<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1998
-----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Oberlin Drive, San Diego, California 92121
------------------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
(619) 453-8030
----------------------------------------------------
(Registrant's telephone number, including area code)
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 [_]
36,109,280 shares of Common Stock were outstanding as of April 7, 1998.
1
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Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Mycogen Corporation
Interim Consolidated Condensed Statements of Operations
(Dollars in thousands, except per share data)
Three months ended Six months ended
February 28, February 28,
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net operating revenues....................... $ 68,741 $ 70,281 $ 89,655 $ 86,571
Contract and other revenues.................. 2,252 2,048 4,362 4,458
-------- -------- -------- --------
Total revenues......................... 70,993 72,329 94,017 91,029
-------- -------- -------- --------
Costs and expenses:
Cost of operating revenues................. 42,618 44,169 55,270 54,317
Selling and marketing...................... 12,481 11,147 23,201 19,291
Research and development................... 6,840 5,672 12,968 10,581
General and administrative................. 3,899 5,083 8,431 8,259
Amortization of intangible assets.......... 787 766 1,559 1,516
Other charges ............................. 18,896 1,519 20,677 3,459
-------- -------- -------- --------
Total costs and expenses............... 85,521 68,356 122,106 97,423
-------- -------- -------- --------
Operating income (loss) ..................... (14,528) 3,973 (28,089) (6,394)
Interest income and expense, net........... (575) (166) (1,359) (67)
Minority interest.......................... 153 - 153 -
Exchange gain (loss)....................... 3 (2) 49 38
-------- -------- -------- --------
Net income (loss) before taxes............... (14,947) 3,805 (29,246) (6,423)
Credit (provision) for income taxes.......... 30 (1,122) (214) (1,122)
-------- -------- -------- --------
Net income (loss)............................ $(14,917) $ 2,683 $(29,460) $ (7,545)
======== ======== ======== ========
Net income (loss) per share:
Basic ..................................... $ (.46) $ .09 $ (.92) $ (.25)
======== ======== ======== ========
Diluted ................................... $ (.46) $ .08 $ (.92) $ (.25)
======== ======== ======== ========
Weighted average number of shares:
Basic ..................................... 32,699 30,668 31,991 30,597
======== ======== ======== ========
Diluted ................................... 32,699 33,300 31,991 30,597
======== ======== ======== ========
</TABLE>
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
2
<PAGE>
Mycogen Corporation
Consolidated Condensed Balance Sheets
(Dollars in thousands, except par value data)
<TABLE>
<CAPTION>
February 28, August 31,
1998 1997
Assets (Unaudited) (Note)
------------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 2,219 $ 1,712
Securities available-for-sale............................... 500 499
Accounts and notes receivable, net of allowances............ 48,153 42,102
Inventories................................................. 84,382 57,135
Prepaid expenses and other current assets................... 7,095 5,306
--------- ---------
Total current assets...................................... 142,349 106,754
Net property, plant and equipment............................. 98,635 87,170
Net intangible assets......................................... 32,496 32,990
Other assets.................................................. 19,333 12,773
--------- ---------
Total assets.................................................. $ 292,813 $ 239,687
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Advances from Dow AgroSciences.............................. $ 3,217 $ 13,500
Short-term borrowings....................................... 3,412 5,102
Accounts payable............................................ 23,446 21,100
Accrued compensation and related taxes...................... 5,650 6,124
Deferred revenues........................................... 23,147 8,246
Other current liabilities................................... 9,390 12,857
--------- ---------
Total current liabilities................................. 68,262 66,929
Long-term liabilities......................................... 14,401 15,544
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares authorized;
36,083,030 and 31,381,344 shares issued and outstanding at
February 28, 1998 and August 31, 1997, respectively....... 36 31
Additional paid in capital.................................. 427,067 344,676
Deficit..................................................... (216,953) (187,493)
--------- ---------
Total stockholders' equity................................ 210,150 157,214
--------- ---------
Total liabilities and stockholders' equity.................... $ 292,813 $ 239,687
========= =========
</TABLE>
Note: The balance sheet at August 31, 1997 has been derived from the audited
financial statements at that date.
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
3
<PAGE>
Mycogen Corporation
Interim Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
February 28, February 28,
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities:
Net loss...................................................... $(29,460) $ (7,545)
Items which did not use cash:
Depreciation ............................................... 4,099 2,540
Amortization of intangible assets........................... 1,559 1,517
Other charges............................................... 9,821 -
Other items not requiring cash.............................. 1,153 2,816
Changes in operating assets and liabilities:
Accounts and notes receivable............................... (6,181) (13,708)
Inventories................................................. (27,247) (22,157)
Prepaid expenses and other current assets................... (1,941) (3,941)
Accounts payable............................................ 2,347 6,603
Deferred revenues........................................... 14,901 18,886
Other current liabilities................................... (6,120) (7,789)
-------- --------
Cash used in operating activities......................... (37,069) (22,778)
-------- --------
Investing activities:
Capital expenditures.......................................... (14,156) (13,766)
Net cash paid for business combinations and intangibles....... (13,897) (37,703)
Change in other assets........................................ 1,905 378
Proceeds from sales of available-for-sale securities.......... - 28,140
Proceeds from maturities of available-for-sale securities..... - 3,703
-------- --------
Cash used in investing activities......................... (26,148) (19,248)
-------- --------
Financing activities:
Net change in borrowings from Dow AgroSciences................ (10,283) -
Net change in other short-term borrowings..................... (1,690) (5,439)
Payments on long-term borrowings.............................. (1,500) (97)
Proceeds from long-term borrowings............................ - 15,000
Proceeds from sale of common stock............................ 78,596 1,854
Purchase of the Company's common stock........................ (1,350) -
-------- --------
Cash provided by financing activities....................... 63,773 11,318
-------- --------
Effect of exchange rate changes on cash and cash equivalents.... (49) 52
-------- --------
Increase (decrease) in cash and cash equivalents................ 507 (30,656)
Cash and cash equivalents at beginning of period................ 1,712 35,854
-------- --------
Cash and cash equivalents at end of period...................... $ 2,219 $ 5,198
======== ========
</TABLE>
See accompanying Notes to Interim Consolidated Condensed Financial Statements.
4
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (continued).
Mycogen Corporation
-------------------
Notes to Interim Consolidated Condensed Financial Statements
General
- -------
The accompanying financial statements include the accounts of Mycogen
Corporation and its wholly-owned and majority-owned subsidiaries ("the
Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation. The interim financial statements have been
prepared by the Company, without audit, according to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
accompanying unaudited financial statements contain all adjustments (which
include only normal recurring adjustments) necessary to state fairly the
financial position, results of operations and cash flows as of and for the
periods indicated.
It is suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Annual Report and
Form 10-K of the Company for the fiscal year ended August 31, 1997.
The Company's business is highly seasonal. Operating revenues are expected to
be concentrated principally in the quarters ending in February and May as a
result of the North American agricultural growing season. Consequently,
operating revenues and results of operations for the three months and six months
ended February 28, 1998 are not indicative of operating revenues and results to
be expected for a full fiscal year.
Reclassifications
- -----------------
Certain amounts in the 1997 Consolidated Condensed Financial Statements have
been reclassified to conform to the 1998 presentation.
Dow AgroSciences LLC
- --------------------
In January 1998, Dow AgroSciences LLC ("Dow AgroSciences") purchased 3,762,038
shares of the Company's common stock for $75 million. As of February 28, 1998,
Dow AgroSciences owned 22,766,157 shares of the Company's common stock or 63%.
On March 17, 1998, Dow AgroSciences purchased two million shares of the
Company's common stock from Pioneer Hi-Bred International, Inc. ("Pioneer")
increasing its ownership interest to 69%, and may acquire additional shares
subject to certain restrictions.
5
<PAGE>
Phytogen Seed Company, LLC
- --------------------------
In December 1997, the Company acquired rights to certain patents and patent
applications ("Intellectual Property") from J.G. Boswell Company ("Boswell") and
agreed to form a joint venture, Phytogen Seed Company, LLC ("Phytogen"), to
develop and market cotton seed internationally. Mycogen paid Boswell $12
million in cash and contributed its cotton breeding materials in return for the
Intellectual Property and a 51% interest in Phytogen. Boswell contributed its
cotton seed business and cotton breeding materials in return for the remaining
49% interest. The joint venture was accounted for as a purchase and,
accordingly, the assets and liabilities of Phytogen are included in the
Consolidated Balance Sheet as of February 28, 1998 and the results of operations
from the acquisition date are reflected in the Consolidated Statements of
Operations. The formation of the joint venture resulted in a purchase price
allocation to in-process technology of $7.6 million, which was written-off upon
acquisition. Additionally, the purchase of the Intellectual Property resulted
in a $3.0 million in-process technology charge. The purchase price allocation is
an estimate that is subject to final adjustments which are not expected to be
material.
Investment in Verneuil Holding
- ------------------------------
In January 1998, the Company obtained an additional 16.25% interest in Verneuil
Holding, S.A. ("Verneuil") in exchange for the issuance of 483,439 shares of
common stock to Dow AgroSciences valued at $9.4 million. The Company now owns
35% of Verneuil and the investment is now accounted for under the equity method.
The Company's investment in Verneuil totaled $18.1 million, which includes
related investment costs and translation adjustments.
Supplemental Schedule of Non-Cash Investing and Financing Activities
- --------------------------------------------------------------------
Non-cash investing and financing activities are as follows:
In conjunction with the acquisition of a 51% ownership interest in Phytogen and
the additional investment in Verneuil in fiscal 1998 and the acquisition of
Morgan Seeds, the initial investment in Verneuil and the purchase of SVO high
oleic sunflower oil assets from the Lubrizol Corporation in fiscal 1997, non-
cash investing and financing activities were as follows:
<TABLE>
<CAPTION>
Six months ended February 28,
-----------------------------
(In thousands) 1998 1997
---------- ----------
<S> <C> <C>
Business acquisitions and investments:
Fair value of assets acquired, other than
cash $ 1,385 $ 48,741
Purchase of intangibles 12,512 744
Liabilities assumed -- (15,396)
Investment in Verneuil 9,400 9,569
Net assets and liabilities of Mycogen S.A.
and Mycogen SRL, excluding cash,
exchanged for Verneuil -- (5,955)
Common stock issued (9,400) --
------- --------
Net cash paid $13,897 $ 37,703
======= ========
</TABLE>
6
<PAGE>
Inventories
- -----------
Inventories are comprised of:
<TABLE>
<CAPTION>
February 28, August 31,
(In thousands) 1998 1997
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 8,436 $ 5,969
Work in process 24,107 14,742
Finished goods 51,839 36,424
------- -------
Total $84,382 $57,135
======= =======
</TABLE>
Accumulated Depreciation and Amortization
- ------------------------------------------
Accumulated depreciation of property, plant and equipment was $23.6 million and
$19.8 million at February 28, 1998 and August 31, 1997, respectively.
Accumulated amortization of intangible assets was $13.3 million and $11.8
million at February 28, 1998 and August 31, 1997, respectively.
Stockholders' Equity
- --------------------
The following table summarizes the transactions affecting common stock
outstanding and additional paid in capital:
<TABLE>
<CAPTION>
Common Stock Additional Paid in
(In thousands) Number of Shares Capital
---------------- ------------------
<S> <C> <C>
Balance at August 31, 1997 31,381 $344,676
Private placement with Dow AgroSciences 3,762 74,996
Stock exchanged for additional investment in Verneuil 483 9,400
Issuance of common stock under stock plans 715 3,896
Compensation related to employee stock plans -- 635
Common stock surrendered in connection with the (104) (2,060)
exercise of stock options
Severance agreement (see Other Charges) -- (2,045)
Purchase of Company's common stock (154) (1,350)
Translation adjustment recorded in accounting for the
investment in Verneuil under the equity method -- (1,030)
Other changes in cumulative translation adjustment -- (51)
------ --------
Balance at February 28, 1998 36,083 $427,067
====== ========
</TABLE>
Income Taxes
- ------------
A provision for income taxes of $.2 million related to Argentine taxes was
recognized for the six months ended February 28, 1998. A provision for income
tax was not recognized for other jurisdictions as the effective tax rate for the
current fiscal year for all other jurisdictions is expected to be zero due to
the available net operating loss carryforwards for which a valuation allowance
had previously been provided.
Net Income (Loss) Per Share
- ---------------------------
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
Per Share." SFAS No. 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes
7
<PAGE>
any dilutive effects of options and unvested restricted stock. Diluted earnings
per share is similar to the previously reported fully diluted earnings per
share. Earnings per share amounts for all periods presented conform to the SFAS
No. 128 requirements, and, where necessary, have been restated.
The following table sets forth the computation of basic and diluted weighted-
average shares.
<TABLE>
<CAPTION>
Three months ended February 28, Six months ended February 28,
------------------------------------------ ------------------------------------------
(In thousands) 1998 1997 1998 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Denominator for basic net
income (loss) per share-
weighted-average shares 32,699 30,668 31,991 30,597
------------------ ------------------ ------------------ ------------------
Effect of dilutive securities:
Stock options -- * 2,472 -- * -- *
Restricted stock -- * 160 -- * -- *
------------------ ------------------ ------------------ ------------------
Dilutive potential common
shares -- 2,632 -- --
------------------ ------------------ ------------------ ------------------
Denominator for diluted net
income (loss) per share-
adjusted weight-average
shares and assumed conversions 32,699 33,300 31,991 30,597
================== ================== ================== ==================
</TABLE>
* Common shares issuable under employee stock options and unvested restricted
shares are not included in the computation of net loss per common share
because their effect was not dilutive.
Other Charges
- -------------
<TABLE>
<CAPTION>
Three months ended February 28, Six months ended February 28,
-------------------------------- -------------------------------
(In thousands) 1998 1997 1998 1997
-------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
In-process technology $11,865 $ -- $11,865 $ --
Patent litigation fees 7,031 1,519 10,857 2,133
Severance agreement -- -- (2,045) --
Equity in loss of investees -- -- -- 1,326
-------------- ------------ ------------- -----------
Total $18,896 $1,519 $20,677 $3,459
============== ============ ============= ===========
</TABLE>
An in-process technology charge of $10.6 million was recorded in connection with
the formation of Phytogen and the purchase of Intellectual Property. The
Company also purchased patent rights related to disease resistance in plants
which resulted in a $1.3 million charge to in-process technology.
The Seed segment incurred $10.9 million and $2.1 million of expenses in the six
months ended February 28, 1998 and 1997, respectively, to enforce its patent
position and license rights to insect resistance and herbicide tolerance
technology in plants. The Company expects to continue to incur significant
legal expenses in enforcing its positions in these matters. Because of the
nature of its business, the Company is subject to pending and threatened legal
actions which arise out of the normal course of its business. Based on
information furnished by legal counsel, management believes the outcome of the
existing pending and threatened legal actions will not have an adverse effect on
the financial condition of the Company.
8
<PAGE>
In connection with the resignation of the Company's former chief executive
officer, Dr. Caulder, Dow AgroSciences entered into an agreement with Dr.
Caulder in May 1997 whereby Dr. Caulder had the option to sell to Dow
AgroSciences any shares acquired by Dr. Caulder through the surrender of his
stock options to the Company at prices based on a specified formula. For the
six months ended February 28, 1998, a credit of $2.0 million was recognized
based on the revaluation of 389,445 options. Dr. Caulder exercised the option
in February 1998, therefore, no future charges or credits will be recorded.
Subsequent Events
- -----------------
In May 1996, the Company filed suit against Monsanto Company ("Monsanto")
seeking damages for breach of contract and interference with the Company's seed
business as a result of Monsanto's refusal to honor a contract to license
certain herbicide tolerance and insect resistance technology to the Company. In
March 1998, a judgment was entered on a jury verdict that awarded the Company
$174.9 million in compensatory damages. The Company expects Monsanto to appeal
the judgment within 60 days.
In April 1998, Dow AgroSciences extended the maturity date of its $75 million
unsecured advance agreement to the Company to September 30, 1999.
9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Acquisitions
In December 1997, the Company acquired Intellectual Property from Boswell
and agreed to form a joint venture to develop and market cotton seed
internationally. Mycogen paid Boswell $12 million in cash and contributed its
cotton breeding materials in return for the Intellectual Property and a 51%
interest in Phytogen. Boswell contributed its cotton seed business and cotton
breeding materials.
In January 1998, the Company obtained an additional 16.25% ownership
interest in Verneuil in exchange for the issuance of 483,439 shares of the
Company's common stock to Dow AgroSciences valued at $9.4 million. The
Company's investment in Verneuil totaled $18.1 million, which includes related
investment costs and translation adjustments.
Seasonality
The Company's businesses are highly seasonal as described in each segment
summary. Revenues, expenses, income and losses for the three and six months
ended February 28, 1998 are not indicative of the revenues, expenses and income
or loss to be expected for a full fiscal year.
Summary
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from
projections in forward-looking statements as a result of many factors. Varying
climatic conditions can shift revenues between quarters. Weather also can
affect operating revenues, seed costs, pest populations, the effectiveness of
seeds and pesticides, seed production yields, commodity prices and growers'
planting decisions. 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. These and other factors may
affect the Company's ability to increase operating revenues and achieve
profitability. The Company also must continue to invest in commercializing
existing products and in discovering and developing new products, so the trend
in losses from operations may continue.
Segment Operating Revenues and Income (Loss)
<TABLE>
<CAPTION>
Three months ended Six months ended
February 28, February 28,
(In thousands) 1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Operating Revenues:
Seed........................... $64,722 $65,671 $74,439 $72,573
Crop Protection................ 4,184 4,610 15,381 13,998
Intersegment Sales............. (165) -- (165) --
------- ------- ------- -------
Total $68,741 $70,281 $89,655 $86,571
======= ======= ======= =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
February 28, February 28,
(In thousands) 1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Income (Loss)
Seed........................... $ 5,663 $ 9,318 $ (6,502) $ 1,526
Crop Protection................ (667) (2,241) 1,286 (1,758)
--------- --------- ---------- -------
Total operations............ 4,996 7,077 (5,216) (232)
Corporate...................... (628) (1,585) (2,196) (2,703)
Other credits (charges):
In-process technology.......... (11,865) -- (11,865) --
Patent litigation fees......... (7,031) (1,519) (10,857) (2,133)
Severance agreement............ -- -- 2,045 --
Equity in loss of investees.... -- -- -- (1,326)
Net interest and other......... (419) (168) (1,157) (29)
-------- ------- -------- -------
Net income (loss)
before taxes............ (14,947) 3,805 (29,246) (6,423)
Credit (provision) for
income taxes.................. 30 (1,122) (214) (1,122)
-------- ------- -------- -------
Net income (loss)......... $(14,917) $ 2,683 $(29,460) $(7,545)
======== ======= ======== =======
</TABLE>
For the first six months of fiscal 1998, the Company's operating revenues
have increased slightly over fiscal 1997 providing an improvement in gross
margins of $2.1 million. This improvement was offset by higher patent
litigation fees and in-process technology charges and increased research and
development and sales and marketing efforts.
Seed revenues have increased due to the addition of Roundup Ready soybean
varieties in North America and the formation of Phytogen. This increase was
largely offset by lower seed sales in Argentina. Seed results are lower due to
higher investments in marketing and sales, breeding and testing and trait
development. Results were also impacted by higher discards and obsolescence in
Argentina. Seed revenues are discussed in more detail under the caption Seed
Operating Revenues.
The improvement in Crop Protection operations is due to improved gross
margins and lower expenses attributable to the restructuring of the biopesticide
unit in August 1997 and higher revenues. Crop Protection revenues are discussed
in more detail under the caption Crop Protection Operating Revenues.
Corporate expenses include costs associated with the pursuit of
acquisitions and strategic alliances and other corporate activities.
The write off of in-process technology of $11.9 million relates primarily
to the formation of Phytogen and the purchase of Intellectual Property.
The Company's results continue to be negatively impacted by legal fees and
expenses associated with enforcing its intellectual property rights. The
Company is currently a party to numerous separate actions arising out of
disputes over patent and license rights for insect resistance and herbicide
tolerance technology in plants. The Company will continue to assert and enforce
its positions in these matters and, therefore, will continue to incur
significant associated expenses.
A credit of $2.0 million was recognized in the first fiscal 1998 quarter
related to the revaluation of certain options as discussed in further detail
under the Other Charges footnote of Item 1.
The equity in loss of investees in fiscal 1997 reflects expenses incurred
by the Company's European subsidiaries through the date that they were
transferred to Verneuil.
11
<PAGE>
Net interest expense has increased due to higher levels of borrowing in
fiscal 1998 attributable to funds used for business acquisitions and capital
expenditures in fiscal 1997. The provision for income taxes relates primarily
to withholding taxes associated with the Company's Argentine subsidiaries.
Seed Operating Revenues
<TABLE>
<CAPTION>
Three months ended Six months ended
February 28, February 28,
(In thousands) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Domestic Seed:
Corn......................... $34,502 $33,953 $34,377 $34,008
Soybean...................... 12,357 7,830 12,360 7,724
Cotton....................... 1,632 -- 1,632 --
Sunflower.................... 545 686 735 695
Sorghum and other............ 3,608 2,773 4,292 2,962
Argentina...................... 2,879 11,672 11,355 17,550
Specialty oil.................. 8,700 7,495 8,958 8,221
Other international............ 499 1,262 730 1,413
------- ------- ------- -------
Total $64,722 $65,671 $74,439 $72,573
======= ======= ======= =======
</TABLE>
Soybean revenues are ahead of last year mainly due to the addition of
Roundup Ready varieties in 1998 and heavier shipments of soybean in the first
half of 1998. Cotton revenues in 1998 are attributable to the formation of
Phytogen in fiscal 1998. The increase in sorghum and other revenues was largely
related to increased alfalfa sales. The decrease in Argentina seed revenues is
primarily due to a 20% decrease in corn planting acres which resulted in higher
returns. Other international revenues declined primarily due to lower export
sales of sunflower. The majority of North American seed operating revenues are
recorded during the second and third fiscal quarters. Similarly, the majority of
Argentina seed operating revenues are recorded during the first and fourth
fiscal quarters. Operating revenues include estimates of seed product returns.
Adjustments to reconcile those earlier estimates are made in the fourth quarter
for North America and in the second quarter for Argentina.
Crop Protection Operating Revenues
<TABLE>
<CAPTION>
Three months ended Six months ended
February 28, February 28,
(In thousands) 1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
SoilServ....................... $2,911 $2,815 $12,590 $11,265
Biopesticides.................. 1,273 1,795 2,791 2,733
------ ------ ------- -------
Total........................ $4,184 $4,610 $15,381 $13,998
====== ======= ======= =======
</TABLE>
On a year-to-date basis, Soilserv sales increased $1.3 million due to heavier
insect pressure in fiscal 1998 attributable to wetter weather conditions. Lower
sales of MVP(R) technical powder to Kubota and a one time sale of consumer
products in fiscal 1997 accounted for the decline in Biopesticides revenues for
the three months ended February 28, 1998. Biopesticides revenues for the six
month
12
<PAGE>
period ended February 28, 1998, remained consistent with the prior year due to
higher sales of MVP(R) bioinsecticide in international markets and higher
domestic sales of Mattch(R) bioinsecticide in the first quarter of fiscal 1998.
The majority of Crop Protection revenues are recorded during the third and
fourth fiscal quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and securities available-for-sale
increased by $.5 million to $2.2 million during the six months ended February
28, 1998. Cash proceeds of $78.6 million from the sale of the Company's common
stock were used for operating activities of $37.1 million, cash paid for
Phytogen and intangibles of $13.9 million, capital expenditures of $14.2
million, payments of $10.3 million on advances from Dow AgroSciences and $3.2
million on other borrowings. The Company may borrow up to $75 million from Dow
AgroSciences, of which $71.8 million was unused at February 28, 1998. Any
advances from Dow AgroSciences are due September 30, 1999. The Company
maintains a $12.8 million unsecured term loan due February 1, 2002, which bears
interest at a rate of 7.5% through February 1999. Additionally, the Company has
a $10 million bank line of credit facility, which expires February 28, 1999, to
fund portions of its seasonal working capital needs, all of which was unused at
February 28, 1998.
During the first six months ended February 28, 1998, the Company invested
$1.8 million in a new business system and spent $12.4 million on other capital
expenditures and expects to spend another $4.5 million and $8 million during the
remainder of fiscal 1998, respectively. The Company's new business system will
be year 2000 compliant.
Pioneer will provide $11 million in research and development funding near
the end of calendar year 1998 in accordance with a technology collaboration
agreement with the Company.
The Company is involved in various actions related to its patent positions
and plans to continue to spend resources as required to enforce its intellectual
property rights. The Company's success will depend in part on its ability to
obtain U.S. and foreign patent protection for its products. To date, the
Company has obtained numerous patents and has filed a large number of patent
applications in the U.S. and foreign jurisdictions relating to the Company's
technology. There can be no assurance that issued patent claims will be
sufficient to protect the Company's technology. The commercial success of the
Company also will depend in part on the Company's ability to avoid infringing
patents issued to competitors. If licenses are required, there can be no
assurance that the Company will be able to obtain such licenses on commercially
favorable terms, if at all. Litigation, which can result in substantial cost to
the Company, will also be necessary to enforce the Company's intellectual
property rights or to determine the scope and validity of third-party
proprietary rights.
The Company anticipates that its current cash position, revenue from
operations and contract and other revenues and funds from its existing lines of
credit 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. However, there can be no assurance that the Company
can raise additional capital under favorable terms, if at all.
13
<PAGE>
PART II - OTHER INFORMATION
Item 3. Legal Proceedings
On February 28, 1994, the U.S. Patent Office notified Mycogen's subsidiary,
Mycogen Plant Science, Inc. ("MPSI"), that an interference had been declared
with MPSI's broad application (USSN: 06/535,354) on Bacillus thuringiensis
("Bt") insect-resistant plants and Monsanto's narrow application on Bt insect
resistant tomatoes. The interference is proceeding in the Patent Office.
On May 19, 1995, MPSI filed suit in Federal District Court in San Diego,
California, claiming that Monsanto's use of synthetic Bt genes to develop and
sell seeds for insect resistant plants infringes Mycogen's U.S. patent covering
the process used to synthesize Bt genes. Certain claims within that suit were
dismissed by the court in 1995, and others are still pending.
On October 31, 1995, Plant Genetic Systems NV ("PGS") filed suit in the
Central District of North Carolina, claiming that Bt seed corn products
developed by Mycogen and Ciba Seeds infringe PGS's U.S. patent covering plants
containing truncated Bt genes. On August 13, 1996, PGS amended its lawsuit
against Mycogen by adding newly issued patent 5,545,565 relating to the
truncated Bt(2) gene sequence. The trial is set for November 18, 1998.
On March 19, 1996, Monsanto filed suit in Federal District Court in
Wilmington, Delaware, claiming that Mycogen's and Ciba Seeds' Bt corn products
infringe Monsanto's U.S. patent covering a modified Bt DNA sequence used to make
insect resistant plants. The trial is set for June 15, 1998.
On April 3, 1996, the California Court of Appeal, Fourth Appellate
District, reversed a San Diego County Superior Court ruling in a case brought by
MPSI against Monsanto in December 1993, and affirmed that MPSI is entitled to
exercise options to license certain herbicide tolerance and insect resistance
technology for plants from Monsanto. On May 8, 1996, Mycogen filed suit in
Superior Court in San Diego, seeking actual and punitive damages for breach of
contract and interference with Mycogen's seeds business as a result of
Monsanto's refusal to honor a contract to license certain herbicide tolerance
and insect resistance technology to MPSI. After a three week trial, a judgment
has been entered on March 26, 1998, on the jury verdict awarding Mycogen $174.9
million in compensatory damages. Mycogen expects Monsanto to appeal the judgment
within 60 days.
On April 30, 1996, DeKalb Genetics Corporation ("DeKalb") filed suit in
Federal District Court in Rockford, Illinois, claiming that Mycogen's and Ciba
Seeds' Bt seed corn products infringe DeKalb's patents covering Bt insect
resistance and glufosinate herbicide tolerance in corn. On July 23, 1996,
DeKalb filed a second suit in Rockford, Illinois, against Mycogen and Ciba Seeds
for infringement of U.S. patents 5,538,877 and 5,538,880 relating to insect
resistant and herbicide resistant corn. On August 27, 1996, DeKalb amended its
July 23, 1996, lawsuit to add newly issued U.S. patent 5,550,318.
On August 15, 1996, MPSI filed in Federal District Court in Wilmington,
Delaware, an action to reverse a U.S. Patent Office ruling in an interference
with Monsanto relating to truncated Bt gene technology. The U.S. Patent Office
ruled that the Monsanto and Mycogen patent applications did not overlap. This
suit was jointly dismissed by MPSI and Monsanto on March 26, 1998. MPSI agreed
to the dismissal because of the issuance to Mycogen on January 20, 1998 of U.S.
patent 5,710,020 that covered cells containing shortened or truncated Bt genes.
14
<PAGE>
On October 22, 1996, Mycogen filed suit in Federal District Court in
Wilmington, Delaware, claiming that insect resistant seed products developed and
marketed by Monsanto, DeKalb and Delta & Pine Land Company infringe U.S. patents
issued to Mycogen that covered modification of Bt genes for plant expression,
introduction of modified Bt genes into plant cells, and to plants and seeds
produced from cells transformed with modified Bt genes. On February 5, 1998, a
jury returned a verdict invalidating these Mycogen patents. Motions were filed
on February 20, 1998, by Mycogen to set aside the verdict. A hearing on these
motions is expected to take place later in 1998.
On January 21, 1997, Mycogen filed suit against Ecogen, Inc. in Federal
District Court in San Diego, California, for patent infringement of Mycogen's
U.S. patents 5,188,960 and 5,126,133 relating to Cry1F Bt toxins. This
technology relates to Mycogen Crop Protection's biopesticide products. On June
11, 1997, the U.S. Patent Office declared an interference between Mycogen's U.S.
patent 5,188,960 and an application filed by Ecogen, Inc. Monsanto now owns the
Ecogen, Inc. patent application. On March 10, 1998, Mycogen settled the patent
infringement action with Ecogen, Inc. and that lawsuit has been dismissed. The
interference to the Cry1F gene is still pending in the U.S. Patent Office
against Monsanto.
It is impossible to predict the outcome of each of the above described
legal actions. Management's analysis of the effect of these legal proceedings is
discussed in the Segment Operating Revenues and Income (Loss) section of Item 2.
These legal proceedings are 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.
a) The annual meeting of stockholders was held on January 8, 1998.
b) See c) below.
c) The following members of the Board of Directors were elected to
serve until the next Annual Meeting and until their successors are
elected and qualified:
<TABLE>
<CAPTION>
Number of Votes Cast
Affirmative Negative
----------- --------
<S> <C> <C>
Roy M. Barbee 30,669,918 0
Carlton J. Eibl 30,545,567 124,351
Perry J. Gehring 30,537,732 132,186
Nickolas D. Hein 30,539,137 130,781
George Khachatourians 30,669,918 0
Louis W. Pribila 30,538,112 131,806
J. Pedro Reinhard 30,669,918 0
Joseph P. Sullivan 30,669,918 0
G. William Tolbert 30,539,032 130,886
</TABLE>
The proposal to approve the amendment to the Company's Articles of
Incorporation to increase the total authorized number of shares
from 45,000,000 to 55,000,000 was approved by 30,159,612
affirmative votes vs. 339,602 negative votes vs. 34,957
abstentions vs. 135,746 broker non-votes.
15
<PAGE>
The proposal to approve an amendment to the Company's 1992 Stock
Option Plan (i) to reduce the number of shares subject to the
automatic grant of non-statutory stock options upon the
appointment or initial election of a Director, who is not a
current or prior employee of the Company, from 20,000 shares to
7,500 shares of common stock and (ii) to provide that, upon re-
election, all non-employee Directors (including officers and
employees of Dow AgroSciences) will automatically receive a grant
of a non-statutory stock option to purchase 7,500 shares of common
stock was approved by 24,525,469 affirmative votes vs. 6,051,452
negative votes vs. 31,808 abstentions vs. 61,188 broker non-votes.
The proposal to ratify the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the fiscal year ending
August 31, 1998 was approved by 30,614,144 affirmative votes vs.
39,035 negative votes vs. 16,739 abstentions vs. 0 broker non-
votes.
The proposal to ratify an amendment to the Automatic Grant Program
of the 1992 Stock Plan i) to change the exercisable period for
options from a series of three equal annual installments over the
optionee's period of service to the Company to one installment
that shall become exercisable one year after the grant date and
ii) to allow for options to remain exercisable for six months
after cessation of non-employee service was approved by 30,669,918
affirmative votes. There were no negative, abstentions, or broker
non-votes.
d) not applicable
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit 3.1 - Amended Articles of Incorporation
Exhibit 3.2 - Amended By-Laws
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements 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
-------------------
(Registrant)
Date: April 14, 1998 /s/ James. A. Baumker
-------------- ------------------------------------------
James A. Baumker
Vice President and Chief Financial Officer
17
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
MYCOGEN CORPORATION
Carlton J. Eibl and Michael W. Sund certify that:
FIRST: They are the President and Secretary, respectively, of Mycogen
Corporation., a California corporation.
SECOND: Section (A) of Article IV of the Articles of Incorporation shall be
amended to read as follows:
"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 fifty-five million (55,000,000) shares. Fifty million (50,000,000)
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."
THIRD: The amendment to change Section A of Article IV of the Articles of
Incorporation to read as set forth above has been approved by the board of
directors.
FOURTH: The amendment to change Section A of Article IV of the Articles of
Incorporation to read as set forth above was duly adopted in accordance with the
provisions of Section 902 of the California General Corporation Law. The total
number of outstanding shares of Common Stock (constituting the only class of
outstanding shares of the corporation) entitled to vote with respect to the
amendment was 31,449,506 and the percentage of shares voting in favor of the
amendment was approximately 97% of the outstanding shares, which amount exceeded
the 50% plus one vote required to approve the amendment.
We further declare under penalty of perjury under the laws of the state of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: January 12, 1998 /s/ Carlton J. Eibl
-------------------
President
/s/ Michael W. Sund
-------------------
Secretary
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
<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
-1-
<PAGE>
Convertible Preferred Stock, Series A (the "Series A Preferred Stock"), 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 share, and any accrued dividends on the Series A
Preferred
-2-
<PAGE>
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 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
-3-
<PAGE>
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 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-
<PAGE>
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.
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.
-5-
<PAGE>
(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 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
-6-
<PAGE>
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 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,
-7-
<PAGE>
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.
(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
-8-
<PAGE>
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 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.
-9-
<PAGE>
"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.
"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
-10-
<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
----------------- --------------------
<C> <S>
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>
-11-
<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 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.
-12-
<PAGE>
"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.
"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.
-13-
<PAGE>
"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.
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.
-14-
<PAGE>
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.
(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.
-15-
<PAGE>
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 April 8, 1998.
Dated: April 8, 1998
/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 April 8, 1998.
/s/ Loreen P. Collins
---------------------
Loreen P. Collins
Incorporator
-16-
<PAGE>
EXHIBIT 3.2
FIRST AMENDED AND RESTATED
BYLAWS
OF
MYCOGEN CORPORATION
ARTICLE I - OFFICES
-------------------
1.1 Principal Executive Office. The principal executive offices of Mycogen
--------------------------
Corporation, 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 fifty (150) days following the end of the fiscal year of the
Corporation (the first such meeting was 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").
-1-
<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, 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
-2-
<PAGE>
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.
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
-3-
<PAGE>
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 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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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). As of January 19, 1998, the Board consisted of nine (9) Directors and
shall not be changed except 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, 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
-7-
<PAGE>
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 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
-8-
<PAGE>
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 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
-9-
<PAGE>
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.
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
-10-
<PAGE>
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 (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,
-11-
<PAGE>
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 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 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.
-12-
<PAGE>
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 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
-13-
<PAGE>
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
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.
-14-
<PAGE>
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, the registered owner
shall be treated as the person exclusively entitled to vote, to receive
notifications and otherwise to
-15-
<PAGE>
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, 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
-16-
<PAGE>
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 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.
-17-
<PAGE>
I, Michael W. Sund, Secretary of Mycogen Corporation, a California
corporation, do hereby certify that the foregoing Bylaws of Mycogen Corporation
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 12th day of
March, 1998.
/s/ Michael W. Sund
--------------------------
Michael W. Sund, Secretary
-18-
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