-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OdVl7A4mqgBNj9E1wdmYsZ3Xf2e8hr1kTG2TmkgU22I4T/syjLjECyobrD8AbnUK auqxaA/WD8d+1GR7H/P1SQ== 0001047469-98-035575.txt : 19980929 0001047469-98-035575.hdr.sgml : 19980929 ACCESSION NUMBER: 0001047469-98-035575 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980928 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MYCOGEN CORP CENTRAL INDEX KEY: 0000813742 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE SERVICES [0700] IRS NUMBER: 953802654 STATE OF INCORPORATION: CA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: SEC FILE NUMBER: 005-39279 FILM NUMBER: 98715489 BUSINESS ADDRESS: STREET 1: 5501 OBERLIN DR CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194538030 MAIL ADDRESS: STREET 1: 5501 OBERLIN DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92121 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DOW CHEMICAL CO /DE/ CENTRAL INDEX KEY: 0000029915 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 381285128 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 2030 DOW CENTER CITY: MIDLAND STATE: MI ZIP: 48674-2030 BUSINESS PHONE: 5176361000 MAIL ADDRESS: STREET 1: 2030 DOW CENTER CITY: MIDLAND STATE: MI ZIP: 48674-2030 SC 14D9/A 1 SC-14D9/A - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1) ______________________ MYCOGEN CORPORATION (Name of Subject Company) MYCOGEN CORPORATION (Name of Person Filing Statement) COMMON STOCK, PAR VALUE $0.001 PER SHARE (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) (Title of Class of Securities) 628452 10 4 (CUSIP Number of Class of Securities) CARLTON J. EIBL PRESIDENT MYCOGEN CORPORATION 5501 OBERLIN DRIVE SAN DIEGO, CA 92121-1718 (619) 453-8030 (Name, address and telephone number of person authorized to receive notice and communications on behalf of the person filing statement) _____________________ COPIES TO: NORMAN M. GOLD, ESQ. PETER H. LIEBERMAN, ESQ. Altheimer & Gray 10 South Wacker Drive Suite 4000 Chicago, Illinois 60606 (312) 715-4000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- This Amendment No. 1 amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 dated September 4, 1998 (the "Schedule 14D-9") of Mycogen Corporation, a California corporation (the "Company") with respect to a tender offer made by AgroSciences Acquisition Inc., a Delaware corporation (the "Purchaser"), which is a majority-owned subsidiary of Dow AgroSciences LLC, a Delaware limited liability company ("Parent"), and an indirect wholly-owned subsidiary of The Dow Chemical Company, a Delaware corporation ("TDCC"), to purchase all of the outstanding shares of common stock, par value $0.001 per share, of the Company (the "Common Stock" or "Shares") at a price of $28.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated September 4, 1998. Capitalized terms used herein and not defined here shall have the meaning ascribed to them in the Schedule 14D-9 and the schedules attached thereto. A. ITEM 3. IDENTITY AND BACKGROUND 1. The first paragraph of Item 3(b)(1) of Schedule 14D-9 is hereby restated as follows: "All information contained in this Statement or incorporated herein by reference concerning Purchaser, Parent or TDCC, or actions or events with respect to any of them, was provided by the Purchaser, Parent or TDCC, respectively. The Company believes that all such information included in the Schedule 14D-9, or incorporated herein, relating to Parent, Purchaser and TDCC is correct. Information contained in this Statement with respect to the Company and its advisors has been provided by the Company." B. ITEM 4. THE SOLICITATION OR RECOMMENDATION 1. The twenty-third paragraph of Item 4(b)(i) of Schedule 14D-9, which currently reads: "During the succeeding ten days, the parties exchanged correspondence regarding the presentations and conclusions of the financial advisors. During this period, Parent questioned the wide discrepancy between the projections presented by the Company's management to the Board in December 1997 and the projections included in the WP&Co. materials. Also during this period, the Special Committee received a report from Mr. Eibl regarding the view of the Company's management with respect to the financial advisors' reports, assumptions and conclusions. This report was provided by the Special Committee to Parent." is hereby amended by adding thereto the following: "This report (the "Management Report") supported the projections included in the WP&Co. materials, which were more favorable to the Company than the estimates presented to the Board in December 1997. In this regard, the Management Report stated that the Company's North American seed business is poised to significantly expand distribution channels and increase market share reach. The Management 2 Report also stated that the Company believes that its internal breeding programs are proving to be competitive. The Management Report noted the Company's recent successes in accessing South American markets (primarily Brazil) and in attracting interest from potential partners in Europe and South Africa. It was also noted that the Company was exploring possible alliances covering alfalfa, turf and vegetables. The Management Report further noted the Company's validation of plant disease resistance technology which has been in-licensed by the Company. The Company's recent successes in developing and acquiring access to potentially valuable new technologies were briefly summarized as were the Company's recent patent litigation successes. The Management Report also indicated that substantial additional investment was necessary in research and development to develop the Company's technology platforms. In light of these developments, the Management Report concluded that the Company's management supported more favorable projected results over a ten-year time frame for the business than those reflected in the projections which had been presented to the Board in December 1997." 2. The paragraph headed paragraph (ix) under Item 4(b)(2) of Schedule 14D-9 is hereby amended and restated as follows: "(ix) the written opinion of WP&Co. delivered to the Special Committee on August 31, 1998 (the "WP&Co. Opinion") to the effect that, subject to the various assumptions and limitations set forth in the WP&Co. Opinion, the $28.00 cash price to be received by the holders of shares of Common Stock (other than TDCC or its affiliates) pursuant to the Merger Agreement is fair to such holders from a financial point of view, and the report and analysis presented by WP&Co. In considering the WP&Co. Opinion, the Special Committee noted that the $28.00 cash price was below the range of valuations derived by WP&Co. for comparable transactions. In this regard, the Special Committee noted WP&Co.'s explanation that there were only four comparable transactions and that the comparability of those transactions was limited because all of the other parties whose securities were acquired were significantly larger companies in terms of sales, had greater market shares with respect to their principal products and were profitable companies. WP&Co. advised the Special Committee that comparable transactions were only one of the means of determining value and in this case not a particularly useful means to do so in light of the foregoing factors. The full text of the WP&Co. Opinion, which sets forth among other things, assumptions made, matters considered and limitations on the review undertaken, is attached hereto as Annex A and is incorporated herein by reference. The WP&Co. Opinion is directed to the Special Committee, addresses only the fairness of the consideration to be received by the Minority Stockholders from a financial point of view and does not constitute a recommendation to any such stockholder as to whether such stockholder should accept the Offer and tender its Shares. STOCKHOLDERS ARE URGED TO CAREFULLY READ THE WP&CO. OPINION AND THE "OPINION OF WP&CO." SECTION SET FORTH BELOW IN THEIR ENTIRETY;" 3 3. The second paragraph under the heading "Opinion of WP&Co." in Item 4(b)(2) of Schedule 14D-9 is hereby amended and restated as follows: "THE FULL TEXT OF THE WRITTEN OPINION OF WASSERSTEIN PERELLA, DATED AUGUST 31, 1998, WHICH SETS FORTH AMONG OTHER THINGS THE OPINIONS EXPRESSED, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION IS ATTACHED AS ANNEX A HERETO AND HOLDERS OF THE SHARES ARE URGED TO READ IT IN ITS ENTIRETY. WASSERSTEIN PERELLA'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES AS TO WHETHER OR NOT SUCH HOLDER SHOULD TENDER SHARES PURSUANT TO THE OFFER OR HOW SUCH HOLDER SHOULD VOTE OR OTHERWISE ACT IN RESPECT OF THE OFFER, THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY AND SHOULD NOT BE RELIED UPON BY ANY HOLDER AS SUCH A RECOMMENDATION. THE SUMMARY OF THE OPINION OF WASSERSTEIN PERELLA SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION ATTACHED AS ANNEX A." 4. The following paragraphs are hereby added as a seventh paragraph and an eighth paragraph under the heading "Opinion of WP&Co." in Item 4(b)(2) of Schedule 14D-9: Preliminary drafts dated June 25, 1998, July 20, 1998, July 27, 1998 and August 3, 1998 of the final valuation report dated August 31, 1998 were presented to and discussed with the Special Committee on or about such dates. See Item 4(b)(i) above. Between June 25, 1998 and August 31, 1998, Wasserstein Perella conducted due diligence with respect to the Company to refine its valuation analysis. Based upon its ongoing due diligence, Wasserstein Perella refined the discount rate, perpetuity growth rate and EBIT exit multiple assumptions used in the discounted cash flow analyses for the Company's various business segments, which had the effect of reducing the per share value of the Company in some instances and had the effect of increasing the per share value of the Company in other instances. The discounted cash flow analyses in the preliminary presentations did not include certain cost savings, synergies, research and development costs, litigation expenses and other miscellaneous items that were taken into account in the August 31, 1998 report, which had the effect of reducing the per share value of the Company in some instances and had the effect of increasing the per share value of the Company in other instances. The draft reports dated June 25, 1998, July 20, 1998 and July 27, 1998 were preliminary in nature and subject to revision and completion and, as a result, were not material to the Special Committee's negotiations of the terms of the contemplated transactions or its determination that the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement are advisable and fair to, and in the best interests of, the Company and the Minority Stockholders. On the other hand, the Special Committee did consider the August 3, 1998 preliminary report to be material to its negotiations of the contemplated transactions and its determination that the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement are advisable and fair to, and in the best interests of, the Company and the Minority Stockholders. However, the August 3, 1998 preliminary report did not include the impact of the recent erosion of the Company's market share which was reflected in Wasserstein Perella's final valuation report. As stated in Wasserstein Perella's August 31, 1998 report, compilation of the Company's fiscal year 1998 financial results revealed that North American and Argentine seed sales and market share would be significantly below projected levels. The discounted cash flow analysis in Wasserstein Perella's August 31, 1998 report took this new information into account and reduced the projected market share growth assumptions, which had the effect of reducing the per share value of the Company derived from the discounted cash flow analysis by approximately $1.00 per Share. 4 5. The following paragraph is hereby added as a fourth paragraph under the subheading "Comparable Transaction Analysis." under the heading "Opinion of WP&Co." of Item 4(b)(2) of Schedule 14D-9: "WP&Co. advised the Special Committee that the comparability of these transactions to the Offer and the Merger was limited by the fact that each of the four companies whose securities were acquired was substantially larger than the Company in terms of sales, had a greater market share than the Company with respect to its principal products and was profitable." 6. The paragraph under the subheading "Composite Range." under the heading "Opinion of WP&Co." in Item 4(b)(2) of Schedule 14D-9 is hereby amended and restated as follows: "COMPOSITE RANGE. At the August 31, 1998 meeting of the Special Committee, WP & Co. provided the Special Committee with a composite range of per share values of $25.00 to $35.00. In deriving this composite range, WP & Co. applied its professional judgment to the foregoing analyses taking into account, among other things, that (i) the Company historically has failed to achieve its operating projections and the projection provided to WP & Co. by management of the Company were significantly higher than those included in the Company's 1997 business plan, (ii) the Company is projecting net operating losses for the next several years, (iii) due to the fact that the Company is projecting net losses for the next several years, the inherent uncertainty associated with the success and timing of scientific research activities and the historical uncertainty associated with the Company's cash flows, selection of appropriate discount rates for purposes of the DCF analyses set forth above involved a greater than usual degree of subjective judgment, and (iv) the Company's competitors generally are significantly larger, better established companies with much greater resources, larger market capitalization, greater market share and a history of profits." C. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 29. Fairness Opinion of Wasserstein Perella & Co., Inc. dated Autgust 31, 1998. Exhibit 38. Memorandum of Understanding dated September 3, 1998 SIGNATURE After reasonable inquiry and to the best on my knowledge and belief, I hereby certify that the information set forth in this statement is true, complete and correct. MYCOGEN CORPORATION By: /s/ Carlton J. Eibl ------------------------------------- Name: Carlton J. Eibl Title: PRESIDENT Dated: September 25, 1998 6 EX-99.29 2 EXHIBIT 99(29) [LOGO] August 31, 1998 Special Committee of the Board of Directors Mycogen Corporation 5501 Oberlin Drive San Diego, CA 92121 Members of the Special Committee of the Board: You have asked us to advise you with respect to the fairness, from a financial point of view, to the holders (other than The Dow Chemical Company and its affiliates (collectively, the "Dow Group")) of shares of common stock, par value $.001 per share (the "Shares"), of Mycogen Corporation, a California corporation (the "Company"), of the consideration to be received by such holders in the Transactions (as defined below) pursuant to the Agreement and Plan of Merger, dated as of August 31, 1998, by and among the Company, Dow AgroSciences LLC ("Parent") and AgroSciences Acquisition Inc. ("Acquisition") (the "Merger Agreement"). The Merger Agreement provides for, among other things, a cash tender offer (the "Tender Offer") by Acquisition to acquire all of the outstanding Shares, other than Shares held by members of the Dow Group, at a price of $28.00 per Share, net to the seller in cash (the "Cash Price"), and for a subsequent merger of Acquisition with and into the Company pursuant to which each outstanding Share (other than as provided in the Merger Agreement) will be converted into the right to receive the Cash Price (the "Merger" and, together with the Tender Offer, the "Transactions"). The terms and conditions of the Transactions are set forth in more detail in the Merger Agreement. In connection with rendering our opinion, we have reviewed the financial terms and provisions of a draft of the Merger Agreement, and for purposes hereof, we have assumed that the financial terms and provisions of the final form of the Merger Agreement will not differ in any material respect from the draft provided to us. We also reviewed the Exchange and Purchase Agreement, dated January 15, 1996, among the Company, Agrigenetics, Inc., DowElanco and United Agriseeds, Inc. (the "Exchange Agreement"), including the Dow Group's rights and obligations thereunder both if the Transactions are completed and not completed. We further reviewed and analyzed certain publicly available business and financial information relating to the Company for recent years and interim periods to date, as well as certain internal financial and operating information, financial forecasts, projections and analyses prepared by or on behalf of the Company and provided to us for purposes of our analysis. We have met with certain representatives of the Company and the Dow Group to review and discuss such information and, among other matters, the Company's business, financial condition, results of operations and prospects. [LOGO] III-1 Special Committee of the Board of Directors August 31, 1998 Page 2 We have reviewed and considered certain financial and stock market data relating to the Company, and we have compared that data with similar data for certain other companies, the securities of which are publicly traded, that we believe may be relevant or comparable in certain respects to the Company or one or more of its businesses or assets, and we have reviewed and considered the financial terms of certain recent acquisitions and business combination transactions in the seed and agrobiotech industries specifically, and in other industries generally, which we believe to be reasonably comparable to the Transactions or otherwise relevant to our inquiry. We have also performed such other studies, analyses and investigations and reviewed such other information as we considered appropriate for purposes of this opinion. In our review and analysis and in formulating our opinion, we have assumed and relied upon the accuracy and completeness of all the financial and other information provided to or discussed with us or publicly available, including the financial projections, forecasts, analyses and other information provided to us, and we have not assumed any responsibility for independent verification of, and express no opinion as to, any of such information. We also have relied upon the reasonableness and accuracy of the unadjusted projections, forecasts, analyses and other information furnished to us, and have assumed, with the Special Committee's consent, that such projections, forecasts and analyses and other information were reasonably prepared in good faith and on bases reflecting the best currently available judgments and estimates of the Company's management as of the date hereof and that management of the Company is unaware of any facts that would make the projections, forecasts and other information provided to us incomplete or misleading. We express no opinion with respect to such projections, forecasts and analyses or the assumptions on which they are based. We have not reviewed any of the books and records of the Company or Parent, and although we have visited selected facilities, we were not retained to conduct, nor have we assumed any responsibility for conducting, a physical inspection of the properties or facilities of the Company or Parent, or for making or obtaining an independent valuation or appraisal of the assets or liabilities of the Company or Parent, and no such independent valuation or appraisal was provided to us. Our opinion is necessarily based on economic and market conditions and other circumstances as they exist and can be evaluated by us as of the date hereof. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. Finally, we have assumed that the transactions described in the Merger Agreement will be consummated on the terms set forth therein, without material waiver or modification. In the context of our engagement, we have not been authorized to and have not solicited alternative offers for the Company or its assets, or investigated any other alternative transactions which may be available to the Company. We express no opinion with respect to the Third Party Sale Value of the Company as such term is defined in the Exchange Agreement. We are acting as financial advisor to the Special Committee of the Board of Directors of the Company (the "Special Committee") in connection with the proposed Transactions and will receive a fee for our services, including this opinion, a significant portion of which is contingent upon the completion of the proposed Transactions and the amount of consideration received by holders of the Shares (other than the Dow Group) in the Transactions. In the ordinary course of our business, we may actively trade the securities of the Company or members of the Dow Group for our own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. [LOGO] III-2 Special Committee of the Board of Directors August 31, 1998 Page 3 Our opinion addresses only the fairness from a financial point of view to the holders of the Shares (other than the members of the Dow Group) of the consideration to be paid to them pursuant to the Merger Agreement and does not address the Special Committee's underlying business decision to recommend the Transactions. This letter is for the benefit and use of the Special Committee in its consideration of the Transactions, and may not be used for any other purpose or reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose without our prior written consent (except as otherwise provided in the engagement letter, dated as of June 11, 1998, between the Company and us). We have been engaged and are acting solely as an advisor to the Special Committee and not as an advisor to or agent of any other person. This opinion does not constitute a recommendation to any stockholder with respect to whether such holder should tender Shares pursuant to the Tender Offer or as to how such holder should vote or otherwise act with respect to the Merger, and should not be relied upon by any stockholder as such a recommendation. Based upon and subject to the foregoing, including the various assumptions and limitations set forth herein it is our opinion that, as of the date hereof, the Cash Price to be received by the holders of Shares (other than members of the Dow Group) in the Transactions pursuant to the Merger Agreement is fair to such holders from a financial point of view. Very truly yours, [LOGO] III-3 EX-99.38 3 EXHIBIT 99(38) MEMORANDUM OF UNDERSTANDING WHEREAS, there are now pending several consolidated putative class action lawsuits in the Superior Court for the State of California, for the County of San Diego (the "Court"), consolidated under the lead case of LESLIE SUSSER V. MYCOGEN CORPORATION, ET AL., Case No. 720255 (the "Litigation"), brought on behalf of the public, minority shareholders of Mycogen Corporation ("Mycogen" or the "Company"); WHEREAS, the Complaint in the Litigation challenges certain actions allegedly taken or not taken by defendant Dow Agrosciences LLC ("DAS") the majority shareholder of Mycogen, The Dow Chemical Company ("TDCC"), DAS's parent, and certain members of Mycogen's Board of Directors, some of whom are also affiliated with DAS and TDCC, in connection with DAS's April 30, 1998, request to the board of directors of Mycogen to execute a contractual amendment to permit Mycogen to enter discussions with DAS regarding the possible acquisition by DAS of all of the outstanding shares of Mycogen common stock held by persons and entities other than DAS at a price of $20.50 per share (the "Proposed Transaction"); WHEREAS, following announcement of the Proposed Transaction, the board of directors of Mycogen formed a Special Committee of disinterested directors to negotiate with TDCC and DAS regarding the Proposed Transaction, which Special Committee retained legal and financial advisors to assist in evaluations and negotiations regarding the Proposed Transaction; WHEREAS, following the commencement of the Litigation and the filing of the complaints, plaintiffs' attorneys continued their investigative efforts, communicated at various times with counsel for the defendants, and, together with their independent financial advisor, were provided by defendants' counsel with, INTER ALIA, confidential financial evaluations, analyses and projections prepared by DAS's financial advisor, Salomon Smith Barney, and the Special Committee's financial advisor, Wasserstein Perella and Company, pertaining to Mycogen and the Proposed Transaction, so that plaintiffs, through their counsel, could convey their position as to a fair price for Mycogen shares. Plaintiffs attorneys and their independent financial advisor reviewed these materials and other publicly available materials filed with the Securities and Exchange Commission with respect to Mycogen in connection with their communications with defendants' counsel and their financial advisors; WHEREAS, the documents provided by defendants' counsel to plaintiffs' counsel included a draft letter written in August 1997 by Dr. Jerry Caulder, who had resigned in May 1997 as Chairman of the Board and Chief Executive Officer of Mycogen, and Thomas J. Cable, a director of the Company, alleging that TDCC and DAS had not acted in the best interest of the Company with regard to certain transactions, and various other documents relating to the matters discussed in the draft letter (collectively, the "Caulder documents"); WHEREAS, after review of the materials provided by the defendants to plaintiffs' counsel and their independent financial advisor, and plaintiffs' counsel's independent review of other pertinent materials, plaintiffs' counsel and their independent financial advisor, at the request of attorneys for the defendants, met in person with attorneys and financial advisors for TDCC, DAS and the Special Committee to discuss the Proposed Transaction and the ongoing negotiations between TDCC and DAS and the Special Committee and to present their views; WHEREAS, the pendency of the Litigation and the communications between counsel for plaintiffs and defendants and their respective financial advisors with respect to the above matters, were among the material causal factors that TDCC, DAS and the Special 2 Committee took into account in the course of the negotiations regarding enhancement of the terms of the Proposed Transaction; WHEREAS, on August 31, 1998, Mycogen and DAS jointly announced the execution of a definitive merger agreement (the "Merger Agreement") whereby DAS, through an acquisition subsidiary, will make a tender offer to acquire all of the shares of Mycogen common stock that DAS does not already own for a price of $28.00 per share (the "Tender Offer") and, following the Tender Offer, if DAS and the acquisition subsidiary obtain at least 90% of the total shares of Mycogen (on a fully diluted basis), the acquisition subsidiary will be merged into Mycogen and each remaining shareholder will receive $28.00 per share for each remaining share of Mycogen common stock; WHEREAS, plaintiffs' counsel, after consultation with their independent financial advisor, and after a candid exchange of views with defendants and their financial advisors, have agreed in principle, subject to the review of final transaction documents and confirmatory discovery as further set forth herein, that the enhanced terms of the transaction set forth in the Merger Agreement result in a transaction that is fair to and in the best interests of the plaintiffs and the minority shareholders of Mycogen, taking into account all factors affecting or potentially affected the value and business prospects of Mycogen; WHEREAS, defendants deny that they have committed any wrongdoing but nevertheless believe that is in their best interests to resolve the Litigation on the basis set forth herein, WHEREAS, counsel for the parties have reached an agreement in principle, subject to confirmatory discovery by plaintiffs in the Litigation and the other terms hereof, 3 providing for the settlement of the Litigation (the "Settlement") between and among plaintiffs, on behalf of themselves and the putative class of persons on behalf of whom plaintiffs have brought the Litigation, and all defendants, on the terms and subject to the conditions set forth below; NOW THEREFORE, as a result of the foregoing and the negotiations among counsel to the parties, the parties to the Litigation hereby agree as follows: 1. INCORPORATION OF RECITALS: The foregoing recitals are incorporated into and expressly made a part of this Memorandum of Understanding. 2. STIPULATION AND OTHER SETTLEMENT DOCUMENTS: The parties to the Litigation will attempt in good faith to agree upon and to execute as soon as practicable an appropriate stipulation of settlement (the "Stipulation") and such other documentation as may be required in order to obtain any and all necessary or appropriate court approvals of the Stipulation and the Settlement, upon and consistent with the terms set forth in this Memorandum of Understanding. The Stipulation will expressly provide, INTER ALIA: (1) CLASS CERTIFICATION: for class certification, conditional on final Court approval (as defined herein) of the Settlement, pursuant to Section 382 of the California Code of Civil Procedure of a class consisting of all persons (other than defendants and their affiliates) who owned common stock of Mycogen on April 30, 1998, and their successors in interest and transferees, immediate and remote through and including the closing of the Merger (the "Class"); (2) NO ADMISSION OF WRONGDOING: that all defendants have denied, and continue to deny, that they have committed any violations of law and that they are entering into 4 the Stipulation because the proposed Settlement would eliminate the burden and expense of further litigation; (3) RELEASE OF ALL CLAIMS: for the release of all claims that were asserted or could have been asserted in the Litigation by members of the Class, or any or all of them, and any and all other or additional such claims by or on behalf of Mycogen itself or the stockholders of Mycogen, against TDCC, DAS, Mycogen, the Special Committee, each of the members thereof, each of the current directors of Mycogen and any and all other defendants, as well as each of their present or former officers, directors, employees, agents, attorneys, accountants, financial advisors, commercial bank lenders, investment bankers, representatives, affiliates, associates, parents, subsidiaries, general and limited partners and partnerships, heirs, executors, administrators, successors and assigns, whether known or unknown, under state or federal law, and whether directly, derivatively, representatively or in any other capacity, arising out of, relating to, or in connection with, in whole or in part, the Proposed Transaction, the Tender Offer, the Merger, the Merger Agreement, the Caulder documents or any of the matters alleged in them, any disclosures made in connection with any of these, or any other matter affecting or alleged to affect the sufficiency or fairness of the consideration offered or paid in the Tender Offer or the Merger on any basis whatsoever, except for statutory appraisal rights (the "Settled Claims"). In addition, Mycogen shall release TDCC, DAS and each of their present or former officers, directors, employees, agents, representatives, affiliates, parents, subsidiaries, successors and assigns, from any and all claims arising out of, relating to, or in connection with, in whole or in part, their fiduciary duties as majority or controlling shareholders or directors of Mycogen, including without limitation any of the matters alleged in the Caulder documents. 5 (4) DISMISSAL: for the dismissal of the Litigation and all Settled Claims with prejudice and without costs to any party (except as set forth below); (5) OPT OUTS: that the defendants shall in their sole discretion have the option to terminate the Settlement if potential class members holding in excess of a certain number of shares of Mycogen (to be agreed upon in advance by the parties and set forth in the Stipulation) request exclusion from the class. 3. SUBMISSION TO THE COURT. The parties to the Litigation, through their counsel, will present the Stipulation and Settlement to the Court for hearing and approval as soon as practicable following appropriate notice to the members of the Class and will use their best efforts to final Court approval of the Stipulation and Settlement, including dismissal of the Litigation with prejudice and the release of all claims as set forth above. It is expressly acknowledged that the Tender Offer and the Merger may be closed prior to final Court approval of the Settlement. As used in this Memorandum of Understanding, "final COURT approval" of the Settlement means that the Court has entered an Order approving the Settlement in accordance with the Stipulation and that Order is finally affirmed on appeal or is no longer subject to appeal. 4. SUSPENSION OF PROCEEDINGS. Pending the preparation of the Stipulation and other documents and their presentation to the Court for its approval, the plaintiffs agree that they shall not move for preliminary injunction in the Litigation and all parties agree that all proceedings in the Litigation shall be suspended, except for the confirmatory discovery provided herein and any other matters as to which the parties may expressly agree. 5. CONFIRMATORY DISCOVERY. The parties shall conduct as expeditiously as possible such reasonable additional discovery as the parties agree or the Court orders is 6 necessary and appropriate to confirm the fairness and reasonableness of the terms of the Settlement. Plaintiffs presently anticipate that up to four depositions will be required in addition to relevant document production in response to the Request for Production of Documents previously served by plaintiff's counsel. Plaintiffs reserve the right to withdraw from the terms of this Memorandum of Understanding and the proposed Settlement in the event that such discovery reveals that the Settlement is not fair and reasonable. 6. ATTORNEYS' FEES. Conditional upon a Stipulation of Settlement being executed, Court approval of the Settlement (including the class certification and release) being granted, and the Court dismissing the Litigation with prejudice, all in accordance with the Stipulation of Settlement, plaintiffs' counsel of record in the Litigation will jointly apply at the settlement hearing to the Court for an award of attorneys' fees and expenses (including, but not limited to, fees and expenses of plaintiffs' counsels' independent financial advisor). The parties shall attempt in good faith to agree on a maximum dollar amount of plaintiffs' counsel's fees application and, in the event they so agree the fee application shall not exceed that maximum dollar amount and the defendants will not oppose the application. In the event the parties are unable to agree on a maximum dollar amount, plaintiffs' counsel may make a fee petition in any amount, without limitation, but the defendants shall reserve the rights to make any and all objections to the petition, or any part thereof, on any relevant grounds, plaintiffs shall reserve the right to oppose any and all such objections and pursue any additional relevant discovery pertaining thereto, and defendants shall reserve the right to oppose such discovery on any applicable ground. Subject to the conditions set forth in this Memorandum of Understanding and any order of the Court, any and all attorneys' fees and expenses awarded by the Court to 7 plaintiffs' counsel may be paid by any combination of TDCC, DAS, Mycogen and/or their successors in interest on behalf of all defendants to the order of Milberg Weiss Bershad Hynes & Lerach LLP, as receiving agent for plaintiffs' counsel, within ten days after final Court approval of the Settlement (as defined in paragraph 3 hereof) and dismissal, with prejudice and without costs or fees (except as otherwise set forth in this paragraph), of the Litigation. TDCC, DAS and/or Mycogen or their successors in interest shall also cause the dissemination of notice of the Settlement to the Class in such manner as the Court determines to be appropriate, and shall pay all costs and expenses incurred in providing such notice to the members of the Class. 7. CONDITIONS TO SETTLEMENT. The consummation of the Settlement is subject to (a) the completion by plaintiffs' counsel of confirmatory discovery as provided above; (b) confirmation by plaintiffs' counsel following such confirmatory discovery that the Settlement is fair and reasonable, (c) drafting and execution of the Stipulation and such other documentation as may be required to obtain final Court approval of the Settlement in a form satisfactory to the parties; (d) consummation of the Tender Offer, and (e) final Court approval of the Settlement and the Stipulation, including class certification, release, and dismissal with prejudice as set forth above. The consummation of the Merger shall not be a condition of this Memorandum of Understanding or of the Settlement. In the event that the Settlement is not consummated for any reason, neither this Memorandum of Understanding, anything contained herein, nor anything done or disclosed by any person or party in connection herewith shall be deemed to prejudice in any way the positions of any party with respect to the Litigation. In such event, neither the existence of this Memorandum of Understanding nor its contents shall be admissible in evidence or shall be referred to for any purpose in the Litigation or in any other litigation or proceeding. 8 8. COUNTERPARTS. This Memorandum of Understanding may be executed in counterpart by any of the signatories hereto, including by telecopier, and as so executed shall constitute one agreement. 9. GOVERNING LAW. This Memorandum of Understanding and the Settlement contemplated by it shall be governed by, and construed in accordance with, the laws of the State of California, without regard to California's conflict of law rules. 10. MODIFICATION. This Memorandum of Understanding may be modified or amended only by a writing signed by the signatories hereto. 11. BINDING EFFECT. This Memorandum of Understanding shall be binding upon and inure to the benefit of the parties and their respective agents, executors, heirs, successors and assigns. 9 12. CONFIDENTIALITY OF INFORMATION. All agreements by, between or among the parties, their counsel and their other advisors as to the confidentiality of information exchanged between or among them shall remain in full force and effect, and shall survive the execution of this Memorandum of Understanding and the consummation of the Settlement, if consummated, without regard to any of the conditions of the Settlement. Dated: September 3, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP By: /s/ Steven G. Schulman ---------------------------------------- STEVEN G. SCHULMAN SETH OTTENSOSER One Pennsylvania Plaza, 49th Floor New York, New York 10119 (212) 594-5300 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH STEVEN W. PEPICH RANDALL J. BARON 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 ABBEY, GARDY & SQUITIERI, LLP DATED: September 3, 1998 By: /s/ Mark C. Gardy ---------------------------------------- ARTHUR ABBEY MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 CO-LEAD COUNSEL FOR PLAINTIFFS 10 MAYER, BROWN & PLATT DATED: September 3, 1998 By: /s/ Bennett W. Lasko _______________________________________ HERBERT L. ZAROV BENNETT W. LASKO 190 South La Salle Street Chicago, IL 60603-3411 Telephone: 312/782-0600 MAYER, BROWN & PLATT FREDERICK S. LEVIN 350 South Grand Avenue 25th Floor Los Angeles, CA 90071 Telephone: 213/229-9500 ATTORNEYS FOR DEFENDANTS DOW AGROSCIENCES, THE DOW CHEMICAL CO. CARLTON J. EIBL, JOHN L. HAGAMAN, NICKOLAS D. HEIN, LOUIS W. PRIBILA, G. WILLIAM TOLBERT, J. PEDRO REINHARD, ROY M. BARBEE, WILLIAM C. SCHMIDT AND PERRY J. GEHRING ALTHEIMER & GRAY DATED: September 3, 1998 By: /s/ Theodore J. Low ---------------------------------------- THEODORE J. LOW 10 South Wacker Drive Suite 4000 Chicago, IL 60606 Telephone: 312/715-4000 GRAY, CARY, WARE & FREIDENRICH ROBERT W. BROWNLIE 401 B Street, Suite 1700 San Diego, CA 92101-4297 Telephone: 619/699-2700 ATTORNEYS FOR DEFENDANTS MYCOGEN CORP., JOSEPH P. SULLIVAN, AND GEORGE KHACHATOURIANS 11 -----END PRIVACY-ENHANCED MESSAGE-----