of
all outstanding shares of Series A Preferred Stock (including Full Cumulative
Dividends with respect thereto), and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Series A Preferred Stock (including Full
Cumulative Dividends with respect thereto), the Corporation shall take such
corporate action as may be necessary to increase its authorized but unissued
Common Stock to such number of shares as shall be sufficient for such purpose.
(e) The Corporation shall pay all documentary, stamp, or other similar
taxes attributable to the issuance or delivery of Common Stock upon conversion
of shares of Series A Preferred Stock (or Full Cumulative Dividends thereon).
However, the Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of the
shares of Series A Preferred Stock (or Full Cumulative Dividends thereon) in
respect of which such shares are being issued.
8. Voting Rights.
-------------
(a) The holders of shares of Series A Preferred Stock shall not be
entitled to vote upon any matter relating to the business or affairs of the
Corporation.
(b) Notwithstanding the provisions of Section 8(a), without the
affirmative approval of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock, given either by their vote at an annual
meeting or a special meeting called for such purpose or in writing without a
meeting, the Corporation shall not effect: (i) any amendment, alteration or
repeal (by any means, including any merger or consolidation) of any of the
provisions of this Article IV(B) or of the Articles of Incorporation of the
Corporation or of any amendment thereto (including, without limitation, any
certificate of determination or similar instrument filed in connection with any
class or series of capital stock of the Corporation) which would alter or change
the absolute or relative powers, preferences or special rights of the shares of
Series A Preferred Stock so as to affect them or any of the holders thereof
adversely; (ii) the creation of any class or series of capital stock other than
Junior Stock (created in accordance with Section 8(c), if applicable); (iii) the
issuance of any shares of Series A Preferred Stock in addition to the shares of
such stock initially issued on the Original
84
<PAGE>
Issuance Date and any P-I-K Shares issued as contemplated herein; (iv) any
Restricted Combination; or (v) any Restricted Transaction.
(c) Notwithstanding the provisions of Section 8(a), without the
affirmative approval of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock, given either by their vote at an annual or a
special meeting called for such purpose or in writing without a meeting, the
Corporation shall not create any Junior Stock if the issuance thereof would
cause a Default.
9. Definitions. For the purposes of this Article IV(B):
-----------
"Additional Dividends" has the meaning indicated in Section 2(b).
--------------------
"Affiliate" means, as to any Person, another Person that directly or
---------
indirectly Controls, is Controlled by or is under common Control with, such
Person.
"Base Price" means Seventeen Dollars and Ninety-Six Cents ($17.96).
----------
"Code" means the Internal Revenue Code of 1986, as amended (or any
----
successor thereto), including the rules and regulations promulgated thereunder
from time to time in effect.
"Common Stock" means the Common Stock, no par value, of the
------------
Corporation and any other class of stock into which such Common Stock is changed
pursuant to any Reclassification or Reorganization.
"Control" and its variants means possession, directly or indirectly,
-------
of power to direct or cause the direction of the management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise) of a Person.
"Controlled Affiliate" means any Affiliate Controlled directly or
--------------------
indirectly by the Corporation.
"Covenant Default" means (i) a material breach or violation by the
----------------
Corporation of any of the terms or provisions set forth in this Article IV(B)
(other than any such breach or violation of Sections 8(b) or 8(c) hereof, or
constituting either a Financial Default or a Dividend Default), which breach or
violation remains uncured 30 days after written notice thereof is given to the
Corporation or (ii) any breach or violation of Sections 8(b) or 8(c) hereof.
"Conversion Date" means the date set forth in Section 7 upon which the
---------------
certificates representing the shares of Series A Preferred Stock to be
converted, the notice of conversion, and the proper assignment have all been
received by the Corporation.
85
<PAGE>
"Conversion Price" means, the lesser of (i) the Base Price or (ii) One
----------------
Hundred and Twenty-Five percent (125%) of the Market Price, and in either such
case shall be subject to adjustment to reflect any share split, combination,
Reclassification, Reorganization or similar event which affects the
convertibility of the Series A Preferred Stock. For purposes of this paragraph,
"Market Price" means the average daily closing price of a share of Common Stock
------------
as reported on the Nasdaq National Market (or, if the Common Stock is listed on
the American or New York Stock Exchange, then on such Exchange) during the sixty
(60)-day period ending on the Conversion Date.
"Default" means a Covenant Default, a Financial Default or a Dividend
-------
Default.
"Dividend Default" means the failure to declare and pay (either in
----------------
cash or in P-I-K Shares), or set aside a sum sufficient for the payment of,
dividends on all outstanding shares of Series A Preferred Stock (including P-I-K
Shares) in accordance with Section 2.
"Dividend Payment Date" has the meaning indicated in Section 2(b).
---------------------
"Exchange Act" means the Securities Exchange Act of 1934, or any
------------
similar Federal statute and the rules and regulations thereunder, all as the
same may be in effect at the time.
"Financial Default" means (i) any failure by the Corporation or
-----------------
Agrigenetics, L.P., a Delaware limited partnership, or any successor thereto
("Agrigenetics") so long as it is a Controlled Affiliate, to pay when due
(taking into account all applicable grace periods, agreed extensions and
waivers) any amount of principal or interest on indebtedness of the Corporation
or Agrigenetics, so long as it is a Controlled Affiliate, which indebtedness is
in an aggregate principal amount of at least $10,000,000 ("Material
Indebtedness") or (ii) a breach or violation of any material covenant contained
in the documents establishing or evidencing any such Material Indebtedness,
which breach or violation remains uncured or unwaived more than 30 days after
the date of occurrence thereof, (iii) any Material Indebtedness being declared
or becoming due and payable prior to its stated maturity or due date, or (iv)
the failure by the Corporation to satisfy any or all of the following financial
covenants:
(1) Minimum Equity. As tabulated below, the Corporation will at
--------------
the indicated date have and maintain until the next indicated date a
minimum balance with respect to stockholders' equity, as such term is
defined under generally accepted accounting principles, except that (a)
the value of any intangible assets acquired by the Corporation or any
of its Subsidiaries after the Original Issuance
86
<PAGE>
Date and (b) the amount attributable to Senior Stock, Parity Stock and
Series A Preferred Stock will not be included in the calculation of
such balance.
<TABLE>
<CAPTION>
At Year Minimum
Ended December 31 Stockholders' Equity
------------------- --------------------
<S> <C>
1995 100 million
1996 100 million
1997 115 Million
1998 115 Million
1999 115 Million
</TABLE>
(2) Maximum Leverage. The sum of the total book value at
----------------
December 31st of each year of all outstanding (a) debt for money
borrowed (excluding any unused portion of any credit facility) which is
created, assumed or guaranteed in any manner, and capitalized leases
(as defined under generally accepted accounting principles) of the
Corporation and its Subsidiaries, but excluding any net increase in
accounts receivable plus inventory minus accounts payable occurring
between August 31, 1995 and December 31 of each year (which net
calculation cannot be less than zero), (b) Senior Stock and (c) Parity
Stock shall not exceed thirty-five percent (35%) of the total book
value of Series A Preferred Stock (including P-I-K Shares), Junior
Stock and stockholders' equity (calculated consistently as set forth
under item 1 above).
(3) Minimum Liquidity. As tabulated below, the Corporation will
-----------------
at the indicated date have and maintain until the next indicated date
an amount in cash plus short-term investments equal to or in excess of
the following percentages of the then outstanding amount of Series A
Preferred Stock (including P-I-K Shares):
<TABLE>
<CAPTION>
Cash Plus Short-Term
Investments as a
Percentage of Series A
Preferred Stock
At October 31st (Including P-I-K Shares)
---------------- -------------------------
<S> <C>
1996 25%
1997 31.2%
1998 37.4%
1999 43.6%
2000 50%
</TABLE>
87
<PAGE>
"Full Cumulative Dividends" means with reference to any share
-------------------------
(including P-I-K Shares) of the Series A Preferred Stock (whether or not in any
dividend period or part thereof in respect of which such terminology is used
there shall have been funds legally available for the payment of such dividends)
that amount which shall be equal to the dollar amounts of dividends at the
applicable rate set forth in Section 2(a) (plus Additional Dividends, if any, as
contemplated by Section 2(b)) for the period of time elapsed from the date of
cumulation of dividends on such share to the date as of which such computation
is being made, less the amount of all such dividends paid in cash upon such
share. For purposes of this Article IV(B), Full Cumulative Dividends on any
share of the Series A Preferred Stock shall be deemed to have been paid in full
only when (i) all P-I-K Shares issued in respect thereof shall have been
redeemed for payment in full and in cash and (ii) all accrued and unpaid
dividends in respect thereof shall have been paid in full and in cash.
"Junior Stock" means any class of equity stock of the Corporation
------------
which is neither Series A Preferred Stock nor Parity Stock nor Senior Stock.
"Liquidation Amount" means $10,000.00 per share of Series A Preferred
------------------
Stock.
"Original Issuance Date" means the date on which the Corporation first
----------------------
issues shares of the Series A Preferred Stock.
"Outstanding" means, as used herein with reference to shares of Series
-----------
A Preferred Stock, such shares as have been issued but, as of the time of
determination thereof, have not yet been redeemed, purchased, converted or
otherwise acquired by the Corporation (including P-I-K Shares), other than any
of such shares held or beneficially owned at such time by the Corporation or any
Controlled Affiliate.
"Parity Stock" means any other series or class of preferred stock of
------------
the Corporation which is equal in liquidation priority and preference to the
Series A Preferred Stock.
"Permitted Purchase" means any purchase or other acquisition for value
------------------
by the Corporation or a Controlled Affiliate of shares of capital stock of the
Corporation pursuant to any of the following: (i) the redemption or conversion
of shares of Series A Preferred Stock in accordance with this Article IV(B),
(ii) the redemption or conversion of any other series of preferred stock
(whether Senior Stock, Parity Stock or Junior Stock) so long as such redemption
or conversion does not result in a Default, (iii) as may be required to comply
with, or to cure violations of, applicable law, or (iv) any program of the
Corporation or a Controlled Affiliate to purchase shares of Common Stock from
time to time or to facilitate the operation of any employee benefit plan of the
Corporation; provided that in connection with any purchases pursuant to the
--------
foregoing clause (iv), the aggregate amount thereof shall not exceed five
percent (5%) of the then issued and
88
<PAGE>
outstanding shares of Common Stock in any consecutive 12-month period.
Notwithstanding the foregoing, such term shall not include any acquisition
referred to in clauses (ii), (iii) or (iv) of the foregoing sentence at any time
while there exists a Default.
"Person" means a corporation, an association, a partnership, an
------
organization, a business, a trust, an individual, a government or political
subdivision thereof or a governmental agency.
"P-I-K Shares" has the meaning indicated in Section 2(d).
------------
"Prime Rate" means the prime interest rate as publicly announced by
----------
Citibank, N.A. in New York.
"Reclassification" means that the Common Stock is changed into the
----------------
same or a different number or amount of other shares, other securities, cash or
other property. In the event of a Reclassification, the Series A Preferred
Stock shall become convertible into the same number or amount of other shares,
other securities, cash, or other property which would have been issuable,
deliverable, or payable on account of the Common Stock issuable upon the
conversion of the shares of the Series A Preferred Stock, assuming such shares
had been converted immediately prior to such Reclassification.
"Redemption Date" means each of the dates fixed by resolution of the
---------------
Board of Directors of the Corporation pursuant to Section 5 and specified in the
notice of redemption.
"Reorganization" means the merger of the Corporation with or into, or
--------------
the consolidation of the Corporation with, any other corporation, or the sale or
exchange of substantially all of the assets of the Corporation as an entirety to
any other Person. In the event of a Reorganization, the Series A Preferred
Stock shall become convertible into the same number or amount of other shares,
other securities, cash or other property of the Corporation or other Person
surviving or resulting from the Reorganization which would have been issuable,
deliverable, or payable on account of the Common Stock issuable upon conversion
of the shares of the Series A Preferred Stock, assuming such shares had been
converted immediately prior to such Reorganization.
"Restricted Combination" means any merger, combination or
----------------------
consolidation of the Corporation with any one or more Persons without regard to
the identity of the surviving or resulting entity, and also means any sale,
lease or other disposition of all or substantially all the assets or properties
of the Corporation or the liquidation or winding up of the Corporation, except
such term shall not include a merger or consolidation of the Corporation in
which the group of Persons who together hold at least a majority of the
outstanding shares of the Common Stock of the Corporation prior to such merger
or consolidation will receive (or will retain) in such transactions, voting
securities in the surviving or resulting entity that represent at least a
majority of the voting power of all voting securities of such surviving or
resulting entity.
89
<PAGE>
"Restricted Transaction" means any transaction in which the
----------------------
Corporation or any of its Subsidiaries or Affiliates is involved if, either
immediately prior to or upon and giving effect to such transaction (and related
occurrences), the Corporation is or would be in Default.
"Senior Stock" means any other series or class of preferred stock of
------------
the Corporation which is superior, in liquidation priority or preference, to the
Series A Preferred Stock.
"Subsidiary" means any corporation, of which not less than a majority
----------
of the capital stock ordinarily entitled to elect directors is owned by the
Corporation and/or one or more Subsidiaries.
"Wholly-Owned Subsidiary" means any subsidiary all the capital stock
-----------------------
of which (other than director's qualifying shares, if any) is owned by the
Corporation and/or one or more Wholly-Owned Subsidiaries.
(C) Common Stock.
------------
1. Dividend Rights. Subject to the rights of holders of all classes
---------------
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 3 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
---------
Except as otherwise provided in these Articles of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the Corporation.
90
<PAGE>
ARTICLE VI
----------
The number of directors of the Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the shareholders.
ARTICLE VII
-----------
Elections of directors need not be by written ballot unless a
shareholder demands election by ballot at a meeting of shareholders or the
Bylaws of the Corporation shall so require.
ARTICLE VIII
------------
The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled to
vote may vote all the shares held by that shareholder for each of the several
nominees for director up to the number of directors to be elected. The
shareholder may not cast more votes for any single nominee than the number of
shares held by that shareholder. This Article VIII shall become effective only
when the Corporation becomes a "listed corporation" within the meaning of the
California Corporations Code Section 301.5(d).
ARTICLE IX
----------
Meetings of shareholders may be held within or without the State of
California, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
California at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
---------
(A) Liability of Directors. The liability of the directors of the
----------------------
Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
(B) Indemnification of Directors, Officers and Agents. The
-------------------------------------------------
Corporation is authorized to indemnify the directors and officers of this
Corporation to the fullest extent permissible under California law. The
Corporation is authorized to provide indemnification of agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject only to applicable limits set forth
in Section 204 of the California Corporations Code with respect to actions for
breach of duty to the Corporation and its shareholders.
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<PAGE>
(C) Repeal or Modification. Any repeal or modification of the
----------------------
foregoing provisions of this Article X shall be prospective and shall not
adversely affect any right of indemnification or liability of a director,
officer or agent of the Corporation relating to acts or omissions occurring
prior to such repeal or modification.
ARTICLE XI
----------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned Incorporator of the Corporation
has executed these Articles of Incorporation on October 31, 1995.
Dated: October 31, 1995
/s/ LOREEN P. COLLINS
---------------------------
Loreen P. Collins
Incorporator
ACKNOWLEDGMENT
I hereby declare that I am the person who executed the foregoing
Articles of Incorporation, which execution is my own act and deed.
Executed on October 31, 1995.
/s/ LOREEN P. COLLINS
--------------------------
Loreen P. Collins
Incorporator
92
<PAGE>
BYLAWS
OF
MYCOGEN CALIFORNIA, INC.
ARTICLE I - OFFICES
-------------------
1.1 PRINCIPAL EXECUTIVE OFFICE. The principal executive offices of Mycogen
--------------------------
California, Inc., a California corporation (the "Corporation"), shall be at such
place, inside or outside, the State of California as the Board of Directors of
the Corporation (the "Board") may determine from time to time.
1.2 OTHER OFFICES. The Corporation may also have offices at such other places
-------------
as the Board may from time to time designate, or as the business of the
Corporation may require.
ARTICLE II - SHAREHOLDERS' MEETINGS
-----------------------------------
2.1 ANNUAL MEETINGS. The annual meeting of the Shareholders of the Corporation
---------------
(the "Shareholders", or individually, a "Shareholder") for the election of
Directors of the Corporation (the "Directors", or individually, a "Director") to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting shall be held between thirty (30) and
one hundred twenty (120) days following the end of the fiscal year of the
Corporation (the first such meeting to be held after the end of fiscal year 1995
of the Corporation) and at such place as may be determined by the Board. If the
annual meeting of the Shareholders is not held as herein prescribed, the
election of Directors may be held at any meeting thereafter called pursuant to
these Bylaws of the Corporation (the "Bylaws").
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<PAGE>
2.2 SPECIAL MEETINGS. Special meetings of the Shareholders, for any purpose
----------------
whatsoever, unless otherwise prescribed by statute, may be called at any time by
the chairman of the Board of the Corporation (the "Chairman"), the president of
the Corporation (the "President"), or by the Board, or by one or more
Shareholders holding not less than ten percent (10%) of the voting power of the
Corporation.
2.3 PLACE. All meetings of the Shareholders shall be at any place within or
-----
without the State of California designated either by the Board or by written
consent of the holders of a majority of the shares entitled to vote thereat,
given either before or after the meeting. In the absence of any such
designation, Shareholders' meetings shall be held at the principal executive
office of the Corporation.
2.4 NOTICE. Notice of meetings of the Shareholders shall be given in writing
------
to each Shareholder entitled to vote, either personally or by first-class mail
(unless the Corporation has five hundred (500) or more Shareholders determined
as provided by the California Corporations Code on the record date for the
meeting, in which case notice may be sent by third-class mail) or other means of
written communication, charges prepaid, addressed to the Shareholder at the
Shareholder's address appearing on the books of the Corporation or given by the
Shareholder to the Corporation for the purpose of notice. Notice of any such
meeting of Shareholders shall be sent to each Shareholder entitled thereto not
less than ten (10) (or, if sent by third-class mail, thirty (30)) nor more than
sixty (60) days before the meeting. Said notice shall state the place, date and
hour of the meeting and, (a) in the case of special meetings, the general nature
of the business to be transacted, and no other business may be transacted, or
(b) in the case of annual meetings,
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<PAGE>
those matters which the Board, at the time of the mailing of the notice, intends
to present for action by the Shareholders, but subject to Section 601(f) of the
California Corporations Code, any proper matter may be presented at the meeting
for Shareholder action, and (c) in the case of any meeting at which Directors
are to be elected, the names of the nominees intended at the time of the mailing
of the notice to be presented by management for election.
2.5 ADJOURNED MEETINGS. Any Shareholders' meeting may be adjourned from time
------------------
to time by the vote of the holders of a majority of the voting shares present at
the meeting either in person or by proxy. Notice of any adjourned meeting need
not be given unless a meeting is adjourned for forty-five (45) days or more from
the date set for the original meeting.
2.6 QUORUM. The presence in person or by proxy of the persons entitled to vote
------
a majority of the shares entitled to vote at any meeting constitutes a quorum
for the transaction of business. The Shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough Shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of Shareholders may be adjourned from time to time by
the vote of a majority of the shares, the holders of which are either present in
person or represented by proxy thereat, but no other business may be transacted,
except as provided above.
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<PAGE>
2.7 CONSENT TO SHAREHOLDER ACTION. Any action which may be taken at any
-----------------------------
meeting of Shareholders may be taken without a meeting and without prior notice,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted; provided,
however, that (a) unless the consents of all Shareholders entitled to vote have
been solicited in writing, notice of any Shareholder approval without a meeting
by less than unanimous written consent shall be given as required by the
California Corporations Code, and (b) Directors may not be elected by written
consent except by unanimous written consent of all shares entitled to vote for
the election of Directors. Any written consent may be revoked by a writing
received by the Secretary of the Corporation (the "Secretary") prior to the time
that written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
2.8 WAIVER OF NOTICE. The transactions of any meeting of Shareholders,
----------------
however called and noticed, and wherever held, are as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice, or a consent to the holding of the meeting, or an approval of
the minutes thereof. All such waivers, consents, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
2.9 VOTING. The voting at all meetings of Shareholders need not be by ballot,
------
but any qualified Shareholder before the voting begins may demand a stock vote
whereupon such
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<PAGE>
stock vote shall be taken by ballot, each of which shall state the name of the
Shareholder voting and the number of shares voted by such Shareholder, and if
such ballot be cast by a proxy, it shall also state the name of any such proxy.
At any meeting of the Shareholders, every Shareholder having the right
to vote shall be entitled to vote in person, or by proxy appointed in a writing
subscribed by such Shareholder and bearing a date not more than eleven (11)
months prior to said meeting, unless the writing states that it is irrevocable
and satisfies Section 705(e) of the California Corporations Code, in which event
it is irrevocable for the period specified in said writing and said Section
705(e).
2.10 RECORD DATES. In the event the Board fixes a day for the determination of
------------
Shareholders of record entitled to vote as provided in Section 5.1 of Article V
of these Bylaws, then, subject to the provisions of the General Corporation Law
of the State of California only persons in whose name shares entitled to vote
stand on the stock records of the Corporation at the close of business on such
day shall be entitled to vote.
If no record date is fixed, (a) the record date for determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders shall
be at the close of business on the business day next preceding the day notice is
given or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; (b) the record date for
determining Shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board is necessary, shall be the
day on which the first written consent is given; and (c) the record date for
determining Shareholders for any other purpose shall be at the close of business
on the day on which
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<PAGE>
the Board adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of Shareholders of record entitled to notice of or to
vote at a meeting of Shareholders shall apply to any adjournment of the meeting
unless the Board fixes a new record date for the adjourned meeting, but the
Board shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days.
2.11 CUMULATIVE VOTING FOR ELECTION OF DIRECTORS. Provided the candidate's
-------------------------------------------
name has been placed in nomination prior to the voting and one or more
Shareholders has given notice at the meeting prior to the voting of the
Shareholder's intent to cumulate the Shareholder's votes, every Shareholder
entitled to vote at any election for Directors shall have the right to cumulate
such Shareholder's votes and give one candidate a number of votes equal to the
number of Directors to be elected multiplied by the number of votes to which the
Shareholder's shares are normally entitled, or distribute the Shareholder's
votes on the same principle among as many candidates as the Shareholder shall
think fit. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of Directors to be elected by
such shares are elected. Notwithstanding anything to the contrary contained
herein, if the Corporation becomes a "listed corporation" within the meaning of
Section 301.5 of the California Corporations Code, the election of Directors by
the Shareholders shall not be by cumulative voting and instead, (i) each
Shareholder entitled to vote may vote all the shares held by the Shareholder for
each of the several nominees for Director up to the number of Directors
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<PAGE>
to be elected; and (ii) each Shareholder may not cast more votes for any single
nominee than the number of shares held by that Shareholder.
ARTICLE III - DIRECTORS
-----------------------
3.1 POWERS. Subject to any limitations in the Articles of Incorporation of the
------
Corporation filed August 29, 1995 (the "Articles of Incorporation") or these
Bylaws and to any provision of the California Corporations Code requiring
Shareholder authorization or approval for a particular action, the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised by, or under the direction of, the Board. The Board may delegate the
management of the day-to-day operation of the business of the Corporation to a
management company or other person provided that the business and affairs of the
Corporation shall be managed and all corporate powers shall be exercised, under
the ultimate direction of the Board.
3.2 NUMBER, TENURE AND QUALIFICATIONS. The number of Directors which shall
---------------------------------
constitute the whole board shall not be less than five (5) nor more than nine
(9). The first Board shall consist of six (6) Directors until changed by a
duly adopted resolution of the Board or the Shareholders. Directors shall hold
office until the next annual meeting of Shareholders and until their respective
successors are elected. If any such annual meeting is not held, or the
Directors are not elected thereat, the Directors may be elected at any special
meeting of Shareholders held for that purpose. Directors need not be
Shareholders.
3.3 REGULAR MEETINGS. A regular annual meeting of the Board shall be held
----------------
without other notice than this Bylaw immediately after, and at the same place
as, the annual
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<PAGE>
meeting of Shareholders. The Board may provide for other regular meetings from
time to time by resolution.
3.4 SPECIAL MEETINGS. Special meetings of the Board may be called at any time
----------------
by the Chairman, the President, the Secretary, or any two Directors. Written
notice of the time and place of all special meetings of the Board shall be
delivered personally or by telephone or telegraph to each Director at least
forty-eight (48) hours before the meeting, or sent to each Director by first-
class mail, postage prepaid, at least four (4) days before the meeting. Such
notice need not specify the purpose of the meeting. Notice of any meeting of
the Board need not be given to any Director who signs a waiver of notice,
whether before or after the meeting, or who attends the meeting without
protesting prior thereto, or at its commencement, the lack of notice to such
Director.
3.5 PLACE OF MEETINGS. Meetings of the Board may be held at any place within
-----------------
or without the State of California, which has been designated in the notice, or
if not stated in the notice or there is no notice, the principal executive
office of the Corporation or as designated by the resolution duly adopted by the
Board.
3.6 PARTICIPATION BY TELEPHONE. Members of the Board may participate in a
--------------------------
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another.
3.7 QUORUM. A majority of the Directors shall constitute a quorum. In the
------
absence of a quorum, a majority of the Directors present may adjourn any meeting
to another time and place. If a meeting is adjourned for more than twenty-four
(24) hours, notice of any
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<PAGE>
adjournment to another time or place shall be given prior to the time of the
reconvened meeting to the Directors who were not present at the time of
adjournment.
3.8 ACTION AT MEETING. Every act or decision done or made by a majority of the
-----------------
Directors present at a meeting duly held at which a quorum is present is the act
of the Board. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of Directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
3.9 WAIVER OF NOTICE. The transactions of any meeting of the Board, however
----------------
called and noticed or wherever held, are as valid as though had at a meeting
duly held after regular call and notice if a quorum is present and if, either
before or after the meeting, each of the Directors not present signs a written
waiver of notice, a consent to holding the meeting, or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
3.10 ACTION WITHOUT MEETING. Any action required or permitted to be taken by
----------------------
the Board may be taken without a meeting, if all members of the Board
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such Directors.
3.11 REMOVAL. The Board may declare vacant the office of a Director who has
-------
been declared of unsound mind by an order of court or who has been convicted of
a felony. The entire Board or any individual Director may be removed from
office without cause by a vote of Shareholders holding a majority of the
outstanding shares entitled to vote at an
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<PAGE>
election of Directors; provided, however, that unless the entire Board is
removed, no individual Director may be removed when the votes cast against
removal, or not consenting in writing to such removal, would be sufficient to
elect such Director if voted cumulatively at an election at which the same total
number of votes cast were cast (or, if such action is taken by written consent,
all shares entitled to vote were voted) and the entire number of Directors
authorized at the time of the Director's most recent election were then being
elected. In the event an office of a Director is so declared vacant or in case
the Board or any one or more Directors be so removed, new Directors may be
elected at the same meeting.
Notwithstanding anything to the contrary contained herein, if the
Corporation becomes a "listed corporation" pursuant to Section 301.5 of the
California Corporations Code, a Director may not be removed if the votes cast
against removal of the Director, or not consenting in writing to the removal,
would be sufficient to elect the Director if voted cumulatively (without regard
to whether shares may otherwise be voted cumulatively) at an election at which
the same total number of votes were cast (or, if the action is taken by written
consent, all shares entitled to vote were voted) and either the number of
Directors elected at the most recent annual meeting of Shareholders, or if
greater, the number of Directors for whom removal is being sought, were then
being elected.
3.12 RESIGNATIONS. Any Director may resign effective upon giving written
------------
notice to the Chairman, the President, the Secretary or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
102
<PAGE>
3.13 VACANCIES. Except for a vacancy created by the removal of a Director, all
---------
vacancies in the Board, whether caused by resignation, death or otherwise, may
be filled by a majority of the remaining Directors, though less than a quorum,
or by a sole remaining Director, and each Director so elected shall hold office
until his successor is elected at an annual, regular or special meeting of the
Shareholders. Vacancies created by the removal of a Director may be filled only
by approval of the Shareholders. The Shareholders may elect a Director at any
time to fill any vacancy not filled by the Directors. Any such election by
written consent requires the consent of a majority of the outstanding shares
entitled to vote.
3.14 COMPENSATION. No stated salary shall be paid Directors, as such, for
------------
their services, but, by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of such Board; provided that nothing herein contained shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
3.15 COMMITTEES. The Board may, by resolution adopted by a majority of the
----------
authorized number of Directors, designate one or more committees, each
consisting of two (2) or more Directors, to serve at the pleasure of the Board.
The Board may designate one or more Directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number
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<PAGE>
of Directors. Any such committee, to the extent provided in the resolution of
the Board, shall have all the authority of the Board in the management of the
business and affairs of the Corporation, except with respect to (a) the approval
of any action requiring Shareholders' approval or approval of the outstanding
shares, (b) the filling of vacancies on the Board or any committee, (c) the
fixing of compensation of Directors for serving on the Board or a committee, (d)
the adoption, amendment or repeal of Bylaws, (e) the amendment or repeal of any
resolution of the Board which by its express terms is not so amendable or
repealable, (f) a distribution to Shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board, and (g) the
appointment of other committees of the Board or the members thereof.
ARTICLE IV - OFFICERS
---------------------
4.1 NUMBER AND TERM. The officers of the Corporation shall be a President, a
---------------
Secretary, an Assistant Secretary and a Chief Financial Officer (which may be a
Vice President responsible for finance), all of which shall be chosen by the
Board. In addition, the Board may appoint a Chairman of the Board, a Chief
Executive Officer, one or more Vice Presidents and such other officers as may be
deemed expedient for the proper conduct of the business of the Corporation, each
of whom shall have such authority and perform such duties as the Board may from
time to time determine. The officers to be appointed by the Board shall be
chosen annually at the regular meeting of the Board held after the annual
meeting of Shareholders and shall serve at the pleasure of the Board. If
officers are not chosen at such meeting of the Board, they shall be chosen as
soon
104
<PAGE>
thereafter as shall be convenient. Each officer shall hold office until his
successor shall have been duly chosen or until his removal or resignation.
4.2 INABILITY TO ACT. In the case of absence or inability to act of any
----------------
officer of the Corporation and of any person herein authorized to act in his
place, the Board may from time to time delegate the powers or duties of such
officer to any other officer, or any Director or other person whom it may
select.
4.3 REMOVAL AND RESIGNATION. Any officer chosen by the Board may be removed at
-----------------------
any time, with or without cause, by the affirmative vote of a majority of all
the members of the Board. Any officer chosen by the Board may resign at any
time by giving written notice of said resignation to the Corporation. Unless a
different time is specified therein, such resignation shall be effective upon
its receipt by the Chairman, the President, the Secretary or the Board.
4.4 VACANCIES. A vacancy in any office for any cause may be filled by the
---------
Board for the unexpired portion of the term.
4.5 CHAIRMAN OF THE BOARD. The Chairman shall preside at all meetings of the
---------------------
Board.
4.6 PRESIDENT. The President shall be the chief operating officer, the general
---------
manager and chief executive officer (unless a separate Chief Executive Officer
is elected by the Board) of the Corporation, subject to the control of the
Board, and as such shall preside at all meetings of Shareholders, shall have
general supervision of the affairs of the Corporation, shall sign or countersign
or authorize another officer to sign all certificates, contracts, and other
instruments of the Corporation as authorized by the Board, shall
105
<PAGE>
make reports to the Board and Shareholders, and shall perform all such other
duties as are incident to such office or are properly required by the Board.
4.7 VICE PRESIDENT. In the absence of the President, or in the event of such
--------------
officer's death, disability or refusal to act, the Vice President, or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their selection, or in the absence of any such
designation, then in the order of their selection, shall perform the duties of
President, and when so acting, shall have all the powers and be subject to all
restrictions upon the President. Each Vice President shall have such powers and
discharge such duties as may be assigned from time to time by the President or
by the Board.
4.8 SECRETARY. The Secretary shall see that notices for all meetings are given
---------
in accordance with the provisions of these Bylaws and as required by law, shall
keep minutes of all meetings, shall have charge of the seal and the corporate
books, and shall make such reports and perform such other duties as are incident
to such office, or as are properly required by the President or by the Board.
The Assistant Secretary or the Assistant Secretaries, in the order of
their seniority, shall, in the absence or disability of the Secretary, or in the
event of such officer's refusal to act, perform the duties and exercise the
powers and discharge such duties as may be assigned from time to time by the
President or by the Board.
4.9 CHIEF FINANCIAL OFFICER. The Chief Financial Officer may also be
-----------------------
designated by the alternate title of "Vice President-Finance" or "Treasurer."
The Chief Financial Officer shall have custody of all moneys and securities of
the Corporation and shall keep regular
106
<PAGE>
books of account. Such officer shall disburse the funds of the Corporation in
payment of the just demands against the Corporation, or as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
Board from time to time as may be required of such officer, an account of all
transactions as Chief Financial Officer and of the financial condition of the
Corporation. Such officer shall perform all duties incident to such office or
which are properly required by the President or by the Board.
The Assistant Chief Financial Officer or the Assistant Chief Financial
Officers, in the order of their seniority, shall, in the absence or disability
of the Chief Financial Officer, or in the event of such officer's refusal to
act, perform the duties and exercise the powers of the Chief Financial Officer,
and shall have such powers and discharge such duties as may be assigned from
time to time by the President or by the Board.
4.10 SALARIES. The salaries of the officers shall be fixed from time to time
--------
by the Board and no officer shall be prevented from receiving such salary by
reason of the fact that such officer is also a Director of the Corporation.
4.11 OFFICERS HOLDING MORE THAN ONE OFFICE. Any two or more offices may be
-------------------------------------
held by the same person.
4.12 APPROVAL OF LOANS TO OFFICERS. The Corporation may, upon the approval of
-----------------------------
the Board alone, make loans of money or property to, or guarantee the
obligations of, any officer of the Corporation or its parent or subsidiary,
whether or not a Director, or adopt an employee benefit plan or plans
authorizing such loans or guaranties provided that (i) the Board determines that
such a loan or guaranty or plan may reasonably be expected to benefit the
Corporation, (ii) the Corporation has outstanding shares held of record by one
107
<PAGE>
hundred (100) or more persons (determined as provided in Section 605 of the
California Corporation Code) on the date of approval by the Board, and (iii) the
approval of the Board is by a vote sufficient without counting the vote of any
interested Director or Directors.
ARTICLE V - MISCELLANEOUS
-------------------------
5.1 RECORD DATE AND CLOSING OF STOCK BONDS. The Board may fix a time in the
--------------------------------------
future as a record date for the determination of the Shareholders entitled to
notice of and to vote at any meeting of Shareholders or entitled to receive
payment of any dividend or distribution, or any allotment of rights, or to
exercise rights in respect to any other lawful action. The record date so fixed
shall not be more than sixty (60) nor less than ten (10) days prior to the date
of the meeting or event for the purposes of which it is fixed. When a record
date is so fixed, only Shareholders of record at the close of business on that
date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise the rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
Corporation after the record date.
The Board may close the books of the Corporation against transfers of
shares during the whole or any part of a period of not more than sixty (60) days
prior to the date of a Shareholders' meeting, the date when the right to any
dividend, distribution, or allotment of rights vests, or the effective date of
any change, conversion or exchange of shares.
5.2 CERTIFICATES. Certificates of stock shall be issued in numerical order and
------------
each Shareholder shall be entitled to a certificate signed in the name of the
Corporation by the
108
<PAGE>
Chairman or the President or a Vice President, and the Chief Financial Officer,
the Secretary or an Assistant Secretary, certifying to the number of shares
owned by such Shareholder. Any or all of the signatures on the certificate may
be facsimile. Prior to the due presentment for registration of transfer in the
stock transfer book of the Corporation, the registered owner shall be treated as
the person exclusively entitled to vote, to receive notifications and otherwise
to exercise all the rights and powers of an owner, except as expressly provided
otherwise by the laws of the State of California.
5.3 REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
----------------------------------------------
corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
Corporation by the Chairman, the President or any Vice President and the Chief
Financial Officer or the Secretary or an Assistant Secretary.
5.4 ANNUAL REPORTS. If the Corporation has more than one hundred (100) holders
--------------
of record of its shares (as determined by California Corporations Code Section
605) then the Annual Report to Shareholders shall be prepared and distributed as
described in the California Corporations Code Section 1501, provided, however,
if the Corporation has less than one hundred (100) holders of record of its
shares then the requirements under California Corporations Code Section
1501shall be expressly waived and dispensed with by the Corporation.
5.5 AMENDMENTS. Bylaws may be adopted, amended, or repealed by the vote or the
----------
written consent of Shareholders entitled to exercise a majority of the voting
power of the Corporation. Subject to the right of Shareholders to adopt, amend,
or repeal Bylaws,
109
<PAGE>
Bylaws may be adopted, amended, or repealed by the Board, except that a Bylaw
amendment thereof changing the authorized number of Directors may be adopted by
the Board only if these Bylaws permit an indefinite number of Directors and the
Bylaw or amendment thereof adopted by the Board changes the authorized number of
Directors within the limits specified in these Bylaws.
5.6 INDEMNIFICATION OF CORPORATE AGENTS. The Corporation shall indemnify each
-----------------------------------
of its Directors, officers, employees and agents against expenses, judgments,
fines, settlements and other amounts, actually and reasonably incurred by such
person by reason of such person's having been made or having threatened to be
made a party to a proceeding to the fullest extent permissible by the provisions
of Section 317 of the California Corporations Code. The indemnification
provided by this section shall not be deemed exclusive of any rights to which
those seeking indemnification may be entitled under any bylaw, agreement, vote
of Shareholders or disinterested Directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of the Corporation. The rights to indemnity
hereunder shall continue as to a person who has ceased to be a Director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of the person.
Expenses incurred by a Director in defending a civil or criminal action,
suit or proceeding by reason of the fact that he is or was a Director of the
Corporation (or was serving at the Corporation's request as a Director or
officer of another corporation) shall be paid by the Corporation in advance of
the final disposition of such action, suit or
110
<PAGE>
proceeding upon receipt of an undertaking by or on behalf of such Director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized by relevant sections of the
California Corporations Code.
I, Carlton J. Eibl, Secretary of Mycogen California, Inc., a California
corporation, do hereby certify that the foregoing Bylaws of Mycogen California,
Inc. are the duly adopted Bylaws of said Corporation as they are in effect on
the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 29th day of
August, 1995.
/s/ CARLTON J. EIBL
--------------------------------
Carlton J. Eibl, Secretary
111
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
112
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-55508 and S-3 No. 33-58721) and in the related Prospectuses of
our report dated October 17, 1995, with respect to the consolidated financial
statements of Mycogen Corporation, included in the Annual Report (Form 10-K) for
the year ended August 31, 1995.
Ernst & Young LLP
San Diego, California
October 27, 1995
113
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
114
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jerry Caulder, Carlton J. Eibl and James A.
Baumker and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign this Form 10-K or any and
all amendments to this Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<S> <C> <C>
Chairman, Chief
Executive Officer and
/s/ JERRY CAULDER Director October 19, 1995
- -----------------
(Jerry Caulder)
/s/ THOMAS J. CABLE Director October 19, 1995
- -------------------
(Thomas J. Cable)
/s/ GEORGE R. HILL Director October 19, 1995
- ------------------
(George R. Hill)
/s/ KENNETH H. HOPPING Director October 19, 1995
- ----------------------
(Kenneth H. Hopping)
/s/ DAVID H. RAMMLER Director October 19, 1995
- --------------------
(David H. Rammler)
/s/ A. JOHN SPEZIALE Director October 19, 1995
- --------------------
(A. John Speziale)
</TABLE>
115
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<CASH> 5,687
<SECURITIES> 11,913
<RECEIVABLES> 29,987
<ALLOWANCES> 2,585
<INVENTORY> 33,633
<CURRENT-ASSETS> 79,902
<PP&E> 66,350
<DEPRECIATION> 16,704
<TOTAL-ASSETS> 159,608
<CURRENT-LIABILITIES> 21,208
<BONDS> 1,905
<COMMON> 19
0
0
<OTHER-SE> 216,436
<TOTAL-LIABILITY-AND-EQUITY> 159,608
<SALES> 106,169
<TOTAL-REVENUES> 113,218
<CGS> 70,985
<TOTAL-COSTS> 70,985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 292
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,443)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
