-----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, FU/dTShoGAxQbTNMI8YmNxC45DchV6FgVkwkPOmdRvMat0BPa7EP9mFQFBNshv+Q B3ipE0Fv08dS2CJM5rjkXw== 0001047469-98-033800.txt : 19980907 0001047469-98-033800.hdr.sgml : 19980907 ACCESSION NUMBER: 0001047469-98-033800 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 37 FILED AS OF DATE: 19980904 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 SEC ACT: SEC FILE NUMBER: 005-39279 FILM NUMBER: 98704556 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: 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 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 SC 14D9 1 SC 14D9 [LOGO] September 4, 1998 Dear Stockholders: I am pleased to inform you that Mycogen Corporation (the "Company") has entered into an Agreement and Plan of Merger dated as of August 31, 1998 (the "Merger Agreement") with Dow AgroSciences LLC ("Parent") and AgroSciences Acquisition Inc. ("Purchaser"), both indirect wholly-owned subsidiaries of The Dow Chemical Company ("TDCC"), pursuant to which Purchaser has today commenced a cash tender offer (the "Offer") to purchase all of the outstanding shares ("Shares") of the common stock, par value $0.001 per share (including the associated preferred stock purchase rights) ("Common Stock") of the Company at a purchase price of $28.00 per Share, net to the seller in cash. The Merger Agreement provides for the making of the Offer which, if consummated and certain conditions are satisfied, will be followed by a merger of Purchaser with and into the Company (the "Merger"), with the Company surviving as an indirect wholly-owned subsidiary of TDCC. In the Merger, Shares (other than Shares owned by Parent, Purchaser or the Company or Shares held by stockholders who properly exercise dissenters' rights under California law) will be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer, without interest thereon. BOTH YOUR BOARD OF DIRECTORS AND A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS HAVE UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY (OTHER THAN TDCC OR ITS AFFILIATES). YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board of Directors and the Special Committee each gave consideration to the factors described in the attached Schedule 14D-9 that is being filed today with the Securities and Exchange Commission, including, among other things, the opinion of Wasserstein Perella & Co., Inc., the Special Committee's financial advisors, that, subject to the various assumptions and limitations set forth therein, as of the date of such opinion, the $28.00 cash price to be received by the holders of Shares in the Offer and the Merger pursuant to the Merger Agreement is fair to such holders (other than TDCC or its affiliates) from a financial point of view. In addition to the attached Schedule 14D-9, enclosed is the Offer to Purchase dated September 4, 1998, together with related materials, including a Letter of Transmittal, to be used for tendering your Shares pursuant to the Offer. These documents state the terms and conditions of the Offer and the Merger, provide detailed information about the transactions and include instructions as to how to tender your Shares. We urge you to read these documents carefully in making your decision with respect to tendering your Shares pursuant to the Offer. Very truly yours, [LOGO] PRESIDENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 ------------------------ 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY The name of the subject company is Mycogen Corporation, a California corporation (the "Company"). The address of the principal executive offices of the Company is 5501 Oberlin Drive, San Diego, California 92121-1718. The title of the class of equity securities to which this Statement relates is shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Common Stock" or "Shares"). ITEM 2. TENDER OFFER OF THE BIDDER This Statement relates to the tender offer (the "Offer") by AgroSciences Acquisition Inc. ("Purchaser"), a Delaware corporation, 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 at $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 (the "Offer to Purchase") and the related Letter of Transmittal (which together with the Offer to Purchase constitute the "Offer"), copies of which are filed respectively as Exhibits 1 and 2 hereto and are incorporated herein by reference in their entirety. The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 dated September 4, 1998 (the "Schedule 14D-1") and in a Rule 13e-3 Transaction Statement on Schedule 13E-3 dated September 4, 1998 (the "Schedule 13E-3"), both of which are filed by Purchaser, Parent, TDCC and certain of their affiliates with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules promulgated by the Commission thereunder. The Offer is being made by Purchaser pursuant to the Agreement and Plan of Merger, dated as of August 31, 1998, among Parent, Purchaser, the Company and, for the limited purpose set forth in the Merger Agreement, TDCC (as the same may be amended from time to time, the "Merger Agreement"), a copy of which is filed as Exhibit 3 hereto and incorporated herein by reference in its entirety. The Schedule 14D-1 states that the address of the principal executive offices of Parent is 9330 Zionsville Road, Indianapolis, Indiana 46268 and that the address of the principal executive offices of Purchaser is 2030 Dow Center, Midland, Michigan 48674. The Merger Agreement provides for the making of the Offer and the terms and conditions thereof. The Merger Agreement further provides that if the Offer is consummated, then upon the terms and subject to the conditions contained in the Merger Agreement, and in accordance with the California General Corporation Law ("CGCL" or "California Law") and the Delaware General Corporation Law (the "DGCL" or "Delaware Law"), Purchaser will be merged with and into the Company (the "Merger" and, together with the Offer, the "Transaction"), with the Company surviving the Merger as an indirect wholly-owned subsidiary of TDCC (the Company following the Merger is sometimes referred to as the "Surviving Corporation"). In the Merger, the holders of Shares as of the effective time of the Merger (other than Parent, Purchaser and the Company, and stockholders who properly exercise dissenters' rights under California law) will receive an amount in cash equal to the Offer Price, without interest thereon. The shares of common stock of Purchaser outstanding immediately prior to the Merger shall be converted into shares of Common Stock of the Surviving Corporation. ITEM 3. IDENTITY AND BACKGROUND (a) The name and business address of the Company, which is the person filing this Statement, are set forth in Item 1 above, which information is incorporated herein by reference. (b)(1) 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, and the Company takes no responsibility for such information. Information contained in this Statement with respect to the Company and its advisors has been provided by the Company. Except as described herein, in Schedule I hereto, and in the Company's Proxy Statement dated November 24, 1997 relating to the Company's Annual Meeting of Stockholders held on January 8, 1998 (the "1997 Proxy Statement") (attached hereto as Exhibit 4 and incorporated herein by reference), to the knowledge of the Company, as of the date hereof there are no material contracts, agreements, arrangements or understandings, or any potential or actual conflicts of interest between the Company or its affiliates and (1) the Company, its executive officers, directors or affiliates or (2) the Purchaser, its executive officers, directors or affiliates. In considering the recommendations of the Board of Directors of the Company (the "Board"), based on the recommendations of the special committee (the "Special Committee") of independent directors of the Board appointed to represent the stockholders of the Company other than TDCC or its affiliates (the "Minority Stockholders") (such committee consisting of Messrs. Joseph P. Sullivan and Clayton K. Yeutter, neither of whom are designees of Parent or officers of the Company), set forth in Item 4(a) hereof, the Minority Stockholders should be aware that certain members of the Board and the Special Committee have interests in the Merger and the Offer which are described in Schedule I hereto and which may present them with certain conflicts of interest. Each of the members of the Board and the Special Committee was aware of these potential conflicts and considered them along with the other factors described in Item 4(b)(2) below. For the members of the Special Committee, such items consist of their compensation, the treatment of their Options and their indemnification. (b)(2) CERTAIN ARRANGEMENTS. Parent and the Company are parties to several agreements and arrangements, the material terms of which are described below. THE EXCHANGE AND PURCHASE AGREEMENT. On January 15, 1996, Parent, the Company, Agrigenetics, Inc. (currently a wholly-owned subsidiary of the Company) and United AgriSeeds, Inc. entered into the Exchange and Purchase Agreement pursuant to which, among other things, Parent acquired 2,707,884 Shares on February 20, 1996. Pursuant to the Exchange and Purchase Agreement, Parent agreed that from February 20, 1998 to February 20, 1999, Parent would not acquire more than 65% of the outstanding Shares (excluding Shares purchased directly from the Company or its employees). Furthermore, Parent agreed not to acquire from any person more than 79.9% of the total outstanding Shares except pursuant to a Buyout Transaction as described below. Under the Exchange and Purchase Agreement, following February 20, 1999, Parent would be permitted to increase its beneficial ownership of Shares above 79.9% of the total outstanding Shares only pursuant to a Buyout Transaction. A Buyout Transaction could only be effected if approved by a majority of the Company's independent directors or if the value to be offered to holders of Shares were determined by an independent appraiser. The Exchange and Purchase Agreement also provides that, until February 20, 1999, (a) at any time Parent is the beneficial owner of less than 20% of the outstanding Shares, Parent will be entitled to designate for nomination one person to serve on the board of directors of the Company, (b) at any time Parent is the beneficial owner of 20% or more but less than 30% of the outstanding Shares, Parent will be entitled to designate for nomination two directors of the Company, (c) at any time Parent is the beneficial owner of 30% or more but less than 50% of the outstanding Shares, the Company will cause the Board to consist of seven members and Parent will be entitled to designate for nomination three (or, if the number of directors is other than seven, the nearest whole number less than one-half times the total number of directors) directors of the Company and (d) at any time Parent is the beneficial owner or more than 50% of the outstanding Shares, the Company will cause its board of directors to consist of nine directors and Parent will be entitled to designate for nomination five (or, if the number of directors is other than nine, the nearest whole number greater than one-half times the total number of directors) directors of the Company. Five of the directors of the Company are designees of Parent at the present time. Under the terms of the Exchange and Purchase Agreement, so long as Parent has the right to nominate at least two members to the Board, the Company agreed that it would not, without prior approval of Parent, issue any Shares or any securities exchangeable for or having the same voting rights as 2 Shares except: (i) Shares authorized and reserved as of January 15, 1996 pursuant to certain existing benefit plans; (ii) new securities exchangeable for or having the same voting rights as not more than an aggregate of 2,000,000 Shares pursuant to employee benefit plans approved by the Company during the three-year period ending February 20, 1999; and (iii) not more than 2,000,000 Shares in exchange for the assets or securities of one or more other persons. If the Company proposes to issue any Shares pursuant to the above, the Company is obligated to offer Parent the right to purchase at market value additional Shares to permit Parent to maintain its total percentage interest in the Company. Following February 20, 1998, the Company is not permitted under the Exchange and Purchase Agreement to issue new securities for cash, other than (i) any securities issuable upon conversion of any convertible security of the Company outstanding as of January 15, 1996, (ii) any securities issuable upon exercise of any option, warrant or other similar security of the Company authorized as of January 15, 1996, and (iii) any securities issuable to stockholders of the Company on a proportional basis in connection with any stock split, stock dividend or recapitalization of the Company, unless the Company affords Parent a right of first refusal to purchase all of the new securities proposed to be issued (other than any new securities issued to officers, directors and employees pursuant to any existing benefit plans or any newly created employee benefit plan or to Parent and its affiliates.) The Company also agreed in the Exchange and Purchase Agreement that it (i) would ensure that the Rights Agreement and the rights thereunder would not prevent Parent or an affiliate from acquiring or proposing to acquire some or all of the outstanding Shares and (ii) would not amend, interpret or enforce the Rights Agreement or adopt any new shareholder rights agreement if such action would have an adverse effect on Parent or on the ability of Parent or an affiliate to acquire or propose to acquire some or all of the outstanding Shares. Under the terms of the Merger Agreement, the Exchange and Purchase Agreement was amended to the extent necessary to permit the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. The Merger Agreement also provides that the Exchange and Purchase Agreement will be deemed to have been canceled and terminated and no longer binding on the parties except for a section of that agreement (providing for the continued inapplicability of the Company's Shareholder Rights Plan to Parent and its affiliates) upon consummation of the Offer, even if Purchaser waives the Minimum Condition and the Merger cannot be consummated. TECHNOLOGY AGREEMENT. Pursuant to the Exchange and Purchase Agreement, the Company, Agrigenetics and Parent executed an Agreement (the "Technology Agreement") providing for the exchange between the parties of certain currently existing genes and tools and certain new genes and tools developed or acquired by the parties during the five year period ending February 20, 2001. LOAN ARRANGEMENTS. Pursuant to certain loan arrangements, the Company may borrow up to $75 million from Parent, of which $20.0 million was unused at August 31, 1998. Such advances from Parent are due September 30, 1999. Pursuant to certain other loan arrangements, Parent may borrow up to $75 million from the Company, none of which was outstanding at August 31, 1998. Additionally, the Company's Argentina subsidiary may borrow up to $50 million from an affiliate of Parent, of which $38.5 million was unused at August 31, 1998; any of these borrowings are due December 31, 1998. The Company maintains an $11.3 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 $10.0 million bank line of credit facility, which expires February 1999, all of which was unused at August 31, 1998. The Company has advanced to Dow Quimica S.A., a subsidiary of TDCC, $9.9 million as of August 13, 1998. Any advances to Dow Quimica are due April 27, 1999. 3 SERVICES AGREEMENT. Pursuant to a services agreement, Parent has agreed to provide certain services to the Company including commercial, finance, treasury, tax, order entry, logistics, operations planning, information systems, legal, materials, management, controllers and purchasing services. VERNEUIL HOLDING S.A. In January 1998, the Company obtained an additional 16.25% interest in VMO in exchange for the issuance of 483,439 Shares to Parent valued at $9.4 million. The Company now owns 35% of VMO. OILSEED BRASSICA AGREEMENT. Parent's subsidiary, Dow AgroSciences Canada (DASC), and the Company are parties to a Brassica License and Research Agreement, effective as of May 15, 1996 the ("Brassica Agreement"). Under the Brassica Agreement, DASC and the Company has agreed to develop imporved cultivars and incorporate insect resistance traits in oilseed BRASSICA varieties in a program to be funded by DASC (the "Brassica Program"). Program product goals and development targets will be determined by a Management Development Committee consisting of two employees of the Company and three employees of DASC. DASC is obligated to fund the Brassica Program at a minimum level of $750,000 per year for at least 5 years. Under the Brassica agreement, the Company granted to DASC an exclusive license to make, use, sell and sublicense BRASSICA varieties developed by the Company prior to the date of the agreement, as well as BRASSICA varieties developed under the Brassica Agreement. DASC agreed to pay the Company royalties on equal to 5% of the Net Sales of any such varieties, plus 20% of the premium earned for varieties which have an oleic acid content in their oil of 70% or more. In connection with the above, DASC granted the Company: (i) an option to obtain a license to any of the foregoing varieties on terms no less favorable than those offered to any third party licensee (but only to the extent that DASC has licensed such varieties to third parties), and (ii) a first right of production of seed of such varieties for DASC and its affiliates. In addition, pursuant to the Brassica Agreement, the Company granted DASC: (i) an option to obtain a license to any Round-Up-Registered Trademark- Ready traits which the Company may obtain for use in BRASSICA, to the extent that the Company can sublicense such traits, and (ii) an option to obtain a license to Bt and other future traits for use in BRASSICA, (but only to the extent that the Company has licensed such traits to third parties); in each case on terms no less favorable than those offered to any third party. HIGH OIL CORN AGREEMENT. Parent and the Company are parties to a Maize High Oil Breeding and License Agreement effective as of April 1996 (the "Maize High Agreement"). Under the Maize High Agreement, Parent and the Company agreed to engage in a maize high oil development program (the "Maize High Program") using their intellectual property to develop varieties of corn with an oil content of 5% or more. Under the Maize High Program, using germplasm from both Parent and the Company, the Company agreed to use diligent efforts to incorporate developmental targets into maize germplasm. Parent is obligated to pay the direct costs for the Maize High Program for a minimum of 5 years, up to a total agreegate amount during that period of $5,300,000. Under the Maize High Agreement, the Company granted to Parent a royalty-bearing license to use and sublicense the Company's intellectual property and inbreds to the extent necessary to make, have made, use, sublicense and sell high oil inbreds and hybrids. In consideration of this license Parent agreed to pay the Company royalties ranging from 1.5% to 6.0% of the net sales of Parent, its affiliates and their sublicensees based on the percentage of Mycogen germplasm in the parent inbred lines used to produce each variety. However, no royalty will be due on any high oil variety if the parent inbred lines for the variety all contain less than 50% of Mycogen germplasm. In addition, if a variety contains a Bt or other Company value added trait under rights proprietary to the Company, then Parent will pay an additional royalty, to be negotiated in good faith by the parties, for a non-exclusive license to such trait. Parent also granted the Company and its affiliates an option to produce high oil varieties for itself, and high oil foundation seed for Parent, its affiliates and their sublicensees provided the Company or its affiliate (i) is 4 able to offer such production on a competitive basis, and (ii) has the internal capacity to process said production without contracting with a non-affiliated party. The foregoing summaries of the Exchange and Purchase Agreement, the Loan Arrangements as the Oilseed Brassica Agreement are qualified in their entirety by reference to the full texts of such documents, which, together with various amendments thereto, are filed as Exhibits 7 through 19 hereto and are incorporated herein by reference. THE MERGER AGREEMENT The following is a brief summary of certain provisions of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement which has been filed as Exhibit 3 hereto. THE OFFER Pursuant to the terms of the Merger Agreement, Purchaser was required to commence the Offer no later than the fifth business day following the public announcement of the terms of the Merger Agreement. Purchaser will, and Parent will cause Purchaser to, subject only to the prior satisfaction or waiver of the conditions of the Offer, accept for payment Shares validly tendered as soon as it is legally permitted to do so under applicable law. As promptly as practicable after such acceptance, Purchaser will, subject to applicable law, pay for such Shares. The Offer Price payable in the Offer will be paid net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the Minimum Condition and the other conditions described under "Conditions of the Offer." Purchaser may not waive the Minimum Condition without the consent of the Special Committee unless, following the consummation of the Offer, Purchaser and Parent, collectively, would be the owners of Shares representing at least 81.07% of the Fully Diluted Shares. Parent and Purchaser would collectively own at least this percentage of Fully Diluted Shares only if Purchaser purchased a majority of the Fully Diluted Shares which Parent does not already own and therefore could be purchased by Purchaser pursuant to the Offer. Purchaser may increase the cash Offer Price, provided that no change may be made that decreases the Offer Price, changes the form of consideration payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer or imposes conditions to the Offer in addition to those set forth under "Conditions of the Offer." The initial expiration date of the Offer will be midnight on Friday, October 2, 1998, the 20th business day following commencement of the Offer. The foregoing notwithstanding, Purchaser may, without the consent of the Company, extend the Offer (i) for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, (ii) if at any scheduled expiration date any of the conditions to the Offer set forth in paragraphs (a) - (e) under "Conditions of the Offer" have not been satisfied or waived, until such time as all of such conditions will have been satisfied or waived, or (iii) in the event all of the conditions to the Offer will have been satisfied or waived, other than the Minimum Condition, for a period or periods aggregating not more than 40 business days after the later of (A) the initial expiration date of the Offer and (B) the date on which all of the conditions set forth in paragraphs (a) - (e) under "Conditions of the Offer" will have been satisfied or waived. If at any scheduled expiration date of the Offer, the Minimum Condition will not have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing), Purchaser will, and Parent will cause Purchaser to, extend the Offer for a period or periods aggregating not more than 40 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described herein. In addition, if at any scheduled expiration date of the Offer, a condition set forth in paragraph (c) or (d) under "Conditions of the Offer" will not have been satisfied but all of the other conditions set forth in paragraphs (a) - (e) under "Conditions of the Offer" will then have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing) and so long as the Company is using its reasonable best efforts to cause such conditions to become satisfied, Purchaser will, and Parent will 5 cause Purchaser to, extend the Offer for up to an additional 20 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in "Termination" below. Subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in "Termination" below, Purchaser will not terminate or withdraw the Offer prior to any scheduled expiration date of the Offer, including as extended as described in this paragraph; provided, however, that Purchaser may, at its option, terminate and withdraw the Offer if, after such required extensions described in this paragraph, the Offer has expired in accordance with its terms without Purchaser being required to accept Shares for payment pursuant to the Merger Agreement. The Merger Agreement requires, as soon as practicable on the date of commencement of the Offer, (a) Parent and Purchaser to file with the Commission (i) a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which will contain the Offer to Purchase and form of the related Letter of Transmittal and (ii) a Rule 13e-3 Transaction Statement with respect to the Offer and the other transactions contemplated thereby and (b) the Company to file a Solicitation/Recommendation Statement on Schedule 14D-9, which it will mail to stockholders promptly after the commencement of the Offer. Purchaser and the Company also agreed to take all steps necessary to cause the Offer to Purchase and form of the related Letter of Transmittal to be disseminated to holders of Shares as and to the extent required by applicable law. CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the obligation of Purchaser to accept for payment any Shares tendered pursuant to the Offer shall be subject to (the following being referred to as the "Offer Conditions") (i) the satisfaction or waiver (under the circumstances in which such waiver is permitted under the Merger Agreement) of the Minimum Condition and (ii) the satisfaction or waiver of the following conditions: (a) NO PROHIBITION. There shall not have been any action or proceeding brought by any governmental authority before any court, or any order or preliminary or permanent injunction entered in any action or proceeding before any court or governmental, administrative or regulatory authority or any statute, rule, regulation, legislation, interpretation, judgment or order proposed or sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Merger by any court, governmental, administrative or regulatory authority which could reasonably be expected to have the effect of: (i) making illegal or otherwise restraining or prohibiting or imposing material penalties or fines or requiring the payment of material damages in connection with the making of the Offer, the acceptance for payment of, payment for, or ownership of some of or all the Shares by Parent or Purchaser, the consummation of the Offer or the Merger; (ii) prohibiting or materially limiting the ownership or operation by the Company or by Parent of all or any material portion of the business or assets of the Company and any of its subsidiaries or Parent, taken as a whole, or compelling Parent to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, as a result of the transactions contemplated by the Merger Agreement; (iii) imposing or confirming material limitations on the ability of Parent effectively to acquire or hold or to exercise full rights of ownership of Shares, including, without limitation, the right to vote any Shares on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption and approval of the Merger Agreement and the Merger or the right to vote any shares of capital stock of any subsidiary of the Company; or (iv) requiring divestiture by Parent or Purchaser, directly or indirectly, of any Shares. (b) OUTSIDE EVENTS. There shall not have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any securities exchange or in the over-the-counter market in the United States (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index) or (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States. 6 (c) PERFORMANCE. The Company shall have performed in all material respects its material covenants and agreements under the Merger Agreement. (d) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of the Company set forth in the Merger Agreement which are qualified as to Material Adverse Effect (as defined in the Merger Agreement) shall not be true and correct when made and as of the expiration of the Offer, or any of the other representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct when made and as of the expiration of the Offer, which failure would have a Material Adverse Effect or, in the case of certain enumerated representations and warranties, which failure would be material with respect to the transactions contemplated by the Merger Agreement (except, in each case, in the case of representations and warranties of the Company which address matters only as of a particular date, which need only be true and correct as aforesaid as of such date). (e) NO TERMINATION. The Merger Agreement shall not have been terminated in accordance with its terms or the Offer shall not have been amended or terminated with the consent of the Company, acting at the direction of the Special Committee. Purchaser shall not be required to accept for payment any Shares tendered pursuant to the Offer if any of the above conditions occurs and remains in effect, which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or omission by Purchaser other than any breach by Parent or Purchaser of the Merger Agreement, or, in the case of (c) or (d) above, a failure of such condition which Parent or Purchaser has caused to occur) giving rise to any such condition which makes it inadvisable to proceed with such acceptance for payment or payments for Shares. The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser regardless of the circumstances (including any action or omission by Purchaser other than any breach by Parent or Purchaser of the Merger Agreement, or, in the case of (c) or (d) above, a failure of such condition which Parent or Purchaser has caused to occur) giving rise to any such condition or may be waived by Purchaser in whole or in part at any time or from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time or from time to time. OPTIONS If the conditions set forth in "Conditions to the Consummation of the Merger" below are satisfied, the Company will use its best efforts to cause all Options still outstanding immediately prior to the Effective Time (as defined below) to become exercisable immediately prior to the Effective Time and to terminate and cease to be outstanding as of the Effective Time; provided, however, that arrangement will be made so that each holder of such an Option who consents to the termination of Options (either before the Effective Time or within a reasonable time thereafter) will be entitled to receive in respect of such Option an amount in cash equal to (x) the Offer Price less the exercise price per Share under such Option multiplied by (y) the number of Shares covered by such Option. Without limiting the generality of the foregoing, the Company's best efforts will, if necessary, be deemed to include the Company's Board of Directors amending the 1992 Plan to provide that the term "Corporate Transaction" shall be deemed to include the Merger. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each holder of Options (whether or not such Options are vested) to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (an "Option Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, such Option to be exercised and the Shares issued as a 7 result of that exercise to be tendered in the Offer. The Company and Purchaser will reflect on their books and records the transactions effected pursuant to the Option Elections. Subject to the terms of the Option Elections and contingent upon the purchase of Shares by Purchaser pursuant to the Offer, the Company will make available to each holder of Options the funds necessary to exercise such Options, and Parent will advance such funds to the Company. The funds advanced to any Option holders in accordance with the preceding sentence will be deducted from the amount payable to such Option holder pursuant to the Offer, and the Option Election and the Offer shall so provide. The funds so deducted will be retained by Purchaser as repayment of the amount advanced to the Company by Parent. The Plan Administrator of the 1992 Plan has taken action to provide that each outstanding Option as to which a valid Option Election with respect to such Option is executed (and not revoked) and delivered to the Company will become exercisable immediately prior to the purchase of Shares (and contingent upon such purchase) by Purchaser pursuant to the Offer. The parties to the Merger Agreement consented to the action of the Plan Administrator of the 1992 Plan referenced in the immediately preceding sentence, agreed that they will not cause the revocation of such action and will use their best efforts to take whatever steps are necessary to make it possible for Shares issuable upon the exercise of Options resulting from the execution and delivery of valid Option Elections to be tendered in the Offer. EMPLOYEE STOCK PURCHASE PLAN The Company will use its best efforts to effectuate the provisions described in the next following paragraph, to provide for termination of the Mycogen Corporation 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan"), effective no later than the Effective Time and to provide that, upon termination of the Stock Purchase Plan and contingent upon the purchase by Purchaser of Shares pursuant to the Offer, any payroll deductions accumulated under the Stock Purchase Plan and not used to purchase Shares under the Stock Purchase Plan for tender in the Offer as described in the next following paragraph will be returned to the applicable participants; provided, however, that arrangement will be made so that each holder of Purchase Rights as described in the next following paragraph who consents to the termination of all Purchase Rights (either before the Effective Time or within a reasonable time thereafter) will be entitled to receive an amount in cash equal to the net amount such holder of Purchase Rights would have received as described in the next following paragraph if such holder had made a Stock Purchase Election. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each individual who has purchase rights outstanding under the Stock Purchase Plan ("Purchase Rights") to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (a "Stock Purchase Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, such Purchase Rights to be exercised (the date on which the Shares are purchased by a holder of Purchase Rights being a "Purchase Date" for purposes of the Stock Purchase Plan) and the Shares issued as a result of such exercise to be tendered in the Offer. The Company and Purchaser will reflect on their books and records the transactions effected pursuant to the Stock Purchase Elections. Subject to the terms of the Stock Purchase Elections and contingent upon the purchase of Shares by Purchaser pursuant to the Offer, the Company will make available to each holder of Purchase Rights who has delivered to the Company an executed Stock Purchase Election (and has not revoked such election) the funds necessary to exercise such Purchase Rights for the amount of Shares that would have been purchased upon such exercise if the purchase period under the Stock Purchase Plan had expired on November 30, 1998 (assuming that the Fair Market Value (as defined in the Stock Purchase Plan) for November 30, 1998 for purposes of calculating the purchase price (within the meaning of the Stock Purchase Plan) would be the Per Share Amount and that payroll deductions had continued at the same level through November 30, 1998), less any payroll deductions accumulated with respect to the holder pursuant to normal operation of the Stock Purchase Plan through the date on which the Offer terminates, and Parent will advance such funds to the Company. The funds advanced to any holder of Purchase Rights in accordance with the 8 preceding sentence will be deducted from the amount payable to such holder of Purchase Rights pursuant to the Offer. The funds so deducted will be retained by Purchaser as repayment of the amount advanced to the Company by Parent. The parties to the Merger Agreement will use their best efforts to take whatever steps are necessary to make it possible for Shares issuable upon the exercise of Purchase Rights resulting from the execution and delivery of valid Stock Purchase Elections to be tendered in the Offer. RESTRICTED STOCK The Company represents that the Plan Administrator of the Mycogen Corporation Restricted Stock Issuance Plan (the "Restricted Stock Plan") has taken action to provide that each unvested Share ("Restricted Stock") outstanding under the Restricted Stock Plan as to which a valid Restricted Stock Election (as defined below) with respect to such Restricted Stock is executed (and not revoked) and delivered to the Company will become fully vested and nonforfeitable immediately prior to the purchase of Shares (and contingent upon such purchase) by Purchaser pursuant to the Offer. The parties to the Merger Agreement consent to the action of the Plan Administrator of the Restricted Stock Plan referenced in the immediately preceding sentence, agree that they will not cause the revocation of such action and will use their best efforts to take whatever steps are necessary to make it possible for the Restricted Stock as to which a valid Restricted Stock Election has been made to be tendered in the Offer. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each holder of shares of Restricted Stock to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (a "Restricted Stock Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, the shares of Restricted Stock (which would be vested in accordance with the foregoing provisions as described in this paragraph) to be tendered in the Offer. Immediately prior to the Effective Time, if the Conditions set forth in "Conditions to the Consummation of the Merger" below are satisfied, the Company will cause the Plan Administrator of the Restricted Stock Plan to cause all shares of Restricted Stock outstanding as of the Effective Time to be fully vested and nonforfeitable. THE MERGER Immediately following the satisfaction or waiver of all conditions set forth in "Conditions to the Consummation of the Merger" below (assuming the transfer of all of Parent's Shares to Purchaser), Parent will cause Purchaser to become the beneficial and record owner of all Shares then owned of record by Parent (the time immediately following such action is referred to herein as the "Designated Time"). At the Designated Time, the parties will (i) file a certificate of ownership with the Secretary of State of the State of California in accordance with California Law (the "California Filing") and (ii) file a certificate of ownership and merger with the Secretary of State of the State of Delaware in accordance with Delaware Law (the "Delaware Filing"). The Merger will become effective at such time as the California Filing and the Delaware Filing are duly filed in accordance with California Law and Delaware Law, respectively, or at such later time as is agreed upon by the parties and specified in the California Filing and the Delaware Filing (the "Effective Time"). At the Effective Time, upon the terms and subject to the conditions of the Merger Agreement and in accordance with California Law and Delaware Law, Purchaser will be merged with and into the Company, whereupon the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation. The Articles of Incorporation of the Company in effect immediately prior to the Effective Time will be the Articles of Incorporation of the Surviving Corporation until amended in accordance with applicable law. The First Amended and Restated Bylaws of the Company in effect at the Effective Time will be the Bylaws of the Surviving Corporation until amended in accordance with applicable law. The directors of Purchaser at the Effective Time will be the initial directors of the Surviving Corporation, each to hold 9 office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly elected and qualified. The officers of the Company at the Effective Time, and any additional individuals designated by Parent, will be the initial officers of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly appointed and qualified. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Purchaser (except as required by California Law), the Company or the holder of any of the following securities: (i) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be canceled as described in the next following clause and Dissenting Shares (as defined in "Dissenting Shares" below)), will by virtue of the Merger and without any action on the part of the holder thereof be canceled and extinguished and be converted into the right to receive an amount in cash equal to the Offer Price; (ii) Each Share issued and outstanding immediately prior to the Effective Time and owned by Parent or Purchaser or any direct or indirect wholly owned subsidiary of Parent or Purchaser, or which is held in the treasury of the Company or by any of the Company's subsidiaries, will be canceled and retired and no payment of any consideration will be made with respect thereto; (iii) Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Promptly after the Effective Time, the Surviving Corporation will cause to be mailed to each record holder, as of the Effective Time, of a certificate or certificates that, prior to the Effective Time, represented Shares, a form of letter of transmittal and instructions for use in effecting the surrender of the certificates in exchange for the Offer Price therefor. Subject to the provision described in the next following paragraph, upon the surrender of each such certificate formerly representing Shares, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the Depositary will deliver to the holder of such certificate the Offer Price multiplied by the number of Shares formerly represented by such certificate in exchange therefor, and such certificate will forthwith be canceled. Until so surrendered and exchanged, each such certificate (other than certificates representing Dissenting Shares or Shares held by Parent, Purchaser or the Company, or any direct or indirect subsidiary thereof) will represent solely the right to receive the Offer Price. No interest will be paid or accrue on the Offer Price. If the Offer Price (or any portion thereof) is to be delivered to any person other than the person in whose name the certificate formerly representing Shares surrendered in exchange therefor is registered, the certificate so surrendered will be properly endorsed or otherwise be in proper form for transfer and that the person requesting such exchange must pay to the Depositary any transfer or other taxes required by reason of the payment of the Offer Price to a person other than the registered holder of the certificate surrendered, or must establish to the satisfaction of the Depositary that such tax has been paid or is not applicable. Following the date which is six months after the Effective Time, each holder of a certificate formerly representing a Share may surrender such certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Offer Price, without any interest thereon. After the Effective Time, there will be no transfers on the stock transfer books of the Surviving Corporation of any Shares. If, after the Effective Time, certificates formerly representing Shares are presented to the Surviving Corporation or the Depositary, such certificates will be canceled and exchanged for the Offer Price, as described above, subject to applicable law in the case of Dissenting Shares. 10 DISSENTING SHARES Holders of Shares do not have dissenters' rights as a result of the Offer. However, in connection with the Merger, holders of Shares, by complying with the provisions of Chapter 13 of California Law, may have certain rights to dissent and to require the Company to purchase their Shares for cash at fair market value. In general, holders of Shares will be entitled to exercise "dissenters' rights" under California Law only if the holders of five percent or more of the outstanding Shares properly file demands for payment or if the Shares held by such holders are subject to any restriction on transfer imposed by the Company or any law or regulation ("Restricted Shares"). Accordingly, any holder of Restricted Shares and, if the holders of five percent or more of the Shares properly file demands for payment, all other such holders who fully comply with all other applicable provisions of Chapter 13 of California Law ("Dissenting Shares") will be entitled to require the Company to purchase their Shares for cash at their fair market value if the Merger is consummated. In addition, if, immediately prior to the Effective Time, the Shares are not listed on a national securities exchange or on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), holders of Shares may likewise exercise their dissenters' rights as to any or all of their Shares entitled to such rights. If the statutory procedures under California Law relating to dissenters' rights were complied with, such rights could lead to a judicial determination of the fair market value of the Shares. The "fair market value" would be determined as of the day before the first announcement of the terms of the proposed Merger, excluding any appreciation or depreciation in consequence of the Merger. The value so determined could be more or less than the Offer Price. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF SECTION 13 OF CALIFORNIA LAW, A COMPLETE COPY OF WHICH IS ATTACHED AS SCHEDULE II TO THE OFFER TO PURCHASE. Notwithstanding anything in the Merger Agreement to the contrary, if demands for payment are filed (within the meaning of California Law) with respect to five percent or more of the outstanding Shares, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted such Shares in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with California Law will not be converted into a right to receive the Offer Price unless such holder fails to perfect or withdraws or otherwise loses his, her or its right to appraisal under California Law. If, after the Effective Time, such holder fails to perfect or withdraws (with the consent of the Company to the extent such consent is required by applicable law) or loses his, her or its right to appraisal under California Law, such holder's Shares will be treated as if they had been converted as of the Effective Time into a right to receive the Offer Price without interest thereon. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various representations and warranties of the Company, including representations by the Company as to (i) organization, qualification and similar corporate matters of the Company and its subsidiaries, (ii) capitalization of the Company and its subsidiaries, (iii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iv) the non-contravention of the Merger Agreement and related transactions with any provision of the Articles of Incorporation or Bylaws, material contract, order, law or regulation to which the Company or its subsidiaries is a party or by which it is bound or obligated, (v) the filing of required Commission reports and the absence of untrue statements of material facts or omissions of material facts in such reports, (vi) the absence of changes or events which have had a material adverse effect on the Company other than the changes or events set forth in the Merger Agreement, (vii) the absence of any untrue statement of a material fact or omission of any material fact required to be stated in any recommendation statement of the Company's Board of 11 Directors, document related to the Offer or proxy or information statement or similar materials distributed to the Company's stockholders in connection with the Merger, (viii) the absence of payments to any intermediary other than listed intermediaries of any finder's, professional or other fee or commission, (ix) the absence of any vote or other approval of the holders of a class of any Company security required to approve the Merger or to approve or adopt the Merger Agreement except any actions required to be taken by Purchaser pursuant to California Law other than the satisfaction of the condition described in "Conditions to the Consummation of the Merger" below, (x) Wasserstein Perella's delivery to the Special Committee, and authorization to deliver to the Company's stockholders pursuant to California Law, its written opinion to the effect that, as of the date of such opinion, subject to the various assumptions and limitations set forth therein as of the date of such opinion, the cash consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to such holders from a financial point of view and (xi) the Company and its Board of Directors having taken all necessary action so that from and after January 15, 1996 (a) Parent and its affiliates (including, without limitation, Purchaser) have never been and will never be included in the definition of "Acquiring Person" under the Company's Amended and Restated Rights Agreement dated as of October 19, 1995, as amended, between the Company and the First National Bank of Boston (the "Rights Agreement") and (b) the acquisition of Shares (whether pursuant to the Exchange and Purchase Agreement (as defined in "Exchange and Purchase Agreement; No Restrictions on Purchase" below), the Merger Agreement or otherwise) by Parent and its affiliates (including, without limitation, Purchaser) has never caused and will never cause under any circumstances whatsoever any adverse consequence to Parent, any of its affiliates (including, without limitation, Purchaser), or the Company pursuant to the Rights Agreement, including, without limitation, the occurrence of a Distribution Date (as defined in the Rights Agreement) or any adjustment to the Purchase Price (as defined in the Rights Agreement). The Merger Agreement provides that no representation or warranty is made by the Company as to certain matters or conditions which were known to Parent's designees to the Board on or prior to the date of the Merger Agreement, or as to certain other listed matters or conditions. The Merger Agreement contains various customary representations and warranties of Parent and Purchaser, including representations by Parent and Purchaser as to (i) organization, qualification and similar limited liability company or corporate matters of Parent and Purchaser, (ii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iii) the non-contravention of the Merger Agreement and related transactions with any provision of the limited liability company agreement of Parent, the Certificate of Incorporation or Bylaws of Purchaser, or any material contract, order, law or regulation to which Parent or Purchaser is a party or by which it is bound or obligated, (iv) the absence of untrue statements of material facts or omissions of material facts in any documents related to the Offer and in information provided to the Company in connection with the Schedule 14D-9 or proxy or information statement or similar materials distributed to the Company's stockholders in connection with the Merger, (v) the absence of prior activities of Purchaser other than in connection with or as contemplated by the Merger Agreement, (vi) the availability of all funds necessary to satisfy Purchaser's obligations under the Merger Agreement, (vii) the absence of payments to any intermediary other than listed intermediaries of any finder's, professional or other fee or commission and (viii) the availability of Parent's "director and officer" insurance coverage for the members of the Special Committee. COVENANTS CONDUCT OF THE BUSINESS OF THE COMPANY. Except with respect to certain enumerated items, from the date of the Merger Agreement to the earlier of the Effective Time or the date on which the Merger Agreement is terminated in accordance with its terms, the Company and its subsidiaries will each conduct its operations in the ordinary course of business consistent with past practice, and the Company and its subsidiaries will, consistent with the foregoing, each use its reasonable best efforts to preserve its business organization, to keep available the services of its officers and employees and to maintain existing 12 relationships with licensors, licensees, suppliers, contractors, distributors, customers and others having business relationships with it. Accordingly, prior to the Effective Time, except as otherwise expressly provided in the Merger Agreement, neither the Company nor any of its subsidiaries may, without the prior written consent of Purchaser, which consent will not be unreasonably withheld or delayed, engage or agree to engage in an enumerated list of transactions generally characterized as being outside the ordinary course of business. Transactions requiring Purchaser's prior approval include actions by the Company or its subsidiaries to (i) authorize for issuance, issue, sell, deliver or agree to commit to issue, sell or deliver any Shares, any stock of any class or any other securities or equity equivalents (including, without limitation, stock appreciation rights), or amend any of the terms of any such securities or agreements outstanding as of the date of the Merger Agreement; (ii) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock, or property or any combination thereof) in respect of its capital stock, or redeem, repurchase or otherwise acquire any of its securities or any securities of its subsidiaries; or (iii) take or agree to take any action which would violate the covenants or any action which would cause the condition described in paragraph (d) of Section 13 not to be satisfied. REASONABLE BEST EFFORTS. Each of the parties will use its reasonable best efforts to take all actions and do all things reasonably necessary to consummate and make effective the transactions contemplated by the Merger Agreement. PUBLIC ANNOUNCEMENTS. Parent and Purchaser, on the one hand, and the Company, on the other hand, will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by the Merger Agreement. INDEMNIFICATION. Parent will cause the Surviving Corporation to keep in effect in its Articles of Incorporation and Bylaws the provisions with respect to exculpation of director and officer liability and indemnification and advancement of expenses set forth in the Articles of Incorporation and First Amended and Restated Bylaws of the Company on the date of the Merger Agreement to the fullest extent permitted under applicable law, which provisions will not be amended, repealed or otherwise modified for at least six years after the Effective Time except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification or advancement of expenses thereunder. Parent will also cause the Surviving Corporation to honor in accordance with their terms the existing Indemnification Agreements between the Company and its directors and executive officers. From and after the Effective Time, Parent will guarantee the obligations of the Surviving Corporation to perform all of its obligations under the Surviving Corporation's Articles of Incorporation and Bylaws with respect to indemnification and to cause the Surviving Corporation to perform all such obligations. The Company will, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, to the fullest extent permitted by applicable law, Joseph P. Sullivan and Clayton K. Yeutter (collectively, the "Indemnified Parties") against all costs and expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in such Indemnified Party's capacity as a director (including, without limitation, as a member of the Special Committee) or fiduciary of the Company (including, without limitation, in connection with the transactions contemplated by the Merger Agreement) occurring on or before the Effective Time (or, if the Merger Agreement is terminated without the Merger becoming effective, occurring on or before the termination of the Merger Agreement), until the expiration of the statute of limitations relating thereto (and will pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under applicable law, upon receipt, in the case of the Company or the Surviving Corporation, as the case may be, from the Indemnified Party to whom expenses are advanced of 13 any undertaking to repay such advances required under applicable law). If the Merger becomes effective, Parent shall be jointly and severally responsible, to the fullest extent permitted under applicable law (it being understood that applicable law may permit Parent to indemnify or advance expenses to the Indemnified Parties under circumstances in which the Company could not do so), for the indemnification and advancement of expenses obligations provided for in the immediately preceding sentence. If the Merger does not become effective, Parent shall have the same responsibilities set forth in the immediately preceding sentence, except that Parent shall have no responsibility for indemnifying or advancing expenses to the Indemnified Parties with respect to matters that do not arise out of or pertain to the work of the Special Committee, the Merger Agreement or the transactions contemplated by the Merger Agreement. In the event of any such claim, action, suit, proceeding or investigation covered by this paragraph, (i) the Company, Parent or the Surviving Corporation, as the case may be, will pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel will be reasonably satisfactory to the Company or the Surviving Corporation, promptly after statements therefor are received and (ii) the Company, Parent and the Surviving Corporation will cooperate in the defense of any such matter; provided, however, that neither the Company nor Parent nor the Surviving Corporation will be liable for any settlement effected without its written consent; and provided, further, that neither the Company, Parent nor the Surviving Corporation, as the case may be, will be obligated as described in this paragraph to pay the fees and expenses of more than one counsel (plus appropriate local counsel) for all Indemnified Parties in any single action except to the extent that two or more of such Indemnified Parties will have conflicting interests in the outcome of such action, in which case additional counsel (including local counsel) as may be required to avoid any such conflict or likely conflict may be retained by the Indemnified Parties at the expense of the Company, Parent or the Surviving Corporation, as the case may be; and provided further that, in the event any claim for indemnification is asserted or made within the period prior to the expiration of the applicable statute of limitations, all rights to indemnification in respect of such claim will continue until the disposition of such claim. In connection with Parent or the Surviving Corporation making any payment or advancing any funds as described in this paragraph, Parent or the Surviving Corporation, as the case may be, will be entitled to require the Indemnified Party in question to use their reasonable best efforts at the cost and expense of Parent and the Surviving Corporation, to cause Parent or the Surviving Corporation, as the case may be, to be subrogated to the rights of such Indemnified Party under any insurance coverage maintained by the Surviving Corporation, Parent or any of their respective affiliates with respect to the underlying subject matter of, and to the extent of, such payment or advance. Parent will cause the Surviving Corporation to maintain in effect for six years from the Effective Time, if available, the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that nothing contained in this Agreement will require the Surviving Corporation to incur any annual premium in excess of 200% of the last annual aggregate premium paid prior to the date of this Agreement for all current directors' and officers' liability insurance policies maintained by the Company. In addition, Parent will cause the Indemnified Parties to receive, for six years following the date of the Merger Agreement, the same directors and officers insurance coverage that other present or formal independent directors of TDCC or its subsidiaries receive. Heirs, representatives and estates of the Indemnified Parties will have the right to enforce the indemnification obligations arising under the Merger Agreement. NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt notice to Parent or Purchaser, and Parent or Purchaser will give prompt notice to the Company, as the case may be, of (i) the occurrence, or non-occurrence of any event which would be likely to cause any condition contained in the Merger Agreement to be unsatisfied and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant or agreement under the Merger Agreement. 14 EXCHANGE AND PURCHASE AGREEMENT; NO RESTRICTIONS ON PURCHASE. The parties agreed to amend the Exchange and Purchase Agreement to the extent necessary to permit the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement. From and after the date that Purchaser first makes payment with respect to validly tendered and not withdrawn Shares pursuant to the Offer, the Exchange and Purchase Agreement will be deemed to have been canceled and terminated and no longer binding on the parties thereto and shall be of no further force or effect; provided, however, that the provisions of Section 6.10 of the Exchange and Purchase Agreement will remain in full force and effect without any amendment thereto. Without limiting the generality of the foregoing, from and after the date that Purchaser first makes payment with respect to validly tendered and not withdrawn Shares pursuant to the Offer, Parent, Purchaser and their affiliates will no longer be bound by the restrictions set forth in Sections 6.12 and 6.13 of the Exchange and Purchase Agreement and, subject to Purchaser's obligations under the Merger Agreement to effect the Merger, Parent, Purchaser and their affiliates will be permitted to acquire additional Shares and/or increase their percentage ownership of the Company (whether through any tender offer, open market purchase, negotiated transaction, merger, consolidation, reverse stock split or otherwise) without restriction under the Exchange and Purchase Agreement. COMPLIANCE BY PURCHASER; FINANCING. Parent will cause Purchaser to timely perform and comply with all of its obligations under or related to the Merger Agreement, including, without limitation, all obligations in or with respect to the Offer. TDCC will ensure that Purchaser has sufficient funds to acquire all the outstanding Shares in the Offer and the Merger. In the Merger Agreement, TDCC made a representation and warranty as to the validity of TDCC's execution and delivery of the Merger Agreement and its enforceability against TDCC. ACCESS TO INFORMATION. From the date of the Merger Agreement to the Effective Time, subject to any applicable legal restrictions, fiduciary duties or applicable privileges, the Company will (and will cause its subsidiaries to) afford to authorized representatives (including, without limitation, attorneys, auditors and financial advisors) of Parent and Purchaser reasonable access during normal business hours to the Company's personnel, offices and other facilities and to all books and records of the Company and will cause its officers and employees to furnish Parent and Purchaser and their authorized representatives such financial and operating data and other information with respect to the Company's business and properties as Parent and Purchaser and their authorized representatives may from time to time reasonably request. CONDITIONS TO THE CONSUMMATION OF THE MERGER The obligations of each party to the Merger Agreement to effect the Merger under the Merger Agreement are subject to the satisfaction or, if appropriate, waiver of the following conditions: (i) PURCHASE OF SHARES. Purchaser will have purchased all Shares validly tendered and not withdrawn pursuant to the Offer and Purchaser will be the record and beneficial owner of a sufficient number of Shares (90% of the outstanding Shares (assuming the transfer to Purchaser of all Shares owned by Parent)) to permit the Merger to be effected pursuant to California Law. (ii) NO PROHIBITION. No order, decree or ruling or other action restraining, enjoining or otherwise prohibiting the Merger, will have been issued or taken by any court or other governmental body. TERMINATION The Merger Agreement provides that the Merger Agreement may be terminated and the Offer and the Merger may be abandoned at any time prior to the Effective Time (i) by mutual written consent of Parent and Purchaser, on the one hand, and of the Company acting upon the direction of the Special Committee, on the other hand, (ii) by the Company acting upon the direction of the Special Committee or by Parent to the extent that performance is prohibited, enjoined or otherwise materially restrained by any final, non-appealable judgment, (iii) by the Company acting upon the direction of the Special Committee 15 or by Parent if, due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth under "Conditions of the Offer," Purchaser will have (a) failed to commence the Offer within 60 days following the date of the Merger Agreement or (b) terminated the Offer without having accepted any Shares for payment thereunder; provided, that the right to terminate this Agreement under this clause (iii) will not be available to any party whose failure to fulfill any material obligation under this Agreement has been the cause or resulted in the circumstances described in this clause (iii), (iv) by the Company, acting upon the direction of the Special Committee if, prior to the purchase of Shares pursuant to the Offer, Parent or Purchaser will have failed to comply in all material respects with any of its covenants or agreements contained in the Merger Agreement required to be complied with prior to the date of such termination, which failure to comply has not been cured within 20 business days following receipt by Parent or Purchaser of written notice of such failure to comply, (v) by the Company acting upon the direction of the Special Committee if, prior to the purchase of Shares pursuant to the Offer, there has been (a) a breach in any material respect by Parent or Purchaser of any representation or warranty that is not qualified as to materiality which has the effect of making such representation or warranty not true and correct in all material respects or (b) a breach by Parent or Purchaser of any representation that is qualified as to materiality, in each case which breach has not been cured within 20 business days following receipt by Parent or Purchaser of written notice of the breach, or (vi) by either the Company acting upon the direction of the Special Committee or by Parent if the Merger will not have occurred on or prior to April 30, 1999; provided, that the right to terminate the Merger Agreement under this clause will not be available to any party whose failure to fulfill any material obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Merger to have occurred on or before such date. In the event of the termination and abandonment of the Merger Agreement as described in the next previous paragraph, the Merger Agreement will become void and have no effect, other than as described in this paragraph and in "Survival of Representations and Warranties" below. No termination of the Merger Agreement and nothing described in this paragraph or in "Survival of Representation and Warranties" below will relieve any party from liability for any willful breach of any representation or warranty contained in the Merger Agreement or any breach of any covenant contained in the Merger Agreement occurring prior to such termination. Subject to the description in the next previous paragraph, each party will bear its own expenses and costs in connection with the Merger Agreement and the transactions. AMENDMENT; EXTENSION; WAIVER The Merger Agreement may be not be amended except by an instrument in writing signed by Parent, Purchaser and the Company. Any amendment to the Merger Agreement, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or any waiver of any of the Company's rights under the Merger Agreement will require the unanimous concurrence of the Special Committee. Subject to the description in the next previous paragraph, at any time prior to the Effective Time, the Company, on the one hand, and Parent and Purchaser, on the other hand, may (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document, certificate or writing delivered pursuant to the Merger Agreement or (iii) waive compliance by the other party with any of the agreements or conditions contained in the Merger Agreement. Any agreement on the part of any party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to assert any of its rights under the Merger Agreement shall not constitute a waiver of such rights. Without limiting the rights of any other party to the Merger Agreement, the Merger Agreement provides that the Special Committee has the right to exercise the Company's rights and enforce the terms of the Merger Agreement on behalf of the Company. 16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties made in the Merger Agreement will not survive beyond the Effective Time or any termination of the Merger Agreement. The covenants and agreements in the Merger Agreement or the termination of the Merger Agreement will survive the Effective Time in accordance with their terms or as contemplated by such terms. GOVERNING LAW The Merger Agreement is governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed in that State, provided that matters of internal corporate law relevant to the Company are governed by California Law. CONFIDENTIALITY AGREEMENTS On July 16, 1998, the Company (by the Special Committee), Parent, TDCC and Wasserstein Perella entered into the Confidentiality Agreement providing for the nondisclosure of confidential information to be provided by Parent and TDCC to the Special Committee and its advisors. The Confidentiality Agreement provided that the Special Committee and its attorneys and financial advisors, each agree that the non-public, confidential, proprietary and/or privileged Parent or TDCC information related to the Company, Parent or TDCC ("Confidential Information") provided to the Special Committee and its attorneys and financial advisors will be kept confidential and used only for evaluation of the proposed amendment and transaction. Merrill Lynch has also agreed to be bound by the terms of the Confidentiality Agreement. All Confidential Information will remain subject to the terms of the Confidentiality Agreement for ten years. The foregoing summary of the Confidentiality Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Confidentiality Agreement, which is filed as an Exhibit 6 hereto and incorporated herein by reference. In addition to the Confidentiality Agreement, the members of the Special Committee in their individual capacities entered into separate agreements with TDCC and Parent to maintain the confidentiality of certain information of TDCC and Parent. ITEM 4. THE SOLICITATION OR RECOMMENDATION (A) RECOMMENDATION Each of the Board and the Special Committee has unanimously approved the Merger Agreement, the Offer and the Merger and determined that the Offer and the Merger, are fair to, and in the best interests of, the stockholders of the Company (other than TDCC or its affiliates). The Board recommends that all holders of Shares accept the Offer and tender their Shares pursuant to the Offer. (B)(I) BACKGROUND As noted above, on January 15, 1996, Parent and the Company entered into the Exchange and Purchase Agreement. Pursuant to the Exchange and Purchase Agreement, Parent agreed (i) to acquire 2,707,884 shares of Common Stock and a $100,000 promissory note of Agrigenetics, Inc. in exchange for all of the outstanding common stock of United Agriseeds, Inc. and (ii) to purchase 1,745,450 shares of Common Stock for consideration of $26,400,000. In addition, on January 15, 1996, Parent entered into a Stock Purchase Agreement with The Lubrizol Corporation to purchase 9,502,348 shares of Common Stock from The Lubrizol Corporation and an affiliate for $126,217,849. The transactions contemplated by these agreements closed on February 20, 1996 (the "Measurement Date"). 17 Pursuant to the Exchange and Purchase Agreement, among other things, Parent agreed that it would not acquire shares of Common Stock beyond specified levels at certain periods, and that it would not acquire shares of Common Stock such that it would hold more than 79.9% of the outstanding Common Stock, unless certain detailed procedures were undertaken. See Item 3(b)(2) "Exchange and Purchase Agreement." During calendar year 1996, Parent continued to acquire shares of Common Stock in the open market, from employees of the Company in connection with the exercise of their stock options, and directly from individual sellers. On December 2, 1996, Parent purchased 1,000,000 shares of Common Stock from Pioneer Overseas Corporation, which, aggregated with shares already owned by Parent, gave Parent ownership of greater than 50% of the outstanding shares of Common Stock and control over the Board. From December 1996 through November 1997, Parent continued to acquire shares of Common Stock in the open market and directly from third-party sellers (including from Dr. Jerry Caulder, who resigned as Chairman of the Board and Chief Executive Officer of the Company in May 1997, but remained a director of the Company). On June 30, 1997, TDCC, through wholly-owned subsidiaries, became the 100% owner of Parent, purchasing the 40% stake in Parent held by another entity. During the summer of 1997, three of the Company's directors--Dr. Caulder, Thomas J. Cable and W. Wayne Withers--alleged that Parent, TDCC and Parent's designees on the Board had breached their fiduciary duties to the Company and the Minority Stockholders. Those allegations are discussed below. See "Summary of Special Committee Investigation of Certain Allegations." TDCC, Parent and Parent's designees deny that they acted wrongfully. On November 11, 1997, Parent notified four directors of the Company (Dr. Caulder, Mr. Cable, Dr. David H. Rammler and Mr. Withers) that Parent would not vote to reelect them to the Board. Parent stated that, in addition to its own designees and Carlton J. Eibl, President of the Company, it would nominate three candidates with special expertise and talents in plant biotechnology, the seed industry and the financial affairs of growth oriented high technology companies. At the Company's annual meeting of stockholders held on January 8, 1998, Joseph P. Sullivan, Dr. George Khachatourians and Roy M. Barbee were elected to fill those vacancies. During March and April 1997, these three new members of the Board were appointed as an independent committee to work with the Company's management in evaluating the best path for the Company. On April 30, 1998, prior to completion of the work of the independent committee described above, Parent notified the Company and publicly announced that it desired to amend the Exchange and Purchase Agreement to allow Parent to purchase all of the Shares held by the Minority Stockholders (the "Minority Shares") and stated that, if the Exchange and Purchase Agreement were amended to permit such discussions, Parent would be prepared to discuss such a transaction at a price per share of $20.50 (the "Initial Proposal"). On May 6, 1998, the Company announced that it had received the Initial Proposal and that the Board had appointed the Special Committee to evaluate Parent's request. The Special Committee, appointed in light of the conflict of interest, with respect to the Initial Proposal, of the five member majority of the Board designated by Parent, consisted of Mr. Sullivan and Dr. Khachatourians. In early May 1998, the Special Committee retained Altheimer & Gray as its legal adviser, and made inquiries with, and interviewed, a number of investment banking firms, including WP&Co. These contacts were reviewed by the Special Committee at a meeting on May 18, 1998, at which the Special Committee also reviewed with Altheimer & Gray the duties of special committees in similar situations. On May 22, 1998, the Special Committee met with WP&Co. regarding WP&Co.'s retention and the work WP&Co. would perform in connection therewith (including due diligence efforts), and on May 26, 1998, the Special Committee announced the retention of WP&Co. as its financial advisor. 18 During late May and early June 1998, the Special Committee and its advisors began extensive due diligence with respect to the Company, including its financial condition and its intellectual property assets and position, both through on-site visits to the Company's headquarters in San Diego, California and by telephone and receipt and review of documents. During late May and early June 1998, Altheimer & Gray learned from Dr. Khachatourians that Dr. Khachatourians had provided three days of consulting services to TDCC and Parent in August 1997 for total consideration of $18,000. In order to avoid any questions regarding his independence, Dr. Khachatourians determined that he should resign from the Special Committee. At a meeting on June 11, 1998, Dr. Khachatourians voluntarily resigned from the Special Committee, and, in accordance with the recommendation of Mr. Sullivan, Ambassador Clayton K. Yeutter was appointed to the Board and to the Special Committee. Mr. Sullivan had considered a number of candidates for the anticipated vacancy on the Special Committee and selected Mr. Yeutter due to his extensive experience in the agricultural field (including serving as U.S. Secretary of Agriculture), his strong negotiating skills and background (including serving as U.S. ambassador to the Uruguay Round of GATT) and Mr. Sullivan's view, based on their experience together with The Vigoro Corporation, where Mr. Sullivan was Chairman of the Board and Mr. Yeutter a director, that Mr. Yeutter would be able to promptly and effectively step into his role on the Special Committee and be a strong representative of the Minority Stockholders. In order to permit Mr. Yeutter's appointment to the Board, Mr. Barbee resigned from the Board. In mid-June 1998, through its due diligence investigation, the Special Committee learned of certain allegations involving actions of Parent and its designated directors on the Board made by former directors and executive officers of the Company, which are described in detail below. See "Summary of Special Committee Investigation of Certain Allegations." These allegations generally involved whether Parent and its Board designees had treated the Company as a wholly-owned subsidiary, ignoring the rights of the Minority Stockholders, and had made decisions based on the benefits of opportunities to Parent, rather than the Company as an independent entity. As described below, the Special Committee and its representatives investigated these allegations. The Special Committee took the results of its investigation into account in its determinations as to the value of the Company and had frank discussions regarding such allegations during its negotiations with Parent. On June 10, 1998, WP&Co. sent a letter to TDCC requesting information on a number of due diligence matters, including issues raised by these allegations. On June 25, 1998, the Special Committee and its legal and financial advisors met with Parent and its representatives to discuss ongoing due diligence issues, disclosure issues (including issues relating to the allegations referred to above) and the anticipated schedule for the process. At this meeting, there was significant discussion as to the information requested by WP&Co. on behalf of the Special Committee and the scope of information to be provided to the Special Committee. At a meeting of the Special Committee later on June 25, the Special Committee was presented with an initial preliminary report by WP&Co. and a detailed discussion by Altheimer & Gray of the Special Committee's duties and issues relating to disclosure by Parent to the Special Committee of certain information. Based on the June 25 meetings, on June 26, 1998, WP&Co. sent another letter to TDCC requesting additional information, particularly with respect to TDCC's and Parent's analyses of the Company, any material discussions in which TDCC or Parent might be engaged with respect to transactions in the biotech area and the issues raised by certain of the Company's former officers and directors. As a part of its review of the Company's business, Altheimer & Gray learned that Parent had performed significant work in two areas relating to the Company's intellectual property estate. Specifically, attorneys for Parent had prepared an overview and categorization of the Company's intellectual property assets, including an assessment of pending litigation, and Parent was managing or participating in a substantial part of the outstanding patent litigation to which the Company is a party. In response to requests from Altheimer & Gray and the Special Commitee, on July 9, 1998, Mr. Sullivan and attorneys 19 from Altheimer & Gray met with Parent and its patent litigation counsel to discuss these due diligence matters. On July 21, 1998, the Special Committee met and approved an amendment to the Exchange and Purchase Agreement, subject to approval by the full Board (which approval was granted the following day), to allow (i) substantive discussions and negotiations with respect to a potential buyout transaction and (ii) a transaction to be formally proposed and consummated if such discussions and negotiations warranted. At that meeting, WP&Co. informed the Special Committee that, if asked, WP&Co. would be unable to opine that a price of $20.50 for such a transaction would be fair to the Minority Stockholders from a financial point of view. Also at that meeting, the Special Committee and its advisors discussed strategies with respect to a meeting with Parent to be held the next day. On July 22, 1998, the Special Committee, along with WP&Co. and Altheimer & Gray met with Parent and its legal and financial advisors in Midland, Michigan. Discussions were held as to certain recently disclosed information, the historical relationship between the Company and Parent (including issues raised by the allegations noted above) and other due diligence matters, including Parent's plans for the Company and the Company's strategic value to Parent. Later that day, the Board approved the amendment to the Exchange and Purchase Agreement and the amendment was executed. On July 24, 1998, the Special Committee received Altheimer & Gray's preliminary analysis of the Company's intellectual property estate and the litigation with respect thereto. The final report with respect to these issues was delivered to the Special Committee on July 31, 1998. On July 27, 1998, the Special Committee met with Altheimer & Gray and WP&Co. and received WP&Co.'s preliminary presentation as to the value of the Company, with a view toward a presentation of this analysis to Parent at a meeting scheduled for August 3, 1998. At this July 27 meeting, the Special Committee and its advisors reviewed the presentation in detail and held lengthy and significant discussions with WP&Co. as to its analysis and assumptions. WP&Co. circulated another draft of its preliminary report, and on July 31, 1998, the Special Committee met by teleconference with its advisors to review the status of the presentation and review further modifications. On August 3, 1998, the Special Committee and WP&Co. met with Parent and its financial advisor, Salomon Smith Barney Inc. The advisors made presentations at this meeting as to their respective analyses of the Company's value, and delivered reports to the parties with respect thereto. 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. On August 14, 1998, the Special Committee met with Parent and discussed the terms of the proposed transaction. Discussions centered on a range of values, with Parent, at this meeting, indicating a high value of $26.00 per Share and the Special Committee, at this meeting, indicating that the low end of its range was $30.00 per Share. The parties agreed to discuss their positions with their respective advisors and to meet again on August 26, 1998. During the succeeding two weeks, the Special Committee and its legal and financial advisors met several times to finalize and refine their information as to all of the matters discussed above. On August 26, 1998, the Special Committee met with Parent and the parties reached a preliminary and tentative agreement as to price at $28.00 per Share, subject to agreement as to the terms and conditions of a definitive agreement and any other material issues that might arise. Parent and the Special Committee instructed their respective advisors to proceed on this basis. Parent indicated to the Special 20 Committee that it would need the approval of its governing body. Following the Special Committee meeting with Parent, the Special Committee asked WP&Co. to formally determine if it would be prepared to render a fairness opinion with respect to a price of $28.00 per Share. On August 27, 1998, counsel for Parent delivered an initial draft merger agreement to Altheimer & Gray, and over the next four days, the parties and their representatives negotiated the terms of the Merger Agreement. During this time, legal counsel for Parent and the Special Committee also entered into discussions with legal counsel for the Company stockholder plaintiffs in the putative class action litigation with respect to a possible settlement. As a result of these discussions, on September 3, 1998, counsel for the plaintiffs, Parent, TDCC and the Special Committee entered into a "Memorandum of Understanding" ("MOU"). The MOU provides that, subject to a number of conditions, including confirmatory discovery, and court approval, the parties would agree to dismiss the putative class action litigation with prejudice. See Item 8. On August 31, 1998, the Special Committee met with Mr. Eibl, WP&Co. and Altheimer & Gray to review the process undertaken to date, review the Merger Agreement as finally negotiated, receive reports from Mr. Eibl, on behalf of management of the Company, from Altheimer & Gray, as to their review of the Company's intellectual property position, the allegations noted above and the Special Committee's duties under applicable law, and from WP&Co. as to its report with respect to the Company from a financial point of view. At this meeting, WP&Co. delivered its opinion, dated August 31, 1998, to the Special Committee to the effect that, subject to the various assumptions and limitations set forth therein, the $28.00 cash price to be received by the Minority Stockholders pursuant to the Merger Agreement is fair to such stockholders from a financial point of view. A copy of the full text of the opinion of WP&Co., dated August 31, 1998, which sets forth, among other things, the opinion expressed, assumptions made, procedures followed, matters considered and limitations of review undertaken in connection with such opinion, is attached hereto as Annex A and should be read in its entirety. The Special Committee (i) unanimously determined 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, (ii) authorized and approved the acquisition of Shares by Purchaser in the Offer and the Merger, (iii) approved and adopted in all respects the Merger Agreement and the performance by the Company of its obligations thereunder, (iv) recommended acceptance of the Offer and the tender of shares pursuant thereto, and (v) recommended that the Board approve and adopt the Merger Agreement, the acquisition of Shares pursuant thereto and that the Board recommend that the Minority Stockholders tender their Shares in the Offer and, to the extent required, approve and adopt the Merger Agreement and the transactions contemplated thereby. Later on August 31, 1998, at a meeting of the Board, the Special Committee presented its report to the Board, including its recommendations set forth above. The Board unanimously (i) determined 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, (ii) authorized and approved the acquisition of shares by Purchaser in the Offer and the Merger, (iii) approved and adopted in all respects the Merger Agreement and the performance by the Company of its obligations thereunder, and (iv) recommended that the Minority Stockholders tender their Shares in the Offer and, to the extent required, approve and adopt the Merger Agreement and the transactions contemplated thereby. Finally, the Compensation Committee of the Board, which governs each of the Mycogen Corporation 1992 Stock Option Plan, the Mycogen Corporation Restricted Stock Issuance Plan and the Mycogen Corporation 1995 Stock Purchase Plan, approved the treatment of the options, purchase rights and restricted stock subject to those plans, as described in the Merger Agreement, and took actions designed to effect such treatment. The Merger Agreement was executed on August 31, 1998, and Parent and the Company issued a joint press release announcing such execution and delivery on August 31, 1998 (a copy of which is attached hereto as Exhibit 28). 21 (b)(2) REASONS FOR THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD. In determining that the Offer and the Merger are fair to, and in the best interests of, the Minority Stockholders, and in making its recommendation to the Board, the Special Committee considered the following material factors, which taken as a whole, supported its determination: (i) the offer of $28.00 per Share represented a premium of approximately 36.6%, 53.4% and 64.7% over the closing price of the Shares on the NASDAQ National Market one full trading day, thirty days and sixty days prior to the public announcement of the Initial Proposal on April 30, 1998, respectively; (ii) the Special Committee's review of historical market prices and recent trading activity of the Shares, including the fact that prior to August 31, 1998, the Shares had not closed above $25.50 per Share since June 1997, and developments in the stock market since the date of the Initial Proposal; (iii) the Special Committee's consideration of, among other things, (a) the business plan and information with respect to the financial condition, results of operations, business and prospects of the Company, (b) the changes and consolidation occurring in the agricultural biotechnology industry, their impact on the Company and the potential implication of these changes on the Company's relationship with Parent, (c) the historical relationship between the Company and Parent, including with respect to the Special Committee's investigation of the allegations described below, (d) the fact that the valuation analyses of WP&Co. involved potentially speculative valuation of income opportunities which were far in the future and involved assumptions of market share in such future periods, (e) the inherent uncertainty as to the value of certain intellectual property rights of the Company which are subject to a number of uncertainties (such as, for example, the litigation to which the intellectual property is subject, the need to commercially develop such rights, and the inherent speculative nature of commercial development of these rights, including the area of oral immunology, and the effect of the Company's competition in these fields), and (f) concerns regarding the achievability of the Company's projections which formed the basis for the discounted cash flow analysis in WP&Co.'s report; (iv) the history of the negotiations between the Special Committee and its representatives and Parent's representatives, including the fact that (a) the negotiations resulted in an increase in the price at which Parent was prepared to acquire the Shares from $20.50 per Share to $28.00 per Share, an increase of 36.6%, and (b) the Special Committee believed that Parent would not further increase the price payable in the Offer and that $28.00 per Share was the highest price that could be obtained from Parent; (v) the Special Committee's review of presentations by, and discussion of the terms of the Merger Agreement (including the Offer and the Merger) with, representatives of the Special Committee's legal counsel and its financial advisors; (vi) the terms of the Offer, the Merger and the Merger Agreement, including the structural features of the Offer, which provide for a prompt cash tender offer for all outstanding Shares held by the Minority Stockholders to be followed if certain conditions are satisfied by a merger for the same consideration (thereby enabling the Minority Stockholders to obtain the benefits of the transaction in exchange for their Shares at the earliest possible time); (vii) other provisions of the Offer and the Merger Agreement, including the fact that (a) the Purchaser is not permitted to waive the Minimum Condition without the approval of the Special Committee unless, after the consummation of the Offer, Parent and Purchaser would own at least 81.07% of the Fully Diluted Shares (so that at least a majority of the Minority Shares on a fully diluted basis would have been tendered), (b) the Offer is not subject to any financing condition and (c) the terms of the Merger Agreement may not be amended or waived without the approval of the Special Committee; 22 (viii) the likelihood that the proposed acquisition would be consummated, based in part on the financial condition of Parent and the limited scope of conditions (other than the Minimum Condition) to be satisfied prior to the consummation of the Merger as provided in the Merger Agreement; (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. 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; (x) the risk that the Company would suffer the loss of key employees and other adverse consequences if the Company had not accepted Parent's offer to engage in the transactions contemplated by the Merger Agreement and had pursued other alternatives with the attendant delay inherent in such alternatives (in particular, it was noted that a competitor of the Company had announced plans to open a facility near the Company's headquarters, and that the risk of loss of key employees described above, which management had indicated was already high, would be increased thereby); (xi) the belief of the Special Committee, and the concurrence of the Company's management, that, in a rapidly developing competitive market, in order for the Company to effectively compete, it would need to be a part of a larger strategic organization or fundamentally change to a different strategy, whether a niche strategy or otherwise, and the fact that such change was unlikely to happen in light of Parent's majority ownership of the Company; in this connection, the Special Committee also considered management's view that the Company has short term cash needs as well as continuing needs over many years to fund certain of its research and development opportunities which would be difficult to meet in the absence of consummating a buyout of the Minority Stockholders by Parent; (xii) the fact that Parent owns a majority of the shares of Common Stock, control of the Board and the right to maintain such ownership level and control, and the stated unwillingness of Parent to sell such shares to a third party bidder for the acquisition of the Company and the improbability of a third party making such a bid; and in connection therewith, Parent had indicated that it was not interested in selling the Company to a third party and the Special Committee and WP&Co. were not authorized to, and did not, solicit third party indications of interest for the acquisition of the Company or its businesses; (xiii) the Special Committee's determination, and the concurrence of the Company's management, that, in light of allegations made and other organizational differences between Parent and the Company, a continuation of the status quo position of the parties would be highly undesirable and would present a significant risk of further erosion of the relationship between Parent and the Company and of the value of the Company; (xiv) the Special Committee's view that, in light of factors (x)--(xiii), together with continued disappointing operating results, and risks with respect to the trading price of the Shares and the stock market in general, the consideration that the stockholders of the Company (other than Parent and Purchaser) would obtain in a future transaction (including any transaction which might be effected by Parent pursuant to the Exchange and Purchase Agreement following February 1999) would likely be less advantageous than the consideration they would receive pursuant to the Offer and the Merger; and 23 (xv) the ability of the Minority Stockholders to exercise dissenters' rights under the CGCL in connection with the Merger. In reaching its determinations referred to above, the Board considered the recommendation of the Special Committee and a report of the Special Committee, which, in the view of the Board, supported such determinations. The members of the Board, including the members of the Special Committee, evaluated the various factors considered in light of their knowledge of the business, financial condition and prospects of the Company, and sought and considered the advice of financial and legal advisors. In light of the number and variety of factors that the Board and the Special Committee considered in connection with their evaluation of the Offer and the Merger, neither the Board nor the Special Committee found it practicable to quantify or otherwise assign relative weights to any of the foregoing factors, and, accordingly, neither the Board nor the Special Committee did so. In addition to the factors listed above, the Special Committee considered the fact that consummation of the Offer and the Merger would eliminate the opportunity of the Minority Stockholders to participate in any potential future growth in the value of the Company, but believed that this loss of opportunity was appropriately reflected by the price of $28.00 per Share to be paid in the Offer and the Merger. The Board, including the Special Committee, believes that the Offer and the Merger are procedurally fair because, among other things: (i) the Special Committee consisted of independent directors (unaffiliated with Parent, Purchaser or their affiliates or the Company's management) appointed to represent the interests of the Minority Stockholders; (ii) the Special Committee retained and was advised by independent legal counsel; (iii) the Special Committee retained and was advised by independent financial advisors, who assisted the Special Committee in evaluating the Offer and the Merger and rendered a fairness opinion, as described herein; (iv) the detailed review by the Special Committee and its advisors of the business, financial condition and intellectual property estate of the Company and the review of the allegations of improprieties by Parent in its relationship with the Company; (iv) the deliberations pursuant to which the Special Committee evaluated the Offer and the Merger and alternatives thereto; (v) the $28.00 per Share price and the other terms and conditions of the Merger Agreement resulted from active arms'-length bargaining between members of the Special Committee, on the one hand, and Parent, on the other; and (vi) Purchaser is not permitted to waive the Minimum Condition without the consent of the Special Committee unless, after the consummation of the Offer, Parent and Purchaser would own at least 81.07% of the Fully Diluted Shares (which would constitute the tender of a majority of the Minority Shares, on a fully diluted basis). On August 31, 1998, the Board held a meeting and, based upon, among other things, the unanimous recommendation of the Special Committee, determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement are fair to, and in the best interests of, the Company and its Minority Stockholders and approved the Offer, the Merger and the Merger Agreement and recommends that the Minority Stockholders of the Company accept the Offer and tender their Shares to Purchaser pursuant to the Offer. THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST INTEREST OF THE COMPANY AND THE MINORITY STOCKHOLDERS, AND, UPON THE RECOMMENDATION OF THE SPECIAL COMMITTEE, RECOMMENDS THAT MINORITY STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES TO PURCHASER. 24 SUMMARY OF SPECIAL COMMITTEE INVESTIGATION OF CERTAIN ALLEGATIONS. During the course of the Special Committee's due diligence efforts, the Special Committee learned of certain allegations made by former officers and directors of the Company. These allegations essentially alleged that Parent and Parent's nominees to the Board had breached fiduciary duties owed to the Company and the Minority Stockholders. The allegations, although involving numerous specifics, fit into five general categories: (i) that Parent and its nominees had inhibited, blocked or prevented the Company from entering into certain transactions (such as mergers, acquisitions, joint development agreements and the like) with third parties that allegedly would have been beneficial to the Company; (ii) that Parent and its nominees had prevented the Company from making a public offering; (iii) that Parent provided equity financing to the Company on terms that were unfair to the Company; (iv), that Parent and its nominees had offered the Company's technology to others in exchange for technology of little or no interest to the Company, but of value to Parent; and (v) that Parent had passed up opportunities to sell the Company as a whole for a favorable price. These allegations have been principally made by Dr. Jerry Caulder, Chief Executive Officer of the Company until May 1997 and Thomas Cable, a director of the Company until January 1998. In November 1997, Parent determined not to vote for the re-election to the Board of Dr. Caulder (who had remained a member of the Board after his resignation as Chief Executive Officer), Mr. Cable, David Rammler, the founder of the Company, and W. Wayne Withers, formerly of Monsanto Corporation and currently General Counsel of Emerson Electric Company. In the summer of 1997, while still members of the Board of the Company (but after Dr. Caulder had resigned as Chief Executive Officer), Dr. Caulder and Mr. Cable sent an unsigned letter (marked "draft") to Pedro Reinhard, Chief Financial Officer of TDCC, cataloging a number of complaints about the way TDCC and Parent had managed the Company. Mr. Withers sent a letter to TDCC around the same time period requesting that the Company hire an independent law firm to advise the independent members of the Board concerning alleged conflicts of interest between Parent and the Company. TDCC and Parent denied the complaints set forth in the draft letter; there is no known response to Mr. Withers' letter and no counsel was hired. In approximately April 1998, officers of the Company prepared two chronologies, one of which described the history of the discussions concerning raising public equity in 1997 and Parent's ultimate refusal to permit additional shares to be sold to the public and the other cataloging a number of transactions with third parties that were said to have been blocked by Parent. During its due diligence review of the Company, the Special Committee (neither of whose members had been on the Board at the time of the events in question) learned of the Caulder/Cable draft letter and the chronologies described above. Altheimer & Gray, as counsel to the Special Committee, assisted the Special Committee in an investigation into these matters. Following is a summary of the Special Committee's analysis of these documents and the allegations set forth therein. 1. Both the Caulder/Cable draft letter and one of the management chronologies, as well as other sources, document cases in which the Company's management wished to pursue various business opportunities--some in the form of acquisitions, some structured as licenses, some as joint development agreements or otherwise--but was purportedly unable to obtain Parent's approval to do so. These transactions involved a large range of differing circumstances. Only one of these transactions was ever actually presented to the Board, which rejected it by a 5-4 vote in February 1997, all of the Parent designees voting against and all of the other directors voting in favor. Other transactions that were favored by the Company's management were not approved by the Company's "Technology Committee" (dominated by Parent), but were not submitted to the Board. The transactions in question were also at various stages of completion. The largest and most ambitious projects were never close to consummation. The Special Committee had significant questions regarding whether these transactions could have been accomplished even with the enthusiastic support of Parent. Other potential business deals were more advanced in their development, even at the final contract stage. In general, the Special Committee found it impossible to tell 25 whether and to what extent the Company would be better off had any or all of these transactions been accomplished. Many were in the nature of long term trait development transactions and it would have been several years before it would be clear whether they would have been profitable. 2. As set forth in the Caulder/Cable draft letter and the other chronology, the Company had been considering means of financing its operations for much of 1997. The Board looked into raising money through the public sale of shares of Common Stock. During the summer of 1997, Parent decided that it would not permit the Company to issue new shares to anyone other than Parent, which Parent had a right to do under the Exchange and Purchase Agreement. The Special Committee determined that Parent's contractual rights, which had been extensively bargained for at arms' length, supported its actions in this case. In addition, Parent has maintained its belief that the raising of funds through outside equity would be too expensive for the Company. Moreover, there is no assurance that the Company could have successfully completed a public sale of shares of Common Stock, or at what price. 3. In approximately October 1997, in connection with a proposed but ultimately unsuccessful acquisition, Parent was prepared to purchase approximately $150 million in value of Common Stock at $24.00 per share. A fairness opinion for that price had been obtained. After the collapse of that transaction, in November 1997, Parent agreed to purchase $75 million in value of Common Stock at a contractually stipulated price of the 90 day trailing average. This transaction was approved unanimously by the Board, including by Dr. Caulder and Messrs. Cable, Rammler and Withers. No fairness opinion was obtained for this transaction. During the two-month period between the time the Board approved the transaction and when it was consummated, the 90 day trailing average price declined from $23.02 to $19.94. Because the stock price was falling at that time, the considerable period of time it took for Parent to formally approve and consumate the transaction resulted in lowering the cost of acquisition for Parent. 4. In the Caulder/Cable draft letter, the allegation is made that Parent had offered to trade (presumably by way of a cross license) the Company's technology to others in exchange for technology that was of little or no interest to the Company but was of value to TDCC and Parent. However, neither Dr. Caulder, Mr. Cable nor current management of the Company were aware of any instance in which such a technology trade was in fact consummated. 5. Finally, Dr. Caulder has maintained that Parent could have arranged for the sale of all of the Company's stock (including the Shares held by the Minority Stockholders) at a considerable premium over the market price if it had chosen to do so. The Special Committee recognized that as a matter of law, Parent was and is under no obligation to agree to sell its own shares of Common Stock, even if it might have been in the best interests of the Minority Stockholders that Parent do so. TDCC, Parent and Parent's designees have denied that they acted wrongfully with respect to any of the matters raised in these allegations. As described above, the Special Committee took these matters and the results of its investigation into account in making its determinations described above and in making its recommendations to the Board. OPINION OF WP&CO. The Special Committee retained Wasserstein Perella to act as its financial advisor in connection with the Transactions (as defined herein). Wasserstein Perella has delivered a written opinion to the Special Committee, dated August 31, 1998, to the effect that, subject to the various assumptions and limitations set forth therein, as of the date thereof, the $28.00 per Share cash consideration to be received by holders of Shares (other than TDCC and its affiliates) in the Offer and the Merger pursuant to the Merger Agreement (collectively, the "Transactions") is fair to such shareholders from a financial point of view. Wasserstein Perella was engaged and acted solely as an advisor to the Special Committee and not as an advisor to or agent of any other person, including the Company. Wasserstein Perella's opinion is for the 26 benefit and use of the Special Committee in its consideration of the Transactions and may not be used for any other purpose. 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 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 IN RESPECT OF SUCH MATTERS. 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. In connection with rendering its opinion, Wasserstein Perella, among other things, (i) reviewed the financial terms and provisions of the Merger Agreement; (ii) reviewed the Exchange and Purchase Agreement, dated January 15, 1996, among the Company, Agrigenetics, Inc., Parent and United Agriseeds, Inc. (the "Exchange and Purchase Agreement"), including TDCC's and its affiliates' rights and obligations thereunder both if the Transactions are completed and not completed; (iii) 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 Wasserstein Perella for purposes of its analyses; (iv) met with certain representatives of the Company and Parent to review and discuss such information and, among other matters, the Company's business, financial condition, results of operations and prospects; (v) reviewed and considered certain financial and stock market data relating to the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded and that Wasserstein Perella believed might be relevant or comparable in certain respects to the Company or one or more of its businesses or assets; (vi) 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 Wasserstein Perella believed to be reasonably comparable to the Transactions or otherwise relevant to its analysis; and (vii) performed such other studies, analyses and investigations and reviewed such other information as Wasserstein Perella considered appropriate. In its review and analysis and in formulating its opinion, Wasserstein Perella assumed and relied on the accuracy and completeness of all the financial and other information provided to or discussed with it or publicly available, including the financial projections, forecasts, analyses and other information provided to Wasserstein Perella, without assuming any responsibility for independent verification of, or expressing an opinion as to, any of such information. Wasserstein Perella also relied upon the reasonableness and accuracy of the unadjusted projections, forecasts, analyses and other information furnished to Wasserstein Perella and assumed, with the Special Committee's consent, that such projections, forecasts, 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 August 31, 1998 and that management of the Company is unaware of any facts that would make the projections, forecasts and other information provided to Wasserstein Perella incomplete or misleading. Wasserstein Perella expressed no opinion with respect to such projections, forecasts and analyses or the assumptions on which they are based. Wasserstein Perella also did not review any of the books and records of the Company or Parent, and although Wasserstein Perella visited certain facilities of the Company, Wasserstein Perella was not retained to conduct, and did not assume any responsibility for conducting, a physical inspection of the properties or 27 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 it. Wasserstein Perella's opinion was based on economic and market conditions and other circumstances as they existed and could be evaluated by it on August 31, 1998. Although subsequent developments may affect Wasserstein Perella's opinion, it is under no obligation to update, revise or reaffirm its opinion. Wasserstein Perella's analysis assumes 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 its engagement, Wasserstein Perella was not authorized to solicit and did not solicit alternative offers for the Company or its assets, or investigate any other alternative transactions which may be available to the Company. Wasserstein Perella expressed no opinion with respect to the Third Party Sale Value of the Company as such term is defined in the Exchange and Purchase Agreement. The following is a summary of the report presented by Wasserstein Perella to the Special Committee in connection with the delivery of its opinion on August 31, 1998. DISCOUNTED CASH FLOW ANALYSES. Wasserstein Perella performed two different discounted cash flow ("DCF") analyses of the Company based on the Company's financial projections for the 1998-2007 period by business segment: (i) a variable discount rate DCF analysis and (ii) a probability-weighted method DCF analysis. The Company's projections for the 1998-2007 period include the impact of three pending acquisitions in Brazil, including the impact of an increase in net debt as a result of these acquisitions. Certain synergies that would be expected in a combination with TDCC such as expense reductions and the Company's use of net operating losses were included in the projections. In conducting the variable discount rate DCF analysis, Wasserstein Perella used a range of discount rates and a range of terminal multiples of earnings before interest and taxes ("EBIT") for each of the Company's more established, growing business segments. For the Company's Biopesticides and the SoilServ business segments, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's Conventional Seed business segment, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 8x to 12x. For the Conventional Seed portion of the Company's joint venture with Verneuil Holding, S.A. ("VMO") and the Company's entire AC Humko joint venture, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's JG Boswell joint venture, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 8x to 12x. For the Company's DAS Canada joint venture, Wasserstein Perella used discount rates ranging from 20.0% to 24 .0% and terminal EBIT multiples ranging from 8x to 12x. These analyses yielded ranges of per share values for each such business segment as follows: Biopesticides $0.09 to $0.12; SoilServ $0.73 to $1.02; Conventional Seed $6.48 to $13.05; VMO (conventional seed only) $0.18 to $0.27; AC Humko $0.06 to $0.07; JG Boswell $1.54 to $2.22; and DAS Canada $0.34 to $0.54. With respect to the Company's less well established business segments or business segments that rely on unproven technology, Wasserstein Perella used a range of discount rates and a range of projected unlevered cash flow perpetuity growth rates. For the Company's Herbicide and Insect Resistence business segment, Wasserstein Perella used discount rates ranging from 20.0% to 24.0% and perpetuity growth rates from 0.0% to 6.5%. For the Company's Output Traits business segment, Wasserstein Perella used discount rates ranging from 25.0% to 30.0% and perpetuity growth rates ranging from 5.0% to 6.5%. For the Company's Disease Resistence business segment, Wasserstein Perella used discount rates ranging from 31.0% to 50.0% and perpetuity growth rates ranging from 8.0% to 10.0%. For all portions of the Company's VMO joint venture excluding the conventional seed portion, Wasserstein Perella used discount rates ranging from 20.0% to 50.0% and perpetuity growth rates ranging from 5.0% to 10.0%. Wasserstein Perella applied discount rates ranging from 20.0% to 24.0% to projected Pioneer Hi-Bred royalties. For the Company's other partner royalties, Wasserstein Perella used discount rates ranging from 20.0% to 28 24.0% and perpetuity growth rates ranging from 1.0% to 2.5%. For the Company's other pest and crop royalties, Wasserstein Perella used discount rates ranging from 31.0% to 50.0% and perpetuity growth rates ranging from 5.0% to 6.5%. These analyses yielded ranges of per share values for each business segment as follows: Herbicide and Insect Resistence $3.75 to $6.65; Output Traits $4.71 to $8.72; Disease Resistence $2.98 to $4.03; VMO (other than conventional seed) $0.02 to $0.08; Pioneer Hi-Bred royalties $0.90 to $0.97; other partner royalties $0.35 to $0.54; and other pest and crop royalties $0.53 to $2.67. In addition, the Wasserstein Perella valued certain miscellaneous items including potential cost savings and use of net operating losses which yielded, in the aggregate, a range of per share values from $4.64 to $6.48. This variable discount rate DCF analyses yielded an aggregate value per share for the Shares ranging from $27.37 to $47.29. Wasserstein Perella also noted that recent declines in volume and unit sales price with respect to corn seed may adversely impact the Company's long term growth projections and that, assuming the Company's recent market share erosion impacts projected market share growth in a constant fashion, the range of values per share of the Company's Shares would be reduced to $26.22 to $45.44. In addition, Wasserstein Perella performed a sensitivity analysis based on certain financial forecasts provided to Wasserstein Perella by management of the Company with respect to certain key business segments of the North America and Brazil portions of the Company's Conventional Seed, Herbicide and Insect Resistance and Output Traits business segments. The Base Case for the sensitivity analysis was predicated on forecasts of the Company's market share in each key business segment for the period from 1997 through 2007 (the "Base Case"). The Base Case projections implied that the Company's market share of the Conventional Seed business for corn in North American will grow from 3.4% in 1997 to 13.6% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $2.46 to $5.40 and that the Company's market share of the Conventional Seed business for corn in Brazil will grow from 11.0% in 1997 to 29.0% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $2.65 to $4.50. The Base Case projections also implied that the Company's market share of the Herbicide and Insect Resistance business for corn crops in North America will grow from 3.4% in 1997 to 13.6% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $1.88 to $3.25 and that the Company's market share of the Herbicide and Insect Resistance business for soybean crops in North America will grow from 1.8% in 1997 to 7.8% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $1.16 to $1.86. The Base Case projections further implied that the Company's market share of the Output Traits business for soybean crops in North America will grow from 1.8% in 1997 to 7.8% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $3.77 to $6.83. In the Base Case, these key business segments comprised 45.3% of the Company's overall value and the remainder of the Company's value was derived from 35 additional business units and miscellaneous items. For purposes of its sensitivity analysis only, Wasserstein Perella also considered two alternative cases (i) a revised Base Case which was predicated on the Company achieving 75% of its projected growth in market share for the key business segments through the year 2007 (the "75% Case") and (ii) a revised Base Case which was predicated on the Company achieving 125% of its projected growth in market share for the key business segments through the year 2007 (the "125% Case"). In the 75% Case, the contribution of the Conventional Seed business for corn in North America to the Company's overall value ranged from $0.98 to $2.87, a reduction from the Base Case of 60.2% and the contribution of the Company's Conventional Seed business for corn in Brazil to the Company's overall value ranged from $2.34 to $3.91, a reduction from the Base Case of 11.7%. In the 75% Case, the contribution of the Company's Herbicide and Pesticide Resistance business for corn crops in North America to the Company's overall value ranged from $1.60 to $2.76, a reduction from the Base Case of 14.9% and the contribution of the Company's Herbicide and Pesticide Resistance business for soybean crops in North America to the Company's overall value ranged from $0.86 to $1.36, a reduction from the Base Case of 25.9%. In the 75% Case, the contribution of the Company's Output Traits business for soybean crops in North America to the Company's overall value 29 ranged from $3.55 to $6.40, a reduction from the Base Case of 5.8%. In the 75% Case, these key business segments comprised 40.6% of the Company's overall value. In the 125% Case, the contribution of the Conventional Seed business for corn in North America to the Company's overall value ranged from $3.93 to $7.92, an increase from the Base Case of 59.8% and the contribution of the Company's Conventional Seed business for corn in Brazil to the Company's overall value ranged from $2.97 to $5.09, an increase from the Base Case of 12.1%. In the 125% Case, the contribution of the Company's Herbicide and Pesticide Resistance business for corn crops in North America to the Company's overall value ranged from $2.16 to $3.72, an increase from the Base Case of 14.9% and the Company's Herbicide and Pesticide Resistance business for soybean crops in North America to the Company's overall value ranged from $1.22 to $1.96, an increase from the Base Case of 5.2%. In the 125% Case, the contribution of the Company's Output Traits business for soybean crops in North America to the Company's overall value ranged from $3.99 to $7.24, an increase from the Base Case of 5.8%. In the 125% Case, the key business segments comprised 48.7% of the Company's overall value. The Base Case, the 75% Case, and the 125% Case resulted in per share valuation ranges for the Shares from $27.37 to $47.29; $23.98 to $41.51 and $30.25 to $52.38, respectively. For purposes of the probability-weighted method DCF analysis, Wasserstein Perella used estimates provided by management of the probability that new products will proceed through certain stages of the commercialization process and ultimately be commercialized in order to weigh the expenses anticipated in connection with commercializing the product and the revenues anticipated to be generated by the product. These probability-weighted expense and revenue streams were then used to estimate the free cash flow attributable to such products. Wasserstein Perella lowered management's probability estimates to reflect execution and commercialization risk in light of the size and financial resources available to the Company's competitors as follows: (i) Wasserstein Perella used 90% of management's probability estimates with respect to Herbicide and Pesticide Resistance products; (ii) Wasserstein Perella used 81% of management's probability estimates with respect to Output Traits products, and; (iii) Wasserstein Perella used 72% of management's probability estimates with respect to Disease Resistance products. For the Company's Biopesticides and the SoilServ business segments, Wasserstein Perella used discount rates ranging from 10.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's Conventional Seed business segment, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 8x to 10x. For the conventional seed portion of the Company's VMO joint venture and the Company's entire joint ventures with AC Humko and JG Boswell, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 6x to 12x. For the Company's DAS Canada joint venture, Wasserstein Perella used discount rates ranging from 10.0% to 14 .0% and terminal EBIT multiples ranging from 4x to 10x. For the Company's Herbicide and Insect Resistence business segment, Output Traits business segment, other partner royalties business segment and other pest and crop royalties business segment, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and perpetuity growth rates ranging from 5.0% to 6.5%. For the Company's Disease Resistence business segment and VMO joint venture (excluding the conventional seed portion), Wasserstein Perella applied discount rates ranging from 11.0% to 14.0% and perpetuity growth rates ranging from 5.0% to 10.0%. Wasserstein Perella applied discount rates ranging from 10.0% to 14.0% to projected Pioneer Hi-Bred royalties. The probability-weighted method DCF analyses yielded an aggregate value per share for the Share ranging from $27.77 to $54.92. Wasserstein Perella also noted that recent declines in volume and unit sales price with respect to corn seed may adversely impact the Company's long term growth projections and that, assuming the Company's recent market share erosion impacts projected market share growth in a constant fashion, the range of values per share would be reduced to $26.83 to $53.29. 30 COMPARABLE TRANSACTION ANALYSIS. Wasserstein Perella reviewed recent acquisitions of all the outstanding equity of, or strategic equity investments in, four publicly traded agrobiotech companies from April 1, 1996 to August 31, 1998 in which the total purchase price for the seller ranged from $268 million to $3.88 billion (acquiror/seller): Monsanto Company ("Monsanto")/Delta and Pine Land Company ("Delta"); E. I. du Pont de Nemours and Company/Pioneer Hi-Bred International, Inc. ("Pioneer"); Monsanto/DeKalb Genetics Corporation ("DeKalb"); and Monsanto/Calgene, Inc. ("Calgene"). In those transactions in which only a substantial equity investment was made, the purchase price was adjusted to translate the price the acquiror paid for part of the seller into a price for the entire company. For each transaction, Wasserstein Perella calculated the multiple of announced purchase price (or adjusted purchase price in the case of substantial equity investments) to the seller's (i) last twelve months ("LTM") sales, (ii) LTM earnings before interest, taxes, depreciation and amortization ("EBITDA") and (iii) LTM EBIT. Wasserstein Perella also calculated the implied equity value of each seller as a multiple of net income and book value. The analysis of the foregoing four transactions, excluding certain multiples which Wasserstein Perella determined were not meaningful, yielded a range of multiples of (a) announced or adjusted purchase price to (i) LTM sales of 4.6x to 9.87x, (ii) LTM EBITDA of 18.4x to 69.8x, (iii) LTM EBIT of 22.6x to 89.6x and (b) of implied equity value to (i) net income of 33.9x (in the one instance in which such information was meaningful) and (ii) book value of 3.1x to 25.1x. Wasserstein Perella used these comparable transaction multiples to calculate implied values for the shares based on the ranges of multiples derived from such transactions. The per Share value implied by this analysis ranged from $33.24 per share to $38.85 per share. PREMIUM ANALYSIS. As part of its analysis, Wasserstein Perella reviewed three acquisition transactions by majority shareholders of publicly owned minority interests in agrobiotech companies with values ranging from $119.4 million to $3,426 million to derive a range of premiums paid over (i) the seller's market price per share one day prior to the announcement of the respective transaction (the "1-Day Market Price"); (ii) the seller's market price per share 30 days prior to the announcement of the respective transaction (the "30-Day Market Price"); and (iii) the seller's market price per share 60 days prior to the announcement of the respective transaction ("60-Day Market Price"). The three transactions involved the following pairs of companies (acquiror/seller): Monsanto/Calgene; Novartis AG/SyStemix, Inc.; and Monsanto/DeKalb (the "Premium Transactions"). The Premium Transactions yielded a range of acquisition premiums to the 1-Day Market Price of 34.9% to 77.3% with a mean of 52.5% and a median of 45.5%. The 1-Day Market Price of the Company was $20.50. The median acquisition premium to the 1-Day Market Price for the Premium Transactions implies a per share price of $29.82. The mean acquisition premium to the 1-Day Market Price for the Premium Transactions implies a per share price of $31.27. The Premium Transactions yielded a range of acquisition premiums to the 30-Day Market Price of 41.2% to 60.0% with a mean of 53.5% and a median of 59.2%. The 30-Day Market Price of the Company was $18.25. The median acquisition premium to the 30-Day Market Price for the Premium Transactions implies a per share price of $29.05. The mean acquisition premium to the 30-Day Market Price for the PremiumTransactions implies a per share price of $28.01. The Premium Transactions yielded a range of acquisition premiums to the 60-Day Market Price of 42.57% to 48.6% with a mean of 45.5% and a median of 45.5%. The 60-Day Market Price of the Company was $17.00. The median acquisition premium to the 60-Day Market Price for the Premium Transactions implies a per share price of $24.73. The mean acquisition premium to the 60-Day Market Price for the Premium Transactions implies a per share price of $24.74. COMPARABLE COMPANY ANALYSIS. Wasserstein Perella reviewed and compared certain financial information of the Company to corresponding financial information for four publicly traded companies: Pioneer; 31 DeKalb; Delta and Agribiotech, Inc. (collectively, the "Comparable Companies"). Such financial information was used to calculate for each Comparable Company (a) the price/earnings ratio ("P/E Ratio") for 1997, the estimated P/E ratio for 1998, the ratio of 1998 estimated P/E Ratio to estimated three to five year earnings growth rate and the price to book ratio, (b) the multiple of adjusted market value to 1997, LTM and estimated 1998 and 1999 financial results, including sales, EBITDA and EBIT and (c) net debt as a percentage of market capitalization. Such analysis, excluding certain multiples which Wasserstein Perella determined were not meaningful, indicated that, (a) the Company had a price to book ratio of 4.1x, as compared to a range of 4.6x to 18.3x, with a mean of 10.1x and a median of 8.8x, for the Comparable Companies, (b) with respect to adjusted market value, (i) the Company traded at a multiple of 4.29x 1997 sales, as compared to a range of 1.34x to 10.32x, with a mean of 5.66x and a median of 5.50x, for the Comparable Companies, (ii) the Company traded at a multiple of 4.15x LTM sales, as compared to a range of 1.34x to 9.33x, with a mean of 5.20x and a median of 5.08x, for the Comparable Companies, (iii) the Company traded at a multiple of 3.53x estimated 1998 sales, as compared to a range of 1.45x to 7.13x, with a mean of 4.72x and a median of 5.15x, for the Comparable Companies, (iv) the Company traded at a multiple of 3.03x estimated 1999 sales, as compared to a range of 0.72x to 5.33x, with a mean of 3.87x and a median of 4.71x, for the Comparable Companies and (c) the Company's net debt was 9.9% of its market capitalization, as compared to a range of (2.3%) to 9.5%, with a mean of 2.6% and a median of 1.6% for the Comparable Companies. The above analysis, when adjusted to account for control premiums of 10%, 30% and 50%, implied per share values of $30.22, $31.93 and $33.64, respectively. COMPOSITE RANGE. Based on the above analyses, Wasserstein Perella derived a composite range of per Share values of $25.00 to $35.00. In deriving this composite range, Wasserstein Perella took into account, among other things, that (i) the Company historically has failed to achieve its operating projections and the projections provided to Wasserstein Perella 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 judgement, 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. CERTAIN GENERAL MATTERS. No company or transaction used in the foregoing analyses is identical to the Company or the Transactions. In addition, those analyses and the discounted cash flow analyses are based and heavily dependent upon, among other factors, assumptions as to future performance and other factors, and are therefore subject to the limitations described in Wasserstein Perella's opinion. Accordingly, an analysis of the results of the foregoing is not entirely mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the acquisition value or the public trading value of the companies to which they are being compared and the Company. A fairness analysis is a complex process and is not necessarily susceptible to a partial analysis or summary description. Wasserstein Perella believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying the analyses performed in reaching its opinion. In addition, Wasserstein Perella considered the results of all such analyses and did not assign relative weights to any of the analyses, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Wasserstein Perella's view of the actual value of the Company. 32 In performing its analyses, Wasserstein Perella made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Wasserstein Perella are not necessarily indicative of actual values, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as part of Wasserstein Perella's opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The Special Committee retained Wasserstein Perella based upon its experience and expertise. Wasserstein Perella is an internationally recognized investment banking and advisory firm. Wasserstein Perella, as part of its investment banking business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the course of its market marking and other trading activities, Wasserstein Perella and its affiliates may, from time to time, have a long or short position, and may buy and sell, securities of the Company. Pursuant to the terms of a letter agreement, dated June 11, 1998 between Wasserstein Perella and the Company (the "Wasserstein Perella Letter Agreement"), the Special Committee retained Wasserstein Perella to serve as financial advisor to the Special Committee with respect a proposal received by the Company from Parent (i) to amend the Exchange and Purchase Agreement and (ii) following such amendment, to acquire all outstanding Shares held by persons other than TDCC and its affiliates at a price initially proposed to be $20.50 per share (an "Engagement Transaction"). The Company agreed in the Wasserstein Perella Letter Agreement to pay Wasserstein Perella $250,000 upon the execution of the Wasserstein Perella Letter Agreement and an additional fee of $1,000,000 at such time as Wasserstein Perella advises the Special Committee that it is prepared to render an opinion to the Special Committee with respect to the fairness from a financial point of view of the consideration to be received by the public holders of Shares pursuant to an Engagement Transaction or that, having completed its review of the proposed Engagement Transaction, it is unable to render such an opinion. In addition, the Company also agreed to pay Wasserstein Perella upon the consummation of an Engagement Transaction 0.50% of the aggregate value paid or payable to the public shareholders of the Company, in excess of $20.50 per share plus 1.80% of the aggregate value paid or payable to such shareholders in excess of $24.06. The Company and Wasserstein Perella further agreed that fees paid to Wasserstein Perella shall in no event be less than $2,250,000 or more than 0.80% of the aggregate value paid to public shareholders. Pursuant to the terms of a letter agreement, dated July 31, 1998, between Merrill Lynch & Co. ("ML") and the Company (the "ML Letter Agreement"), the Special Committee retained ML to make available to the Special Committee certain employees of ML formerly employed by Wasserstein Perella. The Company agreed in the ML Letter Agreement to pay ML $300,000 if a definitive agreement with respect to the Transactions was executed on or prior to August 29, 1998 or $500,000 if a definitive agreement with respect to the Transactions was executed after August 29, 1998. The Company has also agreed to reimburse Wasserstein Perella and ML, subject to certain limitations, for all reasonable out-of-pocket expenses incurred by Wasserstein Perella and ML (including the reasonable fees and disbursements of counsel) in connection with the matters contemplated by the Wasserstein Perella Letter Agreement and the ML Letter Agreement. In addition, pursuant to the terms of an indemnification agreement with Wasserstein Perella, dated June 11, 1998, and an indemnification agreement with ML, dated July 31, 1998, the Company agreed to indemnify Wasserstein Perella and ML (and their affiliates, their respective directors, officers, agents, employees and controlling persons) against 33 certain liabilities arising out of or in connection with Wasserstein Perella's and ML's engagements, including liabilities under the federal securities laws. Neither the Company nor any person acting on its behalf has employed, retained or compensated any other person to make solicitations or recommendations to security holders of the Company on its behalf concerning the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES (a) To the best of the Company's knowledge, other than the transactions disclosed in this Item 6, no transactions in Shares have been effected during the past 60 days by the Company or by any executive officer, director, affiliate or subsidiary of the Company. (b) To the best of the Company's knowledge, all of its executive officers and directors who own Shares intend to tender pursuant to the Offer all Shares which are owned beneficially or of record by such persons. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY (a) Except as described under Item 3(b), the Company is not presently engaged in any negotiation in response to the Offer which relates to or would result in: an extraordinary transaction such as a merger or reorganization involving the Company or any subsidiary of the Company; a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company; a tender offer for or other acquisition of securities by or of the Company; or any material change in the present capitalization or dividend policy of the Company. (b) Except as described in Item 4, there are no transactions, board resolutions, agreements in principle or signed contracts in response to the Offer which relate to or would result in one or more of the matters referred to in paragraph (a) of this Item 7. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Merger is consummated, holders of Shares will have certain rights under Chapter 13 of the CGCL to dissent and demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. The value so determined could be more or less than the price paid in the Offer or the consideration to be received in the Merger. If any holder of Shares who demands appraisal under Chapter 13 of the CGCL fails to perfect, or effectively withdraws or loses his or her right to appraisal, as provided in the CGCL, the Shares of such holder will entitle such holder to receive the consideration provided for in the Merger Agreement. A stockholder may withdraw his or her demand for appraisal by delivery to the Company of a written withdrawal of his or her demand for appraisal. Failure to follow the steps required by Chapter 13 of the CGCL for perfecting appraisal rights may result in the loss of such rights. LITIGATION. In early May 1998, seven putative class action lawsuits were filed in the Superior Court of California for the County of San Diego by various alleged shareholders of the Company (the "plaintiffs") against the Company and the individual directors of the Company (the "defendants"), Parent and TDCC, purportedly on behalf of themselves and a putative class of all other shareholders of the Company, excluding the defendants and any affiliates of the defendants. These cases have been consolidated by the court under the lead case of LESLIE SUSSER V. MYCOGEN CORP., ET AL., Case No. 720255. Each of the class action complaints alleged in substance that the original acquisition price of $20.50 proposed by Parent was 34 inadequate and that it would be a breach of the defendants' fiduciary duties to the plaintiffs and the members of the putative class to agree to an acquisition at that price. The defendants deny all of these allegations. The lawsuits seek an injunction against the acquisition by Parent, damages and an award of attorneys' fees and expenses. The court approved the law firms of Milberg Weiss Bershad Hynes & Lerach LLP and Abbey, Gardy & Squitieri as plaintiffs' co-lead counsel. Parent and the Special Committee provided financial analyses prepared by their financial advisors and other documents and information relating to the proposed transaction to plaintiffs co-lead counsel. Plaintiffs' co-lead counsel retained an independent financial advisor and, together with that advisor, reviewed these materials and other publicly available information filed with the Commission with respect to the Company. Plaintiffs' co-lead counsel and their financial advisor also met in person with attorneys and financial advisors for Parent, TDCC and the Special Committee to discuss the proposed transaction and the ongoing negotiations between Parent and the Special Committee, and to present their views. Plaintiffs' co-lead counsel, after consultation with their independent financial advisor, have agreed in principle that the terms of the Offer and the Merger are fair to and in the best interests of the plaintiffs and the members of the putative class. Based on this agreement in principle, plaintiffs' co-lead counsel and counsel for the defendants entered into a Memorandum of Understanding on September 3, 1998 providing for settlement of the lawsuits. The settlement is subject to the right of plaintiffs' co-lead counsel to conduct further investigation and to take further discovery from the defendants in order to confirm the fairness of the terms of the Offer and the Merger. The settlement also is conditioned on the closing of the Offer and subject to the approval of the court. The settlement does not require any payments by or to any party, except that the defendants will pay attorneys' fees to the plaintiffs' attorneys in an amount to be determined by the court. The payment of attorneys' fees will be made by Parent or TDCC and will not affect the Offer Price or the amount to be paid to any shareholder for such shareholder's Shares. The Memorandum of Understanding provides for the members of the putative class to be given notice and the opportunity to be excluded from the settlement in such manner as the court determines to be appropriate. In the event settlement of the Consolidated Action is not consummated and plaintiffs' counsel continues the Consolidated Action, such litigation could result in substantial expense to the Company and significant diversion of efforts of the Company's management team. The Company believes that all of such lawsuits are without merit, and would vigorously defend such actions. There can be no assurance, however, that the plaintiffs will not be successful. The above summary does not purport to be complete and is qualified in its entirety by reference to the full text of the complaints, the order of consolidation and the memorandum of understanding, which are attached as Exhibits 30 through 38 hereto, respectively, and which are incorporated herein by reference in their entirety. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Form of Offer to Purchase, dated September 4, 1998.* Exhibit 2 Form of Letter of Transmittal.* Exhibit 3 Agreement and Plan of Merger, dated as of August 31, 1998, among Mycogen Corporation, Dow AgroSciences LLC and AgroSciences Acquisition Inc. Incorporated by reference to Exhibit 1 to the Company's Form 8-K for an event occurring August 31, 1998. Exhibit 4 Proxy Statement of Mycogen Corporation dated November 24, 1997 relating to the Company's Annual Meeting of Stockholders. Exhibit 5 Letter to Stockholders of Mycogen Corporation dated September 4, 1998.* Exhibit 6. Confidentiality Agreement dated as of July 16, 1998 among Dow AgroSciences LLC, The Dow Chemical Company, Mycogen Corporation and Wasserstein Perella, & Co., Inc.
35 Exhibit 7. Exchange and Purchase Agreement dated as of January 15, 1996, by and among Mycogen Corporation, Mycogen Seeds, DowElanco and United Agriseeds, Inc. Incorporated by reference from Exhibit 2.1 to the Company's Form 8-K, filed on February 27, 1996. Exhibit 8. Amendment to Exchange and Purchase Agreement dated as of July 22, 1998, by and between Mycogen Corporation and Dow AgroSciences LLC. Exhibit 9. Restated Loan Agreement dated as of April 16, 1998 between Dow AgroSciences LLC and Mycoyen S.A. Exhibit 10. Loan Agreement, dated as of April 1, 1997, between DowElanco and Mycogen Corporation ("Dow Loan Agreement"). Incorporated by reference from Exhibit 10.23 to the Company's Form 10-K for the year ended August 31, 1997, filed on November 25, 1997. Exhibit 11. Amendment No. 1 to Dow Loan Agreement dated as of September 29, 1997. Exhibit 12. Amendment No. 2 to Dow Loan Agreement dated as of November 14, 1997. Exhibit 13. Amendment No. 3 to Dow Loan Agreement dated as of November 18, 1997. Exhibit 14. Amendment No. 4 to Dow Loan Agreement dated as of April 6, 1998. Exhibit 15. Amendment No. 5 to Dow Loan Agreement dated as of April 16, 1998. Exhibit 16. Loan Agreement dated as of April 1, 1997 between Dow Elanco and Mycogen Corporation ("Mycogen Loan Agrement"). Exhibit 17. Amendment No. 1 to Mycogen Loan Agreement dated as of April 6, 1997. Exhibit 18. Amendment No. 2 to Mycogen Loan Agreement dated as of October 1, 1997. Exhibit 19. Brassica License and Research Agreement dated November 3, 1997 between DowElanco Canada and Mycogen Corporation. Exhibit 20. Employment Agreement between Mycogen Corporation and Carlton J. Eibl dated as of January 1, 1996. Exhibit 21. Employment Agreement between Mycogen Corporation and Andrew C. Barnes dated as of January 1, 1996. Exhibit 22. Employment Agreement between Mycogen Corporation and Leo Kim dated as of January 1, 1996. Exhibit 23. Employment Agreement between Mycogen Corporation and James A. Baumker dated as of January 1, 1996. Exhibit 24. Employment Agreement between Mycogen Corporation and Michael W. Sund dated as of January 1, 1996. Exhibit 25. Employment Agreement between Mycogen Corporation and Naomi D. Whitacre dated as of January 1, 1996. Exhibit 26. Form of Indemnification Agreement between Mycogen Corporation and each of its directors. Incorporated by reference from Exhibit 10.1 to the Company's Form 8-K, filed on November 28, 1995. Exhibit 27. Form of Mycogen Corporation Executive Deferred Compensation Plan between Mycogen Corporation and certain executive officers of Mycogen Corporation. Incorporated by reference from Exhibit 10.24 to the Company's Form 10-K for the year ended August 31, 1997, filed on November 25, 1997. Exhibit 28. Joint Press Release issued by Mycogen Corporation, Dow AgroSciences LLC and The Dow Chemical Company dated August 31, 1998. Incorporated by reference from Exhibit 2 to the Company's Form 8-K for an event occuring August 31, 1998. Exhibit 29. Fairness Opinion of Wasserstein Perella & Co., Inc., dated August 31, 1998.*
36 Exhibit 30. Complaint filed May 5, 1998, in Anderson v. Mycogen Corp., et al. (Case No. 720391). Exhibit 31. Complaint filed May 8, 1998, in Boettcher v. Mycogen Corp., et al.(Case No. 720530). Exhibit 32. Complaint filed May 1, 1998, in Ellis Investments, Ltd. v. Carlton C. Eibl, et al. (Case No. 720257). Exhibit 33. Complaint filed May 1, 1998, in Harbor Finance Partners v. Mycogen Corp., et al. (Case No. 720256). Exhibit 34. Complaint filed May 5, 1998, in Kolb v. Mycogen Corp., et al. (Case No. 720388). Exhibit 35. Complaint filed May 1, 1998, in Susser v. Mycogen Corp., et al. (Case No. 720255). Exhibit 36. Complaint filed May 15, 1998, in Verrone v. Mycogen Corp., et al. (Case No. 720700). Exhibit 37. Order of Consolidation, dated July 16, 1998. Exhibit 38. Memorandum of Understanding, dated September 3, 1998. Exhibit 39. Amended and Restated Rights Agreement by and between the Mycogen Corporation and Bank of Boston. Incorporated by reference from Exhibit 4.2 to the Company's Form 8-K, filed on November 28, 1995. Exhibit 40. Amendment to the Rights Agreement by and between the Mycogen Corporation and Bank of Boston. Incorporated by reference from Exhibit 4.1 to the Company's Form 8-K, filed on March 22, 1996. Exhibit 41. Mycogen Corporation 1995 Stock Purchase Plan. Incorporated by reference from Exhibit 10.1 to the Company's Registration Statement on Form S-8, Registration No. 333-00901, filed on February 13, 1996. Exhibit 42. Mycogen Corporation 1995 Stock Purchase Plan Summary and Prospectus. Incorporated by reference from Exhibit 10.2 to the Company's Registration Statement on Form S-8, Registration No. 333-00901, filed on February 13, 1996. Exhibit 43. Mycogen Corporation Restricted Stock Issuance Plan. Incorporated by reference from Exhibit 28.1 to the Company's Registration Statement on Form S-8, Registration No. 33-40349, filed on May 3, 1991. Exhibit 44. Form of Agreements pertaining to the Mycogen Corporation Restricted Stock Issuance Plan. Incorporated by reference from exhibit 28.2 to the Company's Registration Statement on form S-8, Registration No. 33-40349, filed on May 3, 1991. Exhibit 45. Amendment No. 1 to the Mycogen Corporation Restricted Stock Issuance Plan. Incorporated by reference from Exhibit 10.2 to the Company's Registration Statement on Form S-8, Registration No. 333-00899, filed on February 13, 1996. Exhibit 46. Mycogen Corporation 1992 Stock Option Plan (as amended and restated effective October 17, 1996). Incorporated by reference from Exhibit 10.1 to the Company's Registration Statement on Form S-8, Registration Statement No. 33-21467, filed on February 10, 1997. Exhibit 47. Form of Agreements pertaining to the Mycogen Corporation 1992 Stock Option Plan. Incorporated by reference from Exhibits 28.2, 28.3, 28.4 and 28.5 to the Company's Registration Statement on Form S-8, Registration No. 33-55508, filed on December 9, 1992.
37 Exhibit 48. Supplement to Form of Agreements pertaining to the Mycogen Corporation 1992 Stock Option Plan. Incorporated by reference from Exhibit 10.23 to the Company's Form 10-K for the year ended August 31, 1997, filed on November 25, 1997. Exhibit 49. Form of Option Election. Exhibit 50. Form of Restricted Stock Election. Exhibit 51. Form of Stock Purchase Election. Exhibit 52. Amended Articles of Incorporation of Mycogen Corporation. Incorporated by reference from Exhibit 2.1 to the Company's Form 10-Q, filed on April 14, 1998. Exhibit 53. First Amended and Restated Bylaws of Mycogen Corporation. Incorporated by reference from Exhibit 3.2 to the Company's Form 10-Q, filed on April 14, 1998.
- ------------------------ * Included in copies mailed to stockholders. 38 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MYCOGEN CORPORATION By: /s/ CARLTON J. EIBL ----------------------------------------- Name: Carlton J. Eibl Title: PRESIDENT
Dated: September 4, 1998 39 SCHEDULE I INFORMATION WITH RESPECT TO THE INTERESTS OF CERTAIN PERSONS IN THE OFFER AND MERGER In considering the recommendations of the Mycogen Board and the Special Committee set forth in Item 4(a) of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") of which this Schedule I is a part, Minority Stockholders should be aware that certain members of the Mycogen Board and the Special Committee have interests in the Merger and the Offer which are described below and which may present them with certain conflicts of interest. SPECIAL COMMITTEE. The Company has agreed to pay the fees and expenses of the Special Committee's counsel and financial advisor. In addition, in consideration for their services in connection with the Offer and the Merger, the Company has agreed to pay $100,000 to each of the members of the Special Committee. INTERESTS OF EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATES WITH RESPECT TO SHARES CURRENTLY HELD AND OPTIONS. In the Offer, the Minority Stockholders, including certain directors and employees of the Company, will be entitled to receive $28.00 for each Share currently held which is tendered in the Offer and accepted for payment in accordance with its terms. Pursuant to the Merger Agreement, the directors and employees of the Company holding Options may elect to surrender such Options for cancellation and receive in exchange therefor cash payments as described under "THE MERGER" in Item 3(b)(2) of the Schedule 14D-9. Assuming all such Shares are tendered in the Offer and all such Options are surrendered for cancellation prior to the Effective Time, then the directors and executive officers of the Company will be entitled to receive, as contemplated by the Merger Agreement, based upon their holdings as of August 31, 1998, cash payments in the manner set forth in the table below: SHARE AND OPTION AMOUNTS WITH RESPECT TO THE COMPANY'S DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES
$ AMOUNT (OFFER PRICE LESS $ AMOUNT AT OPTIONS EXERCISE OWNED OFFER PRICE CONVERTED PRICE) FOR NAME SHARES FOR SHARES TO CASH OPTIONS - ------------------------------------------------------------- ---------- ------------ ----------- ------------ Andrew C. Barnes............................................. 97,703 2,735,684 375,000 6,366,495 James A. Baumker............................................. 10,216 286,048 164,000 2,432,020 Carlton J. Eibl.............................................. 17,140 479,920 440,834 6,364,243 John L. Hagaman(1)........................................... 0 0 0 0 Nickolas D. Hein(1).......................................... 0 0 0 0 George Khachatourians........................................ 0 0 7,500 65,625 Leo Kim, Ph.D................................................ 8,562 239,736 166,833 2,298,905 Michael J. Muston............................................ 956 26,768 90,000 687,500 Joseph D. Panetta............................................ 3,870 108,360 55,667 929,877 Louis W. Pribila(1).......................................... 0 0 0 0 J. Pedro Reinhard(1)......................................... 0 0 0 0 Joseph P. Sullivan........................................... 0 0 7,500 65,625 Michael W. Sund.............................................. 8,567 239,876 117,000 1,752,590 G. William Tolbert(1)........................................ 0 0 0 0
I-1
$ AMOUNT (OFFER PRICE LESS $ AMOUNT AT OPTIONS EXERCISE OWNED OFFER PRICE CONVERTED PRICE) FOR NAME SHARES FOR SHARES TO CASH OPTIONS - ------------------------------------------------------------- ---------- ------------ ----------- ------------ Naomi D. Whitacre............................................ 10,754 301,112 103,500 1,488,465 Clayton K. Yeutter........................................... 0 0 0(2) 0(2) Capital Research & Management Co. (3)........................ 1,700,000 47,600,000 0 0 333 South Hope Street Los Angeles, CA 90071 Primecap Management Company(4)............................... 1,836,000 51,408,000 0 0 225 South Lake Avenue #400 Pasadena, CA 91101 The State of Wisconsin Investment Board(5)................... 1,800,500 50,414,000 0 0 P.O. Box 7842 Madison, WI 53707
- ------------------------ (1) Excludes 24,766,157 shares of Common Stock beneficially held by Parent of which such person may be considered an affiliate. Such person disclaims beneficial ownership of any Shares held by Parent or its affiliates. Such person was designated by Parent to serve on the board of directors of the Company and has an agreement with Parent pursuant to which such person agrees to forfeit to Parent any Shares issuable pursuant to options granted in connection with such service. (2) Pursuant to the Merger Agreement, Options owned by Mr. Yeutter will be purchased by the Company rather than being converted into cash. See "Purchase of Mr. Yeutter's Options" below. (3) Based on an Information Statement Pursuant to Rules 13d-1 and 13d-2 on Schedule 13G filed by Capital Research & Management Co. with the Commission on July 7, 1998 with respect to Shares beneficially owned as of December 31, 1997. (4) Based on a Statement on Schedule 13F filed by the Primecap Management Company with the Commission with respect to Shares beneficially owned as of June 30, 1998. (5) Based on an Information Statement Pursuant to Rules 13d-1 and 13d-2 on Schedule 13G/A filed by the State of Wisconsin Investment Board with the Commission on January 22, 1998 with respect to Shares beneficially owned as of December 31, 1997. EMPLOYMENT SEVERANCE AGREEMENTS. In January, 1996, the Company entered into employment severance agreements ("Employment Agreements") with the following employees: Messrs. Eibl, Barnes, Baumker and Sund, Dr. Kim, and Ms. Whitacre. The Employment Agreements provide that upon involuntary termination, other than for cause, of these employee's employment (whether or not effected in connection with a Change of Control of the Company) such employees are entitled to certain severance benefits including immediate vesting of their restricted stock and immediate vesting and exercisability of their stock options for three years after termination. If the severance benefits are paid following a change of control, the Employment Agreements provide for these employees to be made whole for any federal excise taxes imposed on payments that constitute excess "parachute payments." Mr. Eibl, under his Employment Agreement, will be entitled to, if his involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to four times the sum of his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) life, disability and health care coverages for a four year period. If Mr. Eibl's involuntary termination occurs after January 1, 1999, he will be entitled to (i) a lump sum payment equal to three times the sum of his average annual rate of base salary and the average bonus I-2 paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) life, disability and health care coverages for a three year period. Each of Dr. Kim and Mr. Barnes, under his respective Employment Agreement, will be entitled to, if his involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to three times the sum of his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) life, disability and health care coverages for a three year period. If Dr. Kim's or Mr. Barnes' involuntary termination occurs after January 1, 1999, he will be entitled to (i) a lump sum payment equal to two times the sum of his average annual rate of base salary and the average bonus paid by the Company in each for services rendered in the two immediately preceding calendar years and (ii) life, disability and health care coverages for a two year period. Each of Messrs. Baumker and Sund and Ms. Whitacre, under each of such employee's Employment Agreement, will be entitled to, if such employee's involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to two times the sum of such employee's annual rate of base salary and average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) life, disability and health care coverage for a two year period. If any of Messrs. Baumker's or Sund's or Ms. Whitacre's involuntary termination occurs after January 1, 1999, such employee will be entitled to (i) a lump sum payment equal to the sum of such employee's average annual rate of base salary and the average bonus paid by the Company for services rendered for the immediately preceding two calendar years and (ii) life, disability and health care coverage for a one year period. The severance benefits provided by the Employment Agreements will not be granted if the employee is terminated for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. The Employment Agreements have an initial period of one year, but will automatically be extended for additional one year periods upon each anniversary of the Employment Agreement unless the Company notifies the employee three months prior to any anniversary date that the Employment Agreement will terminate. The preceding discussion of certain provisions relating to the employment of the Company's executive officers is qualified in its entirety by reference to the full text of the Employment Agreements for each of the executive officers of the Company filed as Exhibits 20 through 25 to this Schedule 14D-9. LOANS TO OFFICERS. Certain officers of the Company who are participants in the Mycogen Corporation Restricted Stock Issuance Plan have borrowed money from the Company to pay such executives' taxes due upon vesting of shares of stock under such plan. These borrowings are evidenced by promissory notes executed by such individuals, certain of which are secured by such shares. Pursuant to the notes, principal thereunder will be due upon the sale of such shares, whether in the Offer or the Merger. None of these notes has an initial principal amount greater than $50,000.00. PURCHASE OF MR. YEUTTER'S OPTIONS. The Merger Agreement provides that if Purchaser purchases shares of Common Stock pursuant to the Offer, the Company will immediately purchase the Options granted to Mr. Yeutter for $30,465. The Company further agrees to take all action required to make such purchase comply with Rule 16b-3(e) under the Exchange Act. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's Articles of Incorporation, as amended, contain certain provisions permitted under the General Corporation Law of California relating to the liability of directors. The provisions eliminate a director's liability for monetary damages for a breach of fiduciary duty, except in certain circumstances involving wrongful acts, such as the breach of a director's duty of loyalty or acts or omissions which involve intentional misconduct, and provide that the Company shall indemnify the Company's directors and officers to the fullest extent permitted by the General Corporation Law of California. The Company believes that these provisions will assist the Company in I-3 attracting and retaining qualified individuals to serve as directors. The foregoing description is qualified in its entirety by reference to Mycogen's Articles of Incorporation, as amended, a copy of which is filed as Exhibit 52 to the Schedule 14D-9 and is hereby incorporated herein by reference. Mycogen has entered into agreements with certain of its directors and officers providing for indemnification to the full extent permitted by California law. See also the discussion in Item 3(b)(2) of the Schedule 14D-9 under "The Merger Agreement" for information concerning certain provisions relating to these matters contained in the Merger Agreement. I-4 ANNEX A [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. 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. [LOGO] Special Committee of the Board of Directors August 31, 1998 Page 2 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. 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 to any such matter. 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 Special Committee of the Board of Directors August 31, 1998 Page 3 (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] EX-99.1 2 EXHIBIT 99.1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MYCOGEN CORPORATION AT $28.00 NET PER SHARE BY AGROSCIENCES ACQUISITION INC. A MAJORITY-OWNED SUBSIDIARY OF DOW AGROSCIENCES LLC AND A WHOLLY OWNED INDIRECT SUBSIDIARY OF THE DOW CHEMICAL COMPANY THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 2, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) (THE "SHARES"), OF MYCOGEN CORPORATION (THE "COMPANY") SUCH THAT, UPON PURCHASE OF SUCH SHARES BY AGROSCIENCES ACQUISITION INC. ("PURCHASER"), PURCHASER AND DOW AGROSCIENCES LLC ("PARENT"), COLLECTIVELY, WILL BE THE OWNERS OF SHARES REPRESENTING AT LEAST 90% OF THE FULLY DILUTED SHARES (AS DEFINED IN THE INTRODUCTION OF THIS OFFER TO PURCHASE). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1 AND 13 HEREOF. THE OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") DATED AS OF AUGUST 31, 1998, AMONG THE COMPANY, PARENT, PURCHASER, AND, FOR THE LIMITED PURPOSE SET FORTH IN THE MERGER AGREEMENT, THE DOW CHEMICAL COMPANY ("TDCC"). UNDER THE MERGER AGREEMENT, FOLLOWING THE CONSUMMATION OF THE OFFER AND SUBJECT TO CERTAIN CONDITIONS, PURCHASER WILL BE MERGED WITH AND INTO THE COMPANY (THE "MERGER"). IN THE MERGER, EACH OUTSTANDING SHARE (OTHER THAN SHARES HELD BY PARENT, PURCHASER OR THE COMPANY, WHICH SHALL BE CANCELED, AND SHARES HELD BY STOCKHOLDERS WHO PROPERLY EXERCISE DISSENTERS' RIGHTS UNDER CALIFORNIA LAW) WOULD BE CONVERTED INTO THE RIGHT TO RECEIVE $28.00 PER SHARE, AND THE COMPANY WOULD BECOME AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TDCC. A SPECIAL COMMITTEE OF TWO OF THE COMPANY'S DIRECTORS INDEPENDENT OF TDCC, PARENT, PURCHASER AND MANAGEMENT OF THE COMPANY (THE "SPECIAL COMMITTEE") UNANIMOUSLY RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS THAT IT ENTER INTO THE MERGER AGREEMENT AND APPROVE THE OFFER. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS BEING EFFECTED TO FACILITATE THE MERGER. SEE "RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS." ------------------ IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares, should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and deliver it and any other required documents to the Depositary and either deliver the certificate(s) representing such Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 hereof or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Any stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. A stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to Salomon Smith Barney Inc. ("Salomon Smith Barney") or to the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. ------------------ The Dealer Manager for the Offer is: SALOMON SMITH BARNEY INC. ------------------ The date of this Offer to Purchase is September 4, 1998. TABLE OF CONTENTS
PAGE --------- INTRODUCTION.............................................................................................. 1 RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS........................................................ 3 THE TENDER OFFER.......................................................................................... 3 1. Terms of the Offer; Extension of Tender Period; Termination; Amendment............................. 3 2. Acceptance for Payment and Payment for Shares...................................................... 5 3. Procedure for Tendering Shares..................................................................... 6 4. Withdrawal Rights; Statutory Rights................................................................ 10 5. Certain U.S. Federal Income Tax Considerations..................................................... 10 6. Price Range of the Shares.......................................................................... 12 7. Certain Information Concerning the Company......................................................... 13 8. Certain Information Concerning Purchaser, Parent and Certain Affiliates of Parent.................. 14 9. Background of the Offer............................................................................ 16 10. Purpose of the Offer; the Merger Agreement......................................................... 41 11. Source and Amount of Funds......................................................................... 52 12. Certain Effects of the Offer....................................................................... 52 13. Certain Conditions of the Offer.................................................................... 54 14. Certain Legal Matters; Regulatory Approvals........................................................ 56 15. Fees and Expenses.................................................................................. 56 16. Miscellaneous...................................................................................... 57 Schedule I--Information Concerning the Directors and Executive Officers of Parent, Purchaser and Certain Affiliates of Parent.................................................................................... I-1 Schedule II--Chapter 13 of the California General Corporation Law......................................... II-1 Schedule III--Opinion of Wasserstein Perella & Co., Inc................................................... III-1
i To the Stockholders of Mycogen Corporation: INTRODUCTION AgroSciences Acquisition Inc., a Delaware corporation ("Purchaser") and a majority-owned subsidiary of Dow AgroSciences LLC, a Delaware limited liability company ("Parent"), hereby offers to purchase all of the outstanding shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Shares"), of Mycogen Corporation, a California corporation (the "Company"), at a purchase price of $28.00 per Share (the "Offer Price"), net to the seller in cash, in accordance with the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, collectively constitute the "Offer"). Parent and Purchaser are each indirect wholly owned subsidiaries of The Dow Chemical Company, a Delaware corporation ("TDCC"). The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of August 31, 1998, among the Company, Purchaser, Parent and, for the limited purpose set forth in the Merger Agreement, TDCC. The Merger Agreement requires Purchaser, on the terms and subject to the conditions set forth therein, to offer to purchase all of the outstanding Shares of the Company pursuant to the Offer. The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares such that upon purchase of such Shares by Purchaser, Purchaser and Parent, collectively, will be the owners of Shares representing at least 90% of the Fully Diluted Shares (as defined below) (the "Minimum Condition"). Purchaser may not waive the Minimum Condition without the consent of the Special Committee (as defined below) unless, following the consummation of the Offer, Purchaser and Parent, collectively, would be the owners of Shares representing at least 81.07% of the Fully Diluted Shares. Parent and Purchaser would collectively own at least this percentage of Fully Diluted Shares only if Purchaser purchased at least a majority of the Fully Diluted Shares which Parent does not already own and therefore could be purchased by Purchaser pursuant to the Offer. The Offer is also subject to the other terms and conditions contained in this Offer to Purchase. See Sections 1 and 13. "Fully Diluted Shares" as of a particular date means the issued and outstanding Shares as of such date, plus the Shares that would be issued if all options to purchase Shares under the Company's option plan ("Options") (whether or not vested) outstanding as of that date were exercisable and exercised and all Shares that would be issued if all eligible persons executed and delivered to the Company valid Stock Purchase Elections (as defined in Section 10 hereof) under the Company's Stock Purchase Plan. As of August 31, 1998, there were outstanding 36,275,538 Shares held by approximately 4,700 holders of record, of which Parent owned 24,766,157 Shares, or 68.3%. As of August 31, 1998, Options covering a total of 3,568,635 Shares were outstanding. Unless Parent consents, the Company may not issue additional Options prior to the consummation of the Offer. Under the Merger Agreement, all unvested Options will become exercisable immediately prior to the expiration of the Offer (contingent upon Purchaser purchasing Shares in the Offer), and all Shares issuable upon the exercise of Options (whether or not previously vested) may be tendered in the Offer. Under the Merger Agreement, Shares that would be issuable under the Company's Stock Purchase Plan as of November 30, 1998 may be purchased immediately prior to the expiration of the Offer (contingent upon Purchaser purchasing Shares in the Offer) and tendered in the Offer. The Company anticipates that there will be no more than 24,000 Shares issuable under the Stock Purchase Plan that would be issued and tendered in the Offer. Under the Merger Agreement, the Shares outstanding under the Restricted Stock Plan may be tendered in the Offer (contingent upon Purchaser purchasing Shares in the Offer). Assuming that no additional Options are issued and that 24,000 Shares are issued under the Stock Purchase Plan, Purchaser estimates that there must be approximately 11,115,000 Shares (including Shares tendered after being issued upon the exercise of Options or under the Stock Purchase Plan and including Shares of Restricted Stock) validly tendered and not properly withdrawn in order to satisfy the Minimum Condition. Under the Merger Agreement, following the consummation of the Offer and subject to certain conditions, Purchaser will merge with and into the Company (the "Merger"). In the Merger, each outstanding Share of the Company (other than Shares held by Parent, Purchaser and the Company which will be canceled, and Shares held by stockholders who properly exercise dissenters' rights under California Law) will be converted into the right to receive an amount in cash equal to the Offer Price. Assuming Shares are purchased in the Offer, the conditions to the Merger, described in more detail in Section 10, include that Purchaser, assuming the transfer of all Shares owned by Parent to Purchaser, own at least 90% of the outstanding Shares and that there not be any order, decree, ruling or other governmental action restraining or prohibiting the Merger. Following the consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will be a majority-owned subsidiary of Parent and a wholly owned indirect subsidiary of TDCC. If Purchaser elects to waive the Minimum Condition and purchase Shares pursuant to the Offer, but, subsequent to the Offer, does not own a sufficient number of Shares to effect the Merger, then, pursuant to the terms of the Merger Agreement, the Exchange and Purchase Agreement (as defined in Section 9) would no longer prevent Purchaser, Parent or their affiliates from acquiring additional Shares or impose conditions on the acquisition of additional Shares or increasing their ownership of the Company (whether through any tender offer, open market purchase, negotiated transaction, merger, consolidation, reverse stock split or otherwise). A SPECIAL COMMITTEE OF TWO OF THE COMPANY'S DIRECTORS INDEPENDENT OF TDCC, PARENT, PURCHASER AND MANAGEMENT OF THE COMPANY (THE "SPECIAL COMMITTEE") UNANIMOUSLY RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS THAT THE COMPANY ENTER INTO THE MERGER AGREEMENT AND THAT THE BOARD OF DIRECTORS APPROVE THE OFFER. THE COMPANY'S ENTIRE BOARD OF DIRECTORS ALSO REVIEWED THE OFFER AND, AFTER RECEIPT OF THE RECOMMENDATION OF THE SPECIAL COMMITTEE, CONCLUDED THAT THE OFFER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN TDCC OR ITS AFFILIATES). ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT EACH OF (1) THE OFFER AND (2) THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY (OTHER THAN TDCC OR ITS AFFILIATES) AND UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. SEE "RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS." Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the transfer and sale of Shares pursuant to the Offer. Purchaser will pay all fees and expenses of Salomon Smith Barney Inc. ("Salomon Smith Barney"), which is acting as Dealer Manager for the Offer (the "Dealer Manager"), BankBoston, N.A. (the "Depositary") and Georgeson & Company Inc. (the "Information Agent") incurred in connection with the Offer. See Section 15. The purpose of the Offer is for Parent, through Purchaser, to acquire any and all outstanding Shares and to facilitate the Merger. On August 31, 1998, the closing market price of the Company's Shares was $20.00 per Share. Accordingly, the Offer provides an opportunity to existing stockholders of the Company to sell Shares at a significant premium over recent trading prices. See Section 6. THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY, CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO AN ANNUAL MEETING OR ANY SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF. ANY SUCH SOLICITATION, IF REQUIRED, WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). Information concerning the Company contained herein has been provided by the Company unless otherwise stated. * * * * * 2 Subject to certain exceptions set forth below, Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer. See Sections 1 and 13. Stockholders are urged to read this Offer to Purchase and the related Letter of Transmittal carefully before deciding whether to tender their Shares. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS The Special Committee unanimously recommended to the Company's Board of Directors that it approve the Offer. The Company's entire Board of Directors also reviewed the Offer and, after receipt of the recommendation of the Special Committee, concluded that the Offer is in the best interests of the Company and its stockholders (other than TDCC or its affiliates). Accordingly, the Company's Board of Directors has unanimously (1) determined that the Merger Agreement is fair to and in the best interests of the stockholders of the Company other than TDCC or its affiliates (the "Minority Stockholders") (2) approved and adopted the Merger Agreement, including the Merger and the Offer, and recommends that the stockholders of the Company accept the Offer, tender their Shares to Purchaser and, if required by applicable law, approve and adopt the Merger Agreement and the Merger. The Offer is being effected to acquire any and all outstanding Shares and to facilitate the Merger. The Offer allows stockholders to receive cash at a premium over recent trading prices for the Company's Shares. See Sections 6 and 9. The Special Committee's financial advisor, Wasserstein Perella & Co., Inc. ("Wasserstein Perella") has delivered to the Special Committee its written opinion, dated August 31, 1998, to the effect that, subject to the various assumptions and limitations set forth therein, as of the date of such opinion, the $28.00 cash price to be received by the holders of Shares (other than TDCC and its affiliates) pursuant to the Merger Agreement is fair to such holders from a financial point of view. A copy of the full text of the opinion of Wasserstein Perella, dated August 31, 1998, which sets forth, among other things, the opinion expressed, assumptions made, procedures followed, matters considered and limitations of review undertaken in connection with such opinion, is attached as Schedule III hereto and should be read in its entirety. THE TENDER OFFER 1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date (as hereinafter defined) at a price of $28.00 per Share, net to the seller in cash. Purchaser may not make a material change to the terms of the Offer other than pursuant to the Merger Agreement or an amendment thereto. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, October 2, 1998, unless Purchaser shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition. The Offer is also subject to certain other conditions set forth in Section 13. Purchaser may waive the Minimum Condition if, following the consummation of the Offer, Purchaser and Parent collectively would be the owners of Shares representing at least 81.07% of the Fully Diluted Shares. Parent and Purchaser would collectively own at least this percentage of Fully Diluted Shares only if Purchaser purchased at least a majority of the Fully Diluted Shares which Parent does not already own and therefore could be purchased by Purchaser pursuant to the Offer. Purchaser may not waive the Minimum Condition (unless the Special Committee consents) if, following the consummation of the Offer, Purchaser and Parent, collectively, would be the owners of Shares representing less than 81.07% of the Fully Diluted Shares. 3 Purchaser expressly reserves the right, in its reasonable discretion, to extend the Offer (i) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "Commission") or the staff thereof applicable to the Offer, (ii) if at any scheduled expiration date any of the conditions to the Offer set forth in paragraphs (a) - (e) of Section 13 have not been satisfied or waived, until such time as all of such conditions will have been satisfied or waived, (iii) in the event all of the conditions to the Offer will have been satisfied or waived, other than the Minimum Condition, for a period or periods aggregating not more than 40 business days after the later of (A) the initial expiration date of the Offer and (B) the date on which all of the conditions set forth in paragraphs (a) - (e) of Section 13 will have been satisfied or waived or (iv) as may otherwise be permitted pursuant to the Merger Agreement or any amendment to the Merger Agreement. If at any scheduled expiration date of the Offer, the Minimum Condition will not have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing), Purchaser will, and Parent will cause Purchaser to, extend the Offer for a period or periods aggregating not more than 40 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described herein. In addition, if at any scheduled expiration date of the Offer, a condition set forth in paragraph (c) or (d) of Section 13 will not have been satisfied but all of the other conditions set forth in paragraphs (a) - (e) of Section 13 will then have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing) and so long as the Company is using its reasonable best efforts to cause such conditions to become satisfied, Purchaser will, and Parent will cause Purchaser to, extend the Offer for up to an additional 20 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in Section 10. Subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in Section 10, Purchaser will not terminate or withdraw the Offer prior to any scheduled expiration date of the Offer, including as extended as described in this paragraph; provided, however, that Purchaser may, at its option, terminate and withdraw the Offer if, after such extensions described in this paragraph, the Offer has expired in accordance with its terms without Purchaser being required to accept Shares for payment pursuant to the Merger Agreement. Purchaser reserves the right to extend, delay, terminate or amend the Offer or waive satisfaction of any condition to the Offer but only as, when and to the extent permitted by the Merger Agreement or any amendment to the Merger Agreement. Any extension, termination or waiver of the Offer will be made by giving oral or written notice of such extension, termination or waiver to the Depositary and by causing the Depositary to provide as soon as practicable thereafter a copy of such notice to all holders of Shares whose Shares have not been taken up prior to the extension. Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of (except as provided by clause (i)) any Shares upon the occurrence of any of the conditions specified in Section 13 without extending the period of time during which the Offer is open. Purchaser may increase the Offer Price and may waive any condition to the Offer, except that it may not waive the Minimum Condition unless either (i) the Special Committee consents or (ii) following consummation of the Offer, Purchaser and Parent collectively would be the owners of at least 81.07% of the Fully Diluted Shares. In addition, without the consent of the Special Committee, no change to the Offer may be made that decreases the price per Share payable in the Offer, changes the form of consideration payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer or imposes conditions to the Offer in addition to the conditions set forth in Section 13. Any such extension, termination or waiver will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which Purchaser may choose to make any public announcement, except as provided by applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require 4 that material changes be promptly disseminated to holders of Shares), Purchaser shall have no obligation to publish, advertise or otherwise communicate any such announcement other than by issuing a release to the Dow Jones News Service or as otherwise may be required by law. If Purchaser makes a material change in the terms of the Offer or if Purchaser waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentages of securities sought, will depend on the facts and circumstances, including the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum ten business day period from the day of such change is generally required to allow for adequate dissemination to stockholders. Accordingly, if prior to the Expiration Date, Purchaser decreases the number of Shares being sought, increases or decreases the consideration offered pursuant to the Offer and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date that notice of such increase or decrease is first published, sent or given to stockholders, the Offer will be extended at least until the expiration of such ten business day period. Except as otherwise provided herein, any extension of the Offer will not constitute a waiver by Purchaser of any of the conditions set forth in Section 13. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date as soon as practicable after the later to occur of (i) the Expiration Date and (ii) the date of satisfaction or waiver of the conditions set forth in Section 13. As promptly as practicable after such acceptance, Purchaser shall, subject to applicable law, pay for such Shares. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment and thereby purchased tendered Shares of the Company if, as and when Purchaser gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Payment for Shares of the Company accepted for payment pursuant to the Offer will be made by deposit by Purchaser of the purchase price to be paid by it with the Depositary, which Depositary will act as agent for the tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders. Under no circumstances will interest be paid by Purchaser on the consideration paid for the Shares of the Company pursuant to the Offer, regardless of any delay in making such payment. Purchaser will pay all stock transfer taxes, if any, payable on the transfer of Shares of the Company purchased by it pursuant to the Offer, except as set forth in Instruction 6 of the Letter of Transmittal. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of a certificate(s) for such Shares or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in Section 3), a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or Agent's Message (as defined in Section 3) and any other documents required by the Letter of Transmittal. For a description of the procedure for tendering Shares of the Company pursuant to the Offer, see Section 3. If any tendered Shares are not accepted for payment for any reason or if certificate(s) are submitted for more Shares than are tendered, certificates evidencing unpurchased or untendered Shares will be returned without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility) as promptly as practicable following the expiration, termination or withdrawal of the Offer. 5 If Purchaser increases the consideration offered to stockholders pursuant to the Offer, such increased consideration will be paid to all stockholders whose Shares are purchased pursuant to the Offer, whether or not such Shares were tendered or accepted for payment prior to such increase in consideration. Purchaser reserves the right to assign, in whole or from time to time in part, to Parent or an affiliate of Parent, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such assignment will not relieve Purchaser of its obligations under the Offer nor will any such assignment prejudice in any way the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. During the pendency of the Offer, Purchaser will not purchase any Shares, whether in the open market or otherwise, except pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES VALID TENDER OF SHARES Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry delivery of Shares as described below, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. In addition, either (i) certificates evidencing tendered Shares must be received by the Depositary at any such address or such Shares must be tendered pursuant to the procedure for book-entry transfer (and a confirmation of receipt of such delivery must be received by the Depositary), in each case, on or prior to the Expiration Date or (ii) the guaranteed delivery procedures set forth below must be complied with. The term "Agent's Message" means a message transmitted by The Depository Trust Company (the "Book-Entry Transfer Facility") to and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares which are the subject of the Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. BOOK-ENTRY TRANSFER The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES Except as otherwise provided below, signatures on Letters of Transmittal must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of 6 Securities Dealers, Inc. (the "NASD"), or a commercial bank or trust company having an office, branch, agency or correspondent in the United States (each of the foregoing constituting an "Eligible Institution"). Signatures on Letters of Transmittal need not be guaranteed if (i) the Letter of Transmittal is signed by the registered holder of Shares tendered and such holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the certificates representing Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not accepted for payment or not tendered are to be returned to a person other than the registered holder, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates are not immediately available, or such stockholder cannot deliver the certificates and all other required documents to reach the Depositary on or prior to the Expiration Date, or such stockholder cannot complete the procedure for book-entry transfer on a timely basis, such Shares may nevertheless be tendered if the following guaranteed delivery procedures are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the certificates (or a book-entry transfer confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three NASDAQ National Market System ("NASDAQ NMS") trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. OPTIONS Under the Merger Agreement, holders of unvested Options outstanding under the Mycogen Corporation 1992 Stock Option Plan (which incorporates outstanding Options under the Mycogen Corporation 1983 Stock Option Plan (the "1992 Plan") who submit valid Option Elections (as defined in Section 10) to the Company prior to the expiration of the Offer will be able (contingent on the purchase by Purchaser of Shares pursuant to the Offer) to exercise their Options immediately prior to the expiration of the Offer and to tender the Shares issuable upon such exercise in the Offer. All Option exercises must be effected through the Company. A holder of Options who wishes to participate in the Offer must submit to the 7 Company an Option Election pursuant to which such holder will be deemed, immediately prior to the expiration of the Offer (and conditioned upon the purchase by Purchaser of Shares pursuant to the Offer), to have (i) exercised all of such holder's Options to purchase Shares and (ii) then tendered such Shares pursuant to the Offer. Any such exercise of an Option and tender of Shares must be in accordance with the terms of the 1992 Plan and the Options. In no event are any Options or Option Elections to be delivered to the Depositary, Purchaser, Parent or any other person other than the Company in connection with a tender of Shares hereunder. The Company will send or deliver to holders of Options additional materials concerning the exercise of Options and the tender of Shares issuable upon exercise of Options, including an Option Election. Holders should use the Option Election to exercise Options and to tender Shares issuable upon exercise of Options, as described above. HOLDERS OF OPTIONS MAY NOT USE THE LETTER OF TRANSMITTAL TO DIRECT THE TENDER OF SHARES ISSUABLE UPON EXERCISE OF OPTIONS. Questions with respect to tendering Shares issuable upon exercise of Options should be directed to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis; telephone number (800) 745-7475. IN ORDER TO ASSURE THAT THE COMPANY, ON BEHALF OF HOLDERS OF OPTIONS WHO EXERCISE THEIR OPTIONS PURSUANT TO OPTION ELECTIONS, CAN TIMELY TENDER SHARES ISSUABLE UPON EXERCISE OF OPTIONS, HOLDERS OF OPTIONS SHOULD COMPLETE AND RETURN THE OPTION ELECTION SO THAT IT IS RECEIVED BY THE COMPANY NO LATER THAN 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. PURCHASE RIGHTS Under the Merger Agreement, holders of purchase rights ("Purchase Rights") under the Mycogen Corporation Employee Stock Purchase Plan (the "Stock Plan") who submit a Stock Purchase Election to the Company prior to the expiration of the Offer will be able (contingent on the purchase of Shares in the Offer) to exercise their Purchase Rights immediately prior to the expiration of the Offer and to tender the Shares issuable upon such exercise (the "Stock Purchase Shares") in the Offer. All Purchase Right exercises must be effected through the Company. A holder of Purchase Rights who wishes to participate in the Offer must submit to the Company a Stock Purchase Election to exercise all of such holder's Purchase Rights to purchase Stock Purchase Shares and then tender such Stock Purchase Shares pursuant to the Offer; provided, that any such exercise of a Purchase Rights is in accordance with the terms of the Stock Plan. In no event are any Purchase Rights or Stock Purchase Elections to be delivered to the Depositary, Purchaser, Parent or any other person other than the Company in connection with a tender of Stock Purchase Shares hereunder. The Company will send or deliver to holders of Purchase Rights additional materials concerning the exercise of Purchase Rights and the tender of Stock Purchase Shares, including a Stock Purchase Election. Holders should use the Stock Purchase Election to exercise Purchase Rights and to tender Stock Purchase Shares, as described above. HOLDERS OF PURCHASE RIGHTS MAY NOT USE THE LETTER OF TRANSMITTAL TO DIRECT THE TENDER OF STOCK PURCHASE SHARES. Questions with respect to tendering Stock Purchase Shares should be directed to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis; telephone number (800) 745-7475. IN ORDER TO ASSURE THAT THE COMPANY, ON BEHALF OF HOLDERS OF PURCHASE RIGHTS WHO EXERCISE THEIR PURCHASE RIGHTS PURSUANT TO STOCK PURCHASE ELECTIONS, CAN TIMELY TENDER STOCK PURCHASE SHARES, HOLDERS OF PURCHASE RIGHTS SHOULD COMPLETE AND RETURN THE STOCK PURCHASE ELECTION SO THAT IT IS RECEIVED BY THE COMPANY NO LATER THAN 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. 8 RESTRICTED SHARES Under the Merger Agreement, holders of shares of restricted stock of the Company ("Restricted Stock") which were granted pursuant to the Mycogen Corporation Restricted Stock Issuance Plan (the "Restricted Stock Plan") who submit a Restricted Stock Election (as defined in Section 10) to the Company prior to the expiration of the Offer will be able (contingent on the purchase of Shares in the Offer) to tender their Restricted Stock in the Offer. Purchaser is offering, as part of the Offer, to purchase any of the Restricted Stock granted pursuant to the Restricted Stock Plan. All tenders of Restricted Stock must be effected through the Company. A holder of Restricted Stock who wishes to participate in the Offer must submit to the Company a Restricted Stock Election to vest such Restricted Stock, a Letter of Transmittal and such holder's Restricted Stock certificates. In no event are any Restricted Stock Elections and Restricted Stock certificates to be delivered to the Depositary, Purchaser, Parent or any other person other than the Company in connection with a tender of Restricted Stock hereunder. The Company will send or deliver to holders of Restricted Stock additional materials concerning the tender of Restricted Stock, including a Restricted Stock Election. Holders should use the Restricted Stock Election and the Letter of Transmittal to tender Restricted Stock as described above. Questions with respect to tendering Restricted Shares should be directed to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis; telephone number (800) 745-7475. IN ORDER TO ASSURE THAT THE COMPANY CAN PERMIT THE RESTRICTED STOCKS TO VEST (CONTINGENT UPON THE PURCHASE BY PURCHASER OF SHARES PURSUANT TO THE OFFER) AND THEREBY PERMIT A TIMELY AND VALID TENDER OF THE RESTRICTED SHARES, HOLDERS OF RESTRICTED SHARES SHOULD COMPLETE AND RETURN THE RESTRICTED STOCK ELECTION AND THE LETTER OF TRANSMITTAL ALONG WITH THE RELATED RESTRICTED SHARE CERTIFICATES SO THAT THEY ARE RECEIVED BY THE COMPANY NO LATER THAT 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. BACKUP U.S. FEDERAL INCOME TAX WITHHOLDING For a discussion of U.S. federal income tax considerations relating to backup withholding, see Section 5. APPOINTMENT AS PROXY By executing a Letter of Transmittal, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's proxies in the manner set forth in the Letter of Transmittal to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies shall be irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies and consents granted by such stockholder with respect to such Shares and other securities will be revoked without further action, and no subsequent proxies may be given nor subsequent written consents executed (and, if given or executed, such proxies or consents will not be deemed effective). The designees of Purchaser will be empowered to exercise all voting and other rights of such stockholder as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company's stockholders, by written consent or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such 9 Shares, Purchaser must be able to exercise full voting rights with respect to such Shares, including voting at any meeting of stockholders scheduled or acting by written consent without a meeting. DETERMINATION OF VALIDITY All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its reasonable discretion. Purchaser reserves the absolute right to reject any and all tenders of Shares determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser reserves the absolute right to waive any defect or irregularity in any tender of Shares of any particular stockholder. None of Purchaser, Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. 4. WITHDRAWAL RIGHTS; STATUTORY RIGHTS Tenders of Shares pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date (or such later date as may apply in case the Offer is extended). Thereafter, such tenders are irrevocable, except that they may be withdrawn after November 2, 1998, unless theretofore accepted for payment as provided in this Offer to Purchase. If Purchaser extends the Offer, is delayed in accepting for payment or paying for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, on behalf of Purchaser, retain all Shares tendered, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as set forth in this Section 4. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary, and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares of the Company may be retendered at any time prior to the Expiration Date by again following one of the procedures described in Section 3. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its reasonable discretion. None of Purchaser, Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. 5. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material U.S. federal income tax consequences of the Offer and the Merger. This summary is based upon the current provisions of the Internal Revenue Code of 1986, as amended, its legislative history, Treasury regulations, administrative pronouncements and judicial decisions, all of which are subject to change, possibly with retroactive effect. This summary does not purport to 10 be a complete discussion of all U.S. federal income tax consequences relating to the Offer and the Merger. This summary does not address the tax consequences of the Offer and the Merger under state, local or non-U.S. tax laws. In addition, this summary may not apply, in whole or in part, to particular categories of holders of Shares, such as financial institutions, broker-dealers, life insurance companies, tax-exempt organizations, investment companies, foreign taxpayers, individuals who received Shares pursuant to employee stock options, restricted stock programs or in other compensatory transactions, and other special status taxpayers. Finally, a tax ruling from the Internal Revenue Service ("IRS") has not be requested. THIS SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ALL HOLDERS OF SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER, INCLUDING ANY STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES. A holder of a Share who receives cash in exchange for his or her Share pursuant to the Offer or the Merger (including cash received upon the exercise of dissenters' appraisal rights) will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount of cash received for such Share and such holder's tax basis in such Share. Such gain or loss will be a capital gain or loss, provided that such Share was held as a capital asset of the holder at the time such Share was tendered in the Offer or exchanged for cash in the Merger, as the case may be. A capital gain or loss will be a long-term capital gain or loss if the holder's holding period is more than 12 months. For individual holders, long-term capital gains are subject to a maximum federal income tax rate of 20 percent. The deduction of capital losses may be subject to limitation. Certain holders of Shares who receive cash in exchange for their Shares pursuant to the Offer or the Merger (including cash received upon the exercise of dissenters' appraisal rights) are required to provide the Depositary (as payer) with their correct taxpayer identification number ("TIN") on a Substitute Form W-9 (included as part of the Letter of Transmittal). If the Depositary is not provided with the correct TIN, a holder may be subject to a $50 penalty imposed by the IRS. In addition, payments made to such holder may be subject to backup withholding. If backup withholding applies, the Depositary is required to withhold 31% of any payment made to a holder. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld, provided that the required information is given to the IRS. If backup withholding results in an overpayment of federal income taxes, a refund may be obtained from the IRS. See instruction 8 of the Letter of Transmittal for a more detailed discussion regarding backup withholding. 11 6. PRICE RANGE OF THE SHARES The Company's Shares are listed and quoted on the NASDAQ NMS under the symbol MYCO. The following table sets forth, for the periods indicated, the high and low sale prices per share for the Shares for the periods indicated. The Company has not paid dividends with respect to Shares in the past two years and is not expected to do so in the foreseeable future.
SHARES ----------------- HIGH LOW ------- ------- Fiscal Year Ended August 31, 1997: First Quarter....................................................... $17 1/8 $13 3/4 Second Quarter...................................................... 29 1/4 16 3/4 Third Quarter....................................................... 28 1/2 17 1/2 Fourth Quarter...................................................... 25 18 3/4 Fiscal Year Ended August 31, 1998: First Quarter....................................................... $25 1/2 $19 1/2 Second Quarter...................................................... 22 1/2 15 7/8 Third Quarter....................................................... 25 1/4 16 5/8 Fourth Quarter...................................................... 25 20 Fiscal Year Ended August 31, 1999: First Quarter (through 9/3/98)...................................... $27 3/4 $27
The following table sets forth for the periods indicated, the purchases of Shares made by Parent, the range of prices paid for such Shares and the average purchase price for each quarterly period of the Company during such periods:
SHARES -------------------------------------------- NUMBER OF SHARES HIGH LOW AVERAGE ---------- --------- ---------- --------- Fiscal Year Ended August 31, 1997: First Quarter................................ 297,700 $ 16.875 $ 15.50 $ 16.484 Second Quarter............................... 1,979,700 25.625 16.75 19.456 Third Quarter................................ 805,077 28.00 21.50 25.429 Fourth Quarter............................... 226,666 24.00 19.25 23.047 Fiscal Year Ended August 31, 1998: First Quarter................................ 146,400 $ 20.75 $ 20.5625 $ 20.694 Second Quarter............................... 4,696,512 20.761 19.3333 19.927 Third Quarter................................ 2,000,000 20.059 20.059 20.059 Fourth Quarter............................... 0 -- -- -- Fiscal Year Ended August 31, 1999: First Quarter (through 9/3/98)............... 0 -- -- --
On August 31, 1998, the last full trading day prior to announcement of the execution of the Merger Agreement and Purchaser's intention to commence the Offer, the closing sale price of the Shares on the NASDAQ NMS was $20.00 per Share. On September 3, 1998, the last full trading day prior to the commencement of the Offer, such closing sale price was $27.5625 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 12 7. CERTAIN INFORMATION CONCERNING THE COMPANY GENERAL The Company is a California corporation with its principal office located at 5501 Oberlin Drive, San Diego, California 92121. The Company is a diversified agribusiness and biotechnology company that develops and markets seed for improved crop varieties and provides crop protection products and services. FINANCIAL INFORMATION Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries derived from the Company's public reports filed with the Commission. More comprehensive financial information is included in reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents are available for inspection and copies thereof are obtainable in the manner set forth below under "Available Information." MYCOGEN CORPORATION SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED YEAR ENDED AUGUST 31, MAY 31, ------------------------------------- ------------------------ 1997(1) 1996(1) 1995 1998 1997 ----------- ----------- ----------- ----------- ----------- Net Operating Revenues.......................... $ 202,407 $ 146,800 $ 106,169 $ 177,562 $ 170,895 Total Revenue................................... 210,973 155,589 113,218 184,318 177,236 Net Loss Applicable to Common Shares............ (37,683 (2) (47,636 (2) (15,946) (37,757 (2) (6,981)(2) Net Loss Per Common Share (Basic)............... (1.22 (1) (1.82 (1) (0.83) (1.13) (0.23) Net Loss Per Common Share (Diluted)............. (1.22 (1) (1.82 (1) (0.83) (1.13) (0.23) Cash, Cash Equivalents and Securities Available-for-Sale............................ 2,211 68,038 17,600 1,514 3,097 Total Assets.................................... 239,687 227,469 159,608 342,359 280,622 Long-Term Liabilities........................... 15,544 5,228 3,291 20,266 16,187 Redeemable Preferred Stock...................... -- -- -- -- -- Stockholders' Equity............................ 157,214 181,194 113,703 203,232 184,341
- ------------------------ (1) The acquisitions of Morgan Seeds in 1997 and UAS and Mycogen Seeds in 1996 affect the comparability of the Selected Financial Data. (2) Net loss in 1997, 1996, the nine months ended May 31, 1998 and the nine months ended May 31, 1997 includes other charges of $31.7 million, $27.6 million, $39.0 million and $14.3 million, respectively, as discussed in further detail in the Notes to the Company's Consolidated Financial Statements. 13 RECENT DEVELOPMENTS The Company has advised Parent that the Company's fourth quarter has been negatively impacted by promotional (free seed) efforts on the part of the Company's competitors. The Company also has advised Parent that fourth quarter results have been negatively impacted by high litigation costs. Based on management's preliminary assessment of the business, fourth quarter revenues are anticipated by the Company to be approximately $25.5 million with a net loss of approximately $25 million, or approximately $0.69 per Share. AVAILABLE INFORMATION The Company is registered under the Exchange Act, and, accordingly, is subject to the informational filing requirements of the Exchange Act. In accordance therewith, the Company files periodic reports, proxy statements and other information with the Commission under the Exchange Act relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at the regional offices of the Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained by mail from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Website on the Internet at http://www.sec.gov which site contains registration statements, reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including the Company. In addition, such material should be available for inspection at the NASD, 1735 K Street, N.W., Washington, D.C. 20006. 8. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND CERTAIN AFFILIATES OF PARENT GENERAL Purchaser, a Delaware corporation with its principal offices at 2030 Dow Center, Midland, Michigan 48674, was organized in April 1998 for the purpose of effecting the Offer and the Merger, and has not carried on any activities except in connection with the Offer and the Merger. Parent owns 69% of the outstanding common stock of Purchaser and Centen Ag Inc., a Delaware corporation ("Centen"), owns 31% of the outstanding common stock of Purchaser. Parent is a Delaware limited liability company with its principal offices located at 9330 Zionsville Road, Indianapolis, Indiana 46268. Parent's principal business is the production of agricultural products, such as Broadstrike-TM- herbicides, Lorsban-TM- insecticides and Dursban-TM- insecticides, used in crop protection and production and for industrial pest control. Parent is 63% owned by Rofan Services Inc., a Delaware corporation ("Rofan") and 37% owned by Centen. Rofan is a Delaware corporation with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. Rofan's principal business is to hold investments in other entities, such as Parent. Rofan is a wholly owned subsidiary of TDCC. Centen is a Delaware corporation with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. Centen's principal business is to hold a membership interest in Parent. Centen is a wholly owned subsidiary of TDCC. TDCC is a Delaware corporation with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. TDCC's principal business is the manufacture and sale of chemicals, plastic materials, 14 agricultural and other specialized products and services. TDCC is a public corporation whose stock is traded on various exchanges, including the New York Stock Exchange, Inc. ("NYSE"). Except as described in this Offer to Purchase, during the last five years, none of TDCC, Rofan, Centen, Parent, Purchaser or, to the best of their knowledge, any of the persons listed in Schedule I (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. The name, business address, present principal occupation or employment, five-year employment history and citizenship of each director and executive officer of TDCC, Rofan, Centen, Parent and Purchaser are set forth in Schedule I. FINANCIAL INFORMATION Set forth below is certain selected consolidated financial information with respect to TDCC and its subsidiaries as of its fiscal years ended December 31, 1997, 1996 and 1995. More comprehensive financial information is included in reports and in documents filed by TDCC with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." THE DOW CHEMICAL COMPANY AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL INFORMATION
FISCAL YEARS ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- (IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS) STATEMENT OF EARNINGS DATA: Net Sales.................................................................. $ 20,018 $ 20,053 $ 20,200 Income from Continuing Operations.......................................... 1,802 1,900 1,900 Net Income Available for Common Stockholders............................... 1,802 1,900 2,071 PER SHARE DATA: Earnings per Common Share from Continuing Operations....................... $ 7.81 $ 7.71 $ 7.03 Earnings per Common Share.................................................. 7.81 7.71 7.72 Earnings per Common Share from Continuing Operations -- Assuming Dilution................................................................. 7.70 7.60 6.93 Earnings per Common Share -- Assuming Dilution............................. 7.70 7.60 7.61 BALANCE SHEET DATA: Working Capital............................................................ $ 1,300 $ 3,826 $ 4,953 Total Assets............................................................... 24,040 24,673 23,582 Net Stockholders Equity.................................................... 7,626 7,954 7,361 Weighted-average Common Shares Outstanding (in millions)................................................ 230.6 246.3 268.2
AVAILABLE INFORMATION TDCC is registered under the Exchange Act, and, accordingly, is subject to the informational filing requirements of the Exchange Act. In accordance therewith, TDCC files periodic reports, proxy statements 15 and other information with the Commission under the Exchange Act relating to its business, financial condition and other matters. TDCC is required to disclose in such proxy statements certain information, as of particular dates, concerning TDCC's directors and officers, their remuneration, stock options granted to them, the principal holders of TDCC's securities and any material interest of such persons in transactions with TDCC. Such reports, proxy statements and other information may be inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at the regional offices of the Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained by mail from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Website on the Internet at http://www.sec.gov which site contains registration statements, reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including TDCC. In addition, such material should be available for inspection at the NYSE, 20 Broad Street, New York, New York 10005. Except as described in this Offer to Purchase, (i) none of TDCC, Rofan, Centen, Parent or Purchaser or, to the best of their knowledge, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of any such persons, beneficially owns or has a right to acquire any equity security of the Company and (ii) none of TDCC, Rofan, Centen, Parent or Purchaser or, to the best of their knowledge, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Jerry E. Toomer, Vice President-Human Resources of Parent, directly owns 840 Shares. Purchaser believes that Mr. Toomer will tender all of his Shares pursuant to the Offer. The designees of Parent who serve on the Board of the Company have agreements with Parent pursuant to which such persons agree to forfeit to Parent any Shares issuable pursuant to Options granted in connection with that service. Accordingly, any Shares subject to such Options cannot be tendered by such persons in response to the Offer. Except as described in this Offer to Purchase, (i) none of TDCC, Rofan, Centen, Parent or Purchaser or, to the best of their knowledge, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship (whether or not legally enforceable) with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer of the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies; (ii) there have been no contacts, negotiations or transactions between TDCC, Centen, Rofan, Parent, Purchaser or any of their respective subsidiaries or, to the best of their knowledge, any of the persons listed on Schedule I on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, a sale or other transfer of a material amount of assets or concerning any other transactions with the Company that are required to be disclosed pursuant to the rules and regulations of the Commission. 9. BACKGROUND OF THE OFFER As noted above, on January 15, 1996, Parent and the Company entered into the Exchange and Purchase Agreement. Pursuant to the Exchange and Purchase Agreement, Parent agreed (i) to acquire 2,707,884 shares of Common Stock and a $100,000 promissory note of Agrigenetics, Inc. in exchange for all of the outstanding common stock of United Agriseeds, Inc. and (ii) to purchase 1,745,450 shares of Common Stock for consideration of $26,400,000. In addition, on January 15, 1996, Parent entered into a Stock Purchase Agreement with The Lubrizol Corporation to purchase 9,502,348 shares of Common Stock from The Lubrizol Corporation and an affiliate for $126,217,849. The transactions contemplated by these agreements closed on February 20, 1996 (the "Measurement Date"). 16 Pursuant to the Exchange and Purchase Agreement, among other things, Parent agreed that it would not acquire shares of Common Stock beyond specified levels at certain periods, and that it would not acquire shares of Common Stock such that it would hold more than 79.9% of the outstanding Common Stock, unless certain detailed procedures were undertaken. See Item 3(b)(2) "Exchange and Purchase Agreement." During calendar year 1996, Parent continued to acquire shares of Common Stock in the open market, from employees of the Company in connection with the exercise of their stock options, and directly from individual sellers. On December 2, 1996, Parent purchased 1,000,000 shares of Common Stock from Pioneer Overseas Corporation, which, aggregated with shares already owned by Parent, gave Parent ownership of greater than 50% of the outstanding shares of Common Stock and control over the Company's Board of Directors (the "Board"). From December 1996 through November 1997, Parent continued to acquire shares of Common Stock in the open market and directly from third-party sellers (including from Dr. Jerry Caulder, who resigned as Chairman of the Board and Chief Executive Officer of the Company in May 1997, but remained a director of the Company). On June 30, 1997, TDCC, through wholly-owned subsidiaries, became the 100% owner of Parent, purchasing the 40% stake in Parent held by another entity. During the summer of 1997, three of the Company's directors--Dr. Caulder, Thomas J. Cable and W. Wayne Withers--alleged that Parent, TDCC and Parent's designees on the Board had breached their fiduciary duties to the Company and the Minority Stockholders. Those allegations are discussed below. See "Summary of Special Committee Investigation of Certain Allegations." TDCC, Parent and Parent's designees deny that they acted wrongfully. On November 11, 1997, Parent notified four directors of the Company (Dr. Caulder, Mr. Cable, Dr. David H. Rammler and Mr. Withers) that Parent would not vote to reelect them to the Board. Parent stated that, in addition to its own designees and Carlton J. Eibl, President of the Company, it would nominate three candidates with special expertise and talents in plant biotechnology, the seed industry and the financial affairs of growth oriented high technology companies. At the Company's annual meeting of stockholders held on January 8, 1998, Joseph P. Sullivan, Dr. George Khachatourians and Roy M. Barbee were elected to fill those vacancies. During March and April 1997, these three new members of the Board were appointed as an independent committee to work with the Company's management in evaluating the best path for the Company. On April 30, 1998, prior to completion of the work of the independent committee described above, Parent notified the Company and publicly announced that it desired to amend the Exchange and Purchase Agreement to allow Parent to purchase all of the Shares held by the Minority Stockholders (the "Minority Shares") and stated that, if the Exchange and Purchase Agreement were amended to permit such discussions, Parent would be prepared to discuss such a transaction at a price per share of $20.50 (the "Initial Proposal"). On May 6, 1998, the Company announced that it had received the Initial Proposal and that the Board had appointed the Special Committee to evaluate Parent's request. The Special Committee, appointed in light of the conflict of interest, with respect to the Initial Proposal, of the five member majority of the Board designated by Parent, consisted of Mr. Sullivan and Dr. Khachatourians. In early May 1998, the Special Committee retained Altheimer & Gray as its legal adviser, and made inquiries with, and interviewed, a number of investment banking firms, including Wasserstein Perella. These contacts were reviewed by the Special Committee at a meeting on May 18, 1998, at which the Special Committee also reviewed with Altheimer & Gray the duties of special committees in similar situations. On May 22, 1998, the Special Committee met with Wasserstein Perella regarding Wasserstein Perella's retention and the work Wasserstein Perella would perform in connection therewith (including due 17 diligence efforts), and on May 26, 1998, the Special Committee announced the retention of Wasserstein Perella as its financial advisor. During late May and early June 1998, the Special Committee and its advisors began extensive due diligence with respect to the Company, including its financial condition and its intellectual property assets and position, both through on-site visits to the Company's headquarters in San Diego, California and by telephone and receipt and review of documents. During late May and early June 1998, Altheimer & Gray learned from Dr. Khachatourians that Dr. Khachatourians had provided three days of consulting services to TDCC and Parent in August 1997 for total consideration of $18,000. In order to avoid any questions regarding his independence, Dr. Khachatourians determined that he should resign from the Special Committee. At a meeting on June 11, 1998, Dr. Khachatourians voluntarily resigned from the Special Committee, and, in accordance with the recommendation of Mr. Sullivan, Ambassador Clayton K. Yeutter was appointed to the Board and to the Special Committee. Mr. Sullivan had considered a number of candidates for the anticipated vacancy on the Special Committee and selected Mr. Yeutter due to his extensive experience in the agricultural field (including serving as U.S. Secretary of Agriculture), his strong negotiating skills and background (including serving as U.S. ambassador to the Uruguay Round of GATT) and Mr. Sullivan's view, based on their experience together with The Vigoro Corporation, where Mr. Sullivan was Chairman of the Board and Mr. Yeutter a director, that Mr. Yeutter would be able to promptly and effectively step into his role on the Special Committee and be a strong representative of the Minority Stockholders. In order to permit Mr. Yeutter's appointment to the Board, Mr. Barbee resigned from the Board. In mid-June 1998, through its due diligence investigation, the Special Committee learned of certain allegations involving actions of Parent and its designated directors on the Board made by former directors and executive officers of the Company, which are described in detail below. See "Summary of Special Committee Investigation of Certain Allegations." These allegations generally involved whether Parent and its Board designees had treated the Company as a wholly-owned subsidiary, ignoring the rights of the Minority Stockholders, and had made decisions based on the benefits of opportunities to Parent, rather than the Company as an independent entity. As described below, the Special Committee and its representatives investigated these allegations. The Special Committee took the results of its investigation into account in its determinations as to the value of the Company and had frank discussions regarding such allegations during its negotiations with Parent. On June 10, 1998, Wasserstein Perella sent a letter to TDCC requesting information on a number of due diligence matters, including issues raised by these allegations. On June 25, 1998, the Special Committee and its legal and financial advisors met with Parent and its representatives to discuss ongoing due diligence issues, disclosure issues (including issues relating to the allegations referred to above) and the anticipated schedule for the process. At this meeting, there was significant discussion as to the information requested by Wasserstein Perella on behalf of the Special Committee and the scope of information to be provided to the Special Committee. At a meeting of the Special Committee later on June 25, the Special Committee was presented with an initial preliminary report by Wasserstein Perella and a detailed discussion by Altheimer & Gray of the Special Committee's duties and issues relating to disclosure by Parent to the Special Committee of certain information. Based on the June 25 meetings, on June 26, 1998, Wasserstein Perella sent another letter to TDCC requesting additional information, particularly with respect to TDCC's and Parent's analyses of the Company, any material discussions in which TDCC or Parent might be engaged with respect to transactions in the biotech area and the issues raised by certain of the Company's former officers and directors. As a part of its review of the Company's business, Altheimer & Gray learned that Parent had performed significant work in two areas relating to the Company's intellectual property estate. Specifically, attorneys for Parent had prepared an overview and categorization of the Company's intellectual property 18 assets, including an assessment of pending litigation, and Parent was managing or participating in a substantial part of the outstanding patent litigation to which the Company is a party. In response to requests from Altheimer & Gray and the Special Commitee, on July 9, 1998, Mr. Sullivan and attorneys from Altheimer & Gray met with Parent and its patent litigation counsel to discuss these due diligence matters. On July 21, 1998, the Special Committee met and approved an amendment to the Exchange and Purchase Agreement, subject to approval by the full Board (which approval was granted the following day), to allow (i) substantive discussions and negotiations with respect to a potential buyout transaction and (ii) a transaction to be formally proposed and consummated if such discussions and negotiations warranted. At that meeting, Wasserstein Perella informed the Special Committee that, if asked, Wasserstein Perella would be unable to opine that a price of $20.50 for such a transaction would be fair to the Minority Stockholders from a financial point of view. Also at that meeting, the Special Committee and its advisors discussed strategies with respect to a meeting with Parent to be held the next day. On July 22, 1998, the Special Committee, along with Wasserstein Perella and Altheimer & Gray met with Parent and its legal and financial advisors in Midland, Michigan. Discussions were held as to certain recently disclosed information, the historical relationship between the Company and Parent (including issues raised by the allegations noted above) and other due diligence matters, including Parent's plans for the Company and the Company's strategic value to Parent. Later that day, the Board approved the amendment to the Exchange and Purchase Agreement and the amendment was executed. On July 24, 1998, the Special Committee received Altheimer & Gray's preliminary analysis of the Company's intellectual property estate and the litigation with respect thereto. The final report with respect to these issues was delivered to the Special Committee on July 31, 1998. On July 27, 1998, the Special Committee met with Altheimer & Gray and Wasserstein Perella and received Wasserstein Perella's preliminary presentation as to the value of the Company, with a view toward a presentation of this analysis to Parent at a meeting scheduled for August 3, 1998. At this July 27 meeting, the Special Committee and its advisors reviewed the presentation in detail and held lengthy and significant discussions with Wasserstein Perella as to its analysis and assumptions. Wasserstein Perella circulated another draft of its preliminary report, and on July 31, 1998, the Special Committee met by teleconference with its advisors to review the status of the presentation and review further modifications. On August 3, 1998, the Special Committee and Wasserstein Perella met with Parent and its financial advisor, Salomon Smith Barney Inc. The advisors made presentations at this meeting as to their respective analyses of the Company's value, and delivered reports to the parties with respect thereto. 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 Wasserstein Perella 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. On August 14, 1998, the Special Committee met with Parent and discussed the terms of the proposed transaction. Discussions centered on a range of values, with Parent, at this meeting, indicating a high value of $26.00 per Share and the Special Committee, at this meeting, indicating that the low end of its range was $30.00 per Share. The parties agreed to discuss their positions with their respective advisors and to meet again on August 26, 1998. During the succeeding two weeks, the Special Committee and its legal and financial advisors met several times to finalize and refine their information as to all of the matters discussed above. 19 On August 26, 1998, the Special Committee met with Parent and the parties reached a preliminary and tentative agreement as to price at $28.00 per Share, subject to agreement as to the terms and conditions of a definitive agreement and any other material issues that might arise. Parent and the Special Committee instructed their respective advisors to proceed on this basis. Parent indicated to the Special Committee that it would need the approval of its governing body. Following the Special Committee meeting with Parent, the Special Committee asked Wasserstein Perella to formally determine if it would be prepared to render a fairness opinion with respect to a price of $28.00 per Share. On August 27, 1998, counsel for Parent delivered an initial draft merger agreement to Altheimer & Gray, and over the next four days, the parties and their representatives negotiated the terms of the Merger Agreement. During this time, legal counsel for Parent and the Special Committee also entered into discussions with legal counsel for the Company stockholder plaintiffs in the putative class action litigation with respect to a possible settlement. As a result of these discussions, on September 3, 1998, counsel for the plaintiffs, Parent, TDCC and the Special Committee entered into a "Memorandum of Understanding" ("MOU"). The MOU provides that, subject to a number of conditions, including confirmatory discovery, and court approval, the parties would agree to dismiss the putative class action litigation with prejudice. See Item 8. On August 31, 1998, the Special Committee met with Mr. Eibl, Wasserstein Perella and Altheimer & Gray to review the process undertaken to date, review the Merger Agreement as finally negotiated, receive reports from Mr. Eibl, on behalf of management of the Company, from Altheimer & Gray, as to their review of the Company's intellectual property position, the allegations noted above and the Special Committee's duties under applicable law, and from Wasserstein Perella as to its report with respect to the Company from a financial point of view. At this meeting, Wasserstein Perella delivered its opinion, dated August 31, 1998, to the Special Committee to the effect that, subject to the various assumptions and limitations set forth therein, the $28.00 cash price to be received by the Minority Stockholders pursuant to the Merger Agreement is fair to such stockholders from a financial point of view. A copy of the full text of the opinion of Wasserstein Perella, dated August 31, 1998, which sets forth, among other things, the opinion expressed, assumptions made, procedures followed, matters considered and limitations of review undertaken in connection with such opinion, is attached hereto as Annex A and should be read in its entirety. The Special Committee (i) unanimously determined 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, (ii) authorized and approved the acquisition of Shares by Purchaser in the Offer and the Merger, (iii) approved and adopted in all respects the Merger Agreement and the performance by the Company of its obligations thereunder, (iv) recommended acceptance of the Offer and the tender of shares pursuant thereto, and (v) recommended that the Board approve and adopt the Merger Agreement, the acquisition of Shares pursuant thereto and that the Board recommend that the Minority Stockholders tender their Shares in the Offer and, to the extent required, approve and adopt the Merger Agreement and the transactions contemplated thereby. Later on August 31, 1998, at a meeting of the Board, the Special Committee presented its report to the Board, including its recommendations set forth above. The Board unanimously (i) determined 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, (ii) authorized and approved the acquisition of shares by Purchaser in the Offer and the Merger, (iii) approved and adopted in all respects the Merger Agreement and the performance by the Company of its obligations thereunder, and (iv) recommended that the Minority Stockholders tender their Shares in the Offer and, to the extent required, approve and adopt the Merger Agreement and the transactions contemplated thereby. Finally, the Compensation Committee of the Board, which governs each of the Mycogen Corporation 1992 Stock Option Plan, the Mycogen Corporation Restricted Stock Issuance Plan and the Mycogen Corporation 1995 Stock Purchase Plan, approved the treatment of the 20 options, purchase rights and restricted stock subject to those plans, as described in the Merger Agreement, and took actions designed to effect such treatment. The Merger Agreement was executed on August 31, 1998, and Parent and the Company issued a joint press release announcing such execution and delivery on August 31, 1998 (a copy of which is attached hereto as Exhibit 28). (b)(2) Reasons for the Recommendation of the Special Committee and the Board. In determining that the Offer and the Merger are fair to, and in the best interests of, the Minority Stockholders, and in making its recommendation to the Board, the Special Committee considered the following material factors, which taken as a whole, supported its determination: (i) the offer of $28.00 per Share represented a premium of approximately 36.6%, 53.4% and 64.7% over the closing price of the Shares on the NASDAQ National Market one full trading day, thirty days and sixty days prior to the public announcement of the Initial Proposal on April 30, 1998, respectively; (ii) the Special Committee's review of historical market prices and recent trading activity of the Shares, including the fact that prior to August 31, 1998, the Shares had not closed above $25.50 per Share since June 1997, and developments in the stock market since the date of the Initial Proposal; (iii) the Special Committee's consideration of, among other things, (a) the business plan and information with respect to the financial condition, results of operations, business and prospects of the Company, (b) the changes and consolidation occurring in the agricultural biotechnology industry, their impact on the Company and the potential implication of these changes on the Company's relationship with Parent, (c) the historical relationship between the Company and Parent, including with respect to the Special Committee's investigation of the allegations described below, (d) the fact that the valuation analyses of Wasserstein Perella involved potentially speculative valuation of income opportunities which were far in the future and involved assumptions of market share in such future periods, (e) the inherent uncertainty as to the value of certain intellectual property rights of the Company which are subject to a number of uncertainties (such as, for example, the litigation to which the intellectual property is subject, the need to commercially develop such rights, and the inherent speculative nature of commercial development of these rights, including the area of oral immunology, and the effect of the Company's competition in these fields), and (f) concerns regarding the achievability of the Company's projections which formed the basis for the discounted cash flow analysis in Wasserstein Perella's report; (iv) the history of the negotiations between the Special Committee and its representatives and Parent's representatives, including the fact that (a) the negotiations resulted in an increase in the price at which Parent was prepared to acquire the Shares from $20.50 per Share to $28.00 per Share, an increase of 36.6%, and (b) the Special Committee believed that Parent would not further increase the price payable in the Offer and that $28.00 per Share was the highest price that could be obtained from Parent; (v) the Special Committee's review of presentations by, and discussion of the terms of the Merger Agreement (including the Offer and the Merger) with, representatives of the Special Committee's legal counsel and its financial advisors; (vi) the terms of the Offer, the Merger and the Merger Agreement, including the structural features of the Offer, which provide for a prompt cash tender offer for all outstanding Shares held by the Minority Stockholders to be followed if certain conditions are satisfied by a merger for the same consideration (thereby enabling the Minority Stockholders to obtain the benefits of the transaction in exchange for their Shares at the earliest possible time); 21 (vii) other provisions of the Offer and the Merger Agreement, including the fact that (a) the Purchaser is not permitted to waive the Minimum Condition without the approval of the Special Committee unless, after the consummation of the Offer, Parent and Purchaser would own at least 81.07% of the Fully Diluted Shares (so that at least a majority of the Minority Shares on a fully diluted basis would have been tendered), (b) the Offer is not subject to any financing condition and (c) the terms of the Merger Agreement may not be amended or waived without the approval of the Special Committee; (viii) the likelihood that the proposed acquisition would be consummated, based in part on the financial condition of Parent and the limited scope of conditions (other than the Minimum Condition) to be satisfied prior to the consummation of the Merger as provided in the Merger Agreement; (ix) the written opinion of Wasserstein Perella delivered to the Special Committee on August 31, 1998 (the "Wasserstein Perella Opinion") to the effect that, subject to the various assumptions and limitations set forth in the Wasserstein Perella 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 Wasserstein Perella. The full text of the Wasserstein Perella 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 Wasserstein Perella 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 WASSERSTEIN PERELLA OPINION AND THE "OPINION OF WASSERSTEIN PERELLA." SECTION SET FORTH BELOW IN THEIR ENTIRETY; (x) the risk that the Company would suffer the loss of key employees and other adverse consequences if the Company had not accepted Parent's offer to engage in the transactions contemplated by the Merger Agreement and had pursued other alternatives with the attendant delay inherent in such alternatives (in particular, it was noted that a competitor of the Company had announced plans to open a facility near the Company's headquarters, and that the risk of loss of key employees described above, which management had indicated was already high, would be increased thereby); (xi) the belief of the Special Committee, and the concurrence of the Company's management, that, in a rapidly developing competitive market, in order for the Company to effectively compete, it would need to be a part of a larger strategic organization or fundamentally change to a different strategy, whether a niche strategy or otherwise, and the fact that such change was unlikely to happen in light of Parent's majority ownership of the Company; in this connection, the Special Committee also considered management's view that the Company has short term cash needs as well as continuing needs over many years to fund certain of its research and development opportunities which would be difficult to meet in the absence of consummating a buyout of the Minority Stockholders by Parent; (xii) the fact that Parent owns a majority of the shares of Common Stock, control of the Board and the right to maintain such ownership level and control, and the stated unwillingness of Parent to sell such shares to a third party bidder for the acquisition of the Company and the improbability of a third party making such a bid; and in connection therewith, Parent had indicated that it was not interested in selling the Company to a third party and the Special Committee and Wasserstein Perella were not authorized to, and did not, solicit third party indications of interest for the acquisition of the Company or its businesses; (xiii) the Special Committee's determination, and the concurrence of the Company's management, that, in light of allegations made and other organizational differences between Parent and the Company, a continuation of the status quo position of the parties would be highly undesirable and 22 would present a significant risk of further erosion of the relationship between Parent and the Company and of the value of the Company; (xiv) the Special Committee's view that, in light of factors (x)--(xiii), together with continued disappointing operating results, and risks with respect to the trading price of the Shares and the stock market in general, the consideration that the stockholders of the Company (other than Parent and Purchaser) would obtain in a future transaction (including any transaction which might be effected by Parent pursuant to the Exchange and Purchase Agreement following February 1999) would likely be less advantageous than the consideration they would receive pursuant to the Offer and the Merger; and (xv) the ability of the Minority Stockholders to exercise dissenters' rights under the California Law in connection with the Merger. In reaching its determinations referred to above, the Board considered the recommendation of the Special Committee and a report of the Special Committee, which, in the view of the Board, supported such determinations. The members of the Board, including the members of the Special Committee, evaluated the various factors considered in light of their knowledge of the business, financial condition and prospects of the Company, and sought and considered the advice of financial and legal advisors. In light of the number and variety of factors that the Board and the Special Committee considered in connection with their evaluation of the Offer and the Merger, neither the Board nor the Special Committee found it practicable to quantify or otherwise assign relative weights to any of the foregoing factors, and, accordingly, neither the Board nor the Special Committee did so. In addition to the factors listed above, the Special Committee considered the fact that consummation of the Offer and the Merger would eliminate the opportunity of the Minority Stockholders to participate in any potential future growth in the value of the Company, but believed that this loss of opportunity was appropriately reflected by the price of $28.00 per Share to be paid in the Offer and the Merger. The Board, including the Special Committee, believes that the Offer and the Merger are procedurally fair because, among other things: (i) the Special Committee consisted of independent directors (unaffiliated with Parent, Purchaser or their affiliates or the Company's management) appointed to represent the interests of the Minority Stockholders; (ii) the Special Committee retained and was advised by independent legal counsel; (iii) the Special Committee retained and was advised by independent financial advisors, who assisted the Special Committee in evaluating the Offer and the Merger and rendered a fairness opinion, as described herein; (iv) the detailed review by the Special Committee and its advisors of the business, financial condition and intellectual property estate of the Company and the review of the allegations of improprieties by Parent in its relationship with the Company; (iv) the deliberations pursuant to which the Special Committee evaluated the Offer and the Merger and alternatives thereto; (v) the $28.00 per Share price and the other terms and conditions of the Merger Agreement resulted from active arms'-length bargaining between members of the Special Committee, on the one hand, and Parent, on the other; and (vi) Purchaser is not permitted to waive the Minimum Condition without the consent of the Special Committee unless, after the consummation of the Offer, Parent and Purchaser would own at least 81.07% of the Fully Diluted Shares (which would constitute the tender of a majority of the Minority Shares, on a fully diluted basis). On August 31, 1998, the Board held a meeting and, based upon, among other things, the unanimous recommendation of the Special Committee, determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement are fair to, and in the best interests of, the Company and its Minority Stockholders and approved the Offer, the Merger and the Merger Agreement and recommends that the Minority Stockholders of the Company accept the Offer and tender their Shares to Purchaser pursuant to the Offer. 23 THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST INTEREST OF THE COMPANY AND THE MINORITY STOCKHOLDERS, AND, UPON THE RECOMMENDATION OF THE SPECIAL COMMITTEE, RECOMMENDS THAT MINORITY STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES TO PURCHASER. SUMMARY OF SPECIAL COMMITTEE INVESTIGATION OF CERTAIN ALLEGATIONS During the course of the Special Committee's due diligence efforts, the Special Committee learned of certain allegations made by former officers and directors of the Company. These allegations essentially alleged that Parent and Parent's nominees to the Board had breached fiduciary duties owed to the Company and the Minority Stockholders. The allegations, although involving numerous specifics, fit into five general categories: (i) that Parent and its nominees had inhibited, blocked or prevented the Company from entering into certain transactions (such as mergers, acquisitions, joint development agreements and the like) with third parties that allegedly would have been beneficial to the Company; (ii) that Parent and its nominees had prevented the Company from making a public offering; (iii) that Parent provided equity financing to the Company on terms that were unfair to the Company; (iv), that Parent and its nominees had offered the Company's technology to others in exchange for technology of little or no interest to the Company, but of value to Parent; and (v) that Parent had passed up opportunities to sell the Company as a whole for a favorable price. These allegations have been principally made by Dr. Jerry Caulder, Chief Executive Officer of the Company until May 1997 and Thomas Cable, a director of the Company until January 1998. In November 1997, Parent determined not to vote for the re-election to the Board of Dr. Caulder (who had remained a member of the Board after his resignation as Chief Executive Officer), Mr. Cable, David Rammler, the founder of the Company, and W. Wayne Withers, formerly of Monsanto Corporation and currently General Counsel of Emerson Electric Company. In the summer of 1997, while still members of the Board of the Company (but after Dr. Caulder had resigned as Chief Executive Officer), Dr. Caulder and Mr. Cable sent an unsigned letter (marked "draft") to Pedro Reinhard, Chief Financial Officer of TDCC, cataloging a number of complaints about the way TDCC and Parent had managed the Company. Mr. Withers sent a letter to TDCC around the same time period requesting that the Company hire an independent law firm to advise the independent members of the Board concerning alleged conflicts of interest between Parent and the Company. TDCC and Parent denied the complaints set forth in the draft letter; there is no known response to Mr. Withers' letter and no counsel was hired. In approximately April 1998, officers of the Company prepared two chronologies, one of which described the history of the discussions concerning raising public equity in 1997 and Parent's ultimate refusal to permit additional shares to be sold to the public and the other cataloging a number of transactions with third parties that were said to have been blocked by Parent. During its due diligence review of the Company, the Special Committee (neither of whose members had been on the Board at the time of the events in question) learned of the Caulder/Cable draft letter and the chronologies described above. Altheimer & Gray, as counsel to the Special Committee, assisted the Special Committee in an investigation into these matters. Following is a summary of the Special Committee's analysis of these documents and the allegations set forth therein. 1. Both the Caulder/Cable draft letter and one of the management chronologies, as well as other sources, document cases in which the Company's management wished to pursue various business opportunities--some in the form of acquisitions, some structured as licenses, some as joint development agreements or otherwise--but was purportedly unable to obtain Parent's approval to do so. These transactions involved a large range of differing circumstances. Only one of these transactions was ever actually presented to the Board, which rejected it by a 5-4 vote in February 1997, all of the Parent designees voting against and all of the other directors voting in favor. Other transactions that were favored by the 24 Company's management were not approved by the Company's "Technology Committee" (dominated by Parent), but were not submitted to the Board. The transactions in question were also at various stages of completion. The largest and most ambitious projects were never close to consummation. The Special Committee had significant questions regarding whether these transactions could have been accomplished even with the enthusiastic support of Parent. Other potential business deals were more advanced in their development, even at the final contract stage. In general, the Special Committee found it impossible to tell whether and to what extent the Company would be better off had any or all of these transactions been accomplished. Many were in the nature of long term trait development transactions and it would have been several years before it would be clear whether they would have been profitable. 2. As set forth in the Caulder/Cable draft letter and the other chronology, the Company had been considering means of financing its operations for much of 1997. The Board looked into raising money through the public sale of shares of Common Stock. During the summer of 1997, Parent decided that it would not permit the Company to issue new shares to anyone other than Parent, which Parent had a right to do under the Exchange and Purchase Agreement. The Special Committee determined that Parent's contractual rights, which had been extensively bargained for at arms' length, supported its actions in this case. In addition, Parent has maintained its belief that the raising of funds through outside equity would be too expensive for the Company. Moreover, there is no assurance that the Company could have successfully completed a public sale of shares of Common Stock, or at what price. 3. In approximately October 1997, in connection with a proposed but ultimately unsuccessful acquisition, Parent was prepared to purchase approximately $150 million in value of Common Stock at $24.00 per share. A fairness opinion for that price had been obtained. After the collapse of that transaction, in November 1997, Parent agreed to purchase $75 million in value of Common Stock at a contractually stipulated price of the 90 day trailing average. This transaction was approved unanimously by the Board, including by Dr. Caulder and Messrs. Cable, Rammler and Withers. No fairness opinion was obtained for this transaction. During the two-month period between the time the Board approved the transaction and when it was consummated, the 90 day trailing average price declined from $23.02 to $19.94. Because the stock price was falling at that time, the considerable period of time it took for Parent to formally approve and consumate the transaction resulted in lowering the cost of acquisition for Parent. 4. In the Caulder/Cable draft letter, the allegation is made that Parent had offered to trade (presumably by way of a cross license) the Company's technology to others in exchange for technology that was of little or no interest to the Company but was of value to TDCC and Parent. However, neither Dr. Caulder, Mr. Cable nor current management of the Company were aware of any instance in which such a technology trade was in fact consummated. 5. Finally, Dr. Caulder has maintained that Parent could have arranged for the sale of all of the Company's stock (including the Shares held by the Minority Stockholders) at a considerable premium over the market price if it had chosen to do so. The Special Committee recognized that as a matter of law, Parent was and is under no obligation to agree to sell its own shares of Common Stock, even if it might have been in the best interests of the Minority Stockholders that Parent do so. TDCC, Parent and Parent's designees have denied that they acted wrongfully with respect to any of the matters raised in these allegations. As described above, the Special Committee took these matters and the results of its investigation into account in making its determinations described above and in making its recommendations to the Board. VALUATION BY THE FINANCIAL ADVISOR TO TDCC As noted above, Salomon Smith Barney, as financial advisor to TDCC, made a presentation to the Special Committee on August 3, 1998, regarding its updated views on the stand-alone valuation of the 25 Company, which presentation had previously been prepared and delivered to TDCC (the "Salomon Smith Barney Valuation"). In connection with its preparation of the Salomon Smith Barney Valuation, Salomon Smith Barney reviewed certain publicly available information concerning the Company and certain other financial information concerning the Company, including financial forecasts that were developed by the managements of the Company and Parent, respectively, and provided to Salomon Smith Barney by Parent. Salomon Smith Barney discussed the past and current business operations, financial condition and prospects of the Company with certain officers and employees of Parent and TDCC. Salomon Smith Barney also considered such other information, financial studies, analyses, investigations and financial, economic and market criteria that it deemed relevant. In its review and analysis, and in arriving at the Salomon Smith Barney Valuation, Salomon Smith Barney assumed and relied upon the accuracy and completeness of the information reviewed by it for purposes of the Salomon Smith Barney Valuation, and Salomon Smith Barney did not assume any responsibility for independent verification of such information. With respect to the financial forecasts of the Company, Salomon Smith Barney assumed that they had been reasonably prepared and reflected the best currently available estimates and judgments of the Company and Parent, and Salomon Smith Barney expressed no view with respect to such forecasts or the assumptions upon which they were based. Salomon Smith Barney did not assume any responsibility for making or obtaining any independent evaluations or appraisals of any of the assets (including properties and facilities) or liabilities of the Company, nor was it provided with any such evaluation or appraisal. The Salomon Smith Barney Valuation was necessarily based upon conditions as they existed and could be evaluated as of such date. The Salomon Smith Barney Valuation is comprised of two sets of analyses: a review of a preliminary valuation analysis prepared for TDCC and delivered on April 28, 1998 ("Preliminary Valuation") and a revised valuation analysis, which updated the Preliminary Valuation, as of August 3, 1998 ("Updated Valuation"). The Salomon Smith Barney Valuation did not imply any conclusion as to the likely trading range, if any, of the Shares following the consummation of a TDCC purchase of the outside shareholders' stock, which may vary depending upon, among other factors, changes in interest rates, dividend rates, market conditions, liquidity and float and other factors that generally influence the price of securities. The Salomon Smith Barney Valuation was only an estimate of the value, from a financial point of view, of the Shares to be purchased by Parent and did not constitute a recommendation to TDCC or to any holder of Shares as to whether such holders should tender Shares in connection with the Offer. The Salomon Smith Barney Valuation also does not constitute an opinion to TDCC or any other person as to the fairness of the consideration to be paid or received in connection with the Offer. The following is a summary of the material analyses presented and discussed by Salomon Smith Barney at the meeting on August 3, 1998. HISTORICAL STOCK PRICE PERFORMANCE. Salomon Smith Barney reviewed the trading prices for Shares over the period from July 1, 1997 to July 31, 1998, which indicated that the stock had traded from a low of approximately $18 per Share to a high of approximately $24 per Share during such period. Salomon Smith Barney noted that the Shares had underperformed by comparison to both the S&P Composite Average and an index of certain of the Company's peer companies. ANALYSIS OF SELECTED PUBLICLY TRADED AGRICULTURAL BIOTECHNOLOGY COMPANIES. Using publicly available information, Salomon Smith Barney compared the financial, operating and market performance of the Company with those of the following agricultural biotechnology companies: AgriBioTech Inc., DEKALB Genetics Corporation ("Dekalb"), Delta and Pine Land Company ("Delta & Pine Land"), Empresas La Moderna S.A. de C.V., Monsanto Company ("Monsanto"), Pioneer Hi-Bred International, Inc. ("Pioneer Hi-Bred"), and Vilmorin et Compagnie (the "Comparable Companies"). Salomon Smith Barney considered the Comparable Companies to be reasonably similar to the Company insofar as they participate in business segments similar to the Company's business segments, but none of these companies has the same 26 management, makeup, size and combination of businesses as the Company. Accordingly, the analysis described below is not purely mathematical. Rather it involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the Company and the Comparable Companies and other factors that could affect public trading value. For the Company and each of the Comparable Companies, Salomon Smith Barney calculated multiples of firm value to the lastest twelve months ("LTM") revenues. Other traditional valuation measures such as multiples of firm value to estimated 1998, 1999, and 2000 earnings as well as firm value to earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and to earnings before interest and taxes ("EBIT") were also calculated, but deemed not to be meaningful due to the Company's negative financial performance. The multiples of firm value to LTM revenues for the Comparable Companies calculated in connection with the Preliminary Valuation ranged from 1.1x to 9.2x, with a median of 2.7x and a mean of 3.6x; while such multiple for the Company was 3.6x. The multiples of firm value to LTM revenues for the Comparable Companies calculated in connection with the Updated Valuation ranged from 1.4x to 9.8x, with a median of 4.2x and a mean of 4.9x; while such multiple for the Company was 4.2x. After review of the different sizes, focuses, market shares, and intellectual property components of the Comparable Companies as well as the Company's total lack of profitability as compared to the performances achieved by the Comparable Companies, Salomon Smith Barney determined that the LTM revenue multiple to be applied in a valuation of the Company would be significantly less than the median multiple found in the agricultural biotechnology sector. In addition, especially as of the Updated Valuation, the agricultural biotechnology sector experienced considerable consolidation which Salomon Smith Barney believed had had an unusually positive impact on the stronger Comparable Companies' stock prices, thereby producing inflated valuation multiples. By applying an adjusted multiple range of 1.2x to 2.5x to the Company's LTM revenue, Salomon Smith Barney derived an implied equity value per Share ranging from $6.34 to $13.68 for the Preliminary Valuation. In connection with the Updated Valuation, Salomon Smith Barney applied an adjusted multiple range of 1.5x to 2.7x, resulting in an implied equity value per Share of $8.03 to $14.81. To account for a possible minority acquisition premium associated with the purchase of the remaining Shares, Salomon Smith Barney applied a 20% to 30% premium (the "Premium") to the implied equity value per Share to arrive at an estimated equity value per Share of $7.60 to $17.79 for the Preliminary Valuation and $9.64 to $19.25 for the Updated Valuation. Salomon Smith Barney also performed a multiple analysis based upon the Company's 2002 projected EBITDA in connection with which the implied value per Share was derived utilizing a 20-30x multiple discounted back to 1998 in an attempt to capture the impact of the Company's projected future profitability. In performing this and other analyses, Salomon Smith Barney utilized two sets of projections. The first set of projections was compiled by the Company management and presented to Parent's Operating Committee in December 1997 ("Company Projections"). The second set of projections included Parent's adjustments to the Company Projections based upon the Company's recent disappointing financial performance, the Company's poor competitive position, and differing assumptions pertaining to the corn market ("TDCC Projections"). Using the Company Projections, Salomon Smith Barney derived an implied value per Share of $5.98 to $13.12 including the Premium. Using the TDCC Projections, Salomon Smith Barney derived an implied value per Share range of $3.25 to $7.88 with the Premium. ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Salomon Smith Barney also analyzed certain financial, operating and stock market information publicly available or estimated by Parent for certain selected merger or acquisition transactions. Since the Company's operations involve both a seed trait business and an intellectual property business, Salomon Smith Barney reviewed ten selected seed driven agricultural biotechnology transactions (the "Seed Transactions") as well as twelve selected intellectual property driven 27 agricultural biotechnology transactions (the "IP Transactions") in order to derive an implied private market valuation for the Shares. Salomon Smith Barney derived the firm values implied by the terms of the transactions and then calculated the resulting multiples of firm value to LTM revenues. In connection with the Preliminary Valuation, the multiple of firm value to LTM revenues in the Seed Transactions ranged from 1.1x to 4.8x, with a median of 2.1x and a mean of 2.3x, while the multiple of firm value to LTM revenues in the IP Transactions ranged from 3.0x to 96.2x, with a median of 10.3x and a mean of 8.3x. To properly account for the Company's distinct seed and intellectual property businesses, Salomon Smith Barney utilized various blended weighted averages of the selected multiple ranges from the Seed Transactions and IP Transactions to derive a reference valuation range of $15.23 to $19.89 per Share. The Updated Valuation included five precedent transactions which occurred after the Preliminary Valuation was complete. By including these five transactions in the derivation of the Seed Transaction and IP Transaction multiple ranges and employing the blended weighted averages used in the Preliminary Valuation, Salomon Smith Barney derived a reference valuation range of $18.76 to $25.54 per Share. While Salomon Smith Barney considered the Seed Transactions and the IP Transactions to be reasonably similar to the Offer and the Merger, no transaction used in the analysis of the Precedent Transactions summarized above is identical to such transactions. The Company's lack of profitability and weak market position, combined with a very limited universe of potential buyers, all impact the comparability of certain of the precedent transactions. DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney also performed a discounted cash flow analysis in connection with which reference ranges of per Share equity value were derived based upon the sum of (i) the value, discounted to present, of a stream of projected unlevered cash flows and (ii) a projected terminal value. The Company's seed business and the intellectual property business were discounted at different discount rates due to their significantly different risk profiles. For each segment, Salomon Smith Barney conducted an analysis based upon the Company Projections and the TDCC Projections. Due to the Company's current negative financial performance there is a considerable impact on values calculated by utilizing a nine year projected cash flow stream by comparison to a four year projected cash flow stream in the discounted cash flow analysis. Therefore, Salomon Smith Barney valued the Company utilizing each set of projections for each of the two different segments of the business based on both a four year and nine year set of projected discounted unlevered cash flows. For the seed business valuations, a weighted average cost of capital ("WACC") ranging from 12.0% to 14.0% was used and the Company terminal value was calculated by applying a 12.0x to 18.0x range of multiples to the Company's projected EBITDA in the final year. For the intellectual property business valuations, Salomon Smith Barney used a 15% to 25% WACC and applied a 6.0x to 10.0x range of multiples to the Company's projected revenue in the final year to derive the terminal value. Salomon Smith Barney calculated an implied per Share equity value for the Company using the Company Projections ranging from $6.65 to $8.92 when four years of cash flows were used and ranging from $8.62 to $15.51 when nine years of projected cash flow were used. When the TDCC Projections were utilized, the implied per Share equity value for the Company ranged from $5.21 to $6.95 when four years of cash flows were used to $5.07 to $9.59 when nine years of projected cash flows were used. Salomon Smith Barney prepared the Valuation solely in connection with advising TDCC with respect to Parent's purchase of the outside shareholders' Shares. Salomon Smith Barney has not rendered an opinion, nor does the Salomon Smith Barney Valuation constitute its opinion, to the Company, Parent, TDCC or any other person as to the fairness of the consideration to be paid or received in the Offer. The preparation of valuation analyses is a complex process involving subjective judgments and is not susceptible to partial analysis or summary descriptions. The summary set forth above does not purport to 28 be a complete description of the analyses underlying the Salomon Smith Barney Valuation. Salomon Smith Barney believes that its analysis and the summary set forth above must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the processes underlying the analysis set forth in the Salomon Smith Barney Valuation. The ranges of valuation implied by any particular analysis described above should not be taken to be the view of Salomon Smith Barney as to the actual value of the Company. In performing its analyses, Salomon Smith Barney made numerous assumptions with respect to industry performance, general business, financial, market and economic conditions and other matters, many of which are beyond the control of Parent and the Company. Any estimates contained in such analyses are not necessarily indicative of actual values or predictive of future results, which may be significantly more or less than such estimates. Estimated values do not purport to be appraisals and do not necessarily reflect the prices at which businesses or companies might actually trade or be sold. Salomon Smith Barney has acted as financial advisor to TDCC in connection with its purchase of Shares and, as described under "Fees and Expenses" below, will receive a fee for its services, a substantial portion of which is contingent upon consummation of the Offer. In the ordinary course of its business, Salomon Smith Barney and its affiliates may actively trade the equity securities of TDCC and the Company for their own account and the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities. Salomon Smith Barney and its affiliates have previously rendered certain investment banking and financial advisory services to TDCC for which they have received customary compensation. Salomon Smith Barney and its affiliates (including Travelers Group Inc.) may have other business relationships with TDCC, Parent or the Company in the ordinary course of their businesses. Salomon Smith Barney is an internationally recognized investment banking firm that provides financial services in connection with a wide range of business transactions. As part of its business, Salomon Smith Barney regularly engages in the valuation of companies and their securities in connection with mergers and acquisitions, restructurings, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. TDCC retained Salomon Smith Barney based on Salomon Smith Barney's expertise in the valuation of companies as well as its familiarity with companies in the agriculture biotechnology industry. OPINION OF WASSERSTEIN PERELLA The Special Committee retained Wasserstein Perella to act as its financial advisor in connection with the Transactions (as defined herein). Wasserstein Perella has delivered a written opinion to the Special Committee, dated August 31, 1998, to the effect that, subject to the various assumptions and limitations set forth therein, as of the date thereof, the $28.00 per Share cash consideration to be received by holders of Shares (other than TDCC and its affiliates) in the Offer and the Merger pursuant to the Merger Agreement (collectively, the "Transactions") is fair to such shareholders from a financial point of view. Wasserstein Perella was engaged and acted solely as an advisor to the Special Committee and not as an advisor to or agent of any other person, including the Company. Wasserstein Perella's opinion 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. 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 SCHEDULE III 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 29 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 IN RESPECT OF SUCH MATTERS. 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 SCHEDULE III. In connection with rendering its opinion, Wasserstein Perella, among other things, (i) reviewed the financial terms and provisions of the Merger Agreement; (ii) reviewed the Exchange and Purchase Agreement, dated January 15, 1996, among the Company, Agrigenetics, Inc., Parent and United Agriseeds, Inc. (the "Exchange and Purchase Agreement"), including TDCC's and its affiliates' rights and obligations thereunder both if the Transactions are completed and not completed; (iii) 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 Wasserstein Perella for purposes of its analyses; (iv) met with certain representatives of the Company and Parent to review and discuss such information and, among other matters, the Company's business, financial condition, results of operations and prospects; (v) reviewed and considered certain financial and stock market data relating to the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded and that Wasserstein Perella believed might be relevant or comparable in certain respects to the Company or one or more of its businesses or assets; (vi) 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 Wasserstein Perella believed to be reasonably comparable to the Transactions or otherwise relevant to its analysis; and (vii) performed such other studies, analyses and investigations and reviewed such other information as Wasserstein Perella considered appropriate. In its review and analysis and in formulating its opinion, Wasserstein Perella assumed and relied on the accuracy and completeness of all the financial and other information provided to or discussed with it or publicly available, including the financial projections, forecasts, analyses and other information provided to Wasserstein Perella, without assuming any responsibility for independent verification of, or expressing an opinion as to, any of such information. Wasserstein Perella also relied upon the reasonableness and accuracy of the unadjusted projections, forecasts, analyses and other information furnished to Wasserstein Perella and assumed, with the Special Committee's consent, that such projections, forecasts, 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 August 31, 1998 and that management of the Company is unaware of any facts that would make the projections, forecasts and other information provided to Wasserstein Perella incomplete or misleading. Wasserstein Perella expressed no opinion with respect to such projections, forecasts and analyses or the assumptions on which they are based. Wasserstein Perella also did not review any of the books and records of the Company or Parent, and although Wasserstein Perella visited certain facilities of the Company, Wasserstein Perella was not retained to conduct, and did not assume 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 it. Wasserstein Perella's opinion was based on economic and market conditions and other circumstances as they existed and could be evaluated by it on August 31, 1998. Although subsequent developments may affect Wasserstein Perella's opinion, it is under no obligation to update, revise or reaffirm its opinion. Wasserstein Perella's analysis assumes 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 its engagement, Wasserstein Perella was not authorized to solicit and did not solicit alternative offers for the Company or its assets, or investigate any other alternative transactions which may 30 be available to the Company. Wasserstein Perella expressed no opinion with respect to the Third Party Sale Value of the Company as such term is defined in the Exchange and Purchase Agreement. The following is a summary of the report presented by Wasserstein Perella to the Special Committee in connection with the delivery of its opinion on August 31, 1998. DISCOUNTED CASH FLOW ANALYSES. Wasserstein Perella performed two different discounted cash flow ("DCF") analyses of the Company based on the Company's financial projections for the 1998-2007 period by business segment: (i) a variable discount rate DCF analysis and (ii) a probability-weighted method DCF analysis. The Company's projections for the 1998-2007 period include the impact of three pending acquisitions in Brazil, including the impact of an increase in net debt as a result of these acquisitions. Certain synergies that would be expected in a combination with TDCC such as expense reductions and the Company's use of net operating losses were included in the projections. In conducting the variable discount rate DCF analysis, Wasserstein Perella used a range of discount rates and a range of terminal multiples of earnings before interest and taxes ("EBIT") for each of the Company's more established, growing business segments. For the Company's Biopesticides and the SoilServ business segments, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's Conventional Seed business segment, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 8x to 12x. For the Conventional Seed portion of the Company's joint venture with Verneuil Holding, S.A. ("VMO") and the Company's entire AC Humko joint venture, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's JG Boswell joint venture, Wasserstein Perella used discount rates ranging from 12.0% to 14.0% and terminal EBIT multiples ranging from 8x to 12x. For the Company's DAS Canada joint venture, Wasserstein Perella used discount rates ranging from 20.0% to 24 .0% and terminal EBIT multiples ranging from 8x to 12x. These analyses yielded ranges of per share values for each such business segment as follows: Biopesticides $0.09 to $0.12; SoilServ $0.73 to $1.02; Conventional Seed $6.48 to $13.05; VMO (conventional seed only) $0.18 to $0.27; AC Humko $0.06 to $0.07; JG Boswell $1.54 to $2.22; and DAS Canada $0.34 to $0.54. With respect to the Company's less well established business segments or business segments that rely on unproven technology, Wasserstein Perella used a range of discount rates and a range of projected unlevered cash flow perpetuity growth rates. For the Company's Herbicide and Insect Resistence business segment, Wasserstein Perella used discount rates ranging from 20.0% to 24.0% and perpetuity growth rates from 0.0% to 6.5%. For the Company's Output Traits business segment, Wasserstein Perella used discount rates ranging from 25.0% to 30.0% and perpetuity growth rates ranging from 5.0% to 6.5%. For the Company's Disease Resistence business segment, Wasserstein Perella used discount rates ranging from 31.0% to 50.0% and perpetuity growth rates ranging from 8.0% to 10.0%. For all portions of the Company's VMO joint venture excluding the conventional seed portion, Wasserstein Perella used discount rates ranging from 20.0% to 50.0% and perpetuity growth rates ranging from 5.0% to 10.0%. Wasserstein Perella applied discount rates ranging from 20.0% to 24.0% to projected Pioneer Hi-Bred royalties. For the Company's other partner royalties, Wasserstein Perella used discount rates ranging from 20.0% to 24.0% and perpetuity growth rates ranging from 1.0% to 2.5%. For the Company's other pest and crop royalties, Wasserstein Perella used discount rates ranging from 31.0% to 50.0% and perpetuity growth rates ranging from 5.0% to 6.5%. These analyses yielded ranges of per share values for each business segment as follows: Herbicide and Insect Resistence $3.75 to $6.65; Output Traits $4.71 to $8.72; Disease Resistence $2.98 to $4.03; VMO (other than conventional seed) $0.02 to $0.08; Pioneer Hi-Bred royalties $0.90 to $0.97; other partner royalties $0.35 to $0.54; and other pest and crop royalties $0.53 to $2.67. In addition, the Wasserstein Perella valued certain miscellaneous items including potential cost savings and use of net operating losses which yielded, in the aggregate, a range of per share values from $4.64 to $6.48. 31 This variable discount rate DCF analyses yielded an aggregate value per share for the Shares ranging from $27.37 to $47.29. Wasserstein Perella also noted that recent declines in volume and unit sales price with respect to corn seed may adversely impact the Company's long term growth projections and that, assuming the Company's recent market share erosion impacts projected market share growth in a constant fashion, the range of values per share of the Company's Shares would be reduced to $26.22 to $45.44. In addition, Wasserstein Perella performed a sensitivity analysis based on certain financial forecasts provided to Wasserstein Perella by management of the Company with respect to certain key business segments of the North America and Brazil portions of the Company's Conventional Seed, Herbicide and Insect Resistance and Output Traits business segments. The Base Case for the sensitivity analysis was predicated on forecasts of the Company's market share in each key business segment for the period from 1997 through 2007 (the "Base Case"). The Base Case projections implied that the Company's market share of the Conventional Seed business for corn in North American will grow from 3.4% in 1997 to 13.6% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $2.46 to $5.40 and that the Company's market share of the Conventional Seed business for corn in Brazil will grow from 11.0% in 1997 to 29.0% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $2.65 to $4.50. The Base Case projections also implied that the Company's market share of the Herbicide and Insect Resistance business for corn crops in North America will grow from 3.4% in 1997 to 13.6% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $1.88 to $3.25 and that the Company's market share of the Herbicide and Insect Resistance business for soybean crops in North America will grow from 1.8% in 1997 to 7.8% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $1.16 to $1.86. The Base Case projections further implied that the Company's market share of the Output Traits business for soybean crops in North America will grow from 1.8% in 1997 to 7.8% in 2007 and that such business segment's contribution to the overall value of the Company ranges from $3.77 to $6.83. In the Base Case, these key business segments comprised 45.3% of the Company's overall value and the remainder of the Company's value was derived from 35 additional business units and miscellaneous items. For purposes of its sensitivity analysis only, Wasserstein Perella also considered two alternative cases (i) a revised Base Case which was predicated on the Company achieving 75% of its projected growth in market share for the key business segments through the year 2007 (the "75% Case") and (ii) a revised Base Case which was predicated on the Company achieving 125% of its projected growth in market share for the key business segments through the year 2007 (the "125% Case"). In the 75% Case, the contribution of the Conventional Seed business for corn in North America to the Company's overall value ranged from $0.98 to $2.87, a reduction from the Base Case of 60.2% and the contribution of the Company's Conventional Seed business for corn in Brazil to the Company's overall value ranged from $2.34 to $3.91, a reduction from the Base Case of 11.7%. In the 75% Case, the contribution of the Company's Herbicide and Pesticide Resistance business for corn crops in North America to the Company's overall value ranged from $1.60 to $2.76, a reduction from the Base Case of 14.9% and the contribution of the Company's Herbicide and Pesticide Resistance business for soybean crops in North America to the Company's overall value ranged from $0.86 to $1.36, a reduction from the Base Case of 25.9%. In the 75% Case, the contribution of the Company's Output Traits business for soybean crops in North America to the Company's overall value ranged from $3.55 to $6.40, a reduction from the Base Case of 5.8%. In the 75% Case, these key business segments comprised 40.6% of the Company's overall value. In the 125% Case, the contribution of the Conventional Seed business for corn in North America to the Company's overall value ranged from $3.93 to $7.92, an increase from the Base Case of 59.8% and the contribution of the Company's Conventional Seed business for corn in Brazil to the Company's overall value ranged from $2.97 to $5.09, an increase from the Base Case of 12.1%. In the 125% Case, the contribution of the Company's Herbicide and Pesticide Resistance business for corn crops in North America to the Company's overall value ranged from $2.16 to $3.72, an increase from the Base Case of 14.9% and the Company's Herbicide and Pesticide Resistance business for soybean crops in North 32 America to the Company's overall value ranged from $1.22 to $1.96, an increase from the Base Case of 5.2%. In the 125% Case, the contribution of the Company's Output Traits business for soybean crops in North America to the Company's overall value ranged from $3.99 to $7.24, an increase from the Base Case of 5.8%. In the 125% Case, the key business segments comprised 48.7% of the Company's overall value. The Base Case, the 75% Case, and the 125% Case resulted in per share valuation ranges for the Shares from $27.37 to $47.29; $23.98 to $41.51 and $30.25 to $52.38, respectively. For purposes of the probability-weighted method DCF analysis, Wasserstein Perella used estimates provided by management of the probability that new products will proceed through certain stages of the commercialization process and ultimately be commercialized in order to weigh the expenses anticipated in connection with commercializing the product and the revenues anticipated to be generated by the product. These probability-weighted expense and revenue streams were then used to estimate the free cash flow attributable to such products. Wasserstein Perella lowered management's probability estimates to reflect execution and commercialization risk in light of the size and financial resources available to the Company's competitors as follows: (i) Wasserstein Perella used 90% of management's probability estimates with respect to Herbicide and Pesticide Resistance products; (ii) Wasserstein Perella used 81% of management's probability estimates with respect to Output Traits products, and; (iii) Wasserstein Perella used 72% of management's probability estimates with respect to Disease Resistance products. For the Company's Biopesticides and the SoilServ business segments, Wasserstein Perella used discount rates ranging from 10.0% to 14.0% and terminal EBIT multiples ranging from 6x to 10x. For the Company's Conventional Seed business segment, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 8x to 10x. For the conventional seed portion of the Company's VMO joint venture and the Company's entire joint ventures with AC Humko and JG Boswell, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and terminal EBIT multiples ranging from 6x to 12x. For the Company's DAS Canada joint venture, Wasserstein Perella used discount rates ranging from 10.0% to 14 .0% and terminal EBIT multiples ranging from 4x to 10x. For the Company's Herbicide and Insect Resistence business segment, Output Traits business segment, other partner royalties business segment and other pest and crop royalties business segment, Wasserstein Perella used discount rates ranging from 11.0% to 14.0% and perpetuity growth rates ranging from 5.0% to 6.5%. For the Company's Disease Resistence business segment and VMO joint venture (excluding the conventional seed portion), Wasserstein Perella applied discount rates ranging from 11.0% to 14.0% and perpetuity growth rates ranging from 5.0% to 10.0%. Wasserstein Perella applied discount rates ranging from 10.0% to 14.0% to projected Pioneer Hi-Bred royalties. The probability-weighted method DCF analyses yielded an aggregate value per share for the Share ranging from $27.77 to $54.92. Wasserstein Perella also noted that recent declines in volume and unit sales price with respect to corn seed may adversely impact the Company's long term growth projections and that, assuming the Company's recent market share erosion impacts projected market share growth in a constant fashion, the range of values per share would be reduced to $26.83 to $53.29. COMPARABLE TRANSACTION ANALYSIS. Wasserstein Perella reviewed recent acquisitions of all the outstanding equity of, or strategic equity investments in, four publicly traded agrobiotech companies from April 1, 1996 to August 31, 1998 in which the total purchase price for the seller ranged from $268 million to $3.88 billion (acquiror/seller): Monsanto Company ("Monsanto")/Delta and Pine Land Company ("Delta"); E. I. du Pont de Nemours and Company/Pioneer Hi-Bred International, Inc. ("Pioneer"); Monsanto/DeKalb Genetics Corporation ("DeKalb"); and Monsanto/Calgene, Inc. ("Calgene"). In those transactions in which only a substantial equity investment was made, the purchase price was adjusted to translate the price the acquiror paid for part of the seller into a price for the entire company. For each transaction, Wasserstein Perella calculated the multiple of announced purchase price (or adjusted purchase price in the case of substantial equity investments) to the seller's (i) last twelve months 33 ("LTM") sales, (ii) LTM earnings before interest, taxes, depreciation and amortization ("EBITDA") and (iii) LTM EBIT. Wasserstein Perella also calculated the implied equity value of each seller as a multiple of net income and book value. The analysis of the foregoing four transactions, excluding certain multiples which Wasserstein Perella determined were not meaningful, yielded a range of multiples of (a) announced or adjusted purchase price to (i) LTM sales of 4.6x to 9.87x, (ii) LTM EBITDA of 18.4x to 69.8x, (iii) LTM EBIT of 22.6x to 89.6x and (b) of implied equity value to (i) net income of 33.9x (in the one instance in which such information was meaningful) and (ii) book value of 3.1x to 25.1x. Wasserstein Perella used these comparable transaction multiples to calculate implied values for the shares based on the ranges of multiples derived from such transactions. The per Share value implied by this analysis ranged from $33.24 per share to $38.85 per share. PREMIUM ANALYSIS. As part of its analysis, Wasserstein Perella reviewed three acquisition transactions by majority shareholders of publicly owned minority interests in agrobiotech companies with values ranging from $119.4 million to $3,426 million to derive a range of premiums paid over (i) the seller's market price per share one day prior to the announcement of the respective transaction (the "1-Day Market Price"); (ii) the seller's market price per share 30 days prior to the announcement of the respective transaction (the "30-Day Market Price"); and (iii) the seller's market price per share 60 days prior to the announcement of the respective transaction ("60-Day Market Price"). The three transactions involved the following pairs of companies (acquiror/seller): Monsanto/Calgene; Novartis AG/SyStemix, Inc.; and Monsanto/DeKalb (the "Premium Transactions"). The Premium Transactions yielded a range of acquisition premiums to the 1-Day Market Price of 34.9% to 77.3% with a mean of 52.5% and a median of 45.5%. The 1-Day Market Price of the Company was $20.50. The median acquisition premium to the 1-Day Market Price for the Premium Transactions implies a per share price of $29.82. The mean acquisition premium to the 1-Day Market Price for the Premium Transactions implies a per share price of $31.27. The Premium Transactions yielded a range of acquisition premiums to the 30-Day Market Price of 41.2% to 60.0% with a mean of 53.5% and a median of 59.2%. The 30-Day Market Price of the Company was $18.25. The median acquisition premium to the 30-Day Market Price for the Premium Transactions implies a per share price of $29.05. The mean acquisition premium to the 30-Day Market Price for the PremiumTransactions implies a per share price of $28.01. The Premium Transactions yielded a range of acquisition premiums to the 60-Day Market Price of 42.57% to 48.6% with a mean of 45.5% and a median of 45.5%. The 60-Day Market Price of the Company was $17.00. The median acquisition premium to the 60-Day Market Price for the Premium Transactions implies a per share price of $24.73. The mean acquisition premium to the 60-Day Market Price for the Premium Transactions implies a per share price of $24.74. COMPARABLE COMPANY ANALYSIS. Wasserstein Perella reviewed and compared certain financial information of the Company to corresponding financial information for four publicly traded companies: Pioneer; DeKalb; Delta and Agribiotech, Inc. (collectively, the "Comparable Companies"). Such financial information was used to calculate for each Comparable Company (a) the price/earnings ratio ("P/E Ratio") for 1997, the estimated P/E ratio for 1998, the ratio of 1998 estimated P/E Ratio to estimated three to five year earnings growth rate and the price to book ratio, (b) the multiple of adjusted market value to 1997, LTM and estimated 1998 and 1999 financial results, including sales, EBITDA and EBIT and (c) net debt as a percentage of market capitalization. Such analysis, excluding certain multiples which Wasserstein Perella determined were not meaningful, indicated that, (a) the Company had a price to book ratio of 4.1x, as compared to a range of 4.6x to 18.3x, with a mean of 10.1x and a median of 8.8x, for the Comparable Companies, (b) with respect to adjusted market value, (i) the Company traded at a multiple of 4.29x 1997 sales, as compared to a range of 1.34x to 34 10.32x, with a mean of 5.66x and a median of 5.50x, for the Comparable Companies, (ii) the Company traded at a multiple of 4.15x LTM sales, as compared to a range of 1.34x to 9.33x, with a mean of 5.20x and a median of 5.08x, for the Comparable Companies, (iii) the Company traded at a multiple of 3.53x estimated 1998 sales, as compared to a range of 1.45x to 7.13x, with a mean of 4.72x and a median of 5.15x, for the Comparable Companies, (iv) the Company traded at a multiple of 3.03x estimated 1999 sales, as compared to a range of 0.72x to 5.33x, with a mean of 3.87x and a median of 4.71x, for the Comparable Companies and (c) the Company's net debt was 9.9% of its market capitalization, as compared to a range of (2.3%) to 9.5%, with a mean of 2.6% and a median of 1.6% for the Comparable Companies. The above analysis, when adjusted to account for control premiums of 10%, 30% and 50%, implied per share values of $30.22, $31.93 and $33.64, respectively. COMPOSITE RANGE. Based on the above analyses, Wasserstein Perella derived a composite range of per share values of $25.00 to $35.00. In deriving this composite range, Wasserstein Perella took into account, among other things, that (i) the Company historically has failed to achieve its operating projections and the projections provided to Wasserstein Perella 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 judgement, 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. CERTAIN GENERAL MATTERS. No company or transaction used in the foregoing analyses is identical to the Company or the Transactions. In addition, those analyses and the discounted cash flow analyses are based and heavily dependent upon, among other factors, assumptions as to future performance and other factors, and are therefore subject to the limitations described in Wasserstein Perella's opinion. Accordingly, an analysis of the results of the foregoing is not entirely mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the acquisition value or the public trading value of the companies to which they are being compared and the Company. A fairness analysis is a complex process and is not necessarily susceptible to a partial analysis or summary description. Wasserstein Perella believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying the analyses performed in reaching its opinion. In addition, Wasserstein Perella considered the results of all such analyses and did not assign relative weights to any of the analyses, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Wasserstein Perella's view of the actual value of the Company. In performing its analyses, Wasserstein Perella made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Wasserstein Perella are not necessarily indicative of actual values, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as part of Wasserstein Perella's opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold. The Special Committee retained Wasserstein Perella based upon its experience and expertise. Wasserstein Perella is an internationally recognized investment banking and advisory firm. Wasserstein Perella, as part of its investment banking business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate 35 and other purposes. In the course of its market marking and other trading activities, Wasserstein Perella and its affiliates may, from time to time, have a long or short position, and may buy and sell, securities of the Company. ENGAGEMENT AGREEMENTS OF FINANCIAL ADVISORS Pursuant to the terms of a letter agreement, dated June 11, 1998 between Wasserstein Perella and the Company (the "Wasserstein Perella Letter Agreement"), the Special Committee retained Wasserstein Perella to serve as financial advisor to the Special Committee with respect a proposal received by the Company from Parent (i) to amend the Exchange and Purchase Agreement and (ii) following such amendment, to acquire all outstanding Shares held by persons other than TDCC and its affiliates at a price initially proposed to be $20.50 per share (an "Engagement Transaction"). The Company agreed in the Wasserstein Perella Letter Agreement to pay Wasserstein Perella $250,000 upon the execution of the Wasserstein Perella Letter Agreement and an additional fee of $1,000,000 at such time as Wasserstein Perella advises the Special Committee that it is prepared to render an opinion to the Special Committee with respect to the fairness from a financial point of view of the consideration to be received by the public holders of Shares pursuant to an Engagement Transaction or that, having completed its review of the proposed Engagement Transaction, it is unable to render such an opinion. In addition, the Company also agreed to pay Wasserstein Perella upon the consummation of an Engagement Transaction 0.50% of the aggregate value paid or payable to the public shareholders of the Company, in excess of $20.50 per share plus 1.80% of the aggregate value paid or payable to such shareholders in excess of $24.06. The Company and Wasserstein Perella further agreed that fees paid to Wasserstein Perella shall in no event be less than $2,250,000 or more than 0.80% of the aggregate value paid to public shareholders. Pursuant to the terms of a letter agreement, dated July 31, 1998, between Merrill Lynch & Co. ("ML") and the Company (the "ML Letter Agreement"), the Special Committee retained ML to make available to the Special Committee certain employees of ML formerly employed by Wasserstein Perella. The Company agreed in the ML Letter Agreement to pay ML $300,000 if a definitive agreement with respect to the Transactions was executed on or prior to August 29, 1998 or $500,000 if a definitive agreement with respect to the Transactions was executed after August 29, 1998. The Company has also agreed to reimburse Wasserstein Perella and ML, subject to certain limitations, for all reasonable out-of-pocket expenses incurred by Wasserstein Perella and ML (including the reasonable fees and disbursements of counsel) in connection with the matters contemplated by the Wasserstein Perella Letter Agreement and the ML Letter Agreement. In addition, pursuant to the terms of an indemnification agreement with Wasserstein Perella, dated June 11, 1998, and an indemnification agreement with ML, dated July 31, 1998, the Company agreed to indemnify Wasserstein Perella and ML (and their affiliates, their respective directors, officers, agents, employees and controlling persons) against certain liabilities arising out of or in connection with Wasserstein Perella's and ML's engagements, including liabilities under the federal securities laws. Such report, opinion or appraisal shall be made available for inspection and copying at the principal executive offices of the Company between 9:00 a.m. and 5:00 p.m. Eastern time by any interested stockholder or his representative who has been so designated in writing. A copy of such report, opinion or appraisal will be transmitted by the Company to any interested stockholder or his representative who has been so designated in writing upon written request and at the expense of the requesting stockholder. POSITION OF PARENT, PURCHASER, ROFAN, CENTEN AND TDCC REGARDING FAIRNESS OF THE OFFER AND THE MERGER Parent, Purchaser, Rofan, Centen and TDCC (the "Dow Entities") believe that the acquisition of all of the outstanding Shares of the Company is necessary in order for the Company to sustain its viability in 36 the highly competitive business environment in which it operates. In particular, the Dow Entities believe that it will be necessary to utilize efficiently the financial, technological and other resources of the Company and Parent in order for the Company to effectively compete in the plant genetics biotechnology industry, which has been undergoing rapid consolidation. The Dow Entities have concluded that utilizing the resources of the Company and Parent in the most effective manner will only be possible if the Company becomes a wholly owned subsidiary of Parent. The Dow Entities believe that the consideration to be received by the Company's stockholders pursuant to the Offer and the Merger is fair to the Minority Stockholders. The Dow Entities base this belief on (i) the fact that the Company's Board of Directors, acting upon the unanimous recommendation of the Special Committee, determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement are fair to, and in the best interests of, the Company and its Minority Stockholders, (ii) the fact that the Dow Entities and their financial and legal advisors negotiated the Merger Agreement with the Special Committee on an arms'-length basis, (iii) the financial analysis of Salomon Smith Barney provided to certain senior executives of the Dow Entities and summarized above, (iv) the current and historical market prices for the Shares and the fact that the consideration to be paid in the Offer and the Merger represents a premium of 40% over the closing price for the Shares on the NASDAQ NMS on August 31, 1998, the last trading day prior to the public announcement of the execution of the Merger Agreement and (v) the fact that Parent is not interested under any circumstances in selling its interest in the Company to a third party. The Dow Entities have reviewed the factors considered by the Special Committee in support of its decision, as described above, and have no basis to question their consideration of or reliance on those factors. None of the Dow Entities found it practicable to assign, nor did any of them assign, relative weights to the individual factors considered in reaching their conclusion as to fairness. SHAREHOLDER LITIGATION In early May 1998, seven putative class action lawsuits were filed in the Superior Court of California for the County of San Diego by various alleged shareholders of the Company (the "plaintiffs") against the Company and the individual directors of the Company (the "defendants"), Parent and TDCC, purportedly on behalf of themselves and a putative class of all other shareholders of the Company, excluding the defendants and any affiliates of the defendants. These cases have been consolidated by the court under the lead case of LESLIE SUSSER V. MYCOGEN CORP., ET AL., Case No. 720255. Each of the class action complaints alleged in substance that the original acquisition price of $20.50 proposed by Parent was inadequate and that it would be a breach of the defendants' fiduciary duties to the plaintiffs and the members of the putative class to agree to an acquisition at that price. The defendants deny all of these allegations. The lawsuits seek an injunction against the acquisition by Parent, damages and an award of attorneys' fees and expenses. The court approved the law firms of Milberg Weiss Bershad Hynes & Lerach LLP and Abbey, Gardy & Squitieri as plaintiffs' co-lead counsel. Parent and the Special Committee provided financial analyses prepared by their financial advisors and other documents and information relating to the proposed transaction to plaintiffs co-lead counsel. Plaintiffs' co-lead counsel retained an independent financial advisor and, together with that advisor, reviewed these materials and other publicly available information filed with the Commission with respect to the Company. Plaintiffs' co-lead counsel and their financial advisor also met in person with attorneys and financial advisors for Parent, TDCC and the Special Committee to discuss the proposed transaction and the ongoing negotiations between Parent and the Special Committee, and to present their views. Plaintiffs' co-lead counsel, after consultation with their independent financial advisor, have agreed in principle that the terms of the Offer and the Merger are fair to and in the best interests of the plaintiffs and the members of the putative class. Based on this agreement in principle, plaintiffs' co-lead counsel and counsel for the defendants entered into a Memorandum of Understanding on September 3, 1998 providing 37 for settlement of the lawsuits. The settlement is subject to the right of plaintiffs' co-lead counsel to conduct further investigation and to take further discovery from the defendants in order to confirm the fairness of the terms of the Offer and the Merger. The settlement also is conditioned on the closing of the Offer and subject to the approval of the court. The settlement does not require any payments by or to any party, except that the defendants will pay attorneys' fees to the plaintiffs' attorneys in an amount to be determined by the court. The payment of attorneys' fees will be made by Parent or TDCC and will not affect the Offer Price or the amount to be paid to any shareholder for such shareholder's Shares. The Memorandum of Understanding provides for the members of the putative class to be given notice and the opportunity to be excluded from the settlement in such manner as the court determines to be appropriate. In the event settlement of the above-described actions is not consummated and plaintiff's counsel continues above-described actions, such litigation could result in substantial expense to the Company and significant diversion of efforts of the Company's management team. The Company believes that all of such lawsuits are without merit, and would vigorously defend such actions. There can be no assurance, however, that the plaintiffs will not be successful. The above summary does not purport to be complete and is qualified in its entirety by reference to the full text of the complaints, the order of consolidation and the Memorandum of Understanding, which are attached as Exhibits to the Schedule 14D-1 filed by Purchaser, respectively, and which are incorporated herein by reference in their entirety. CERTAIN RELATIONSHIPS THE EXCHANGE AND PURCHASE AGREEMENT. On January 15, 1996, Parent, the Company, Agrigenetics, Inc. (currently a wholly owned subsidiary of the Company) and United AgriSeeds, Inc. entered into the Exchange and Purchase Agreement pursuant to which, among other things, Parent acquired 2,707,884 Shares on February 20, 1996. Pursuant to the Exchange and Purchase Agreement, Parent agreed that from February 20, 1998 to February 20, 1999, Parent would not acquire more than 65% of the outstanding Shares (excluding Shares purchased directly from the Company or its employees). Furthermore, Parent agreed not to acquire from any person more than 79.9% of the total outstanding Shares except pursuant to a Buyout Transaction as described below. Under the Exchange and Purchase Agreement, following February 20, 1999, Parent would be permitted to increase its beneficial ownership of Shares above 79.9% of the total outstanding Shares only pursuant to a Buyout Transaction. A Buyout Transaction could only be effected if approved by a majority of the Company's independent directors or if the value to be offered to holders of Shares were determined by an independent appraiser. The Exchange and Purchase Agreement also provides that, until February 20, 1999, (a) at any time Parent is the beneficial owner of less than 20% of the outstanding Shares, Parent will be entitled to designate for nomination one person to serve on the board of directors of the Company, (b) at any time Parent is the beneficial owner of 20% or more but less than 30% of the outstanding Shares, Parent will be entitled to designate for nomination two directors of the Company, (c) at any time Parent is the beneficial owner of 30% or more but less than 50% of the outstanding Shares, the Company will cause its Board of Directors to consist of seven members and Parent will be entitled to designate for nomination three (or, if the number of directors is other than seven, the nearest whole number less than one-half times the total number of directors) directors of the Company and (d) at any time Parent is the beneficial owner or more than 50% of the outstanding Shares, the Company will cause its Board of Directors to consist of nine directors and Parent will be entitled to designate for nomination five (or, if the number of directors is other than nine, the nearest whole number greater than one-half times the total number of directors) directors of the Company. Five of the directors of the Company are designees of Parent at the present time. 38 Under the terms of the Exchange and Purchase Agreement, so long as Parent has the right to nominate at least two members to the Company's Board of Directors, the Company agreed that it would not, without prior approval of Parent, issue any Shares or any securities exchangeable for or having the same voting rights as Shares except: (i) Shares authorized and reserved as of January 15, 1996 pursuant to certain existing benefit plans; (ii) new securities exchangeable for or having the same voting rights as not more than an aggregate of 2,000,000 Shares pursuant to employee benefit plans approved by the Company during the three-year period ending February 20, 1999; and (iii) not more than 2,000,000 Shares in exchange for the assets or securities of one or more other persons. If the Company proposes to issue any Shares pursuant to the above, the Company is obligated to offer Parent the right to purchase at market value additional Shares to permit Parent to maintain its total percentage interest in the Company. Following February 20, 1998, the Company is not permitted under the Exchange and Purchase Agreement to issue new securities for cash, other than (i) any securities issuable upon conversion of any convertible security of the Company outstanding as of January 15, 1996, (ii) any securities issuable upon exercise of any option, warrant or other similar security of the Company authorized as of January 15, 1996, and (iii) any securities issuable to stockholders of the Company on a proportional basis in connection with any stock split, stock dividend or recapitalization of the Company, unless the Company affords Parent a right of first refusal to purchase all of the new securities proposed to be issued (other than any new securities issued to officers, directors and employees pursuant to any existing benefit plans or any newly created employee benefit plan or to Parent and its affiliates.) The Company also agreed in the Exchange and Purchase Agreement that it (i) would ensure that the Rights Agreement and the rights thereunder would not prevent Parent or an affiliate from acquiring or proposing to acquire some or all of the outstanding Shares and (ii) would not amend, interpret or enforce the Rights Agreement or adopt any new shareholder rights agreement if such action would have an adverse effect on Parent or on the ability of Parent or an affiliate to acquire or propose to acquire some or all of the outstanding Shares. Under the terms of the Merger Agreement, the Exchange and Purchase Agreement was amended to the extent necessary to permit the execution, delivery and performance of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger. The Merger Agreement also provides that the Exchange and Purchase Agreement will be deemed to have been canceled and terminated and no longer binding on the parties except for a section of that agreement (providing for the continued inapplicability of the Company's Shareholder Rights Plan to Parent and its affiliates) upon consummation of the Offer, even if Purchaser waives the Minimum Condition and the Merger cannot be consummated. TECHNOLOGY AGREEMENT. Pursuant to the Exchange and Purchase Agreement, the Company, Agrigenetics and Parent executed an Agreement (the "Technology Agreement") providing for the exchange between the parties of certain currently existing genes and tools and certain new genes and tools developed or acquired by the parties during the five year period ending February 20, 2001. LOAN ARRANGEMENTS. Pursuant to certain loan arrangements, the Company may borrow up to $75 million from Parent, of which $20.0 million was unused at August 31, 1998. Such advances from Parent are due September 30, 1999. Pursuant to certain other loan arrangements, Parent may borrow up to $75 million from the Company, none of which was outstanding at August 31, 1998. Additionally, the Company's Argentina subsidiary may borrow up to $50 million from an affiliate of Parent, of which $38.5 million was unused at August 31, 1998; any of these borrowings are due December 31, 1998. The Company maintains an $11.3 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 $10.0 million bank line of credit facility, which expires February 1999, all of which was unused at August 31, 1998. The Company has advanced to Dow Quimica S.A., a subsidiary of TDCC, $9.9 million as of August 13, 1998. Any advances to Dow Quimica are due April 27, 1999. 39 SERVICES AGREEMENT. Pursuant to a services agreement, Parent has agreed to provide certain services to the Company including commercial, finance, treasury, tax, order entry, logistics, operations planning, information systems, legal, materials, management, controllers and purchasing services. VERNEUIL HOLDING S.A. In January 1998, the Company obtained an additional 16.25% interest in VMO in exchange for the issuance of 483,439 Shares to Parent valued at $9.4 million. The Company now owns 35% of VMO. OILSEED BRASSICA AGREEMENT. Parent's subsidiary, Dow AgroSciences Canada (DASC), and the Company are parties to a Brassica License and Research Agreement, effective as of May 15, 1996 the ("Brassica Agreement"). Under the Brassica Agreement, DASC and the Company has agreed to develop imporved cultivars and incorporate insect resistance traits in oilseed BRASSICA varieties in a program to be funded by DASC (the "Brassica Program"). Program product goals and development targets will be determined by a Management Development Committee consisting of two employees of the Company and three employees of DASC. DASC is obligated to fund the Brassica Program at a minimum level of $750,000 per year for at least 5 years. Under the Brassica agreement, the Company granted to DASC an exclusive license to make, use, sell and sublicense BRASSICA varieties developed by the Company prior to the date of the agreement, as well as BRASSICA varieties developed under the Brassica Agreement. DASC agreed to pay the Company royalties on equal to 5% of the Net Sales of any such varieties, plus 20% of the premium earned for varieties which have an oleic acid content in their oil of 70% or more. In connection with the above, DASC granted the Company: (i) an option to obtain a license to any of the foregoing varieties on terms no less favorable than those offered to any third party licensee (but only to the extent that DASC has licensed such varieties to third parties), and (ii) a first right of production of seed of such varieties for DASC and its affiliates. In addition, pursuant to the Brassica Agreement, the Company granted DASC: (i) an option to obtain a license to any Round-Up-Registered Trademark- Ready traits which the Company may obtain for use in BRASSICA, to the extent that the Company can sublicense such traits, and (ii) an option to obtain a license to Bt and other future traits for use in BRASSICA, (but only to the extent that the Company has licensed such traits to third parties); in each case on terms no less favorable than those offered to any third party. HIGH OIL CORN AGREEMENT. Parent and the Company are parties to a Maize High Oil Breeding and License Agreement effective as of April 1996 (the "Maize High Agreement"). Under the Maize High Agreement, Parent and the Company agreed to engage in a maize high oil development program (the "Maize High Program") using their intellectual property to develop varieties of corn with an oil content of 5% or more. Under the Maize High Program, using germplasm from both Parent and the Company, the Company agreed to use diligent efforts to incorporate developmental targets into maize germplasm. Parent is obligated to pay the direct costs for the Maize High Program for a minimum of 5 years, up to a total agreegate amount during that period of $5,300,000. Under the Maize High Agreement, the Company granted to Parent a royalty-bearing license to use and sublicense the Company's intellectual property and inbreds to the extent necessary to make, have made, use, sublicense and sell high oil inbreds and hybrids. In consideration of this license Parent agreed to pay the Company royalties ranging from 1.5% to 6.0% of the net sales of Parent, its affiliates and their sublicensees based on the percentage of Mycogen germplasm in the parent inbred lines used to produce each variety. However, no royalty will be due on any high oil variety if the parent inbred lines for the variety all contain less than 50% of Mycogen germplasm. In addition, if a variety contains a Bt or other Company value added trait under rights proprietary to the Company, then Parent will pay an additional royalty, to be negotiated in good faith by the parties, for a non-exclusive license to such trait. Parent also granted the Company and its affiliates an option to produce high oil varieties for itself, and high oil foundation seed for Parent, its affiliates and their sublicensees provided the Company or its affiliate (i) is 40 able to offer such production on a competitive basis, and (ii) has the internal capacity to process said production without contracting with a non-affiliated party. FORFEITURE OF DIRECTOR OPTIONS TO PARENT. Persons who are designated by Parent to serve on the Board of the Company have agreements with Parent pursuant to which such persons agree to forfeit to Parent any Shares issuable pursuant to options granted in connection with such service. 10. PURPOSE OF THE OFFER; THE MERGER AGREEMENT PURPOSE OF THE OFFER The purpose of the Offer is to enable Parent, through Purchaser, to acquire any and all outstanding Shares. If the Minimum Condition is satisfied and Purchaser purchases Shares pursuant to the Offer, Purchaser intends to exercise its right under California Law, if and to the extent available, to acquire all of the Shares not purchased in the Offer by way of a statutory short-form merger. THE MERGER AGREEMENT The following is a brief summary of certain provisions of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement which has been filed as an exhibit to the Schedule 14D-1. THE OFFER Pursuant to the terms of the Merger Agreement, Purchaser was required to commence the Offer no later than the fifth business day following the public announcement of the terms of the Merger Agreement. Purchaser will, and Parent will cause Purchaser to, subject only to the prior satisfaction or waiver of the conditions of the Offer, accept for payment Shares validly tendered as soon as it is legally permitted to do so under applicable law. As promptly as practicable after such acceptance, Purchaser will, subject to applicable law, pay for such Shares. The Offer Price payable in the Offer will be paid net to the seller in cash, upon the terms and subject to the conditions of the Offer, including the Minimum Condition and the other conditions described in Section 13. Purchaser may not waive the Minimum Condition without the consent of the Special Committee unless, following the consummation of the Offer, Purchaser and Parent, collectively, would be the owners of Shares representing at least 81.07% of the Fully Diluted Shares. Parent and Purchaser would collectively own at least this percentage of Fully Diluted Shares only if Purchaser purchased a majority of the Fully Diluted Shares which Parent does not already own and therefore could be purchased by Purchaser pursuant to the Offer. Purchaser may increase the cash Offer Price, provided that no change may be made that decreases the Offer Price, changes the form of consideration payable in the Offer, reduces the maximum number of Shares to be purchased in the Offer or imposes conditions to the Offer in addition to those set forth in Section 13. The initial expiration date of the Offer will be midnight on Friday, October 2, 1998, the 20th business day following commencement of the Offer. The foregoing notwithstanding, Purchaser may, without the consent of the Company, extend the Offer (i) for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, (ii) if at any scheduled expiration date any of the conditions to the Offer set forth in paragraphs (a) - (e) of Section 13 have not been satisfied or waived, until such time as all of such conditions will have been satisfied or waived, or (iii) in the event all of the conditions to the Offer will have been satisfied or waived, other than the Minimum Condition, for a period or periods aggregating not more than 40 business days after the later of (A) the initial expiration date of the Offer and (B) the date on which all of the conditions set forth in paragraphs (a) - (e) of Section 13 will have been satisfied or waived. If at any scheduled expiration date of the Offer, the Minimum Condition will not have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing), Purchaser will, and Parent will cause Purchaser to, extend the Offer for a period or periods aggregating not 41 more than 40 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described herein. In addition, if at any scheduled expiration date of the Offer, a condition set forth in paragraph (c) or (d) of Section 13 will not have been satisfied but all of the other conditions set forth in paragraphs (a) - (e) of Section 13 will then have been satisfied, then, at the request of the Company (acting at the direction of the Special Committee, which request will subsequently be confirmed in writing) and so long as the Company is using its reasonable best efforts to cause such conditions to become satisfied, Purchaser will, and Parent will cause Purchaser to, extend the Offer for up to an additional 20 business days, subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in "Termination" below. Subject to the right of Purchaser and Parent to terminate the Merger Agreement as described in "Termination" below, Purchaser will not terminate or withdraw the Offer prior to any scheduled expiration date of the Offer, including as extended as described in this paragraph; provided, however, that Purchaser may, at its option, terminate and withdraw the Offer if, after such required extensions described in this paragraph, the Offer has expired in accordance with its terms without Purchaser being required to accept Shares for payment pursuant to the Merger Agreement. The Merger Agreement requires, as soon as practicable on the date of commencement of the Offer, (a) Parent and Purchaser to file with the Commission (i) a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which will contain the Offer to Purchase and form of the related Letter of Transmittal and (ii) a Rule 13e-3 Transaction Statement with respect to the Offer and the other transactions contemplated thereby and (b) the Company to file a Solicitation/Recommendation Statement on Schedule 14D-9, which it will mail to stockholders promptly after the commencement of the Offer. Purchaser and the Company also agreed to take all steps necessary to cause the Offer to Purchase and form of the related Letter of Transmittal to be disseminated to holders of Shares as and to the extent required by applicable law. OPTIONS If the conditions set forth in "Conditions to the Consummation of the Merger" below are satisfied, the Company will use its best efforts to cause all Options still outstanding immediately prior to the Effective Time (as defined below) to become exercisable immediately prior to the Effective Time and to terminate and cease to be outstanding as of the Effective Time; provided, however, that arrangement will be made so that each holder of such an Option who consents to the termination of Options (either before the Effective Time or within a reasonable time thereafter) will be entitled to receive in respect of such Option an amount in cash equal to (x) the Offer Price less the exercise price per Share under such Option multiplied by (y) the number of Shares covered by such Option. Without limiting the generality of the foregoing, the Company's best efforts will, if necessary, be deemed to include the Company's Board of Directors amending the 1992 Plan to provide that the term "Corporate Transaction" shall be deemed to include the Merger. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each holder of Options (whether or not such Options are vested) to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (an "Option Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, such Option to be exercised and the Shares issued as a result of that exercise to be tendered in the Offer. The Company and Purchaser will reflect on their books and records the transactions effected pursuant to the Option Elections. Subject to the terms of the Option Elections and contingent upon the purchase of Shares by Purchaser pursuant to the Offer, the Company will make available to each holder of Options the funds necessary to exercise such Options, and Parent will advance such funds to the Company. The funds advanced to any Option holders in accordance with the preceding sentence will be deducted from the amount payable to such Option holder pursuant to the Offer, and the Option Election and the Offer shall so provide. The funds so deducted will be retained by Purchaser as repayment of the amount advanced to the Company by Parent. The Plan Administrator of the 42 1992 Plan has taken action to provide that each outstanding Option as to which a valid Option Election with respect to such Option is executed (and not revoked) and delivered to the Company will become exercisable immediately prior to the purchase of Shares (and contingent upon such purchase) by Purchaser pursuant to the Offer. The parties to the Merger Agreement consented to the action of the Plan Administrator of the 1992 Plan referenced in the immediately preceding sentence, agreed that they will not cause the revocation of such action and will use their best efforts to take whatever steps are necessary to make it possible for Shares issuable upon the exercise of Options resulting from the execution and delivery of valid Option Elections to be tendered in the Offer. EMPLOYEE STOCK PURCHASE PLAN The Company will use its best efforts to effectuate the provisions described in the next following paragraph, to provide for termination of the Stock Purchase Plan, effective no later than the Effective Time and to provide that, upon termination of the Stock Purchase Plan and contingent upon the purchase by Purchaser of Shares pursuant to the Offer, any payroll deductions accumulated under the Stock Purchase Plan and not used to purchase Shares under the Stock Purchase Plan for tender in the Offer as described in the next following paragraph will be returned to the applicable participants; provided, however, that arrangement will be made so that each holder of Purchase Rights as described in the next following paragraph who consents to the termination of all Purchase Rights (either before the Effective Time or within a reasonable time thereafter) will be entitled to receive an amount in cash equal to the net amount such holder of Purchase Rights would have received as described in the next following paragraph if such holder had made a Stock Purchase Election. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each individual who has Purchase Rights outstanding under the Stock Purchase Plan to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (a "Stock Purchase Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, such Purchase Rights to be exercised (the date on which the Shares are purchased by a holder of Purchase Rights being a "Purchase Date" for purposes of the Stock Purchase Plan) and the Shares issued as a result of such exercise to be tendered in the Offer. The Company and Purchaser will reflect on their books and records the transactions effected pursuant to the Stock Purchase Elections. Subject to the terms of the Stock Purchase Elections and contingent upon the purchase of Shares by Purchaser pursuant to the Offer, the Company will make available to each holder of Purchase Rights who has delivered to the Company an executed Stock Purchase Election (and has not revoked such election) the funds necessary to exercise such Purchase Rights for the amount of Shares that would have been purchased upon such exercise if the purchase period under the Stock Purchase Plan had expired on November 30, 1998 (assuming that the Fair Market Value (as defined in the Stock Purchase Plan) for November 30, 1998 for purposes of calculating the purchase price (within the meaning of the Stock Purchase Plan) would be the Per Share Amount and that payroll deductions had continued at the same level through November 30, 1998), less any payroll deductions accumulated with respect to the holder pursuant to normal operation of the Stock Purchase Plan through the date on which the Offer terminates, and Parent will advance such funds to the Company. The funds advanced to any holder of Purchase Rights in accordance with the preceding sentence will be deducted from the amount payable to such holder of Purchase Rights pursuant to the Offer. The funds so deducted will be retained by Purchaser as repayment of the amount advanced to the Company by Parent. The parties to the Merger Agreement will use their best efforts to take whatever steps are necessary to make it possible for Shares issuable upon the exercise of Purchase Rights resulting from the execution and delivery of valid Stock Purchase Elections to be tendered in the Offer. 43 RESTRICTED STOCK The Company represents that the Plan Administrator of the Restricted Stock Plan has taken action to provide that each share of Restricted Stock outstanding under the Restricted Stock Plan as to which a valid Restricted Stock Election (as defined below) with respect to such Restricted Stock is executed (and not revoked) and delivered to the Company will become fully vested and nonforfeitable immediately prior to the purchase of Shares (and contingent upon such purchase) by Purchaser pursuant to the Offer. The parties to the Merger Agreement consent to the action of the Plan Administrator of the Restricted Stock Plan referenced in the immediately preceding sentence, agree that they will not cause the revocation of such action and will use their best efforts to take whatever steps are necessary to make it possible for the Restricted Stock as to which a valid Restricted Stock Election has been made to be tendered in the Offer. As soon as practicable after the commencement of the Offer, the Company will use its reasonable best efforts to cause each holder of shares of Restricted Stock to execute and deliver to the Company, prior to the expiration of the Offer, an agreement (a "Restricted Stock Election") under which such holder would agree, contingent upon the purchase of Shares by Purchaser pursuant to the Offer, to cause, immediately prior to the expiration of the Offer, the shares of Restricted Stock (which would be vested in accordance with the foregoing provisions as described in this paragraph) to be tendered in the Offer. Immediately prior to the Effective Time, if the Conditions set forth in "Conditions to the Consummation of the Merger" below are satisfied, the Company will cause the Plan Administrator of the Restricted Stock Plan to cause all shares of Restricted Stock outstanding as of the Effective Time to be fully vested and nonforfeitable. THE MERGER Immediately following the satisfaction or waiver of all conditions set forth in "Conditions to the Consummation of the Merger" below (assuming the transfer of all of Parent's Shares to Purchaser), Parent will cause Purchaser to become the beneficial and record owner of all Shares then owned of record by Parent (the time immediately following such action is referred to herein as the "Designated Time"). At the Designated Time, the parties will (i) file a certificate of ownership with the Secretary of State of the State of California in accordance with California Law (the "California Filing") and (ii) file a certificate of ownership and merger with the Secretary of State of the State of Delaware in accordance with Delaware Law (the "Delaware Filing"). The Merger will become effective at such time as the California Filing and the Delaware Filing are duly filed in accordance with California Law and Delaware Law, respectively, or at such later time as is agreed upon by the parties and specified in the California Filing and the Delaware Filing (the "Effective Time"). At the Effective Time, upon the terms and subject to the conditions of the Merger Agreement and in accordance with California Law and Delaware Law, Purchaser will be merged with and into the Company, whereupon the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation. The Articles of Incorporation of the Company in effect immediately prior to the Effective Time will be the Articles of Incorporation of the Surviving Corporation until amended in accordance with applicable law. The First Amended and Restated Bylaws of the Company in effect at the Effective Time will be the Bylaws of the Surviving Corporation until amended in accordance with applicable law. The directors of Purchaser at the Effective Time will be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly elected and qualified. The officers of the Company at the Effective Time, and any additional individuals designated by Parent, will be the initial officers of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly appointed and qualified. 44 At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Purchaser (except as required by California Law), the Company or the holder of any of the following securities: (i) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be canceled as described in the next following clause and Dissenting Shares (as defined in "Dissenting Shares" below)), will by virtue of the Merger and without any action on the part of the holder thereof be canceled and extinguished and be converted into the right to receive an amount in cash equal to the Offer Price; (ii) Each Share issued and outstanding immediately prior to the Effective Time and owned by Parent or Purchaser or any direct or indirect wholly owned subsidiary of Parent or Purchaser, or which is held in the treasury of the Company or by any of the Company's subsidiaries, will be canceled and retired and no payment of any consideration will be made with respect thereto; (iii) Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Promptly after the Effective Time, the Surviving Corporation will cause to be mailed to each record holder, as of the Effective Time, of a certificate or certificates that, prior to the Effective Time, represented Shares, a form of letter of transmittal and instructions for use in effecting the surrender of the certificates in exchange for the Offer Price therefor. Subject to the provision described in the next following paragraph, upon the surrender of each such certificate formerly representing Shares, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the Depositary will deliver to the holder of such certificate the Offer Price multiplied by the number of Shares formerly represented by such certificate in exchange therefor, and such certificate will forthwith be canceled. Until so surrendered and exchanged, each such certificate (other than certificates representing Dissenting Shares or Shares held by Parent, Purchaser or the Company, or any direct or indirect subsidiary thereof) will represent solely the right to receive the Offer Price. No interest will be paid or accrue on the Offer Price. If the Offer Price (or any portion thereof) is to be delivered to any person other than the person in whose name the certificate formerly representing Shares surrendered in exchange therefor is registered, the certificate so surrendered will be properly endorsed or otherwise be in proper form for transfer and that the person requesting such exchange must pay to the Depositary any transfer or other taxes required by reason of the payment of the Offer Price to a person other than the registered holder of the certificate surrendered, or must establish to the satisfaction of the Depositary that such tax has been paid or is not applicable. Following the date which is six months after the Effective Time, each holder of a certificate formerly representing a Share may surrender such certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Offer Price, without any interest thereon. After the Effective Time, there will be no transfers on the stock transfer books of the Surviving Corporation of any Shares. If, after the Effective Time, certificates formerly representing Shares are presented to the Surviving Corporation or the Depositary, such certificates will be canceled and exchanged for the Offer Price, as described above, subject to applicable law in the case of Dissenting Shares. DISSENTING SHARES Holders of Shares do not have dissenters' rights as a result of the Offer. However, in connection with the Merger, holders of Shares, by complying with the provisions of Chapter 13 of California Law, may have certain rights to dissent and to require the Company to purchase their Shares for cash at fair market value. In general, holders of Shares will be entitled to exercise "dissenters' rights" under California Law only if the holders of five percent or more of the outstanding Shares properly file demands for payment or if the 45 Shares held by such holders are subject to any restriction on transfer imposed by the Company or any law or regulation ("Restricted Shares"). Accordingly, any holder of Restricted Shares and, if the holders of five percent or more of the Shares properly file demands for payment, all other such holders who fully comply with all other applicable provisions of Chapter 13 of California Law ("Dissenting Shares") will be entitled to require the Company to purchase their Shares for cash at their fair market value if the Merger is consummated. In addition, if, immediately prior to the Effective Time, the Shares are not listed on a national securities exchange or on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), holders of Shares may likewise exercise their dissenters' rights as to any or all of their Shares entitled to such rights. If the statutory procedures under California Law relating to dissenters' rights were complied with, such rights could lead to a judicial determination of the fair market value of the Shares. The "fair market value" would be determined as of the day before the first announcement of the terms of the proposed Merger, excluding any appreciation or depreciation in consequence of the Merger. The value so determined could be more or less than the Offer Price. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF SECTION 13 OF CALIFORNIA LAW, A COMPLETE COPY OF WHICH IS ATTACHED HERETO AS SCHEDULE II. Notwithstanding anything in the Merger Agreement to the contrary, if demands for payment are filed (within the meaning of California Law) with respect to five percent or more of the outstanding Shares, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted such Shares in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with California Law will not be converted into a right to receive the Offer Price unless such holder fails to perfect or withdraws or otherwise loses his, her or its right to appraisal under California Law. If, after the Effective Time, such holder fails to perfect or withdraws (with the consent of the Company to the extent such consent is required by applicable law) or loses his, her or its right to appraisal under California Law, such holder's Shares will be treated as if they had been converted as of the Effective Time into a right to receive the Offer Price without interest thereon. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various representations and warranties of the Company, including representations by the Company as to (i) organization, qualification and similar corporate matters of the Company and its subsidiaries, (ii) capitalization of the Company and its subsidiaries, (iii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iv) the non-contravention of the Merger Agreement and related transactions with any provision of the Articles of Incorporation or Bylaws, material contract, order, law or regulation to which the Company or its subsidiaries is a party or by which it is bound or obligated, (v) the filing of required Commission reports and the absence of untrue statements of material facts or omissions of material facts in such reports, (vi) the absence of changes or events which have had a material adverse effect on the Company other than the changes or events set forth in the Merger Agreement, (vii) the absence of any untrue statement of a material fact or omission of any material fact required to be stated in any recommendation statement of the Company's Board of Directors, document related to the Offer or proxy or information statement or similar materials distributed to the Company's stockholders in connection with the Merger, (viii) the absence of payments to any intermediary other than listed intermediaries of any finder's, professional or other fee or commission, (ix) the absence of any vote or other approval of the holders of a class of any Company security required to approve the Merger or to approve or adopt the Merger Agreement except any actions required to be taken by Purchaser pursuant to California Law other than the satisfaction of the condition described in 46 "Conditions to the Consummation of the Merger" below, (x) Wasserstein Perella's delivery to the Special Committee, and authorization to deliver to the Company's stockholders pursuant to California Law, its written opinion to the effect that, as of the date of such opinion, subject to the various assumptions and limitations set forth therein as of the date of such opinion, the cash consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to such holders from a financial point of view and (xi) the Company and its Board of Directors having taken all necessary action so that from and after January 15, 1996 (a) Parent and its affiliates (including, without limitation, Purchaser) have never been and will never be included in the definition of "Acquiring Person" under the Company's Amended and Restated Rights Agreement dated as of October 19, 1995, as amended, between the Company and the First National Bank of Boston (the "Rights Agreement") and (b) the acquisition of Shares (whether pursuant to the Exchange and Purchase Agreement (as defined in "Exchange and Purchase Agreement; No Restrictions on Purchase" below), the Merger Agreement or otherwise) by Parent and its affiliates (including, without limitation, Purchaser) has never caused and will never cause under any circumstances whatsoever any adverse consequence to Parent, any of its affiliates (including, without limitation, Purchaser), or the Company pursuant to the Rights Agreement, including, without limitation, the occurrence of a Distribution Date (as defined in the Rights Agreement) or any adjustment to the Purchase Price (as defined in the Rights Agreement). The Merger Agreement provides that no representation or warranty is made by the Company as to certain matters or conditions which were known to Parent's designees to the Board on or prior to the date of the Merger Agreement, or as to certain other listed matters or conditions. The Merger Agreement contains various customary representations and warranties of Parent and Purchaser, including representations by Parent and Purchaser as to (i) organization, qualification and similar limited liability company or corporate matters of Parent and Purchaser, (ii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iii) the non-contravention of the Merger Agreement and related transactions with any provision of the limited liability company agreement of Parent, the Certificate of Incorporation or Bylaws of Purchaser, or any material contract, order, law or regulation to which Parent or Purchaser is a party or by which it is bound or obligated, (iv) the absence of untrue statements of material facts or omissions of material facts in any documents related to the Offer and in information provided to the Company in connection with the Schedule 14D-9 or proxy or information statement or similar materials distributed to the Company's stockholders in connection with the Merger, (v) the absence of prior activities of Purchaser other than in connection with or as contemplated by the Merger Agreement, (vi) the availability of all funds necessary to satisfy Purchaser's obligations under the Merger Agreement, (vii) the absence of payments to any intermediary other than listed intermediaries of any finder's, professional or other fee or commission and (viii) the availability of Parent's "director and officer" insurance coverage for the members of the Special Committee. COVENANTS CONDUCT OF THE BUSINESS OF THE COMPANY. Except with respect to certain enumerated items, from the date of the Merger Agreement to the earlier of the Effective Time or the date on which the Merger Agreement is terminated in accordance with its terms, the Company and its subsidiaries will each conduct its operations in the ordinary course of business consistent with past practice, and the Company and its subsidiaries will, consistent with the foregoing, each use its reasonable best efforts to preserve its business organization, to keep available the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, contractors, distributors, customers and others having business relationships with it. Accordingly, prior to the Effective Time, except as otherwise expressly provided in the Merger Agreement, neither the Company nor any of its subsidiaries may, without the prior written consent of Purchaser, which consent will not be unreasonably withheld or delayed, engage or agree to engage in an enumerated list of transactions generally characterized as being outside the ordinary course of business. 47 Transactions requiring Purchaser's prior approval include actions by the Company or its subsidiaries to (i) authorize for issuance, issue, sell, deliver or agree to commit to issue, sell or deliver any Shares, any stock of any class or any other securities or equity equivalents (including, without limitation, stock appreciation rights), or amend any of the terms of any such securities or agreements outstanding as of the date of the Merger Agreement; (ii) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock, or property or any combination thereof) in respect of its capital stock, or redeem, repurchase or otherwise acquire any of its securities or any securities of its subsidiaries; or (iii) take or agree to take any action which would violate the covenants or any action which would cause the condition described in paragraph (d) of Section 13 not to be satisfied. REASONABLE BEST EFFORTS. Each of the parties will use its reasonable best efforts to take all actions and do all things reasonably necessary to consummate and make effective the transactions contemplated by the Merger Agreement. PUBLIC ANNOUNCEMENTS. Parent and Purchaser, on the one hand, and the Company, on the other hand, will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by the Merger Agreement. INDEMNIFICATION. Parent will cause the Surviving Corporation to keep in effect in its Articles of Incorporation and Bylaws the provisions with respect to exculpation of director and officer liability and indemnification and advancement of expenses set forth in the Articles of Incorporation and First Amended and Restated Bylaws of the Company on the date of the Merger Agreement to the fullest extent permitted under applicable law, which provisions will not be amended, repealed or otherwise modified for at least six years after the Effective Time except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification or advancement of expenses thereunder. Parent will also cause the Surviving Corporation to honor in accordance with their terms the existing Indemnification Agreements between the Company and its directors and executive officers. From and after the Effective Time, Parent will guarantee the obligations of the Surviving Corporation to perform all of its obligations under the Surviving Corporation's Articles of Incorporation and Bylaws with respect to indemnification and to cause the Surviving Corporation to perform all such obligations. The Company will, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, to the fullest extent permitted by applicable law, Joseph P. Sullivan and Clayton K. Yeutter (collectively, the "Indemnified Parties") against all costs and expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in such Indemnified Party's capacity as a director (including, without limitation, as a member of the Special Committee) or fiduciary of the Company (including, without limitation, in connection with the transactions contemplated by the Merger Agreement) occurring on or before the Effective Time (or, if the Merger Agreement is terminated without the Merger becoming effective, occurring on or before the termination of the Merger Agreement), until the expiration of the statute of limitations relating thereto (and will pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under applicable law, upon receipt, in the case of the Company or the Surviving Corporation, as the case may be, from the Indemnified Party to whom expenses are advanced of any undertaking to repay such advances required under applicable law). If the Merger becomes effective, Parent shall be jointly and severally responsible, to the fullest extent permitted under applicable law (it being understood that applicable law may permit Parent to indemnify or advance expenses to the Indemnified Parties under circumstances in which the Company could not do so), for the indemnification and advancement of expenses obligations provided for in the immediately preceding sentence. If the Merger does not become effective, Parent shall have the same responsibilities set forth in the immediately 48 preceding sentence, except that Parent shall have no responsibility for indemnifying or advancing expenses to the Indemnified Parties with respect to matters that do not arise out of or pertain to the work of the Special Committee, the Merger Agreement or the transactions contemplated by the Merger Agreement. In the event of any such claim, action, suit, proceeding or investigation covered by this paragraph, (i) the Company, Parent or the Surviving Corporation, as the case may be, will pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel will be reasonably satisfactory to the Company or the Surviving Corporation, promptly after statements therefor are received and (ii) the Company, Parent and the Surviving Corporation will cooperate in the defense of any such matter; provided, however, that neither the Company nor Parent nor the Surviving Corporation will be liable for any settlement effected without its written consent; and provided, further, that neither the Company, Parent nor the Surviving Corporation, as the case may be, will be obligated as described in this paragraph to pay the fees and expenses of more than one counsel (plus appropriate local counsel) for all Indemnified Parties in any single action except to the extent that two or more of such Indemnified Parties will have conflicting interests in the outcome of such action, in which case additional counsel (including local counsel) as may be required to avoid any such conflict or likely conflict may be retained by the Indemnified Parties at the expense of the Company, Parent or the Surviving Corporation, as the case may be; and provided further that, in the event any claim for indemnification is asserted or made within the period prior to the expiration of the applicable statute of limitations, all rights to indemnification in respect of such claim will continue until the disposition of such claim. In connection with Parent or the Surviving Corporation making any payment or advancing any funds as described in this paragraph, Parent or the Surviving Corporation, as the case may be, will be entitled to require the Indemnified Party in question to use their reasonable best efforts at the cost and expense of Parent and the Surviving Corporation, to cause Parent or the Surviving Corporation, as the case may be, to be subrogated to the rights of such Indemnified Party under any insurance coverage maintained by the Surviving Corporation, Parent or any of their respective affiliates with respect to the underlying subject matter of, and to the extent of, such payment or advance. Parent will cause the Surviving Corporation to maintain in effect for six years from the Effective Time, if available, the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not less favorable) with respect to matters occurring prior to the Effective Time; provided, however, that nothing contained in this Agreement will require the Surviving Corporation to incur any annual premium in excess of 200% of the last annual aggregate premium paid prior to the date of this Agreement for all current directors' and officers' liability insurance policies maintained by the Company. In addition, Parent will cause the Indemnified Parties to receive, for six years following the date of the Merger Agreement, the same directors and officers insurance coverage that other present or formal independent directors of TDCC or its subsidiaries receive. Heirs, representatives and estates of the Indemnified Parties will have the right to enforce the indemnification obligations arising under the Merger Agreement. NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt notice to Parent or Purchaser, and Parent or Purchaser will give prompt notice to the Company, as the case may be, of (i) the occurrence, or non-occurrence of any event which would be likely to cause any condition contained in the Merger Agreement to be unsatisfied and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant or agreement under the Merger Agreement. EXCHANGE AND PURCHASE AGREEMENT; NO RESTRICTIONS ON PURCHASE. The parties agreed to amend the Exchange and Purchase Agreement to the extent necessary to permit the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement. From and after the date that Purchaser first makes payment with respect to validly tendered and not withdrawn Shares pursuant to the Offer, the Exchange and Purchase Agreement will be deemed to 49 have been canceled and terminated and no longer binding on the parties thereto and shall be of no further force or effect; provided, however, that the provisions of Section 6.10 of the Exchange and Purchase Agreement will remain in full force and effect without any amendment thereto. Without limiting the generality of the foregoing, from and after the date that Purchaser first makes payment with respect to validly tendered and not withdrawn Shares pursuant to the Offer, Parent, Purchaser and their affiliates will no longer be bound by the restrictions set forth in Sections 6.12 and 6.13 of the Exchange and Purchase Agreement and, subject to Purchaser's obligations under the Merger Agreement to effect the Merger, Parent, Purchaser and their affiliates will be permitted to acquire additional Shares and/or increase their percentage ownership of the Company (whether through any tender offer, open market purchase, negotiated transaction, merger, consolidation, reverse stock split or otherwise) without restriction under the Exchange and Purchase Agreement. COMPLIANCE BY PURCHASER; FINANCING. Parent will cause Purchaser to timely perform and comply with all of its obligations under or related to the Merger Agreement, including, without limitation, all obligations in or with respect to the Offer. TDCC will ensure that Purchaser has sufficient funds to acquire all the outstanding Shares in the Offer and the Merger. In the Merger Agreement, TDCC made a representation and warranty as to the validity of TDCC's execution and delivery of the Merger Agreement and its enforceability against TDCC. ACCESS TO INFORMATION. From the date of the Merger Agreement to the Effective Time, subject to any applicable legal restrictions, fiduciary duties or applicable privileges, the Company will (and will cause its subsidiaries to) afford to authorized representatives (including, without limitation, attorneys, auditors and financial advisors) of Parent and Purchaser reasonable access during normal business hours to the Company's personnel, offices and other facilities and to all books and records of the Company and will cause its officers and employees to furnish Parent and Purchaser and their authorized representatives such financial and operating data and other information with respect to the Company's business and properties as Parent and Purchaser and their authorized representatives may from time to time reasonably request. CONDITIONS TO THE CONSUMMATION OF THE MERGER The obligations of each party to the Merger Agreement to effect the Merger under the Merger Agreement are subject to the satisfaction or, if appropriate, waiver of the following conditions: (i) PURCHASE OF SHARES. Purchaser will have purchased all Shares validly tendered and not withdrawn pursuant to the Offer and Purchaser will be the record and beneficial owner of a sufficient number of Shares (90% of the outstanding Shares (assuming the transfer to Purchaser of all Shares owned by Parent)) to permit the Merger to be effected pursuant to California Law. (ii) NO PROHIBITION. No order, decree or ruling or other action restraining, enjoining or otherwise prohibiting the Merger, will have been issued or taken by any court or other governmental body. TERMINATION The Merger Agreement provides that the Merger Agreement may be terminated and the Offer and the Merger may be abandoned at any time prior to the Effective Time (i) by mutual written consent of Parent and Purchaser, on the one hand, and of the Company acting upon the direction of the Special Committee, on the other hand, (ii) by the Company acting upon the direction of the Special Committee or by Parent to the extent that performance is prohibited, enjoined or otherwise materially restrained by any final, non-appealable judgment, (iii) by the Company acting upon the direction of the Special Committee or by Parent if, due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in Section 13, Purchaser will have (a) failed to commence the Offer within 60 days following the date of the Merger Agreement or (b) terminated the Offer without having accepted any Shares for payment thereunder; provided, that the right to terminate this Agreement under this clause (iii) will not be 50 available to any party whose failure to fulfill any material obligation under this Agreement has been the cause or resulted in the circumstances described in this clause (iii), (iv) by the Company, acting upon the direction of the Special Committee if, prior to the purchase of Shares pursuant to the Offer, Parent or Purchaser will have failed to comply in all material respects with any of its covenants or agreements contained in the Merger Agreement required to be complied with prior to the date of such termination, which failure to comply has not been cured within 20 business days following receipt by Parent or Purchaser of written notice of such failure to comply, (v) by the Company acting upon the direction of the Special Committee if, prior to the purchase of Shares pursuant to the Offer, there has been (a) a breach in any material respect by Parent or Purchaser of any representation or warranty that is not qualified as to materiality which has the effect of making such representation or warranty not true and correct in all material respects or (b) a breach by Parent or Purchaser of any representation that is qualified as to materiality, in each case which breach has not been cured within 20 business days following receipt by Parent or Purchaser of written notice of the breach, or (vi) by either the Company acting upon the direction of the Special Committee or by Parent if the Merger will not have occurred on or prior to April 30, 1999; provided, that the right to terminate the Merger Agreement under this clause will not be available to any party whose failure to fulfill any material obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Merger to have occurred on or before such date. In the event of the termination and abandonment of the Merger Agreement as described in the next previous paragraph, the Merger Agreement will become void and have no effect, other than as described in this paragraph and in "Survival of Representations and Warranties" below. No termination of the Merger Agreement and nothing described in this paragraph or in "Survival of Representation and Warranties" below will relieve any party from liability for any willful breach of any representation or warranty contained in the Merger Agreement or any breach of any covenant contained in the Merger Agreement occurring prior to such termination. Subject to the description in the next previous paragraph, each party will bear its own expenses and costs in connection with the Merger Agreement and the transactions. AMENDMENT; EXTENSION; WAIVER The Merger Agreement may be not be amended except by an instrument in writing signed by Parent, Purchaser and the Company. Any amendment to the Merger Agreement, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or any waiver of any of the Company's rights under the Merger Agreement will require the unanimous concurrence of the Special Committee. Subject to the description in the next previous paragraph, at any time prior to the Effective Time, the Company, on the one hand, and Parent and Purchaser, on the other hand, may (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document, certificate or writing delivered pursuant to the Merger Agreement or (iii) waive compliance by the other party with any of the agreements or conditions contained in the Merger Agreement. Any agreement on the part of any party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to assert any of its rights under the Merger Agreement shall not constitute a waiver of such rights. Without limiting the rights of any other party to the Merger Agreement, the Merger Agreement provides that the Special Committee has the right to exercise the Company's rights and enforce the terms of the Merger Agreement on behalf of the Company. SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties made in the Merger Agreement will not survive beyond the Effective Time or any termination of the Merger Agreement. The covenants and agreements in the Merger 51 Agreement or the termination of the Merger Agreement will survive the Effective Time in accordance with their terms or as contemplated by such terms. GOVERNING LAW The Merger Agreement is governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed in that State, provided that matters of internal corporate law relevant to the Company are governed by California Law. CONFIDENTIALITY AGREEMENTS The following summary of the Confidentiality Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Confidentiality Agreement, which is filed as an exhibit to Schedule 14D-1 and incorporated herein by reference. On July 16, 1998, the Company (by the Special Committee), Parent, TDCC and Wasserstein Perella entered into the Confidentiality Agreement providing for the nondisclosure of confidential information to be provided by Parent and TDCC to the Special Committee and its advisors. The Confidentiality Agreement provided that the Special Committee and its attorneys and financial advisors, each agree that the non-public, confidential, proprietary and/or privileged Parent or TDCC information related to the Company, Parent or TDCC ("Confidential Information") provided to the Special Committee and its attorneys and financial advisors will be kept confidential and used only for evaluation of the proposed amendment and transaction. Merrill Lynch has also agreed to be bound by the terms of the Confidentiality Agreement. All Confidential Information will remain subject to the terms of the Confidentiality Agreement for ten years. In addition to the Confidentiality Agreement, the members of the Special Committee in their individual capacities entered into separate agreements with TDCC and Parent to maintain the confidentiality of certain information of TDCC and Parent. 11. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by Purchaser and Parent to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $377 million. Purchaser has available to it all funds necessary to satisfy its obligations under the Merger Agreement. TDCC will ensure that Purchaser has sufficient funds to acquire all the outstanding Shares in the Offer and the Merger. 12. CERTAIN EFFECTS OF THE OFFER Following the consummation of the Offer, assuming satisfaction of the Minimum Condition, Purchaser and Parent, collectively, will own at least 90% of the outstanding Shares of the Company. SHORT-FORM MERGER--SECTION 1110 OF CALIFORNIA LAW The Merger Agreement provides, among other things, for the making of the Offer and further provides that, following Purchaser's purchase of Shares pursuant to the Offer, upon the terms and subject to the conditions set forth in the Merger Agreement, and in accordance with California Law and Delaware Law, Purchaser will be merged with and into the Company and the Company will continue as the Surviving Corporation. If Purchaser acquires, pursuant to the Offer, Shares which, together with Shares owned by Parent, constitute at least 90% of the Shares then outstanding, and Parent subsequently transfers its Shares to Purchaser, then under Section 1110 of California Law, Purchaser will be able to approve the Merger 52 Agreement and the transactions contemplated thereby, including the Merger, without a vote of the Company's stockholders (a "short-form merger"). In such event, Parent, Purchaser and the Company have agreed to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's stockholders. Section 1110 of California Law further provides that the Merger may not be accomplished for cash paid to the Company's stockholders if Purchaser or Parent owns directly or indirectly more than 50% but less than 90% of the then outstanding shares unless either all the stockholders consent or the Commissioner of Corporations of the State of California approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. Purchaser currently intends to effect a short-form merger if it is able to do so. For a description of stockholder rights under California Law to dissent to the Merger, see Section 10. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. The purchase of Shares pursuant to the Offer can also be expected to reduce the number of holders of Shares. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly could adversely affect the liquidity and market value of the remaining Shares held by the public. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer Price therefor. STOCK QUOTATION Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the listing requirements for the NASDAQ NMS, which require that an issuer have at least 200,000 publicly held shares, held by at least 400 stockholders or 300 stockholders of round lots, with a market value of at least $1,000,000, and have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during the issuer's four most recent fiscal years. If these standards are not met, the Shares might nevertheless continue to be publicly quoted in an over-the-counter market but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for NASD reporting and the NASD would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company's Form 10-K, as of October 14, 1997, there were approximately 4,694 holders of Shares and, as of September 30, 1997, there were 31,404,483 Shares outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the listing requirements for NASDAQ NMS or for any other over-the-counter market, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the NASDAQ, it is possible that the Shares would continue to trade in an over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. 53 EXCHANGE ACT REGISTRATION; FILING REQUIREMENTS The Shares are currently registered under the Exchange Act. The purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration of the Shares may be terminated upon application by the Company to the Commission if the Shares are not listed on a "national securities exchange" and there are fewer than 300 record holders of Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirements of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) or 14(c) and the related requirement of an annual report, no longer applicable to the Company. If the Shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions would no longer be applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or, with respect to certain persons, eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or eligible for stock exchange listing or NASD reporting. Purchaser believes that the purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act, and it would be the intention of Purchaser to cause the Company to make an application for termination of registration of the Shares as soon as possible after successful completion of the Offer if the Shares are then eligible for such termination. If registration of the Shares is not terminated prior to the Merger, then the registration of the Shares under the Exchange Act and the quotation of the Shares on the NASDAQ NMS will be terminated following the consummation of the Merger. In addition to the possibility of deregistration under the Exchange Act, Purchaser's purchase of the Shares pursuant to the Offer may result in the suspension of the duty of the Company to file periodic and other reports with the Commission. Under Section 15(d) of the Exchange Act, the duty of an issuer of a class of securities to file certain periodic and other reports with the Commission is automatically suspended as to any fiscal year (other than the fiscal year in which the registration statement with respect to that class of securities became effective), if, at the beginning of such fiscal year, the securities are held by less than 300 persons. The suspension of the filing requirements of the Company under the Exchange Act would substantially reduce the information required to be provided by the Company to its stockholders and the Commission. MARGIN REGULATIONS The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which have the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares for the purpose of buying, carrying or trading in securities ("Purpose Loans"). Depending upon factors such as the number of record holders of the Shares and the number and market value of publicly held Shares, following the purchase of Shares pursuant to the Offer, the Shares might no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and, therefore, could no longer be used as collateral for Purpose Loans made by brokers. In addition, if registration of the Shares under the Exchange Act were terminated, the Shares would no longer constitute "margin securities." 13. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the obligation of Purchaser to accept for payment any Shares tendered pursuant to the Offer shall be subject to (the following being referred to as the "Offer 54 Conditions") (i) the satisfaction or waiver (under the circumstances in which such waiver is permitted under the Merger Agreement) of the Minimum Condition and (ii) the satisfaction or waiver of the following conditions: (a) NO PROHIBITION. There shall not have been any action or proceeding brought by any governmental authority before any court, or any order or preliminary or permanent injunction entered in any action or proceeding before any court or governmental, administrative or regulatory authority or any statute, rule, regulation, legislation, interpretation, judgment or order proposed or sought, enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Merger by any court, governmental, administrative or regulatory authority which could reasonably be expected to have the effect of: (i) making illegal or otherwise restraining or prohibiting or imposing material penalties or fines or requiring the payment of material damages in connection with the making of the Offer, the acceptance for payment of, payment for, or ownership of some of or all the Shares by Parent or Purchaser, the consummation of the Offer or the Merger; (ii) prohibiting or materially limiting the ownership or operation by the Company or by Parent of all or any material portion of the business or assets of the Company and any of its subsidiaries or Parent, taken as a whole, or compelling Parent to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, as a result of the transactions contemplated by the Merger Agreement; (iii) imposing or confirming material limitations on the ability of Parent effectively to acquire or hold or to exercise full rights of ownership of Shares, including, without limitation, the right to vote any Shares on all matters properly presented to the stockholders of the Company, including, without limitation, the adoption and approval of the Merger Agreement and the Merger or the right to vote any shares of capital stock of any subsidiary of the Company; or (iv) requiring divestiture by Parent or Purchaser, directly or indirectly, of any Shares. (b) OUTSIDE EVENTS. There shall not have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any securities exchange or in the over-the-counter market in the United States (other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index) or (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States. (c) PERFORMANCE. The Company shall have performed in all material respects its material covenants and agreements under the Merger Agreement. (d) REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties of the Company set forth in the Merger Agreement which are qualified as to Material Adverse Effect (as defined in the Merger Agreement) shall not be true and correct when made and as of the expiration of the Offer, or any of the other representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct when made and as of the expiration of the Offer, which failure would have a Material Adverse Effect or, in the case of certain enumerated representations and warranties, which failure would be material with respect to the transactions contemplated by the Merger Agreement (except, in each case, in the case of representations and warranties of the Company which address matters only as of a particular date, which need only be true and correct as aforesaid as of such date). (e) NO TERMINATION. The Merger Agreement shall not have been terminated in accordance with its terms or the Offer shall not have been amended or terminated with the consent of the Company, acting at the direction of the Special Committee. Purchaser shall not be required to accept for payment any Shares tendered pursuant to the Offer if any of the above conditions occurs and remains in effect, which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or omission by Purchaser other than any breach by Parent or Purchaser of the Merger Agreement, or, in the case of (c) or (d) above, a 55 failure of such condition which Parent or Purchaser has caused to occur) giving rise to any such condition which makes it inadvisable to proceed with such acceptance for payment or payments for Shares. The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser regardless of the circumstances (including any action or omission by Purchaser other than any breach by Parent or Purchaser of the Merger Agreement, or, in the case of (c) or (d) above, a failure of such condition which Parent or Purchaser has caused to occur) giving rise to any such condition or may be waived by Purchaser in whole or in part at any time or from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time or from time to time. 14. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS Except as described below, Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of the Company's Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser and Parent currently contemplate that such approval or other action will be sought. Except as otherwise expressly described in this Section 14, Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter. Purchaser is unable to predict whether it may determine that it is required to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of. See Section 13 for certain conditions to the Offer. 15. FEES AND EXPENSES Salomon Smith Barney is acting as the Dealer Manager in connection with the Offer and has provided certain financial advisory services in connection with the acquisition of the Company. Parent and Purchaser have agreed to pay Salomon Smith Barney a fee of $1.75 million upon consummation of the Offer. The Company also has agreed to reimburse Salomon Smith Barney for certain expenses incurred in connection with the Offer, including out-of-pocket expenses and reasonable attorney's fees and disbursements, and to indemnify Salomon Smith Barney against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser has retained Georgeson & Company Inc. to act as the Information Agent, and BankBoston, N.A. to act as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. Each of the Information Agent and the Depositary will receive reasonable and customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. 56 The following table sets forth the estimated expenses incurred in connection with the Merger. These fees will be paid by Parent and its affiliates and will not be the responsibility of the Company. Filing fees..................................................... $ 84,437 Printing costs.................................................. $ 200,000 Legal fees...................................................... $ 600,000 Accounting fees................................................. $ 0 Solicitation expenses........................................... $ 35,000 Financial Advisory Fees......................................... $1,750,000 --------- Total....................................................... $2,669,437 --------- ---------
Except as set forth above, Purchaser will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding the Offer materials to their customers. 16. MISCELLANEOUS The Offer is being made solely by this Offer to Purchase, the related Letter of Transmittal, the Option Election, the Stock Purchase Election and the Restricted Stock Election and is being made to all holders of Shares, Options, Purchase Rights and Restricted Shares. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares, Options, Purchase Rights and Restricted Shares of the Company residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares, Options, Purchase Rights and Restricted Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. Parent and Purchaser have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act containing certain additional information with respect to the Offer. Such Schedule and any amendments thereto, including exhibits, may be examined and copies may be obtained from the principal office of the Commission in the manner set forth in Section 8 (except that they will not be available at the regional offices of the Commission). NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR PARENT NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 57 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER AND CERTAIN AFFILIATES OF PARENT A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The following table sets forth the name, present principal occupation or employment and material occupation, positions, offices or employment for the past five years of each director and executive officer of Parent. Unless otherwise indicated below, the address of each director and officer is 9330 Zionsville Road, Indianapolis, Indiana 46268 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND NAME AND BUSINESS ADDRESS FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- A. Charles Fischer.................. Mr. Fischer has served as Vice President-Agricultural Chemicals and Urban Pest of Parent since November 1997. Prior to assuming his current position, Mr. Fischer had been Vice President-North America of Parent since 1992. John L. Hagaman..................... Mr. Hagaman has served as President and Chief Executive Officer of Parent since the formation of Parent in October 1989. He was appointed to the Members Committee of Parent in August 1997. Mr. Hagaman served as a Director of the Company from February 1996 to March 1997 and was reelected to the Company board in March 1998. He is also a member of the Corporate Leadership Team of TDCC. Nickolas D. Hein.................... Mr. Hein is Vice President-Biotechnology for Parent. Prior to assuming that role in February 1998, Mr. Hein had served as Parent's Global Vice President since 1990. Mr. Hein has been a Director of the Company since March 1997, and Chairman of the Board of Directors of the Company since May 1997. Louis W. Pribila.................... Mr. Pribila has served as Vice President, Secretary and General Counsel of Parent since May 1995. Mr. Pribila has been a Director of the Company since December 1996. Prior to assuming his current position at Parent, Mr. Pribila had been Assistant General Counsel of TDCC since 1989. Sean S. Skinner..................... Mr. Skinner has been Treasurer of Parent since the formation of Parent in October 1989. John A. Tomke....................... Mr. Tomke has served as Vice President-Operations for Parent since January 1992. Jerry E. Toomer..................... Mr. Toomer has been Vice President-Human Resources, for Parent since June 1995. Prior to that, Dr. Toomer had been Director of Human Resources for TDCC's Pacific Area organization since 1991. Gary L. Whitlock.................... Mr. Whitlock has served as Vice President-Finance for Parent since February 1998. In 1996, Mr. Whitlock was named Global Cost and Functional Controller for TDCC. In addition, he was the financial liaison to a major joint venture, DuPont Dow Elastomers LLC.
I-1
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND NAME AND BUSINESS ADDRESS FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Joseph L. Downey.................... Mr. Downey has served as Chairman of the Members Committee of Parent since August 1997. Mr. Downey has been a Director of TDCC since 1989. Mr. Downey has served as a Senior Consultant to TDCC since 1994. Until July 1994 Mr. Downey served as a Senior Vice President of TDCC. Fernand J. Kaufmann................. Mr. Kaufmann has served on the Members Committee of Parent since August 1997. Mr. Kaufmann has been a Vice President for New Businesses and Strategic Development of TDCC since 1995. Prior to 1995, Mr. Kaufmann served as Group Vice President for the Ventures, Chemicals and Plastics Business Group of TDCC. Mr. Kaufmann is a citizen of Luxembourg. J. Pedro Reinhard................... Mr. Reinhard has served on the Members Committee of Parent since August 1997. Mr. Reinhard has been a Director and the Chief Financial Officer of TDCC since October 1995. Mr. Reinhard was elected Executive Vice President of TDCC in November 1996. Prior to October 1995, Mr. Reinhard served as Financial Vice President of TDCC. Mr. Reinhard is a citizen of Brazil. William S. Stavropoulos............. Mr. Stavropoulos has served on the Members Committee of Parent since August 1997. Mr. Stavropoulos has been the Chief Executive Officer of TDCC since November 1995. Prior to 1995, Mr. Stavropoulos served as President and Chief Operating Officer of TDCC. Mr. Stavropoulos has been a Director since July 1990.
I-2 B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER The following table sets forth the name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated below, the address of each director and officer is 2030 Dow Center, Midland, Michigan 48674.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND NAME AND BUSINESS ADDRESS FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Brian G. Taylorson.................. Mr. Taylorson is a Director and also the President of Purchaser. Mr. Taylorson has served as Corporate Director, Mergers and Acquisitions of TDCC since July 1995. Prior to that Mr. Taylorson served as Treasurer of Dow Chemical Canada Inc. Mr. Taylorson is a citizen of the United Kingdom. Charles J. Hahn..................... Mr. Hahn is a Director and also the Treasurer of Purchaser. Mr. Hahn has served as Tax Director and Assistant Secretary of TDCC since 1994. Prior to that, Mr. Hahn was a member of TDCC's Tax Department. Jane M. Gootee...................... Ms. Gootee is a Director and also the Secretary of Purchaser. Ms. Gootee has served as the Manager-Financial Law for TDCC since June 1994. Prior to that Ms. Gootee served as a Senior Counsel of Dow Europe S.A.
I-3 C. DIRECTORS AND EXECUTIVE OFFICERS OF CENTEN The following table sets forth the name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Centen. Unless otherwise indicated below, the address of each director and officer is 2030 Dow Center, Midland, Michigan 48674 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- Alfonso Escudero........................................ Mr. Escudero is a Director and also the Treasurer of Centen. Mr. Escudero has served as Corporate Finance Director of TDCC since November 1996. Prior to that Mr. Escudero served as Treasurer for the Benelux/Nordic region in Belgium. Mr. Escudero is a citizen of Spain. Jane M. Gootee.......................................... Ms. Gootee is a Director and also the Secretary of Centen. Ms. Gootee has served as the Manager-Financial Law for TDCC since June 1994. Prior to that Ms. Gootee served as a Senior Counsel of Dow Europe S.A. Douglas F. Ward......................................... Mr. Ward is a Director of Centen. Mr. Ward has served as Corporate Reporting Controller of TDCC since February 1998. Prior to that Mr. Ward served as Director of Accounting Analysis and Reporting for the Corporate Controllers Department of TDCC since 1993. Brian G. Taylorson...................................... Mr. Taylorson is a Director and also the President of Centen. Mr. Taylorson has served as Corporate Director, Mergers and Acquisitions of TDCC since July 1995. Prior to that Mr. Taylorson served as Treasurer of Dow Chemical Canada Inc. Mr. Taylorson is a citizen of the United Kingdom.
I-4 D. DIRECTORS AND EXECUTIVE OFFICERS OF ROFAN The following table sets forth the name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Rofan. Unless otherwise indicated below, the address of each director and officer is 2030 Dow Center, Midland, Michigan 48674 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- J. Pedro Reinhard....................................... Mr. Reinhard is a Director and also the President of Rofan. Mr. Reinhard has been a Director and the Chief Financial Officer of TDCC since October 1995. Mr. Reinhard was elected Executive Vice President of TDCC in November 1996. Mr. Reinhard served as Financial Vice President of TDCC from 1995-96 and as TDCC Treasurer from 1988-96. Mr. Reinhard is a citizen of Brazil. Geoffery E. Merszei..................................... Mr. Merszei is a Director and also a Vice President of Rofan. Mr. Merszei has served as Vice President of TDCC since July 1996 and as Treasurer of TDCC since May 1996. Prior to that Mr. Merszei served as Director of Finance for Dow Europe S.A. Mr. Merszei is a citizen of Canada. Brian G. Taylorson...................................... Mr. Taylorson is a Director and also a Vice President of Rofan. Mr. Taylorson has served as Corporate Director, Mergers and Acquisitions of TDCC since July 1995. Prior to that Mr. Taylorson served as Treasurer of Dow Chemical Canada Inc. Mr. Taylorson is a citizen of the United Kingdom. Jane M. Gootee.......................................... Ms. Gootee is a Director and also the Secretary of Rofan. Ms. Gootee has served as the Manager-Financial Law for TDCC since June 1994. Prior to that Ms. Gootee served as a Senior Counsel of Dow Europe S.A.
I-5 E. DIRECTORS AND EXECUTIVE OFFICERS OF TDCC The following table sets forth the name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of TDCC. Unless otherwise indicated below, the address of each director and officer is 2030 Dow Center, Midland, Michigan 48674 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- Frank P. Popoff......................................... Mr. Popoff has been the Chairman of the Board of Directors of TDCC since December 1992 and has been a Director since 1982. Mr. Popoff also served as Chief Executive Officer of TDCC until November 1995. Mr. Popoff is a Director of American Express Company, US WEST, Inc., Chemical Financial Corporation, United Technologies Corporation and the Michigan Molecular Institute. William S. Stavropoulos................................. Mr. Stavropoulos has been a Director of TDCC since July 1990, Chief Executive Officer of TDCC since November 1995 and President of TDCC since 1993. Prior to 1995, Mr. Stavropoulos served as Chief Operating Officer of TDCC. Mr. Stavropoulos has served on the Members Committee of Parent since August 1997. Mr. Stavropoulos is a Director of Dow Corning Corporation, NCR Corporation, BellSouth Corporation, Chemical Financial Corporation, and Chemical Bank and Trust Company. J. Pedro Reinhard....................................... Mr. Reinhard has been a Director and the Chief Financial Officer of TDCC since October 1995. Mr. Reinhard was elected Executive Vice President of TDCC in November 1996. Mr. Reinhard served as Financial Vice President of TDCC from 1995-1996 and as TDCC Treasurer from 1988-1996. Mr. Reinhard has served on the Members Committee of Parent since August 1997. Mr. Reinhard is a citizen of Brazil. Arnold A. Allemang...................................... Mr. Allemang has been a Director of TDCC since July 1996. Mr. Allemang has also served as Vice President of Operations of TDCC since August 1997. From 1993-1995, Mr. Allemang was Vice President of Manufacturing Operations for Dow Europe S.A. Mr. Allemang was Vice President and Director of Manufacturing and Engineering from 1995-1997. Jacqueline K. Barton.................................... Dr. Barton has been a Director of TDCC since 1993. Dr. Barton is the "Arthur and Marian Hanisch Memorial Professor of Chemistry" at the California Institute of Technology.
I-6
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- David T. Buzzelli....................................... Mr. Buzzelli has been a Director of TDCC since 1993. Mr. Buzzelli has served as a Senior Consultant to TDCC since July 1997. Mr. Buzzelli was Corporate Director of Public Affairs from 1993-1997, Corporate Director of Environment, Health and Safety from 1990-1997 and Dow Vice President from 1990-1997. Mr. Buzzelli is also a Director of the Dow Corning Corporation. Anthony J. Carbone...................................... Mr. Carbone has been a Director of TDCC since July 1995 and has been Executive Vice President, Plastics, Hydrocarbons and Energy of TDCC since 1996. Mr. Carbone was Group Vice President-Global Plastics, Hydrocarbons and Energy from 1995-1996 and Group Vice President for Global Plastics from 1993-1995. Fred P. Corson.......................................... Mr. Corson has been a Director of TDCC since 1994. Mr. Corson has been a Senior Consultant to TDCC since April 1998. Mr. Corson served as Vice President and Director of Research and Development of TDCC from 1990 until March 31, 1998. John C. Danforth........................................ Senator Danforth has been a Director of TDCC since February 1996. Senator Danforth represented the State of Missouri in the United States Senate from 1976 until his retirement from the Senate in 1995. Mr. Danforth is a partner with the law firm of Bryan Cave LLP. He is a Director of General American Life Insurance Company and Cerner Corporation. Willie D. Davis......................................... Mr. Davis has been a Director of TDCC since 1988. Mr. Davis is owner of All-Pro Broadcasting, Inc., a Los Angeles broadcasting company. Mr. Davis is also a Director of Sara Lee Corporation, Alliance Bank, MGM Grand Company, Kmart Corporation, Wicor, Inc., Johnson Controls Inc., Rally's Hamburgers Inc. and the Strong Funds. Michael L. Dow.......................................... Mr. Dow has been a Director of TDCC since 1988. Mr. Dow is Chairman and Chief Executive Officer of General Aviation, Inc. Mr. Dow is also a Director of Chemical Financial Corporation and Chemical Bank and Trust Company. Mr. Dow is also a trustee and the Treasurer of the Herbert H. and Grace A. Dow Foundation and a trustee of the Michigan State University Foundation.
I-7
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- Joseph L. Downey........................................ Mr. Downey has been a Director of TDCC since 1989. Mr. Downey has served as a Senior Consultant to TDCC since 1994. Until July 1994 Mr. Downey served as a Senior Vice President of TDCC. Mr. Downey has also served as Chairman of the Members Committee of Parent since 1989. Mr. Downey is a Director of Security National Bank. Enrique C. Falla........................................ Mr. Falla has been a Director of TDCC since 1985. Mr. Falla has served as a Senior Vice President to TDCC since May 1997 and has been a Senior Consultant since 1997. Prior to that, Mr. Falla served as Executive Vice President from 1991-1997 and Chief Financial Officer from 1987-1995. Mr. Falla is a Director of Dow Corning Corporation, Kmart Corporation, Guidant Corporation, and the University of Miami. Barbara Hackman Franklin................................ Ms. Franklin has served as a Director of TDCC since 1993. From 1992 to 1993, Ms. Franklin served as the U.S. Secretary of Commerce. Ms. Franklin was a business consultant from 1993 to 1995. Ms. Franklin has been President and Chief Executive Officer of Barbara Franklin Enterprises, a private consulting and investment firm, since 1995. Allan D. Gilmour........................................ Mr. Gilmour has served as a Director of TDCC since 1995. Mr. Gilmour retired as Vice Chairman of the Ford Motor Company in 1995. Mr. Gilmour is a Director of DTE Energy Company, The Prudential Insurance Company of America, US WEST, Inc. and Whirlpool Corporation. Michael D. Parker....................................... Mr. Parker has served as a Director of TDCC since July 1995. Mr. Parker has served as Executive Vice President of TDCC since 1996. Mr. Parker has been President of Dow North America and Group Vice President- Chemicals and Metals of TDCC since 1995. Mr. Parker was Dow Group Vice President from 1993-1996 and Group Vice President-Chemicals and Hydrocarbons 1993-1995. He is also a Director of the National Association of Manufacturers and the National Legal Center for the Public Interest. Mr. Parker is a citizen of the United Kingdom.
I-8
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- Harold T. Shapiro....................................... Dr. Shapiro has served as a Director of TDCC since 1985. Dr. Shapiro is the President of Princeton University as well as a professor of economics and public affairs. Dr. Shapiro is Chairman of the Board and a Trustee of the Alfred P. Sloan Foundation. He is also a Trustee of Educational Testing Service, the University of Pennsylvania Medical Center and the Universities Research Association. He also serves as a Director of the National Bureau of Economic Research. Dr. Shapiro is a member of the Institute of Medicine and the American Philosophical Society and a fellow of the American Academy of Arts and Sciences. Paul G. Stern........................................... Dr. Stern has been a Director of TDCC since 1992. Dr. Stern is a partner and co-founder, in 1995, of Thayer Capital Partners. From 1993-1995, Dr. Stern was a Special Partner at Forstmann Little & Co. Dr. Stern is also a director of LTV Corporation and Whirlpool Corporation. Dr. Stern is Treasurer of the John F. Kennedy Center for the Performing Arts. John G. Scriven......................................... Mr. Scriven has served as Vice President and General Counsel since January 1994 and Secretary of TDCC since August 1996. Mr. Scriven is a visiting professor at McGeorge School of Law, University of the Pacific and a guest lecturer to the Swiss Banking Institute. Mr. Scriven is a member of the North America Board of Advisors of the Swiss Chamber of Commerce and a member of the board of directors of the American Arbitration Association. Mr. Scriven is a citizen of Switzerland. Lawrence J. Washington, Jr.............................. Mr. Washington has served as Vice President- Human Resources since October 1995 and as Vice President of Environment, Health & Safety, Human Resources and Public Affairs for TDCC since July 1997. From 1990-1994, Mr. Washington served as Vice President, Dow North America and General Manager for Michigan Division. Geoffery E. Merszei..................................... Mr. Merszei has served as Vice President of TDCC since July 1996 and as Treasurer of TDCC since May 1996. Prior to that Mr. Merszei served as Director of Finance for Dow Europe S.A. Mr. Merszei is a citizen of Canada.
I-9
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- G. Michael Lynch........................................ Mr. Lynch has served as Vice President and Controller of TDCC since February 1997. Prior to that date Mr. Lynch was an executive with the Ford Motor Company. Richard M. Gross........................................ Mr. Gross has served as Vice President and Director of Research & Development of TDCC since April 1998. From 1995-March 1998, Mr. Gross served as Vice President and Director of Michigan Operations and Core Research and Development. From 1992-94, Mr. Gross served as Research and Development Director for North American Chemicals and Metals/Hydrocarbons Research and Development. Mr. Gross is on the governing board of the Council for Chemical Research and is a member of the external advisory board for the Chemical Engineering Department at Georgia Tech University.
I-10 SCHEDULE II CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW SECTION 1300 [SHORT FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE; "DISSENTING SHARES" AND DISSENTING SHAREHOLDER].-- (a) If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter. (b) As used in this chapter, "dissenting shares" means shares which come within all of the following descriptions: (1) Which were not immediately prior to the reorganization or short-form merger either (A) listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100 or (B) listed on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any class of shares described in subparagraph (A) or (B) if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class. (2) Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or which were held of record on the effective date of a short-form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting. (3) Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301. (4) Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302. (c) As used in this chapter, "dissenting shareholder" means the recordholder of dissenting shares and includes a transferee of record. SECTION 1301 [DISSENTERS' RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES].-- (a) If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, such corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of such approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires to exercise the shareholder's II-1 right under such sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309. (b) Any shareholder who has a right to require the corporation to purchase the shareholder's shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase such shares shall make written demand upon the corporation for the purchase of such shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause (i) or (ii) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders' meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder. (c) The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what such shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at such price. SECTION 1302 [DISSENTING SHARES, STAMPING OR ENDORSING].-- Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder's certificates representing any shares which the shareholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares. SECTION 1303 [DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; TIME OF PAYMENT].-- (a) If the corporation and the shareholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation. (b) Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement. SECTION 1304 [DISSENTERS' ACTIONS; JOINDER; CONSOLIDATION; APPOINTMENT OF APPRAISERS].-- (a) If the corporation denies that the shares are dissenting shares, or the corporation and the shareholder fail to agree upon the fair market values of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting II-2 shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint. (b) Two or more dissenting shareholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated. (c) On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares. SECTION 1305 [APPRAISERS' DUTY AND REPORT; COURT JUDGMENT; PAYMENT; APPEAL; COSTS OF ACTION].-- (a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it. (b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares. (c) Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares which any dissenting shareholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered. (d) Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment. (e) The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys' fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301). SECTION 1306 [DISSENTING SHAREHOLDERS: EFFECT OF PREVENTION OF PAYMENT OF FAIR MARKET VALUE].-- To the extent that the provisions of Chapter 5 prevent the payment to any holders of dissenting shares of their fair market value, they shall become creditors of the corporation for the amount thereof together with interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any liquidation proceeding, such debt to be payable when permissible under the provisions of Chapter 5. SECTION 1307 [DISSENTING SHARES, DISPOSITION OF DIVIDENDS].-- Cash dividends declared and paid by the corporation upon the dissenting shares after the date of approval of the reorganization by the outstanding shares (Section 152) and prior to payment for the shares by the corporation shall be credited against the total amount to be paid by the corporation therefor. SECTION 1308 [DISSENTING SHARES, RIGHTS AND PRIVILEGES].-- Except as expressly limited in this chapter, holders of dissenting shares continue to have all the rights and privileges incident to their shares, until the fair market value of their shares is agreed upon or determined. A dissenting shareholder may not withdraw a demand for payment unless the corporation consents thereto. II-3 SECTION 1309 [DISSENTING SHARES, LOSS OF STATUS].-- Dissenting shares lose their status as dissenting shares and the holders thereof cease to be dissenting shareholders and cease to be entitled to require the corporation to purchase their shares upon the happening of any of the following: (a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys' fees. (b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles. (c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder. (d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder's demand for purchase of the dissenting shares. SECTION 1310 [SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING].-- If litigation is instituted to test the sufficiency or regularity of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation. SECTION 1311 [CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF SHARES].-- This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a reorganization or merger. SECTION 1312 [VALIDITY OF REORGANIZATION OR SHORT-FORM MERGER, ATTACK ON; SHAREHOLDERS' RIGHTS; BURDEN OF PROOF].-- (a) No shareholder of a corporation who has a right under this chapter to demand payment of cash for the shares held by the shareholder shall have any right at law or in equity to attack the validity of the reorganization or short-form merger, or to have the reorganization or short-form merger set aside or rescinded, except in an action to test whether the number of shares required to authorize or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms and provisions specifically set forth the amount to be paid in respect to them in the event of a reorganization or short-form merger is entitled to payment in accordance with those terms and provisions or, if the principal terms of the reorganization are approved pursuant to subdivision (b) of Section 1202, is entitled to payment in accordance with the terms and provisions of the approved reorganization. (b) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, subdivision (a) shall not apply to any shareholder of such party who has not demanded payment of cash for such shareholder's shares pursuant to this chapter; but if the shareholder institutes any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, the shareholder shall not thereafter have any right to demand payment of cash for the shareholder's shares pursuant to this chapter. The court in any action attacking the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded shall not restrain or enjoin the consummation of the transaction except upon 10 days, prior notice to the corporation and upon a determination by the court that clearly no other remedy will adequately protect the complaining shareholder or the class of shareholders of which such shareholder is a member. II-4 (c) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, in any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, (1) a party to a reorganization or short-form merger which controls another party to the reorganization or short-form merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the shareholders of any party so controlled. II-5 SCHEDULE III [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 to any such matter. 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 THE DEPOSITARY FOR THE OFFER IS: BANKBOSTON, N.A. BY MAIL: BY HAND: BY OVERNIGHT, CERTIFIED OR BankBoston, N.A. Securities Transfer & EXPRESS MAIL DELIVERY: Attn: Corporate Reorganization Reporting Services, Inc. BankBoston, N.A. P.O. Box 8029 c/o Boston EquiServe LP Attn: Corporate Boston, Massachusetts 02266-8029 1 Exchange Plaza Reorganization 55 Broadway, 3rd Floor 150 Royall Street New York, New York 10006 Canton, Massachusetts 02021
BY FACSIMILE: CONFIRM FACSIMILE BY TELEPHONE: (781) 575-2233/2232 (800) 730-4001 (For Eligible Institutions Only) (For Confirmation Only)
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below and will be furnished promptly at Purchaser's expense. You may also contact the Dealer Manager or your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 ALL OTHERS CALL TOLL-FREE: (800) 223-2064 THE DEALER MANAGER FOR THE OFFER IS: SALOMON SMITH BARNEY INC. Seven World Trade Center New York, New York 10048 EX-99.2 3 EXHIBIT 99.2 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MYCOGEN CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 OF AGROSCIENCES ACQUISITION INC. A MAJORITY-OWNED SUBSIDIARY OF DOW AGROSCIENCES LLC AND A WHOLLY OWNED INDIRECT SUBSIDIARY OF THE DOW CHEMICAL COMPANY ------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 2, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- To: BankBoston, N.A., Depositary BY MAIL: BY HAND: BY OVERNIGHT, CERTIFIED OR EXPRESS MAIL BankBoston, N.A. Securities Transfer & Reporting DELIVERY: Attn: Corporate Reorganization Services, Inc. BankBoston, N.A. P.O. Box 8029 c/o Boston EquiServe LP Attn: Corporate Reorganization Boston, Massachusetts 1 Exchange Plaza 150 Royall Street 02266-8029 55 Broadway, 3rd Floor Canton, Massachusetts 02021 New York, New York 10006
BY FACSIMILE: CONFIRM FACSIMILE BY (781) 575-2233/2232 TELEPHONE: (For Eligible Institutions (800) 730-4001 Only) (For Confirmation Only)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used by stockholders of Mycogen Corporation if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the book-entry transfer procedures set forth under "The Tender Offer--3. Procedure for Tendering Shares" in the Offer to Purchase dated September 4, 1998. Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders." Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. Stockholders who cannot deliver their Shares and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase) or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares pursuant to the guaranteed delivery procedure set forth under "The Tender Offer--3. Procedure for Tendering Shares" in the Offer to Purchase. See Instruction 2.
- --------------- DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 2 AND 4) ------------ NAMES(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE (ATTACH ADDITIONAL LIST, IF NECESSARY) CERTIFICATES) - --------------- TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- TOTAL SHARES - --------------- * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. -------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
------------------------------------------------------------------------------------------- / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: DTC Account No.: DTC Transaction Code No.: / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Stockholder(s): Window Ticket Number (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: If delivery is by book entry transfer: Name of Tendering Institution: DTC Account No.: DTC Transaction Code No.: - -------------------------------------------------------------------------------------------
Ladies and Gentlemen: The undersigned hereby tenders to AgroSciences Acquisition Inc., a Delaware corporation ("Purchaser") and a majority-owned subsidiary of Dow AgroSciences LLC, the above-described shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Shares"), of Mycogen Corporation, a California corporation (the "Company"), pursuant to Purchaser's offer to purchase all of the outstanding Shares at a price of $28.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together, as may be amended or supplemented from time to time, constitute the "Offer"). Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment, the undersigned hereby sells, assigns and transfers to or upon the order of Purchaser all right, title and interest in and to all the Shares that are being tendered hereby or orders the registration of such Shares delivered by book-entry transfer (and any and all other Shares or other securities issued or issuable in respect thereof on or after September 4, 1998, and any or all dividends thereon or distributions with respect thereto (collectively, "Distributions")) and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and all Distributions), or transfer ownership of such Shares (and all Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and 2 authenticity to, or upon the order of, Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price, (b) present such Shares (and all Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Charles J. Hahn, Jane M. Gootee and Brian G. Taylorson and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, with respect to all of the Shares (and all Distributions) tendered hereby which have been accepted for payment by Purchaser prior to the time of any vote or other action at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. This power of attorney and proxy is coupled with an interest and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke, without any further action, any other power of attorney or proxy granted by the undersigned at any time with respect to such Shares, and no subsequent power of attorney or proxies will be given or will be executed by the undersigned (and if given or executed, will not be deemed to be effective). The undersigned understands that Purchaser reserves the right to require that, in order for such Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser is able to exercise full voting rights with respect to such Shares and other securities, including voting at any meeting of stockholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares and all Distributions tendered hereby and that when the same are accepted for payment by Purchaser, Purchaser will acquire good and marketable title and unencumbered ownership thereto, free and clear of all liens, restrictions, charges, security interests, and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares and all Distributions tendered hereby. In addition, the undersigned will promptly remit and transfer to the Depositary for the account of Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of any such Distributions, and may withhold the entire purchase price or deduct from the purchase price of Shares tendered hereby, the amount or value thereof, as determined by Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer or otherwise required by applicable law, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described under "The Tender Offer--3. Procedure for Tendering Shares" in the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, Purchaser may terminate or amend the Offer or may not be required to accept for payment any of the Shares tendered herewith. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price or return any Shares not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price or return any Share certificates not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price or return any Shares not tendered or accepted for payment in the name(s) of, and deliver said check or return certificates to, the 3 person or persons so indicated. Stockholders tendering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at the Book-Entry Transfer Facility as such stockholder may designate by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of such Shares. INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., a financial institution (including most banks, trust companies, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the instruction entitled "Special Delivery Instruments" or "Special Payment Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedures set forth in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal on or prior to the Expiration Date. Stockholders who cannot deliver their Shares and all other required documents to the Depositary on or prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedure set forth in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by AgroSciences Acquisition Inc. ("Purchaser") must be received by the Depositary on or prior to the Expiration Date and (c) the certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three NASDAQ National Market System trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Tender Offer--3. Procedure for Tendering Shares." If Shares are forwarded separately to the Depositary, each must be accompanied by a duly executed Letter of Transmittal (or facsimile thereof). THE METHOD OF DELIVERING SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 4 No alternative, conditional or contingent tenders will be accepted. By executing this Letter of Transmittal (or facsimile thereof), the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers or the number of Shares should be listed on a separate schedule attached hereto and separately signed on each page thereof in the same manner as this Letter of Transmittal is signed. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, Purchaser will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), or if a transfer tax is imposed for any reason other than the sale or transfer of Shares to Purchaser pursuant to the Offer, then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted herewith. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase price of any Shares purchased is to be issued, or any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for 5 Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account at the Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. SUBSTITUTE FORM W-9. Under the federal income tax laws, the Depositary will be required to backup withhold 31% of the amount of any payments made to certain stockholders pursuant to the Offer. In order to avoid such backup withholding, each tendering stockholder, and, if applicable, each other payee, must provide the Depositary with such stockholder's or payee's correct taxpayer identification number and certify that such stockholder or payee is not subject to such backup withholding by completing the Substitute Form W-9 set forth below. In general, if a stockholder or payee is an individual, the taxpayer identification number is the Social Security number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the stockholder or payee may be subject to a $50 penalty imposed by the Internal Revenue Service ("IRS"). Certain stockholders or payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order to satisfy the Depositary that a foreign individual qualifies as an exempt recipient, such stockholder or payee must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9. Failure to complete the Substitute Form W-9 will not, by itself, cause Shares to be deemed invalidly tendered, but may require the Depositary to withhold 31% of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the IRS. If a tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future, such holder must complete the Certificate Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the Certificate of Awaiting Taxpayer Identification Number is completed, the Depository will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depository. However, such amounts will be refunded to such holder if a TIN is provided to the Depository within 60 days. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent or Dealer Manager at their respective addresses or telephone numbers set forth below. 10. MYCOGEN CORPORATION 1992 STOCK OPTION PLAN. Holders of options (each an "Option") to purchase Shares through the Mycogen Corporation 1992 Stock Option Plan (which incorporates outstanding Options granted under the Mycogen Corporation 1983 Stock Option Plan) may not use this Letter of Transmittal to direct the exercise of Options and the tender of Shares issuable upon exercise of such Options, but must use the separate Option Election sent or delivered to them by the Company. See Section 3 of the Offer to Purchase. 6 11. MYCOGEN CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN. Participants in the Mycogen Corporation 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") must use this Letter of Transmittal to direct the exercise of purchase rights outstanding under the Stock Purchase Plan (each a "Purchase Right") and the tender of Shares issuable upon exercise of such Purchase Rights, but must use the separate Stock Purchase Election sent or delivered to them by the Company. See Section 3 of the Offer to Purchase. 12. MYCOGEN CORPORATION RESTRICTED STOCK ISSUANCE PLAN. Holders of unvested Shares ("Restricted Stock") through the Mycogen Corporation Restricted Stock Issuance Plan MUST use this Letter of Transmittal to tender Restricted Stock, and also MUST use the separate Restricted Stock Election sent or delivered to them by the Company. See Section 3 of the Offer to Purchase. Completed Letters of Transmittal relating to Restricted Stock should be returned, along with a completed Restricted Stock Election and your Restricted Stock Certificate(s), to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis. DO NOT return a Letter of Transmittal relating to Restricted Stock to the Depositary. 13. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. Instructions will then be given to what steps must be taken to obtain a replacement certificate(s). The Letter of Transmittal and related documents cannot be processed until the procedures for replacing such missing certificate(s) have been followed. 7 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates of Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: BANKBOSTON, N.A. BY MAIL: BY HAND: BY OVERNIGHT, CERTIFIED OR BankBoston, N.A. Securities Transfer & EXPRESS MAIL DELIVERY: Attn: Corporate Reorganization Reporting Services, Inc. BankBoston, N.A. P.O. Box 8029 c/o Boston EquiServe LP Attn: Corporate Boston, Massachusetts 1 Exchange Plaza Reorganization 02266-8029 55 Broadway, 3rd Floor 150 Royall Street New York, New York 10006 Canton, Massachusetts 02021
BY FACSIMILE: CONFIRM FACSIMILE BY (781) 575-2233/2232 TELEPHONE: (For Eligible Institutions (800) 730-4001 Only) (For Confirmation Only)
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning this Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] Wall Street Plaza New York, New York 10005 Call Collect (Banks and Brokers): (212) 440-9800 All Others Call Toll-Free: (800) 223-2064 THE DEALER MANAGER FOR THE OFFER IS: SALOMON SMITH BARNEY INC. Seven World Trade Center New York, NY 10048 8 - ------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or stock certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue check or certificates to: Name: ______________________________________________________________________ (PLEASE PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) ____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (COMPLETE SUBSTITUTE FORM W-9) - ------------------------------------------------ - ------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or stock certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail check or certificates to: Name _______________________________________________________________________ (PLEASE PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) - ----------------------------------------------- - -------------------------------------------------------------------------------- SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) X___________________________________________________________________________ X___________________________________________________________________________ SIGNATURE(S) OF OWNER(S) Dated: _______________________________________________________________, 1998 Name(s) ____________________________________________________________________ (PLEASE PRINT) ____________________________________________________________________________ Capacity (full title): _____________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ Tax Identification or Social Security No.: _________________________________ (COMPLETE SUBSTITUTE W-9 ON REVERSE SIDE) (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Name of Firm: ______________________________________________________________ Authorized Signature: ______________________________________________________ Name: ______________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ Dated: _______________________________________________________________, 1998 - -------------------------------------------------------------------------------- 9 TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 8) PAYER'S NAME: BANKBOSTON, N.A. - ----------------------------------------------------------------------------------------- SUBSTITUTE Part I--PLEASE Social Security Number FORM W-9 PROVIDE YOUR TIN IN or ------------------------ Department of the Treasury THE BOX AT RIGHT AND Employer Identification Number Internal Revenue Service CERTIFY BY SIGNING AND DATING BELOW - ----------------------------------------------------------------------------------------- CERTIFICATION--Under penalty of perjury, I certify that: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGNATURE: -------------------------------------------- DATE:--------------------, 1998 - -----------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TAX IDENTIFICATION NUMBER.
- ---------------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. SIGNATURE: ------------------------------------------- DATE: -------------------, 1998 - ----------------------------------------------------------------------------------------
10 EX-99.4 4 EXHIBIT 99.4 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 MYCOGEN CORPORATION (Name of Registrant as Specified in Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, tor the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: MYCOGEN CORPORATION 5501 OBERLIN DRIVE SAN DIEGO, CALIFORNIA 92121-1718 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 8, 1998 To the Stockholders of MYCOGEN CORPORATION: The annual meeting of stockholders of Mycogen Corporation (the "Company") will be held at the headquarters of Mycogen Corporation, 5501 Oberlin Drive, San Diego, California 92121-1718 on Thursday, January 8, 1998, at 10:00 a.m. (the "Annual Meeting") for the following purposes: 1. To elect the Board of Directors to serve until the Company's next annual meeting and until their successors are elected and qualified; 2. 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; 3. 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 DowElanco) will automatically receive a grant of a non-statutory stock option to purchase 7,500 shares of common stock; 4. To ratify the appointment of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending August 31, 1998; and 5. To transact such other business as may properly come before the meeting or any adjournment thereof. The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Any stockholders of record at the close of business on November 19, 1997, will be entitled to vote at the Annual Meeting and at any adjournment thereof. The transfer books will not be closed. A list of stockholders entitled to vote at the Annual Meeting will be available for inspection at the offices of the Company. If you do not plan to attend the Annual Meeting in person, please sign, date and return the enclosed proxy in the envelope provided to which no postage need be affixed if mailed in the United States. If you attend the Annual Meeting and vote by ballot, your proxy will be revoked automatically and only your vote at the Annual Meeting will be counted. The prompt return of your proxy will assist us in preparing for the Annual Meeting. Your shares can not be voted unless you sign and return a proxy or vote by ballot at the Annual Meeting. We look forward to seeing you at the Annual Meeting. By Order of the Board of Directors /s/ Michael W. Sund Michael W. Sund, as Secretary San Diego, California November 24, 1997 MYCOGEN CORPORATION 5501 OBERLIN DRIVE SAN DIEGO, CALIFORNIA 92121-1718 PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 8, 1998 GENERAL The enclosed proxy is solicited on behalf of the Board of Directors (the "Board of Directors" or the "Board") of Mycogen Corporation, a California corporation (the "Company" or "Mycogen"), for use at the Annual Meeting of stockholders to be held on January 8, 1998 (the "Annual Meeting"). The Annual Meeting will be held at 10:00 a.m. at the headquarters of Mycogen, 5501 Oberlin Drive, San Diego, California 92121-1718. Stockholders of record on November 19, 1997, will be entitled to notice of and to vote at the Annual Meeting. This proxy statement (the "Proxy Statement") and accompanying proxy (the "Proxy") will be mailed to stockholders on or about December 10, 1997. Voting On November 19, 1997, the record date for determination of stockholders entitled to vote at the Annual Meeting, there were 31,449,506 shares of the Company's common stock ("Common Stock") outstanding. Each stockholder is entitled to one vote for each share of Common Stock held by such stockholder except that the election of directors will be conducted pursuant to cumulative voting. Under cumulative voting, each share of Common Stock is entitled to one vote multiplied by the number of directors to be elected, and that number of votes may be cast for one director or may be distributed among any number of directors as designated by the stockholder or his or her proxy. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum for the transaction of business at the Annual Meeting. In the election of the Company's Board of Directors, the six candidates receiving the highest number of affirmative votes will be elected. Proposal 2 requires the affirmative vote of a majority of the outstanding shares of Common Stock for approval. Proposals 3 and 4 require (i) the affirmative vote of a majority of the shares present and entitled to vote and (ii) the affirmative vote of a majority of the required quorum for approval. Thus, abstentions and broker non-votes can have the effect of preventing approval of a proposal where the number of affirmative votes, though a majority of the votes cast, do not constitute a majority of the required quorum. Revocability of Proxies Any person giving a proxy has the power to revoke it at any time before its exercise. It may be revoked by filing with the Secretary of the Company at the Company's principal executive office, 5501 Oberlin Drive, San Diego, California 92121-1718, a notice of revocation or another signed proxy with a later date. You may also revoke your proxy by attending the Annual Meeting and voting in person. Solicitation The Company will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of this Proxy Statement, the Proxy and any additional soliciting material furnished to stockholders. Copies of solicitation material will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. In addition, the Company may reimburse such persons for their costs of forwarding the solicitation materials to such beneficial owners. The original solicitation of proxies by mail may be supplemented by solicitation by telephone, telegram or other means by directors, officers, employees or agents of the Company. No additional compensation will be paid to these individuals for any such services. Except as described above, the Company does not presently intend to solicit proxies other than by mail. Fiscal Year All references herein to a particular year refer to the Company's fiscal year which ends or ended August 31 of the year indicated. 1 PROPOSAL NO. 1 ELECTION OF DIRECTORS The persons named below are nominees for director of the Company ("Director") to serve until the Company's next annual meeting of stockholders and until their successors have been elected and qualified. The Company's bylaws provide that the authorized number of Directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. The authorized number of Directors is currently between five and nine. The Board of Directors has selected six nominees, all of whom are currently Directors, except Mr. Eibl, who is being nominated for election by the stockholders for the first time. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unavailable to serve. It is the intention of the Board to fill all nine Director positions authorized by the Company's bylaws by electing three additional Directors as soon as practicable. New Director candidates will be recruited from the food, agricultural and financial industries to complement the knowledge base of the nominees currently standing for election. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named below. The six candidates receiving the highest number of affirmative votes of the shares entitled to vote at the Annual Meeting will be elected Directors of the Company. Nominees The following table sets forth information regarding the nominees for the Board of Directors:
YEAR FIRST ELECTED NAME POSITIONS AND OFFICES HELD DIRECTOR -------------------------- -------- Carlton J. Eibl President -- Perry J. Gehring, Ph.D. Director 1996 Nickolas D. Hein Chairman of the Board, Director 1997 Louis W. Pribila, Esq. Director 1996 William C. Schmidt Director 1996 G. William Tolbert Director 1996
Business Experience of Directors Mr. Eibl, 37, is being nominated for election to the Board of Directors for the first time. Mr. Eibl joined the Company in December of 1992 and currently serves as President of the Company and is responsible for overseeing the Company's strategic development, operations and resources. From December, 1992, to September, 1995, Mr. Eibl served as Executive Vice President of the Company. Prior to joining the Company, Mr. Eibl was employed as a corporate attorney with the law firms of Brobeck, Phleger & Harrison in San Diego (1989-1992) and Paul, Weiss, Rifkind, Wharton & Garrison in New York (1985-1989). Dr. Gehring, 61, has served as a Director since February, 1996. Dr. Gehring is Vice President - Research and Development for DowElanco LLC ("DowElanco"), a subsidiary of The Dow Chemical Company, and has served in that position since 1989. DowElanco's name will change effective January 1, 1998, to Dow AgroSciences LLC. Dr. Gehring is also Vice President - Research and Development for DowElanco B.V. Prior to working at DowElanco, Dr. Gehring held various positions at The Dow Chemical Company including Vice President of Global Agricultural Products Research and Development (1981-1989). Mr. Hein, 52, has served as a Director since March, 1997, and Chairman of the Board since May, 1997. Mr. Hein is Vice President - Biotechnology and Global Growth for DowElanco and previously served as DowElanco's Vice President Global (1990-1997) and Commercial Director - Ag. Products - North America (1989-1990). Prior to working for DowElanco, Mr. Hein held various positions at The Dow Chemical Company including Director - 2 Sales and Marketing North America Ag. Products (1987-1989) and Director - Government & Public Affairs - Ag. Products Department (1985-1987). Mr. Hein is Vice President of DowElanco B.V. Mr. Pribila, 59, has served as a Director since December, 1996. Mr. Pribila is Vice President, Secretary and General Counsel of DowElanco. Prior to serving in his current position at DowElanco, Mr. Pribila served as Assistant General Counsel of The Dow Chemical Company (1989-1995), General Counsel and Secretary of Dow Chemical Pacific (1984 - 1989) and General Counsel - Dowell Division (1978-1984). Mr. Pribila is also Vice President, Secretary and General Counsel of DowElanco B.V. and the Secretary and a director of Dintec Agrichemicals, a privately held company. Mr. Schmidt, 59, has served as a Director since June, 1996. Mr. Schmidt is Vice President and Chief Financial Officer of DowElanco. Mr. Schmidt is also President of DowElanco (Barbados) Limited, Vice President and Chief Financial Officer of DowElanco B.V. and Treasurer of DowElanco China Ltd. and DowElanco International Ltd. Prior to working for DowElanco, Mr. Schmidt held various positions at The Dow Chemical Company including Assistant Controller (1986-1989) and Controller for Dow U.S.A. (1978-1986). Mr. Schmidt is a director of DowElanco B.V., DowElanco International Ltd., DERe Insurance Company, Dintec Agroquimica and Dintec Agrichemicals, all of which are privately held companies. Mr. Tolbert, 46, has served as a Director since February, 1996. Mr. Tolbert is Director of Global Business Development for DowElanco. Prior to joining DowElanco, Mr. Tolbert held various positions at Eli Lilly and Company including Global Director of Elanco Ag Chem Business Planning, Licensing and Acquisition (1986-1989); Global Manager of Agricultural Licensing and Acquisition in Elanco Products Company (1984-1986); Manager of Professional Recruitment (1983-1984) and Manager of Strategic Planning for Elanco Products (1981-1983). Board Meetings and Committees The Board of Directors of the Company held a total of nine meetings during the fiscal year ended August 31, 1997. In the past fiscal year, one Director, John L. Hagaman, resigned from the Board and was replaced by Mr. Hein. Four current Directors, Thomas J. Cable; Jerry D. Caulder, Ph.D.; David H. Rammler, Ph.D. and W. Wayne Withers, Esq. are not seeking re-election to the Board. The Board of Directors has an Audit Committee, a Compensation Committee and a Technology Committee. The Company does not have a Nominating Committee or a committee that performs the functions of a Nominating Committee. The Audit Committee was established in 1987 and is primarily responsible for reviewing the financial reporting process and the Company's internal accounting controls, and approving the services performed by, and the independence of, the Company's auditors. The Audit Committee currently consists of Messrs. Cable, Pribila and Schmidt. The Audit Committee held two meetings during the fiscal year ended August 31, 1997. The Compensation Committee was established in 1985 and is responsible for determining the Company's executive compensation policy. The Compensation Committee currently consists of Messrs. Hein, Pribila and Withers. The Compensation Committee held a total of six meetings during the fiscal year ended August 31, 1997. The Technology Committee was established in 1997 and is responsible for establishing the Company's research and development priorities. The Technology Committee currently consists of Drs. Gehring and Rammler and Mr. Tolbert. The Technology Committee held one meeting during the fiscal year ended August 31, 1997. All incumbent nominees for the Board of Directors attended 75% or more of the aggregate meetings of the Board of Directors and the Board Committees on which they served in 1997. Director Compensation Current members of the Board of Directors are each eligible to receive an annual retainer fee of $16,000, plus reimbursement of all out-of-pocket costs incurred in connection with their attendance at Board of Directors, Audit Committee, Compensation Committee or Technology Committee meetings. Dr. Gehring and Messrs. Hein, Pribila, Schmidt and Tolbert, have each waived their right to receive the annual retainer fee. Under the Company's current 1992 Stock Option Plan (as amended, the "Stock Option Plan"), each Director, who is not an officer of DowElanco or an employee of the Company, will automatically receive an option grant for 7,500 shares of Common Stock on the date of each annual stockholders' meeting at which such Director is re-elected to the Board. For Directors who are officers of DowElanco, the number of shares of Common Stock granted on the date of each annual stockholders' meeting at which such DowElanco officer is re-elected to the Board is currently 5,000 shares. Accordingly, on December 12, 1996, the date of the 1996 Annual Stockholders' Meeting, (i) Messrs. Cable and Withers and Dr. Rammler each received an automatic option grant for 7,500 shares with an exercise price of $22.875 per share; (ii) Dr. Gehring and Messrs. Hagaman, Pribila, Schmidt 3 and Tolbert each received an automatic option grant for 5,000 shares with an exercise price of $22.875 per share and (iii) Dr. Caulder, as an employee of the Company at that time, did not receive an automatic option grant. Currently, each individual who first becomes a Director, and is not a current or prior employee of the Company, whether through election by the stockholders or appointment by the Board of Directors, will automatically be granted, at the time of such initial election or appointment, a non-statutory stock option to purchase 20,000 shares of Common Stock. Each automatic grant will have an exercise price per share equal to the fair market value of the Common Stock on the grant date. Accordingly, (i) on December 6, 1996, the date the Board elected Mr. Pribila a Director, he received an automatic grant of 20,000 shares with an exercise price of $19.00 and (ii) on March 27, 1997, the date the Board elected Mr. Hein a Director, he received 13,333 shares with an exercise price of $24.75 per share. Mr. Hein elected to receive only a portion of the 20,000 shares since he replaced Mr. Hagaman, also an officer of DowElanco, prior to the full vesting of Mr. Hagaman's automatic grant of 20,000 shares. At the time Mr. Hein replaced Mr. Hagaman, only 6,667 shares of the automatic grant had vested and thus, Mr. Hein received 13,333 shares, or the difference between the automatic grant of 20,000 shares and the vested shares. Any stock options granted to Dr. Gehring and Messrs. Hein, Pribila, Schmidt and Tolbert will be received for the benefit of DowElanco. The options granted to the Directors will become exercisable over the optionee's period of service on the Board of Directors in three equal annual installments, beginning one year after the grant date. However, the option will immediately become exercisable for all of the option shares should the Company be acquired by merger or asset sale or through a hostile take-over effected through a tender offer for more than 50% of the outstanding Common Stock or a proxy contest for Board membership. The option will have a maximum term of ten years measured from the grant date, subject to earlier termination upon the optionee's cessation of service on the Board of Directors. Upon the successful completion of a hostile tender offer for more than 50% of the Company's outstanding Common Stock, members of the Board, who are not current or prior employees of the Company, will have a 30-day period in which to surrender each of his or her automatic option grants to the Company for a cash distribution based upon the tender offer price of the shares of Common Stock subject to each surrendered option. Recommendation of the Board of Directors The Board of Directors recommends a vote FOR the nominees listed herein. 4 PROPOSAL NO. 2 APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES On November 12, 1997, the Board of Directors approved an amendment to the Company's Articles of Incorporation to increase the total number of the Company's authorized shares from the current 45,000,000 shares to 55,000,000 shares, of which 50,000,000 shares shall be Common Stock, par value $0.001 per share and 5,000,000 shall be Preferred Stock. This amendment is being presented to the stockholders for their approval. At November 12, 1997, 31,447,506 shares of Common Stock were issued and outstanding, and the Company had reserved an additional 1,048,378 shares of Common Stock for issuance under its various benefit plans. Upon approval of this proposed amendment, the Company would have approximately 18.5 million shares of Common Stock authorized but not outstanding. The additional shares to be authorized pursuant to this Proposal No. 2 may be used by the Company in connection with new equity financings, acquisition of businesses and other corporate purposes. The Company has been looking for opportunities for business combinations and has held discussions with other companies concerning business combinations from time to time. At this time, no definitive agreements have been reached for any such combination. The existence of additional authorized shares would increase the number of shares of Common Stock the Board of Directors could issue under certain circumstances without further stockholder action. The Board of Directors considers it appropriate for the Company to have additional authorized shares available for issuance without stockholder action to permit the Company to respond rapidly to potential business opportunities and to give the Company added flexibility. Separate stockholder approval of the issuance of shares of the Common Stock authorized pursuant to this Proposal No. 2 would be obtained in the event that the federal securities laws, the Schedules to the Bylaws of the National Association of Securities Dealers, Inc. or any state laws require such authorization. If the proposed amendment is approved, the second and third sentences of Section (A) of Article IV of the Company's Articles of Incorporation will read as follows: 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 affirmative vote of a majority of the outstanding shares of the Company's Common Stock is required for the approval of the amendment to the Articles of Incorporation increasing the number of authorized shares of Common Stock. Recommendation of the Board of Directors The Board of Directors recommends that the stockholders vote FOR the approval of the amendment to the Company's Articles of Incorporation to increase the authorized number of shares of Common Stock. 5 PROPOSAL NO. 3 APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN In November 1997, the Board of Directors adopted, subject to stockholder approval at the Annual Meeting, an amendment to the Stock Option Plan to effect the following changes: (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 DowElanco) will automatically receive a grant of a non-statutory stock option to purchase 7,500 shares of Common Stock. As of September 30, 1997, options covering an aggregate of 4,474,066 shares of Common Stock were outstanding, 2,226,285 shares of Common Stock had been issued under the Stock Option Plan and 866,368 shares of Common Stock remained available for option grant. Plan Structure The Stock Option Plan is divided into two separate components: the Discretionary Grant Program and the Automatic Grant Program. Under the Discretionary Grant Program, options may be issued to key employees (including officers), non-employee Board members, consultants and other independent contractors of the Company or its subsidiaries (which shall include corporate subsidiaries or entities owned 50% or more by the Company) who contribute to the management, growth and financial success of the Company or its subsidiaries. Under the Automatic Grant Program, a special one-time option grant will be made to each individual who first joins the Board of Directors as a non-employee Director on or after the effective date of the Stock Option Plan and subsequent annual automatic option grants will be made to each individual who continues to serve as a non-employee Director of the Company. As of September 30, 1997, seven executive officers and approximately 900 other employees were eligible to participate in the Discretionary Grant Program. As of September 30, 1997, nine Board members were eligible to participate in the Automatic Grant Program, however, only five of the eligible Board members are being considered for re-election. Effective retroactive to January 1, 1996, no one participant in the Stock Option Plan may receive stock option grants and separately exercisable stock appreciation rights for more than 200,000 shares of Common Stock in the aggregate per calendar year. Plan Administration The Discretionary Grant Program is administered by the Compensation Committee. The Compensation Committee has the sole and exclusive authority, subject to the provisions of the Stock Option Plan, to determine the eligible individuals who are to receive options under the Discretionary Grant Program, the number of shares to be covered by each granted option, the date or dates on which the option is to become exercisable and the maximum term for which the option is to remain outstanding. The Compensation Committee also has the authority to determine whether the granted option is to be an incentive stock option ("Incentive Option") under the Federal tax laws and to establish rules and regulations for proper plan administration. Issuable Shares The aggregate number of shares available for issuance over the term of the Stock Option Plan may not exceed 7,566,719 shares of Common Stock, subject to adjustment from time to time in the event of certain changes to the Company's capital structure. The authorized share reserve includes (i) the aggregate number of shares currently available for issuance under the Stock Option Plan, including the shares subject to outstanding options, plus (ii) the proposed additional increase of 2,000,000 shares of Common Stock. As of September 30, 1997, 2,226,285 shares have been issued under the Stock Option Plan. 6 Should any option under the Stock Option Plan expire or terminate prior to exercise or surrender in full, the shares subject to the portion of the option not so exercised or surrendered will be available for subsequent option grants. Shares subject to any option surrendered in accordance with the option surrender provisions of the Stock Option Plan will reduce on a share-for share basis, the number of shares available for subsequent option grants. Unvested shares repurchased by the Company at the original option price paid per share pursuant to its repurchase rights under the Stock Option Plan will be added back to share reserve and will accordingly be available for future option grants. Option Price and Exercisability The exercise price of options issued under the Discretionary Grant Program may not be less than 85% of the fair market value of the Common Stock on the grant date, and the maximum period during which any option may remain outstanding may not exceed 10 years. Options issued under the Discretionary Grant Program may either be immediately exercisable for the full number of shares purchasable thereunder or may become exercisable in cumulative increments over a period of months or years as determined by the Compensation Committee. The option price may be paid in cash or in shares of Common Stock valued at fair market value on the exercise date. Outstanding options may also be exercised through a same-day sale program, pursuant to which a designated brokerage firm is to effect an immediate sale of the shares purchased under the option and pay over to the Company, out of the sales proceeds available on the settlement date, sufficient funds to cover the option price for the purchased shares, plus all applicable withholding taxes. The Compensation Committee may also assist any optionee (including an officer) in the exercise of outstanding options under the Discretionary Grant Program by authorizing a loan from the Company or permitting the optionee to pay the option price in installments over a period of years. The terms and conditions of any such loan or installment payment will be established by the Compensation Committee in its sole discretion, but in no event may the maximum credit extended to the optionee exceed the aggregate option price payable for the purchased shares, plus any Federal, State or local income taxes or Federal employment taxes incurred by the optionee in connection with the option exercise. Valuation For purposes of establishing the option price and for all other valuation purposes under the Stock Option Plan, the fair market value per share of Common Stock on any relevant date will be the closing selling price per share on such date, as reported on the Nasdaq National Market System ("NMS"). If there is no reported selling price for such date, then the closing selling price for the last previous date for which such quotation exists will be determinative of fair market value. On September 30, 1997, the fair market value per share of Common Stock was $23.50 on the basis of the closing selling price on that date. Stockholder Rights and Assignability of Options No optionee is to have any stockholder rights with respect to the option shares until such individual has exercised the option, paid the option price and been issued a stock certificate for the purchased shares. Options are not assignable or transferable other than by will or by the laws of inheritance, and, during the optionee's lifetime, the option may be exercised only by the optionee. Repurchase Rights Any unvested shares of Common Stock issued under the Stock Option Plan will be subject to repurchase by the Company, at the original exercise price paid per share, upon the optionee's cessation of service prior to vesting in such shares. The Compensation Committee will have complete discretion in establishing the vesting schedule for any such unvested shares and will have full authority to cancel the Company's outstanding repurchase rights with respect to one or more unvested shares held by the optionee and may exercise this discretion at any time, whether before or after the optionee's service actually ceases. 7 Acceleration of Options Corporate Transaction In the event of any of the following stockholder-approved transactions to which the Company is a party (a "Corporate Transaction"): (i) a merger or consolidation in which the Company is not the surviving entity (except for a transaction the principal purpose of which is to change the State of the Company's incorporation); (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in complete liquidation or dissolution of the Company; or (iii) a reverse merger in which the Company is the surviving entity but in which the holders of securities possessing more than 50% of the combined voting power of the Company's outstanding securities (as determined immediately prior to such merger) transfer their ownership of those securities to person or persons not otherwise part of the transferor group, each outstanding option under the Discretionary Grant Program will automatically become exercisable for all of the option shares and may be exercised for all or any portion of such fully-vested shares. However, an outstanding option under the Discretionary Grant Program will not be so accelerated if and to the extent: (i) such option is either to be assumed by the successor corporation (or its parent corporation) in such Corporate Transaction or is otherwise to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation, (ii) such option is to be replaced by a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for pay-out in accordance with the same vesting schedule in effect for the option or (iii) the acceleration of such option is subject to other limitations imposed by the Compensation Committee at the time of grant. The Compensation Committee will, however, have full power and authority to grant options under the Discretionary Grant Program, which are to automatically accelerate in whole or in part immediately prior to the Corporate Transaction, whether or not those options are otherwise to be assumed or replaced in connection with the consummation of such Corporate Transaction. The Company's outstanding repurchase rights under the Stock Option Plan will also terminate, and the shares subject to such terminated rights will become fully vested, upon the Corporate Transaction, except to the extent (i) one or more of such repurchase rights are expressly assigned to the successor corporation (or its parent company) or (ii) such termination and accelerated vesting are precluded by other limitations imposed by the Compensation Committee at the time the repurchase rights are issued. Upon the consummation of the Corporate Transaction, all outstanding options under the Stock Option Plan will terminate and cease to be exercisable, except to the extent assumed by the successor corporation. Change in Control The Compensation Committee will have full power and authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more options under the Discretionary Option Grant Program so that each such option may, immediately prior to a Change in Control, be exercised for any or all of the shares of Common Stock at the time subject to such option. The Compensation Committee will have complete discretion in establishing the specific terms and conditions upon which one or more outstanding options are to accelerate in connection with the Change in Control or upon which any of the Company's outstanding repurchase rights under the Stock Option Plan are to terminate. Accordingly, the Compensation Committee may in its discretion condition such accelerated vesting (and the termination of any outstanding repurchase rights) upon the termination of the optionee's service within a specified period following the Change in Control. A Change in Control will be deemed to occur under the Stock Option Plan in the event: (i) any person or related group of persons (other than the Company or any affiliate) acquires beneficial ownership of securities possessing more than 50% of the combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to 8 the Company's stockholders which the Board of Directors does not recommend such stockholders to accept; or (ii) there is a change in the composition of the Board over a period of 24 consecutive months or less such that a majority of the Board members ceases by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the members of the Board described in clause (A) who were still in office at the time such election or nomination was approved by the Board. The acceleration of options in the event of a Corporate Transaction or Change in Control may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of the Company. The acceleration of options also could have the effect of discouraging a Change in Control of the Company and in management, even though such Changes in Control could be favored by a majority of stockholders. Stock Appreciation Rights At the Compensation Committee's discretion, options may be granted with stock appreciation rights. Two types of stock appreciation rights are authorized for issuance under the Stock Option Plan: (i) tandem rights which require the option holder to elect between the exercise of the underlying option for shares of Common Stock and the surrender of such option for an appreciation distribution from the Company and (ii) limited rights which will become exercisable upon the occurrence of a Hostile Take-Over (as defined below). Tandem stock appreciation rights provide the holders with the right to receive an appreciation distribution from the Company equal in amount to the excess of (i) the fair market value (on the date such right is exercised) of the shares of Common Stock in which the optionee is at the time vested under the surrendered option over (ii) the aggregate exercise price payable for such shares. Such appreciation distribution may, at the Compensation Committee's discretion, be made in shares of Common Stock valued at fair market value on the exercise date, in cash or in a combination of cash and Common Stock. One or more officers of the Company subject to the short-swing profit restrictions of the Federal securities laws may, at the Compensation Committee's discretion, be granted limited stock appreciation rights as part of any stock option grants made to such officers under the Stock Option Plan. Any option with such a limited stock appreciation right may, at the officer's election, be surrendered to the Company upon the occurrence of a Hostile Take-Over, to the extent the option is at such time exercisable for vested shares (including any shares which vest in connection with such Hostile Take-Over). In return, the optionee will be entitled to a cash distribution from the Company in an amount equal to the excess of (i) the Take-Over Price (as defined below) of the vested shares of Common Stock at the time subject to the surrendered option (or the surrendered portion) over (ii) the aggregate exercise price payable for such shares. The balance of the option (if any) will continue to remain outstanding and exercisable in accordance with the agreement evidencing such grant. For purposes of such limited stock appreciation right, the following definitions will be in effect under the Stock Option Plan: Hostile Take-Over: the acquisition by any person or related group of persons (other than the Company or its affiliates) of securities possessing more than 50% of the combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board of Directors does not recommend such stockholders to accept. Take-Over Price: the greater of (A) the fair market value of the shares subject to the surrendered option, measured on the option surrender date in accordance with the valuation provisions of the Stock Option Plan described above, or (B) the highest reported price per share paid by the acquiring entity in effecting the Hostile Take-Over. 9 Termination of Service Outstanding options under the Discretionary Grant Program will terminate, with respect to any shares for which such options are exercisable at the time of the optionee's cessation of service with the Company, within a specified period (generally not in excess of 12 months) following such cessation of service, unless the Compensation Committee determines that such exercise period should be further extended for one or more additional months or years. Under no circumstances, however, may any such option remain exercisable after the specified expiration date of the option term. To the extent the option is not exercisable for one or more shares at the time of the optionee's cessation of service, the option will immediately terminate and cease to be outstanding with respect to those shares. Should the optionee die while holding one or more exercisable options, then those options may subsequently be exercised by the personal representative of the optionee's estate or by the persons to whom such options are transferred by the optionee's will or by the laws of inheritance. Should the optionee's service be terminated for misconduct, all outstanding options held by the optionee will be terminated immediately and cease to be outstanding. During the applicable exercise period following the optionee's cessation of service, the option may not be exercised for more than the number of option shares for which the option is exercisable at the time of such cessation of service. However, the Compensation Committee will have the discretionary authority to accelerate in whole or in part the vesting of any outstanding options held by the optionee and may exercise this discretion at any time while the option remains outstanding. For purposes of the Stock Option Plan, the optionee will be deemed to be in the service of the Company for so long as such individual renders periodic services to the Company or any subsidiary, whether as an employee, Board member or independent consultant. Cancellation and New Grant of Options The Compensation Committee has the authority to effect the cancellation of outstanding options under the Discretionary Grant Program and to grant replacement options covering the same or different numbers of shares of Common Stock but having an option price per share not less than 85% of the fair market value of the Common Stock on the new grant date. Special Tax Withholding Election The Compensation Committee may, in its discretion and upon such terms and conditions as it may deem appropriate, provide one or more option holders under the Discretionary Grant Program with the election to have the Company withhold, from the shares of Common Stock otherwise issuable upon the exercise of their options, a portion of such shares with an aggregate fair market value equal to the designated percentage (up to 100% as specified by the option holder) of the Federal, State and local income tax liability and Federal employment tax liability incurred by such option holder in connection with the exercise of such option. Any election so made will be subject to the approval of the Compensation Committee, and no shares will actually be withheld in satisfaction of such taxes except to the extent approved by the Compensation Committee. One or more option holders may also be granted the alternative right, subject to Compensation Committee approval, to deliver previously-issued shares of Common Stock in satisfaction of such tax liability. Automatic Grant Program Under the Automatic Grant Program, each individual who first becomes a non-employee Board member, whether through election by the stockholders or appointment by the Board, will automatically be granted, at the time of such initial election or appointment, a non-statutory stock option to purchase 7,500 shares of Common Stock, provided such individual has not otherwise been in the prior employ of the Company. In addition, on the date of each Annual Stockholders' Meeting, each individual re-elected to serve as a non-employee member of the Board will automatically be granted a stock option to purchase 7,500 shares of Common Stock. There will be no limit on the number of such 7,500-share option grants any one non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously served in the Company's employ will be fully eligible for one or more annual option grants. 10 Each such option grant will be subject to the following terms and conditions: (i) The option price per share will be equal to 100% of the fair market value per share of Common Stock on the grant date; (ii) Each option is to have a maximum term of ten years measured from the grant date; (iii) Each automatic grant will become exercisable in a series of three equal annual installments over the optionee's period of service on the Board, with the first such installment to become exercisable one year after the automatic grant date; (iv) The option will remain exercisable for a six-month period following the optionee's cessation of Board service for any reason other than death. Should the optionee die while holding the automatic grant, then such option will remain exercisable for a twelve month period following such optionee's death and may be exercised by the personal representative of the optionee's estate or the person to whom the grant is transferred by the optionee's will or the laws of inheritance. In no event, however, may the option be exercised after the expiration date of the option term. During the applicable exercise period, the option may not be exercised for more than the number of shares (if any) for which it is exercisable at the time of the optionee's cessation of Board service. To the extent the option is not exercisable for one or more option shares at the time of the optionee's cessation of service on the Board, the option will immediately terminate and cease to be outstanding with respect to those shares; (v) The option will become immediately exercisable for all of the shares at the time subject to such option in the event of a Corporate Transaction. Upon the consummation of the Corporate Transaction, each automatic option grant will terminate and cease to be outstanding, except to the extent assumed by the successor entity; (vi) The option will become immediately exercisable for all of the shares at the time subject to such option in the event of a Change in Control. Except as otherwise provided in paragraph (vii) below, the accelerated option will continue to remain outstanding until the expiration or sooner termination of the option term; (vii) Upon the occurrence of a Hostile Take-Over, the non-employee Board member will have a thirty-day period in which he or she may elect to surrender the automatic option grant to the Company. In return for the surrendered option, the non-employee Board member will be entitled to a cash distribution from the Company in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the option is otherwise at the time exercisable for such shares) over (ii) the aggregate exercise price payable for such shares; and (viii) The remaining terms and conditions of the option will in general conform to the terms described above for option grants made under the Discretionary Grant Program and will be incorporated into the option agreement evidencing the automatic grant. Changes in Capitalization In the event any change is made to the Common Stock issuable under the Stock Option Plan by reason of any recapitalization, stock dividend, stock split, combination of shares, exchange of shares or other change in corporate structure effected without the Company's receipt of consideration, appropriate adjustments will be made to (i) the maximum number and/or class of securities issuable under the Stock Option Plan, (ii) the maximum number of shares for which any one participant may be granted stock options and separately exercisable stock appreciation rights per calendar year, (iii) the number and/or class of securities and price per share in effect under each outstanding option (including all discretionary and automatic option grants under the Stock Option Plan) and (iv) the number and/or class of securities per non-employee member of the Board of Directors for which the special option grants will subsequently be made under the Automatic Grant Program. 11 Each outstanding option which is assumed or is otherwise to continue in effect after a Corporate Transaction will be appropriately adjusted to apply and pertain to the number and class of securities which would have been issuable, in connection with such Corporate Transaction, to an actual holder of the same number of shares of Common Stock as are subject to such option immediately prior to such Corporate Transaction. Appropriate adjustments will also be made to the option price payable per share and to number and class of securities available for issuance under the Stock Option Plan. Option grants under the Stock Option Plan will not affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. Amendment and Termination of the Stock Option Plan The Board of Directors may amend or modify the Stock Option Plan in any or all respects whatsoever, subject, however, to any required stockholder approval under applicable law or regulation. No such amendment, however, may adversely affect the rights of outstanding option holders without their consent. The Board may terminate the Stock Option Plan at any time, and the Stock Option Plan will in all events terminate no later than December 31, 2002. Any options outstanding at the time of such plan termination will continue to remain outstanding and exercisable in accordance with the terms and provisions of the instruments evidencing those grants. The Stock Option Plan will, however, automatically terminate on the date all shares available for issuance under the Stock Option Plan are issued or canceled pursuant to the exercise, surrender or cash-out of outstanding options under the Stock Option Plan. Federal Tax Consequences Options granted under the Stock Option Plan may be either Incentive Options which satisfy the requirements of Section 422 of the Internal Revenue Code or non-statutory options which do not meet such requirements. The Federal income tax treatment for the two types of options differs as follows: Incentive Options. No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is generally recognized at the time the option is exercised. The optionee will, however, recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of disposition. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying and (ii) disqualifying. The optionee will make a qualifying disposition of the purchased shares if the sale or disposition is made more than two years after the grant date of the option and more than one year after the exercise date. If the optionee fails to satisfy either of these two holding periods prior to sale or disposition, then a disqualifying disposition of the purchased shares will result. Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the option price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date over (ii) the option price paid for the shares will be taxable as ordinary income. Any additional gain recognized upon the disposition will be capital gain. If the optionee makes a disqualifying disposition of the purchased shares, then the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the excess of (i) the fair market value of such shares on the date the option was exercised over (ii) the option price paid for such shares. In no other instance will the Company be allowed a deduction with respect to the optionee's disposition of the purchased shares. Non-Statutory Options. No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will in general recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the option price paid for such shares, and the optionee will be required to satisfy the tax withholding requirements applicable to such income. Special provisions of the Internal Revenue Code apply to the acquisition of Common Stock under a non-statutory option, if the purchased shares are subject to repurchase by the Company. These special provisions may be summarized as follows: 12 (a) If the shares acquired upon exercise of the non-statutory option are subject to repurchase by the Company at the original option price in the event the optionee should terminate service prior to vesting in the shares, the optionee will not recognize any taxable income at the time of exercise but will have to report as ordinary income, as and when the Company's repurchase right lapses, an amount equal to the excess of (i) the fair market value of the shares on the date the Company's repurchase right lapses with respect to those shares over (ii) the option price paid for such shares. (b) The optionee may, however, elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in the year of exercise an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date (determined as if the shares were not subject to the Company's repurchase right) over (ii) the option price paid for such shares. If the Section 83(b) election is made, the optionee will not recognize any additional income as and when the Company's repurchase right lapses. The Company will be entitled to a business expense deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option. The deduction will in general be allowed for the taxable year of the Company in which ordinary income is recognized by the optionee in connection with the acquisition of the option shares. Surrender Rights. An optionee who surrenders an outstanding option for a cash or stock distribution from the Company will recognize ordinary income in the year of surrender equal to the amount of the appreciation distribution. The Company will be entitled to a corresponding business expense deduction for such appreciation distribution. The deduction will be allowed in the taxable year of the Company in which the ordinary income is recognized by the optionee. Deductibility of Executive Compensation. The Company anticipates that any compensation deemed paid by it in connection with disqualifying dispositions of incentive stock option shares or exercises of non-statutory options granted with an exercise price equal to the fair market value of the option shares at the time of grant will qualify as performance-based compensation for purposes of Internal Revenue Code Section 162(m) and will not have to be taken into account for purposes of the $1 million limitation per covered individual on the deductibility of the compensation paid to certain executive officers of the Company. Accordingly, all compensation deemed paid with respect to those options will remain deductible by the Company without limitation under Internal Revenue Code Section 162(m). Accounting Treatment The grant of options with an exercise price less than the fair market value of the option shares on the grant date will result in a compensation expense equal to the discount at the time of grant, and the Company will have to amortize that expense against the Company's reported earnings over the vesting period in effect for the option shares. Option grants with an exercise price equal to the fair market value of the option shares at the time of grant will generally not result in any charge to the Company's earnings, but the Company must disclose, in pro-forma statements to the Company's financial statements, the impact those options would have upon the Company's reported earnings were the value of those options at the time of grant treated as compensation expense. Whether or not granted at a discount, the number of outstanding options is a factor in determining the Company's earnings per share. Should one or more optionees be granted stock appreciation rights which have no conditions upon exercisability other than a service or employment requirement, then such rights will result in compensation expense to the Company's earnings. 13 Outstanding Grants For each of the executive officers named in the Summary Compensation Table and the various indicated groups, the table below shows (i) the number of shares of Common Stock subject to options granted under the Stock Option Plan during the period from September 1, 1996, to September 30, 1997, and (ii) the weighted average exercise price payable per share under such options.
Number of Weighted Average Exercise Price Name and Position Option Shares of Granted Options ----------------- ------------- ------------------------------- Carlton J. Eibl 90,000 $14.438 President Andrew C. Barnes 35,000 $14.438 Executive Vice President Leo Kim 35,000 $14.438 Executive Vice President and Chief Technical Officer Michael W. Sund 20,000 $14.438 Vice President and Secretary James A. Baumker 35,000 $14.438 Vice President and Chief Financial Officer Naomi D. Whitacre 20,000 $14.438 Vice President Michael J. Muston 70,000 $19.571 Vice President All current executive officers as a 305,000 $15.616 group (7 persons) All current directors 165,834 $17.980 as a group (9 persons) All employees, including current 616,500 $18.825 officers who are not executive officers, as a group (183 persons)
New Plan Benefits If this Proposal is approved, Dr. Gehring and Messrs. Hein, Pribila, Schmidt and Tolbert will each receive an automatic grant for 7,500 shares upon their re-election to the Board at the Annual Meeting. Stockholder Approval The affirmative vote of a majority of the outstanding voting shares of the Company present or represented and entitled to vote at the Annual Meeting is required for approval of the amendment to the Stock Option Plan. If such approval is not obtained, then (i) the initial automatic option grant to non-employee Board members will remain at 20,000 shares per individual and (ii) the automatic option grants to be made to eligible Board members who are officers or employees of DowElanco and who are re-elected at the Annual Meeting will remain at 5,000 shares per individual. 14 Recommendation of the Board of Directors The Board of Directors recommends that the stockholders vote FOR the approval of the amendment to the Stock Option Plan. The Board believes that it is in the best interests of the Company to maintain a comprehensive equity incentive program for the Company's officers, employees, non-employee Board members and consultants which will encourage such individuals to remain in the Company's service and more closely align their interests with those of the stockholders. 15 PROPOSAL NO. 4 Ratification of the Appointment of the Independent Auditors The Company is asking the stockholders to ratify the selection of Deloitte & Touche LLP as the Company's independent auditors for the year ending August 31, 1998. The affirmative vote of the holders of a majority of the shares represented and voting at the Annual Meeting together with the affirmative vote of the majority of the required quorum, will be required to ratify the selection of Deloitte & Touche LLP. In the event the stockholders fail to ratify the appointment, the Board of Directors will reconsider its selection. Even if the selection is ratified, the Board of Directors, in its discretion, may direct the appointment of a different independent auditing firm at any time during the year if the Board of Directors feels that such a change would be in the Company's and its stockholders' best interests. Representatives of Deloitte & Touche LLP are expected to be at the Annual Meeting, and may make a statement, if they desire to do so, and will be available to respond to appropriate questions. Dismissal of Ernst & Young LLP At a meeting held on November 12, 1997, the Board of Directors of the Company approved the engagement of Deloitte & Touche LLP as its independent auditors for the fiscal year ending August 31, 1998 to replace the firm of Ernst & Young LLP who were dismissed as auditors of the Company effective upon completion of the annual audit for the Company's fiscal year ended August 31, 1997. The reports of Ernst & Young LLP on the Company's financial statements for the past two fiscal years did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company's financial statements for each of the two fiscal years ended August 31, 1996, and in the subsequent interim period, there were no disagreements with Ernst & Young LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the matter in their report. Representatives of Ernst & Young LLP are expected to be at the Annual Meeting, and may make a statement, if they desire to do so, and will be available to respond to appropriate questions. Recommendation of the Board of Directors The Board of Directors recommends that the stockholders vote FOR the proposal to ratify its selection of Deloitte & Touche LLP to serve as the Company's independent auditors for the year ending August 31, 1998. 16 ADDITIONAL INFORMATION Principal Stockholders The following table sets forth certain information regarding the ownership of Common Stock as of September 30, 1997, for each person known to the Company to be the beneficial owner of more than 5% of Common Stock. Unless otherwise indicated, each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned.
Number of Shares Beneficial Owner Beneficially Owned Percent Owned(1) ------------------ DowElanco(2,3) 17,923,245 57.1% 9330 Zionsville Road Indianapolis, IN 46268-1054 Pioneer Hi-Bred International, Inc. 2,000,000 6.4% 700 Capital Square 400 Locust Street Des Moines, IA 50309 The State of Wisconsin Investment Board 1,800,500 5.7% PO Box 7842 Madison, WI 53707 Capital Research & Management Co. 1,700,000 5.4% 333 South Hope Street Los Angeles, CA 90071
(1) Percentage of beneficial ownership is calculated pursuant to Securities and Exchange Commission ("SEC") Rule 13d-3(d)(1). (2) Mr. Hein (Vice President - Biotechnology and Global Growth of DowElanco), Mr. Pribila (Vice President, Secretary and General Counsel of DowElanco), Mr. Schmidt (Vice President and Chief Financial Officer of DowElanco), Dr. Gehring (Vice President of Research and Development of DowElanco) and Mr. Tolbert (Director of Global Business Development of DowElanco) are members of the Board of Directors. (3) The Dow Chemical Company owns 100% of DowElanco. Executive Officers
Name Age Position Held With the Company --- ------------------------------ Andrew C. Barnes 44 Executive Vice President James A. Baumker 46 Vice President and Chief Financial Officer Carlton J. Eibl 37 President Leo Kim, Ph.D. 55 Executive Vice President and Chief Technical Officer Michael J. Muston 41 Vice President Michael W. Sund 54 Vice President and Secretary Naomi D. Whitacre 49 Vice President
17 Responsibilities and Business Experience of Executive Officers Mr. Barnes, a founder of the Company, currently serves as Executive Vice President responsible for the Company's business development. Prior to joining the Company, Mr. Barnes served as President of Zymogenetics Corporation, a genetic engineering company, and managed that company's initial growth and financing. Mr. Barnes began his career as a project and process engineer with G.D. Searle & Co. and then served as a biotechnology licensing associate for Stanford University's Office of Technology Licensing. Mr. Baumker joined the Company in August of 1987 as Controller of the Company and currently serves as Vice President and Chief Financial Officer. From June, 1995, to September, 1995, Mr. Baumker served as the Company's Chief Accounting Officer. Prior to joining the Company, Mr. Baumker served as Project Manager, Latin America, for Monsanto Agricultural Company (1983-1987) and Accounting Manager, Asia Pacific, for Monsanto International (1978-1982). Mr. Eibl is being considered for the position of Director of the Company. See "Election of Directors - Business Experience of Directors." Dr. Kim joined the Company in September of 1986 and currently serves as Executive Vice President and Chief Technical Officer of the Company. Prior to joining the Company, Dr. Kim was employed by Shell Oil Company for 18 years in a variety of positions, including Principal Scientist involved in agricultural biotechnology, Research and Development Director-Biomedical, Research and Development Director-Interferon and Manager Biological Chemistry in Shell's Agricultural Research Center. Mr. Muston joined the Company in July of 1996, and currently serves as Vice President responsible for the Company's North American seed business unit, Agrigenetics, Inc., doing business as Mycogen Seeds. Prior to joining the Company, Mr. Muston was employed at DowElanco from 1989 through 1996 where he held various positions including General Manager - Western Agriculture, Global Business Operations Manager - Herbicides and Global Third Party Manufacturing Manager. Mr. Muston also was employed by Elanco from 1978 through 1989 in various positions. Mr. Sund joined the Company in January of 1993 and currently serves as Vice President and Secretary of the Company and is responsible for communications and investor relations. Prior to joining the Company, Mr. Sund was President of Mike Sund Public Relations, Inc. (1986-1992) and Director of Public Relations, Joan B. Kroc Foundation (1984-1986). Ms. Whitacre joined the Company in January of 1993 and currently serves as Vice President responsible for overseeing the Company's facilities and human resources department. Prior to joining the Company, Ms. Whitacre served as Assistant Vice President at Glendale Federal Bank (1990-1993) and Human Resources Manager at Wavetek Corporation (1985-1990). 18 Executive Compensation Summary of Cash and Certain Other Compensation The following table provides certain summary information concerning the compensation earned by the Company's President, each of the other four most highly compensated executive officers of the Company and the former Chief Executive Officer of the Company for services rendered in all capacities to the Company and its subsidiaries for the fiscal years ended August 31, 1997, 1996 and 1995.
Annual Compensation Compensation Awards ------------------- ------------------- Securities Other Restricted Underlying Name and Annual Stock Options/ All Other Principal Position Year Salary(1) Bonus Compensation Award(s)(2) SARs(3) Compensation ($) ($) ($) ($) (#) ($) --- --- --- --- --- --- Carlton J. Eibl 1997 $284,813 -- -- -- 90,000 $ 2,000(4) President 1996 $200,417 $ 75,000 -- $138,130 200,000 $ 2,000(4) 1995 $150,000 -- -- $ 58,440 150,000 $ 2,000(4) 1995 -- -- -- -- 80,000(5) -- Jerry D. Caulder, Ph.D. 1997 $301,524 -- $ 8,000(6) -- 90,000 $2,813,350(7) (resigned as of May 1997 1996 $297,500 $100,000 -- $276,260 175,000 $ 2,238(4) from the position of 1995 $285,000 -- -- $116,880 100,000 $ 2,000(4) Chief Executive Officer) 1995 -- -- -- -- 260,000(5) -- Andrew C. Barnes 1997 $185,000 -- -- -- 35,000 $ 2,000(4) Executive Vice President 1996 $173,333 $ 50,000 -- $138,130 100,000 $ 2,000(4) 1995 $165,000 -- -- $ 58,440 50,000 $ 2,000(4) 1995 -- -- -- -- 160,000(5) -- James A. Baumker 1997 $157,646 $ 25,000 -- -- 35,000 $ 2,000(4) Vice President, Chief 1996 $110,000 -- -- $ 69,065 50,000 $ 2,000(4) Financial Officer Leo Kim, Ph.D. 1997 $186,250 -- -- -- 35,000 $ 2,000(4) Executive Vice President 1996 $173,333 $ 50,000 -- $138,130 100,000 $ 2,000(4) Chief Technical Officer 1995 $165,000 -- -- $ 58,440 50,000 $ 1,430(4) 1995 -- -- -- -- 135,000(5) -- Michael J. Muston 1997 $139,167 $ 20,000 $48,953(8) -- 70,000 $ 2,633(4) Vice President 1996 $ 22,500 $ 11,250 -- -- -- $ 101(4)
19 (1) The Salary column of the Summary Compensation table shows the full salary received by the named executive officer although some of the officer's salary may have been deferred under the Company's 401(k) Plan or Executive Deferred Compensation Plan. (2) Restricted Stock holdings at the end of the 1997 fiscal year were as follows:
Name # of Shares Value ----------- ----- Andrew C. Barnes 11,667 $288,758 James A. Baumker 8,334 $206,267 Carlton J. Eibl 11,667 $288,758 Leo Kim, Ph.D. 11,667 $288,758
For grants issued prior to fiscal year 1996, the shares of restricted stock will vest upon the named officers' completion of three years of service, measured from the award date. Messrs. Barnes and Eibl, and Dr. Kim's restricted stock vests as follows: 3,333 shares on December 13, 1997; 3,334 shares on December 13, 1998 and 5,000 shares on February 16, 1999. Mr. Baumker's restricted stock vests as follows: 1,667 shares on December 13, 1997; 1,667 shares on December 13, 1998; 2,000 shares on April 20, 1998 and 3,000 shares on July 21, 1998. For grants issued in fiscal year 1996, the shares of restricted stock will vest annually over three years of service, measured from the award date. However, in the event the Company is acquired by merger or asset sale or there is a hostile take-over of the Company by tender offer for 25% or more of the outstanding Common Stock or a proxy contest for Board membership, then each restricted stock award which has been outstanding for at least six months will immediately vest in full. In connection with Dr. Caulder's resignation, 23,333 shares of his restricted stock vested. (3) Two option grants are shown in year 1995 because the chart is based on a fiscal year beginning September 1 and ending August 31. Previously, the Company's fiscal year began January 1 and ended December 31 and options were granted only once during such period. Therefore, calendar year 1995 includes option grants occurring in fiscal years 1994 and 1995. (4) These figures reflect contributions made by the Company on behalf of the named executive officer under the Company's 401(k) Plan. (5) These options were granted on December 21, 1994, pursuant to an option cancellation/regrant program for all full-time employees of the Company. Under the program, each named officer exchanged his outstanding options with exercise prices in excess of $8.50 for new options for the same number of shares with an exercise price of $8.50 per share, the fair market value of the Common Stock on the date of the new grant. Each option granted to an executive officer is immediately exercisable for all the option shares, but any shares purchased under the option will be subject to repurchase by the Company, at the original exercise price paid per share, upon the optionee's cessation of service prior to vesting in those shares. The shares subject to each December 21, 1994 grant will vest in 36 successive equal monthly installments upon the optionee's completion of each month of service over the 36-month period measured from the date of the new grant. (6) This figure reflects the amount of Director's fees paid to Dr. Caulder by the Company. (7) This figure includes a $2,000 contribution made by the Company under its 401(k) Plan, and severance paid by the Company to Dr. Caulder in May of 1997 which consisted of (i) a one-time cash payment of $1,537,500, (ii) $1,232,850 for the value of 65,752 shares of Common Stock issued to Dr. Caulder and (iii) $41,000 for the value of a country club membership transferred to Dr. Caulder upon his resignation. (8) This figure reflects amounts paid by the Company for relocation costs incurred by Mr. Muston. 20 Stock Options and Stock Appreciation Rights The following table contains information concerning the grant of stock options and stock appreciation rights ("SARs") under the Stock Option Plan to the named executive officers:
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individaul Grants for Option Term ----------------- --------------- (a) (b) (c) (d) (e) (f) (g) % of Total Number of Number of Securities Securities Underlying Underlying Options/ Options/SARs Exercise SARs Granted to or Base Name Granted 1 Employees in Price(2) Expiration 5%(3) 10%(3) (#) Fiscal Year ($/Share) Date ($) ($) ------------- ----------- --------- ---- --- --- Carlton J. Eibl 90,000(4) 9.4% $14.438 10-17-06 $817,198 $2,070,940 Jerry D. Caulder, Ph.D. 90,000(5) 9.4% $14.438 5-1-00 $244,959 $521,405 (resigned as of May, 1997) Andrew C. Barnes 35,000(4) 3.6% $14.438 10-17-06 $317,799 $805,366 James A. Baumker 35,000(4) 3.6% $14.438 10-17-06 $317,799 $805,366 Leo Kim, Ph.D. 35,000(4) 3.6% $14.438 10-17-06 $317,799 $805,366 Michael J. Muston 40,000(6) 4.2% $16.250 9-5-06 $408,782 $1,035,933 30,000(7) 3.1% $24.000 1-29-07 $452,804 $1,147,494 --------- ---- ------- ------- -------- ----------
(1) The Compensation Committee, as Plan Administrator, may grant two types of SARs in connection with option grants made under the Stock Option Plan: (i) tandem rights which require the holder to elect between the exercise of the underlying option for shares of Common Stock and the surrender of such option for a distribution from the Company, payable in cash or shares of Common Stock, based upon the appreciated value of the option shares and (ii) limited rights which provide the optionee with a 30-day period following the successful completion of a hostile tender offer for 25% or more of the outstanding Common Stock in which to surrender the option to the Company for a cash distribution equal to the excess of the tender offer price per share of the vested shares of Common Stock subject to the surrendered option over the option exercise price otherwise payable for such shares. To date, the Plan Administrator has not granted any tandem SARs to the Company's executive officers, but each of their options does include a limited SAR. The shares subject to each option will immediately vest in the event the Company is acquired by a merger or asset sale, unless the Company's repurchase rights with respect to those shares are transferred to the acquiring entity. Each option has a maximum term of ten years, subject to earlier termination in the event of the optionee's cessation of service with the Company. (2) The exercise price may be paid in cash, in shares of Common Stock valued at fair market value on the exercise date or through a cashless exercise procedure involving a same-day sale of the purchased shares. If shares of Common Stock are used to pay the option price, the option holder surrenders to the Company a sufficient number of fully paid shares of Common Stock, valued at the fair market value on the exercise date, to fully pay the option price on the options being exercised. The Company may also finance the option exercise by loaning the optionee sufficient funds to pay the 21 exercise price for the purchased shares and the Federal and State tax liability incurred in connection with such exercise. The optionee may be permitted, subject to the approval of the Plan Administrator, to apply a portion of the shares purchased under the option (or to deliver existing shares of Common Stock) in satisfaction of such tax liability. (3) There is no assurance provided to any executive officer or any other holder of the Company's securities that the actual stock price appreciation over the ten-year option term will be at the assumed 5% and 10% levels or at any other defined level. Unless the market price of the Common Stock does in fact appreciate over the option term, no value will be realized from the option grants made to the executive officers. (4) These options were granted on October 17, 1996. Each option granted to an executive officer is immediately exercisable for all the option shares, but any shares purchased under the option will be subject to repurchase by the Company, at the original exercise price paid per share, upon the optionee's cessation of service prior to vesting in those shares. The shares subject to each grant will vest annually over three years of service measured from the grant date. (5) These options were granted on October 17, 1996 and vested on May 1, 1997, in connection with Dr. Caulder's severance agreement with the Company. These options expire on May 1, 2000. (6) These options were granted on September 5, 1996. The terms of the grant, other than exercise price, are the same as set forth above in footnote 4. (7) These options were granted on January 1, 1997. The terms of the grant, other than exercise price, are the same as set forth above in footnote 4. 22 Option/SAR Exercises and Holdings The following table provides information, with respect to the named executive officers, concerning the exercise of options and/or SARs held as of the end of the 1997 fiscal year:
Number of Securities Underlying Unexercised Value of Unexercised Options/SARs In-the-Money Options/SARs at August 31, 1997 at August 31, 1997 ------------------ ------------------ Shares Acquired on Value Exercise Realized Exercisable(1) Unexercisable Exercisable Unexercisable Name (#) ($) (#) (#) ($) ($) ---- --- --- --- --- --- --- Carlton J. Eibl 121,666 $1,804,490 398,334 -- $4,899,657 -- Jerry D. Caulder, Ph.D. (resigned as of May 1997) -- -- 722,000 -- $10,580,225 -- Andrew C. Barnes 45,000 $987,750 377,000 -- $5,446,540 -- James A. Baumker -- -- 147,444 6,556 $1,950,084 $106,535 Leo Kim, Ph.D. 86,667 $1,283,650 180,833 -- $2,203,572 -- Michael Muston -- -- 70,000 -- $362,500 -- ------- ---------- ------- ----- ---------- --------
(1) The exercisable options are immediately exercisable for all of the option shares, but any shares purchased under the option will be subject to repurchase by the Company at the option exercise price upon the optionee's termination of employment prior to vesting in those shares. As of August 31, 1997, the number of unvested shares underlying the options held by each named executive officer is as follows: Mr. Barnes 169,445; Mr. Baumker 74,890; Mr. Eibl 348,889; Dr. Kim 166,667 and Mr. Muston 70,000. Security Ownership of Directors and Management as of September 30, 1997 The following table provides information, as of September 30, 1997, with respect to the Directors and named executive officers, concerning the amount and nature of beneficial ownership of Common Stock.
Amount and Nature of Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class+ ------------------------ -------------------- ----------------- Common Stock Andrew C. Barnes 465,747(1) 1.5% Common Stock James A. Baumker 160,808(2) * Common Stock Thomas J. Cable 43,332(3) * Common Stock Jerry D. Caulder, Ph.D. 742,080(4) 2.3% Common Stock Carlton J. Eibl 421,543(5) 1.3% Common Stock Perry J. Gehring, Ph.D. --(6) -- Common Stock Nickolas D. Hein --(6) -- Common Stock Leo Kim, Ph.D. 192,585(7) * Common Stock Michael J. Muston 70,278(8) * Common Stock Louis W. Pribila, Esq. --(6) -- Common Stock David H. Rammler, Ph.D. 151,626(9) * Common Stock William C. Schmidt --(6) -- Common Stock G. William Tolbert --(6) -- Common Stock W. Wayne Withers, Esq. 6,966(10) * Common Stock Directors and executive 2,433,688(11) 7.3% Officers as a Group
23 * Less than 1%. + Percentage of beneficial ownership is calculated pursuant to SEC Rule 13d-3(d)(1). (1) This figure includes 377,000 shares of Common Stock, issuable upon exercise of options held by Mr. Barnes, which are currently exercisable or will become exercisable within sixty days of September 30, 1997, 88,287 shares held by the Andrew C. Barnes Family Trust and 85 shares held by the Mycogen 401(k) Plan. (2) This figure includes 150,721 shares of Common Stock, issuable upon exercise of options held by Mr. Baumker, which are currently exercisable or will be exercisable within sixty days of September 30, 1997, and 87 shares held by the Mycogen 401(k) Plan. (3) This figure includes 43,332 shares of Common Stock, issuable upon exercise of options held by Mr. Cable, which are currently exercisable or will become exercisable within sixty days of September 30, 1997. (4) This figure includes 722,000 shares of Common Stock, issuable upon exercise of options held by Dr. Caulder, which are currently exercisable or will become exercisable within sixty days of September 30, 1997, 2,968 shares held by the Jerry D. Caulder Family Trust and 78 shares held by the Mycogen 401(k) Plan. (5) This figure includes 398,334 shares of Common Stock, issuable upon exercise of options held by Mr. Eibl, which are currently exercisable or will become exercisable within sixty days of September 30, 1997, and 78 shares held by the Mycogen 401(k) Plan. (6) This figure does not include 17,923,245 shares of Common Stock owned by DowElanco. Dr. Gehring and Messrs. Hein, Pribila, Schmidt and Tolbert are all officers of DowElanco. See "Certain Relationships and Related Transactions." (7) This figure includes 180,833 shares of Common Stock, issuable upon exercise of options held by Dr. Kim, which are currently exercisable or will become exercisable within sixty days of September 30, 1997, and 85 shares held by the Mycogen 401(k) Plan. (8) This figures includes 70,000 shares of Common Stock, issuable upon exercise of options held by Mr. Muston, which are currently exercisable or will become exercisable within sixty days of September 30, 1997, and 89 shares held by the Mycogen 401(k) Plan. (9) This figure includes 48,332 shares of Common Stock, issuable upon exercise of options held by Dr. Rammler, which are currently exercisable or will become exercisable within sixty days of September 30, 1997. (10) This figure includes 6,666 shares of Common Stock, issuable upon exercise of options held by Mr. Withers, which are currently exercisable or will become exercisable within sixty days of September 30, 1997. (11) This figure includes 2,157,602 shares of Common Stock which are currently exercisable or will become exercisable within sixty days of September 30, 1997, issuable upon options held by all Directors and executive officers as a group. 24 Employment Contracts, Termination of Employment Agreements and Change of Control Arrangements The Company has entered into employment/severance agreements ("Employment Agreements") with the following named executive officers: Messrs. Eibl, Barnes and Baumker and Dr. Kim. The Employment Agreements provide that upon involuntary termination of the named executive officer's employment (whether or not effected in connection with a Change of Control of the Company) the named executive officer is entitled to certain severance benefits including immediate vesting of the executive officer's restricted stock and stock options. Mr. Eibl, under his Employment Agreement, will be entitled to, if his involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to four times the sum of his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the four immediately preceding calendar years and (ii) health care coverage for a four year period. If Mr. Eibl's involuntary termination occurs after January 1, 1999, he will be entitled to (i) a lump sum payment equal to three times the sum of his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the three immediately preceding calendar years and (ii) health care coverage for a three year period. Dr. Kim and Mr. Barnes, under their respective Employment Agreements, each will be entitled to, if their involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to three times the sum of their average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) health care coverage for a three year period. If Dr. Kim's and/or Mr. Barnes' involuntary termination occurs after January 1, 1999, they each will be entitled to (i) a lump sum payment equal to two times the sum of their average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) health care coverage for a two year period. Mr. Baumker, under his Employment Agreement, will be entitled to, if his involuntary termination is prior to January 1, 1999, (i) a lump sum payment equal to two times the sum of his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered in the two immediately preceding calendar years and (ii) health care coverage for a two year period. If Mr. Baumker's involuntary termination occurs after January 1, 1999, he will be entitled to (i) a lump sum payment equal to his average annual rate of base salary and the average bonus paid by the Company, in each case for services rendered for the immediately preceding two calendar years and (ii) health care coverage for a one year period. The severance benefits provided by the Employment Agreements will not be granted if the officer is terminated for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. One executive officer of the Company, Dr. Caulder, resigned in fiscal year 1997. Prior to Dr. Caulder's resignation, the Company had entered into an Employment Agreement with him which terminated upon his resignation. Dr. Caulder received $2,811,350 as total severance with the Company consisting of (i) a lump sum cash payment of $1,537,500 paid on May 1, 1997, (ii) $1,232,850 in the form of Common Stock valued at the date of his resignation and (iii) a country club membership valued at $41,000. As an additional part of his severance with the Company, Dr. Caulder will receive medical and dental insurance coverage for ten years following his resignation and life and disability insurance continuing for five years following his resignation. Upon his resignation, 23,337 shares of Dr. Caulder's restricted stock vested and 389,445 of Dr. Caulder's stock options vested. As indicated in footnote (1) to the table under the heading "Stock Options and Stock Appreciation Rights," the shares subject to option grants made to date under the Stock Option Plan will immediately vest upon a merger in which the Company is not the surviving entity, a sale of substantially all of the Company's assets in liquidation or dissolution of the Company or a reverse merger in which the Company is the surviving entity but in which 50% or more of the Company's outstanding voting stock is transferred to person or persons different from those who held such stock immediately prior to the merger, unless the Company's repurchase rights with respect to those shares are transferred to the successor entity. Compensation Committee Interlocks and Insider Participation Mr. Withers has served on the Compensation Committee for the entire 1997 fiscal year. Messrs. Hagaman and Cable served on the Compensation Committee from September 1, 1996 to March 27, 1997. Messrs. Hein and Pribila have served on the Compensation Committee since March 27, 1997. 25 No member of the Compensation Committee was at any time during the 1997 fiscal year or at any other time an officer or employee of the Company. No executive officer of the Company served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Company's Board of Directors or Compensation Committee. The following Compensation Committee Report on Executive Compensation and the Performance Graph should not be considered to be part of this Proxy Statement and any current or future cross references to this Proxy Statement in filings with the SEC under either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, shall not include the Compensation Committee Report on Executive Compensation, or the Performance Graph. Compensation Committee Report on Executive Compensation The following is the report delivered by the Compensation Committee with respect to the principal factors considered by such Committee in determining the compensation of the Company's executive officers. This report comments on the factors considered in determining compensation paid to the executive officers in fiscal year 1997 and in setting compensation for fiscal year 1998. Role of the Compensation Committee. As members of the Compensation Committee, it is our duty, after discussions with the Company's President and Vice President of Human Resources, to set the base salary, annual rewards, long-term awards and other compensation of the Company's executive officers. The Compensation Committee is also responsible for reviewing and approving the design of compensation and benefit programs for the Company and to administer the Stock Option Plan under which grants may be made to officers and other key employees. General Compensation Policy. The Compensation Committee's fundamental policy is to provide competitive compensation to the Company's executive officers based upon their contribution to the success of the Company in achieving its corporate objectives and enhancing stockholder value. In the 1997 fiscal year, the Company completed and presented to the Compensation Committee an extensive analysis of executive compensation pay practices within the agricultural seed and biotechnology industries. The study included a review of compensation paid to executives from a comparator group of ten biotechnology companies and five agricultural seed companies, all of which are located in the United States. The compensation information was compiled from two independent salary surveys. The targeted group of comparator biotechnology companies have one or more of the following attributes: related industry, similar market capitalization ($500 million to $1 billion) and/or a strong technology orientation. Those companies are all represented in the current Performance Graph included in this Proxy Statement. The agricultural seed companies chosen for the comparator group are leaders in their respective businesses and direct competitors of Mycogen. The Compensation Committee believes that the Company's most direct competitors for executive talent are not necessarily all of the companies that should be included in an index established for comparing shareholder returns for the following reasons: i) direct competitors for executive talent are not necessarily the same companies that are relevant for comparing shareholder returns because such factors as the geographical location, size and type of organization can have a greater impact on salaries than on investor decisions and ii) the ability to obtain accurate information influences which companies are included in the pay comparison. Compensation Elements. It is the Compensation Committee's continuing objective to have a substantial portion of each officer's compensation contingent upon the Company's performance as well as upon his or her own level of performance. Accordingly, each executive officer's compensation package is comprised of three elements: (i) base salary which reflects individual performance and is intended to be competitive with salary levels in the industry; (ii) annual performance awards, if awarded, are payable in cash and tied to the achievement of the Company's corporate objectives and to specific individual performance objectives and (iii) long-term stock-based incentive awards that strengthen mutual interests between the executive officers and the Company's stockholders. As an officer's level of responsibility increases, it is the Compensation Committee's intent to have a greater portion of his or her total compensation be dependent upon Company performance and stock price appreciation rather than base salary. For fiscal year 1997, the Compensation Committee approved base salary adjustments for individual executive officers to close the gap identified between an individual executive's base salary and base salaries of the comparator group and approved the award of annual variable bonuses (short-term cash bonuses) and long-term incentives to the executive officers based upon the progress the Company had made in reaching its strategic objectives. For fiscal year 1998, the Compensation Committee endorsed the Company's use of an independent compensation consulting firm to assist the Company in 26 redesigning its incentive programs, specifically to replace the Company's variable bonus awards with targeted incentive awards. Generally, the Company, as part of its fiscal year business planning process, sets key strategic objectives which, if achieved, would add the greatest value to the Company and its shareholders. For fiscal year 1998, the Company will establish incentive target awards for each executive officer based on his or her level of responsibility and upon each executive's ability to impact the Company's performance and the correlation of such performance to shareholder value. The total cash compensation paid to the Company's executive officers in fiscal year 1997 placed approximately in the 10th to 25th percentile of executive compensation paid to executive officers in companies included in the compensation analysis described above. Long-term incentive compensation (stock options) awarded to the Company's executive officers in fiscal year 1997 placed approximately in the 65th to 75th percentile. Base salary for the Company's executive officers for fiscal year 1997 was generally in the 25th to 35th percentile range of executive compensation of comparator companies. Factors. Executive compensation is based primarily on the Company's achievement of corporate objectives established at the start of each fiscal year. For fiscal year 1997, the corporate objectives were (i) to make substantial progress toward profitability in 1997, (ii) to position the Company for continued future profitability, (iii) to continue the Company's growth in terms of technological and product developments, (iv) to increase market acceptance of the Company's products, (v) to maintain market share following merger and acquisition activities in North and South America, (vi) to increase sales and earnings per share growth and broadened participation in the seed industry through strategic transactions and (vii) to strategically realign the crop protection business. The Company will use these same corporate objectives as the foundation for developing objectives for fiscal year 1998. In the future, the Company may, in its discretion, apply entirely different factors, particularly different measures of corporate growth and financial performance, in setting executive compensation. Base Salary. The base salary for each executive officer is set on the basis of the level of responsibility of the executive officers and the salary levels in effect for comparable positions within the Company's comparator group. The Compensation Committee supported base salary adjustments for the executive officers beginning in fiscal 1997 to bring them up to or near the 50th percentile range of executive compensation of the comparator group for fiscal 1998. Annual Incentive Compensation Program. In February, 1996, the Company implemented a strategic alliance with DowElanco, which, together with other strategic alliances completed by the Company, has resulted in the Company dramatically improving its revenues and pre-tax operating results, boosting its product development efforts, expanding and upgrading the Company's seeds business, realigning its biopesticide business and expanding distribution into new geographic markets. This progress has resulted in significant appreciation of the Company's stock value in fiscal year 1997 as compared to fiscal year 1996. With reference to this progress, cash bonuses were paid in March, 1996, to the Company's executive officers who had served as executive officers during the prior two fiscal years, and in September, 1996 to executive officers who had served as officers beginning in fiscal year 1996. Long-Term Incentive Compensation. Stock options are granted to align the interest of each executive officer with those of the stockholders and provide each executive officer with a significant incentive to manage the Company from the perspective of an owner with an equity stake in the business. For fiscal year 1997, stock option grant awards were made to each executive officer. The number of shares subject to each option grant was based on the officer's level of responsibilities, relative position in the Company and contribution to the Company's corporate objectives discussed above. The options granted to the executive officers in fiscal year 1997 vest in three equal annual installments. The three-year vesting intends to provide an incentive for the executive group to remain intact and to try to aggressively build shareholder value over that time frame. Each stock option has a maximum term of ten years from the grant date. Each stock option grant allows the executive officer to acquire shares of Common Stock at a fixed price per share (the market price on the grant date) over a specified period of time. Accordingly, the option will provide a return to the executive officer only if the market price of the shares appreciates over the option term. President's and CEO'S Compensation. In May, 1997, Dr. Caulder resigned from his position of Chief Executive Officer of the Company and Mr. Eibl assumed sole responsibility for overseeing all the Company's functions and directing the organization to ensure the attainment of sales and profit goals, maximum return on invested capital and, subject to the approval of the Board of Directors, formulation of the Company's current and long-range plans and objectives. In setting the compensation payable to Mr. Eibl, the Compensation Committee has sought to be competitive with other companies in the industry and has recognized Mr. Eibl's expanded responsibilities while, at the same time, tying a significant percentage of such compensation to Company performance and stock price appreciation. Mr. Eibl's total cash compensation was analyzed as part of the extensive study presented to the Compensation Committee cited above and places approximately in the 10th percentile of chief executive compensation of the comparator group. Base salary for Mr. Eibl for 27 fiscal year 1997 was in the 25th percentile range. With respect to Mr. Eibl's base salary, it is the Compensation Committee's intent to provide him with a level of stability and certainty each year and not have this particular component of compensation affected to any significant degree by Company performance factors. In setting the fiscal year 1997 compensation payable to the Company's Chief Executive Officer, Dr. Caulder, the Compensation Committee sought to be competitive with other companies in the industry, while at the same time tying a significant percentage of such compensation to Company performance and stock price appreciation. Dr. Caulder's total cash compensation places approximately in the 10th percentile of chief executive compensation of comparator companies. Base salary for Dr. Caulder for fiscal year 1997 was in the 35th percentile range. The Compensation Committee determined the severance for Dr. Caulder, which consisted of a cash payment of $1,537,500, $1,232,850 in the form of Common Stock, and the acceleration of the vesting of 23,337 shares of restricted stock and 389,445 stock options held by Dr. Caulder. The stock option grants awarded to Mr. Eibl and Dr. Caulder during the 1997 fiscal year were intended to place a significant portion of their total compensation for the year at risk, since the options would have no value unless there was appreciation in the value of the Common Stock over the option term. As indicated, it is the Compensation Committee's objective to have an increasing percentage of Mr. Eibl's total compensation each year tied to the attainment of the Company's corporate objectives and stock price appreciation on his option shares. As a result of Section 162(m) of the Internal Revenue Code, which was enacted into law in 1993, the Company will not be allowed a Federal income tax deduction for compensation paid to certain officers, to the extent that compensation exceeds $1 million per officer in any one year. This limitation is in effect for all taxable years of the Company beginning after December 31, 1993, and will apply to all compensation which is not considered to be performance-based. Compensation which does qualify as performance-based compensation will not have to be taken into account for purposes of this limitation. Any compensation deemed paid in connection with options granted under the Stock Option Plan at an exercise price equal to the fair market value of the option shares at the time of grant will qualify as performance-based compensation. The cash compensation paid to the Company's executive officers during the 1997 fiscal year did not exceed the $1 million limit per officer, except for the severance payment awarded Dr. Caulder. Dr. Caulder's severance award exceeded the $1 million threshold and, thus, the Company will not be allowed a Federal income tax deduction for any of his severance over $1 million. The Compensation Committee decided, in recognition of Dr. Caulder's exemplary services to the Company over the last ten years, to award him a severance in excess of $1 million. The Compensation Committee does not believe that a similar event will occur in fiscal year 1998. Therefore, the Committee has decided not to take any action at this time to limit or restructure the elements of cash compensation payable to the Company's executive officers. The Compensation Committee will reconsider this should the individual compensation of any executive officer, in the future, approach the $1 million level. The Compensation Committee Through March 27, 1997: Thomas J. Cable John L. Hagaman W. Wayne Withers, Esq. From March 27, 1997 to the present: Nickolas D. Hein Louis W. Pribila, Esq. W. Wayne Withers, Esq. 28 Performance Graph The following graph compares total stockholder returns of the Company over the last five fiscal years to the weighted average return of stocks of companies included in the Nasdaq Stock Market Total Return Index (the "NMS Index") and in the Nasdaq Non-Financial Stocks Industry Index. The Common Stock is traded on the NMS. The total return for each of the Company's Common Stock, the NMS Index and the Nasdaq Non-Financial Stocks Industry Index assumes the reinvestment of dividends, although dividends have not been declared on the Common Stock, and is based on the returns of the component companies weighted according to their market capitalization as of the end of each monthly period for which returns are indicated. The NMS Index tracks the aggregate price performance of equity securities of companies traded on the NMS. The Nasdaq Non-Financial Stocks Industry Index tracks all non-financial stocks traded on the NMS. Last year, a peer group index of companies identified by the Company was used because there were no published industry or line-of-business indices that paralleled the agricultural-biotechnology industry. Because of the rapid changes in equity ownership and consolidations within this industry, the Nasdaq Non-Financial Stocks Industry Index has been selected as the Company's industry index. The former peer group index consisted of the following agricultural biotechnology companies, which were the only agricultural, crop-protection biotechnology companies known to the Company to have their shares traded on NMS at that time: Calgene, Inc.; DeKalb Genetics Corporation, Inc.; Ecogen, Inc.; Ringer Corporation; Biosys, Inc.; DNA Plant Technology Corporation, Inc. and Ecoscience Corporation. The graph below includes this former peer group index for comparative purposes only. The stockholder return shown on the graph below is not necessarily indicative of future performance and the Company will not make or endorse any predictions as to future stockholder returns. COMPARISON OF CUMULATIVE FIVE-YEAR RETURNS ASSUMES $100 INVESTED ON 8/31/92 AND DIVIDEND REINVESTMENT
NASDAQ Non- Mycogen NASDAQ Financial Former Corporation NMS Stocks Peer Index ----------- --- ------ ---------- 8/31/92 100 100 100 100 9/30/92 98 104 104 101 10/30/92 96 108 108 104 11/30/92 96 116 117 119 12/31/92 106 121 120 128 1/29/93 113 124 124 116 2/26/93 100 119 117 105 3/31/93 92 123 121 97 4/30/93 94 118 116 98 5/28/93 94 125 125 104 6/30/93 100 125 125 110 7/30/93 96 125 124 95 8/31/93 100 132 131 97 9/30/93 96 136 135 106 10/29/93 85 139 139 119 11/30/93 77 135 135 106 12/31/93 77 139 139 100 1/31/94 88 143 144 108 2/28/94 83 141 142 107 3/31/94 70 133 132 98 4/29/94 85 131 129 88 5/31/94 79 131 128 103 6/30/94 81 126 122 93 7/29/94 75 129 125 84 8/31/94 79 137 134 89 9/30/94 75 137 134 76 10/31/94 75 140 138 70 11/30/94 75 135 134 62 12/30/94 63 135 134 60 1/31/95 86 136 133 59 2/28/95 70 143 140 61 3/31/95 74 148 145 58 4/28/95 70 152 150 57 5/31/95 63 156 154 53 6/30/95 62 169 168 58 7/31/95 65 181 181 55 8/31/95 77 185 183 54 9/29/95 104 189 187 56 10/31/95 101 188 185 51 11/30/95 99 193 189 47 12/29/95 128 191 186 47 1/31/96 123 192 188 60 2/29/96 147 200 196 60 3/29/96 130 200 196 61 4/30/96 130 217 215 64 5/31/96 138 227 225 66 6/28/96 113 217 213 65 7/31/96 116 197 191 66 8/30/96 120 209 202 65 9/30/96 108 224 218 10/31/96 121 222 214 11/29/96 126 236 227 12/31/96 162 236 226 1/31/97 192 252 244 2/28/97 197 238 227 3/31/97 175 223 211 4/30/97 137 230 218 5/30/97 177 256 245 6/30/97 148 264 250 7/31/97 169 291 278 8/31/97 187 291 277 29
Certain Relationships and Related Transactions DowElanco On February 19, 1996, the Company issued 4.5 million shares of Common Stock to DowElanco in exchange for one of its subsidiaries, United AgriSeeds, Inc., and $26.4 million in cash. In connection with this transaction, the Company and DowElanco entered into a five year, royalty-free, cross-licensing agreement for the use of certain current and future biological tools for genetic modification of plants and other organisms. In April of 1997, DowElanco and Mycogen entered into a loan agreement whereby DowElanco agreed to make, from time to time, advances to Mycogen up to an aggregate of $50 million. Messrs. Pribila, Hein, Tolbert, Schmidt, and Dr. Gehring are all officers of DowElanco and current members of the Company's Board of Directors. Pioneer Hi-Bred International, Inc. On December 13, 1995, Pioneer Hi-Bred International, Inc. ("Pioneer") purchased 3 million shares of Common Stock for $30 million. Concurrent with the purchase, the Company entered into a collaboration agreement with Pioneer whereby Pioneer will provide $21 million in research and development funding to the Company and will also devote extensive research and development staff and resources to the joint development program. The Company had previously licensed gene promoter technology to Pioneer in 1994 in exchange for an up-front license payment, and license maintenance fees of $10,000 per year until January 15, 2004, unless the license is terminated earlier. On August 30, 1996, the Company entered into two additional gene promoter licenses for an up-front license fee of $400,000 for each license. Transactions With Executive Officers On September 13, 1996, the Company made a $200,000 loan to Mr. Eibl, which accrues interest at 6.64% and is due and payable in five years. Mr. Eibl used a portion of the loan proceeds to purchase shares of Common Stock. The Company made a second loan of $39,996 on December 31, 1996, to Mr. Eibl which accrued interest at 6.64% and was due and payable on August 29, 1997. On July 30, 1997, Mr. Eibl paid the Company $41,655 as full payment on the outstanding balance of his second loan. The largest combined balance of these two loans during fiscal year 1997 was $253,284. On December 31, 1996, the Company made a $79,992 loan to Dr. Caulder which accrued interest at 6.64% and was due and payable on August 29, 1997. On March 31, 1997, Dr. Caulder paid the Company $81,564 as full payment of the outstanding balance of his loan. STOCKHOLDER PROPOSALS FOR 1998 PROXY STATEMENT Stockholder proposals that are intended to be presented at the Company's annual meeting of stockholders to be held in 1999 must be received by the Company no later than August 12, 1998, in order to be included in the proxy statement and related proxy materials. FORM 10-K THE COMPANY WILL MAIL WITHOUT CHARGE, UPON VERBAL REQUEST, A COPY OF THE ANNUAL REPORT AND FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE MADE BY CALLING 1-888-SEE-MYCO (1-888-733-6926). The Company's filings with the SEC are also available at the Company's web site located at http://www.mycogen.com. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC and Nasdaq. Officers, Directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, the Company believes that, during the period from September 1, 1996 to August 31, 1997, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were satisfied. 30 OTHER BUSINESS The Board of Directors knows of no other business that will be presented for consideration at the Annual Meeting. If other matters are properly brought before the Annual Meeting, however, it is the intention of the persons named in the accompanying proxy to vote the shares represented thereby on such matters in accordance with their best judgment. Dated: November 24, 1997 By Order of the Board of Directors /s/ Michael W. Sund MICHAEL W. SUND, as Secretary 31 MYCOGEN CORPORATION 1992 STOCK OPTION PLAN AS AMENDED AND RESTATED EFFECTIVE NOVEMBER 12, 1997 ARTICLE ONE GENERAL PROVISIONS I. PURPOSES OF THE PLAN A. This 1992 Stock Option Plan (the "Plan") is intended to promote the interests of Mycogen Corporation, a Delaware corporation (the "Company"), by providing a method whereby (i) key employees (including officers and directors) of the Company (or its parent or subsidiaries) who are primarily responsible for the management, growth and financial success of the Company (or its parent or subsidiaries), (ii) the non-employee members of the Company's Board of Directors and (iii) consultants and other independent contractors who provide valuable services to the Company (or its parent or subsidiaries) may be offered the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Company as an incentive for them to remain in the service of the Company (or its parent or subsidiaries). B. The Plan initially became effective immediately upon approval by the Company's stockholders at the 1992 Special Stockholders Meeting on October 27, 1992. Such date is hereby designated as the Effective Date of the Plan. This November 1997 restatement of the Plan (the "November 1997 Restatement") shall become effective immediately upon adoption by the Board of Directors, subject, however, to stockholder approval at the 1997 Annual Meeting. The Plan shall be administered in compliance with the applicable requirements of SEC Rule 16b-3, as in effect from time to time. C. This Plan shall serve as the successor to the Mycogen Corporation 1983 Stock Option Plan (the "1983 Plan"), and no further option grants shall be made under the 1983 Plan from and after the Effective Date of this Plan. All options outstanding under the 1983 Plan on such Effective Date are hereby incorporated into this Plan and shall accordingly be treated as outstanding options under this Plan. However, each outstanding option so incorporated shall continue to be governed solely by the express terms and conditions of the instrument evidencing such grant, and no provision of this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of the Company's common stock thereunder or their exercise of any outstanding stock appreciation rights thereunder. D. For purposes of the Plan, the following provisions shall be applicable in determining the parent and subsidiaries of the Company: Any corporation (other than the Company) in an unbroken chain of corporations ending with the Company shall be considered to be a parent corporation of the Company, provided each such corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Each corporation, partnership or other entity (other than the Company) in an unbroken chain of corporations, partnerships or other entities beginning with the Company shall be considered to be a subsidiary of the Company, provided each such corporation, partnership or other entity (other than the last corporation, partnership or other entity) in the unbroken chain owns, at the time of the determination, stock or other ownership interests possessing fifty percent (50%) or more of of the total combined voting power of all classes of stock or other ownership interests in one of the other corporations, partnerships or other entities in such chain. II. STRUCTURE OF THE PLAN A. STOCK PROGRAMS. THE PLAN SHALL BE DIVIDED INTO TWO SEPARATE components: the Discretionary Option Grant Program specified in Article Two and the Automatic Option Grant Program specified in Article Three. Under the Discretionary Option Grant Program, key employees (including officers), non-employee Board members, consultants and other independent contractors of the company or its subsidiaries who contribute to the management, growth and financial success of the Company or its subsidiaries, may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock in accordance with the provisions of Article Two. Under the Automatic Option Grant Program, certain non-employee members of the Company's Board of Directors (the "Board") will automatically receive special option grants to purchase shares of Common Stock in accordance with the provisions of Article Three. B. GENERAL PROVISIONS. UNLESS THE CONTEXT CLEARLY INDICATES otherwise, the provisions of Articles One and Four of the Plan shall apply to both the Discretionary Option Grant Program and the Automatic Option Grant Program and shall accordingly govern the interests of all individuals under the Plan. III. ADMINISTRATION OF THE PLAN A. The Discretionary Option Grant Program shall be administered by a committee ("Committee") of two (2) or more non-employee Board members appointed by the Board. B. The Committee as Plan Administrator shall have the sole and exclusive power and authority (subject to the express provisions of the Discretionary Option Grant Program) to establish such rules and regulations as it may deem appropriate for the proper administration of such program and to make such determinations under the program and any outstanding option as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties with an interest in any outstanding option under the Discretionary Option Grant Program. C. Service on the Committee shall constitute service as a Board member, and members of the Committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on the Committee. No member of the Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option granted under the Plan. D. Administration of the Automatic Option Grant Program shall be self-executing in accordance with the express terms and conditions of Article Three. IV. ELIGIBILITY FOR OPTION GRANTS A. The persons eligible to participate in the Discretionary Option Grant Program under Article Two of the Plan shall be limited to the following: (i) officers and other key employees of the Company (or its parent or subsidiaries) who render services which contribute to the management, growth and financial success of the Company (or its parent or subsidiaries); (ii) non-employee Board members; and (iii) those consultants and other independent contractors who provide valuable services to the Company (or its parent or subsidiaries). B. The Plan Administrator shall have the sole and exclusive authority to determine which eligible individuals are to receive option grants under the Discretionary Option Grant Program, the number of shares to be covered by each such grant, the status of the granted option as either an incentive stock option ("Incentive Option") which satisfies the requirements of Section 422 of the Internal Revenue Code or a non-statutory option not intended to meet such requirements, the time or times at which each such option is to become exercisable, and the maximum term for which the option is to remain outstanding. V. STOCK SUBJECT TO THE PLAN A. Shares of the Company's Common Stock shall be issuable under the Plan, and such shares may be obtained from either the Company's authorized but unissued shares of Common Stock or from shares of Common Stock reacquired by the Company and held as treasury shares. The maximum number of shares available for issuance over the term of the Plan shall not exceed 7,566,719 shares of Common Stock, subject to adjustment from time to time in accordance with the provisions of this Section V. To the extent one or more outstanding options under the 1983 Plan which have been incorporated into this Plan are subsequently exercised, the number of shares issued with respect to each such option shall reduce, on a share-for-share basis, the number of shares available for issuance under this Plan. B. In no event shall any one individual participating in the Plan be granted stock options and separately exercisable stock appreciation rights for more than 200,000 shares of Common Stock in the aggregate per calendar year, effective retroactive to January 1, 1996. C. Should an outstanding option under this Plan (including any outstanding options under the 1983 Plan incorporated into this Plan) expire or terminate for any reason prior to exercise in full (including any option canceled in accordance with the cancellation-regrant provisions of Section IV of Article Two of this Plan), the shares subject to the portion of the option not so exercised shall be available for subsequent option grants under this Plan. Unvested shares issued under the Plan and subsequently repurchased by the Company at the original option or issue price paid per share shall be added back to the share reserve and shall accordingly be made available for subsequent issuance under the Plan. Shares subject to any option or portion thereof surrendered in accordance with Section V of Article Two or Section III of Article Three shall not be available for subsequent issuance under the Plan. In addition, should the exercise price of an outstanding option under the Plan (including any option incorporated from the 1983 Plan) be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Company in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock actually issued to the option holder. D. In the event any change is made to the Common Stock issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company's receipt of consideration, then appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one participant may be granted stock options and separately exercisable stock appreciation rights per calendar year, (iii) the number and/or class of securities and price per share in effect under each outstanding option under the Discretionary Option Grant Program, (iv) the number and/or class of securities per non-employee Board member for which automatic option grants are subsequently to be made under the Automatic Option Grant Program to both newly-elected and re-elected non-employee Board members, (v) the number and/or class of securities and price per share in effect under each grant outstanding under the Automatic Option Grant Program and (vi) the number and/or class of shares and price per share in effect under each outstanding option incorporated into this Plan from the 1983 Plan. The purpose of such adjustments to the outstanding options shall be to preclude the enlargement or dilution of rights and benefits thereunder. ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM VI. TERMS AND CONDITIONS OF OPTIONS Options granted pursuant to this Article Two shall be authorized by action of the Plan Administrator and may, at the Plan Administrator's discretion, be either Incentive Options or non-statutory options. Individuals who are not employees of the Company or its parent or subsidiaries may only be granted non-statutory options under this Article Two. Each option granted shall be evidenced by one or more instruments in the form approved by the Plan ADMINISTRATOR; PROVIDED, HOWEVER, THAT EACH SUCH INSTRUMENT SHALL COMPLY WITH the terms and conditions specified below. Each instrument evidencing an Incentive Option shall, in addition, be subject to the applicable provisions of Section II of this Article Two. A. OPTION PRICE 1. The option price per share shall be fixed by the Plan Administrator. In no event, however, shall the option price per share be less than eighty-five percent (85%) of the fair market value per share of Common Stock on the date of the option grant. 2. The option price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section VI of this Article Two and the instrument evidencing the grant, be payable in one of the alternative forms specified below: (i) full payment in cash or check drawn to the Company's order; or (ii) full payment in shares of Common stock held by the optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at fair market value on the Exercise Date (as such term is defined below); or (iii) full payment through a combination of shares of Common Stock held by the optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at fair market value on the Exercise Date and cash or check drawn to the Company's order; or (iv) full payment effected through a broker-dealer sale and remittance procedure pursuant to which the optionee (I) shall provide irrevocable written instructions to a Company-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased shares plus all applicable Federal, State and local income and employment taxes required to be withheld by the Company by reason of such purchase and (II) shall provide written directives to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. For purposes of this subparagraph 2. the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Company. Except to the extent the sale and remittance procedure above is utilized in connection with the exercise of the option, payment of the option price for the purchased shares must accompany such notice. 3. The fair market value per share of Common Stock on any relevant date under subparagraph 1 or 2 above (and for all other valuation purposes under the Plan) shall be determined in accordance with the following provisions: (i) If the Common Stock is not at the time listed or admitted to trading on any national stock exchange but is traded on the Nasdaq National Market, then the fair market value shall be the closing selling price per share of Common Stock on the date in question, as reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no reported closing selling price for the Common Stock on the date in question, then the closing selling price on the last preceding date for which such quotation exists on the Nasdaq National Market shall be determinative of fair market value. (ii) If the Common Stock is at the time listed or admitted to trading on any national stock exchange, then the fair market value shall be the closing selling price per share of Common Stock on the date in question on the stock exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no such reported price on the date in question, then the fair market value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. B. TERM AND EXERCISE OF OPTIONS. Each option granted under this Article Two shall be exercisable at such time or times, during such period, and for such number of shares as shall be determined by the Plan Administrator and set forth in the instrument evidencing such option. No such option, however, shall have a maximum term in excess of ten (10) years from the grant date. During the lifetime of the optionee, the option, together with any stock appreciation rights pertaining to such option, shall be exercisable only by the optionee and shall not be assignable or transferable by the optionee other than a transfer of the option effected by will or by the laws of descent and distribution following the optionee's death. C. TERMINATION OF SERVICE. 1. Should an optionee cease to remain in Service for any reason (including death or permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code) while the holder of one or more outstanding options under this Article Two, then each such option shall not (except to the extent otherwise provided pursuant to Section VII of this Article Two) remain exercisable for more than a twelve (12) month period (or such shorter period as is determined by the Plan Administrator and specified in the instrument evidencing the grant) measured from the date of such cessation of Service. Under no circumstances, however, shall any such option be exercisable after the specified expiration date of the option term. Each such option shall, during such twelve (12) month or shorter period, be exercisable only to the extent of the number of shares (if any) for which the option is exercisable on the date of the optionee's cessation of Service. Upon the expiration of such twelve (12) month or shorter period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any unexercised shares for which the option was exercisable at the time of the optionee's cessation of Service. The option, however, shall immediately terminate and cease to be outstanding, at the time of the optionee's cessation of Service, with respect to any shares for which such option is not otherwise at the time exercisable or in which the optionee is not otherwise at that time vested. 2. Should the optionee die while holding one or more outstanding options under this Article Two, then each such option shall be exercisable, subject to the limitations of subparagraph 1 above, by the personal representative of the optionee's estate or by the person or persons to whom the option is transferred pursuant to the optionee's will or the laws of descent and distribution. 3. Should (i) the optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (ii) the optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Company or its parent or subsidiaries, then in any such event all outstanding options held by the optionee under this Article Two shall terminate immediately and cease to be outstanding. 4. The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time the option remains outstanding, to permit one or more options granted under this Article Two to be exercised, during the applicable exercise period under subparagraph 1 above, not only for the number of shares for which each such option is exercisable at the time of the optionee's cessation of Service but also for one or more subsequent installments of purchasable shares for which the option would otherwise have become exercisable had such cessation of Service not occurred. 5. For purposes of the foregoing provisions of the Section 1.C (and for all other purposes under the Plan): The optionee shall be deemed to remain in the Service of the Company for so long as such individual renders services on a periodic basis to the Company (or any parent or subsidiary) in the capacity of the Employee, a non-employee member of the board of directors or an independent consultant or advisor. The optionee shall be considered to be an Employee for so long as such individual remains in the employ of the Company or one or more of its parent or subsidiaries, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance. D. STOCKHOLDER RIGHTS. An optionee shall have none of the rights of a stockholder with respect to the shares of Common Stock subject to the option until such individual shall have exercised the option, paid the option price for the purchased shares and been issued a stock certificate for such shares. E. REPURCHASE RIGHTS. The shares of Common Stock issued under this Article Two may be subject to repurchase by the Company in accordance with the following provisions: 1. The Plan Administrator shall have the discretion to authorize the issuance of unvested shares of Common Stock under this Article Two. Should the Optionee cease Service while holding such unvested shares, the Company shall have the right to repurchase any or all of those unvested shares at the option price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the issued shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right. 2. All of the Company's outstanding repurchase rights shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of any Corporate Transaction under Section III of this Article Two, except to the extent: (i) any such repurchase right is, in connection with a Corporate Transaction, expressly assigned to the successor corporation (or parent thereof) or (ii) such termination is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is granted. 3. The Plan Administrator shall have the discretionary authority, exercisable either before or after the optionee's cessation of Service, to cancel the Company's outstanding repurchase rights with respect to one or more shares purchased or purchasable by the optionee under this Article Two and thereby accelerate the vesting of such shares at any time. VII. INCENTIVE OPTIONS The terms and conditions specified below shall be applicable to all Incentive Options granted under this Article Two. Incentive Options may only be granted to individuals who are Employees of the Company. Options which are specifically designated as "non-statutory" options when issued under the Plan SHALL NOT BE SUBJECT TO SUCH TERMS AND CONDITIONS. A. OPTION PRICE. THE OPTION PRICE PER SHARE OF THE COMMON STOCK subject to an Incentive Option shall in no event be less than one hundred percent (100%) of the fair market value of such Common Stock on the grant date. B. DOLLAR LIMITATION. THE AGGREGATE FAIR MARKET VALUE (DETERMINED AS of the respective date or dates of grant) of the Common Stock for which one or more options granted to any Employee under this Plan (or any other option plan of the Company or its parent or subsidiaries) may for the first time become exercisable as incentive stock options under the Federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. To the extent the One Hundred Thousand Dollar ($100,000) limitation is exceeded in any calendar year, the option shall nevertheless be exercisable for the excess number of shares as a non-statutory option. C. 10% STOCKHOLDER. IF ANY INDIVIDUAL TO WHOM AN INCENTIVE OPTION IS granted is the owner of stock (as determined under Section 424(d) of the Internal Revenue Code) possessing 10% or more of the total combined voting power of all outstanding classes of stock of the Company or any parent or subsidiary, then the option price per share shall not be less than one hundred and ten percent (110%) of the fair market value per share of the Common Stock on the grant date, and the option term shall not exceed five (5) years, measured from the grant date. Except as modified by the preceding provisions of this Section II, the provisions of Articles One, Two and Four of the Plan shall apply to all Incentive Options granted hereunder. VIII. CORPORATE TRANSACTION/CHANGE IN CONTROL A. In the event of any of the following stockholder-approved transactions to which the Company is a party (a "Corporate Transaction"): (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation. (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in complete liquidation or dissolution of the Company, or (iii) any reverse merger in which the Company is the surviving entity but in which the holders of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities (as measured immediately prior to such merger) transfer ownership to those securities to person or persons not otherwise part of the transfer or group, the exercisability of each option at the time outstanding under this Article Two shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares. However, an outstanding option under this Article Two shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof, (ii) such option is to be replaced by a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for pay-out in accordance with the same vesting schedule in effect for such option, or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive. The Plan Administrator shall also have full power and authority to grant options under the Plan which are to automatically accelerate in whole or in part immediately prior to the Corporate Transaction, whether or not those options are otherwise to be assumed or replaced in connection with the consummation of such Corporate Transaction. B. Upon the consummation of the Corporate Transaction, all outstanding options under this Article Two shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation or its parent company. C. Each outstanding option under this Article Two which is assumed in connection with the Corporate Transaction or is otherwise to continue in effect shall be appropriately adjusted, immediately after such Corporate Transaction, to apply and pertain to the number and class of securities which would have been issuable, in consummation of such Corporate Transaction, to an actual holder of the same number of shares of Common Stock as are subject to such option immediately prior to such Corporate Transaction. Appropriate ADJUSTMENTS SHALL ALSO BE MADE TO THE OPTION PRICE PAYABLE PER SHARE, PROVIDED the aggregate option price payable for such securities shall remain the same. In addition, the class and number of securities available for issuance under the Plan following the consummation of the Corporate Transaction shall be appropriately adjusted. D. The grant of options under this Article Two shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. E. The Plan Administrator shall have the discretionary authority, exercisable in advance of any actually-anticipated Change in Control or at the time of an actual Change in Control, to provide for the automatic acceleration of one or more outstanding options under this Article Two (and the automatic termination of one or more of the Company's outstanding repurchase rights under this Article Two) upon the occurrence of the Change in Control. Alternatively, the Plan Administrator shall have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the optionee's Service within a specified period following the Change in Control. For purposes of this Article Two, a Change in Control shall be deemed to occur in the event: (i) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept; or (ii) there is a change in the composition of the Board over a period of twenty-four (24) consecutive months or less such that a majority of the Board members (rounded up to the next whole number) cease, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time such election or nomination was approved by the Board F. Each option accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term or the cancellation of such option in accordance with Section V of this Article Two (if applicable). G. The exercisability as incentive stock options under the Federal tax laws of any options accelerated under this Section III in connection with Corporate Transaction or Change in Control shall remain subject to the applicable dollar limitation specified in Section II of this Article two. IX. CANCELLATION AND REGRANT OF OPTIONS The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, the cancellation of any or all outstanding options under this Article Two and to grant in substitution new options under the Plan covering the same or different numbers of shares of Common Stock but having an option price per share not less than (i) eighty-five percent (85%) of the fair market value of the Common Stock on the new grant date, or (ii) one hundred percent (100%) of such fair market value in the case of an Incentive Option, or (iii) one hundred ten percent (110%) of such fair market value in the case of an Incentive Option to be granted to a 10% Stockholder. X. STOCK APPRECIATION RIGHTS A. Provided and only if the Plan Administrator determines in its discretion to implement the stock appreciation right provisions of this Section V, one or more optionees may be granted the right, exercisable upon such terms and conditions as the Plan Administrator may establish, to surrender all or part of an unexercised option under this Article Two in exchange for a distribution from the Company in an amount equal to the excess of (i) the fair market value (on the option surrender date) of the number of shares in which the optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate option price payable for such vested shares. B. No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the optionee shall accordingly become entitled under this Section V may be made in shares of Common Stock valued at fair market value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. C. If the surrender of an option is rejected by the Plan Administrator, then the optionee shall retain whatever rights the optionee had under the surrendered option (or surrendered portion thereof) on the option SURRENDER DATE AND MAY EXERCISE SUCH RIGHTS AT ANY TIME PRIOR TO THE LATER OF (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years (or five (5) years in the case of an Incentive Option granted to a 10% Stockholder) after the date of the option grant. D. One or more officers of the Company subject to the short-swing profit restrictions of the Federal securities laws may, in the Plan Administrator's sole discretion, be granted limited stock appreciation rights in tandem with their outstanding options under this Discretionary Option Grant Program. Upon the occurrence of a Hostile Take-Over, each such officer holding one or more options with such a limited stock appreciation right in effect shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Company, to the extent the option is at the time exercisable for vested shares of Common Stock. In return for the surrendered option, the officer shall be entitled to a cash distribution from the Company in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion) over (ii) the aggregate exercise price payable for such vested shares. Such cash distribution shall be paid within five (5) days following the option surrender date. At the time any such limited stock appreciation right is granted, the Plan Administrator shall concurrently pre-approve the subsequent exercise of that right in accordance with the provisions of this Section V.D. and no additional approval of the Board of any Plan Administrator shall accordingly be required at the time of the actual option surrender and cash distribution. The balance of the option (if any) shall continue in full force and effect in accordance with the instrument evidencing such grant. E. For purposes of Section V.D. the following definitions shall be in effect: A Hostile Take-Over shall be deemed to occur in the event (i) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept. The Take-Over Price per share shall be deemed to be equal to the GREATER OF (a) THE FAIR MARKET VALUE PER SHARE ON THE OPTION SURRENDER DATE, AS determined pursuant to the valuation provisions of Section I.A.3 of this Article Two, or (b) the highest reported price per share paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (a) price per share. F. The shares of Common Stock subject to any option surrendered for an appreciation distribution pursuant to this Section V shall not be available for subsequent grants under the Plan. XI. LOANS OR INSTALLMENT PAYMENTS The Plan Administrator may assist any optionee (including any officer) in the exercise of one or more outstanding options under this Article Two by (a) authorizing the extension of a loan to such optionee from the Company or (b) permitting the optionee to pay the option price for the purchased Common Stock in installments over a period of years. The terms of any such loan or installment method of payment (including the interest rate and terms of repayment) shall be established by the Plan Administrator in its sole discretion. Loans and installment payments may be granted without security or collateral, but the maximum credit available to the optionee shall not exceed THE SUM OF (i) THE AGGREGATE OPTION PRICE (LESS PAR VALUE) OF THE PURCHASED shares plus (ii) any Federal, State and local income tax and employment tax liabilities incurred by the optionee in connection with the exercise of the option. XII. EXTENSION OF EXERCISE PERIOD The Plan Administrator shall have full power and authority to extend the period of time for which any option granted under this Article Two is to remain exercisable following the optionee's cessation of Service or death from the limited period in effect under Section 1.C.1 of this Article Two to such greater period of time as the Plan Administrator shall deem appropriate; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL SUCH OPTION BE EXERCISABLE AFTER THE specified expiration date of the option term. ARTICLE THREE AUTOMATIC OPTION GRANT PROGRAM XIII. ELIGIBILITY A. ELIGIBLE OPTIONEES. THE INDIVIDUALS ELIGIBLE TO RECEIVE automatic option grants pursuant to the provisions of this successor Article Three program shall be limited to (i) those individuals who are first elected or appointed as non-employee Board members on or after the Effective Date of this Plan, whether through appointment by the Board or election by the Company's stockholders, provided they have not otherwise been in the prior employ of the Company (or any parent or subsidiary) and (ii) those individuals who are re-elected as non-employee Board member at one or more stockholder meetings held after the Effective Date, whether or not such individuals are otherwise serving as non-employee Board members on the Effective Date. XIV. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS A. GRANT DATES. OPTION GRANTS WILL BE MADE UNDER THIS ARTICLE THREE on the dates specified below: (i) Each individual who first becomes a non-employee Board member on or after the Effective Date of the Plan, whether through election by the Company's stockholders or appointment by the Board, and who has not otherwise been in the prior employ of the Company shall automatically be granted, at the time of such initial election or appointment, a non-statutory stock option to purchase 7,500 shares of Common Stock upon the terms and conditions of this Article Three. (ii) Each individual re-elected as a non-employee Board member at one or more annual stockholder meetings, beginning with the 1997 Annual Meeting at which this November 1997 Restatement is approved, shall automatically be granted, at each such meeting at which he or she is so re-elected, a non-statutory stock option to purchase an additional 7,500 shares of Common Stock upon the terms and conditions of this Article Three. There shall be no limit on the number of annual option grants any one non-employee Board member may receive over the period of Board service. The applicable 7,500-share limitation on the automatic grants to be made to each newly-elected or re-elected non-employee Board member shall be subject to periodic adjustment pursuant to the applicable provisions of Section V.C of Article One. B. EXERCISE PRICE. THE EXERCISE PRICE PER SHARE OF EACH AUTOMATIC option grant made under this Article Three shall be equal to one hundred percent (100%) of the fair market value per share of Common Stock on the automatic grant date. C. PAYMENT The exercise price shall be payable in one of the alternative forms specified below: (i) full payment in cash or check made payable to the Company's order; or (ii) full payment in shares of Common Stock held for the requisite period necessary to avoid a charge to the Company's reported earnings and valued at fair market value on the Exercise Date (as such term is defined below), or (iii) full payment in a combination of shares of Common Stock held for the requisite period necessary to avoid a charge to the Company's reported earnings and valued at fair market value on the Exercise Date and cash or check payable to the Company's order; or (iv) full payment through a safe and remittance procedure pursuant to which the non-employee Board member shall provide irrevocable written directives to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares and shall concurrently provide written instructions to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction. For purposes of this subparagraph, the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Company, and the fair market value per share of Common Stock on any relevant date shall be determined in accordance with the provisions of Section I.A.3 of Article Two. Except to the extent the sale and remittance procedure specified above is utilized for the exercise of the option, payment of the option price for the purchased shares must accompany the exercise notice. D. OPTION TERM. EACH AUTOMATIC GRANT UNDER THIS ARTICLE THREE SHALL have a maximum term of ten (10) years measured from the automatic grant date. E. EXERCISABILITY. EACH AUTOMATIC GRANT SHALL BECOME EXERCISABLE IN a series of three (3) equal annual installments over the optionee's period of service on the board, with the first such installment to become exercisable one (1) year after the automatic grant date. The option shall not become exercisable for any additional option shares following the optionee's cessation of Board service for any reason. F. NON-TRANSFERABILITY. DURING THE LIFETIME OF THE OPTIONEE, EACH automatic option grant, together with the limited stock appreciation right pertaining to such option, shall be exercisable only by the optionee and shall not be assignable or transferable by the optionee other than a transfer of the option effected by will or by the laws of descent and distribution following optionee's death. G. EFFECT OF TERMINATION OF BOARD MEMBERSHIP. 1. Should the optionee cease to serve as a Board member for any reason (other than death) while holding one or more automatic option grants under this Article Three, then such optionee shall have a six (6) month period following the date of such cessation of Board membership in which to exercise each such option for any or all of the shares of Common Stock for which the option is exercisable at the time of such cessation of Board service. Each such option shall immediately terminate and cease to be outstanding, at the time of such cessation of Board service, with respect to any shares for which the option is not otherwise at that time exercisable. 2. Should the optionee die while serving as a member of the Board or within six (6) months after cessation of Board service, then each outstanding automatic option grant held by the optionee at the time of death may subsequently be exercised, for any or all of the shares of Common Stock for which the option is exercisable at the time of the optionee's cessation of Board service (less any option shares subsequently purchased by the optionee prior to death), by the personal representative of the optionee's estate or by the person or persons to whom the option is transferred pursuant to the optionee's will or in accordance with the laws of descent and distribution. Any such exercise must occur within twelve (12) months after the date of the optionee's death. However, each such automatic option grant shall immediately terminate and cease to be outstanding, at the time of the optionee's cessation of Board service, with respect to any option shares for which it is not otherwise at such time exercisable. 3. In no event shall any automatic grant under this Article Three remain exercisable after the specified expiration date of the ten (10)- year option term. Upon the expiration of the applicable exercise period in accordance with subparagraphs 1 and 2 above or (if earlier) upon the expiration of the ten (10)-year option term, the automatic grant shall terminate and cease to be outstanding for any unexercised shares for which the option was exercisable at the time of the optionee's cessation of Board service. H. STOCKHOLDER RIGHTS. THE HOLDER OF AN AUTOMATIC OPTION GRANT under this Article Three shall have none of the rights of a stockholder with respect to any shares subject to such option until such individual shall have exercised the option, paid the exercise price for the purchased shares and been issued a stock certificate for such shares. I. REMAINING TERMS. THE REMAINING TERMS AND CONDITIONS OF EACH automatic option grant shall be as set forth in the prototype Non-statutory Stock Option Agreement attached as Exhibit A to the Plan. XV. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any of the following stockholder-approved transactions to which the Company is a party (a "Corporate Transaction"): (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation, (ii) the sale, transfer or disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company, or (iii) any reverse merger in which the Company is the surviving entity but in which the holders of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities (as measured immediately prior to such merger) transfer ownership of those securities to person or persons not otherwise part of the transferor group, the exercisability of each automatic option grant at the time outstanding under this Article Three shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such options and may be exercised for all or any portion of such shares. Upon the consummation of the Corporate Transaction, all automatic option grants under this Article Three shall terminate and cease to be outstanding. B. In connection with any Change in Control of the Company, the exercisability of each automatic option grant at the time outstanding under this Article Three shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Change in Control, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares. For purposes of this Article Three, a Change in Control shall be deemed to occur in the event: (i) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept; or (ii) there is a change in the composition of the Board over a period of twenty-four (24) consecutive months or less such that a majority of the Board members (rounded up to the next whole number) cease, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time such election or nomination was approved by the Board. C. Upon the occurrence of a Hostile Take-Over, each non-employee Board member holding an automatic option grant under this Article Three shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender such option in return for a cash distribution from the Company in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the option is otherwise at the time exercisable for such shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date. At the time of each Article Three option grant, the Board shall concurrently pre-approve any subsequent surrender of that option in accordance with the provisions of this Section III.C, and no additional approval of the Board or any Plan Administrator shall accordingly be required at the time of the actual option surrender and cash distribution. D. For purposes of this Section III, the following definitions shall be in effect: A Hostile Take-Over shall be deemed to occur in the event (i) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept. The Take-Over Price per share shall be deemed to be equal to the greater of (a) the fair market value per share on the option surrender date, as determined pursuant to the valuation provisions of Section I.A.3 of Article Two, or (b) the highest reported price per share paid by the tender offeror in effecting such Hostile Take-Over. E. The shares of Common Stock subject to each option surrendered in connection with the Hostile Take-Over shall not be available for subsequent issuance under this Plan. F. The automatic option grants outstanding under this Article Three shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. ARTICLE FOUR MISCELLANEOUS XVI. AMENDMENT OF THE PLAN The Board shall have complete and exclusive power and authority to AMEND OR MODIFY THE PLAN IN ANY OR ALL RESPECTS WHATSOEVER; PROVIDED, HOWEVER, that no such amendment or modification shall, without the consent of the holders, adversely affect rights and obligations with respect to options at the time outstanding under the Plan. In addition, amendments to the Plan shall be subject to stockholder approval to the extent required under applicable law or regulation. XVII. TAX WITHHOLDING A. The Company's obligation to deliver shares of Common Stock or cash upon the exercise of stock options or stock appreciation rights granted under the Discretionary Option Grant Program shall be subject to the satisfaction of all applicable Federal, State and local income tax and employment tax withholding requirements. B. The Plan Administrator may, in its discretion and in accordance with the provisions of this Section II of Article Four and such supplemental rules as the Plan Administrator may from time to time adopt (including the applicable safe-harbor provisions of Securities and Exchange Commission Rule 16b-3), provide any or all holders of non-statutory options (other than the automatic grants made pursuant to Article Three of the Plan) or unvested shares under the Plan with the right to use shares of the Company's Common Stock in satisfaction of all or part of the Federal, State and local income tax and employment tax liabilities incurred by such holders in connection with the exercise of their options or the vesting of their shares (the "Taxes"). Such right may be provided to any such option holder in either or both of the following formats: 1. STOCK WITHHOLDING: THE HOLDER OF THE NON-STATUTORY OPTION OR unvested shares may be provided with the election to have the Company withhold, from the shares of Common Stock otherwise issuable upon the exercise of such non-statutory option or the vesting of such shares, a portion of those shares with an aggregate fair market value not to exceed one hundred percent (100%) of the applicable Taxes. 2. STOCK DELIVERY: THE PLAN ADMINISTRATOR MAY IN ITS discretion, provide the holder of the non-statutory option or the unvested shares with the election to deliver to the Company, at the time the non-statutory option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate fair market value equal to the designated percentage (up to 100%) as specified by the option holder) of the Taxes incurred in connection with such option exercise or share vesting. XVIII. EFFECTIVE DATE AND TERM OF PLAN A. This Plan, as successor to the Company's 1983 Plan, became effective immediately upon approval by the Company's stockholders at the 1992 Special Stockholders Meeting. B. Each option issued and outstanding under the 1983 Plan immediately prior to the Effective Date of this Plan was incorporated into this Plan and treated as an outstanding option under this Plan, but each such option continued to be governed solely by the terms and conditions of the instrument evidencing such grant, and nothing in this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such options with respect to their acquisition of shares of Common Stock thereunder or their exercise of outstanding stock appreciation rights thereunder. C. The Plan was amended and restated on November 12, 1997 to effect the following changes: (i) to decrease the number of shares of Common Stock for which options are to be granted upon the appointment or initial election of non-employee Board member from 20,000 shares to 7,500 and (ii) to increase from 5,000 to 7,500 the number of shares of Common Stock for which options are to be granted on an annual basis to non-employee Board members who are also an officer or other executive of DowElanco LLC, the Company's majority shareholder, upon their re-election to the Board at each Annual Stockholders Meeting, beginning with the 1997 Annual Meeting. The November 1997 Restatement is subject to stockholder approval at the 1997 Annual Meeting, and no option grants made on the basis of the share increase included in this November 1997 Restatement shall become exercisable in whole or in part unless and until this November 1997 Restatement is approved by the stockholders. Should such stockholder approval not be obtained at the 1997 Annual Meeting, then each option grant made pursuant to the share increase included in this November 1997 Restatement shall terminate and cease to remain outstanding, and no further option grants shall be made on the basis of that share increase. However, the provisions of the Plan as in effect immediately prior to the amendments effected by this November 1997 Restatement shall automatically be reinstated, and option grants may thereafter continue to be made pursuant to the reinstated provisions of the Plan. All option grants made prior to this November 1997 Restatement shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options, and nothing in this November 1997 Restatement shall be deemed to modify or in any way affect those outstanding options. Subject to the foregoing limitations, the Plan Administrator may make option grants under the Plan at any time before the date fixed herein for the termination of the Plan. D. Unless sooner terminated in accordance with Section III of Article Two and Section III of Article Three, the Plan shall terminate upon the EARLIER OF (i) DECEMBER 31, 2002 OR (ii) THE DATE ON WHICH ALL SHARES AVAILABLE for issuance under the Plan shall have been issued or canceled pursuant to the exercise, surrender or cash-out of the options granted hereunder. If the date of termination is determined under clause (i) above, then options outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such options. E. Options may be granted under this Plan to purchase shares of Common Stock in excess of the number of shares then available for issuance under THE PLAN, PROVIDED EACH OPTION SO GRANTED IS NOT TO BECOME EXERCISABLE, IN WHOLE or in part, at any time prior to stockholder approval of an amendment authorizing a sufficient increase in the number of shares issuable under the Plan. XIX. USE OF PROCEEDS Any cash proceeds received by the Company from the sale of shares pursuant to options granted under the Plan shall be used for general corporate purposes. XX. REGULATORY APPROVALS The implementation of the Plan, the granting of any option hereunder, and the issuance of stock upon the exercise or surrender of any such option shall be subject to the procurement by the Company of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the stock issued pursuant to it. XXI. NO EMPLOYMENT/SERVICE RIGHTS Neither the action of the Company in establishing this Plan, nor any action taken by the Plan Administrator hereunder, nor any provision of this Plan shall be construed so as to grant any individual the right to remain in the employ or service of the Company (or any parent or subsidiary) for any period of specific duration, and the Company (or any parent subsidiary corporation retaining the services of such individual) may terminate such individual's employment or service at any time and for any reason, with or without cause. PROXY MYCOGEN CORPORATION PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Michael W. Sund, the Secretary of the Company, as proxy, with full power of substitution, to vote all shares of stock which the undersigned is entitled to vote at the Annual meeting of Stockholders of Mycogen Corporation to be held on Thursday, January 8, 1998, or at any adjournment(s) thereof, as specified on the reverse side, and to vote in his discretion on such other business as may properly come before the Meeting and any adjournment(s) thereof. (Please sign and date on reverse side) 1997 HIGHLIGHTS DETACH HERE MYCF Major Seed Acquisition - Early in fiscal 1997, Mycogen made a major addition to its corn and oilseed commercialization platform with the acquisition of Morgan Seeds, Argentina's second-leading marketer of seed corn and third-leading marketer of sunflower seed, and an exporter of seed products to several other South American countries. Disease Resistance Technology - In November 1997, Mycogen obtained exclusive worldwide rights for synthetic peptide technology for development of plant disease resistant varieties of several major crops. Edible Vaccines - In October 1997, Mycogen entered into license agreements with Washington University, St. Louis, Mo., for exclusive commercial rights to human and animal health applications of technology to genetically alter plants to produce and deliver edible vaccines. [X] Please mark notes as in this example. Unless otherwise specified by the undersigned this proxy will be voted in the manner directed below, but if no contrary direction is made, it will be voted FOR the director nominees listed below, and by the proxyholder at his or her discretion as to any other matters properly transacted at the Annual Meeting or any adjournment(s) thereof. 1. Election of Directors NOMINEES: Carlton J. Eibl, Perry J. Gehring, Nickolas D. Hein, Louis W. Pribila, William C. Schmidt, and G. William Tolbert FOR [ ] WITHHELD [ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ] [ ] For all nominees except as noted above. 2. 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.\ FOR [ ] AGAINST [ ] ABSTAIN [ ] 3. To approve two amendments to the Company's 1992 Stock Option Plan: (i) a reduction in the initial automatic stock option grant to a non-employee Director from 20,000 shares to 7,500 shares, and (ii) to provide that all non-employee Directors be entitled to a grant of 7,500 shares. FOR [ ] AGAINST [ ] ABSTAIN [ ] 4. To ratify the appointment of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending August 31, 1998. FOR [ ] AGAINST [ ] ABSTAIN [ ] 5. The undersigned confers upon the proxy hereby appointed discretion to transact any other business which may properly come before the Meeting or any adjournment(s) thereof. Please sign exactly as name appears on your stock certificates. if signing as attorney, executor, administrator, trustee, or guardian, please give full title as such and if signing for an organization, give your title. When shares are in the names of more than one person, each should sign. Signature DATE: Signature DATE: EX-99.5 5 EXHIBIT 99.5 [LOGO] September 4, 1998 Dear Stockholders: I am pleased to inform you that Mycogen Corporation (the "Company") has entered into an Agreement and Plan of Merger dated as of August 31, 1998 (the "Merger Agreement") with Dow AgroSciences LLC ("Parent") and AgroSciences Acquisition Inc. ("Purchaser"), both indirect wholly-owned subsidiaries of The Dow Chemical Company ("TDCC"), pursuant to which Purchaser has today commenced a cash tender offer (the "Offer") to purchase all of the outstanding shares ("Shares") of the common stock, par value $0.001 per share (including the associated preferred stock purchase rights) ("Common Stock") of the Company at a purchase price of $28.00 per Share, net to the seller in cash. The Merger Agreement provides for the making of the Offer which, if consummated and certain conditions are satisfied, will be followed by a merger of Purchaser with and into the Company (the "Merger"), with the Company surviving as an indirect wholly-owned subsidiary of TDCC. In the Merger, Shares (other than Shares owned by Parent, Purchaser or the Company or Shares held by stockholders who properly exercise dissenters' rights under California law) will be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer, without interest thereon. BOTH YOUR BOARD OF DIRECTORS AND A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS HAVE UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY (OTHER THAN TDCC OR ITS AFFILIATES). YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board of Directors and the Special Committee each gave consideration to the factors described in the attached Schedule 14D-9 that is being filed today with the Securities and Exchange Commission, including, among other things, the opinion of Wasserstein Perella & Co., Inc., the Special Committee's financial advisors, that, subject to the various assumptions and limitations set forth therein, as of the date of such opinion, the $28.00 cash price to be received by the holders of Shares in the Offer and the Merger pursuant to the Merger Agreement is fair to such holders (other than TDCC or its affiliates) from a financial point of view. In addition to the attached Schedule 14D-9, enclosed is the Offer to Purchase dated September 4, 1998, together with related materials, including a Letter of Transmittal, to be used for tendering your Shares pursuant to the Offer. These documents state the terms and conditions of the Offer and the Merger, provide detailed information about the transactions and include instructions as to how to tender your Shares. We urge you to read these documents carefully in making your decision with respect to tendering your Shares pursuant to the Offer. Very truly yours, [LOGO] PRESIDENT EX-99.6 6 EXHIBIT 99.6 July 16, 1998 The Dow Chemical Company 2030 Dow Center Midland, Michigan 48674 Attention: Brian J. Taylorson Dow AgroSciences LLC 9330 Zionsville Road Indianapolis, Indiana 46268 Attention: Louis M. Pribila Dear Mr. Taylorson and Mr. Pribila: In order to evaluate the request by Dow AgroSciences LLC ("DAS") that the Board of Directors of Mycogen Corporation ("MYCOGEN") consider amending (the "PROPOSED AMENDMENT") the Exchange and Purchase Agreement dated as of January 15, 1996 among Mycogen, Agrigenetics, Inc., DAS and United Agriseeds, Inc., the Special Committee of independent directors (the "SPECIAL COMMITTEE") appointed on April 30, 1998 by the Board of Directors of Mycogen to consider the advisability of entering into the Proposed Amendment has requested that The Dow Chemical Company ("TDCC") and DAS provide the Special Committee and its representatives access to certain non-public, confidential, proprietary and/or privileged TDCC and DAS information relating to Mycogen, DAS or TDCC (the "CONFIDENTIAL INFORMATION"). As a condition to being furnished the Confidential Information, the Special Committee and its representatives, and any other person who receives Confidential Information pursuant to this letter agreement, each agree to treat such Confidential Information in accordance with the terms of this letter agreement. The term "Confidential Information" includes information which has been provided to the Special Committee and its representatives since April 30, 1998 as well as information which will be provided on or after the date of this letter agreement. The term "Confidential Information" does not include information which (i) was or becomes generally available to the public other than as a result of a disclosure in violation of the terms of this letter agreement, or (ii) was or becomes available to the Special Committee or its representatives on a non-confidential basis from a source other than DAS or TDCC, provided that the Special Committee or its representatives, as the case may be, reasonably believes that such source has obtained such information lawfully and is not under any obligation of confidentiality to DAS or TDCC. The Special Committee agrees that the Confidential Information will be kept confidential and will be used only for evaluating the Proposed Amendment and, in the event the Proposed Amendment is entered into by Mycogen and DAS subsequently makes an offer to purchase all of Mycogen's capital stock (a "PROPOSED TRANSACTION"), for evaluating any Proposed Transaction. The Special Committee further agrees that the Confidential Information shall not be shown, made available or communicated in any way to anyone other than members of the Special Committee, its attorneys, Altheimer & Gray, and its financial advisor, Wasserstein Perella & Co., Inc. (including, if determined by the Special Committee, Dr. Alan J. Biloski, formerly of Wasserstein Perella & Co.). DAS, TDCC and the Special Committee acknowledge that the Special Committee may believe it appropriate to disclose Confidential Information to other parties in connection with its deliberations. If the Special Committee desires to disclose any Confidential Information to any other person(s), the Special Committee shall identify to DAS and TDCC the person(s) and the Confidential Information desired to be disclosed to such person(s) and request DAS' and TDCC's approval to such disclosure, and may not disclose such Confidential Information without DAS's and TDCC's prior written approval. Wasserstein Perella & Co., Inc., Dr. Biloski (if the Special Committee determines to provide him with any Confidential Information) and any other person approved by DAS and TDCC to receive Confidential Information shall execute a copy of and agree to be bound by the terms of this letter. All Confidential Information will remain subject to the terms of this letter for ten years from the letterhead date. In the event the Special Committee or its representatives, or any other person who receives Confidential Information pursuant to this letter, receive a subpoena or other legal administrative, regulatory (including self-regulatory) or judicial process or notice requesting Confidential Information, the person receiving such request shall, to the extent permitted under such legal, administrative, regulatory or judicial process or notice, provide prompt notice to TDCC and DAS of such request to allow TDCC and DAS an opportunity to prevent disclosure of the Confidential Information, and shall also reasonably cooperate with TDCC and DAS to prevent disclosure of such Confidential Information. Except as provided in the immediately preceding sentence, nothing in this letter shall restrict any use or disclosure of Confidential Information required by law or required by or in response to applicable legal, administrative, regulatory or judicial process or rules or as required consistent with fiduciary duties of the directors or officers of Mycogen in their capacities as such, in each case as advised by counsel. Without prejudice to the rights and remedies otherwise available to them, TDCC and DAS shall each be entitled to equitable relief by way of specific performance, injunction or otherwise in the event of any actual or threatened breach of any provision of this letter agreement. It is further understood and agreed that no failure or delay by TDCC or DAS in exercising any right, power or privilege under this letter agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege under this letter agreement. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without reference to conflicts of laws principles. * * * 2 Please confirm your agreement with the foregoing by signing and returning to the undersigned a duplicate copy of this letter. Very truly yours, Special Committee of the Board of Directors of Mycogen Corporation By: --------------------------------- Peter Lieberman Altheimer & Gray 10 S. Wacker Drive Suite 4000 Chicago, IL 60606 Counsel for the Special Committee Wasserstein, Perella & Co., Inc. By: --------------------------------- John Simpson Managing Director Accepted and Agreed THE DOW CHEMICAL COMPANY By: ---------------------------- Name: Title: DOW AGROSCIENCES LLC By: ---------------------------- Name: Title: 3 EX-99.8 7 EXHIBIT 99.8 AMENDMENT TO EXCHANGE AND PURCHASE AGREEMENT This AMENDMENT TO EXCHANGE AND PURCHASE AGREEMENT, (this "Amendment") dated as of July 22, 1998, is among MYCOGEN CORPORATION, a California corporation (the "Company") and DOW AGROSCIENCES LLC ("DAS" or "Parent"). WHEREAS, DAS is the successor to DowElanco, an Indiana general partnership ("DowElanco"); WHEREAS, the Company and DAS desire to amend the Exchange and Purchase Agreement dated as of January 15, 1996 among the Company, Agrigenetics, Inc., DowElanco and United Agriseeds, Inc. (the "Exchange and Purchase Agreement"); and WHEREAS, each of the Independent Directors and the Company's Board of Directors have approved this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Amendment, and intending to be legally bound, the Company and DAS, as the successor to DowElanco, agree as follows. 1. Section 6.12 of the Exchange and Purchase Agreement is hereby amended by inserting the following Section 6.12.3 at the end of Section 6.12: 6.12.3 Notwithstanding anything to the contrary contained in this Agreement, (i) Parent or its affiliates may during the period (the "Exception Period") beginning on July 22, 1998 and ending on August 31, 1998 (which Exception Period may be extended from time to time in writing signed by Joseph Sullivan and Clayton Yeutter, acting as the Special Committee of the Board of Directors of the Company (the "Special Committee")), discuss and negotiate with the Special Committee and its legal and financial representatives the terms and conditions (including terms relating to valuation and pricing) of a possible transaction involving the acquisition by Parent or any of its affiliates of all outstanding shares of Common Stock and the acquisition of, or other arrangement providing for the exchange, cancellation or amendment of, all outstanding options to purchase shares of Common Stock from the holders of such shares and options; and (ii) if appropriate terms and conditions of such a transaction have been approved in writing during the Exception Period by the Special Committee in its sole and absolute discretion, then Parent or its affiliates may, thereafter during the Exception Period and for such period thereafter as permitted by such approval, formally propose to the Company's shareholders and option holders to effect such approved transaction, and thereafter consummate such approved transaction in accordance with its terms. Nothing in this Section 6.12.3 shall affect the rights or obligations of the parties set forth in Section 6.13 for the period following the third anniversary of the Measurement Date. 2. In all other respects the Exchange and Purchase remains in full force and effect in accordance with its terms without any amendment thereto. If there is any perceived conflict between this Amendment and the remainder of the Exchange and Purchase Agreement, such a conflict shall be resolved in favor of implementing this Amendment. 3. This Amendment will be governed by and construed in accordance with the law of the State of Delaware, without regard to the principles of conflicts of law thereof. 4. This Amendment may be executed in two or more counterparts, each of which will be deemed to be an original, but all of which will constitute one and the same agreement. 5. References to Parent in this Amendment and the Exchange and Purchase Agreement shall be deemed to apply to DAS as the successor of DowElanco. 6. Capitalized terms used but not otherwise defined in this Amendment shall have the meaning assigned to those terms in the Exchange and Purchase Agreement. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed on its behalf by its authorized representatives as of the day and year first above written. MYCOGEN CORPORATION By: /s/ Joseph P. Sullivan Name: Joseph P. Sullivan Title: Director DOW AGROSCIENCES LLC By: /s/ Louis W. Pribila Name: Louis W. Pribila Title: Vice President, Secretary and General Counsel EX-99.9 8 EXHIBIT 99.9 RESTATED LOAN AGREEMENT This Restated Loan Agreement ("Agreement") is made as of April 16, 1998 between Dow AgroSciences LLC, a Delaware limited liability company (the "Lender"), and Mycoyen S.A., an Argentine corporation (the "Borrower") (together, the "parties"). WHEREAS, Mycogen Corporation has executed an Assignment of Loan dated April 16, 1998, assigning to Lender all of its rights, title and interest to a certain Revolving Loan Agreement dated January 1, 1997, between Mycogen Corporation, successor in interest to Agrigenetics, Inc., and Borrower, and WHEREAS, the parties agree to restate the Revolving Loan Agreement in its entirety; NOW, THEREFORE, the parties hereto have agreed and do hereby agree as follows: 1. THE LOAN 1.1 The Advance From the above date to December 31, 1998, the Lender agrees to make from time to time advances to the Borrower ("Advances"), in an aggregate amount not exceeding $50,000,000 (fifty million U.S. dollars), at any time outstanding ("Commitment"). Advances repaid prior to December 31, 1998, may be reborrowed. This Agreement involves U.S. dollars only. The term "Termination Date" shall mean December 31, 1998. Borrower must give notice to Lender by 9:00 a.m. Eastern Standard Time on any Business Day if Advances are requested for that day. 1.2 Repayment (a) The unpaid principal amount of each Advance shall be due and payable on the last Business Day of the term of each Advance (each, a "Maturity Date"). Notwithstanding the foregoing, the unpaid principal amount of the Loan shall be due and payable on the Termination Date. (b) Interest on the unpaid principal amount of the Loan shall be capitalized and added to the unpaid principal amount of the Loan on the first Business Day of each month. Notwithstanding the foregoing, all accrued and unpaid interest is due and payable on the Repayment date. (c) Repayment may be made at any time, provided that the final repayment be made on or prior to December 31, 1998. Borrower must receive Lender's request for repayment by 9:00 a.m. Eastern -1- Standard Time on an Business Day if repayment is to be made that day. 1.3 Cancellation/Reduction As provided under 2, EVENTS OF DEFAULT, Lender may at any time permanently reduce the Commitment and the unpaid principal and all interest shall be due and payable immediately. 1.4 Evidence of Debt The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from the Loan and the amounts of principal and interest payable and paid from time to time hereunder. In any legal action or proceeding in respect of the Agreement, the entries made in such account or accounts shall, unless in case of obvious or manifest error, be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded. 1.5 Interest (a) The Loan shall bear interest from day to day at an interest rate per annum (i) From the date of this Agreement until the Maturity Date equal to the lesser of (x) LIBOR, as defined below, plus 0.375%, or (y) the maximum rate allowable by law (the "Interest Rate"). (ii) "LIBOR" means the rate of deposits in U.S. dollars for a period of one month which appears on the Telerate page 3750 as of 11:00 a.m., London time, on the date that is two Business days prior to the first day of the Interest Period. Interest accrues on the unpaid principal amount of each Advance from the date of each Advance and is payable in accordance with Section 1.2. (b) The Interest Rate for each Interest Period is calculated by Lender prior to each interest Period. Such calculation is conclusive and binding absent manifest error. (c) Interest is calculated on the basis of a 360-day year for actual days occurring during the Interest Period. -2- (d) "Interest Period" means the period commencing on the first Business Day of each month and ending on the day immediately preceding the first Business Day of the succeeding month. 2. EVENTS OF DEFAULT In the event that: (A) The Borrower fails to pay any sum payable hereunder when due; or (B) The Borrower defaults in the due performance and observance of any other term of this Agreement and such default is not remedied within 15 days after notice of such default; or (C) The Borrower goes bankrupt or becomes insolvent or is subject to a receivership either voluntary or compulsory; or (D) Any order is made or law, decree, regulation or resolution passed for the liquidation, winding up or dissolution of the Borrower; or (E) All or any substantial part of the business or assets of the Borrower is expropriated, nationalized, compulsorily acquired or taken into public ownership or the Borrower ceases to be able or entitled to exercise the rights of control or ownership of the same; or (F) The Borrower ceases to be directly or indirectly controlled by Lender, then and in any such event, and at any time thereafter if any such event shall then be continuing, the Lender may, by written notice to the Borrower declare the Loan immediately due and payable together with all interest accrued thereon and all other amounts payable hereunder, including all interest accrued on any past due principal, to the extent permitted by law. 3. REPRESENTATIONS AND WARRANTIES OF BORROWER, The Borrower represent and warrants as follows: (A) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the Republic of Argentina; (B) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's Articles of Formation or By-laws or (ii) any law or any judgment or contractual restriction binding on or affecting the Borrower; -3- (C) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body which has not already been obtained or made is required for the due execution, delivery and performance by the Borrower of this Agreement; and (D) This Agreement is the legal, valid and binding obligation of the Borrower enforceable against Borrower in accordance with its terms. 4. COVENANTS OF THE BORROWER; REPORTING REQUIREMENTS. So long as the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender: (A) As soon as practicable, in any event within five Business Days after the occurrence of each Event of Default, or each event which with notice or lapse of time or both would become an Event of Default, which is continuing on the date of such statement, a statement of an authorized representative of the Borrower setting forth details of such Event of Default or event and the action which the Borrower proposes to take with respect thereto; and (B) Such other information respecting the business, properties or the condition or operations, financial or otherwise, of the Borrower as the Lender may from time to time reasonably request. 5. COSTS AND EXPENSES The Borrower agrees to pay on demand all losses and all costs and expenses, if any, in connection with the enforcement of this Agreement and any instruments or other documents delivered hereunder, including, without limitation, losses, costs and expenses sustained as a result of a default by the Borrower in the performance of its obligations contained in this Agreement or any instrument or document delivered hereunder. 6. ALTERNATIVE DISPUTE RESOLUTION The parties shall negotiate in good faith to resolve any dispute arising out of or relating to this Agreement. In the event that the parties fail to resolve a dispute by good faith negotiations, or if either party deems a resolution by such means to be improbable, either party may initiate mediation of the dispute upon written notice to the other party. Such mediation shall be conducted promptly in accordance with the Center for Public Resources Model Procedure for Mediation of Business Disputes. If, within 60 days after notice of mediation, the parties have failed to resolve the dispute by mediation, either party may propose binding arbitration or initiate litigation. If either party requests mediation, it shall occur in Indianapolis, Indiana. -4- 7. CHANGE OF CONTROL. After any change of Control (as defined below) of the Borrower, the Lender may, at its option, upon notice to the Borrower declare all principal, interest, and other amounts payable under this Agreement to be immediately due and payable, whereupon the same shall become immediately due and payable. 8. DEFINITIONS. Capitalized terms as to which such capitalization would not be required in accordance with standard rules of grammar shall have the meanings specified below. "Affiliate" means, with respect to each party hereto, a party that directly, or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the party specified. The term "control" is defined below. For purposes of this Agreement, Borrower is not an Affiliate of Lender. "Business Day" means any day other than a Saturday, Sunday or other day on which banking institutions in Indianapolis, Indiana are required or authorized by law to suspend operations. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any individual, corporation, partnership, unincorporated association or other entity, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of 20% or more of a corporation's outstanding voting stock shall be deemed to have Control of such corporation. 9. MISCELLANEOUS The Borrower agrees to take all such steps and actions and to execute and to deliver and/or cause to be delivered all such further documents and instruments as may be necessary in the opinion of the Lender to establish, maintain and protect the rights of the Lender hereunder and generally to carry out the true intent of this Agreement. 10. ASSIGNMENT This Agreement may not be assigned in whole or in part by Borrower without the express written consent of the other party. This Agreement may be assigned by Lender to any Affiliate. 11. SUCCESSORS This Agreement and any instrument or document executed in accordance herewith shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assignees. -5- 12. GOVERNING LAW This Agreement and any instruments or other documents executed in accordance herewith shall be governed by and construed in accordance with the laws of the State of Indiana. 13. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any instrument delivered hereunder, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by an authorized representative of the Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first written above. LENDER: BORROWER: Dow AgroSciences LLC Mycoyen S.A. By: /s/ Sean S. Skinner By: [Illegible] ---------------------------- --------------------------- Printed: Sean S. Skinner Printed: [Illegible] ----------------------- ---------------------- Title: Treasurer Title: Vice President ------------------------- ------------------------ Date: 5/15/98 Date: -------------------------- ------------------------- [Illegible] -6- EX-99.10 9 EXHIBIT 99.10 LOAN AGREEMENT This Loan Agreement ("Agreement") is made as of April 1, 1997 between Mycogen Corporation, a California corporation (the "Lender"), and DowElanco, an Indiana general partnership (the "Borrower"). The parties hereto have agreed and do hereby agree as follows: 1. THE LOAN 1.1 The Advance From the above date to April 1, 1998, the Lender agrees to make from time to time advances to the Borrower ("Advances"), in an aggregate amount not exceeding $50,000,000 (fifty million U.S. dollars), at any time outstanding ("Commitment"). Lender must receive Borrower's request for an advance by 9:00 a.m. Eastern Standard Time if the advance is to be made that day. Advances repaid prior to April 1, 1998, may be reborrowed. This Agreement involves U.S. dollars only. 1.2 Repayment Repayment may be made at any time, provided that the final repayment be made on or prior to April 1, 1998. 1.3 Cancellation/Reduction From time to time and upon 30 days written notice, the Borrower or Lender may at any time permanently reduce the Commitment and the unpaid principal and all interest shall be due and payable immediately. 1.4 Evidence of Debt The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from the Loan and the amounts of principal and interest payable and paid from time to time hereunder. In any legal action or proceeding in respect of the Agreement, the entries made in such account or accounts shall, unless in case of obvious or manifest error, be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded. -1- 1.5 Interest The Loan shall bear interest from day to day at Borrower's rate of deposit, as advised from time to time by Borrower, minus 1/8% per annum payable every three months from the date hereof to maturity on the outstanding balance. 2. EVENTS OF DEFAULT In the event that: (A) The Borrower fails to pay any sum payable hereunder when due; or (B) The Borrower defaults in the due performance and observance of any other term of this Agreement and such default is not remedied within 15 days after notice of such default; or (C) The Borrower goes bankrupt or becomes insolvent or is subject to a receivership either voluntary or compulsory; or (D) Any order is made or law, decree, regulation or resolution passed for the liquidation, winding up or dissolution of the Borrower; or (E) All or any substantial part of the business or assets of the Borrower is expropriated, nationalized, compulsorily acquired or taken into public ownership or the Borrower ceases to be able or entitled to exercise the rights of control or ownership of the same; or (F) The Borrower ceases to be directly or indirectly controlled by The Dow Chemical Company, Midland, Michigan, U.S.A., then and in any such event, and at any time thereafter if any such event shall then be continuing, the Lender may, by written notice to the Borrower declare the Loan immediately due and payable whereupon the same shall become immediately due and payable together with all interest accrued thereon and all other amounts payable hereunder, including all interest accrued on any past due principal, to the extent permitted by law. 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. The Borrower represents and warrants as follows: (A) The Borrower is an Indiana general partnership; (B) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's powers, have been duly authorized by all necessary action, and do not contravene (i) the Borrower's -2- Partnership Agreement or Authorization Policy or (ii) any law or any judgment or contractual restriction binding on or affecting the Borrower; (C) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body which has not already been obtained or made is required for the due execution, delivery and performance by the Borrower of this Agreement; and (D) This Agreement is the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. 4. COVENANTS OF THE BORROWER; REPORTING REQUIREMENTS. So long as the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender: (A) As soon as practicable, in any event within five Business Days after the occurrence of each Event of Default, or each event which with notice or lapse of time or both would become an Event of Default, which is continuing on the date of such statement, a statement of an authorized representative of the Borrower setting forth details of such Event of Default or event and the action which the Borrower proposes to take with respect thereto; and (B) Such other information respecting the business, properties or the condition or operations, financial or otherwise, of the Borrower as the Lender may from time to time reasonably request. 5. COSTS AND EXPENSES The Borrower agrees to pay on demand all losses and all costs and expenses, if any, in connection with the enforcement of this Agreement and any instruments or other documents delivered hereunder, including, without limitation, losses, costs and expenses sustained as a result of a default by the Borrower in the performance of its obligations contained in this Agreement or any instrument or document delivered hereunder. 6. ALTERNATIVE DISPUTE RESOLUTION The parties shall negotiate in good faith to resolve any dispute arising out of or relating to this Agreement. In the event that the parties fail to resolve a dispute by good faith negotiations, or if either party deems a resolution by such means to be improbable, either party may initiate mediation of the dispute upon written notice to the other party. Such mediation shall be conducted promptly in accordance with the Center for Public Resources Model Procedure for Mediation of Business Disputes. If, within 60 days after notice of mediation, the parties have failed to resolve the dispute by mediation, either party may propose binding arbitration or -3- initiate litigation. If either party requests mediation, it shall occur in Indianapolis, Indiana. 7. CHANGE OF CONTROL. After any change of Control (as defined below) of the Borrower, the Lender may, at its option, upon notice to the Borrower declare all principal, interest, and other amounts payable under this Agreement to be immediately due and payable, whereupon the same shall become immediately due and payable. 8. DEFINITIONS. Capitalized terms as to which such capitalization would not be required in accordance with standard rules of grammar shall have the meanings specified below. "Affiliate" means, with respect to each party hereto, a party that directly, or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the party specified. The term "control" is defined below. For purposes of this Agreement, Lender is not an Affiliate of Borrower. "Business Day" means any day other than a Saturday, Sunday or other day on which banking institutions in Indianapolis, Indiana are required or authorized by law to suspend operations. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any individual, corporation, partnership, unincorporated association or other entity, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of 20% or more of a corporation's outstanding voting stock shall be deemed to have Control of such corporation. 9. MISCELLANEOUS The Borrower agrees to take all such steps and actions and to execute and to deliver and/or cause to be delivered all such further documents and instruments as may be necessary at any time or times in the reasonable opinion of the Lender to establish, maintain and protect the rights of the Lender hereunder and generally to carry out the true intent of this Agreement. 10. ASSIGNMENT This agreement may not be assigned in whole or in part by Lender without the express written consent of the other party. This Agreement may be assigned by Borrower to any Affiliate. -4- 11. SUCCESSORS This Agreement and any instrument or document executed in accordance herewith shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assignees. 12. GOVERNING LAW This Agreement and any instruments or other documents executed in accordance herewith shall be governed by and construed in accordance with the laws of the State of Indiana. 13. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any instrument delivered hereunder, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by an authorized representative of the Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first written above. LENDER: BORROWER: DowElanco Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ James A. Baumker ---------------------------- --------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: VP CFO ------------------------- ------------------------ Date: 5/20/97 Date: 6/10/97 -------------------------- ------------------------- [Illegible] -5- EX-99.11 10 EXHIBIT 99.11 AMENDMENT NO. 1 TO LOAN AGREEMENT This Amendment No. 1 to Loan Agreement ("Amendment") is made as of September 29, 1997 between DowElanco LLC, a Delaware corporation, f/k/a DowElanco, an Indiana general partnership (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower") (together, the "parties"). WHEREAS, the parties executed a Loan Agreement as of April 1, 1997 (the "Agreement"); and WHEREAS, the parties wish to amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: Section 1.3 Cancellation/Reduction is hereby deleted in its entirety and replaced with the following: 1.3 Cancellation/Reduction As provided under 2. EVENTS OF DEFAULT the Borrower or Lender may at any time permanently reduce the Commitment and the unpaid principal and all interest shall be due and payable immediately. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: DowElanco LLC Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ James A. Baumker ----------------------------- ------------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: VP CFO ------------------------- ------------------------ Date: 9/23/97 Date: 9/29/97 -------------------------- ------------------------- EX-99.12 11 EXHIBIT 99.12 AMENDMENT NO.2 TO LOAN AGREEMENT This Amendment No. 2 to Loan Agreement ("Amendment") is made as of November 14, 1997 between DowElanco LLC, a Delaware corporation, f/k/a DowElanco, an Indiana general partnership (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower") (together, the "parties"). WHEREAS, the parties executed a Loan Agreement as of April 1, 1997, and Amendment No. 1 as of September 29, 1997 (the "Agreement"); and WHEREAS, the parties wish to amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: Section 1.1 The Advance is hereby deleted in its entirety and replaced with the following: 1.1 The Advance From the date of this Amendment No. 2 to April 1, 1998, the Lender agrees to make from time to time advances to the Borrower ("Advances"), in an aggregate amount not exceeding $75,000,000 (seventy-five million U.S. dollars), at any time outstanding ("Commitment"). Lender must receive Borrower's request for an advance by 9:00 a.m. Eastern Standard Time if the advance is to be made that day. Advances repaid prior to April 1, 1998, may be reborrowed. This Agreement involves U.S. dollars only. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: DowElanco LLC Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ James A. Baumker ----------------------------- ------------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: VP CFO ------------------------- ------------------------ Date: 11/14/97 Date: 11/17/97 -------------------------- ------------------------- EX-99.13 12 EXHIBIT 99.13 AMENDMENT NO. 3 TO LOAN AGREEMENT This Amendment No. 3 to Loan Agreement ("Amendment") is made as of November 18, 1997 between DowElanco LLC, a Delaware corporation, f/k/a DowElanco, an Indiana general partnership (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower") (together, the "parties"). WHEREAS, Lender and Borrower are parties to that certain Loan Agreement dated as of April 1, 1997, as amended by Amendment No. 1 as of September 29, 1997, and Amendment No. 2 as of November 14, 1997 (the "Agreement"); and WHEREAS, the parties wish to further amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: Section 1.2 is hereby deleted in its entirety and replaced with the following: 1.2 Repayment Repayment may be made at any time, provided that the final repayment be made on or prior to September 30, 1998. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: DowElanco LLC Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ James A. Baumker ----------------------------- ------------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: VP CFO ------------------------- ------------------------ Date: 11/18/97 Date: 11/19/97 -------------------------- ------------------------- EX-99.14 13 EXHIBIT 99.14 AMENDMENT NO. 4 TO LOAN AGREEMENT This Amendment No. 4 to Loan Agreement ("Amendment") is made as of April 6, 1998 between Dow AgroSciences LLC, formerly known as DowElanco LLC, a Delaware limited liability company (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower") (together, the "parties"). WHEREAS, Lender and Borrower are parties to that certain Loan Agreement dated as of April 1, 1997, as amended by Amendment No. 1 as of September 29, 1997, Amendment No. 2 as of November 14, 1997, and Amendment No. 3 as of November 18, 1997 (the "Agreement"); and WHEREAS, the parties wish to further amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: Section 1.2 Repayment is hereby deleted in its entirety and replaced with the following: 1.2 Repayment Repayment may be made at any time, provided that the final repayment be made on or prior to September 30, 1999. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: Dow AgroSciences LLC Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ James A. Baumker ----------------------------- ------------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: CEO ------------------------- ------------------------ Date: 4/7/98 Date: 4/8/98 -------------------------- ------------------------- EX-99.15 14 EXHIBIT 99.15 AMENDMENT NO. 5 TO LOAN AGREEMENT This Amendment No. 5 to Loan Agreement ("Amendment") is made as of ___________, 1997 between Dow AgroScience LLC, formerly known as DowElanco LLC, a Delaware limited liability company (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower") (together, the "parties"). WHEREAS, Lender and Borrower are parties to that certain Loan Agreement dated as of April 1, 1997, as amended by Amendment No. 1 as of September 29, 1997, Amendment No. 2 as of November 14, 1997, Amendment No. 3 as of November 18, 1997, and Amendment No. 4 as of April 6, 1998 (the "Agreement"); and WHEREAS, the parties wish to further amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: 1. Section 1.2 Repayment is hereby deleted in its entirety and replaced with the following: 1.2 Repayment (a) The unpaid principal amount of each Advance shall be due and payable on the Repayment Date. (b) Interest on the unpaid principal amount of the Loan is due and payable as it accrues on the first Business Day of each calendar quarter until December 31, 1997; thereafter, interest on the unpaid principal amount of the Loan shall be capitalized and added to the unpaid principal amount of the Loan on the first Business Day of each month. Notwithstanding the foregoing, all accrued and unpaid interest is due and payable on the Repayment Date. (c) Repayment may be made at any time, provided that the final repayment be made on or prior to the Repayment Date. Borrower must receive Lender's request for repayment by 9:00 a.m. Eastern Standard Time on any Business Day if repayment is to be made that day. 2. Section 1.5 Interest is hereby deleted in its entirety and replaced with the following: 1.5 Interest (a) The Loan shall bear interest from day to day at an interest rate per annum 1 (i) From October 1, 1997 through March 31, 1998, equal to LIBOR, as defined below, plus 0.25%, and (ii) From April 1, 1998, until the Repayment Date equal to LIBOR, as defined below, plus 0.375%. (iii) From October 1, 1997 until December 31, 1997, "LIBOR" means the rate of deposits in U.S. dollars for a period of three months which appears on the Telerate page 3750 as of 11:00 a.m., London time, on the date that is two Business days prior to the first day of the Interest Period. Effective January 1, 1998, "LIBOR" means the rate for deposits in U.S. dollars for a period of one month which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the date that is two Business Days prior to the first date of the Interest Period. Interest accrues on the unpaid principal amount of each Advance from the date of each Advance and is payable in accordance with Section 1.2. (b) The Interest Rate for each Interest Period is calculated by Lender prior to each Interest Period. Such calculation is conclusive and binding absent manifest error. (c) Interest is calculated on the basis of a 360-day year for actual days occurring during the Interest Period. (d) "Interest Period" means each calendar quarter, or part of each calendar quarter, during which the Loan or any Advance is outstanding between the date of this Amendment and December 31, 1997. Thereafter, "Interest Period" means the period commencing on the first Business Day of each month and ending on the day immediately preceding the first Business Day of the succeeding month. All other terms and conditions of the Agreement shall remain in full force and effect. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: Dow AgroSciences LLC Mycogen Corporation By: /s/ Sean S. Skinner By: /s/ J.A. Baumker ---------------------------- ---------------------------- Printed: Sean S. Skinner Printed: J.A. Baumker ----------------------- ----------------------- Title: Treasurer Title: CEO ------------------------- ------------------------- Date: 4/13/98 Date: 4/15/98 -------------------------- -------------------------- 3 EX-99.16 15 EXHIBIT 99.16 LOAN AGREEMENT This Loan Agreement ("Agreement") is made as of April 1, 1997 between DowElanco, an Indiana general partnership (the "Lender"), and Mycogen Corporation, a California corporation (the "Borrower"). The parties hereto have agreed and do hereby agree as follows: 1. THE LOAN 1.1 The Advance From the above date to April 1, 1998, the Lender agrees to make from time to time advances to the Borrower ("Advances"), in an aggregate amount not exceeding $50,000,000 (fifty million U.S. dollars), at any time outstanding ("Commitment"). Advances repaid prior to April 1, 1998, may be reborrowed. This Agreement involves U.S. dollars only. 1.2 Repayment Repayment may be made at any time, provided that the final repayment be made on or prior to April 1, 1998. Borrower must receive Lender's request for repayment by 9:00 a.m. Eastern Standard Time on any Business Day if repayment is to be made that day. 1.3 Cancellation/Reduction From time to time and upon 30 days written notice, except as provided under 2. EVENTS OF DEFAULT, the Borrower or Lender may at any time permanently reduce the Commitment and the unpaid principal and all interest shall be due and payable immediately. 1.4 Evidence of Debt The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from the Loan and the amounts of principal and interest payable and paid from time to time hereunder. In any legal action or proceeding in respect of the Agreement, the entries made in such account or accounts shall, unless in case of obvious or manifest error, be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded. -1- 1.5 Interest The Loan shall bear interest from day to day at Lender's cost of borrowing, as advised from time to time by Lender, plus 1/8% per annum payable every three months from the date hereof to maturity on the outstanding balance. 2. EVENTS OF DEFAULT In the event that: (A) The Borrower fails to pay any sum payable hereunder when due; or (B) The Borrower defaults in the due performance and observance of any other term of this Agreement and such default is not remedied within 15 days after notice of such default; or (C) The Borrower goes bankrupt or becomes insolvent or is subject to a receivership either voluntary or compulsory; or (D) Any order is made or law, decree, regulation or resolution passed for the liquidation, winding up or dissolution of the Borrower; or (E) All or any substantial part of the business or assets of the Borrower is expropriated, nationalized, compulsorily acquired or taken into public ownership or the Borrower ceases to be able or entitled to exercise the rights of control or ownership of the same; or (F) The Borrower ceases to be directly or indirectly controlled by Lender. then and in any such event, and at any time thereafter if any such event shall then be continuing, the Lender may, by written notice to the Borrower declare the Loan immediately due and payable together with all interest accrued thereon and all other amounts payable hereunder, including all interest accrued on any past due principal, to the extent permitted by law. 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. The Borrower represents and warrants as follows: (A) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (B) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's Articles of Incorporation or By-laws or (ii) any law or any judgment or contractual restriction binding on or affecting the Borrower; -2- (C) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body which has not already been obtained or made is required for the due execution, delivery and performance by the Borrower of this Agreement; and (D) This Agreement is the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. 4. COVENANTS OF THE BORROWER; REPORTING REQUIREMENTS. So long as the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender: (A) As soon as practicable, in any event within five Business Days after the occurrence of each Event of Default, or each event which with notice or lapse of time or both would become an Event of Default, which is continuing on the date of such statement, a statement of an authorized representative of the Borrower setting forth details of such Event of Default or event and the the action which the Borrower proposes to take with respect thereto; and (B) Such other information respecting the business, properties or the condition or operations, financial or otherwise, of the Borrower as the Lender may from time to time reasonably request. 5. COSTS AND EXPENSES The Borrower agrees to pay on demand all losses and all costs and expenses, if any, in connection with the enforcement of this Agreement and any instruments or other documents delivered hereunder, including, without limitation, losses, costs and expenses sustained as a result of a default by the Borrower in the performance of its obligations contained in this Agreement or any instrument or document delivered hereunder. 6. ALTERNATIVE DISPUTE RESOLUTION The parties shall negotiate in good faith to resolve any dispute arising out of or relating to this Agreement. In the event that the parties fail to resolve a dispute by good faith negotiations, or if either party deems a resolution by such means to be improbable, either party may initiate mediation of the dispute upon written notice to the other party. Such mediation shall be conducted promptly in accordance with the Center for Public Resources Model Procedure for Mediation of Business Disputes. If, within 60 days after notice of mediation, the parties have failed to resolve the dispute by mediation, either party may propose binding arbitration or initiate litigation. If either party requests mediation, it shall occur in Indianapolis, Indiana. -3- 7. CHANGE OF CONTROL. After any change of Control (as defined below) of the Borrower, the Lender may, at its option, upon notice to the Borrower declare all principal, interest, and other amounts payable under this Agreement to be immediately due and payable, whereupon the same shall become immediately due and payable. 8. DEFINITIONS. Capitalized terms as to which such capitalization would not be required in accordance with standard rules of grammar shall have the meanings specified below. "Affiliate" means, with respect to each party hereto, a party that directly, or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the party specified. The term "control" is defined below. For purposes of this Agreement, Borrower is not an Affiliate of Lender. "Business Day" means any day other than a Saturday, Sunday or other day on which banking institutions in Indianapolis, Indiana are required or authorized by law to suspend operations. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any individual, corporation, partnership, unincorporated association or other entity, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of 20% or more of a corporation's outstanding voting stock shall be deemed to have Control of such corporation. 9. MISCELLANEOUS The Borrower agrees to take all such steps and actions and to execute and to deliver and/or cause to be delivered all such further documents and instruments as may be necessary in the opinion of the Lender to establish, maintain and protect the rights of the Lender hereunder and generally to carry out the true intent of this Agreement. 10. ASSIGNMENT This agreement may not be assigned in whole or in part by Borrower without the express written consent of the other party. This Agreement may be assigned by Lender to any Affiliate. 11. SUCCESSORS This Agreement and any instrument or document executed in accordance herewith shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assignees. -4- 12. GOVERNING LAW This Agreement and any instruments or other documents executed in accordance herewith shall be governed by and construed in accordance with the laws of the State of Indiana. 13. AMENDMENTS, ETC. No amendment of waiver of any provision of this Agreement or any instrument delivered hereunder, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by an authorized representative of the Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first written above. LENDER: BORROWER: DowElanco Mycogen Corporation By: /s/ Sean S. Skinner By: James A. Baumker ---------------------------- --------------------------- Printed: Sean S. Skinner Printed: James A. Baumker ----------------------- ---------------------- Title: Treasurer Title: VP CFO ------------------------- ------------------------ Date: 5/20/97 Date: 6/10/97 -------------------------- ------------------------- [Illegible] -5- EX-99.17 16 EXHIBIT 99.17 AMENDMENT NO. 1 TO LOAN AGREEMENT This Amendment No. 1 to Loan Agreement ("Amendment") is made as of April 6, 1998 between Mycogen Corporation, a California corporation (the "Lender"), and Dow AgroSciences LLC, formerly known as DowElanco LLC, a Delaware limited liability company (the "Borrower") (together, the "parties"). WHEREAS, Lender and Borrower are parties to that certain Loan Agreement dated as of April 1, 1997 (the "Agreement"); and WHEREAS, the parties wish to amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: Section 1.2 Repayment is hereby deleted in its entirety and replaced with the following: 1.2 Repayment Repayment may be made at any time, provided that the final repayment be made on or prior to September 30, 1999. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: Mycogen Corporation Dow AgroSciences LLC By: /s/ James A. Baumker By: /s/ Sean S. Skinner ------------------------------ ----------------------------- Printed: James A. Baumker Printed: Sean S. Skinner ---------------------- ----------------------- Title: CEO Title: Treasurer ------------------------ ------------------------- Date: 4/8/98 Date: 4/7/98 ------------------------- -------------------------- i EX-99.18 17 EXHIBIT 99.18 AMENDMENT NO. 2 TO LOAN AGREEMENT This Amendment No. 2 to Loan Agreement ("Amendment") is made as of October 1, 1997 between Mycogen Corporation, a California corporation (the "Lender"), and Dow AgroSciences LLC, formerly known as DowElanco LLC, a Delaware limited liability company (the "Borrower") (together, the "parties"). WHEREAS, Lender and Borrower are parties to that certain Loan Agreement dated as of April 1, 1997, as amended by Amendment No. 1 as of April 6, 1998 (the "Agreement"); and WHEREAS, the parties wish to amend the Agreement; NOW THEREFORE, the parties hereto have agreed and do hereby agree to amend the Agreement as follows: 1. Section 1.2 Repayment is hereby deleted in its entirety and replaced with the following: 1.2 Repayment (a) The unpaid principal amount of each Advance shall be due and payable on the Repayment Date. (b) Interest on the unpaid principal amount of the Loan is due and payable as it accrues on the first Business Day of each calendar quarter until December 31, 1997; thereafter, interest on the unpaid principal amount of the Loan shall be capitalized and added to the unpaid principal amount of the Loan on the first Business Day of each month. Notwithstanding the foregoing, all accrued and unpaid interest is due and payable on the Repayment Date. (c) Repayment may be made at any time, provided that the final repayment be made on or prior to the Repayment Date. Borrower must receive Lender's request for repayment by 9:00 a.m. Eastern Standard Time on any Business Day if repayment is to be made that day. 2. Section 1.5 Interest is hereby deleted in its entirety and replaced with the following: 1.5 Interest (a) From October 1, 1997 until the Repayment Date, the Loan shall bear interest at a rate equal to LIBID, as defined below, minus 0.25%. 1 (b) "LIBID" means LIBOR minus 0.125%. From October 1, 1997 until December 31, 1997, "LIBOR" means the rate of deposits in U.S. dollars for a period of three months which appears on the Telerate page 3750 as of 11:00 a.m., London time, on the date that is two Business days prior to the first day of the Interest Period. Effective January 1, 1998, "LIBOR" means the rate for deposits in U.S. dollars for a period of one month which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the date that is two Business Days prior to the first date of the Interest Period. Interest accrues on the unpaid principal amount of each Advance from the date of each Advance and is payable in accordance with Section 1.2. (c) The Interest Rate for each Interest Period is calculated by Lender prior to each Interest Period. Such calculation is conclusive and binding absent manifest error. (d) Interest is calculated on the basis of a 360-day year for actual days occurring during the Interest Period. (e) "Interest Period" means each calendar quarter, or part of each calendar quarter, during which the Loan or any Advance is outstanding between the date of this Amendment and December 31, 1997. Thereafter, "Interest Period" means the period commencing on the first Business Day of each month and ending on the day immediately preceding the first Business Day of the succeeding month. All other terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed on the date first written above. LENDER: BORROWER: Mycogen Corporation Dow AgroSciences LLC By: /s/ J.A. Baumker By: /s/ Sean S. Skinner ---------------------------- ---------------------------- Printed: J.A. Baumker Printed: Sean S. Skinner ----------------------- ----------------------- Title: CEO Title: Treasurer ------------------------- ------------------------- Date: 4/15/98 Date: 4/13/98 -------------------------- -------------------------- 2 EX-99.19 18 EXHIBIT 99.19 BRASSICA LICENSE AND RESEARCH AGREEMENT This Agreement is between DowElanco Canada (hereinafter DEC) a Canadian Corporation and Mycogen Corporation (hereinafter Mycogen), a California Corporation. WHEREAS Mycogen owns certain rights to i) BACILLUS THURINGIENSIS technology, ii) BACILLUS THURINGIENSIS patents and patent applications, iii) owns BRASSICA germplasm, which is listed in Appendix A, and can further develop BRASSICA germplasm; WHEREAS DEC is interested in having another party develop BRASSICA germplasm for its use; WHEREAS, the parties have previously entered into a Memorandum of Understanding dated March 13, 1996 for an oilseed BRASSICA program to develop improved cultivars and incorporate insect resistance traits based on use of BACILLUS THURINGIENSIS technology; WHEREAS, the parties recognize that certain basic assumptions and facts which the BRASSICA program was based upon have changed, NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows: ARTICLES ARTICLE I - DEFINITIONS SECTION 1.01 BRASSICA: "BRASSICA" means species, germplasm and cultures of OILSEED BRASSICA, including but not limited to BRASSICA NAPUS, BRASSICA RAPA, BRASSICA CARINATA, BRASSICA JUNCEA and SINAPIS ALBA. SECTION 1.02 Bt PROGRAM VARIETIES: "Bt Program Varieties" means Program Varieties which have incorporated Bt Traits. SECTION 1.03 Bt VARIETIES: "Bt Varieties" means Varieties which have incorporated Bt Traits. SECTION 1.04 Bt TRAITS: "Bt Traits" means BACILLUS THURINGIENSIS genes or transgenic plant containing BT genes (events) developed from the Pioneer/Mycogen Bt Collaboration, developed solely by Mycogen or developed by Mycogen and another collaborator, and any Bt genes or events which Mycogen may have access to through licenses with third-parties, but only to the extent such genes are available for sublicensing to DEC for purposes of this Agreement. Bt Traits with activity against Flea Beetle (primary target) and Bertha Armyworm/Diamondback Moth (secondary target) are included, as are other Bt Traits for other targets, which may be identified by DEC to Mycogen in writing from time to time. 1 SECTION 1.05 CONFIDENTIAL INFORMATION: "Confidential Information" means either party's information and includes, but is not limited to, all information contained in unpublished patent application(s), Developmental Targets, Product Goals and any information related thereto, Intellectual Property, Technology and any information related to business relationships, strategies, surveys, forecasts, marketing research, product concepts and product development processes. SECTION 1.06 DEC AFFILIATES: "DEC Affiliates" mean DowElanco or DowElanco B.V., any company which owns, directly or indirectly, an equity interest in DowElanco (the Indiana Partnership) or DowElanco B.V., and any company which DowElanco Canada, DowElanco (the Indiana partnership) or DowElanco B.V., now or hereafter owns, directly or indirectly, at least twenty-five percent (25%) of the company's outstanding equity. For purposes of this Agreement, Mycogen and Mycogen Affiliates will not be considered DEC Affiliates. SECTION 1.07 DEC TRANSGENIC TRAITS: "DEC Transgenic Traits" means any trait which is derived or produced via molecular methods other than markers. SECTION 1.08 DEVELOPMENTAL TARGETS: "Developmental Targets" means the quantitative target for the agronomic, oil and meal traits that are defined as Product Goal, i.e., one such agronomic trait is yield (see definition of Product Goals) and the Developmental Target for this trait could be for example yield more than or at least equal to the variety Quannum. SECTION 1.09 HIGH OLEIC: "High Oleic" means oleic acid content in seed oil greater than seventy percent (70%) on a weight percent basis. SECTION 1.10 INTELLECTUAL PROPERTY: "Intellectual Property" means all PVP(s), and Patent(s) and patent know-how owned or controlled by Mycogen, filed or developed prior to the execution of this Agreement, related to Varieties, Product Goals and Developmental Targets and any continuation, divisional, continuation-in-part, reexaminations reissue application(s) thereof, and any corresponding foreign patent application(s) thereof and any patents derived from any of the foregoing, and any other U.S. or foreign patent/patent application(s) owned or licensed by Mycogen to the extent that the PVP(s) and Patent(s)/patent application(s) claim any of the Varieties, Product Goals or Developmental Targets. SECTION 1.11 MANAGEMENT DEVELOPMENT TEAM: "Management Development Team or MDT" means a team comprising two (2) Mycogen and three (3) DEC and/or DEC Affiliate employees. SECTION 1.12 MYCOGEN AFFILIATES: "Mycogen Affiliates" means any company which Mycogen owns directly or indirectly at least twenty-five percent (25%) of the company's outstanding equity. 2 SECTION 1.13 NET SALES: "Net Sales" means the invoice price of any sale, lease, transfer or other disposition of Planting Seeds to customers less (i) value added tax, sales or turnover tax, excise taxes and duties which are included in the price, (ii) trade, quantity and cash discounts actually allowed and taken, (iii) allowances for credits given for rejected or returned Planting Seeds, (iv) rebates, and (v) freight and insurance if included in the price. If Planting Seeds are transferred among DEC Affiliates, such transfers shall not be considered to be included in Net Sales and subject to a royalty under this Agreement, unless the transferee uses the Planting Seeds without transferring such Planting Seeds to a non-DEC Affiliate for consideration. Any subsequent transfer by a DEC Affiliate to a non-DEC Affiliate shall be included in the Net Sales subject to a royalty under this Agreement, and the invoice price used in determining Net Sales for the transfer shall be the invoice price for the transfer by the DEC Affiliate to the non-DEC Affiliate. SECTION 1.12 PATENT(S): "Patent(s)" shall mean all patent(s) and patent application(s) owned or controlled by Mycogen, including any application(s) and patent(s) which were filed prior to the execution of this Agreement, any continuation, divisional, continuations-in-part, reexamination, reissue patent(s) and patent application(s), as well as foreign patent(s) and patent application(s) claiming Varieties or products produced by Varieties which meet Product Goals, such as oils having High Oleic content and include, but not limited to, US Patent Application No. 08/374402 entitled "75% Oleate Canola Oil with Improved Stability" and any continuation, divisional, continuations-in-part, reexamination, reissue patent(s) and patent application(s), as well as foreign patent(s) thereof. SECTION 1.15 PLANTING SEEDS: "Planting Seeds" means seeds of Varieties which are sold for commercial production of canola or other BRASSICA species. SECTION 1.16 PRODUCTS: "Products" means materials developed from processing of commercial crop grown from Planting Seeds or Program Planting Seeds. SECTION 1.17 PRODUCT GOALS: "Product Goals" means a) agronomic traits, such as, but not limited to: yield, maturity, lodging resistance and disease resistance, such as blackleg; b) oil traits, such as, but not limited to: oil percentage on a seed weight basis, erocic acid level, oleic acid level and linolenic acid level; and c) meal traits, such as, but not limited to: fiber percentage, glucosinolate content, sinapine content, phytic acid content, and protein content. The Product Goals may be further defined by the Management Development Team. However, Product Goals will exclude transgenic traits, including but not limited to Bt Traits and Roundup Ready Traits, except as to the extent that such traits become available to DEC under the provisions of this Agreement, or by other written agreement of the parties. 3 SECTION 1.18 PROGRAM: "Program" means development via traditional breeding and mutation techniques of BRASSICA germplasm and cultivars and the production of Program Varieties to meet Product Goals and Development Targets. SECTION 1.19 PROGRAM PLANTING SEEDS: "Program Planting Seeds" means seeds of Program Varieties which are sold for commercial production of canola or other BRASSICA species. SECTION 1.20 PROGRAM PVP(s): "Program PVP(s)" means Plant Variety Protection applications(s) and certificate(s) claiming Porgram Varieties. SECTION 1.21 PROGRAM REPORTS: "Programs Reports" means written reports containing information on progress of research and development, field data, along with the costs and expenditures of the Program. The costs and expenditures shall be reported in sufficient detail such that a third party audit could be completed if necessary. Research and development information shall include but shall not be limited to information about results from laboratory analysis of oil and meal traits identified as Developmental Targets and Product Goals. Field data shall include all results from nurseries and yield trials for agronomic traits identified as Product Goals and Developmental Targets. SECTION 1.22 PROGRAM VARIETIES: "Program Varieties" means varieties developed under the Program using Mycogen germplasm, licensed germplasm and germplasm in the public domain. SECTION 1.23 PVP(S): "PVP(S)" means Plant Variety Protection applications(s) and certificate(s) owned or controlled by Mycogen covering Varieties. SECTION 1.24 ROUND-UP READY VARIETIES: "Round-up Ready Varieties" means Varieties, Program Varieties, Bt Varieties, Bt Program Varieties that contain the Round-up Ready gene. SECTION 1.25 SEEDS: "Seeds" shall mean an organ of the plant which is harvested and sown in a successive growing season to produce the next generation of plants, where such Seeds are not Planting Seeds or Program Planting Seeds. SECTION 1.26 TECHNOLOGY: "Technology" means Varieties, and Intellectual Property, breeding techniques and any know-how that is related to the Program, but was developed prior to the effective date of this agreement, but only to the extent that such technology is used in the program. SECTION 1.27 THIRD PARTY VARIETIES: "Third Party Varieties" means Varieties developed solely from third-party germplasm outside the Program. SECTION 1.28 VARIETIES: "Varieties" means oilseed BRASSICA germplasm and cultivars developed by Mycogen prior to the Program as listed in Appendix A. 4 ARTICLE 2 - OILSEED BRASSICA VARIETY AND BREEDING LINES DEVELOPMENT PROGRAM SECTION 2.01 BRASSICA VARIETY DEVELOPMENT SCHEDULE: BRASSICA Variety Development Schedule is defined in Appendix B and is incorporated in full by reference. The MDT, as defined in the Section below, will agree upon Product Goals and Developmental Targets for the Program. Thereafter on a yearly basis, the MDT shall establish and modify the benchmarks and monitor the progress of the Program. Modifications to the Developmental Targets and Program Goals shall be made yearly on or by February 15th by the MDT. Mycogen will use reasonably diligent efforts to develop by March 15th of year four (4) at least twenty (20) Program Varieties containing Developmental Targets for DEC evaluation. The objective of the Program is to commercialize at least one (1) Program Variety in year seven (7) of the Program. SECTION 2.02 BRASSICA VARIETY MANAGEMENT DEVELOPMENT TEAM: A Management Development Team (MDT) will meet within thirty (30) days of receipt of Program Reports. The location of the meetings shall be determined by the MDT. The MDT shall annually up date Appendix C, listing the Varieties that are developed under the Program. The MDT shall be comprised of two (2) Mycogen and three (3) DEC employees, and ad hoc a DEC and a Mycogen attorney. The MDT shall review the Program Reports and make recommendations regarding modification of the Program so that the Program meets its Product Goals and Developmental Targets. SECTION 2.03 BRASSICA VARIETY DEVELOPMENT PROGRAM: A) DEVELOPMENTAL TARGETS: Mycogen shall incorporate Developmental Targets into germplasm according to the BRASSICA Variety Development Schedule in Section 1 above. SECTION 2.04 PROGRAM REPORTS: Mycogen shall provide Program Reports on a quarterly basis according to a schedule established by the MDT, which schedule may be changed from time to time. SECTION 2.05 MAINTENANCE OF ADVANCED SEED: Mycogen shall be responsible for maintaining at least five (5) pounds of pre-breeder seed of all advanced relevant Varieties and Program Varieties as determined by the MDT. At the request of DEC a breeder seed increase will be performed by Mycogen. SECTION 2.06 DEC FIELD TESTING: At DEC's discretion, DEC may conduct testing/field testing of Varieties or Program Varieties. DEC shall share data from such testing/field testing with Mycogen. SECTION 2.07 MYCOGEN FIELD TESTING: Mycogen shall obtain data which supports advancement of Varieties or Program Varieties according to the BRASSICA Variety 5 Development Schedule-attached hereto as Appendix B. This data shall be included in Program Reports. SECTION 2.08 FUNDING AND PAYMENTS: DEC shall pay only the actual costs of the Program, which in any event, at least U.S. $750,000 per year. Costs and expenditures of the Program shall be included in Program Reports. DEC shall pay Mycogen for the cost of Program within thirty (30) days of receipt of Program Report. Payments for the Program shall be made to the following address: Mycogen Corporation 5501 Berlin Drive San Diego, California 92121 SECTION 2.09 INVENTIONS: Subject to Articles 3 and 4, DEC shall own all Program Varieties. The Parties shall be responsible for filing and/or maintaining Patent(s) as specified in Section 2.10. SECTION 2.10 FILING AND MAINTAINING PATENT(S) AND PVP(S): Mycogen warrants that it will use its best efforts to prosecute and maintain any Patent(s) or PVP(s) which exist at the execution of this agreement. Mycogen warrants that it shall pay any taxes and maintenance fees to keep Patent(s) or PVP(s) in full force and effect during the term of this Agreement. However, if Mycogen decides not to make such payments or abandon prosecution of Patent(s) or PVP(s), Mycogen shall give DEC at least sixty (60) days notice so that DEC may talk over the prosecution of Patent(s) or PVP(s) or make such payments to keep Patent(s) or PVP(s) in force. DE shall be solely reponsible for filing, prosecuting and maintaining patent(s) or PVPs which are filed after the execution of this Agreement and which are developed under the Program. If DEC decides no to file patent(s) or PVP(s) claiming Program Varieties, Mycogen may file such patent(s) or PVP(s). If DEC decides to abandon or fails to pay maintenance fees or taxes, Mycogen may take over payment of fees or taxes for patent(s) or PVP(s). However, even if Mycogen takes over the filing or maintenance of patent(s) or PVP(s), DEC shall have a license as described in Sections 3.01 and 4.01 hereunder. ARTICLE 3 - RIGHTS AND GRANTS SECTION 3.01 MYCOGEN GRANTS REGARDING VARIETIES: Mycogen grants DEC a sole, irrevocable, exclusive right to develop, make, have made, use, sublicense sell and have sold the Planting Seeds and Program Planting Seeds and products therefrom. No right is granted under this Agreement to sublicense the use of Varieties or Program Varieties for breeding or the development of new planting materials. SECTION 3.02 DEC OPTION REGARDING Bt PATENT(S) AND ACCESS TO ROUND-UP READY TRAITS: If Mycogen grants a Bt license in BRASSICA to a third party, the DEC may license Bt's from Mycogen to produce Planting Seed of Bt Varieties or Program Planting Seed of Bt 6 Program Varieties under terms and conditions no less favorable than other licensees of Bt in BRASSICA. If Mycogen obtains access to Round-up Ready traits for BRASSICA and can sublicense such rights, DEC shall have an option to license the traits for producing Planting Seed of Round-up Ready Varieties or Program Planting Seed of Round-up Ready Program Varieties. The terms and conditions of the license shall be no less favorable than the terms and conditions of other Mycogen Round-up Ready licenses. SECTION 3.03 MYCOGEN OPTION REGARDING PLANTING SEED AND PROGRAM PLANTING SEED OF VARIETIES AND PROGRAM VARIETIES: If DEC licenses Planting Seed or Program Planting Seed of Varieties or Program Varieties to third parties, then Mycogen will have the right to obtain a license from DEC to make, have made, use and sell such Planting Seeds and Program Planting Seeds of such Varieties or Program Varieties from DEC under terms and conditions no less favorable than those granted by DEC to such third Parties. SECTION 3.04 DEC OPTION REGARDING FUTURE TRAITS: If Mycogen grants a license to a third party for future traits or technology related to BRASSICA, then DEC may license such traits or technology under terms and conditions no less favorable than other licensees; however, if Mycogen obtains a license to Rutgers University low saturation technology for use in oilseed BRASSICA, Mycogen will license the technology to DEC for use in BRASSICA. DEC and Mycogen shall agree to negotiate licensing terms and conditions for the Rutgers University low saturation technology in good faith. SECTION 3.05 MYCOGEN OPTION TO PRODUCE SEED: Mycogen and Mycogen Affiliates will have the first option to produce Planting Seeds for DEC and DEC Affiliates, provided that Mycogen or a Mycogen Affiliate is able to offer such production on a competitive basis in terms of quality, quantity and price. ARTICLE 4 - ROYALTIES SECTION 4.01 ROYALTIES PAID BY DEC FOR VARIETIES: DEC shall pay Mycogen a five percent (5%) royalty in U.S. dollars based on Net Sales of Planting Seed of Varieties and Program Planting Seed of Program Varieties. If Varieties or Program Varieties are High Oleic, then DEC shall pay Mycogen an additional royalty of twenty percent (20%) of any premium that is earned when compared to canola oil which is not High Oleic. The price for canola oil shall be determined by the closing price of canola on the Canadian Commodities Exchange based on the volume sold and the date of sale. Royalties will not be paid to Mycogen for the commercialization of Third Party Varieties. Royalties will not be paid on value-added to Planting Seeds or Program Planting Seeds by the incorporation of DEC Transgenic Traits. No royalties will be due under this provision on any Net Sales of Planting Seed of Varieties or Program Planting of Program Varieties by Mycogen or Mycogen Affiliates. 7 SECTION 4.02 TERM OF ROYALTIES PAID: DEC shall pay the five percent (5%) royalties, as described in Sections 4.01, for the commercial lifetime of the Varieties or Program Varieties. ARTICLE 5 - REGISTRATION SECTION 5.01 CANADIAN REGISTRATION FOR VARIETIES, PROGRAM VARIETIES, BT PROGRAM VARIETIES AND BT VARIETIES: DEC shall develop registration data packages for obtaining Canadian regulatory approval for the sale of any Bt Traits in Bt Varieties or Bt Program Varieties and for the registration of Varieties or Program Varieties. DEC shall have access and be able to use any Mycogen regulatory data and information without additional compensation to Mycogen. At the request of DEC, Mycogen shall use reasonable efforts to provide data needed for registration, including but not limited to data related to Product Goals, morphological traits and the like. ARTICLE 6 - RECORDS AND TAXES SECTION 6.01 RECORDS: The parties agree to maintain complete and accurate books and records in accordance with normal accounting practice in respect to all Varieties and Program Varieties sold under this Agreement. SECTION 6.02 TAXES: In the event that withholding taxes are due on any royalties payable under this Agreement, the party paying the royalty shall withhold the withholding taxes required and promptly remit such taxes to the appropriate tax authority. DEC shall be entitled to deduct such withheld taxes from the royalties otherwise payable to the other party hereunder. The party paying the taxes shall promptly provide the other party with documentation evidencing the payment of such taxes. SECTION 6.03 ADDRESS OF ROYALTIES PAYMENTS: Mycogen, to: Mycogen Seeds 1340 Corporate Ctr Curve St. Paul, MN 55121 Attention: Finance Department DEC, to: DowElanco 9330 Zionsville Road Indianapolis, Indiana Attention: or to such other address provided in writing. 8 ARTICLE 7 - WARRANTIES, INFRINGEMENT & PRODUCT LIABILITY SECTION 7.01 WARRANTIES OF OWNERSHIP AND MERCHANTABILITY: A. Mycogen warrants that it has the right to license Varieties and has the right to enter into this Agreement. If, after the execution of this Agreement, any licenses are obtained by either party from third parties to varieties, both Mycogen and DEC warrant they will use their best efforts to obtain terms of the license which permits utilization of such license within the scope of this license. However, nothing in this Agreement shall be construed as: (i) a warranty as to the validity or scope of any Patent(s) or PVP(s); (ii) a warranty or representation that anything made, used, sold or otherwise disposed of under the licenses granted in this Agreement will or will not infringe patents or plant variety protection certificates of third paries; and (iii) an obligation to bring or prosecute actions or suits against third parties for infringement of patent(s) or plant variety protection certificate(s), except as agreed herein under Section 5.02 hereof. B. MYCOGEN MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES FOR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO ANY MATERIALS PROVIDED TO DEC RELATING TO THE TECHNOLOGY OR TO THE USE, SALE, OR OTHER DISPOSITION BY DEC OR ITS VENDEES OR OTHER TRANSFEREES OF PLANTING SEEDS OR PROGRAM PLANTING SEEDS INCORPORATING OF MADE BY USE OF INTELLECTUAL PROPERTY LICENSED UNDER THIS AGREEMENT. SECTION 7.02 INFRINGEMENT OF PATENT(S): A. DEC may pursue actions to abate infringement of the Patent(s) or PVP(s) and DEC shall incur all costs associated with abatement of the infringing activity. Mycogen shall reasonably assist DEC in such litigation, provided DEC reasonably compensates Mycogen for such assistance. If there is a commercially significant third party infringement of any claim(s) in any Patent(s) or PVP(s) and DEC does not wish to bring an infringement action, then DEC shall execute whatever documents are necessary to enable Mycogen to pursue such infringement action in their name if so desired. DEC shall provide reasonable assistance to Mycogen; however, Mycogen shall reimburse DEC for reasonable expenses associated with such assistance. If a party declines to participate in the litigation, other than reasonable assistance, then the party filing the litigation shall have the right to control such litigation. If the interested party prevails, any damages and/or costs awarded shall belong to the interested party provided that during such litigation, the interested party acted in good faith to preserve the right, title and interest in 9 and to the Patent(s) or PVP(s). If DEC files actions to abate infringement of patent(s) or PVP(s) developed under the Program and filed after the execution of this Agreement, Mycogen shall provide reasonable assistance to DEC. DEC shall reimburse Mycogen for reasonable expenses associated with such assistance. B. In the event that DEC or its sublicensees are sued by a third party for infringement of a third party's patent with respect to activities performed in accordance with the licenses granted to DEC under this Agreement, DEC may request from Mycogen reasonable assistance in defending such infringement allegations. DEC shall reimburse Mycogen for any out-of-pocket expenses incurred by Mycogen with respect to such assistance, provided that such suit is not due to a breach of the Warranties provided in Section 5.01 hereof, or is due to gross negligence by Mycogen or its representatives. If DEC or its sublicensees negotiate a license from the third party to practice under the third party's patent(s) or plant variety protection certificate(s), Mycogen shall in good faith renegotiated the royalty rates set forth in Section 4.01 and 4.02 hereof, to reflect the additional expenditures required by DEC to practice the licenses granted herein. C. The A and B provisions above will not apply to intellectual property rights relating to any Mycogen transgenic traits, including but not limited to Bt Traits, Round-up Ready Traits and transgenic disease resistance traits. The enforcement and defense of these rights will be controlled by Mycogen, except to the extent otherwise agreed by the parties. SECTION 7.03 PRODUCT LIABILITY: DEC shall indemnify Mycogen for any liabilities related to claims and expenses, including legal expenses and reasonable attorney's fees, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the production, manufacture, sale, use, lease, consumption or advertisement of Planting Seeds or Program Planting Seeds, except where negligent conduct on the part of Mycogen is the sole cause of the claim. ARTICLE 8 - CONFIDENTIALITY SECTION 8.01 CONFIDENTIAL INFORMATION: The parties shall hold all Confidential Information in confidence and shall use their best efforts to protect the confidentiality of the information. The parties shall not publish, disclose, or allow a third party access to, nor use for any purpose the other party's Confidential Information. The parties may disclose confidential Information to consultants and third parties provided: a) a secrecy agreement is obtained that is at least as restrictive as the confidentiality provisions in this Agreement, and b) each party notifies the other party of such disclosure and provides a copy of the executed secrecy agreement with the consultant or third party: however under no circumstances shall Mycogen disclose information to Pioneer International Hi-bred without the written consent of DEC. The term for confidentiality between the parties hereto shall continue until five (5) years after the termination of this Agreement. 10 SECTION 8.02 EXCEPTIONS: The obligations of confidentiality of Section 8.01 hereof shall not apply to Confidential Information that the receiving party can show; A) by written records was in its possession prior to disclosure under this Agreement and which has not been previously acquired from the disclosing party: B) is or becomes part of the public domain through no fault of the receiving party; C) is lawfully received without an obligation of confidence from a third party legally entitled to disclose the information. D) is required by law to be disclosed but only to the extent it is so required; or E) is required to be disclosed to a governmental agency to obtain the necessary approvals for the sale of Planting Seeds and Program Planting Seeds and such information cannot be claimed as "business confidential". ARTICLE 9 - RECORD KEEPING SECTION 9.01 BOOKS AND RECORDS: The parties shall keep books and records sufficient to verify the accuracy and completeness of payments under Article 4 hereof. Such books and records shall be preserved for a period not less than three (3) years after they are created during and after the term of this Agreement. SECTION 9.02 AUDIT: On thirty (30) days notice, during regular business hours and at a single location, a party shall have the right to have an independent auditor examine the other party's sales records and books of accounts to verify the accuracy of royalty payments. The costs for any audit shall be paid by the party requesting the audit. ARTICLE 10 - TERM & TERMINATION SECTION 10.01 EXPIRATION OF LICENSE: The term of this License Agreement shall begin on May 15, 1996 and continue until the last commercial sale of Varieties. SECTION 10.02 PROGRAM TERM: The term of the Program is retroactive and begins five (5) years from May 15, 1996. The Program may be extended in writing upon mutual agreement between the parties. SECTION 10.03 TERMINATION: If the parties are unable to agree on the initial Product Goals and Development Targets by April 30th of year one (1), DEC may terminate this Agreement within thirty (30) days written notice of April 30th. Thereafter, DEC may terminate the Program at any time for any reason by giving at least six(6) months 11 unambiguous, written notice of such termination to Mycogen. Termination of the PRogram shall not effect the licenses gratned herein. SECTION 10.04 DEFAULT: If either party at any time defaults in the timely payment of any moneys due to the other party, or if Mycogen fails to actively pursue the Program, or if either party fails to remedy any such breach or default within ninety (90) days after written notice thereof by the other party, the non-breaching party may, at its option, terminate this Agreement by giving notice of termination to the breaching party. However, if there is any disagreement as to the sufficiency of the brreaching party's remedy, the praties agree to settle the controversy through a mutually agreed upon third- party mediator no later than sexty (60) days after the aforementioned ninety (90) day period has ended. SECTION 10.05 ACCOUNTING UPON TERMINATIOIN OR EXPIRATION: On the termination or expiration of this License Agreement, the parties shall remain obligated to provide an accounting for and to pay royalties earned up to the date of the termination or expiration. ARTICLE 11 - MISCELLANEOUS SECTION 11.01 PUBLIC ANNOUNCEMENTS: No public announcement or press release concerning this Agreement or the transactions contemplated herein shall be made by either of the parties hereto without the prior consent and approval of the other party (which consent shall not be unreasonably withheld or delayed), except to the extent required by law. SECTION 11.02 ASSIGNMENT AND TRANSFERABILTIY OF THE AGREEMENT: This Agreement may be assigned to DEC Affiliates, or to a purchaser of substantially all of the business interests of DEC. Mycogen may not assign this Agreement under any circumstances without the written consent of DEC. Section 11.03 ENTIRE AGREEMENT: This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect to the subject matter of this Agreement. There are no rerepresentations, warranties, terms, conditions, undertakintgs or collateral agreements, express, implied or statutory, between the parties other than as expressly set forth in this Agreement. Section 11.04 AMENDMENTS AND WAIVER: No modification of or amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the parties hereto and no waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived. 12 SECTION 11.05 NOTICES: Any demand, notice or other communication to be given in connecion with this Agreement shall be given in writing and shall be given by personal delivery or by electronic means addressed to the recipeient as follow: To Mycogen: Mycogen Seeds 1340 Corporate Ctr Curve St. Paul, MN 55121 Attention: Larry Sernyk with written copy to Mycogen Seeds 5501 Oberlin Drive San Diego, CA 92121 Attention: Legal Department To DEC: General Patent Counsel Patent Department DowElanco 9330 Zionsville Road Indianapolis, Indiana 46265-1054 or to such other address, individual or electronic communication number as may be desgnated by notice given by either pary to the other. Any demand, notice or other communication given by personal delivery shall be conclusively deemed to have been given on the day of actual delivery thereof and, if given by electronic communication. On the day of transmittal thereof if given during the normal business hours next occur if not given during such hours on any day. IF the pary giving any demand, notice or other communication knows or ought reasonable to know of any difficulties with the postal system which might affect the delivery of mail, any such demand, notice or other communication shall not be mailed but shall be given by personal delivery or by electronic communication. SECTION 11.06 GOVERNING LAW: This Agreement shall be governed by and construed in accordance with the laws of the State of California, USA. SECTION 11.07 HEADINGS: The Headings of Articles and SEctions used in this Agreement are for reference purpose only and will not be considered as padrt of this Agreement for purposes of interpretation. SECTION 11.08 PROVISIONS OF THE AGREEMENT: If any one or more of the provisions of tlhis Agreement should for any reason be held by a Court of competent jurisdiction to be invalid, illegal or unenfoceable , the remainder of this Agreement will nevertheless remain in full force and efect unless such provision(s) go to the essence and substance of this Agreement. 13 SECTION 11.09 SCHEDULES: Mycogen shall provide Schedules A,B, and C within thirty (30) days of the last signature hereto. The schedules shall not affect the effective date of this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below. MYCOGEN CORPORATION By: /s/ Carl Eibl -------------------------------- Name: Carl Eibl Title: President Date: 11/3/97 ------------------------------ DOWELANCO CANADA, INC. By: /s/ John L. Hagaman -------------------------------- Name: John L. Hagaman Title: President and CEO Date: October 30, 1997 ------------------------------ 14 Appendix A - ----------- Brassica germplasm (Schedule to be provided by Mycogen within thiry (30) days of signing) 15 SCHEDULE A MYCOGEN SEEDS BRASSICA AND RELATED SPECIES GERMPLASM BRASSICA NAPUS L. ADVANCED STRAINS
- -------------------------------------------------------------------------------- Variety/Strain Description - -------------------------------------------------------------------------------- AG019 HOLLY Canole-!st HOLLY Canola developed by Agrigenetics and basis for HOLLY oil patent applications - -------------------------------------------------------------------------------- EXP94-03 HOLLY Canola - -------------------------------------------------------------------------------- EXP94-06 HOLLY Canola-registered in 1997 for contract production in Canada uner the designation DMS100 - -------------------------------------------------------------------------------- SVO95-08 HOLLY Canola - -------------------------------------------------------------------------------- SVO95-13 HOLLY Canola with very low C18;3 - -------------------------------------------------------------------------------- EXP95-06 High oleic Canola - -------------------------------------------------------------------------------- EXP95-09 High oleic Canola - -------------------------------------------------------------------------------- EXP95-10 High oleic Canola - -------------------------------------------------------------------------------- MPS96-01 High erucic/low glucosinolates with high oil content - -------------------------------------------------------------------------------- MPS96-02 High erucic/low glucosinolates with high oil content - -------------------------------------------------------------------------------- MPS96-03 High erucic/low glucosinolates with high oil content - -------------------------------------------------------------------------------- MPS96-04 High erucic/low glucosinolates with high oil content - -------------------------------------------------------------------------------- MPS96-05 High erucic/low glucosinolates with high oil content - -------------------------------------------------------------------------------- MPS96-06 High palmitic/high erucic/low glucosinolates - -------------------------------------------------------------------------------- MPS96-07 High palmitic/high erucic/low glucosinolates - --------------------------------------------------------------------------------
BRASSICA NAPUS L. BREEDING POPULATIONS As described in the Mycogen/Agrigentics laboratory notebooks listed below:
- ---------------------------------------------------------------------- Volume Notebook Number Issued To - ---------------------------------------------------------------------- Rapeseed V! 2007 Larry Sernyk Rapeseed V2 2155 Larry Sernyk Rapeseed V3 2293 Larry Sernyk Rapeseed V4 2343 Jay Laing - ----------------------------------------------------------------------
Appendix B - ---------- Variety Development Schedule Appendix C Program Varieties VARIETY DEVELOPMENT FLOWCHART - RAPESEED CONTRACT REGISTRATION
Mycogen Seeds YEAR 1 2 3 4 STAGE Oa ob 1 2 Produce Othaplod Crosses Production Nursery Prelim (1 year) (1 year) (1 year) (1 year) ------------------------------------------------------------------------------------------------------ STAGE Plan and make Produce dihaploids Nursery screening of Replicated trials at 4 DESCRIPTION crosses according to using microscope dihaploids at 2 location (3 replicates) product goals culture locations of best dilhaploids from nursery screen ------------------------------------------------------------------------------------------------------ NUMBER OF STRAINS 2000 250 25 AT END OF STAGE 12.5% 10.0% RESPONSIBILITIIES ------------------------------------------------------------------------------------------------------ RESEARCH (MYCOGEN) 1. Plan F1 crosses 1. Produce dihaploids 1. Conduct dihaploids 1. Conduct replicated trials According to strains nurseries (In house and contract) product goals 2. Make F1 crosses 2. Analytical screen 2. Analyze results 2. Analyize results and for product goal and make selections make selection for for advancement advancement 3. probreeder seed production (winter greenhouse) -------------------------------------------------------------------------------------------------------- PRODUCT CHARACTERIZATION LEADER (PCL) (DOWELANCO CANADA) 1. Monitor strain 1. Monitor strain advancement advancement process process -------------------------------------------------------------------------------------------------------- PRODUCT SUCESS LEADER (PSL) (DOWELANCO CANADA) 1. Delias product 1. Review strain performance goals 2. Communicate product lineup needs with research
DowElenco YEAR 5 6 7 8 STAGE 3a 3b 4 5 Contract Contract Registration 1 Registration 2 Pre-Launch Launch (1 year) (1 year) -------------------------------------------------------------------------------------------------------- STAGE First year contract Second year contract Validale varieial One variety every two years DESCRIPTION registration trials registration trials characteristics with in each of mid season and at 6-E locations of at 6-E location of growers and end long season maturity best dilhaploids dilhaploids from users groups from prelim first year contract trials registration trials -------------------------------------------------------------------------------------------------------- NUMBER OF STRAINS 4 1 1 AT END OF STAGE 18.0% 25.0% 100.0% RESPONSIBILITIIES -------------------------------------------------------------------------------------------------------- RESEARCH (MYCOGEN) 1. Greeder seed 1. Collect 1. Provid's support to 1. Provide support to PCL and production (year Information in PCL and PSL as PSL as required in 4-5 winter) contract required regulation for and file PVP 2. Collect information in contract registration trials for PVP -------------------------------------------------------------------------------------------------------- PRODUCT CHARACTERIZATION 1. Conduct contract 1. Conduct contract 1. Provide support to 1. Provide support to PSL as LEADER (PCL) registration registration PSL as required required (DOWELANCO CANADA) trials (In house trials (In house and contract) contract 2. Analze results 2. Analyze results and 2. Organize agronomic and make prepare submission and quality selections for for variety validation trials advancement registration thoughout target area 3. Foundation seed production -------------------------------------------------------------------------------------------------------- PRODUCT SUCESS LEADER 1. Review strain 1. Review strain 1. Certified seed 1. Lauch variety (PSL) performance performance production (DOWELANCO CANADA) 2. Participate in 2. Participate in 2. Commercial strain strain production advancement advancement discussions discussions 3. Project seed 3. Develop commercial requirement for strategy for launch strains --------------------------------------------------------------------------------------------------------
EX-99.20 19 EXHIBIT 99.20 January 1, 1996 Carlton J. Eibl President and Chief Operating Officer Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Mr. Eibl: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise 1 tax by the Internal Revenue Service. Part Four provides for certain additional rights and responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means Carlton J. Eibl. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of President and Chief Operating Officer. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $190,000. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 6 EX-99.21 20 EXHIBIT 99.21 January 1, 1996 Andrew C. Barnes Executive Vice President Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Mr. Barnes: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise tax by the Internal Revenue Service. Part Four provides for certain additional rights and 1 responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means Andrew C. Barnes. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of Executive Vice President. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $165,000. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 9. SEVERANCE BENEFITS. A. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for Cause) prior to January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to three (3) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of thirty-six (36) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and other coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section 9.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section 9.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under Section 4980A of the Code and Part VI of Title I of the Employee Retirement Income Security Act ("COBRA") or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's Common Stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. B. You will be entitled to receive the severance benefits specified below in the event there 6 should occur an Involuntary Termination of your employment (other than a Termination for Cause) at any time after January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to two (2) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twenty-four (24) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section B.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section B.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under COBRA or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's common stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. 10. RESTRICTIVE COVENANT. During the Employment Period: (i) You will devote your full working time and effort to the performance of your duties as an executive officer of the Company. 7 (ii) You will not directly or indirectly, whether for your own account or as an employee, consultant or advisor, provide services to any business enterprise other than the Company, unless otherwise authorized by the Company in writing. 8 However, you will have the right to perform such incidental services as are necessary in connection with (a) your private passive investments, (b) your charitable or community activities, and (c) your participation in trade or professional organizations, but only to the extent such incidental services do not interfere with the performance of your services hereunder. 11. NON-SOLICITATION. During any period for which you are receiving compensation payments pursuant to Part Two, Section 4 and one (1) year thereafter, you will not directly or indirectly solicit any Company employee to leave the Company's employ for any reason or interfere in any other manner with the employment relationships at the time existing between the Company and its current employees. 12. CONFIDENTIALITY. A. You hereby acknowledge that the Company may, from time to time during the Employment Period, disclose to you confidential information pertaining to the Company's business and affairs and client base, including (without limitation) customer lists and accounts, other similar items indicating the source of the Company's income and information pertaining to the salaries, duties and performance levels of the Company's employees. You will not, at any time during or after such Employment Period, disclose to any third party or directly or indirectly make use of any such confidential information, including (without limitation) the names, addresses and telephone numbers of the Company's customers, other than in connection with, and in furtherance of, the Company's business and affairs. Nothing contained in this paragraph shall be construed to prevent Employee from disclosing the amount of his salary. B. All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such proprietary information of the Company which come into your possession during the Employment Period will be returned by you to the Company immediately upon the termination of the Employment Period or upon any earlier request by the Company, and you will not retain any copies, notes or excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to retain his file or rolodex containing names, addresses and telephone numbers and personal diaries and calendars; provided, however, that Employee shall continue to be bound by the terms of Section 12.A. above to the extent such retained materials constitute confidential information. C. Your obligations under this Section 12 will continue in effect after the termination of your employment with the Company, whatever the reason or reasons for such termination, and the Company will have the right to communicate with any of your future or prospective employers concerning your continuing obligations under this Section 12. 13. OWNERSHIP RIGHTS. A. All materials, ideas, discoveries and inventions pertaining to the Company's business or clients, including (without limitation) all patents and copyrights, patent applications, patent renewals and extensions and the names, addresses and telephone numbers of customers, 9 will belong solely to the Company. B. All materials, ideas, discoveries and inventions which you may devise, conceive, develop or reduce to practice (whether individually or jointly with others) during the Employment Period will be the sole property of the Company and are hereby assigned by you to the Company, except for any idea, discovery or invention (i) for which no Company equipment, supplies, facility or trade secret information is used, (ii) which is developed entirely on your own time and (iii) which neither (a) relates at the time of conception or reduction to practice, to the Company's business or any actual or demonstrably-anticipated research or development program of the Company nor (b) results from any work performed by you for the Company. The foregoing exception corresponds to the assignment of inventions precluded by California Labor Code Section 2870, attached as Exhibit A. C. You will, at all times whether during or after the Employment Period, assist the Company, at the Company's sole expense, in obtaining, maintaining, defending and enforcing patents, copyrights and other proprietary rights of the Company. Such assistance will include (without limitation) the execution of documents and assistance and cooperation in legal proceedings. D. You will continue to be bound by all the terms and provisions of your existing Proprietary Information and Invention Agreements with the Company, and nothing in this document will be deemed to modify or affect your duties and obligations under those other agreements. 14. TERMINATION OF EMPLOYMENT. A. The Company (or any successor entity resulting from a Change in Control) may terminate your employment under this Agreement at any time for any reason, with or without cause, by providing you with at least thirty (30) days prior written notice. However, such notice requirement will not apply in the event there is a Termination for Cause under subparagraph D below. B. In the event there is an Involuntary Termination of your employment with the Company (other than Termination for Cause) during the Employment Period, you will become entitled to the benefits specified in Part Two, Section 9 in addition to any unpaid compensation earned by you under Part Two, Section 4 for services rendered prior to such termination. C. Should your employment with the Company terminate by reason of your death or disability during the Employment Period, no severance benefits will be payable to you under Part Two, Section 9, and only the limited death or disability benefits provided under Part Two, Section 8 will be payable, to the extent applicable. D. The Company may at any time, upon written notice, terminate your employment hereunder for any act qualifying as a Termination for Cause. Such termination will 10 be effective immediately upon such notice. E. Upon such Termination for Cause, the Company will only be required to pay you any unpaid compensation earned by you pursuant to Part Two, Section 4 for services rendered through the date of such termination, and no termination or severance benefits will be payable to you under Part Two, Section 9. 11 PART THREE -- INTERNAL REVENUE CODE LIMITATIONS 1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this Agreement, if Employee is entitled to benefits hereunder following the occurrence of a Change in Control, in no event shall the present value of benefits payable under this Agreement, taken together with Employee's benefits under the Stock Option Plan and Restricted Stock Issuance Plan and other applicable sources, that, in the opinion of counsel (as identified in Section 3 of this Part Three), are considered "parachute payments" under Section 4999 of the Code, be reduced by the excise tax imposed by Section 4999 of the Code. In the event that such benefits so taken together would exceed the amount which is exempt from the excise tax imposed by Section 4999 of the Code, the Company shall pay to Employee an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee, after deduction for the amount of any excise tax under Section 4999 and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or local income tax) on the present value of such benefits, and any federal, state and local income tax, excise tax and penalties and interest, if applicable, upon the additional payment provided for by this Section 1, shall be equal to the present value of such benefits. For purposes of determining the additional amount to be paid to Employee pursuant to this Section 1, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the additional payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of his residence on the date the additional payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction from such state and local taxes. 2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this Part Three, the term "parachute payment" shall have the meaning ascribed to it under Section 280G(b)(2) of the Code, and "present value" shall be determined in accordance with Section 280G(d)(4) of the Code. 3. INTERPRETATION. This Part Three shall be interpreted so as to avoid the imposition of excise taxes on Employee under Section 4999 of the Code, or to minimize such taxes. In applying the provisions of this Part Three if, for any reason, an exemption from the application of the rules of Section 4999 of the Code shall be available under the terms of said Section or under any applicable regulations or rulings thereunder, such exemption shall be fully applied. All payments under this Agreement or otherwise that are, in the opinion of counsel (as identified in this Section 3), parachute payments shall be taken into account in applying the provisions of this Part Three, and no others. In application of the provisions of this Part Three, calculations necessary to be made pursuant to the provisions of this Part Three and interpretation of the Code and applicable regulations for purposes of compliance with this Part Three shall be made by the private law firm serving as executive compensation and tax counsel to the Board immediately prior to the Change in Control, and the determination of such counsel made in good faith shall be binding and conclusive upon both the Company and Employee. All fees and expenses of such law firm pertaining thereto shall be borne by the Company. Payments shall be made pursuant to this Agreement notwithstanding that the status of any payment as a parachute payment has not been finally determined by the Internal Revenue Service or any court of competent jurisdiction, or by 12 arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as determined pursuant to Section 1 of this Part Three, shall be paid by the Company to Employee within five (5) days of the receipt of the law firm's determination. If the law firm determines that no excise tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the excise tax on Employee's applicable federal income tax return would not result in the imposition of a negligence (or similar) penalty. Any determination by the law firm shall be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the law firm hereunder, it is possible that Gross-Up Payments will not have been made in full by the Company, consistent with the calculations required to be made hereunder (with such shortfall as "Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 4 of this Part Three and Employee thereafter is required to make a payment of any excise tax, the law firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. 4. INTERNAL REVENUE SERVICE CLAIMS. Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (a) give the Company any information reasonably requested by the Company relating to such claim (without requiring a waiver of Employee's attorney-client privilege); (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith in order to effectively contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any excise tax or income tax (including interest and penalties and respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and 13 conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any excise tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statue of limitations relating to payment of taxes for the taxable years of Employee with respect to which such contested amount is claimed to be due is limited solely to issues relating to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment shall be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 4 of this Part Three, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 4 of this Part Three), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of any amount advanced by the Company pursuant to Section 4 of this Part Three, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES 1. MITIGATION. Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Employee's existing rights which would accrue solely as a result of the passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as defined in ERISA), compensation arrangement, incentive plan, stock option or other stock-related plan. 2. LEGAL COSTS. If any legal action or other proceeding is brought by Employee for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, Employee shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which he may be entitled, in the event and to the extent that 14 Employee prevails in such action or other proceeding. Notwithstanding anything hereinabove to the contrary, as between Employee and the Company, the Company shall bear all legal costs and expenses of defending the validity of this Agreement against any third party. The Company shall bear all legal costs and expenses incurred in contesting or disputing the characterization of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of an excise tax under Section 4999 of the Code. 3. FULL SETTLEMENT. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by an set-off, counterclaim, recoupment, defense or other claim, or other action which the Company may have against Employee or others. PART FIVE -- MISCELLANEOUS PROVISIONS 1. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the stock, business or assets of the Company whether by merger, consolidation, division, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Employment Agreement). The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Employment Agreement entitling Employee to the benefits hereunder, as though Employee was subject to Involuntary Termination. This Agreement shall be binding upon and inure to the benefit of Employee, his successors, assigns, executors, administrators or beneficiaries. 2. DEATH. Should you die before receipt of all the separation payments to which you may become entitled under Part Two, Section 9, then such payment or payments will be made, on the due date or dates hereunder had you survived, to the executors or administrators of your estate. Should you die before you exercise your outstanding vested options, then each such option may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by person to whom the option is transferred pursuant to your will or in accordance with the laws of inheritance. In no event, however, may any such vested option be exercised after the specified expiration date of the option term. 3. INDEMNIFICATION. The indemnification provisions for Officers and Directors under the Company's Bylaws will (to the maximum extent permitted by law) be extended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your Employment Period. 15 EX-99.22 21 EXHIBIT 99.22 January 1, 1996 Mr. Leo Kim Executive Vice President and Chief Technical Officer Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Mr. Kim: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise 1 tax by the Internal Revenue Service. Part Four provides for certain additional rights and responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means Leo Kim. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of Executive Vice President and Chief Technical Officer. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $165,000. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 9. SEVERANCE BENEFITS. A. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for Cause) prior to January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to three (3) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of thirty-six (36) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and other coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section 9.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section 9.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under Section 4980A of the Code and Part VI of Title I of the Employee Retirement Income Security Act ("COBRA") or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's Common Stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. B. You will be entitled to receive the severance benefits specified below in the event there 6 should occur an Involuntary Termination of your employment (other than a Termination for Cause) at any time after January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to two (2) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twenty-four (24) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section B.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section B.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under COBRA or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's common stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. 10. RESTRICTIVE COVENANT. During the Employment Period: (i) You will devote your full working time and effort to the performance of your duties as an executive officer of the Company. 7 (ii) You will not directly or indirectly, whether for your own account or as an employee, consultant or advisor, provide services to any business enterprise other than the Company, unless otherwise authorized by the Company in writing. 8 However, you will have the right to perform such incidental services as are necessary in connection with (a) your private passive investments, (b) your charitable or community activities, and (c) your participation in trade or professional organizations, but only to the extent such incidental services do not interfere with the performance of your services hereunder. 11. NON-SOLICITATION. During any period for which you are receiving compensation payments pursuant to Part Two, Section 4 and one (1) year thereafter, you will not directly or indirectly solicit any Company employee to leave the Company's employ for any reason or interfere in any other manner with the employment relationships at the time existing between the Company and its current employees. 12. CONFIDENTIALITY. A. You hereby acknowledge that the Company may, from time to time during the Employment Period, disclose to you confidential information pertaining to the Company's business and affairs and client base, including (without limitation) customer lists and accounts, other similar items indicating the source of the Company's income and information pertaining to the salaries, duties and performance levels of the Company's employees. You will not, at any time during or after such Employment Period, disclose to any third party or directly or indirectly make use of any such confidential information, including (without limitation) the names, addresses and telephone numbers of the Company's customers, other than in connection with, and in furtherance of, the Company's business and affairs. Nothing contained in this paragraph shall be construed to prevent Employee from disclosing the amount of his salary. B. All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such proprietary information of the Company which come into your possession during the Employment Period will be returned by you to the Company immediately upon the termination of the Employment Period or upon any earlier request by the Company, and you will not retain any copies, notes or excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to retain his file or rolodex containing names, addresses and telephone numbers and personal diaries and calendars; provided, however, that Employee shall continue to be bound by the terms of Section 12.A. above to the extent such retained materials constitute confidential information. C. Your obligations under this Section 12 will continue in effect after the termination of your employment with the Company, whatever the reason or reasons for such termination, and the Company will have the right to communicate with any of your future or prospective employers concerning your continuing obligations under this Section 12. 13. OWNERSHIP RIGHTS. A. All materials, ideas, discoveries and inventions pertaining to the Company's business or clients, including (without limitation) all patents and copyrights, patent applications, patent renewals and extensions and the names, addresses and telephone numbers of customers, 9 will belong solely to the Company. B. All materials, ideas, discoveries and inventions which you may devise, conceive, develop or reduce to practice (whether individually or jointly with others) during the Employment Period will be the sole property of the Company and are hereby assigned by you to the Company, except for any idea, discovery or invention (i) for which no Company equipment, supplies, facility or trade secret information is used, (ii) which is developed entirely on your own time and (iii) which neither (a) relates at the time of conception or reduction to practice, to the Company's business or any actual or demonstrably-anticipated research or development program of the Company nor (b) results from any work performed by you for the Company. The foregoing exception corresponds to the assignment of inventions precluded by California Labor Code Section 2870, attached as Exhibit A. C. You will, at all times whether during or after the Employment Period, assist the Company, at the Company's sole expense, in obtaining, maintaining, defending and enforcing patents, copyrights and other proprietary rights of the Company. Such assistance will include (without limitation) the execution of documents and assistance and cooperation in legal proceedings. D. You will continue to be bound by all the terms and provisions of your existing Proprietary Information and Invention Agreements with the Company, and nothing in this document will be deemed to modify or affect your duties and obligations under those other agreements. 14. TERMINATION OF EMPLOYMENT. A. The Company (or any successor entity resulting from a Change in Control) may terminate your employment under this Agreement at any time for any reason, with or without cause, by providing you with at least thirty (30) days prior written notice. However, such notice requirement will not apply in the event there is a Termination for Cause under subparagraph D below. B. In the event there is an Involuntary Termination of your employment with the Company (other than Termination for Cause) during the Employment Period, you will become entitled to the benefits specified in Part Two, Section 9 in addition to any unpaid compensation earned by you under Part Two, Section 4 for services rendered prior to such termination. C. Should your employment with the Company terminate by reason of your death or disability during the Employment Period, no severance benefits will be payable to you under Part Two, Section 9, and only the limited death or disability benefits provided under Part Two, Section 8 will be payable, to the extent applicable. D. The Company may at any time, upon written notice, terminate your employment hereunder for any act qualifying as a Termination for Cause. Such termination will 10 be effective immediately upon such notice. E. Upon such Termination for Cause, the Company will only be required to pay you any unpaid compensation earned by you pursuant to Part Two, Section 4 for services rendered through the date of such termination, and no termination or severance benefits will be payable to you under Part Two, Section 9. 11 PART THREE -- INTERNAL REVENUE CODE LIMITATIONS 1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this Agreement, if Employee is entitled to benefits hereunder following the occurrence of a Change in Control, in no event shall the present value of benefits payable under this Agreement, taken together with Employee's benefits under the Stock Option Plan and Restricted Stock Issuance Plan and other applicable sources, that, in the opinion of counsel (as identified in Section 3 of this Part Three), are considered "parachute payments" under Section 4999 of the Code, be reduced by the excise tax imposed by Section 4999 of the Code. In the event that such benefits so taken together would exceed the amount which is exempt from the excise tax imposed by Section 4999 of the Code, the Company shall pay to Employee an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee, after deduction for the amount of any excise tax under Section 4999 and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or local income tax) on the present value of such benefits, and any federal, state and local income tax, excise tax and penalties and interest, if applicable, upon the additional payment provided for by this Section 1, shall be equal to the present value of such benefits. For purposes of determining the additional amount to be paid to Employee pursuant to this Section 1, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the additional payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of his residence on the date the additional payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction from such state and local taxes. 2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this Part Three, the term "parachute payment" shall have the meaning ascribed to it under Section 280G(b)(2) of the Code, and "present value" shall be determined in accordance with Section 280G(d)(4) of the Code. 3. INTERPRETATION. This Part Three shall be interpreted so as to avoid the imposition of excise taxes on Employee under Section 4999 of the Code, or to minimize such taxes. In applying the provisions of this Part Three if, for any reason, an exemption from the application of the rules of Section 4999 of the Code shall be available under the terms of said Section or under any applicable regulations or rulings thereunder, such exemption shall be fully applied. All payments under this Agreement or otherwise that are, in the opinion of counsel (as identified in this Section 3), parachute payments shall be taken into account in applying the provisions of this Part Three, and no others. In application of the provisions of this Part Three, calculations necessary to be made pursuant to the provisions of this Part Three and interpretation of the Code and applicable regulations for purposes of compliance with this Part Three shall be made by the private law firm serving as executive compensation and tax counsel to the Board immediately prior to the Change in Control, and the determination of such counsel made in good faith shall be binding and conclusive upon both the Company and Employee. All fees and expenses of such law firm pertaining thereto shall be borne by the Company. Payments shall be made pursuant to this Agreement notwithstanding that the status of any payment as a parachute payment has not been finally determined by the Internal Revenue Service or any court of competent jurisdiction, or by 12 arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as determined pursuant to Section 1 of this Part Three, shall be paid by the Company to Employee within five (5) days of the receipt of the law firm's determination. If the law firm determines that no excise tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the excise tax on Employee's applicable federal income tax return would not result in the imposition of a negligence (or similar) penalty. Any determination by the law firm shall be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the law firm hereunder, it is possible that Gross-Up Payments will not have been made in full by the Company, consistent with the calculations required to be made hereunder (with such shortfall as "Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 4 of this Part Three and Employee thereafter is required to make a payment of any excise tax, the law firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. 4. INTERNAL REVENUE SERVICE CLAIMS. Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (a) give the Company any information reasonably requested by the Company relating to such claim (without requiring a waiver of Employee's attorney-client privilege); (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith in order to effectively contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any excise tax or income tax (including interest and penalties and respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and 13 conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any excise tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statue of limitations relating to payment of taxes for the taxable years of Employee with respect to which such contested amount is claimed to be due is limited solely to issues relating to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment shall be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 4 of this Part Three, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 4 of this Part Three), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of any amount advanced by the Company pursuant to Section 4 of this Part Three, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES 1. MITIGATION. Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Employee's existing rights which would accrue solely as a result of the passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as defined in ERISA), compensation arrangement, incentive plan, stock option or other stock-related plan. 2. LEGAL COSTS. If any legal action or other proceeding is brought by Employee for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, Employee shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which he may be entitled, in the event and to the extent that 14 Employee prevails in such action or other proceeding. Notwithstanding anything hereinabove to the contrary, as between Employee and the Company, the Company shall bear all legal costs and expenses of defending the validity of this Agreement against any third party. The Company shall bear all legal costs and expenses incurred in contesting or disputing the characterization of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of an excise tax under Section 4999 of the Code. 3. FULL SETTLEMENT. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by an set-off, counterclaim, recoupment, defense or other claim, or other action which the Company may have against Employee or others. PART FIVE -- MISCELLANEOUS PROVISIONS 1. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the stock, business or assets of the Company whether by merger, consolidation, division, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Employment Agreement). The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Employment Agreement entitling Employee to the benefits hereunder, as though Employee was subject to Involuntary Termination. This Agreement shall be binding upon and inure to the benefit of Employee, his successors, assigns, executors, administrators or beneficiaries. 2. DEATH. Should you die before receipt of all the separation payments to which you may become entitled under Part Two, Section 9, then such payment or payments will be made, on the due date or dates hereunder had you survived, to the executors or administrators of your estate. Should you die before you exercise your outstanding vested options, then each such option may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by person to whom the option is transferred pursuant to your will or in accordance with the laws of inheritance. In no event, however, may any such vested option be exercised after the specified expiration date of the option term. 3. INDEMNIFICATION. The indemnification provisions for Officers and Directors under the Company's Bylaws will (to the maximum extent permitted by law) be extended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your Employment Period. 15 4. MISCELLANEOUS. The provisions of this Agreement will be construed and interpreted under the laws of the State of California. This Agreement incorporates the entire Agreement between you and the Company relating to the terms of your employment and the subject of severance benefits and supersedes all prior agreements and understandings with respect to such subject matter. This Agreement may only be amended by written instrument signed by you and an authorized officer of the Company. 5. ARBITRATION. Any controversy which may arise between you and the Company with respect to the construction, interpretation or application of any of the terms, provisions, covenants or conditions of this Agreement or any claim arising from or relating to this Agreement will be submitted to final and binding arbitration in San Diego, California in accordance with the rules of the American Arbitration Association then in effect. 6. NOTICES. Any notice required to be given under this Agreement shall be deemed sufficient, if in writing, and sent by certified mail, return receipt requested, via overnight courier, or hand delivered to the Company at 5501 Oberlin Drive, San Diego, California, 92121, and to Employee at his most recent address reflected in the permanent Company records. Please indicate your acceptance of the foregoing provisions of this Agreement by signing the enclosed copy of this Agreement and returning it to the Company. Very truly yours, MYCOGEN CORPORATION By: /s/ Jerry Caulder ----------------------- Chairman and Chief Executive Officer ACCEPTED BY AND AGREED TO Signature: /s/ Leo Kim ----------- Dated: 1/15/96 ------- 16 EXHIBIT A Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER. (a) Any provision in an employment agreement which provides that an employee will assign, or offer to assign, any of his or her rights in an invention to his or her employer will not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer. (2) Result from any work performed by the employee for his employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable. 17 EX-99.23 22 EXHIBIT 99.23 January 1, 1996 James A. Baumker Vice President Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Mr. Baumker: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise 1 tax by the Internal Revenue Service. Part Four provides for certain additional rights and responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means James A. Baumker. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of Vice President. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $110,000.00. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 9. SEVERANCE BENEFITS. A. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for Cause) prior to January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to two (2) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twenty-four (24) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and other coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section 9.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section 9.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under Section 4980A of the Code and Part VI of Title I of the Employee Retirement Income Security Act ("COBRA") or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's Common Stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. B. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for 6 Cause) at any time after January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twelve (12) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section B.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section B.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under COBRA or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's common stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. 10. RESTRICTIVE COVENANT. During the Employment Period: (i) You will devote your full working time and effort to the performance of your duties as an executive officer of the Company. (ii) You will not directly or indirectly, whether for your own account or as an employee, consultant or advisor, provide services to any business enterprise 7 other than the Company, unless otherwise authorized by the Company in writing. 8 However, you will have the right to perform such incidental services as are necessary in connection with (a) your private passive investments, (b) your charitable or community activities, and (c) your participation in trade or professional organizations, but only to the extent such incidental services do not interfere with the performance of your services hereunder. 11. NON-SOLICITATION. During any period for which you are receiving compensation payments pursuant to Part Two, Section 4 and one (1) year thereafter, you will not directly or indirectly solicit any Company employee to leave the Company's employ for any reason or interfere in any other manner with the employment relationships at the time existing between the Company and its current employees. 12. CONFIDENTIALITY. A. You hereby acknowledge that the Company may, from time to time during the Employment Period, disclose to you confidential information pertaining to the Company's business and affairs and client base, including (without limitation) customer lists and accounts, other similar items indicating the source of the Company's income and information pertaining to the salaries, duties and performance levels of the Company's employees. You will not, at any time during or after such Employment Period, disclose to any third party or directly or indirectly make use of any such confidential information, including (without limitation) the names, addresses and telephone numbers of the Company's customers, other than in connection with, and in furtherance of, the Company's business and affairs. Nothing contained in this paragraph shall be construed to prevent Employee from disclosing the amount of his salary. B. All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such proprietary information of the Company which come into your possession during the Employment Period will be returned by you to the Company immediately upon the termination of the Employment Period or upon any earlier request by the Company, and you will not retain any copies, notes or excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to retain his file or rolodex containing names, addresses and telephone numbers and personal diaries and calendars; provided, however, that Employee shall continue to be bound by the terms of Section 12.A. above to the extent such retained materials constitute confidential information. C. Your obligations under this Section 12 will continue in effect after the termination of your employment with the Company, whatever the reason or reasons for such termination, and the Company will have the right to communicate with any of your future or prospective employers concerning your continuing obligations under this Section 12. 13. OWNERSHIP RIGHTS. A. All materials, ideas, discoveries and inventions pertaining to the Company's business or clients, including (without limitation) all patents and copyrights, patent applications, patent renewals and extensions and the names, addresses and telephone numbers of customers, will belong solely to the Company. 9 B. All materials, ideas, discoveries and inventions which you may devise, conceive, develop or reduce to practice (whether individually or jointly with others) during the Employment Period will be the sole property of the Company and are hereby assigned by you to the Company, except for any idea, discovery or invention (i) for which no Company equipment, supplies, facility or trade secret information is used, (ii) which is developed entirely on your own time and (iii) which neither (a) relates at the time of conception or reduction to practice, to the Company's business or any actual or demonstrably-anticipated research or development program of the Company nor (b) results from any work performed by you for the Company. The foregoing exception corresponds to the assignment of inventions precluded by California Labor Code Section 2870, attached as Exhibit A. C. You will, at all times whether during or after the Employment Period, assist the Company, at the Company's sole expense, in obtaining, maintaining, defending and enforcing patents, copyrights and other proprietary rights of the Company. Such assistance will include (without limitation) the execution of documents and assistance and cooperation in legal proceedings. D. You will continue to be bound by all the terms and provisions of your existing Proprietary Information and Invention Agreements with the Company, and nothing in this document will be deemed to modify or affect your duties and obligations under those other agreements. 14. TERMINATION OF EMPLOYMENT. A. The Company (or any successor entity resulting from a Change in Control) may terminate your employment under this Agreement at any time for any reason, with or without cause, by providing you with at least thirty (30) days prior written notice. However, such notice requirement will not apply in the event there is a Termination for Cause under subparagraph D below. B. In the event there is an Involuntary Termination of your employment with the Company (other than Termination for Cause) during the Employment Period, you will become entitled to the benefits specified in Part Two, Section 9 in addition to any unpaid compensation earned by you under Part Two, Section 4 for services rendered prior to such termination. C. Should your employment with the Company terminate by reason of your death or disability during the Employment Period, no severance benefits will be payable to you under Part Two, Section 9, and only the limited death or disability benefits provided under Part Two, Section 8 will be payable, to the extent applicable. D. The Company may at any time, upon written notice, terminate your employment hereunder for any act qualifying as a Termination for Cause. Such termination will be effective immediately upon such notice. 10 E. Upon such Termination for Cause, the Company will only be required to pay you any unpaid compensation earned by you pursuant to Part Two, Section 4 for services rendered through the date of such termination, and no termination or severance benefits will be payable to you under Part Two, Section 9. 11 PART THREE -- INTERNAL REVENUE CODE LIMITATIONS 1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this Agreement, if Employee is entitled to benefits hereunder following the occurrence of a Change in Control, in no event shall the present value of benefits payable under this Agreement, taken together with Employee's benefits under the Stock Option Plan and Restricted Stock Issuance Plan and other applicable sources, that, in the opinion of counsel (as identified in Section 3 of this Part Three), are considered "parachute payments" under Section 4999 of the Code, be reduced by the excise tax imposed by Section 4999 of the Code. In the event that such benefits so taken together would exceed the amount which is exempt from the excise tax imposed by Section 4999 of the Code, the Company shall pay to Employee an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee, after deduction for the amount of any excise tax under Section 4999 and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or local income tax) on the present value of such benefits, and any federal, state and local income tax, excise tax and penalties and interest, if applicable, upon the additional payment provided for by this Section 1, shall be equal to the present value of such benefits. For purposes of determining the additional amount to be paid to Employee pursuant to this Section 1, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the additional payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of his residence on the date the additional payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction from such state and local taxes. 2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this Part Three, the term "parachute payment" shall have the meaning ascribed to it under Section 280G(b)(2) of the Code, and "present value" shall be determined in accordance with Section 280G(d)(4) of the Code. 3. INTERPRETATION. This Part Three shall be interpreted so as to avoid the imposition of excise taxes on Employee under Section 4999 of the Code, or to minimize such taxes. In applying the provisions of this Part Three if, for any reason, an exemption from the application of the rules of Section 4999 of the Code shall be available under the terms of said Section or under any applicable regulations or rulings thereunder, such exemption shall be fully applied. All payments under this Agreement or otherwise that are, in the opinion of counsel (as identified in this Section 3), parachute payments shall be taken into account in applying the provisions of this Part Three, and no others. In application of the provisions of this Part Three, calculations necessary to be made pursuant to the provisions of this Part Three and interpretation of the Code and applicable regulations for purposes of compliance with this Part Three shall be made by the private law firm serving as executive compensation and tax counsel to the Board immediately prior to the Change in Control, and the determination of such counsel made in good faith shall be binding and conclusive upon both the Company and Employee. All fees and expenses of such law firm pertaining thereto shall be borne by the Company. Payments shall be made pursuant to this Agreement notwithstanding that the status of any payment as a parachute payment has not been finally determined by the Internal Revenue Service or any court of competent jurisdiction, or by arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as determined 12 pursuant to Section 1 of this Part Three, shall be paid by the Company to Employee within five (5) days of the receipt of the law firm's determination. If the law firm determines that no excise tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the excise tax on Employee's applicable federal income tax return would not result in the imposition of a negligence (or similar) penalty. Any determination by the law firm shall be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the law firm hereunder, it is possible that Gross-Up Payments will not have been made in full by the Company, consistent with the calculations required to be made hereunder (with such shortfall as "Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 4 of this Part Three and Employee thereafter is required to make a payment of any excise tax, the law firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. 4. INTERNAL REVENUE SERVICE CLAIMS. Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (a) give the Company any information reasonably requested by the Company relating to such claim (without requiring a waiver of Employee's attorney-client privilege); (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith in order to effectively contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any excise tax or income tax (including interest and penalties and respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any 13 permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any excise tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statue of limitations relating to payment of taxes for the taxable years of Employee with respect to which such contested amount is claimed to be due is limited solely to issues relating to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment shall be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 4 of this Part Three, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 4 of this Part Three), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of any amount advanced by the Company pursuant to Section 4 of this Part Three, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES 1. MITIGATION. Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Employee's existing rights which would accrue solely as a result of the passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as defined in ERISA), compensation arrangement, incentive plan, stock option or other stock-related plan. 2. LEGAL COSTS. If any legal action or other proceeding is brought by Employee for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, Employee shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which he may be entitled, in the event and to the extent that Employee prevails in such action or other proceeding. Notwithstanding anything hereinabove to the contrary, as between Employee and the Company, the Company shall bear all legal costs and expenses of defending the validity of this Agreement against any third party. The Company shall 14 bear all legal costs and expenses incurred in contesting or disputing the characterization of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of an excise tax under Section 4999 of the Code. 3. FULL SETTLEMENT. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by an set-off, counterclaim, recoupment, defense or other claim, or other action which the Company may have against Employee or others. PART FIVE -- MISCELLANEOUS PROVISIONS 1. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the stock, business or assets of the Company whether by merger, consolidation, division, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Employment Agreement). The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Employment Agreement entitling Employee to the benefits hereunder, as though Employee was subject to Involuntary Termination. This Agreement shall be binding upon and inure to the benefit of Employee, his successors, assigns, executors, administrators or beneficiaries. 2. DEATH. Should you die before receipt of all the separation payments to which you may become entitled under Part Two, Section 9, then such payment or payments will be made, on the due date or dates hereunder had you survived, to the executors or administrators of your estate. Should you die before you exercise your outstanding vested options, then each such option may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by person to whom the option is transferred pursuant to your will or in accordance with the laws of inheritance. In no event, however, may any such vested option be exercised after the specified expiration date of the option term. 3. INDEMNIFICATION. The indemnification provisions for Officers and Directors under the Company's Bylaws will (to the maximum extent permitted by law) be extended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your Employment Period. 4. MISCELLANEOUS. The provisions of this Agreement will be construed and interpreted under the laws of the State of California. This Agreement incorporates the entire Agreement between you and the Company relating to the terms of your employment and the subject of severance benefits and supersedes all prior agreements and understandings with respect to such 15 subject matter. This Agreement may only be amended by written instrument signed by you and an authorized officer of the Company. 16 5. ARBITRATION. Any controversy which may arise between you and the Company with respect to the construction, interpretation or application of any of the terms, provisions, covenants or conditions of this Agreement or any claim arising from or relating to this Agreement will be submitted to final and binding arbitration in San Diego, California in accordance with the rules of the American Arbitration Association then in effect. 6. NOTICES. Any notice required to be given under this Agreement shall be deemed sufficient, if in writing, and sent by certified mail, return receipt requested, via overnight courier, or hand delivered to the Company at 5501 Oberlin Drive, San Diego, California, 92121, and to Employee at his most recent address reflected in the permanent Company records. Please indicate your acceptance of the foregoing provisions of this Agreement by signing the enclosed copy of this Agreement and returning it to the Company. Very truly yours, MYCOGEN CORPORATION By: /s/ Jerry Caulder -------------------------------- Chairman and Chief Executive Officer ACCEPTED BY AND AGREED TO Signature: /s/ James A. Baumker --------------------------- Dated: January 1, 1996 --------------------------- 17 EXHIBIT A Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER. (a) Any provision in an employment agreement which provides that an employee will assign, or offer to assign, any of his or her rights in an invention to his or her employer will not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer. (2) Result from any work performed by the employee for his employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable. 18 EX-99.24 23 EXHIBIT 99.24 January 1, 1996 Michael W. Sund Director Investor Relations Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Mr. Sund: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise 1 tax by the Internal Revenue Service. Part Four provides for certain additional rights and responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means Michael W. Sund. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of Director Investor Relations. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $120,000.00. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 9. SEVERANCE BENEFITS. A. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for Cause) prior to January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to two (2) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twenty-four (24) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and other coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section 9.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section 9.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under Section 4980A of the Code and Part VI of Title I of the Employee Retirement Income Security Act ("COBRA") or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's Common Stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. B. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for 6 Cause) at any time after January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twelve (12) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section B.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section B.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under COBRA or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's common stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. 10. RESTRICTIVE COVENANT. During the Employment Period: (i) You will devote your full working time and effort to the performance of your duties as an executive officer of the Company. (ii) You will not directly or indirectly, whether for your own account or as an employee, consultant or advisor, provide services to any business enterprise 7 other than the Company, unless otherwise authorized by the Company in writing. 8 However, you will have the right to perform such incidental services as are necessary in connection with (a) your private passive investments, (b) your charitable or community activities, and (c) your participation in trade or professional organizations, but only to the extent such incidental services do not interfere with the performance of your services hereunder. 11. NON-SOLICITATION. During any period for which you are receiving compensation payments pursuant to Part Two, Section 4 and one (1) year thereafter, you will not directly or indirectly solicit any Company employee to leave the Company's employ for any reason or interfere in any other manner with the employment relationships at the time existing between the Company and its current employees. 12. CONFIDENTIALITY. A. You hereby acknowledge that the Company may, from time to time during the Employment Period, disclose to you confidential information pertaining to the Company's business and affairs and client base, including (without limitation) customer lists and accounts, other similar items indicating the source of the Company's income and information pertaining to the salaries, duties and performance levels of the Company's employees. You will not, at any time during or after such Employment Period, disclose to any third party or directly or indirectly make use of any such confidential information, including (without limitation) the names, addresses and telephone numbers of the Company's customers, other than in connection with, and in furtherance of, the Company's business and affairs. Nothing contained in this paragraph shall be construed to prevent Employee from disclosing the amount of his salary. B. All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such proprietary information of the Company which come into your possession during the Employment Period will be returned by you to the Company immediately upon the termination of the Employment Period or upon any earlier request by the Company, and you will not retain any copies, notes or excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to retain his file or rolodex containing names, addresses and telephone numbers and personal diaries and calendars; provided, however, that Employee shall continue to be bound by the terms of Section 12.A. above to the extent such retained materials constitute confidential information. C. Your obligations under this Section 12 will continue in effect after the termination of your employment with the Company, whatever the reason or reasons for such termination, and the Company will have the right to communicate with any of your future or prospective employers concerning your continuing obligations under this Section 12. 13. OWNERSHIP RIGHTS. A. All materials, ideas, discoveries and inventions pertaining to the Company's business or clients, including (without limitation) all patents and copyrights, patent applications, patent renewals and extensions and the names, addresses and telephone numbers of customers, will belong solely to the Company. 9 B. All materials, ideas, discoveries and inventions which you may devise, conceive, develop or reduce to practice (whether individually or jointly with others) during the Employment Period will be the sole property of the Company and are hereby assigned by you to the Company, except for any idea, discovery or invention (i) for which no Company equipment, supplies, facility or trade secret information is used, (ii) which is developed entirely on your own time and (iii) which neither (a) relates at the time of conception or reduction to practice, to the Company's business or any actual or demonstrably-anticipated research or development program of the Company nor (b) results from any work performed by you for the Company. The foregoing exception corresponds to the assignment of inventions precluded by California Labor Code Section 2870, attached as Exhibit A. C. You will, at all times whether during or after the Employment Period, assist the Company, at the Company's sole expense, in obtaining, maintaining, defending and enforcing patents, copyrights and other proprietary rights of the Company. Such assistance will include (without limitation) the execution of documents and assistance and cooperation in legal proceedings. D. You will continue to be bound by all the terms and provisions of your existing Proprietary Information and Invention Agreements with the Company, and nothing in this document will be deemed to modify or affect your duties and obligations under those other agreements. 14. TERMINATION OF EMPLOYMENT. A. The Company (or any successor entity resulting from a Change in Control) may terminate your employment under this Agreement at any time for any reason, with or without cause, by providing you with at least thirty (30) days prior written notice. However, such notice requirement will not apply in the event there is a Termination for Cause under subparagraph D below. B. In the event there is an Involuntary Termination of your employment with the Company (other than Termination for Cause) during the Employment Period, you will become entitled to the benefits specified in Part Two, Section 9 in addition to any unpaid compensation earned by you under Part Two, Section 4 for services rendered prior to such termination. C. Should your employment with the Company terminate by reason of your death or disability during the Employment Period, no severance benefits will be payable to you under Part Two, Section 9, and only the limited death or disability benefits provided under Part Two, Section 8 will be payable, to the extent applicable. D. The Company may at any time, upon written notice, terminate your employment hereunder for any act qualifying as a Termination for Cause. Such termination will be effective immediately upon such notice. 10 E. Upon such Termination for Cause, the Company will only be required to pay you any unpaid compensation earned by you pursuant to Part Two, Section 4 for services rendered through the date of such termination, and no termination or severance benefits will be payable to you under Part Two, Section 9. 11 PART THREE -- INTERNAL REVENUE CODE LIMITATIONS 1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this Agreement, if Employee is entitled to benefits hereunder following the occurrence of a Change in Control, in no event shall the present value of benefits payable under this Agreement, taken together with Employee's benefits under the Stock Option Plan and Restricted Stock Issuance Plan and other applicable sources, that, in the opinion of counsel (as identified in Section 3 of this Part Three), are considered "parachute payments" under Section 4999 of the Code, be reduced by the excise tax imposed by Section 4999 of the Code. In the event that such benefits so taken together would exceed the amount which is exempt from the excise tax imposed by Section 4999 of the Code, the Company shall pay to Employee an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee, after deduction for the amount of any excise tax under Section 4999 and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or local income tax) on the present value of such benefits, and any federal, state and local income tax, excise tax and penalties and interest, if applicable, upon the additional payment provided for by this Section 1, shall be equal to the present value of such benefits. For purposes of determining the additional amount to be paid to Employee pursuant to this Section 1, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the additional payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of his residence on the date the additional payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction from such state and local taxes. 2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this Part Three, the term "parachute payment" shall have the meaning ascribed to it under Section 280G(b)(2) of the Code, and "present value" shall be determined in accordance with Section 280G(d)(4) of the Code. 3. INTERPRETATION. This Part Three shall be interpreted so as to avoid the imposition of excise taxes on Employee under Section 4999 of the Code, or to minimize such taxes. In applying the provisions of this Part Three if, for any reason, an exemption from the application of the rules of Section 4999 of the Code shall be available under the terms of said Section or under any applicable regulations or rulings thereunder, such exemption shall be fully applied. All payments under this Agreement or otherwise that are, in the opinion of counsel (as identified in this Section 3), parachute payments shall be taken into account in applying the provisions of this Part Three, and no others. In application of the provisions of this Part Three, calculations necessary to be made pursuant to the provisions of this Part Three and interpretation of the Code and applicable regulations for purposes of compliance with this Part Three shall be made by the private law firm serving as executive compensation and tax counsel to the Board immediately prior to the Change in Control, and the determination of such counsel made in good faith shall be binding and conclusive upon both the Company and Employee. All fees and expenses of such law firm pertaining thereto shall be borne by the Company. Payments shall be made pursuant to this Agreement notwithstanding that the status of any payment as a parachute payment has not been finally determined by the Internal Revenue Service or any court of competent jurisdiction, or by arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as determined 12 pursuant to Section 1 of this Part Three, shall be paid by the Company to Employee within five (5) days of the receipt of the law firm's determination. If the law firm determines that no excise tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the excise tax on Employee's applicable federal income tax return would not result in the imposition of a negligence (or similar) penalty. Any determination by the law firm shall be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the law firm hereunder, it is possible that Gross-Up Payments will not have been made in full by the Company, consistent with the calculations required to be made hereunder (with such shortfall as "Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 4 of this Part Three and Employee thereafter is required to make a payment of any excise tax, the law firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. 4. INTERNAL REVENUE SERVICE CLAIMS. Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (a) give the Company any information reasonably requested by the Company relating to such claim (without requiring a waiver of Employee's attorney-client privilege); (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith in order to effectively contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any excise tax or income tax (including interest and penalties and respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any 13 permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any excise tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statue of limitations relating to payment of taxes for the taxable years of Employee with respect to which such contested amount is claimed to be due is limited solely to issues relating to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment shall be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 4 of this Part Three, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 4 of this Part Three), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of any amount advanced by the Company pursuant to Section 4 of this Part Three, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES 1. MITIGATION. Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Employee's existing rights which would accrue solely as a result of the passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as defined in ERISA), compensation arrangement, incentive plan, stock option or other stock-related plan. 2. LEGAL COSTS. If any legal action or other proceeding is brought by Employee for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, Employee shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which he may be entitled, in the event and to the extent that Employee prevails in such action or other proceeding. Notwithstanding anything hereinabove to the contrary, as between Employee and the Company, the Company shall bear all legal costs and expenses of defending the validity of this Agreement against any third party. The Company shall 14 bear all legal costs and expenses incurred in contesting or disputing the characterization of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of an excise tax under Section 4999 of the Code. 3. FULL SETTLEMENT. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by an set-off, counterclaim, recoupment, defense or other claim, or other action which the Company may have against Employee or others. PART FIVE -- MISCELLANEOUS PROVISIONS 1. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the stock, business or assets of the Company whether by merger, consolidation, division, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Employment Agreement). The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Employment Agreement entitling Employee to the benefits hereunder, as though Employee was subject to Involuntary Termination. This Agreement shall be binding upon and inure to the benefit of Employee, his successors, assigns, executors, administrators or beneficiaries. 2. DEATH. Should you die before receipt of all the separation payments to which you may become entitled under Part Two, Section 9, then such payment or payments will be made, on the due date or dates hereunder had you survived, to the executors or administrators of your estate. Should you die before you exercise your outstanding vested options, then each such option may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by person to whom the option is transferred pursuant to your will or in accordance with the laws of inheritance. In no event, however, may any such vested option be exercised after the specified expiration date of the option term. 3. INDEMNIFICATION. The indemnification provisions for Officers and Directors under the Company's Bylaws will (to the maximum extent permitted by law) be extended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your Employment Period. 4. MISCELLANEOUS. The provisions of this Agreement will be construed and interpreted under the laws of the State of California. This Agreement incorporates the entire Agreement between you and the Company relating to the terms of your employment and the subject of severance benefits and supersedes all prior agreements and understandings with respect to such 15 subject matter. This Agreement may only be amended by written instrument signed by you and an authorized officer of the Company. 16 5. ARBITRATION. Any controversy which may arise between you and the Company with respect to the construction, interpretation or application of any of the terms, provisions, covenants or conditions of this Agreement or any claim arising from or relating to this Agreement will be submitted to final and binding arbitration in San Diego, California in accordance with the rules of the American Arbitration Association then in effect. 6. NOTICES. Any notice required to be given under this Agreement shall be deemed sufficient, if in writing, and sent by certified mail, return receipt requested, via overnight courier, or hand delivered to the Company at 5501 Oberlin Drive, San Diego, California, 92121, and to Employee at his most recent address reflected in the permanent Company records. Please indicate your acceptance of the foregoing provisions of this Agreement by signing the enclosed copy of this Agreement and returning it to the Company. Very truly yours, MYCOGEN CORPORATION By: /s/ Jerry Caulder ------------------------------- Chairman and Chief Executive Officer ACCEPTED BY AND AGREED TO Signature: /s/ Michael W. Sund ----------------------- Dated: /s/ Jan. 1, 1996 -------------------------- 17 EXHIBIT A Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER. (a) Any provision in an employment agreement which provides that an employee will assign, or offer to assign, any of his or her rights in an invention to his or her employer will not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer. (2) Result from any work performed by the employee for his employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable. 18 EX-99.25 24 EXHIBIT 99.25 January 1, 1996 Ms. Naomi D. Whitacre Vice President Mycogen Corporation 5501 Oberlin Drive San Diego, California 92121 Dear Ms. Whitacre: We are pleased to inform you that the Board of Directors (the "Board") of Mycogen Corporation (the "Company") has authorized an employment package for you which will provide certain assurances concerning the terms and conditions of your continued employment with the Company and will allow you to participate in a program of severance benefit payments should your employment terminate. The purpose of this letter agreement (the "Agreement") is to document the terms of your employment package by providing you with a formal employment contract. The Company considers it essential to the continuing operation of the Company and in the best interests of its shareholders to assure the continuous dedication of key management personnel. It is recognized in the context of public ownership that a termination of an employee's employment without cause may be sought and that such circumstances could prove distracting to key executives and detrimental to the ongoing management and administration of the Company. Such distraction is not in the best interest of the shareholders of the Company. Accordingly, the Board has determined to discourage the inevitable distraction to you in the face of potentially disturbing circumstances inherent in any uncertainty regarding your employment status. This Agreement is intended to secure and encourage your ongoing retention by providing separation benefits in the event that your employment is altered as hereinafter described. In order to induce you to remain in the employ of the Company, and in consideration of the your agreement set forth in Sections 10, 11, 12 and 13 of Part Two hereof, the Company agrees to pay the severance payments and benefits set forth in this Employment Agreement, under the circumstances described herein. This Agreement supersedes any written employment agreement between you and the Company prior to the date hereof. Part One of this Agreement sets forth certain definitional provisions to be in effect for purposes of determining your benefit entitlements. Part Two specifies the terms and conditions which will apply to your continued employment with the Company, including the severance payments and benefits to which you will become entitled in the event your employment should be terminated. Part Three provides an additional gross-up bonus to you in the particular circumstance where the payment of or separation benefits generates the imposition of an excise 1 tax by the Internal Revenue Service. Part Four provides for certain additional rights and responsibilities of both yourself and the Company. Part Five concludes this Agreement with a series of general terms and conditions applicable to your employment benefits. PART ONE -- DEFINITIONS DEFINITIONS. For purposes of this Agreement, including in particular the severance payments and benefits to which you may become entitled under Part Three, the following definitions will be in effect: "CHANGE IN CONTROL" means: (i) a merger or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State of the Company's incorporation; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company or a sale/leaseback of all or substantially all of the Company's assets (with or without a purchase option); (iii) a transfer of all or substantially all of the Company's assets pursuant to a partnership or joint venture agreement or similar arrangement where the Company's resulting interest is or becomes fifty percent (50%) or less; (iv) any reverse merger in which the Company is the surviving entity but in which fifty percent (50%) or more of the Company's outstanding voting stock is transferred to holders different from those who held the stock immediately prior to such merger; (v) on or after the date hereof, a change in ownership of the Company through an action or series of transactions, such that any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the securities of the combined voting power of the Company's outstanding securities; (vi) a change in the composition of the Board such that the individuals elected to the Board at the last meeting of the shareholders at which there is not a contested election subsequently cease to comprise a majority of the Board; or (vii) the occurrence of any other event constituting a "change in control" under Code Section 280G or the Treasury regulations promulgated thereunder. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "EMPLOYEE" means Naomi D. Whitacre. 2 "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under Section 3 of ERISA. "EMPLOYMENT PERIOD" means the period of your employment with the Company governed by the terms and provisions of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time. "INVOLUNTARY TERMINATION" means the termination of your employment with the Company: (i) involuntarily upon your discharge, dismissal, or the Company's failure to renew this Agreement pursuant to Section 3 of Part Two, whether or not in connection with a Change in Control; or (ii) voluntarily or involuntarily, provided such termination occurs in connection with (a) a change in your position with the Company which materially reduces your level of responsibility or changes your title, (b) a reduction in your level of compensation (including base salary, fringe benefits and any non-discretionary bonuses or other incentive payments earned pursuant to objective standards or criteria) by more than ten percent (10%), or (c) a relocation of your principal place of employment by more than fifty (50) miles or a change in your responsibilities such that you must spend more than twenty percent (20%) of your working days outside of the San Diego, California area, AND such change, reduction or relocation is effected without your written concurrence. "OPTION" means any option granted to you under the Stock Option Plan which is outstanding at the time of your Involuntary Termination. "STOCK OPTION PLAN" means the Company's 1992 Stock Option Plan (including the predecessor 1983 Stock Option Plan), as amended through the date hereof. "RESTRICTED STOCK ISSUANCE PLAN" means the 1990 Restricted Stock Issuance Plan, as revised on April 18, 1991, and as further amended through the date hereof. "TERMINATION FOR CAUSE" will mean an Involuntary Termination of your employment for one or more alleged acts of fraud, embezzlement, misappropriation of proprietary information or any other verifiable misconduct adversely affecting the business reputation of the Company in a material manner. 3 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT The following terms and conditions will govern your employment with the Company throughout the Employment Period and will also, to the extent indicated below, remain in effect following your termination date. 1. EMPLOYMENT AND DUTIES. The Company will continue to employ you as an executive officer in the position of Vice President. You agree to continue in such employment for the duration of the Employment Period and to perform in good faith and to the best of your ability all services which may be required of you in your executive position and to be available to render such services at all reasonable times and places in accordance with reasonable directives and assignments issued by the Board or your superiors. During your Employment Period, you will devote your full time and effort to the business and affairs of the Company within the scope of your executive office. Your principal place of operations will be at the Company's corporate offices in San Diego, California. You may, however, be required to travel periodically to Company facilities in other geographic locations in connection with your duties. 2. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof. The term of this Agreement shall continue in effect from such date for a period of one (1) year from such date, subject to the provisions of this Part Two, unless sooner terminated by the parties in accordance with the provisions hereof. No termination or expiration of this Agreement shall affect any rights, obligations or liabilities of Employee or the Company that shall have accrued on or prior to the date of termination or expiration. 3. AUTOMATIC EXTENSION. Commencing on the first anniversary of the effective date hereof, and on each succeeding anniversary of the date hereof, the term of this Agreement shall automatically be extended for one (1) additional year unless, not later than three (3) months preceding such anniversary date, the Company shall have given written notice pursuant to Section 6 of Part Five that it will not extend the term of this Agreement. The automatic extension of the term of this Employment Agreement pursuant to this Section 3 shall not be a modification of this Agreement in any significant respect within the meaning of Section 280G of the Code and the rules and regulations thereunder. 4. COMPENSATION. A. For service in the 1996 calendar year, your base salary will be the annual rate of $85,000. Your annual rate of base salary will be subject to adjustment each calendar year by the Board. B. Your base salary will be paid at periodic intervals in accordance with the Company's payroll practices for salaried employees. 4 C. You will be entitled to such bonuses (if any) for service rendered during the Employment Period as the Board may determine in its sole discretion based upon the recommendation of the Company's Chief Employee Officer and such additional factors as the Board deems appropriate, including your individual performance and the Company's profitability. D. The Company will deduct and withhold, from the compensation payable to you hereunder, any and all applicable Federal, State and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation. 5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement from the Company for all customary, ordinary and necessary business expenses incurred by you in the performance of your duties hereunder, PROVIDED you furnish the Company with vouchers, receipts and other substantiation of such expenses within thirty (30) days after they are incurred. 6. FRINGE BENEFITS. During the Employment Period, you will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan, accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing plans, cafeteria benefit programs, and stock option plans, which are made available to executives and for which you qualify. 7. VACATION. You will accrue paid vacation benefits during the Employment Period in accordance with the Company policy in effect for executive officers. 8. DEATH OR DISABILITY. A. Upon your death or disability during the Employment Period, the employment relationship created pursuant to this Agreement will immediately terminate, and no further compensation will become payable to you pursuant to Part Two, Section 4. In connection with such termination, the Company will only be required to pay you (or your estate) any unpaid compensation earned under Part Two, Section 4 for services rendered through the date of your death or disability, together with a special termination payment equal to the additional amount of base salary you would have earned hereunder had your employment continued for an additional thirty (30) days. B. You will be deemed disabled if you are, in the Company's reasonable opinion, unable by reason of any permanent physical or mental injury or illness to substantially perform the services required of you hereunder either for a period in excess of one hundred eighty (180) days or for a period of one hundred eighty (180) days in the aggregate during any two hundred seventy (270) day period. In such event, you will be deemed disabled as of the end of such one hundred eightieth (180th) day. C. Upon death or disability the terms of The Stock Plan will apply. 5 9. SEVERANCE BENEFITS. A. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for Cause) prior to January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to two (2) times the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twenty-four (24) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and other coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section 9.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section 9.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under Section 4980A of the Code and Part VI of Title I of the Employee Retirement Income Security Act ("COBRA") or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's Common Stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. B. You will be entitled to receive the severance benefits specified below in the event there should occur an Involuntary Termination of your employment (other than a Termination for 6 Cause) at any time after January 1, 1999, whether or not effected in connection with a Change in Control: (i) SEVERANCE BENEFIT. The Company will make a severance payment to you, in one lump sum within fifteen (15) days of the date of your Involuntary Termination, in an aggregate amount equal to the sum of (a) the average annual rate of base salary and (b) the average bonus paid to you by the Company, in each case for service rendered in the two (2) immediately preceding calendar years. If a bonus was paid for only one of those calendar years, then the clause (b) amount will be equal to that bonus. (ii) WELFARE BENEFITS. For a period of twelve (12) months, Employee (and his dependents, as applicable) shall be provided by the Company with the same life, health and disability plan participation, benefits and coverages to which he was entitled as an employee immediately before the Involuntary Termination. In the event that under applicable law or the terms of the relevant Employee Benefit Plans such participation, benefits and/or coverage cannot be provided to Employee following his Involuntary Termination, such coverage and/or benefits shall be provided directly by the Company pursuant to this Agreement on a comparable basis. In its sole discretion, the Company may obtain such coverage and benefits for Employee through private insurance acquired at the Company's expense. Amounts paid or payable to or on behalf of Employee pursuant to any "employee welfare benefit plan", as defined in ERISA, providing health and/or disability benefits, that is sponsored by the Company or an affiliate of the Company, shall be credited against amounts due under this Section B.A.(ii). To the maximum extent permitted by applicable law, the benefits provided under this Section B.A.(ii) shall be in discharge of any obligations of the company or any rights of Employee under the benefit continuation provisions under COBRA or any other legislation of similar import. (iii) UNVESTED STOCK. Any unvested shares of the Company's common stock which you hold under the Restricted Stock Issuance Plan at the time of such Involuntary Termination will immediately vest in full. (iv) OPTION ACCELERATION. Each of your Options under the Stock Option Plan will (to the extent not then otherwise exercisable) automatically accelerate so that each such Option will become immediately exercisable for the total number of shares purchasable thereunder. Each such accelerated Option, together with all of your other vested Options, will remain exercisable for a period of three (3) years following your Involuntary Termination and may be exercised for any or all of the accelerated shares in accordance with the exercise provisions of the Option agreement evidencing the grant. 10. RESTRICTIVE COVENANT. During the Employment Period: (i) You will devote your full working time and effort to the performance of your duties as an executive officer of the Company. (ii) You will not directly or indirectly, whether for your own account or as an employee, consultant or advisor, provide services to any business enterprise 7 other than the Company, unless otherwise authorized by the Company in writing. 8 However, you will have the right to perform such incidental services as are necessary in connection with (a) your private passive investments, (b) your charitable or community activities, and (c) your participation in trade or professional organizations, but only to the extent such incidental services do not interfere with the performance of your services hereunder. 11. NON-SOLICITATION. During any period for which you are receiving compensation payments pursuant to Part Two, Section 4 and one (1) year thereafter, you will not directly or indirectly solicit any Company employee to leave the Company's employ for any reason or interfere in any other manner with the employment relationships at the time existing between the Company and its current employees. 12. CONFIDENTIALITY. A. You hereby acknowledge that the Company may, from time to time during the Employment Period, disclose to you confidential information pertaining to the Company's business and affairs and client base, including (without limitation) customer lists and accounts, other similar items indicating the source of the Company's income and information pertaining to the salaries, duties and performance levels of the Company's employees. You will not, at any time during or after such Employment Period, disclose to any third party or directly or indirectly make use of any such confidential information, including (without limitation) the names, addresses and telephone numbers of the Company's customers, other than in connection with, and in furtherance of, the Company's business and affairs. Nothing contained in this paragraph shall be construed to prevent Employee from disclosing the amount of his salary. B. All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such proprietary information of the Company which come into your possession during the Employment Period will be returned by you to the Company immediately upon the termination of the Employment Period or upon any earlier request by the Company, and you will not retain any copies, notes or excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to retain his file or rolodex containing names, addresses and telephone numbers and personal diaries and calendars; provided, however, that Employee shall continue to be bound by the terms of Section 12.A. above to the extent such retained materials constitute confidential information. C. Your obligations under this Section 12 will continue in effect after the termination of your employment with the Company, whatever the reason or reasons for such termination, and the Company will have the right to communicate with any of your future or prospective employers concerning your continuing obligations under this Section 12. 13. OWNERSHIP RIGHTS. A. All materials, ideas, discoveries and inventions pertaining to the Company's business or clients, including (without limitation) all patents and copyrights, patent applications, patent renewals and extensions and the names, addresses and telephone numbers of customers, will belong solely to the Company. 9 B. All materials, ideas, discoveries and inventions which you may devise, conceive, develop or reduce to practice (whether individually or jointly with others) during the Employment Period will be the sole property of the Company and are hereby assigned by you to the Company, except for any idea, discovery or invention (i) for which no Company equipment, supplies, facility or trade secret information is used, (ii) which is developed entirely on your own time and (iii) which neither (a) relates at the time of conception or reduction to practice, to the Company's business or any actual or demonstrably-anticipated research or development program of the Company nor (b) results from any work performed by you for the Company. The foregoing exception corresponds to the assignment of inventions precluded by California Labor Code Section 2870, attached as Exhibit A. C. You will, at all times whether during or after the Employment Period, assist the Company, at the Company's sole expense, in obtaining, maintaining, defending and enforcing patents, copyrights and other proprietary rights of the Company. Such assistance will include (without limitation) the execution of documents and assistance and cooperation in legal proceedings. D. You will continue to be bound by all the terms and provisions of your existing Proprietary Information and Invention Agreements with the Company, and nothing in this document will be deemed to modify or affect your duties and obligations under those other agreements. 14. TERMINATION OF EMPLOYMENT. A. The Company (or any successor entity resulting from a Change in Control) may terminate your employment under this Agreement at any time for any reason, with or without cause, by providing you with at least thirty (30) days prior written notice. However, such notice requirement will not apply in the event there is a Termination for Cause under subparagraph D below. B. In the event there is an Involuntary Termination of your employment with the Company (other than Termination for Cause) during the Employment Period, you will become entitled to the benefits specified in Part Two, Section 9 in addition to any unpaid compensation earned by you under Part Two, Section 4 for services rendered prior to such termination. C. Should your employment with the Company terminate by reason of your death or disability during the Employment Period, no severance benefits will be payable to you under Part Two, Section 9, and only the limited death or disability benefits provided under Part Two, Section 8 will be payable, to the extent applicable. D. The Company may at any time, upon written notice, terminate your employment hereunder for any act qualifying as a Termination for Cause. Such termination will be effective immediately upon such notice. 10 E. Upon such Termination for Cause, the Company will only be required to pay you any unpaid compensation earned by you pursuant to Part Two, Section 4 for services rendered through the date of such termination, and no termination or severance benefits will be payable to you under Part Two, Section 9. 11 PART THREE -- INTERNAL REVENUE CODE LIMITATIONS 1. CODE LIMITATIONS. Notwithstanding anything to the contrary in this Agreement, if Employee is entitled to benefits hereunder following the occurrence of a Change in Control, in no event shall the present value of benefits payable under this Agreement, taken together with Employee's benefits under the Stock Option Plan and Restricted Stock Issuance Plan and other applicable sources, that, in the opinion of counsel (as identified in Section 3 of this Part Three), are considered "parachute payments" under Section 4999 of the Code, be reduced by the excise tax imposed by Section 4999 of the Code. In the event that such benefits so taken together would exceed the amount which is exempt from the excise tax imposed by Section 4999 of the Code, the Company shall pay to Employee an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee, after deduction for the amount of any excise tax under Section 4999 and any interest charges or penalties in respect of the imposition of such excise tax (but not any federal, state or local income tax) on the present value of such benefits, and any federal, state and local income tax, excise tax and penalties and interest, if applicable, upon the additional payment provided for by this Section 1, shall be equal to the present value of such benefits. For purposes of determining the additional amount to be paid to Employee pursuant to this Section 1, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the additional payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of his residence on the date the additional payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction from such state and local taxes. 2. DEFINITIONS APPLICABLE TO THIS PART THREE. For purposes of this Part Three, the term "parachute payment" shall have the meaning ascribed to it under Section 280G(b)(2) of the Code, and "present value" shall be determined in accordance with Section 280G(d)(4) of the Code. 3. INTERPRETATION. This Part Three shall be interpreted so as to avoid the imposition of excise taxes on Employee under Section 4999 of the Code, or to minimize such taxes. In applying the provisions of this Part Three if, for any reason, an exemption from the application of the rules of Section 4999 of the Code shall be available under the terms of said Section or under any applicable regulations or rulings thereunder, such exemption shall be fully applied. All payments under this Agreement or otherwise that are, in the opinion of counsel (as identified in this Section 3), parachute payments shall be taken into account in applying the provisions of this Part Three, and no others. In application of the provisions of this Part Three, calculations necessary to be made pursuant to the provisions of this Part Three and interpretation of the Code and applicable regulations for purposes of compliance with this Part Three shall be made by the private law firm serving as executive compensation and tax counsel to the Board immediately prior to the Change in Control, and the determination of such counsel made in good faith shall be binding and conclusive upon both the Company and Employee. All fees and expenses of such law firm pertaining thereto shall be borne by the Company. Payments shall be made pursuant to this Agreement notwithstanding that the status of any payment as a parachute payment has not been finally determined by the Internal Revenue Service or any court of competent jurisdiction, or by arbitration as provided in Section 3 of Part Four. Any Gross-Up Payment, as determined 12 pursuant to Section 1 of this Part Three, shall be paid by the Company to Employee within five (5) days of the receipt of the law firm's determination. If the law firm determines that no excise tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the excise tax on Employee's applicable federal income tax return would not result in the imposition of a negligence (or similar) penalty. Any determination by the law firm shall be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the law firm hereunder, it is possible that Gross-Up Payments will not have been made in full by the Company, consistent with the calculations required to be made hereunder (with such shortfall as "Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 4 of this Part Three and Employee thereafter is required to make a payment of any excise tax, the law firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Employee. 4. INTERNAL REVENUE SERVICE CLAIMS. Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall: (a) give the Company any information reasonably requested by the Company relating to such claim (without requiring a waiver of Employee's attorney-client privilege); (b) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; (c) cooperate with the Company in good faith in order to effectively contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any excise tax or income tax (including interest and penalties and respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any 13 permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold Employee harmless, on an after-tax basis, from any excise tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statue of limitations relating to payment of taxes for the taxable years of Employee with respect to which such contested amount is claimed to be due is limited solely to issues relating to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment shall be payable hereunder and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 5. INTERNAL REVENUE SERVICE REFUNDS. If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 4 of this Part Three, Employee becomes entitled to receive any refund with respect to such claim, Employee shall (subject to the Company's complying with the requirements of Section 4 of this Part Three), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of any amount advanced by the Company pursuant to Section 4 of this Part Three, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. PART FOUR - ADDITIONAL RIGHTS AND RESPONSIBILITIES 1. MITIGATION. Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Employee's existing rights which would accrue solely as a result of the passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as defined in ERISA), compensation arrangement, incentive plan, stock option or other stock-related plan. 2. LEGAL COSTS. If any legal action or other proceeding is brought by Employee for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, Employee shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which he may be entitled, in the event and to the extent that Employee prevails in such action or other proceeding. Notwithstanding anything hereinabove to the contrary, as between Employee and the Company, the Company shall bear all legal costs and expenses of defending the validity of this Agreement against any third party. The Company shall 14 bear all legal costs and expenses incurred in contesting or disputing the characterization of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of an excise tax under Section 4999 of the Code. 3. FULL SETTLEMENT. The Company's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by an set-off, counterclaim, recoupment, defense or other claim, or other action which the Company may have against Employee or others. PART FIVE -- MISCELLANEOUS PROVISIONS 1. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the stock, business or assets of the Company whether by merger, consolidation, division, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Employment Agreement). The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Employment Agreement entitling Employee to the benefits hereunder, as though Employee was subject to Involuntary Termination. This Agreement shall be binding upon and inure to the benefit of Employee, his successors, assigns, executors, administrators or beneficiaries. 2. DEATH. Should you die before receipt of all the separation payments to which you may become entitled under Part Two, Section 9, then such payment or payments will be made, on the due date or dates hereunder had you survived, to the executors or administrators of your estate. Should you die before you exercise your outstanding vested options, then each such option may be exercised, within twelve (12) months after your death, by the executors or administrators of your estate or by person to whom the option is transferred pursuant to your will or in accordance with the laws of inheritance. In no event, however, may any such vested option be exercised after the specified expiration date of the option term. 3. INDEMNIFICATION. The indemnification provisions for Officers and Directors under the Company's Bylaws will (to the maximum extent permitted by law) be extended to you, during the period following your Involuntary Termination, with respect to any and all matters, events or transactions occurring or effected during your Employment Period. 4. MISCELLANEOUS. The provisions of this Agreement will be construed and interpreted under the laws of the State of California. This Agreement incorporates the entire Agreement between you and the Company relating to the terms of your employment and the subject of severance benefits and supersedes all prior agreements and understandings with respect to such 15 subject matter. This Agreement may only be amended by written instrument signed by you and an authorized officer of the Company. 16 5. ARBITRATION. Any controversy which may arise between you and the Company with respect to the construction, interpretation or application of any of the terms, provisions, covenants or conditions of this Agreement or any claim arising from or relating to this Agreement will be submitted to final and binding arbitration in San Diego, California in accordance with the rules of the American Arbitration Association then in effect. 6. NOTICES. Any notice required to be given under this Agreement shall be deemed sufficient, if in writing, and sent by certified mail, return receipt requested, via overnight courier, or hand delivered to the Company at 5501 Oberlin Drive, San Diego, California, 92121, and to Employee at his most recent address reflected in the permanent Company records. Please indicate your acceptance of the foregoing provisions of this Agreement by signing the enclosed copy of this Agreement and returning it to the Company. Very truly yours, MYCOGEN CORPORATION By: /s/ Jerry Caulder ----------------------------------- Chairman and Chief Executive Officer ACCEPTED BY AND AGREED TO Signature: /s/ Naomi Dennis Whitacre --------------------------- Dated: /s/ January 1, 1996 --------------------------- 17 EXHIBIT A Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER. (a) Any provision in an employment agreement which provides that an employee will assign, or offer to assign, any of his or her rights in an invention to his or her employer will not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer. (2) Result from any work performed by the employee for his employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable. 18 EX-99.29 25 EXHIBIT 99.29 ANNEX A [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. 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. [LOGO] Special Committee of the Board of Directors August 31, 1998 Page 2 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. 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 to any such matter. 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 Special Committee of the Board of Directors August 31, 1998 Page 3 (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] EX-99.30 26 EXHIBIT 30 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 LAW OFFICES OF JAMES V. BASHIAN, P.C. BERMAN, DeVALERIO & PEASE JAMES V. BASHIAN GLEN DeVALERIO 500 Fifth Avenue One Liberty Square Suite 2700 Boston, MA 02109 New York, NY 10110 Telephone: 617/542-8300 Telephone: 212/921-4110 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO JEANETTE ANDERSON, On Behalf of ) Case No. 720391 Herself and All Others Similarly ) Situated, ) CLASS ACTION ) ------------ Plaintiff, ) ) vs. ) ) JURY DEMAND MYCOGEN CORPORATION, J. PEDRO ) REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) ) - ------------------------------------------- ) Plaintiff demands a trial by jury. DATED: May 5, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach ------------------------------ WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 BERMAN, DeVALERIO & PEASE GLEN DeVALERIO One Liberty Square Boston, MA 02109 Telephone: 617/542-8300 LAW OFFICES OF JAMES V. BASHIAN, P.C. JAMES V. BASHIAN 500 Fifth Avenue Suite 2700 New York, NY 10110 Telephone: 212/921-4110 Attorneys for Plaintiff - 1 - MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 LAW OFFICES OF JAMES V. BASHIAN, P.C. BERMAN, DeVALERIO & PEASE JAMES V. BASHIAN GLEN DeVALERIO 500 Fifth Avenue One Liberty Square Suite 2700 Boston, MA 02109 New York, NY 10110 Telephone: 617/542-8300 Telephone: 212/921-4110 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO JEANETTE ANDERSON, On Behalf of ) Case No. 720391 Herself and All Others Similarly ) Situated, ) CLASS ACTION ) ------------ Plaintiff, ) ) COMPLAINT BASED UPON UNFAIR vs. ) BUSINESS PRACTICES, SELF ) DEALING AND BREACH OF MYCOGEN CORPORATION, J. PEDRO ) FIDUCIARY DUTY REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------------- ) -------------------- Plaintiff, by her attorneys, alleges upon information and belief, except as to PARA 4 which plaintiff alleges upon knowledge, as follows: JURISDICTION AND VENUE 1. This court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This Court has jurisdiction over Mycogen Corporation because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. PARTIES 4. Plaintiff Jeanette Anderson is a stockholder of defendant Mycogen Corporation ("Mycogen" or the "Company"). 5. Defendant Mycogen is a corporation duly organized and existing under the laws of the State of California, with its principal offices located at 5501 Oberlin Drive, San Diego, California 92121. Mycogen develops, manufacturers and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. As of April 7, 1998, there were over 36 million shares of Mycogen common stock outstanding. 6. Defendant Dow Chemical Company ("Dow") is a corporation duly organized and existing under the laws of the State of Delaware - 1 - with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. Dow is the fifth largest chemical company in the world, with annual sales of more than $20 billion. Dow manufactures and supplies chemicals, plastics, energy, agricultural products, consumer goods and environmental services. Through its wholly-owned subsidiary, Dow Agrosciences, LLC ("Dow Agrosciences"), Dow owns or controls shares representing approximately 69 percent of the outstanding common stock of Mycogen. 7. Defendant J. Pedro Reinhard is a Director of Mycogen and the Chief Financial Officer and Executive Vice President of Dow Agrosciences. 8. Defendant Carlton J. Eibl is the President of Mycogen and a member of its Board of Directors. 9. Defendant John L. Hagaman is a Director of Mycogen and the President of Dow Agrosciences. 10. Defendant Joseph P. Sullivan is a Director of Mycogen. 11. Defendant Roy M. Barbee is a Director of Mycogen. 12. Defendant George Khacharourians is a Director of Mycogen. 13. Defendant Nickolas D. Hein is the Chairman of Mycogen's Board of Directors and a Vice President of "Global Growth" for Dow Agrosciences. 14. Defendant G. William Tolbert is a Director of Mycogen and a "Global Business Development Director" for Dow Agrosciences. 15. Defendant Louis W. Pribila is a Director of Mycogen and the Secretary, General Counsel and a Vice President of Dow Agrosciences. - 2 - 16. The defendants named in PARA 7 through 15 are sometimes collectively referred to herein as the "Individual Defendants." 17. The true names and capacities of defendants sued herein under California Code of Civil Procedures Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe Defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 18. The Individual Defendants as officers and/or directors of Mycogen have a fiduciary relationship and responsibility to plaintiff and the other common public stockholders of Mycogen and owe to plaintiff and the other class members the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 19. Plaintiff brings this action pursuant to Section 382 of the California Code of Civil Procedure on her own behalf and as a class action on behalf of all common stockholders of Mycogen, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any defendants. 20. This action is properly maintainable as a class action because: - 3 - (a) The Class is so numerous that joinder of all members is impracticable. There are hundreds of Mycogen stockholders of record who are located throughout the United States; (b) There are questions of law and fact which are common to the Class, including: whether the defendants have engaged or are continuing to act in a manner calculated to benefit themselves at the expense of Mycogen's minority stockbrokers; and whether plaintiff and other members of the Class would be irreparably damaged if the defendants are not enjoined in the manner described below; (c) The defendants have acted or refuse to act on grounds generally applicable to the Class thereby making appropriate final injunctive relief with respect to the Class as a whole; (d) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interest as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; and (e) Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 21. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this controversy. - 4 - CLAIM FOR RELIEF 22. Mycogen is a California corporation that develops, manufactures and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. The Company's products are based on natural agents that are compatible with the environment and are developed through genetic engineering technology and innovative formulations. 23. Dow currently owns or controls approximately 69 percent of the outstanding common stock of Mycogen. Under the terms of a prior stand still agreement with Mycogen (the "Agreement"), Dow cannot acquire the remaining shares of Mycogen prior to February 1999. 24. After the close of trading on April 30, 1998, it was reported that Dow is seeking to amend the Agreement to permit it, acting through Dow Agrosciences, to begin discussions regarding the acquisition of the remaining shares of Mycogen common stock Dow does not already own for $20.50 per share in cash. 25. The majority of the nine board members identified above are in irrevocable positions of conflict and cannot be expected to act in the best interest of Mycogen's minority stockholders in connection with this proposed transaction. They alone have the authority to vote to allow the amendment to the Agreement that is being sought by Dow and to thereby deprive Mycogen's minority shareholders of the true value of their Mycogen shares. 26. The sole purpose of the proposed acquisition is to enable Dow to acquire the shares of Mycogen it does not already own, as well as Mycogen's valuable assets, for Dow's own benefit at the expense of Mycogen's minority stockholders. - 5 - 27. The proposed acquisition comes at a time when Mycogen has performed well and Dow expects it will continue to perform well because it is already positioned to do so. 28. Dow has timed this transaction to capture Mycogen's future potential and is seeking to appropriate Mycogen's assets for itself without paying an adequate or fair price for the Company's remaining shares. 29. Amidst a backdrop of an improving financial position and increased prospects for growth, Dow announced its desire to acquire the remaining shares of Mycogen for $20.50 cash per share. The offer made by Dow represents no premium over the current price of Mycogen common stock. In fact, prior to Dow's announcement on April 30, 1998, the price of Mycogen common stock closed at $20.625 per share -- higher than the price offered by Dow in the proposed acquisition. 30. The Individual Defendants and Dow are in a position of control and power over Mycogen's stockholders and have access to internal financial information about Mycogen, its true value, expected increase in true value, and the benefits to Dow of 100 percent ownership of Mycogen, to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control to benefit Dow in this transaction, to the detriment of Mycogen's minority common stockholders. 31. In proposing the acquisition, Dow and the Individual Defendants have committed or threatened to commit the following acts to the detriment and disadvantage of Mycogen minority stockholders: - 6 - (a) They have undervalued Mycogen's common stock by ignoring the full value of its assets and future prospects. The proposed acquisition consideration does not reflect the value of Mycogen's valuable assets; and (b) They timed the announcement of the proposed buyout in order to artificially depress the market price of Mycogen's common stock to justify a price that is unfair to Mycogen's minority stockholders. 32. The Individual Defendants have clear and material conflicts of interest and are acting to better the interests of Dow and themselves at the expense of Mycogen's minority stockholders. 33. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require: * undertake an appropriate evaluation of Mycogen's worth as an acquisition candidate; * act independently so that the interests of Mycogen's minority stockholders will be protected, including, but not limited to, the retention of independent advisors and the appointment of a Special Committee of some or all of the members of Mycogen's board to consider the Dow offer and negotiate with Dow on behalf of Mycogen's minority stockholders; * adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all - 7 - conflicts be resolved in the best interests of Mycogen's minority stockholders; and * if an acquisition transaction is to go forward, require that it be approved by a majority of Mycogen's minority stockholders. 34. As a result of the defendants' failure to take such steps to date, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their proportionate share of the value of the Company's assets and business, and have been and will be prevented from obtaining a fair price for their common stock. 35. Defendants, in failing to disclose the material non-public information in their possession as to the value of Mycogen's assets, the full extent of the future earnings potential of Mycogen and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the members of the Class. 36. As a result of the defendants' unlawful actions, plaintiff and the other members of the Class will be irreparably harmed in that they will not receive their fair portion of the value of Mycogen's assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed acquisition is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, will not engage in arm's-length negotiations on the acquisition terms, and will not supply to Mycogen's minority stockholders sufficient information to enable - 8 - them to cast informed votes on the proposed acquisition and may consummate the proposed acquisition, all to the irreparable harm of the members of the Class. 37. Plaintiff and the other members of the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: 1. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; 2. Declaring that defendants have breached their fiduciary and other duties to plaintiff and the other members of the Class; 3. Entering an order requiring defendants to take the steps set forth herein; 4. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed transaction; 5. In the event the proposed acquisition is consummated, rescinding it and setting it aside; 6. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 7. Awarding costs and disbursements, including plaintiff's counsel's fees and experts' fees; and - 9 - 8. Granting such other and further relief as the Court may deem just and proper. DATED: May 5, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach -------------------------------- WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 BERMAN, DeVALERIO & PEASE GLEN DeVALERIO One Liberty Square Boston, MA 02109 Telephone: 617/542-8300 LAW OFFICES OF JAMES V. BASHIAN, P.C. JAMES V. BASHIAN 500 Fifth Avenue Suite 2700 New York, NY 10110 Telephone: 212/921-4110 Attorneys for Plaintiff - 10 - EX-99.31 27 EXHIBIT 99.31 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619-231-1058 KAPLAN, KILSHEIMER & FOX LLP ROBERT N. KAPLAN CHRISTINE M. COMAS 685 Third Avenue, 26th Fl. New York, NY 10017 Telephone: 212-687-1980 Attorneys for Plaintiff [Additional Counsel On Signature Page] SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO JEAN BOETTCHER, On Behalf of ) Case No. 720530 Herself and All Others Similarly ) Situated, ) CLASS ACTION ) ------------ v. ) ) MYCOGEN CORPORATION, J. PEDRO ) REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) JURY DEMAND NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) ) - ------------------------------------------- ) Plaintiff demands a trial by jury. DATED: May 8, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach ------------------------------ WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 KAPLAN, KILSHEIMER & FOX LLP ROBERT N. KAPLAN CHRISTINE M. COMAS 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212-687-1980 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff - 1 - MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619-231-1058 KAPLAN, KILSHEIMER & FOX LLP ROBERT N. KAPLAN CHRISTINE M. COMAS 685 Third Avenue, 26th Fl. New York, NY 10017 Telephone: 212-687-1980 Attorneys for Plaintiff [Additional Counsel On Signature Page] SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO JEAN BOETTCHER, On Behalf of ) Case No. 720530 Herself and All Others Similarly ) Situated, ) CLASS ACTION ) ------------ v. ) ) MYCOGEN CORPORATION, J. PEDRO ) COMPLAINT BASED UPON UNFAIR REINHARD, CARLTON J. EIBL, JOHN L. ) BUSINESS PRACTICES, SELF HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) DEALING AND BREACH OF BARBEE, GEORGE KHACHATOURIANS, ) FIDUCIARY DUTY NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------------- ) -------------------- Plaintiff, by her attorneys, alleges upon information and belief, except as to PARA 4 which plaintiff alleges upon knowledge, as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This Court has jurisdiction over Mycogen Corporation ("Mycogen" or the "Company") because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations and omissions which had an effect in this County. PARTIES 4. Plaintiff Jean Boettcher is a stockholder of defendant Mycogen. 5. Defendant Mycogen is a corporation duly organized and existing under the laws of the State of California, with its principal offices located at 5501 Oberlin Drive, San Diego, California 92121. Mycogen develops, manufacturers and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. As of April 7, 1998, there were over 36 million shares of Mycogen common stock outstanding. - 1 - 6. Defendant Dow Chemical Company ("Dow") is a corporation duly organized and existing under the laws of the State of Delaware with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. Dow is the fifth largest chemical company in the world, with annual sales of more than $20 billion. Dow manufactures and supplies chemicals, plastics, energy, agricultural products, consumer goods and environmental services. Through its wholly-owned subsidiary, Dow Agrosciences, LLC ("Dow Agrosciences"), Dow owns or controls shares representing approximately 69 percent of the outstanding common stock of Mycogen. 7. Defendant J. Pedro Reinhard is a Director of Mycogen and the Chief Financial Officer and Executive Vice President of Dow Agrosciences. 8. Defendant Carlton J. Eibl is the President of Mycogen and a member of its Board of Directors. 9. Defendant John L. Hagaman is a Director of Mycogen and the President of Dow Agrosciences. 10. Defendant Joseph P. Sullivan is a Director of Mycogen. 11. Defendant Roy M. Barbee is a Director of Mycogen. 12. Defendant George Khacharourians is a Director of Mycogen. 13. Defendant Nickolas D. Hein is the Chairman of Mycogen's Board of Directors and a Vice President of "Global Growth" for Dow Agrosciences. 14. Defendant G. William Tolbert is a Director of Mycogen and a "Global Business Development Director" for Dow Agrosciences. - 2 - 15. Defendant Louis W. Pribila is a Director of Mycogen and the Secretary, General Counsel and a Vice President of Dow Agrosciences. 16. The defendants named in PARA 7 through 15 are sometimes collectively referred to herein as the "Individual Defendants." 17. The true names and capacities of defendants sued herein under California Code of Civil Procedures Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe Defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 18. The Individual Defendants as officers and/or directors of Mycogen have a fiduciary relationship and responsibility to plaintiff and the other common public stockholders of Mycogen and owe to plaintiff and the other class members the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 19. Plaintiff brings this action pursuant to Section 382 of the California Code of Civil Procedure on her own behalf and as a class action on behalf of all common stockholders of Mycogen, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any defendants. - 3 - 20. This action is properly maintainable as a class action because: (a) The Class is so numerous that joinder of all members is impracticable. There are hundreds of Mycogen stockholders of record who are located throughout the United States; (b) There are questions of law and fact which are common to the Class, including: whether the defendants have engaged or are continuing to act in a manner calculated to benefit themselves at the expense of Mycogen's minority stockholders; and whether plaintiff and other members of the Class would be irreparably damaged if the defendants are not enjoined in the manner described below; (c) The defendants have acted or refuse to act on grounds generally applicable to the Class thereby making appropriate final injunctive relief with respect to the Class as a whole; (d) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interest as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; and (e) Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 21. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this controversy. - 4 - CLAIM FOR RELIEF 22. Mycogen is a California corporation that develops, manufactures and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. The Company's products are based on natural agents that are compatible with the environment and are developed through genetic engineering technology and innovative formulations. 23. Dow currently owns or controls approximately 69 percent of the outstanding common stock of Mycogen. Under the terms of a prior stand still agreement with Mycogen (the "Agreement"), Dow cannot acquire the remaining shares of Mycogen prior to February 1999. 24. After the close of trading on April 30, 1998, it was reported that Dow is seeking to amend the Agreement to permit it, acting through Dow Agrosciences, to begin discussions regarding the acquisition of the remaining shares of Mycogen common stock Dow does not already own for $20.50 per share in cash. 25. The majority of the nine board members identified in paragraphs 7 through 15 are in irrevocable positions of conflict and cannot be expected to act in the best interest of Mycogen's minority stockholders in connection with this proposed transaction. They alone have the authority to vote to allow the amendment to the Agreement that is being sought by Dow and to thereby deprive Mycogen's minority shareholders of the true value of their Mycogen shares. 26. The sole purpose of the proposed transaction is to enable Dow to acquire the shares of Mycogen it does not already own, as - 5 - well as Mycogen's valuable assets, for Dow's own benefit at the expense of Mycogen's minority stockholders. 27. The proposed transaction comes at a time when Mycogen has performed well and Dow expects it will continue to perform well because it is already positioned to do so. 28. Dow has timed this transaction to capture Mycogen's future potential and is seeking to appropriate Mycogen's assets for itself without paying an adequate or fair price for the Company's remaining shares. 29. Amidst a backdrop of an improving financial position and increased prospects for growth, Dow announced its desire to acquire the remaining shares of Mycogen for $20.50 cash per share. The offer made by Dow represents no premium over the current price of Mycogen common stock. In fact, prior to Dow's announcement on April 30, 1998, the price of Mycogen common stock closed at $20.625 per share -- higher than the price offered by Dow in the proposed acquisition. 30. The Individual Defendants and Dow are in a position of control and power over Mycogen's stockholders and have access to internal financial information about Mycogen, its true value, its expected increase in true value, and the benefits to Dow of 100 percent ownership of Mycogen, to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control to benefit Dow in this transaction to the detriment of Mycogen's minority common stockholders. 31. In proposing the acquisition, Dow and the Individual Defendants have committed or threatened to commit the following - 6 - acts to the detriment and disadvantage of Mycogen minority stockholders: a. They have undervalued Mycogen's common stock by ignoring the full value of its assets and future prospects. The proposed acquisition consideration does not reflect the true value of Mycogen's valuable assets; and b. They have timed the announcement of the proposed buyout in order to artificially depress the market price of Mycogen's common stock to justify a price that is unfair to Mycogen's minority stockholders. 32. The Individual Defendants have clear and material conflicts of interest and are acting to better the interests of Dow and themselves at the expense of Mycogen's minority stockholders. 33. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require: - undertake an appropriate evaluation of Mycogen's worth as an acquisition candidate; - act independently so that the interests of Mycogen's minority stockholders will be protected, including, but not limited to, the retention of independent advisors and the appointment of a Special Committee of some or all of the members of Mycogen's board to consider the Dow offer and negotiate with Dow on behalf of Mycogen's minority stockholders; - adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts be resolved -7- in the best interests of Mycogen's minority stockholders; and - if an acquisition transaction is to go forward, require that it be approved by a majority of Mycogen's minority stockholders. 34. As a result of the defendants' failure to take such steps to date, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their proportionate share of the value of the Company's assets and business, and have been and will be prevented from obtaining a fair price for their common stock. 35. Defendants, in failing to disclose the material non-public information in their possession as to the value of Mycogen's assets, the full extent of the future earnings potential of Mycogen and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and continue to breach their fiduciary duties to the members of the Class. 36. As a result of the defendants' unlawful actions, plaintiff and the other members of the Class will be irreparably harmed in that they will not receive their fair portion of the value of Mycogen's assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed acquisition is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, will not engage in arm's-length negotiations on the acquisition terms, and will not supply to Mycogen's minority stockholders sufficient information to enable -8- them to cast informed votes on the proposed acquisition and may consummate the proposed acquisition, all to the irreparable harm of the members of the Class. 37. Plaintiff and the other members of the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: 1. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; 2. Declaring that defendants have breached their fiduciary and other duties to plaintiff and the other members of the Class; 3. Entering an order requiring defendants to take the steps set forth herein; 4. Preliminary and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed transaction; 5. In the event the proposed acquisition is consummated, rescinding it and setting it aside; 6. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 7. Awarding costs and disbursements, including plaintiff's counsel's fees and experts' fees; and -9- 8. Granting such other and further relief as the Court may deem just and proper. DATED: May 8, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach -------------------------------- WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 KAPLAN, KILSHEIMER & FOX, LLP ROBERT N. KAPLAN CHRISTINE M. COMAS 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212/687-1980 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff -10- EX-99.32 28 EXHIBIT 99.32 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 BERNSTEIN LIEBHARD & LIFSHITZ STANLEY D. BERNSTEIN 274 Madison Avenue New York, NY 10016 Telephone: 212/779-1414 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO ELLIS INVESTMENTS, LTD., On Behalf ) Case No. 720257 of Itself and All Others Similarly ) Situated, ) CLASS ACTION Plaintiff, ) ) COMPLAINT FOR BREACHES OF vs. ) FIDUCIARY DUTIES ) CARLTON J. EIBL, PERRY J. GEHRING, ) NICKOLAS D. HEIN, LOUIS W. PRIBILA, ) WILLIAM C. SCHMIDT, G. WILLIAM ) TOLBERT, MYCOGEN CORP., DOW ) AGROSCIENCES LLC and DOES 1-25, ) inclusive ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------- ) ------------------- Plaintiff, by its attorneys, for its complaint against defendants, alleges upon information and belief, except for paragraph 4 hereof, which is alleged upon knowledge, as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This Court has jurisdiction over Mycogen because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. 4. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 5. This Court has jurisdiction over Mycogen because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 6. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. PARTIES 7. Plaintiff Ellis Investments, Ltd. has been the owner of the common stock of the Mycogen Corp. ("Mycogen" or the "Company") 1 since prior to the transaction herein complained of and continuously to date. 8. Defendant Mycogen is a corporation duly organized and existing under the laws of the State of California and maintains its principal executive offices at 5501 Oberlin Drive, San Diego, California. The Company is a diversified agribusiness and biotechnology company that develops and markets seed for improved crop varieties and provides crop protection products and services. 9. Defendant Dow AgroSciences LLC ("Dow AG") is a wholly owned subsidiary of the Dow Chemical Company which maintains its principal offices at 2030 Dow Center, Midland, Michigan. Dow AG owns or controls approximately 69% of Mycogen. 10. Defendant Nickolas D. Hein is Chairman of the Board of Directors of Mycogen. 11. Defendant Carlton J. Eibl is President and a Director of Mycogen. 12. Defendant Perry J. Gehring is a Director of Mycogen and a Vice President of Dow AG. 13. Defendant Louis W. Pribila is a Director of Mycogen and a Vice President and General Counsel of Dow AG. 14. Defendant William C. Schmidt is a Director of Mycogen and Vice President and Chief Financial Officer of Dow AG. 15. Defendant G. William Tolbert is a Director of Mycogen and a Director of Dow AG. 16. The Individual Defendants named in paragraphs 7 through 12 are controlled by Dow AG and are in a fiduciary relationship with plaintiff and the other public stockholders of Mycogen and owe them the highest obligations of good faith and fair dealing. 2 17. The true names and capacitates of defendants sued herein under California Code of Civil Procedure Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 18. Each defendant herein is sued individually as a conspirator and aider and abbetor, as well as in his capacity as an officer and/or director of the Company (in the case of the Individual Defendants), or as a control person, and the liability of each arises from the fact that he or it has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 19. Plaintiff brings this action on its own behalf and as a class action, pursuant to Section 382 of the California Code of Civil Procedure, on behalf of all common stockholders of the Company (except the defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein (the "Class"). 20. This action is properly maintainable as a class action. 21. The Class is so numerous that joinder of all members is impracticable. As of November 25,1997, there were in excess of 3 31.4 million shares of Mycogen common stock outstanding, of which approximately 31% were held by persons not affiliated with Dow AG. 22. There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. The common questions include, inter alia, the following: (a) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the members of the Class; (b) whether defendants are pursing a scheme or course of conduct designed to eliminate the public securities holders of Mycogen in violation of the laws of the State of California in order to enrich Dow AG at the expense and to the detriment of the public shareholders of Mycogen; (c) whether the proposed transaction, hereinafter described, constitutes a breach of the duty of fair dealing with respect to the plaintiff and the other members of the Class; and (d) whether the Class is entitled to injunctive relief or damages as a result of the wrongful conduct committed by defendants. 23. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of the plaintiff are typical of the claims of other members of the Class, and plaintiff has the same interests as the other members the Class. Plaintiff will fairly and adequately represent the Class. A class action is superior to any other type of adjudication of this controversy. 24. Defendants have acted in a manner which affects plaintiff and all members of the Class, thereby making appropriate injunctive relief and/or corresponding declaratory relief with respect to the Class as a whole. 4 25. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class, which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would, as a practical matter, be dispositive of the interests of other members or substantially impair or impede their ability to protect their interests. SUBSTANTIVE ALLEGATIONS 26. In February 1996, Dow AG (at the time known as Dow AG LLC) purchased 37% of Mycogen's common stock from the Lubrizol Corporation, and in a simultaneous transaction, Mycogen issued Dow AG 9% of its common stock in return for cash and Dow AG's seed businesses. As part of this transaction, Dow AG entered into an agreement (the "1996 Agreement") whereby it was prohibited from acquiring all of the shares of Mycogen prior to February 1999. 27. On April 30, 1998, Dow, through a press release, announced that, through Dow AG, it had requested an amendment to the 1996 Agreement to permit Dow AG to acquire the shares of Mycogen that it does not already own. If the amendment to the 1996 Agreement is approved, Dow AG will offer to purchase the shares held by Mycogen's minority shareholders for $20.50 per share. 28. The press release indicated that Dow's request to amend the 1996 Agreement would have to be approved by "Mycogen's board of directors and the independent directors." Given Dow's stranglehold over the Company, none of the directors can be considered "independent," and they cannot be expected to vigorously protect the rights and interests of Mycogen's public shareholders. 5 Accordingly, the approval of the amendment is a foregone conclusion. 29. The price of $20.50 per share to be paid to the Class members is unconscionable, unfair and grossly inadequate consideration because, among other things: (a) the intrinsic value of the stock of Mycogen is materially in excess of $20.50 per share, giving due consideration to the possibilities of growth and profitability of Mycogen in light of its business, earnings and earnings power, present and future; (b) the $20.50 per share price is inadequate and offers no premium to the public stockholders of Mycogen in light of the fact that Mycogen shares closed at $20.50 on April 30, 1998, prior to the announcement by Dow; and (c) the $20.50 per share price is not the result of arm's-length negotiations but was fixed arbitrarily by Dow AG to "cap" the market price of Mycogen stock. As part of a plan for Dow AG to obtain complete ownership of Mycogen's assets and business at the lowest possible price. 30. The proposed bid serves no legitimate business purpose of Mycogen but rather is an attempt by defendants to unfairly benefit Dow AG from the transaction at the expense of Mycogen's public stockholders. The proposed plan will, for a grossly inadequate consideration, deny plaintiff and the other members of the Class their right to share proportionately in the future success of Mycogen and its valuable assets, while permitting Dow AG to reap huge benefits from the transaction. 31. By reason of the foregoing acts, practices and course of conduct, Dow AG has breached and will breach its duty as 6 controlling stockholder of Mycogen by engaging in improper overreaching in attempting to carry out the proposed transaction. 32. By reason of the foregoing, the Individual Defendants will violate their fiduciary duties to Mycogen and the minority stockholders of Mycogen in the event that they fail to oppose the bid on the terms presently proposed. 33. Plaintiff and the Class have suffered and will continue to suffer irreparable damage unless defendants are enjoined from breaching their fiduciary duties and from carrying out the aforesaid plan and scheme. 34. Plaintiff and the other members of the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, plaintiff demands judgment against the defendants jointly and severally, as follows: 1. declaring this action to be a class action and certifying plaintiff as Class representative; 2. enjoining, preliminarily and permanently, Dow AG's offer for acquisition of the Mycogen stock owned by plaintiff and the other members of the Class under the terms presently proposed; 3. to the extent, if any, that the transaction or transactions complained of are consummated prior to the entry of this Court's final judgment, rescinding such transaction or transactions, and granting, inter alia, rescissory damages; 4. directing that defendants pay to plaintiff and the other members of the Class all damages caused to them and account for all profits and any special benefits obtained as a result of their unlawful conduct; 7 5. awarding the plaintiff the costs and disbursements of this action, including a reasonable allowance for the fees and expenses of plaintiff's attorneys and experts; and 6. granting plaintiff and the other members of the Class such other and further relief as may be just and proper. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /S/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 BERNSTEIN LIEBHARD & LIFSHITZ STANLEY D. BERNSTEIN 274 Madison Avenue New York, NY 10016 Telephone: 212/779-1414 Attorneys for Plaintiff 8 2MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DAREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 BERNSTEIN LIEBHARD & LIFSHITZ STANLEY D. BERNSTEIN 274 Madison Avenue New Yor, NY 10016 Telephone: 212/779-1414 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO ELLIS INVESTMENTS, LTD., On behalf ) Case No. of Itself and All Others Similarly ) Situated, ) CLASS ACTION Plaintiff, ) ) vs. ) JURY DEMAND ) CARLTON H. EIBL, PERRY J. GEHRING, ) NICKOLAS D. HEIN, LOUIS W. PRIBILA, ) WILLIAM C. SCHMIDT, G. WILLIAM ) TOLBERT, MYCOGEN CORP., and DOW ) AGROSCIENCES LLC, and DOES 1-25, ) inclusive ) ) Defendants. ) ) - ------------------------------------- ) Plaintiff demands a trial by jury. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /S/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 BERNSTEIN LIEHARD & LIFSHITZ STANLEY D. BERNSTEIN 274 Madison Avenue New York, NY 10016 Telephone: 212/779-1414 Attorneys for Plaintiff 1 EX-99.33 29 EXHIBIT 99.33 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LEARCH (68581) ALAN SCHULMAN (128661) DAREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WECHSLER HARWOOD HALEBIAN & FEFFER LLP SAMUEL K. ROSEN 488 Madison Avenue 8th Floor New York, NY 10022 Telephone: 212/935-7400 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO HARBOR FINANCE PARTNERS, ) Case No. 720256 Individually and On Behalf of All ) Others Similarly Situated, ) CLASS ACTION Plaintiff, ) ) COMPLAINT vs. ) ) MYCOGEN CORPORATION, CARLTON J. ) EIBL, JOHN L. HAGAMAN, NICKOLAS D. ) HEIN, LOUIS W. PRIBILA, WILLIAM C. ) SCHMIDT, G. WILLIAM TOLBERT, DOW ) AGROSCIENCES and DOES 1-25, ) inclusive, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------- ) ------------------- Plaintiff, by its attorneys, for its class action complaint against defendants, makes the following allegations upon information and belief, except as to Paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based on, inter alia, investigation conducted by its attorneys, including review of documents filed with the Securities and Exchange Commission, articles in the financial news media, press releases, and other publicly available information. JURISDICTION AND VENUE 1. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This Court has jurisdiction over Mycogen because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. 4. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendants and persons or entities related to them, who own the common stock of Mycogen Corp. ("Mycogen" or the "Company") and thus are similarly situated (the "Class"), for injunctive and other relief. Plaintiff seeks injunctive relief herein to, inter alia, enjoin the implementation of an inherently unfair transaction ("the Offer") whereby Mycogen's majority shareholder, Dow AgroSciences, formerly known as Dow Elanco ("DowAgro") -- which owns approximately 69% of the 1 outstanding common stock of Mycogen and controls the operations of the Company -- will acquire all of the remaining shares of the Company that it does not already own for a grossly inadequate price. Alternatively, in the event that the proposed transaction is implemented, plaintiff seeks to recover damages caused by the breach of fiduciary duties owned by defendants. PARTIES 5. Plaintiff Harbor Finance is a Colorado partnership, and at all relevant times has been the owner of Mycogen common stock. 6. Defendant Mycogen is a California corporation that maintains its principal place of business at 5501 Oberlin Drive, San Diego, California. Mycogen's shares trade on the NASDAQ National Market System. Mycogen is a diversified agribusiness and biotechnology company that develops and markets seed for improved crop varieties and provides crop protection products. 7. Defendant DowAgro, an Indiana partnership, is a subsidiary of the Dow Chemical Company and presently owns or controls approximately 69% of Mycogen's outstanding stock. 8. Defendant Carlton J. Eibl ("Eibl") is and has been a director of the Company since January 1998. He is the Company's President. 9. Defendants John L. Hagaman, Nickolas D. Hein, Louis W. Pribila, William C. Schmidt, and G. William Tolbert are, and have at all relevant times, been directors of Mycogen. Each is, and has at all relevant times, been an officer of DowAgro. 10. The true names and capacitates of defendants sued herein under California Code of Civil Procedure Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues 2 these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 11. By reason of its dominant position as the majority stockholder of Mycogen and its ability to control the business and corporate affairs of Mycogen at all relevant times, DowAgro owed and owes Mycogen stockholders fiduciary duties of fairness and trust, and was and is obligated to refrain from using its dominant position over Mycogen to enrich itself at the expense of other stockholders. 12. The individual director defendant, by reason of their corporate directorship and/or executive positions, stand in a fiduciary position relative to the Company's shareholders, which fiduciary relationship, at all times relevant herein, required the defendants to exercise their best judgment, and to act in a prudent manner and in the best interests of the Company's shareholders. A director is not permitted to act in his/her own self-interest to the detriment of the shareholders. 13. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his/her capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he or she has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. 3 CLASS ACTION ALLEGATIONS 14. Plaintiff brings this action individually on its own behalf and as a class action, pursuant to Section 382 of the California Civil Code of Civil Procedure on behalf of all stockholders of the Company (except the defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein (the "Class"). 15. This action is properly maintainable as a class action. 16. The Class is so numerous that joinder of all members is impracticable. There are thousands of shareholders who hold the approximately 31,000,000 shares of Mycogen common stock outstanding. The disposition of their claims in a class action will be of benefit to the parties and the Court. The record holders of Mycogen securities can be easily determined from the stock transfer journals maintained by Mycogen or its agents. 17. A class action is superior to other methods for the fair and efficient adjudication of the claims herein asserted, and no unusual difficulties are likely to be encountered in the management of this action as a class action. The likelihood of individual class members prosecuting separate claims is remote. 18. There is a well-defined community of interest in the questions of law and fact involved affecting the members of the Class. Among the questions of law and fact which are common to the Class, which predominate over questions affecting any individual class member are, inter alia, the following: 4 (a) whether defendants have engaged in conduct constituting unfair dealing by failing to maximize shareholder value through an adequate auction or market check process; (b) whether the proposed buy-out is grossly unfair to the public stockholders of Mycogen; (c) whether defendants have failed to disclose all material facts relating to the buy-out proposal including the potential and expected positive future financial benefits which they expect to derive from Mycogen; (d) whether defendants have engaged and are continuing to engage in a plan and scheme to eliminate the public stockholders of Mycogen through fraudulent, deceptive, and coercive means and devices; (e) whether defendants willfully and wrongfully failed or refused to obtain or attempt to obtain a purchaser for the assets of Mycogen at a price higher than the buy-out proposal; (f) whether plaintiff and the other members of the Class would be irreparably damaged were the transaction complained of herein consummated; (g) whether defendants have breached or aided and abetted the breach of the fiduciary and other common law duties owed by them to plaintiff and the members of the Class; and (h) whether defendants are pursuing a scheme and course of business designed to eliminate the public stockholders of Mycogen in violation of the laws of the State of California. 19. Plaintiff is a member of the Class and is committed to prosecuting this action. Plaintiff has retained competent counsel experienced in litigation of this nature. The claims of the 5 plaintiff are typical of the claims of other members of the Class, and plaintiff has the same interests as the other members of the Class. Plaintiff does not have interests antagonistic to or in conflict with those it seeks to represent. Plaintiff is an adequate representative of the Class. 20. The likelihood of individual class members prosecuting separate individual actions is remote due to the relatively small loss suffered by each Class member as compared to the burden and expense of prosecuting litigation of this nature and magnitude. Absent a class action, the defendants are likely to avoid liability for their wrongdoing, and Class members are unlikely to obtain redress for their wrongs alleged herein. There are no difficulties likely to be encountered in the management of the Class claims. This Court is an appropriate forum for this dispute. SUBSTANTIVE ALLEGATIONS 21. By the acts, transactions, and courses of conduct alleged herein, defendants, individually and as part of a common plan and scheme and/or aiding and abetting one another in total disregard of their fiduciary duties, are attempting to deceive plaintiff and the Class and deprive them unfairly of their investment in Mycogen. 22. On April 30, 1998, Dow Chemical announced it wanted to amend an agreement (the "Agreement") dated January 15, 1996, pursuant to which DowAgro had already acquired 69% of Mycogen's shares of common stock. Under the terms of the Agreement, DowAgro cannot acquire all the remaining stock of Mycogen until February 1999. The amendment Dow Chemical seeks is the right to acquire the balance of Mycogen's shares now. The proposed transaction would provide Mycogen shareholders $20.50 cash, per share, exactly the 6 price at which Mycogen closed on the NASDAQ before the proposal was announced thus giving them no premium for their shares. 23. DowAgro is taking advantage of its majority stock ownership position in Mycogen by imposing the inadequate Offer on Mycogen's public stockholders. The Offer is being made at a time when, based upon DowAgro's inside knowledge and dominance and control of Mycogen, DowAgro can acquire the balance of Mycogen's shares at prices lower than it expects to pay in February 1999. 24. Under the terms of the Agreement, the remaining shares of Mycogen can only be bought by DowAgro (then Dow Elanco) under the following terms: DowElanco may increase its beneficial ownership of Common Stock above 79.9% of the total outstanding shares only pursuant to a tender offer, merger or similar transaction (but not a sale of assets) for all of the outstanding shares of Common Stock that offers each holder of Common Stock other than DowElanco the opportunity to dispose of some or all of their Common Stock at the value that an unaffiliated third party would be expected to pay in an arms' -length transaction negotiated by a willing seller and a willing buyer for all of Mycogen's then outstanding shares of Common Stock and not taking into account the potentially controlling position of DowElanco (a "Buyout Transaction"). 25. DowAgro announced the Offer during the period when the Agreement precludes its acquisition of the remainder of Mycogen's publicly traded shares of Mycogen because DowAgro believes that the price of Mycogen's shares will increase prior to February 1999 and wishes to acquire those shares at a lower price than it believes it will have to pay on that date. 26. Because of its position of dominance and control of Mycogen, DowAgro has announced the Offer at this time so that it can cap the price of Mycogen at no more than the approximate amount of the Offer, thereby limiting the price it will have to pay for 7 the balance of Mycogen's stock. By announcing the Offer now, DowAgro has locked in the offer price and avoided having to make a higher offer were Mycogen's stock, unaffected by the Offer, to rise between now and February 1999. 27. Besides being the largest stockholder of Mycogen, DowAgro has 5 of the 6 members on Mycogen's Board. Thus, DowAgro seeks, through its hand-picked Board for Mycogen, to acquire Mycogen's business, growth, and cash flow and squeeze out Mycogen's public stockholders at a price which is wholly inadequate. 28. Even in light of what had been publicly disclosed about Mycogen's present business and future prospects, the Offer is grossly unfair, inadequate, and provides value to Mycogen's shareholders substantially below the fair or inherent value of the Company. The intrinsic value of the equity of Mycogen is materially greater than the consideration contemplated by the Offer price, taking into account Mycogen's pharmaceutical business, asset value, liquidation value, its expected growth, and its revenues and cash flow. 29. The Offer is wrong, unfair, harmful to Mycogen's public stockholders, wholly inadequate, and will deny Class members their right to share proportionately in the true value of Mycogen's valuable assets, profitable business, and future growth in profits and earnings, while usurping the same for the benefit of defendants. 30. The Offer is not the result of arm's-length negotiations but was fixed arbitrarily by DowAgro, which dominates and controls Mycogen, as part of its unlawful plan and scheme to obtain 100% 8 ownership of Mycogen at the lowest possible price and to usurp for itself Mycogen's profitable business. 31. Defendants have violated fiduciary and other common law duties owed to plaintiff and the other members of the Class in that it is using its dominant control position over Mycogen to enrich itself at the expense of Mycogen's other stockholders. 32. As a result of defendants' actions, plaintiff and the Class have been and will be damaged by breaches of fiduciary duty and, therefore, plaintiff and the Class will not receive the fair value of Mycogen's assets and businesses. 33. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, and will succeed in their plan to exclude plaintiff and the Class from the fair proportionate share of Mycogen's valuable assets and businesses, all to the irreparable harm of the Class. 34. Plaintiff and the Class have no adequate remedy of law. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: 1. declaring that this lawsuit is properly maintainable as a class action and certifying plaintiff as representative of the Class; 2. declaring that the defendants and each of them have committed or aided and abetted a gross abuse of trust and have breached their fiduciary duties to plaintiff and the other members of the Class; 3. declaring the transaction to be a nullity; 9 4. preliminarily and permanently enjoining defendants and their counsel, agents, employees, and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the transaction; 5. in the event the transaction is consummated, rescinding it and setting it aside; 6. ordering defendants, jointly and severally, to account to plaintiff and the Class for all profits realized and to be realized by them as a result of the transaction complained of and, pending such accounting, to hold such profits in a constructive trust for the benefit of plaintiff and other members of the Class; 7. ordering defendants to permit a stockholders' committee comprising of class members and the representatives only to ensure a fair procedure, adequate procedural safe-guards, and independent input by plaintiff and the Class in connection with any transaction for the public shares of Mycogen; 8. awarding compensatory damages against defendants, jointly and severally, in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 9. awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and 10 10. granting such other and further relief as may be just and proper. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /S/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WECHSLER HARWOOD HALEBIAN & FEFFER LLP SAMUEL K. ROSEN 488 Madison Avenue 8th Floor New York, NY 10022 Telephone: 212/935-7400 Attorneys for Plaintiff 11 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WECHSLER HARWOOD HALEBIAN & FEFFER LLP SAMUEL K. ROSEN 488 Madison Avenue 8th Floor New York, NY 10022 Telephone: 212/935-7400 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO
HARBOR FINANCE PARTNERS, ) Case No. 720256 Individually and On Behalf of All ) Others Similarly Situated, ) CLASS ACTION ) Plaintiff, ) ) JURY DEMAND vs. ) ) MYCOGEN CORPORATION, CARLTON J. ) EIBL, JOHN L. HAGAMAN, NICKOLAS D. ) HEIN, LOUIS W. PRIBILA, WILLIAM C. ) SCHMIDT, G. WILLIAM TOLBERT, DOW ) AGROSCIENCES and DOES 1-25, ) inclusive. ) ) Defendants. ) ) - ------------------------------------- )
Plaintiff demands a trial by jury. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /S/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WECHSLER HARWOOD HALEBIAN & FEFFER LLP SAMUEL K. ROSEN 488 Madison Avenue 8th Floor New York, NY 10022 Telephone: 212/935-7400 Attorneys for Plaintiff 2 EX-99.34 30 EXHIBIT 99.34 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO RICHARD A. KOLB, INDIVIDUAL ) Case No. 720388 RETIREMENT ACCOUNT, On Behalf of ) Himself and All Others Similarly ) CLASS ACTION Situated, ) ------------ ) Plaintiff, ) ) vs. ) ) JURY DEMAND MYCOGEN CORPORATION, J. PEDRO ) REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) ) - ------------------------------------------- ) Plaintiff demands a trial by jury. DATED: May 5, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach ------------------------------ WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff - 1 - MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO RICHARD A. KOLB, INDIVIDUAL ) Case No. 720388 RETIREMENT ACCOUNT, On Behalf of ) Himself and All Others Similarly ) CLASS ACTION Situated, ) ------------ ) Plaintiff, ) COMPLAINT BASED UPON UNFAIR ) BUSINESS PRACTICES, SELF vs. ) DEALING AND BREACH OF ) FIDUCIARY DUTY MYCOGEN CORPORATION, J. PEDRO ) REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------------- ) -------------------- Plaintiff, by his attorneys, alleges upon information and belief, except as to PARA 4 which plaintiff alleges upon knowledge, as follows: JURISDICTION AND VENUE 1. This court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This Court has jurisdiction over Mycogen Corporation because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. PARTIES 4. Plaintiff Richard A. Kolb Individual Retirement Account is a stockholder of defendant Mycogen Corporation ("Mycogen" or the "Company"). 5. Defendant Mycogen is a corporation duly organized and existing under the laws of the State of California, with its principal offices located at 5501 Oberlin Drive, San Diego, California 92121. Mycogen develops, manufacturers and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. As of April 7, 1998, there were over 36 million shares of Mycogen common stock outstanding. - 1 - 6. Defendant Dow Chemical Company ("Dow") is a corporation duly organized and existing under the laws of the State of Delaware with its principal offices located at 2030 Dow Center, Midland, Michigan 48674. Dow is the fifth largest chemical company in the world, with annual sales of more than $20 billion. Dow manufactures and supplies chemicals, plastics, energy, agricultural products, consumer goods and environmental services. Through its wholly-owned subsidiary, Dow Agrosciences, LLC ("Dow Agrosciences"), Dow owns or controls shares representing approximately 69 percent of the outstanding common stock of Mycogen. 7. Defendant J. Pedro Reinhard is a Director of Mycogen and the Chief Financial Officer and Executive Vice President of Dow Agrosciences. 8. Defendant Carlton J. Eibl is the President of Mycogen and a member of its Board of Directors. 9. Defendant John L. Hagaman is a Director of Mycogen and the President of Dow Agrosciences. 10. Defendant Joseph P. Sullivan is a Director of Mycogen. 11. Defendant Roy M. Barbee is a Director of Mycogen. 12. Defendant George Khacharourians is a Director of Mycogen. 13. Defendant Nickolas D. Hein is the Chairman of Mycogen's Board of Directors and a Vice President of "Global Growth" for Dow Agrosciences. 14. Defendant G. William Tolbert is a Director of Mycogen and a "Global Business Development Director" for Dow Agrosciences. - 2 - 15. Defendant Louis W. Pribila is a Director of Mycogen and the Secretary, General Counsel and a Vice President of Dow Agrosciences. 16. The defendants named in PARA 7 through 15 are sometimes collectively referred to herein as the "Individual Defendants." 17. The true names and capacities of defendants sued herein under California Code of Civil Procedures Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe Defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 18. The Individual Defendants as officers and/or directors of Mycogen have a fiduciary relationship and responsibility to plaintiff and the other common public stockholders of Mycogen and owe to plaintiff and the other class members the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 19. Plaintiff brings this action pursuant to Section 382 of the California Code of Civil Procedure on his own behalf and as a class action on behalf of all common stockholders of Mycogen, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any defendants. - 3 - 20. This action is properly maintainable as a class action because: (a) The Class is so numerous that joinder of all members is impracticable. There are hundreds of Mycogen stockholders of record who are located throughout the United States; (b) There are questions of law and fact which are common to the Class, including: whether the defendants have engaged or are continuing to act in a manner calculated to benefit themselves at the expense of Mycogen's minority stockbrokers; and whether plaintiff and other members of the Class would be irreparably damaged if the defendants are not enjoined in the manner described below; (c) The defendants have acted or refuse to act on grounds generally applicable to the Class thereby making appropriate final injunctive relief with respect to the Class as a whole; (d) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interest as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; and (e) Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 21. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this controversy. - 4 - CLAIM FOR RELIEF 22. Mycogen is a California corporation that develops, manufactures and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. The Company's products are based on natural agents that are compatible with the environment and are developed through genetic engineering technology and innovative formulations. 23. Dow currently owns or controls approximately 69 percent of the outstanding common stock of Mycogen. Under the terms of a prior stand still agreement with Mycogen (the "Agreement"), Dow cannot acquire the remaining shares of Mycogen prior to February 1999. 24. After the close of trading on April 30, 1998, it was reported that Dow is seeking to amend the Agreement to permit it, acting through Dow Agrosciences, to begin discussions regarding the acquisition of the remaining shares of Mycogen common stock Dow does not already own for $20.50 per share in cash. 25. The majority of the nine board members identified above are in irrevocable positions of conflict and cannot be expected to act in the best interest of Mycogen's minority stockholders in connection with this proposed transaction. They alone have the authority to vote to allow the amendment to the Agreement that is being sought by Dow and to thereby deprive Mycogen's minority shareholders of the true value of their Mycogen shares. 26. The sole purpose of the proposed acquisition is to enable Dow to acquire the shares of Mycogen it does not already own, as well as Mycogen's valuable assets, for Dow's own benefit at the expense of Mycogen's minority stockholders. - 5 - 27. The proposed acquisition comes at a time when Mycogen has performed well and Dow expects it will continue to perform well because it is already positioned to do so. 28. Dow has timed this transaction to capture Mycogen's future potential and is seeking to appropriate Mycogen's assets for itself without paying an adequate or fair price for the Company's remaining shares. 29. Amidst a backdrop of an improving financial position and increased prospects for growth, Dow announced its desire to acquire the remaining shares of Mycogen for $20.50 cash per share. The offer made by Dow represents no premium over the current price of Mycogen common stock. In fact, prior to Dow's announcement on April 30, 1998, the price of Mycogen common stock closed at $20.625 per share -- higher than the price offered by Dow in the proposed acquisition. 30. The Individual Defendants and Dow are in a position of control and power over Mycogen's stockholders and have access to internal financial information about Mycogen, its true value, expected increase in true value, and the benefits to Dow of 100 percent ownership of Mycogen, to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control to benefit Dow in this transaction, to the detriment of Mycogen's minority common stockholders. 31. In proposing the acquisition, Dow and the Individual Defendants have committed or threatened to commit the following acts to the detriment and disadvantage of Mycogen minority stockholders: - 6 - (a) They have undervalued Mycogen's common stock by ignoring the full value of its assets and future prospects. The proposed acquisition consideration does not reflect the value of Mycogen's valuable assets; and (b) They timed the announcement of the proposed buyout in order to artificially depress the market price of Mycogen's common stock to justify a price that is unfair to Mycogen's minority stockholders. 32. The Individual Defendants have clear and material conflicts of interest and are acting to better the interests of Dow and themselves at the expense of Mycogen's minority stockholders. 33. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require: * undertake an appropriate evaluation of Mycogen's worth as an acquisition candidate; * act independently so that the interests of Mycogen's minority stockholders will be protected, including, but not limited to, the retention of independent advisors and the appointment of a Special Committee of some or all of the members of Mycogen's board to consider the Dow offer and negotiate with Dow on behalf of Mycogen's minority stockholders; * adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all - 7 - conflicts be resolved in the best interests of Mycogen's minority stockholders; and * if an acquisition transaction is to go forward, require that it be approved by a majority of Mycogen's minority stockholders. 34. As a result of the defendants' failure to take such steps to date, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their proportionate share of the value of the Company's assets and business, and have been and will be prevented from obtaining a fair price for their common stock. 35. Defendants, in failing to disclose the material non-public information in their possession as to the value of Mycogen's assets, the full extent of the future earnings potential of Mycogen and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the members of the Class. 36. As a result of the defendants' unlawful actions, plaintiff and the other members of the Class will be irreparably harmed in that they will not receive their fair portion of the value of Mycogen's assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed acquisition is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, will not engage in arm's-length negotiations on the acquisition terms, and will not supply to Mycogen's minority stockholders sufficient information to enable - 8 - them to cast informed votes on the proposed acquisition and may consummate the proposed acquisition, all to the irreparable harm of the members of the Class. 37. Plaintiff and the other members of the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: 1. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; 2. Declaring that defendants have breached their fiduciary and other duties to plaintiff and the other members of the Class; 3. Entering an order requiring defendants to take the steps set forth herein; 4. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed transaction; 5. In the event the proposed acquisition is consummated, rescinding it and setting it aside; 6. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 7. Awarding costs and disbursements, including plaintiff's counsel's fees and experts' fees; and - 9 - 8. Granting such other and further relief as the Court may deem just and proper. DATED: May 5, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ William S. Lerach -------------------------------- WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 Attorneys for Plaintiff - 10 - EX-99.35 31 EXHIBIT 99.35 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 ABBEY, GARDY & SQUITIERI, LLP MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO LESLIE SUSSER, On Behalf of Himself ) Case No. and All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) COMPLAINT BASED UPON UNFAIR vs. ) BUSINESS PRACTICES, SELF ) DEALING AND BREACH OF MYCOGEN CORPORATION, J. PEDRO ) FIDUCIARY DUTY REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - ------------------------------------- ) ------------------- Plaintiff. by his name attorneys, alleges upon information and belief, except as to PARA4 which plaintiff alleges upon knowledge, as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article XL, Section 10, because this case is a cause not given by statute to other trial courts. 2. This court has jurisdiction over Mycogen because this defendant is a California corporation with its principal place of business at 5501 Oberlin Drive, San Diego, California. 3. Venue is proper in this Court because the conduct at issue took place and had an effect in this County and defendants made misrepresentations which had an effect in this County. PARTIES 4. Plaintiff Leslie Susser is a stockholder of defendant Mycogen Corporation ("Mycogen" or the "Company"). 5. Defendant Mycogen is a corporation duly organized and existing under the laws of the state of California, with its principal offices located at 5501 Oberlin Drive, San Diego, California 92121. Mycogen develops, manufactures and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. As of April 7, 1998, there were over 36 million shares of Mycogen common stock outstanding. 6. Defendant Dow Chemical Company ("Dow") is a corporation duly organized and existing under the laws of the State of Delaware with its principal offices located at 2030 Dow Center, Midland, 1 Michigan 48674. Dow is the fifth largest chemical company in the world, with annual sales of more than $20 billion. Dow manufactures and supplies chemicals, plastics, energy, agricultural products, consumer goods and environmental services. Through its wholly-owned subsidiary, Dow Agrosciences, LLC ("Dow Agrosciences"), Dow owns or controls shares representing approximately 69 percent of the outstanding common stock of Mycogen. 7. Defendant J. Pedro Reinhard is a Director of Mycogen and the Chief Financial Officer and Executive Vice President of Dow Agrosciences. 8. Defendant Charles J. Eibl is the President of Mycogen and a member of its Board of Directors. 9. Defendant John L. Hagaman is a Director of Mycogen and the President of Dow Agrosciences. 10. Defendant Joseph P. Sullivan is a Director of Mycogen. 11. Defendant Roy M. Barbee is a Director of Mycogen. 12. Defendant George Khachatourians is a Director of Mycogen. 13. Defendant Nickolas D. Hein is a Chairman of Mycogen's Board of Directors and a Vice President of "Global Growth" for Dow Agrosciences. 14. Defendant G. William Tolbert is a Director of Mycogen and a "Global Business Development Director" for Dow Agrosciences. 15. Defendant Louis W. Pribila is a Director of Mycogen and the Secretary, General Counsel and Vice President of Dow Agrosciences. 16. The Defendants named in PARAs 7 through 15 are sometimes collectively referred to herein as the "Individual Defendants." 2 17. The true names and capacities of defendants sued herein under California Code of Civil Procedure Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe defendants' true names and capacities when they are ascertained. Each of the fictitiously named defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 18. The Individual Defendants as officers and/or directors of Mycogen have a fiduciary relationship and responsibility to plaintiff and the other common public stockholders of Mycogen and owe to plaintiff the other class members the highest obligations of good faith, loyalty, fair dealing, due care and candor. CLASS ACTION ALLEGATIONS 19. Plaintiff brings this action pursuant to Section 382 of the California Code of Civil Procedure on his own behalf and as a class action on behalf of all common stockholders of Mycogen, or their successors in interest, who are being and will be harmed by defendants' actions described below (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants. 20. This action is properly maintainable as a class action because: (a) The Class is so numerous that joinder of all members is impracticable. There are hundreds of Mycogen stockholders of record who are located throughout the United States; 3 (b) There are questions of law and fact which are common to the Class, including: whether the defendants have engaged or are continuing to act in a manner calculated to benefit themselves at the expense of Mycogen's minority stockholders; and whether plaintiff and the other members of the Class would be irreparably damaged if the defendants are not enjoined in the manner described below; (c) The defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole; (d) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class; and (e) Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 21. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this controversy. CLAIM FOR RELIEF 22. Mycogen is a California corporation that develops, manufactures and markets biopesticides as alternatives to chemical pesticides to control a variety of insects, weeds and parasitic worms. The Company's products are based on natural agents that are 4 compatible with the environment and are developed through genetic engineering technology and innovative formulations. 23. Dow currently owns or controls approximately 69 percent of the outstanding common stock of Mycogen. Under the terms of a prior agreement with Mycogen (the "Agreement"), Dow cannot acquire the remaining shares of Mycogen before February 1999. 24. After the close of trading on April 30, 1998, it was reported that Dow, through Dow Argosciences, requested an amendment to the Agreement to permit it to begin discussions regarding the acquisition of the remaining shares of Mycogen common stock it does not already own for $20.50 per share in cash. 25. As set forth above, Mycogen has 9 board members whose loyalties are, at best, divided in the instant transaction and cannot be expected to act in the best interest of Mycogen's minority stockholders. 26. The purpose of the proposed acquisition is to enable Dow to acquire the shares of Mycogen it does not already own, as well as Mycogen's valuable assets, for Dow's own benefit at the expense of Mycogen's minority stockholders. 27. The proposed acquisition comes at a time when Mycogen has performed well and Dow expects it will continue to perform well because it is already well positioned to do so. 28. Dow has timed this transaction to capture Mycogen's future potential and use it to its own ends without paying an adequate or fair price for the Company's remaining shares. 29. Amidst this backdrop of positive and improving financial position and increased prospects for growth, Dow announced its desire to acquire the remaining shares of Mycogen for $20.50 cash 5 per share. The offer made by Dow represents no premium over the current price of Mycogen common stock. In fact, prior to Dow's announcement on April 30, 1998, the price of Mycogen common stock closed at $20.625 per share -- higher than the price offered by Dow in the proposed acquisition. 30. The Individual Defendants and Dow are in a position of control and power over Mycogen's stockholders and have access to internal financial information about Mycogen, its true value, expected increase in true value and the benefits to Dow of 100 percent ownership of Mycogen to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control to benefit Dow in this transaction, to the detriment of the Mycogen common stockholders. 31. In proposing the aquisition, Dow and the Individual Defendants have committed or threatened to commit the following acts to the detriment and disadvantage of Mycogen minority stockholders: (a) They have undervalued Mycogen's common stock by ignoring the full value of its assets and future prospects. The proposed acquisition consideration does not reflect the value of Mycogen's valuable assets; and (b) They timed the announcement of the proposed buyout to place an artificial lid on the market price of Mycogen's common stock to justify a price that is unfair to Mycogen's minority stockholders. 32. The Individual Defendants have clear and material conflicts of interest and are acting to better the interests of Dow and themselves at the expense of Mycogen's minority stockholders. 6 33. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require: - undertake an appropriate evaluation of Mycogen's worth as an acquisition candidate; - act independently so that the interests of Mycogen's minority stockholders will be protected, including but not limited to the retention of independent advisors and the appointment of a Special Committee of some or all of the members of the Mycogen's board to consider the Dow offer and negotiate with Dow on behalf of Mycogen's minority stockholders; - adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts be resolved in the best interests of Mycogen's minority stockholders; and - if an acquisition transaction is to go forward, require that it be approved by a majority of Mycogen's minority stockholders. 34. As a result of the defendants' failure to take such steps to date, plaintiff and the other members of the Class have been and will be damaged in that they have not and will not receive their proportionate share of the value of the Company's assets and business, and have been and will be prevented from obtaining a fair price for their common stock. 35. Defendants, in failing to disclose the material non-public information in their possession as to the value of Mycogen's assets, the full extent of the future earnings potential of Mycogen and its expected increase in profitability, are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the member of the Class. 36. As a result of the defendants' unlawful actions, plaintiff and the other members of the Class will be irreparably 7 harmed in that they will not receive their fair portion of the value of Mycogen's assets and business and will be prevented from obtaining the real value of their equity ownership of the Company. Unless the proposed acquisition is enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the members of the Class, will not engage in arm's-length negotiations on the acquisition terms, and will not supply to Mycogen's minority stockholders sufficient information to enable them to cast informed votes on the proposed acquisition and may consummate the proposed acquisition, all to the irreparable harm of the members of the Class. 37. Plaintiff and other members of the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, plaintiff prays for judgment and relief as follows: 1. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; 2. Declaring that defendants have breached their fiduciary and other duties to plaintiff and other members of the Class; 3. Entering an order requiring defendants to take the steps set forth hereinabove; 4. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed transaction; 5. In the event the proposed acquisition is consummated, rescinding it and setting it aside; 8 6. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; 7. Awarding costs and disbursements, including plaintiff's counsel's fees and experts' fees; and 8. Granting such other and further relief as to the Court may seem just and proper. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 ABBEY, GARDY & SQUITIERI, LLP MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 Attorneys for Plaintiff 9 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH (68581) ALAN SCHULMAN (128661) DARREN J. ROBBINS (168593) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 ABBEY, GARDY & SQUITIERI, LLP MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO LESLIE SUSSER, On Behalf of Himself ) Case No. 720255 and All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) JURY DEMAND vs. ) ) MYCOGEN CORPORATION, J. PEDRO ) REINHARD, CARLTON J. EIBL, JOHN L. ) HAGAMAN, JOSEPH P. SULLIVAN, ROY M. ) BARBEE, GEORGE KHACHATOURIANS, ) NICKOLAS D. HEIN, G. WILLIAM ) TOLBERT, LOUIS W. PRIBILA, DOW ) CHEMICAL COMPANY and DOES 1-25, ) inclusive. ) ) Defendants. ) ) - ------------------------------------- )
Plaintiff demands a trial by jury. DATED: May 1, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH ALAN SCHULMAN DARREN J. ROBBINS /s/ Alan Schulman ----------------------------------- ALAN SCHULMAN 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 ABBEY, GARDY & SQUITIERI, LLP MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 Attorneys for Plaintiff 1 EX-99.36 32 EXHIBIT 99.36 KEVIN J. YOURMAN (147159) VAHN ALEXANDER (167373) WEISS & YOURMAN 10940 Wilshire Blvd. 24th Floor Los Angeles, California 90024 Tel: (310) 208-2800 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO PETER VERRONE on Behalf of Himself and all Others ) CASE NO. 720700 Similarly Situated, ) ) (VIA FACSIMILE) Plaintiff, ) ) CLASS ACTION ) ------------ v. ) ) MYCOGEN CORPORATION, DOW ) COMPLAINT FOR BREACH AGROSCIENCES LLC, NICHOLAS D. HEIN, ) OF FIDUCIARY DUTIES AND CARLTON J. EIBL, THOMAS J. CABLE, JERRY D. ) INJUNCTIVE RELIEF CAULDER, PERRY J. GEHRING, LOUIS W. ) PRIBILA, DAVID H, RAMMLER, WILLIAM C. ) SCHMIDT, G. WILLIAM TOLBERT, W. WAYNE ) JURY TRIAL DEMAND WITHERS and DOES 1-25, inclusive ) ) Defendants. ) ) - ------------------------------------------------- KEVIN J. YOURMAN (147159) VAHN ALEXANDER (167373) WEISS & YOURMAN 10940 Wilshire Blvd. 24th Floor Los Angeles, California 90024 Tel: (310) 208-2800 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO PETER VERRONE on Behalf of Himself and all Others ) CASE NO: Similarly Situated, ) ) (VIA FACSIMILE) Plaintiff, ) ) CLASS ACTION ) ------------ v. ) ) ) MYCOGEN CORPORATION, DOW ) COMPLAINT FOR BREACH AGROSCIENCES LLC, NICHOLAS D. HEIN ) OF FIDUCIARY DUTIES AND CARLTON J. EIBL, THOMAS J. CABLE, JERRY D. ) INJUNCTIVE RELIEF CAULDER, PERRY J. GEHRING, LOUIS W. ) PRIBILA, DAVID H, RAMMLER, WILLIAM C. ) SCHMIDT, G. WILLIAM TOLBERT, W. WAYNE ) JURY TRIAL DEMAND WITHERS and DOES 1-25, inclusive ) ) Defendants. ) ) - ------------------------------------------------- Plaintiff, by his undersigned attorneys, for his complaint against defendants, alleges upon knowledge as to himself and his own acts, and upon information and belief, as to all other matters, as follows: 1. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendants, who own the common stock of Mycogen Corporation ("Mycogen" or the "Company") and who are similarly situated ("the Class"), to enjoin the consummation of the proposed acquisition of the remaining shares of Mycogen by Dow AgroSciences LLC ("Dow") for a purchase price of $20.50 per share or $232 million (the "proposed transaction"). Alternatively, in the event that the proposed transaction is consummated, plaintiff seeks to recover damages caused by the breach of fiduciary duties of care, candor and loyalty, described herein, owed by all defendants. The proposed transaction and the acts of defendants constitute a breach of defendants' fiduciary duties to plaintiff and the Class to take all necessary and appropriate steps to obtain the maximum value realizable for the shareholders of Mycogen. PARTIES 2. Plaintiff Peter Verrone is, and has been since the announcement of the proposed transaction described herein, the owner of shares of common stock of Mycogen. 3. Defendant Mycogen is a California corporation headquartered at 5501 Oberlin Drive, San Diego, California, 92121. The Company is publicly traded on the NASDAQ market exchange under the ticker symbol "MYCO" and currently has over 36,100,000 shares of common stock outstanding. Mycogen is a diversified agribusiness and biotechnology company that develops and markets seeds and value-added traits for genetically-enhanced crops and provides crop protection products and services. Mycogen's majority owner is Dow, a wholly-owned subsidiary of The Dow Chemical Company of Midland, Michigan. 4. Defendant Dow (formerly DowElanco) is a wholly owned subsidiary of the Dow Chemical Company and maintains its principal offices at 9330 Zionsville Road, Indianapolis, Indiana, 46268. Dow owns approximately 69% of Mycogen. Dow employs more than 3,000 people in 26 countries and has worldwide sales of more than $2 billion. The company discovers, develops, 2 manufactures and markets a wide range of agricultural and specialty products for farm, home and industrial use. 5. Defendant Nicholas D. Hein ("Hein") is, and at all relevant times has been, Chairman of the Board of the Company. Defendant Hein is also Vice President of Biotechnology of Dow. 6. Defendant Carlton J. Eibl ("Eibl") is, and at relevant times has been, President and Chief Executive Officer of the Company. 7. Defendant Thomas J. Cable ("Cable") is, and at all relevant times has been, a Director of the Company. 8. Defendant Jerry D. Caulder ("Caulder") is, and at all relevant times has been, a Director of the Company. 9. Defendant Perry J. Gehring ("Gehring") is, and at all relevant times has been, a Director of the Company. Defendant Gehring is also Vice President of Research and Development of Dow. 10. Defendant Louis W. Pribila ("Pribila") is, and at all relevant times has been, a Director of the Company. Defendant Pribila is also Vice President, Secretary and General Counsel of Dow. 11. Defendant David H. Rammler ("Rammler") is, and at all relevant times has been, a Director of the Company. 12. Defendant William C. Schmidt ("Schmidt") is, and at all relevant times has been, a Director of the Company. Defendant Schmidt is also Vice President and Chief Financial Officer of Dow. 13. Defendant G. William Tolbert ("Tolbert") is, and at all relevant times has been, a Director of the Company. Defendant Tolbert is also a Director of Dow. 14. Defendant W. Wayne Withers ("Withers") is, and at all relevant times has been, a Director of the Company. 15. The true names and capacities of defendants used herein under California Code of Civil Procedure Section 474 as Does 1 through 25, inclusive, are presently not known to plaintiff, who therefore sues these defendants by such fictitious names. Plaintiff will seek to amend this Complaint and include these Doe defendants' true names and capacities when they are ascertained. Each of the fictitiously named 3 defendants is responsible in some manner for the conduct alleged herein and for the injuries suffered by the Class. 16. Defendants Hein, Eibl, Cable, Caulder, Gehring, Pribila, Rammler, Schmidt, Tolbert and Withers (collectively the "Individual Defendants"), by reason of their corporate directorship and/or executive positions, stand in a fiduciary position relative to Mycogen's shareholders, which fiduciary relationship, at all times relevant herein, required the Individual Defendants to exercise their best judgment and to act in a prudent manner and in the best interests of Mycogen's shareholders. A director is not permitted to act in his/her own self-interest to the detriment of the shareholders. 17. Defendant Dow, as a majority shareholder of the Company, also stands in a fiduciary position relative to Mycogen's shareholders, which fiduciary relationship, at all times relevant herein, required Dow to exercise its best judgment and to act in a prudent manner and in the best interests of Mycogen's shareholders. A majority shareholder is not permitted to act in its own self-interest to the detriment of the shareholders. 18. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in such defendant's capacity as an officer and/or director or majority shareholder of Mycogen, and the liability of each arises from the fact that he, she, or it has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. JURISDICTION AND VENUE 19. This Court has proper jurisdiction over this action pursuant to SECTION 410.10 of the California Code of Civil Procedure. The violations of law complained of herein occurred in this county. Furthermore, the amounts in controversy exceed the jurisdictional minimum of this Court. 20. Venue is proper in the Superior Court of the County of San Diego pursuant to California Code of Civil Procedure SECTIONS 395 and 395.5. CLASS ACTION ALLEGATIONS 21. Plaintiff brings this action individually on his own behalf and as a class action, on behalf of all stockholders of Mycogen (except defendants herein, and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are 4 or will be threatened with injury arising from defendants' actions as more fully described herein (the "Class"). 22. This action is properly maintained as a class action. 23. The class is so numerous that joinder of all members is impracticable. As of May 1998, there were over 36,100,000 shares of Mycogen common stock outstanding. The disposition of their claims in a class action will be of benefit to the parties and the Court. The record holders of Mycogen's common stock can be easily determined from the stock transfer journals maintained by Mycogen or its agents. 24. A class action is superior to other methods for the fair and efficient adjudication of the claims herein asserted, and no unusual difficulties are likely to be encountered in the management of this action as a class action. 25. There is a well-defined community of interests in the questions of law and fact involved affecting the members of the Class. Among the questions of law and fact which are common to the Class, which predominate over questions affecting any individual class member are, INTER ALIA, the following: a. whether the proposed transaction is grossly unfair to the public stockholders of Mycogen, b. whether defendants have failed to disclose all material facts relating to the proposal including the potential positive future financial benefits which they expect to derive from Mycogen; c. whether defendants willfully and wrongfully failed or refused to obtain or attempt to obtain a purchaser for the assets of Mycogen at a higher price than the Dow proposal; d. whether plaintiff and the other members of the Class would be irreparably damaged were the proposed transaction complained of herein consummated; e. whether defendants have breached or aided and abetted the breach of fiduciary and other common law duties owned by them to plaintiff and the members of the Class; and f. whether plaintiff and the members of the Class have been damaged and what is the proper measure of damages. 5 26. Plaintiff is a member of the Class and is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Plaintiff does not have interests antagonistic to or in conflict with those she seeks to represent. Plaintiff is an adequate representative of the Class. 27. The likelihood of individual class members prosecuting separate individual actions is remote due to the relatively small loss suffered by each Class member as compared to the burden and expense of prosecuting litigation of this nature and magnitude. Absent a class action, the defendants are likely to avoid liability for their wrongdoing, and Class members are unlikely to obtain redress for their wrongs alleged herein. This Court is an appropriate forum for this dispute. SUBSTANTIVE ALLEGATIONS 28. Mycogen was founded in 1983 by chemical engineer Andrew Barnes, biochemist David Edwards, and defendant Rammler. The goal was to use genetic engineering techniques to create alternatives to chemical pesticides. Mycogen went public in 1987 and acquired control of seed company Agrigenetics from The Lubrizol Corporation ("Lubrizol") in 1992. That year it also took a controlling interest in Lubrizol. One of the keys to Mycogen's rapid growth was its discovery of a protein-delivery system, a gelatin capsule that protects the Bt toxin from ultraviolet rays and plant acidity. 29. The San Diego-based company develops technology-based seed and biopesticide products that control agricultural pests and improve crop yields. Using its proprietary "Bacillus thuringiensis" (Bt) biotoxin gene technology, Mycogen has developed pesticides that can target specific pests. Its Mycogen Seeds division develops genetically enhanced pest-resistant planting seeds. Mycogen Crop Protection develops fungicides, herbicides, and insecticides, while its Soilserv subsidiary provides specialized crop-protection services. Mycogen also conducts research with other companies, including seed giant Pioneer Hi-Bred. 30. In February 1996, Dow purchased 37% of Mycogen's common stock from Lubrizol, and in a simultaneous transaction, Mycogen issued Dow 9% of its common stock in return for cash and Dow seed businesses. As part of this transaction, Dow entered into an agreement (the "1996 Agreement") whereby it was prohibited from acquiring all of the shares of Mycogen prior to February 1999. 6 31. Nevertheless, since 1996, Dow has substantially increased its interest in Mycogen. For example, as recently as November 12, 1997, defendants issued a press release over the PR NEWSWIRE entitled MYCOGEN BOARD APPROVES $75 MILLION PRIVATE PLACEMENT WITH DOW/ELANCO. The release stated in pertinent part: The Board of Directors of Mycogen Corporation (Nasdaq: MYCO) today approved private placement of up to $75 million in newly issued shares of Mycogen common stock with the company's majority owner, DowElanco. ***** As of October 31, 997, DowElanco, a wholly owned subsidiary of The Dow Chemical Company (NYSE: DOW), owned 18.1 million shares, or approximately 57.5 percent of Mycogen's 31.4 million outstanding common shares. 32. This private placement boosted Dow's stake in Mycogen from 57.5% to 63%. Shortly thereafter, Dow increased its interest in Mycogen once more. On or about March 17, 1998, defendant Dow issued the following press release over the PR NEWSWIRE entitled DOW AGROSCIENCES PURCHASES ADDITIONAL MYCOGEN SHARES. The release stated: Dow AgroSciences today announced it has purchased $40.1 million of additional equity in Mycogen Corporation from Pioneer Hi-Bred International, Inc. The acquisition totals two (2) million shares of Mycogen common stock at $20.059 per share. "DOW AGROSCIENCES IS PLEASED TO ADVANCE ITS INTEREST AND OWNERSHIP OF MYCOGEN," SAID NICK HEIN, VICE PRESIDENT OF BIOTECHNOLOGY AT DOW AGROSCIENCES AND CHAIRMAN OF MYCOGEN'S BOARD OF DIRECTORS. "WE'VE STATED BEFORE OUR BELIEF IN MYCOGEN'S LONG-TERM VALUE AND THAT WE WOULD CONTINUE FROM TIME TO TIME TO ENHANCE OUR INVESTMENT IN IT. We are doubly pleased that this change in ownership will in no way affect the joint research and product development collaboration formed by Mycogen and Pioneer in 1995." THE ADDITIONAL INVESTMENT IN MYCOGEN INCREASES DOW AGROSCIENCES' TOTAL OWNERSHIP FROM 63 PERCENT TO 69 PERCENT OF MYCOGEN'S OUTSTANDING COMMON SHARES. 33. In response to Dow's acquisition of additional shares of Mycogen, THE DES MOINES REGISTER reported the following on or about March 18, 1998: WITH A MAJORITY INTEREST IN MYCOGEN EVEN BEFORE THE PURCHASE FROM PIONEER, DOW ALREADY HAD A STRONG INFLUENCE ON THE COMPANY, ANALYSTS SAID. THE ADDITIONAL SHARES WILL STRENGTHEN ITS GRIP, THEY SAID. "The expectation is it's going to own 100 percent of Mycogen at some point, so you have to get shares wherever you can," said George Dahlman, an analyst with Piper Jaffray in Minneapolis. 34. Then, on or about April 30, 1998, defendants issued the following press release over the PR NEWSWIRE entitled DOW REQUESTS AMENDMENT TO AGREEMENT WITH MYCOGEN. The release noted: 7 The Dow Chemical Company (NYSE:DOW), through its wholly owned subsidiary Dow AgroSciences LLC, announced today that it has requested an amendment to a 1996 agreement with Mycogen Corporation (Nasdaq: MYCO). The amendment would allow Dow AgroSciences to begin discussions regarding the acquisition of the remaining shares of Mycogen that it does not already own. Dow AgroSciences currently owns approximately 69 percent of Mycogen's outstanding shares. THE TERMS OF DOW AGROSCIENCES' 1996 AGREEMENT WITH MYCOGEN CURRENTLY STATE THAT DOW AGROSCIENCES CANNOT ACQUIRE THE REMAINING SHARES OF MYCOGEN BEFORE FEBRUARY 1999. IF MYCOGEN'S BOARD OF DIRECTORS AND THE INDEPENDENT DIRECTORS AGREE TO AMEND THE AGREEMENT, DOW AGROSCIENCES IS PREPARED TO BEGIN DISCUSSIONS IMMEDIATELY REGARDING A TRANSACTION IN WHICH MYCOGEN'S MINORITY SHAREHOLDERS WOULD RECEIVE $20.50 IN CASH PER SHARE. Under the terms of the proposed amendment, any transaction would be subject to the prior approval of Mycogen's board of directors and the independent directors. 35. The following day, THE NEW YORK TIMES released an article regarding the proposed transaction which stated: The Dow Chemical Company said yesterday that it would seek talks to acquire the remaining shares of the Mycogen Corporation that it does not already own for $20.50 a share in cash. Dow AgroSciences LLC currently owns about 69 percent of Mycogen's outstanding shares. DOW AGROSCIENCES' OFFER OF $20.50 IN CASH WAS EQUAL TO YESTERDAY'S CLOSING PRICE FOR THE SHARES OF MYCOGEN, WHICH IS BASED IN SAN DIEGO. MYCOGEN'S MINORITY SHAREHOLDERS OWN 11.3 MILLION SHARES OF THE BIOTECHNOLOGY AND GENETICALLY ENGINEERED CROPS COMPANY, MAKING THE PROPOSED TRANSACTION WORTH $231.7 MILLION. 36. In light of Dow's stranglehold over the Company, and its Board of Directors, Dow's request to amend the 1996 Agreement is a foregone conclusion. None of the directors can be considered "independent" and they cannot be expected to vigorously protect the rights and interests of Mycogen's public shareholders. Defendants' intention to pursue the above proposed transaction, a transaction which offers no premium whatsoever for Mycogen's shareholders, is in breach of their fiduciary duties of care, candor, and loyalty owed to the Company's stockholders to take all necessary steps to ensure that Mycogen's minority shareholders will receive the maximum value realizable for their shares in any extraordinary transaction involving the Company. 37. The $20.50 per share price is not the result of arm's-length negotiations but was unilaterally set by Dow so that it could obtain complete ownership of Mycogen's assets and business at the lowest possible price. The intrinsic value of the equity of the Company is materially greater than the consideration proposed, taking into account, INTER ALIA, Mycogen's asset value, liquidation value, expected growth, full extent of its future earnings potential, expected increase in profitability, strength of its business, its revenues, cash flow, and earnings power. 8 38. The defendants willingness to entertain the proposed transaction requires them to take all reasonable steps to assure the maximization of stockholder value, including the implementation of a bidding mechanism to foster a fair auction of those shares not held by Dow to the highest bidder or the exploration of strategic alternatives which will return greater or equivalent short-term value to the plaintiff and the Class. 39. Defendants, knowing all of the above, have failed to take the necessary and appropriate steps to obtain the maximum value realizable for the public shareholders of Mycogen. 40. There is no indication that defendants have taken any steps to ensure that the interests of Mycogen's minority shareholders, in maximizing the value of their holdings, are being protected from Dow's control. Defendants have not conducted an auction for those Mycogen shares not held by Dow, solicited other offers, or otherwise sought out other potential purchasers. Nor have defendants explored strategic alternatives which will obtain the highest possible price for Mycogen's stockholders or return greater or equivalent value to the plaintiff and the class. 41. Further, if defendants accept Dow's proposal without seeking out other purchasers, defendants have inhibited the chances of receiving competing offers. If the proposed transaction is consummated, Mycogen's shareholders will be deprived of the opportunity for substantial gains which the Company may have realized. 42. By reason of all of the foregoing, defendants herein have willfully participated in unfair dealing toward plaintiff and the other members of the Class and have engaged in and substantially assisted and aided and abetted each other in breach of the fiduciary duties owed by them to the Class. 43. Defendants have violated fiduciary and other common law duties owed to the plaintiff and the other members of the Class in that they have not and are not exercising independent business judgment, and have acted and are acting to the detriment of the Class. 44. As a result of the actions of defendants, plaintiff and the Class have been and will be damaged in that they are not receiving the fair value of their Mycogen shares. 45. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the Class and will succeed in excluding the Class from its fair proportionate share of Mycogen's assets and businesses, all to the irreparable harm of the Class. 9 46. Plaintiff and the Class have no adequate remedy of law. FIRST CAUSE OF ACTION AGAINST ALL DEFENDANTS FOR BREACH OF FIDUCIARY DUTIES OF CARE, CANDOR, AND LOYALTY ----------------------------------------------------------- 47. Plaintiff hereby incorporates by reference paragraphs 1 through 46 above as though fully set forth herein. 48. By virtue of plaintiff's purchase of Mycogen's common stock, and the defendants' positions as directors and/or officers and majority shareholder of the Company, and because plaintiff reposed trust and confidence in them, the defendants owed to plaintiff fiduciary duties of care, candor and loyalty of the highest good faith, integrity and fair dealing. 49. In taking and/or failing to take the actions hertofore alleged, defendants violated their fiduciary obligations to plaintiff. 50. As a proximate result of defendants' aforesaid conduct, plaintiff was damaged by injury to his property, lost profits, loss of future income, and other general and specific damages. WHEREFORE, plaintiff prays for judgement and relief as follows: (1) declaring that this lawsuit is properly maintainable as a class action and certifying plaintiff as representative of the Class; (2) declaring that the defendants and each of them have committed or aided and abetted in a breach of their fiduciary duties to plaintiff and the other members of the Class; (3) declaring the proposed transaction to be a nullity; (4) preliminary and permanently enjoining defendants and all persons acting under, in concert with, or for them, from proceeding with, consummating or closing the proposed transaction; (5) in the event the proposed transaction is consummated rescinding it and setting it aside; (6) ordering defendants, jointly and severally, to account to plaintiff and the Class for all profits realized and to be realized by them as a result of the proposed transaction complained of and, pending such accounting, to hold such profits in a constructive trust for the benefit of plaintiff and other members of the Class; 10 (7) ordering defendants to permit a stockholders' committee comprised of class members and their representatives only to ensure a fair procedure, adequate procedural safeguards, and independent input by plaintiff and the Class in connection with any proposed transaction for the shares of Mycogen; (8) awarding compensatory damages against defendants, jointly and severally, in the amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; (9) awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and (10) granting such other further relief as may be just and proper. Dated: May 15, 1998 KEVIN J. YOURMAN VAHN ALEXANDER WEISS & YOURMAN By: VAHN ALEXANDER ----------------------------------- Vahn Alexander 10940 Wilshire Blvd., 24th Floor Los Angeles, CA 90024 (213) 208-2800 Attorneys for Plaintiff 11 JURY DEMAND Plaintiff demands a trial by jury of all issues so triable. Dated: May 15, 1998 KEVIN J. YOURMAN VAHN ALEXANDER WEISS & YOURMAN By: VAHN ALEXANDER ----------------------------------- Vahn Alexander 10940 Wilshire Blvd. 24th Floor Los Angeles, CA 90024 (213) 208-2800 Attorneys for Plaintiff 12 EX-99.37 33 EXHIBIT 99.37 FILED KENNETH E. MARTONE Clerk of the Superior Court June 22, 1998 By: J. JOHNSON, Deputy SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN DIEGO LESLIE SUSSER, On Behalf of Himself ) Lead Case No. 720255 and All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) ASSIGNED TO: Judge Herbert vs. ) B. Hoffman ) MYCOGEN CORPORATION, et al., ) DATE: July 16, 1998 ) TIME: 3:30 p.m. Defendants. ) DEPT: 51 ___________________________________ ) DATE ACTION FILED: 05/01/98 PRETRIAL ORDER NO. 1 RE: (i) SETTING STATUS CONFERENCE; (ii) CONSOLIDATING ACTIONS; (iii) APPROVING PLAINTIFFS' ORGANIZATION OF COUNSEL; (iv) FILING CONSOLIDATED AMENDED COMPLAINT; AND (v) FILING MOTION FOR CLASS CERTIFICATION In furtherance of efficient case management and the interests of justice and after due consideration and good cause appearing therefor, IT IS HEREBY ORDERED as follows: I. SETTING OF STATUS CONFERENCE A status conference in this matter is hereby set for July 16, 1998 at 3:30 p.m. All parties through their counsel shall attend. II. CONSOLIDATION OF PENDING ACTIONS AND FILING OF AMENDED COMPLAINT 1. Pursuant to California Code of Civil Procedure Section 1048, Local Rule 5.4, and the general equitable powers of this Court, the following actions shall be consolidated in Department 51 for all pretrial purposes: LESLIE SUSSER v. MYCOGEN CORP., et al., Case No. 720255 (filed May 1, 1998; Dept. 51) ("SUSSER"); HARBOR FINANCE PARTNERS v. MYCOGEN CORP., et al., Case No. 720256 (filed May 1, 1998; Dept. 51) ("HARBOR FINANCE"); ELLIS INVESTMENTS, LTD v. CARLTON H. EIBL, et al., Case No. 720257 (filed May 1, 1998; Dept. 39) ("ELLIS INVESTMENTS"); RICHARD A. KOLB v. MYCOGEN CORP., et al., Case No. 720388 (filed May 5, 1998; Dept. 40) ("KOLB"); JEANETTE ANDERSON v. MYCOGEN CORP., et al., Case No. 720391 (filed May 5, 1998; Dept. 48) ("ANDERSON"); JEAN BOETTCHER v. MYCOGEN CORP., et al., Case No. 720530 (filed May 8, 1998; Dept. 38) ("BOETTCHER"); and PETER VERRONE v. MYCOGEN CORP., et al., Case No. 720700 (filed May 15, 1998; Dept. 51) ("VERRONE"). 2. Any other actions now pending or hereinafter filed in or transferred to this Court which arise out of the same facts as alleged in the above-identified cases shall be consolidated for all pretrial purposes, if, as and when they are drawn to the Court's attention. - 1 - 3. Plaintiffs will file within 60 days from the entry of this order a Consolidated Amended Class Action Complaint. In the Consolidated Amended Class Action Complaint, plaintiffs may add or drop parties and claims. The Consolidated Amended Class Action Complaint shall supersede the complaints filed in the above-described actions. Defendants need not respond to the complaints in the SUSSER, HARBOR FINANCE, ELLIS INVESTMENTS, KOLB, ANDERSON, BOETTCHER and VERRONE actions. Defendants will have 30 days from the filing of the Consolidated Amended Class Action Complaint to respond to that Complaint. III. ORGANIZATION OF PLAINTIFFS' COUNSEL The leadership structure of plaintiffs' counsel for the conduct of this consolidated action shall consist of the following Co-Lead Counsel: Milberg Weiss Bershad Hynes & Lerach LLP 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 - and - One Pennsylvania Plaza New York, NY 10119-0165 Telephone: 212/594-5300 Abbey, Gardy & Squitieri, LLP 212 East 39th Street New York, N.Y. Telephone: 212/889-3700 IV. DUTIES AND RESPONSIBILITIES OF PLAINTIFFS' COUNSEL Plaintiffs' Co-Lead Counsel are hereby vested with the following responsibilities and duties on behalf of plaintiffs and plaintiffs' counsel: 1. Plaintiffs' Co-Lead Counsel shall have authority to speak and make agreements for plaintiffs in matters regarding pretrial - 2 - procedure, settlement negotiations, trial and any post-trial or appellate proceedings and shall make all work assignments in such manner as to facilitate the orderly and efficient prosecution of this litigation and to avoid duplicative or unproductive effort. 2. Plaintiffs' Co-Lead Counsel shall be responsible for coordination of all activities and appearances on behalf of plaintiffs and for the dissemination of notices and orders of this Court. No motion, request for discovery, or other pretrial or post-trial proceedings shall be initiated or filed by any plaintiff except through plaintiffs' Co-Lead Counsel. 3. Plaintiffs' Co-Lead Counsel also shall be available and responsible for communications to and from this Court. 4. Plaintiffs' Co-Lead Counsel shall direct the preparation for a trial of this matter and delegate work responsibilities as may be required in such a manner as to lead to the orderly and efficient prosecution of this litigation and to avoid duplicative or unproductive efforts. 5. Plaintiffs' Co-Lead Counsel is authorized to employ consultants and experts. 6. Defendants' counsel may rely upon all agreements made with plaintiffs' Co-Lead Counsel and such agreements shall be binding on plaintiffs. 7. Service by defendants' counsel on plaintiffs' co-lead counsel of any pleading, motion or other paper required to be served shall be effective as service on all plaintiffs. V. FILING OF PLAINTIFFS' MOTION FOR CLASS CERTIFICATION In light of this consolidation order and the future filing of a Consolidated Amended Class Action Complaint, plaintiffs shall - 3 - file their Motion for Class Certification within fifteen days after defendants file their latest answers to the Consolidated Amended Class Action Complaint. IT IS SO ORDERED. DATED: JUNE 22, 1998 /s/ HERBERT B. HOFFMAN --------------- -------------------------------- THE HONORABLE HERBERT B. HOFFMAN SUPERIOR COURT JUDGE SUBMITTED AND APPROVED BY: DATED: June 15, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH STEVEN W. PEPICH RANDALL J. BARON /S/ Steven W. Pepich ------------------------ STEVEN W. PEPICH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 MILBERG WEISS BERSHAD HYNES & LERACH LLP STEVEN G. SCHULMAN U. SETH OTTENSOSER One Pennsylvania Plaza New York, NY 10119-0165 Telephone: 212/594-5300 ABBEY, GARDY & SQUITIERI, LLP MARK C. GARDY JAMES S. NOTIS 212 East 39th Street New York, NY 10016 Telephone: 212/889-3700 WECHSLER HARWOOD HALEBIAN & FEFFER LLP SAMUEL ROSEN 488 Madison Avenue 8th Floor New York, NY 10022 Telephone: 212/935-7400 - 4 - BERNSTEIN LIEBHARD & LIFSHITZ STANLEY D. BERNSTEIN 274 Madison Avenue New York, NY 10016 Telephone: 212/779-1414 WOLF POPPER LLP ROBERT M. KORNREICH PAUL O. PARADIS 845 Third Avenue New York, NY 10022 Telephone: 212/759-4600 BERMAN, DeVALERIO & PEASE GLEN DeVALERIO One Liberty Square Boston, MA 02109 Telephone: 617/542-8300 LAW OFFICES OF JAMES V. BASHIAN, P.C. JAMES V. BASHIAN 500 Fifth Avenue Suite 2700 New York, NY 10110 Telephone: 212/921-4110 KAPLAN, KILSHEIMER & FOX, LLP ROBERT N. KAPLAN CHRISTINE M. COMAS 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212-687-1980 DATED: June 15, 1998 WEISS & YOURMAN KEVIN YOURMAN VAHN ALEXANDER /s/ Vahn Alexander ----------------------------- VAHN ALEXANDER 10940 Wilshire Blvd. 24th Floor Los Angeles, CA 90024 Telephone: 310/208-2800 Attorneys for Plaintiffs MAYER, BROWN & PLATT BENNETT W. LASKO 190 South La Salle Street Chicago, IL 60603-3441 - 5 - Telephone: 312/782-0600 DATED: June 16, 1998 MAYER, BROWN & PLATT FREDRICK S. LEVIN /s/ Fredrick S. Levin -------------------------------- FREDRICK S. LEVIN 350 South Grand Avenue 25th Floor Los Angeles, CA 90071 Telephone: 213/229-9500 Attorneys for Defendants Dow Agrosciences, 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 DATED: June 15, 1998 GRAY, CARY, WARE & FREIDENRICH ROBERT W. BROWNLIE /s/ Robert W. Brownlie --------------------------------- ROBERT W. BROWNLIE 401 B Street, Suite 1700 San Diego, CA 92101-4297 Telephone: 619/699-2700 ALTHEIMER & GRAY THEODORE J. LOW 10 South Wacker Dr. Suite 4000 Chicago, IL 60606 Telephone: 312/715-4000 Attorneys for Defendants Mycogen Corp., Joseph P. Sullivan, and George Khachatourians - 6 - EX-99.38 34 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 __, 1998 MILBERG WEISS BERSHAD HYNES & LERACH LLP By: _______________________________________ 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 __, 1998 By: _______________________________________ 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: illegible __________________________________ 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 EX-99.49 35 EXHIBIT 99.49 OPTION ELECTION TO EXERCISE OPTIONS AND TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MYCOGEN CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 OF AGROSCIENCES ACQUISITION INC. A MAJORITY-OWNED SUBSIDIARY OF DOW AGROSCIENCES LLC AND A WHOLLY OWNED INDIRECT SUBSIDIARY OF THE DOW CHEMICAL COMPANY - ---------------------------------------------------------------- SIGNATURE REQUIRED ON PAGE 4 ---------------------------------------------------------------------------- Dear Option Holder: AgroSciences Acquisition Inc. ("Purchaser"), a majority-owned subsidiary of Dow AgroSciences LLC ("Parent") and a wholly owned indirect subsidiary of The Dow Chemical Company ("TDCC"), has made an offer to purchase all of the outstanding shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Shares"), of Mycogen Corporation (the "Company"), at a purchase price of $28.00 per Share, net to the seller in cash. The enclosed Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal enclosed with this Option Election (which, together with the Offer to Purchase, constitute the "Offer"), describe the Offer in greater detail. As a holder of options ("Options") to purchase Shares under the Mycogen Corporation 1992 Stock Option Plan (which incorporates outstanding Options granted under the Mycogen Corporation 1983 Stock Option Plan) (the "1992 Plan"), you may submit to the Company this Option Election exercising all of your outstanding Options (whether or not the Option was previously exercisable) and instructing the Company to tender each of the Shares issuable under all such Options (the "Option Shares") in the Offer, as set forth below under "Instructions"; provided, that any exercise of an Option must be in accordance with the terms of the 1992 Plan. By signing below, you hereby agree that, immediately prior to the purchase of Shares by Purchaser in the Offer, and contingent upon such purchase, you will be deemed to have fully exercised each Option held by you and to have tendered each of the Option Shares to Purchaser pursuant to the Offer. By signing below, you also agree that the exercise price per Option Share (the "Exercise Price") will be deemed to be paid with the proceeds of an interest free advance from the Company (the "Advance"). The Advance will be deemed to be repaid in full on your behalf by Purchaser from a portion of the consideration due to you for such Shares in the Offer. After such repayment, you will be entitled to receive from Purchaser with respect to each Option Share purchased by Purchaser pursuant to the Offer an amount equal to the difference between (a) the Exercise Price and (b) the price per Share paid by Purchaser pursuant to the Offer. By signing below, you acknowledge that you have been advised that (1) Options for which a valid Option Election has been executed and delivered to the Company that are not already vested will become vested immediately prior to the expiration of the Offer (but contingent upon the purchase by Purchaser of Shares pursuant to the Offer), (2) the Company and Parent will make it possible for Option Shares issuable upon exercise of the Options covered by Option Elections above to be tendered in the Offer and (3) upon the purchase of Option Shares pursuant to this Option Election, you will have no further rights under such Option. TO ASSURE THAT YOUR OPTION ELECTION CAN BE PROCESSED ON TIME, PLEASE EXECUTE THIS OPTION ELECTION AND DELIVER IT TO THE COMPANY ACCORDING TO THE INSTRUCTIONS SET FORTH BELOW, BEFORE 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of August 31, 1998, among the Company, Purchaser, Parent and, for the limited purpose set forth in the Merger Agreement, TDCC. If you decide not to execute this Option Election and return it to the Company and, thereby, not exercise your Options and tender your Option Shares under the Offer, then your Options will become exercisable immediately prior to the Effective Time of the Merger (as defined in the Offer to Purchase) (contingent upon the purchase by Purchaser of Shares pursuant to the Offer) and the Company intends on treating your Options as terminated and no longer outstanding as of the Effective Time of the Merger; provided, however, that the Company will make arrangements so that if you consent to the termination of your Options (either before the Effective Time of the Merger or within a reasonable time thereafter), then you will be entitled to receive in respect of your Options an amount in cash equal to $28.00 less the exercise price per Share under each of your Options multiplied by the number of Option Shares. If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender Option Shares or the completion of this Option Election, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE AND ALL OTHER ENCLOSED MATERIALS. THE SPECIAL COMMITTEE COMPRISED OF TWO MEMBERS OF THE COMPANY'S BOARD OF DIRECTORS INDEPENDENT OF TDCC, PARENT AND PURCHASER (THE "SPECIAL COMMITTEE"), UNANIMOUSLY RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS THAT IT APPROVE THE OFFER. THE COMPANY'S ENTIRE BOARD OF DIRECTORS ALSO REVIEWED THE OFFER AND, AFTER RECEIPT OF THE RECOMMENDATION OF THE SPECIAL COMMITTEE, CONCLUDED THAT THE OFFER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN TDCC OR ITS AFFILIATES). ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. ------------------------ INSTRUCTIONS Carefully complete this Option Election below. To assure that your Option Election can be processed on time, please be sure to sign and date the form and return this Option Election to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. The Company reserves the absolute right to waive any defect or irregularity in the exercise of any Option or the tender of any Shares. No exercise of Options and tender of Option Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders of exercises of Options and Option Shares, and none of them will incur any liability for failure to give any such notice. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF OPTIONS. NO FACSIMILE TRANSMISSIONS OF THE OPTION ELECTION WILL BE ACCEPTED. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY BY 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998. 2 OPTION EXERCISE If you want to exercise your Options and tender your Option Shares in the Offer, follow the instructions below. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 2, 1998, UNLESS PURCHASER EXTENDS THE OFFER. EXCEPT AS SET FORTH HEREIN, IF YOU WANT TO PARTICIPATE IN THE OFFER, YOU MUST COMPLETE AND RETURN THE ENCLOSED OPTION ELECTION AS SET FORTH IN INSTRUCTION (2) BELOW PRIOR TO THE EXPIRATION OF THE OFFER. To properly complete your Option Election, you need to do the following: (1) Complete, date and sign the Option Election on page 4. (2) Return this Option Election to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. Option Elections received after the expiration of the Offer will not be honored. NO FACSIMILE TRANSMITTALS OF THE OPTION ELECTION WILL BE ACCEPTED. WITHDRAWAL If completely and properly submitted, your direction to exercise Options and tender the related Shares will be deemed irrevocable upon receipt by the Company unless withdrawn prior to the Expiration of the Offer, unless extended. In order to make an effective withdrawal, you must submit a new Option Election which may be obtained by calling Cheri Manis of the Company's Investor Relations Department at (800) 745-7475 (or use a photocopy of an Option Election). Your new Option Election must be signed and dated on page 4. You must also write "WITHDRAW" in the space beneath the signature block on page 4. Upon receipt of a new, signed, dated and properly completed Option Election, your previous direction will be deemed canceled. You may be deemed to re-exercise your Options and be deemed to re-tender your Option Shares by obtaining another Option Election from Cheri Manis (or use a photocopy of an Option Election) and repeating the previous instructions for directing exercises and tenders as set forth above. FURTHER INFORMATION If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender Shares receivable upon exercise of your Options or the completion of this Option Election, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. 3 - -------------------------------------------------------------------------------- SIGNATURE (REQUIRED) The undersigned acknowledges receipt of the Offer to Purchase, dated September 4, 1998, from Purchaser and Parent and represents that the undersigned has carefully read such documents. The undersigned hereby instructs the Company, subject to the terms and conditions set forth in this Option Election and the Offer to Purchase, to carry out the instructions contained in this form. The Company is hereby authorized to exercise all Options of which the undersigned is a holder and to tender the undersigned's Option Shares. The undersigned understands that withholding taxes, at the minimum rate or the rate specified in Form B tax election previously filed with the Company, will be withheld from any proceeds received by the undersigned (unless the undersigned has submitted with this form, or pursuant to subsequent notification from the Company, a check in an amount sufficient to cover such amount). The undersigned further agrees that, if such proceeds are insufficient to cover applicable withholding taxes, Option Shares will not be credited to his or her account until he or she has, upon request of the Company, forwarded to the Company a check in an amount sufficient to cover such taxes. In lieu of withholding at such rates, the undersigned instructs the Company to withhold taxes at the following rates (which may not be less than the minimum federal, state or local tax rates applicable to you, nor in excess of such proceeds): Federal:________%; State:________%; Local:________%. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE UNDERSIGNED. Signature:________________________ Date:_______________________ Name:_______________________ Social Security Number:_______________________ (PLEASE PRINT) Address:____________________________________________________________________ (STREET ADDRESS, INCLUDING APARTMENT NUMBER -- PLEASE PRINT) __________________________________________________________________________ (CITY) (STATE) (ZIP CODE) -------------------------------------------------------------------------- 4 EX-99.50 36 EXHIBIT 99.50 RESTRICTED STOCK ELECTION TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MYCOGEN CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 OF AGROSCIENCES ACQUISITION INC. A MAJORITY-OWNED SUBSIDIARY OF DOW AGROSCIENCES LLC AND A WHOLLY OWNED INDIRECT SUBSIDIARY OF THE DOW CHEMICAL COMPANY - -------------------------------------------------------------------------------- SIGNATURE REQUIRED ON PAGE 4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- YOU MUST ALSO COMPLETE, SIGN AND RETURN TO THE COMPANY A LETTER OF TRANSMITTAL AND YOUR RESTRICTED STOCK CERTIFICATE(S) - -------------------------------------------------------------------------------- Dear Restricted Stock Holder: AgroSciences Acquisition Inc. ("Purchaser"), a majority-owned subsidiary of Dow AgroSciences LLC ("Parent") and a wholly owned indirect subsidiary of The Dow Chemical Company ("TDCC"), has made an offer to purchase all of the outstanding shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Shares"), of Mycogen Corporation (the "Company"), at a purchase price of $28.00 per Share, net to the seller in cash. The enclosed Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal enclosed with this Restricted Stock Election (which, together with the Offer to Purchase, constitute the "Offer"), describe the Offer in greater detail. As a holder of Shares under the Mycogen Corporation Restricted Stock Issuance Plan (the "Restricted Stock Plan") that are not vested under the Restricted Stock Plan ("Restricted Shares"), you may submit to the Company (i) this Restricted Stock Election instructing the Company to tender each of the Restricted Shares in the Offer, (ii) a Letter of Transmittal, as set forth below under "Instructions" and (iii) your Restricted Stock Certificate(s). By signing below, you hereby agree that, immediately prior to the purchase of Shares by Purchaser in the Offer, and contingent upon such purchase, you will be deemed to have tendered each of your Restricted Shares (regardless of the fact that the Restricted Shares were not previously vested) to Purchaser pursuant to the Offer. You will be entitled to receive from Purchaser with respect to each Restricted Share purchased by Purchaser pursuant to the Offer an amount equal to the price per Share paid by Purchaser pursuant to the Offer. By signing below, you acknowledge that you have been advised that (1) Restricted Shares for which a valid Restricted Stock Election and a Letter of Transmittal have been executed and delivered to the Company will become vested immediately prior to the expiration of the Offer (but contingent upon the purchase by Purchaser of Shares pursuant to the Offer), (2) the Company and Parent will make it possible for Restricted Shares covered by Restricted Stock Elections above to be tendered in the Offer, and (3) upon the purchase of Restricted Shares pursuant to this Restricted Stock Election, you will have no further rights under your Restricted Shares. TO ASSURE THAT YOUR RESTRICTED STOCK ELECTION CAN BE PROCESSED ON TIME, PLEASE EXECUTE THIS RESTRICTED STOCK ELECTION AND A LETTER OF TRANSMITTAL AND DELIVER THEM ALONG WITH YOUR RESTRICTED STOCK CERTIFICATE(S) TO THE COMPANY ACCORDING TO THE INSTRUCTIONS SET FORTH BELOW, BEFORE 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of August 31, 1998, among the Company, Purchaser, Parent and, for the limited purpose set forth in the Merger Agreement, TDCC. If you decide not to execute this Restricted Stock Election and a Letter of Transmittal and return them to the Company and, thereby, not tender your Restricted Shares under the Offer, then, contingent on the purchase by Purchaser of Shares pursuant to the Offer, your Restricted Shares will become fully vested immediately prior to the Effective Time of the Merger (as defined in the Offer to Purchase). If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender Restricted Shares or the completion of this Restricted Stock Election, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE AND ALL OTHER ENCLOSED MATERIALS. THE SPECIAL COMMITTEE COMPRISED OF TWO MEMBERS OF THE COMPANY'S BOARD OF DIRECTORS INDEPENDENT OF TDCC, PARENT AND PURCHASER (THE "SPECIAL COMMITTEE"), UNANIMOUSLY RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS THAT IT APPROVE THE OFFER. THE COMPANY'S ENTIRE BOARD OF DIRECTORS ALSO REVIEWED THE OFFER AND, AFTER RECEIPT OF THE RECOMMENDATION OF THE SPECIAL COMMITTEE, CONCLUDED THAT THE OFFER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN TDCC OR ITS AFFILIATES). ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. ------------------------ INSTRUCTIONS Carefully complete this Restricted Stock Election below. To assure that your Restricted Stock Election can be processed on time, please be sure to sign and date the form and return this Restricted Stock Election along with a completed Letter of Transmittal to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. The Company reserves the absolute right to waive any defect or irregularity in the tender of any Restricted Shares. No tender of Restricted Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders of Restricted Shares, and none of them will incur any liability for failure to give any such notice. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF RESTRICTED SHARES. NO FACSIMILE TRANSMISSIONS OF THE OPTION ELECTION WILL BE ACCEPTED. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY BY 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. TENDER OF RESTRICTED SHARES If you want to tender your Restricted Shares in the Offer, follow the instructions below. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 2, 1998, UNLESS PURCHASER EXTENDS THE OFFER. EXCEPT AS SET FORTH HEREIN, IF YOU WANT TO PARTICIPATE IN THE OFFER, YOU MUST COMPLETE AND RETURN THE ENCLOSED RESTRICTED STOCK ELECTION, THE LETTER OF TRANSMITTAL AND YOUR RESTRICTED STOCK CERTIFICATE(S) AS SET FORTH IN INSTRUCTION (3) BELOW PRIOR TO THE EXPIRATION OF THE OFFER. 2 To properly complete your Restricted Stock Election, you need to do the following: (1) Complete, date and sign the Restricted Stock Election on page 4. (2) Complete, date and sign a Letter of Transmittal respecting the Restricted Shares. (3) Return this Restricted Stock Election, the Letter of Transmittal and your Restricted Stock Certificate(s) to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. Restricted Stock Elections received after the expiration of the Offer will not be honored. NO FACSIMILE TRANSMITTALS OF THE RESTRICTED STOCK ELECTION OR THE LETTER OF TRANSMITTAL WILL BE ACCEPTED. WITHDRAWAL If completely and properly submitted, your direction to tender your Restricted Shares and Letter of Transmittal will be deemed irrevocable upon receipt by the Company unless withdrawn prior to the Expiration of the Offer, unless extended. In order to make an effective withdrawal, you must submit a new Restricted Stock Election which may be obtained by calling Cheri Manis of the Company's Investor Relations Department at (800) 745-7475 (or use a photocopy of a Restricted Stock Election). Your new Restricted Stock Election must be signed and dated on page 4. You must also write "WITHDRAW" in the space beneath the signature block on page 4. Upon receipt of a new, signed, dated and properly completed Restricted Stock Election, your previous direction will be deemed canceled. You may be deemed to re-tender your Restricted Shares by obtaining another Restricted Stock Election and Letter of Transmittal from Cheri Manis (or use a photocopy of a Restricted Stock Election and Letter of Transmittal) and repeating the previous instructions for directing exercises and tenders as set forth above. FURTHER INFORMATION If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender your Restricted Shares or the completion of this Restricted Stock Election and Letter of Transmittal, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. 3 - -------------------------------------------------------------------------------- SIGNATURE (REQUIRED) The undersigned acknowledges receipt of the Offer to Purchase, dated September 4, 1998, from Purchaser and Parent and represents that the undersigned has carefully read such documents. The undersigned hereby instructs the Company, subject to the terms and conditions set forth in this Restricted Stock Election and the Offer to Purchase, to carry out the instructions contained in this form. The Company is hereby authorized to tender the undersigned's Restricted Shares by delivering the completed Letter of Transmittal and your Restricted Stock Certificate(s) to the Depositary. The undersigned understands that withholding taxes, at the minimum rate or the rate specified in Form B tax election previously filed with the Company, will be withheld from any proceeds received by the undersigned (unless the undersigned has submitted with this form, or pursuant to subsequent notification from the Company, a check in an amount sufficient to cover such amount). The undersigned further agrees that, if such proceeds are insufficient to cover applicable withholding taxes, Restricted Shares will not be treated as vested for his or her account until he or she has, upon request of the Company, forwarded to the Company a check in an amount sufficient to cover such taxes. In lieu of withholding at such rates, the undersigned instructs the Company to withhold taxes at the following rates (which may not be less than the minimum federal, state or local tax rates applicable to you, nor in excess of such proceeds): Federal:________%; State:________%; Local:________%. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE UNDERSIGNED. Signature:________________________ Date:_______________________ Name:_______________________ Social Security Number:_______________________ (PLEASE PRINT) Address:____________________________________________________________________ (STREET ADDRESS, INCLUDING APARTMENT NUMBER -- PLEASE PRINT) __________________________________________________________________________ (CITY) (STATE) (ZIP CODE) - -------------------------------------------------------------------------------- 4 EX-99.51 37 EXHIBIT 99.51 STOCK PURCHASE ELECTION TO EXERCISE PURCHASE RIGHTS AND TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF MYCOGEN CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 OF AGROSCIENCES ACQUISITION, INC. A MAJORITY-OWNED SUBSIDIARY OF DOW AGROSCIENCES LLC AND A WHOLLY-OWNED INDIRECT SUBSIDIARY OF THE DOW CHEMICAL COMPANY - ---------------------------------------------------------------- SIGNATURE REQUIRED ON PAGE 4 ---------------------------------------------------------------------------- Dear Purchase Rights Holder: AgroSciences Acquisition Inc. ("Purchaser"), a majority-owned subsidiary of Dow AgroSciences LLC ("Parent") and a wholly owned indirect subsidiary of The Dow Chemical Company ("TDCC"), has made an offer to purchase all of the outstanding shares of common stock, par value $0.001 per share (including the associated preferred stock purchase rights) (the "Shares"), of Mycogen Corporation (the "Company"), at a purchase price of $28.00 per Share, net to the seller in cash. The enclosed Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal enclosed with this Stock Purchase Election (which, together with the Offer to Purchase, constitute the "Offer"), describe the Offer in greater detail. As a holder of purchase rights ("Purchase Rights") to purchase Shares under the Mycogen Corporation 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan"), you may submit to the Company this Stock Purchase Election exercising all of your Purchase Rights (calculated assuming your payroll deductions had continued at the same level through November 30, 1998) and the Company will tender each of the Shares issuable under all such Purchase Rights (the "Stock Purchase Shares") in the Offer, as set forth below under "Instructions"; provided that any exercise of Purchase Rights must be in accordance with the terms of the Stock Purchase Plan. By signing below, you hereby agree that, immediately prior to the purchase of Shares by Purchaser in the Offer, and contingent upon such purchase, you will be deemed to have fully exercised your Purchase Rights and to have tendered each of the Stock Purchase Shares to Purchaser pursuant to the Offer. By signing below, you also agree that the amount of payroll deductions accumulated in your account under the Stock Purchase Plan will be used to exercise the Purchase Rights and that the difference between the entire purchase price for the Stock Purchase Shares and the amount of the accumulated payroll deductions shall be deemed to be paid with the proceeds of an interest free advance from the Company (the "Advance"). The Advance will be deemed to be repaid in full on your behalf by Purchaser from a portion of the consideration due to you for such Stock Purchase Shares in the Offer. After such repayment, you will be entitled to receive from Purchaser the balance of such consideration with respect to each Stock Purchase Share purchased by Purchaser pursuant to the Offer. By signing below, you acknowledge that you have been advised that (1) the Company and Parent will make it possible for Stock Purchase Shares issuable upon exercise of Purchase Rights covered by Stock Purchase Elections above to be deemed tendered in the Offer, and (2) upon the purchase of Stock Purchase Shares pursuant to this Stock Purchase Election, you will have no further rights under such Purchase Rights. TO ASSURE THAT YOUR STOCK PURCHASE ELECTION CAN BE PROCESSED ON TIME, PLEASE EXECUTE THIS STOCK PURCHASE ELECTION AND DELIVER IT TO THE COMPANY ACCORDING TO THE INSTRUCTIONS SET FORTH BELOW, BEFORE 5:00 P.M., SAN DIEGO, CALIFORNIA TIME, ON WEDNESDAY, SEPTEMBER 30, 1998, UNLESS THE OFFER IS EXTENDED. The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of August 31, 1998, among the Company, Purchaser, Parent and, for the limited purpose set forth in the Merger Agreement, TDCC. If you decide not to execute this Stock Purchase Election and return it to the Company and, thereby, not exercise your Purchase Rights and tender your Stock Purchase Shares under the Offer, then, contingent upon the purchase by Purchaser of Shares pursuant to the Offer, the Company intends to treat your Purchase Rights as terminated and no longer outstanding as of the Effective Time of the Merger (as defined in the Offer to Purchase) and your payroll deductions will be returned to you; provided, however, that the Company will make arrangements so that if you consent to the termination of your Purchase Rights (either before the Effective Time of the Merger, or within a reasonable time thereafter), then you will be entitled to receive in respect of your Purchase Rights an amount in cash equal to the net amount you would have received if you had executed the Stock Purchase Election. If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender Stock Purchase Shares or the completion of this Stock Purchase Election, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY THE ACCOMPANYING OFFER TO PURCHASE AND ALL OTHER ENCLOSED MATERIALS. THE SPECIAL COMMITTEE COMPRISED OF TWO MEMBERS OF THE COMPANY'S BOARD OF DIRECTORS INDEPENDENT OF TDCC, PARENT AND PURCHASER (THE "SPECIAL COMMITTEE"), UNANIMOUSLY RECOMMENDED TO THE COMPANY'S BOARD OF DIRECTORS THAT IT APPROVE THE OFFER. THE COMPANY'S ENTIRE BOARD OF DIRECTORS ALSO REVIEWED THE OFFER AND, AFTER RECEIPT OF THE RECOMMENDATION OF THE SPECIAL COMMITTEE, CONCLUDED THAT THE OFFER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS (OTHER THAN TDCC OR ITS AFFILIATES). ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. ------------------------ INSTRUCTIONS Carefully complete this Stock Purchase Election below. To assure that your Stock Purchase Election can be processed on time, please be sure to sign and date the form and return this Stock Purchase Election to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. The Company reserves the absolute right to waive any defect or irregularity in the exercise of any Purchase Rights or the tender of any Stock Purchase Shares. No exercise of Purchase Rights and tender of Stock Purchase Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders of exercises of Purchase Rights and Stock Purchase Shares, and none of them will incur any liability for failure to give any such notice. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF PURCHASE RIGHTS. NO FACSIMILE TRANSMISSIONS OF THE STOCK PURCHASE ELECTION WILL BE ACCEPTED. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. 2 STOCK PURCHASE EXERCISE If you want to exercise your Purchase Rights and tender your Stock Purchase Shares in the Offer, follow the instructions below. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 2, 1998, UNLESS PURCHASER EXTENDS THE OFFER. EXCEPT AS SET FORTH HEREIN, IF YOU WANT TO PARTICIPATE IN THE OFFER, YOU MUST COMPLETE AND RETURN THE ENCLOSED STOCK PURCHASE ELECTION AS SET FORTH IN INSTRUCTION (2) BELOW PRIOR TO THE EXPIRATION OF THE OFFER. To properly complete your Stock Purchase Election, you need to do the following: (1) Complete, date and sign the Stock Purchase Election on page 4. (2) Return this Stock Purchase Election to Mycogen Corporation, AgroSciences Tender Offer, 5501 Oberlin Drive, San Diego, California 92121, Attention: Cheri Manis, not later than 5:00 p.m., San Diego, California time, on Wednesday, September 30, 1998, unless the Offer is extended. Stock Purchase Elections received after the expiration of the Offer will not be honored. NO FACSIMILE TRANSMITTALS OF THE STOCK PURCHASE ELECTION WILL BE ACCEPTED. WITHDRAWAL If completely and properly submitted, your direction to exercise Purchase Rights and tender the related Stock Purchase Shares will be deemed irrevocable upon receipt by the Company unless withdrawn prior to the expiration of the Offer, unless the Offer is extended. In order to make an effective withdrawal, you must submit a new Stock Purchase Election which may be obtained by calling Cheri Manis of the Company's Investor Relations Department at (800) 745-7475 (or use a photocopy of a Stock Purchase Election). Your new Stock Purchase Election must be signed and dated on page 4. You must also write "WITHDRAW" in the space beneath the signature block on page 4. Upon receipt of a new, signed, dated and properly completed Stock Purchase Election, your previous direction will be deemed canceled. You may be deemed to re-exercise your Purchase Rights and be deemed to re-tender your Stock Purchase Shares by obtaining another Stock Purchase Election from Cheri Manis (or use a photocopy of a Stock Purchase Election) and repeating the previous instructions for directing exercises and tenders as set forth above. FURTHER INFORMATION If you require additional information concerning the terms and conditions of the Offer, please call Georgeson & Company Inc., the Information Agent, at (800) 223-2064. If you require additional information concerning the procedure to tender Stock Purchase Shares receivable upon exercise of your Purchase Rights or the completion of this Stock Purchase Election, please call Cheri Manis of the Company's Investor Relations Department at (800) 745-7475. 3 - -------------------------------------------------------------------------------- SIGNATURE (REQUIRED) The undersigned acknowledges receipt of the Offer to Purchase, dated September 4, 1998, from Purchaser and Parent and represents that the undersigned has carefully read such documents. The undersigned hereby instructs the Company, subject to the terms and conditions set forth in this Stock Purchase Election and the Offer to Purchase, to carry out the instructions contained in this form. The Company is hereby authorized to exercise all Purchase Rights of which the undersigned is a holder and to tender the undersigned's Stock Purchase Shares. The undersigned understands that withholding taxes, at the minimum rate or the rate specified in Form B tax election previously filed with the Company, will be withheld from any proceeds received by the undersigned (unless the undersigned has submitted with this form, or pursuant to subsequent notification from the Company, a check in an amount sufficient to cover such amount). The undersigned further agrees that, if such proceeds are insufficient to cover applicable withholding taxes, Stock Purchase Shares will not be credited to his or her account until he or she has, upon request of the Company, forwarded to the Company a check in an amount sufficient to cover such taxes. In lieu of withholding at such rates, the undersigned instructs the Company to withhold taxes at the following rates (which may not be less than the minimum federal, state or local tax rates applicable to you, nor in excess of such proceeds): Federal________%; State:________%; Local:________%. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE UNDERSIGNED. Signature:________________________ Date:_______________________ Name:_______________________ Social Security Number:_______________________ (PLEASE PRINT) Address:____________________________________________________________________ (STREET ADDRESS, INCLUDING APARTMENT NUMBER -- PLEASE PRINT) __________________________________________________________________________ (CITY) (STATE) (ZIP CODE) -------------------------------------------------------------------------- 4 -----END PRIVACY-ENHANCED MESSAGE-----