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[DEKALB Letterhead]
February 7, 1996
Dear Fellow Shareholders:
DEKALB Genetics and Monsanto have announced a long-term research and
development collaboration in the field of agricultural biotechnology,
particularly corn and soybean seed. In connection with the collaboration,
Monsanto will purchase from DEKALB newly issued shares of Class A (voting) stock
of DEKALB equal to 10% of the shares of Class A stock and 378,000 newly issued
shares of Class B (non-voting) stock, in each case at a price of $65.00 per
share. In addition, Monsanto has commenced a tender offer to purchase up to 1.8
million shares of Class B stock of DEKALB at a price of $71.00 per share, net to
the seller in cash. Your Board of Directors has received the opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated that the proposed transactions, taken
as a whole, are fair to DEKALB and its shareholders from a financial point of
view and has unanimously determined that the transactions, taken together, are
fair to, and in the best interests of, DEKALB and its shareholders.
The collaboration and cross-licensing agreements offer DEKALB an
opportunity to join forces in the development of new agronomic seed products
with Monsanto, a research partner bringing complementary skills to those already
possessed by DEKALB. Monsanto possesses substantial technology resources and
larger funding capabilities than DEKALB in the field of biotechnology gene and
trait discovery and development and brings significant global regulatory
expertise beyond that which an enterprise of DEKALB's size has the time or
resources to develop internally.
DEKALB believes that the synergy of combining the talent and intellectual
property assets which the collaboration envisions should enable a faster rate of
innovation in the new and highly competitive field of transgenic seeds with
desirable traits. The collaboration strategically positions DEKALB's research
capabilities for the start of the 21st Century and facilitates an important
source of license revenue. It also provides assurance to our customers and
dealers that DEKALB will continue to offer the most advanced genetic seed
products to the marketplace.
The tender offer provides shareholders an opportunity to sell all or a
portion of their shares of Class B stock at a price which represents a premium
of approximately 20% over $59 1/4, the closing market price per share of Class B
stock on the last full trading day prior to the public announcement of the
tender offer, and approximately 39% over $51, the average of the closing market
prices per share for the 30 trading days prior to the public announcement of the
tender offer.
Your Board has unanimously recommended the tender offer to shareholders who
desire an opportunity to sell all or a portion of their shares of Class B stock
for cash at this time. The maximum number of shares of Class B Stock that may be
purchased by Monsanto in the tender offer, together with the newly issued Class
B stock, would constitute approximately 45% of the total issued and outstanding
shares of Class B stock. Additional information about the tender offer,
including the process for tendering your shares, is contained elsewhere in this
package.
Further information with respect to the agreements with Monsanto, including
the recommendation of your Board and the opinion of Merrill Lynch, is included
in the Statement on Schedule 14D-9 filed by DEKALB with the Securities and
Exchange Commission, a copy of which is enclosed. You should refer to Monsanto's
Offer to Purchase, Letter of Transmittal and related documents (copies of which
are also enclosed) for the procedure for tendering shares and other information.
Bruce P. Bickner
Chairman and Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DEKALB GENETICS CORPORATION
(Name of Subject Company)
DEKALB GENETICS CORPORATION
(Name of Person(s) Filing Statement)
CLASS B COMMON STOCK, WITHOUT PAR VALUE
(Title of Class of Securities)
244878 20 3
(CUSIP Number of Class of Securities)
John H. Witmer, Jr., Esq.
Senior Vice President and General Counsel
3100 Sycamore Road
DeKalb, Illinois 60115
(815) 758-3461
(Name, address and telephone number of person
authorized to receive notices and communications
on behalf of the person(s) filing statement)
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COPIES TO:
James G. Archer Peter D. Lyons
Sidley & Austin Shearman & Sterling
875 Third Avenue 599 Lexington Avenue
New York, NY 10022 New York, NY 10022
(212) 906-2000 (212) 848-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is DEKALB Genetics Corporation, a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 3100 Sycamore Road, DeKalb, Illinois 60115. The title of the class of equity
securities to which this statement relates is the Company's Class B Common
Stock, without par value (the "Class B Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by Monsanto Company, a Delaware
corporation ("Monsanto"), to purchase up to 1,800,000 shares of Class B Stock at
$71.00 per share net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in the offer to purchase dated February
7, 1996 and in the related letter of transmittal (which together constitute the
"Offer"). The Offer is disclosed in the Tender Offer Statement on Schedule 14D-1
dated February 7, 1996 (the "Schedule 14D-1"), as filed by Monsanto with the
Securities and Exchange Commission (the "Commission"). The Schedule 14D-1 states
that the address of the principal executive offices of Monsanto is 800 North
Lindbergh Blvd., St. Louis, Missouri 63167.
The Offer is being made pursuant to the terms of an Investment Agreement
(the "Investment Agreement"), dated as of January 31, 1996, between the Company
and Monsanto. Certain terms and conditions of the Investment Agreement are
described below in Item 3. A copy of the Investment Agreement is filed as
Exhibit 1 to this statement and is incorporated herein by reference. A copy of
the press release issued by the Company on February 1, 1996 is filed as Exhibit
2 to this statement and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
(A) NAME AND BUSINESS ADDRESS OF PERSON FILING THIS STATEMENT.
The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(B)(1) ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE
COMPANY.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers are described under
the sections entitled "Board of Directors and Committees", "Security Ownership
of Management", "Executive Compensation", "Option Grants During Fiscal 1995",
"Aggregated Option Exercises During Fiscal 1995 and Fiscal 1995 Year-End Option
Values", "Long-Term Incentive -- Awards During Fiscal 1995", "Estimated Annual
Retirement Benefits for Years of Service", "Employment Agreements" and
"Compensation Committee Report on Executive Compensation" at pages 3 through 4,
6 through 7 and 9 through 14 of the Company's Proxy Statement dated December 4,
1995, for its Annual Meeting of Stockholders held on January 16, 1996. A copy of
such sections is filed as Exhibit 3 to this statement and each such section is
incorporated herein by reference.
Option Grants. On January 16, 1996, the Compensation Committee of the Board
of Directors of the Company (the "Board of Directors" or the "Board") granted to
the directors and executive officers of the Company listed below, options to
purchase the number of shares of Class A Common Stock, without par value ("Class
A Stock" and, together with the Class B Stock, "Common Stock") of the Company
listed opposite such individual's name below:
NUMBER OF SHARES
DIRECTOR OR SUBJECT TO
EXECUTIVE OFFICER OPTION
--------------------------------------------------------- ----------------
Bruce P. Bickner 4,700
Richard O. Ryan 8,000
Richard T. Crowder 7,000
John H. Witmer, Jr. 1,000
Thomas R. Rauman 5,000
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Each such option is exercisable at a price of $48.25 per share (which was
the last sale price of the shares of Class B Stock on The Nasdaq National Market
on the date of grant), vests over a three-year period (with one-third of the
options vesting on each of the first, second and third anniversaries of the date
of grant) and expires ten years from the date of grant.
On January 16, 1996, each of Charles J. Arntzen, Allan Aves, Tod R.
Hamachek, Paul H. Hatfield, Virginia Roberts Holt, John T. Roberts and H. Blair
White received an immediately exercisable option to purchase 1,659 shares of
Class A Stock at an exercise price of $36.19 per share. These options were
granted pursuant to and in accordance with the DEKALB Genetics Corporation
Director Stock Option Plan, which provides that directors who are not officers
or employees of the Company may elect to receive options to purchase shares of
Class A Stock in lieu of cash compensation.
Indemnification of Directors and Officers; Directors and Officers Liability
Insurance. Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") permits a corporation incorporated thereunder to indemnify its
directors, officers, employees and agents against certain liabilities and
expenses incurred by them by reason of their serving in such capacities if their
conduct meets specified standards. Article Ninth of the Company's Restated
Certificate of Incorporation ("Article Ninth"), which is described below,
provides for such indemnification to the full extent permitted by the DGCL. As
permitted by Section 145 of the DGCL, Article Ninth also provides (i) that the
Company may purchase and maintain insurance on behalf of any of its directors,
officers, employees or agents against any liability, whether or not the Company
would have the power to indemnify such person against such liability under the
DGCL and (ii) that its provisions regarding indemnification and the advancement
of expenses are not exclusive of any other rights to indemnification or the
advancement of expenses that a person may have. The Company maintains directors
and officers liability insurance. The Company has entered into an
indemnification agreement (an "Indemnification Agreement"), the terms of which
are described below, with each of its directors and officers and expects to
enter into Indemnification Agreements with future directors and officers.
Indemnification Provisions of Article Ninth. Article Ninth provides that
each person who was or is made a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative), other than an action by or in the
right of the Company, by reason of the fact that such person is or was a
director, officer, employee or agent of the Company (or is or was serving at the
request of the Company as a director, officer, employee or agent of another
entity) will be indemnified by the Company, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection therewith if such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. A
similar standard of care is applicable with respect to indemnification relating
to a claim by or in the right of the Company, except that (i) indemnification
only extends to expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such claim and (ii) no
indemnification can be made in respect of any claim as to which the person
seeking indemnification has been found liable to the Company, unless and only to
the extent that the court in which the action was brought determines that such
indemnification is proper.
Article Ninth permits payment by the Company of expenses incurred in
defending a proceeding specified in the previous paragraph prior to the final
disposition thereof, upon receipt of an undertaking by the person seeking
indemnification to repay all amounts so paid if it is ultimately determined that
such person is not entitled to be indemnified.
Any indemnification under Article Ninth (unless ordered by a court) will be
made by the Company only as authorized in a specific case upon a determination
that such indemnification is proper. Such determination may be made (i) by the
Board of Directors acting by a majority vote of a quorum consisting of directors
who were not parties to the action, suit or proceeding, (ii) if such a quorum is
not obtainable, or if obtainable and a quorum of disinterested directors so
directs, by independent legal counsel (compensated by the Company) in a written
opinion or (iii) by the stockholders of the Company.
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Indemnification Agreements. The Indemnification Agreements are intended to
supplement the indemnification provisions of the DGCL and Article Ninth and any
coverage provided by directors and officers liability insurance maintained by
the Company.
Each Indemnification Agreement provides that notwithstanding any subsequent
amendment, modification or repeal of the indemnification provisions of the DGCL
or the Company's Restated Certificate of Incorporation, the Company will provide
indemnification, except as noted below, against any and all expenses (including
attorneys' fees), costs, judgments, fines or amounts paid in settlement and
which are actually and reasonably incurred ("Expenses") in connection with any
threatened, pending or completed claim, action, suit or proceeding (whether
civil, criminal, administrative or investigative, and whether or not such action
is by or in the right of the Company or another entity with respect to which the
indemnified party serves or has served as a director or officer at the request
of the Company) which arises by reason of the fact that such indemnified party
is or was a director or officer of the Company or such entity (an "Action").
Indemnification will not be made under an Indemnification Agreement: (i) to
the extent that indemnification is provided pursuant to directors and officers
liability insurance maintained by the Company; (ii) for remuneration paid if it
is ultimately determined that such remuneration was in violation of law; (iii)
for Expenses incurred on account of an Action in which judgment is rendered
against the indemnified party for an accounting of profits made from the
purchase and sale of securities of the Company pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or similar law;
(iv) for Expenses incurred on account of such indemnified party's conduct which
is ultimately determined to have been a breach by such indemnified party of his
duty of loyalty to the Company or its stockholders, an act or omission which was
not in good faith or which involved intentional misconduct or a transaction from
which such indemnified party derived an improper personal benefit; (v) if a
court ultimately determines that such indemnification is not lawful as against
public policy; or (vi) for income taxes, or any interest or penalties related
thereto, in respect of compensation received for services as a director or
officer.
Each Indemnification Agreement requires the Company to advance amounts to
cover Expenses prior to the final disposition of the related Action, upon
receipt of (i) an undertaking by the indemnified party to repay all amounts so
advanced if it is ultimately determined that such indemnified party is not
entitled to be indemnified and (ii) satisfactory evidence as to such amounts.
Limitation of Directors' Personal Liability. As permitted by the DGCL,
Article Ninth eliminates the personal liability of any person who is or was a
director of the Company for monetary damages for any breach of fiduciary duty by
such person as a director other than: (i) a breach of the director's duty of
loyalty to the Company or its stockholders, (ii) an act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL (unlawful payment of dividends) or (iv) for
any transaction from which such person derived an improper personal benefit. The
Company's Restated Certificate of Incorporation also provides that if the DGCL
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended. The Company's Restated Certificate of Incorporation further provides
that if it is amended and such amendment would have the effect of increasing the
liability of any director of the Company or if Article Ninth is repealed, such
amendment or repeal shall not apply to or have any effect on the liability of
any director of the Company for or with respect to any act or omission of such
director occurring prior to such amendment or repeal.
(B)(2) AGREEMENTS BETWEEN MONSANTO AND ITS AFFILIATES AND THE COMPANY.
The following summaries of the Investment Agreement and the Ancillary
Agreements (as hereinafter defined) do not purport to be complete and are
qualified in their entirety by reference to the Investment Agreement and the
Ancillary Agreements, copies of which have been filed as Exhibits hereto and are
incorporated herein by reference.
The Offer. The Offer is being made pursuant to the Investment Agreement.
Simultaneously with the execution of the Investment Agreement, the following
agreements were executed and delivered by the
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Company and Monsanto: (i) a Registration Rights Agreement (the "Registration
Rights Agreement"), (ii) a Collaboration Agreement and License (the
"Collaboration Agreement"), (iii) a Corn Borer-Protected Corn License Agreement
(the "Corn Borer-Protected Corn License Agreement"), (iv) a Glyphosate-Protected
Corn License Agreement (the "Glyphosate-Protected Corn License Agreement") and
(v) a CaMV Promoter License Agreement (the "CaMV Promoter License Agreement"
and, together with the Corn Borer-Protected Corn License Agreement and the
Glyphosate-Protected Corn License Agreement, the "License Agreements"). The
Registration Rights Agreement, the Collaboration Agreement and the License
Agreements are referred to herein as the "Ancillary Agreements."
The Offer provides that Monsanto shall not be required to accept for
payment or pay for any shares of Class B Stock tendered pursuant to the Offer if
(i) there shall have occurred any event which constitutes a material adverse
effect, or the occurrence or existence of facts or circumstances reasonably
expected to result in a material adverse effect, on the business, assets,
results of operations, properties, financial or operating condition of the
Company and its subsidiaries taken as a whole (without including economic or
other matters affecting business or the seed industry generally) or the ability
of the Company (and, to the extent applicable, its subsidiaries) to perform its
(or their) obligations under the Investment Agreement or consummate the
transactions contemplated by the Investment Agreement or the Ancillary
Agreements; (ii) any of the representations and warranties of the Company in the
Investment Agreement are not true and correct in any material respect as of the
date of the Investment Agreement or the expiration date of the Offer (the
"Expiration Date"); (iii) during the period from the date of the Investment
Agreement to the Expiration Date the Company shall have sold or disposed of any
business or assets of the Primary Business (as defined below) of the Company
that constitute more than 5% of the total consolidated assets of the Company
(excluding sales of inventory or assets in the normal course of business); (iv)
the By-Laws of the Company have not been amended as described under "Investment
Agreement -- Amendment of Bylaws of the Company"; (v) the Investment Agreement
has been terminated in accordance with its terms; or (vi) certain other
conditions specified in the Offer exist (such conditions to the Offer described
in this paragraph being referred to as the "Offer Conditions").
The Investment Agreement provides that Monsanto may increase the Offer
Price and may make any other changes in the terms and conditions of the Offer,
but that, unless previously approved by the Company in writing, Monsanto may not
(i) decrease the Offer Price, (ii) change the form of consideration payable in
the Offer, (iii) increase or decrease the minimum number of shares of Class B
Stock sought pursuant to the Offer, (iv) add to or modify the Offer Conditions,
(v) amend the Offer in a manner which would require the extension of the
Expiration Date to a date later than April 17, 1996, as required by any rule,
regulation, interpretation or position of the Commission or the staff thereof or
(vi) otherwise amend the Offer in any manner adverse to the interests of the
Company or its stockholders. Unless Monsanto extends the Offer, the Offer will
expire at midnight, New York City time, on Wednesday, March 6, 1996. The
Investment Agreement provides that Monsanto will extend the Offer for at least
ten business days and may extend the Offer for up to 30 business days (A) if at
the scheduled expiration date of the Offer any of the Offer Conditions shall not
have been satisfied or waived, until such time as such Offer Conditions are
satisfied or waived and (B) for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer. The Investment Agreement provides that Monsanto will terminate the
Offer if the Investment Agreement is terminated.
The Share Issuance. The Investment Agreement provides that, subject to the
satisfaction or waiver of the conditions set forth therein, the Company will
issue and sell to Monsanto, and Monsanto will purchase from the Company (i) a
number of newly issued shares of Class A Stock (the "Newly Issued Class A
Shares"), at a price per share of $65.00, equal to ten percent of the
outstanding shares of Class A Stock immediately after the expiration of the
Offer and issuance of the Newly Issued Class A Shares and (ii) 378,000 newly
issued shares of Class B Stock (the "Newly Issued Class B Shares" and, together
with the Newly Issued Class A Shares, the "Newly Issued Shares"), at a price per
share of $65.00. The issuance and sale of the Newly Issued Shares is referred to
herein as the "Share Issuance." See "Investment Agreement -- The Newly Issued
Shares" and "-- Conditions Precedent to the Purchase and Sale of the Newly
Issued Shares."
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The Newly Issued Class B Shares would constitute approximately 8% of the
total issued and outstanding shares of Class B Stock at January 31, 1996 (after
giving effect to the issuance of the Newly Issued Class B Shares). In addition,
the Newly Issued Class B Shares, together with the maximum number of shares of
Class B Stock that may be purchased by Monsanto in the Offer, would constitute
approximately 45% of the total issued and outstanding shares of Class B Stock.
The Investment Agreement, among other things: (i) provides Monsanto with
the right, for one year after the closing under the Investment Agreement (the
"Closing"), to purchase in the market additional Class B Stock so long as the
total Common Stock owned by Monsanto does not exceed 40% of the Common Stock
outstanding at such time; (ii) restricts the ability of Monsanto to transfer
securities of the Company; (iii) provides the Company under specified
circumstances with a right of first refusal in respect of certain proposed
transfers by Monsanto of securities of the Company; (iv) limits for ten years,
subject to certain exceptions, the ability of Monsanto to acquire additional
securities of the Company; (v) requires that the Company provide notice to
Monsanto of certain transactions in order to provide Monsanto with the
opportunity to propose an alternative transaction to the Company; and (vi)
prohibits Monsanto from engaging in specified activities. See "Investment
Agreement -- Additional Market Purchases of Class B Stock," "-- Restrictions on
Transfer," "-- Right of First Refusal" and "-- Standstill."
The Investment Agreement also provides that after the closing, Monsanto
will be entitled to nominate one member to the Company's Board of Directors and
that if Monsanto acquires 20% or more of the outstanding Common Stock pursuant
to the Offer and the Investment Agreement, Monsanto may nominate for election in
January 1997 an additional member to the Company's Board. The Company is
obligated to support any such nominations made in accordance with the terms of
the Investment Agreement. The Investment Agreement further provides that during
any period in which Monsanto is entitled to nominate one or more members to the
Company's Board the Company will use all reasonable efforts to assure that there
be at least three members of its Board who are independent of the Company,
Monsanto and certain large holders of Class A Stock. See "Investment Agreement
- -- Election of Monsanto Directors and Independent Directors." The Company has
also agreed to certain amendments to its Bylaws. See "Investment Agreement --
Amendment of Bylaws of the Company."
Monsanto and the Company have also entered into the Collaboration
Agreement, in which they have agreed to a long-term research and development
collaboration for the development of new transgenic products in the field of
agricultural biotechnology. A variety of crops is contemplated under the
Collaboration Agreement, including corn, soybean and others. Monsanto and the
Company have further entered into the License Agreements to commercialize
genetically engineered corn hybrids incorporating Bacillus thuringiensis
tolerance to lepidopteran insects such as the European Corn Borer (YIELDGARD(TM)
Bt insect resistant corn), corn hybrids that are tolerant to glyphosate
herbicide (ROUNDUP READY(TM) glyphosate tolerant corn), and corn hybrids that
are tolerant to glufosinate herbicides. The License Agreements define specific
areas of commercial interest between Monsanto and the Company in Bt corn and in
herbicide tolerant corn, while the Collaboration Agreement covers broadly all
other fields of agricultural biotechnology in a spectrum of crops. The
Collaboration Agreement and the License Agreements each contemplates a worldwide
territory. See "Collaboration Agreement and License Agreements."
INVESTMENT AGREEMENT
THE NEWLY ISSUED SHARES
In addition to the terms of the Offer, the Investment Agreement also sets
forth the terms and conditions by which the Company will issue and sell to
Monsanto the Newly Issued Shares. Pursuant to the terms of the Investment
Agreement, Monsanto will purchase from the Company newly issued shares of Class
A Stock at a price per share of $65.00 (such shares representing 10% of the
outstanding shares of Class A Stock after expiration of the Offer and after
giving effect to the issuance thereof) and 378,000 newly issued shares of Class
B Stock at a price per share of $65.00. Subject to the satisfaction or waiver of
the conditions set forth in the next three paragraphs, the Closing of the
purchase and sale of the Newly Issued Shares will occur as
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promptly as practicable after the expiration of the Offer, or on such later date
and time as may be mutually agreed by Monsanto and the Company.
CONDITIONS PRECEDENT TO THE PURCHASE AND SALE OF THE NEWLY ISSUED SHARES
The respective obligations of Monsanto and the Company to consummate the
transactions contemplated to occur at the Closing, including the purchase and
sale of the Newly Issued Shares, are subject, among other things, to the
satisfaction or waiver of the following conditions as of the Closing: (i) there
not being threatened or pending by any Governmental Authority (as defined in the
Investment Agreement) any suit, action or proceeding, and there not being
pending by any other person any suit, action or proceeding, which has a
substantial likelihood of success, seeking: (x) to restrain or prohibit the
purchase and sale of the Newly Issued Shares or the Class B Stock pursuant to
the Offer, (y) to compel the Company to dispose of or hold separate any material
portion of the business or assets of the Company and its subsidiaries, taken as
a whole, or to compel Monsanto or its subsidiaries to dispose of, or hold
separate any material portion of the business or assets of Monsanto and its
subsidiaries, as a result of any of the transactions contemplated by the
Investment Agreement or the Ancillary Agreements or (z) to prohibit Monsanto or
the Company, as the case may be, from effectively exercising any of its material
rights under the Investment Agreement or any Ancillary Agreement; and (ii) no
Governmental Authority having enacted, entered, promulgated, enforced or issued
any statute, rule, regulation, executive order, decree, temporary restraining
order, preliminary or permanent injunction or other order, legal restraint or
prohibition then in effect preventing the consummation of any of the
transactions contemplated by the Investment Agreement or the Ancillary
Agreements or having any of the other consequences described in clause (i).
The obligation of Monsanto to consummate the transactions contemplated to
occur at the Closing, including the purchase and sale of the Newly Issued
Shares, is also subject to the satisfaction or waiver of the following
conditions as of the Closing: (i) the representations and warranties of the
Company set forth in the Investment Agreement and in the Ancillary Agreements
being true and correct in all material respects as of the date of the Investment
Agreement and as of the date of the Closing (the "Closing Date") as though made
as of such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects on and as of such
earlier date); Monsanto having received a certificate to such effect dated as of
the Closing Date and executed by a duly authorized officer of the Company; and
the Company having performed or complied in all material respects with all
obligations and covenants required by the Investment Agreement and the Ancillary
Agreements to be performed or complied with by the Company by the time of the
Closing; (ii) amendments to the Company's Bylaws contemplated by the Investment
Agreement (see, "-- Amendment of Bylaws of the Company") having been duly
authorized, approved and effected; (iii) the Company having furnished to
Monsanto an opinion of John H. Witmer, Jr., Senior Vice President and General
Counsel of the Company; and (iv) the Company (including its subsidiaries) not
having sold or otherwise disposed of (or authorized, committed or agreed to sell
or otherwise dispose of) any business or assets relating to the research-based
production, marketing, licensing and sale of agronomic seed (including both
technology related thereto and products derived therefrom) (the "Primary
Business") that constitute more than 5% of the total consolidated assets of the
Company as shown on the Company's consolidated balance sheet as of the end of
the most recent fiscal quarter ending prior to the time the determination is
made, excluding sales in the normal course of business.
The obligation of the Company to consummate the transactions contemplated
to occur at the Closing, including the purchase and sale of the Newly Issued
Shares, is also subject to the satisfaction or waiver of the following
conditions as of the Closing: (i) the representations and warranties of Monsanto
set forth in the Investment Agreement and in the Ancillary Agreements being true
and correct in all material respects as of the date of the Investment Agreement
and as of the Closing Date as though made as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct in all
material respects on and as of such earlier date); the Company having received a
certificate to such effect dated as of the Closing Date and executed by a duly
authorized officer of Monsanto; and Monsanto having performed or complied in all
material respects with all
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obligations and covenants required by the Investment Agreement and the Ancillary
Agreements to be performed or complied with by Monsanto by the time of the
Closing; (ii) the Offer having expired and Monsanto having purchased or accepted
for payment and purchase any Class B Stock which it will acquire pursuant to the
Offer; and (iii) Monsanto having furnished to the Company an opinion of Frank E.
Vigus, Assistant General Counsel of Monsanto.
ADDITIONAL MARKET PURCHASES OF CLASS B STOCK
The Newly Issued Class B Shares, together with the maximum number of shares
of Class B Stock that may be purchased by Monsanto in the Offer, would
constitute approximately 45% of the total issued and outstanding shares of Class
B Stock at January 31, 1996 after giving effect to the issuance of the Newly
Issued Class B Shares. The Investment Agreement provides that if, after
completion of the Offer and the purchase of the Newly Issued Shares at the
Closing, Monsanto beneficially owns less than 40% of the outstanding Common
Stock on the first day after completion of the Offer and the Closing, then
Monsanto will have the right, at any time prior to the first anniversary of the
Closing Date, to acquire in the market up to an additional number of shares of
Class B Stock so that after such purchases the total Common Stock beneficially
owned by Monsanto and its affiliates does not exceed 40% of the outstanding
Common Stock at such time.
REPRESENTATIONS AND WARRANTIES; SURVIVAL; INDEMNIFICATION
The Investment Agreement contains various representations and warranties of
the Company, relating, among other things, to: (i) its organization, existence,
good standing, corporate power and qualification and the organization,
existence, good standing, corporate power and qualification of its Significant
Subsidiaries (as defined in the Investment Agreement), (ii) its subsidiaries,
(iii) its capitalization and the issuance of the Newly Issued Shares, (iv) its
authorization, execution, delivery and performance of and the enforceability of
the Investment Agreement and the Ancillary Agreements; the absence of conflicts
or violations of or defaults under, the Restated Certificate of Incorporation of
the Company, the Bylaws of the Company and certain other agreements and
documents; and required consents and approvals, (v) the documents and reports
filed by the Company with the Commission and the accuracy and completeness of
the information contained therein, (vi) the absence of certain changes or
events, (vii) pending or threatened litigation, (viii) tax matters, (ix)
stockholder voting requirements, (x) broker's or similar fees, (xi) compliance
with applicable laws and environmental matters, (xii) material contracts and
(xiii) the accuracy and completeness of information relating to the Investment
Agreement and the Ancillary Agreements.
The Investment Agreement also contains various representations and
warranties of Monsanto, relating, among other things to: (i) its organization,
existence, good standing and corporate power; (ii) its authorization, execution,
delivery and performance of and the enforceability of the Investment Agreement
and the Ancillary Agreements; the absence of conflicts or violations of or
defaults under, its Certificate of Incorporation, its Bylaws and certain other
agreements and documents; and required consents and approvals; (iii) broker's or
similar fees, (iv) certain matters relating to its purchase of the Newly Issued
Shares and related federal securities laws matters and (v) its ownership of
Common Stock and related matters.
The representations and warranties in the Investment Agreement and in the
instruments delivered pursuant thereto (without regard to the Ancillary
Agreements) will survive the Closing for a period of 24 months, except that
certain of the Company's representations and warranties, to the extent
applicable to the issuance of the Newly Issued Shares to Monsanto at the
Closing, will survive the Closing indefinitely and certain of the Company's
representations and warranties relating to tax matters will survive the Closing
until the expiration of the applicable statute of limitations.
The Investment Agreement provides that (i) the Company will indemnify and
hold Monsanto and its directors, officers, employees and agents (collectively,
"Monsanto Indemnified Parties") harmless from and against any and all claims,
liabilities, fines, penalties, demands, causes of action, suits, judgments,
losses, injuries, damages (including costs of defense, settlement and reasonable
attorneys' fees) (collectively, "Liabilities, Actions and Damages") suffered or
incurred by Monsanto Indemnified Parties with respect to any inaccuracy of
representations and warranties of the Company in the Investment Agreement or,
subject to
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a 60-day cure period following written notice thereof, with respect to breaches
by the Company of its covenants made in the Investment Agreement and (ii)
Monsanto will indemnify and hold the Company and its directors, officers,
employees and agents (collectively, the "Company Indemnified Parties") harmless
from and against any and all Liabilities, Actions and Damages suffered or
incurred by the Company Indemnified Parties with respect to any inaccuracy of
representations and warranties of Monsanto in the Investment Agreement or,
subject to a 60-day cure period following written notice thereof, with respect
to breaches by Monsanto of its covenants made in the Investment Agreement.
CONDUCT OF BUSINESS BY THE COMPANY UNTIL THE CLOSING
The Company has agreed that during the period from the date of the
Investment Agreement until the Closing, the Company will, and will cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as previously conducted.
Without limiting the generality of the foregoing, the Company has agreed that it
will not (and, as applicable, neither the Company nor any subsidiary will) take
any of the following actions:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (other than dividends
on Common Stock to be declared and paid only at the customary rates and
times) or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than (i) the issuance of
new options or Common Stock under the Company's Long Term Incentive Plan,
Savings and Investment Plan and Director Stock Option Plan (collectively,
the "Stock Plans") or Common Stock upon the exercise or conversion of
rights outstanding on the date of the Investment Agreement and in
accordance with their present terms, (ii) the purchase of Common Stock
pursuant to the Stock Plans, in accordance with their respective terms and
(iii) the issuance and sale of the Newly Issued Shares in accordance with
the terms of the Investment Agreement);
(c) acquire, in a single transaction or in a series of related
transactions, any business or assets outside the Primary Business of the
Company that would be equal in amount to more than 25% of the total
consolidated assets of the Company as shown on the Company's consolidated
balance sheet as of the end of the most recent fiscal quarter ending prior
to the time the determination is made whether such acquisition be by merger
or consolidation or the purchase of stock or assets or otherwise;
(d) amend its certificate of incorporation or bylaws except for
amending the bylaws of the Company as contemplated by the Investment
Agreement (see, "-- Amendment of Bylaws of the Company"); or
(e) authorize, or commit or agree to take, any of the foregoing
actions.
ELECTION OF MONSANTO DIRECTORS AND INDEPENDENT DIRECTORS
The Investment Agreement provides that no later than 20 business days after
the Closing, the Board of Directors will be increased in number so that Monsanto
may nominate one director whose term will expire at the Company's 1999 annual
meeting of stockholders. The Investment Agreement further provides that if
Monsanto acquires beneficial ownership of at least 20% of the outstanding Common
Stock in accordance with the terms of the Investment Agreement, Monsanto may
nominate an additional director who will be placed on the ballot for election at
the Company's annual meeting of stockholders to be held in January, 1997 and
whose term will expire at the Company's 2000 annual meeting (each such director
and any other persons nominated from time to time by Monsanto pursuant to the
terms of the Investment Agreement described herein, a "Monsanto Nominee"). Any
Monsanto Nominee may be an employee, officer or director of Monsanto or any of
its subsidiaries and each shall be reasonably satisfactory to the Company. The
Company will use all reasonable efforts at all times thereafter, during which
(i) Monsanto retains beneficial ownership of at least 7.5% of the Class A Stock
and that number of shares of Common Stock (the "75% Limitation") as is equal to
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at least 75% of the highest percentage of the outstanding Common Stock
beneficially owned by Monsanto after completion of the Offer, the Closing and
the acquisition of any additional shares of Class B Stock acquired by Monsanto
pursuant to the provisions described under "-- Acquisition of Additional Class B
Stock" and (ii) the Collaboration Agreement is in full force and effect (except
if terminated by reason of a material breach of its terms by the Company), to
cause the Monsanto Nominees to be elected to the Board of Directors; provided,
if Monsanto retains beneficial ownership of less than 7.5% of the Class A Stock
and the 75% Limitation but at (i) least 5% of the outstanding Class A Stock and
that number of shares of Common Stock is equal to 50% of the highest percentage
of the outstanding Common Stock beneficially owned by Monsanto after completion
of the Offer, the Closing and the acquisition of any additional shares of Class
B Stock acquired by Monsanto pursuant to the provisions described under "--
Acquisition of Additional Class B Stock" and (ii) the Collaboration Agreement
remains in full force and effect as aforesaid, then the Monsanto Nominees will
be limited to one director (any period during which Monsanto is entitled to
nominate one or more Monsanto Nominees is referred to as a "Director
Representation Period").
Monsanto has agreed that if at any time the conditions entitling Monsanto
to elect one or two Monsanto Nominees, as the case may be, are not met: (i) at
the request of the Company, Monsanto will use all reasonable efforts to cause
such Monsanto Nominee(s) who shall then be serving as a member of the Board of
Directors to resign and (ii) Monsanto will have no further rights under the
Investment Agreement with respect to the election of one or two Monsanto
Nominees, as the case may be.
The Company has agreed that during any Director Representation Period in
which two Monsanto Nominees serve as members of the Board of Directors, one such
Monsanto Nominee will be a member of the Company's Executive Committee and the
other will be a member of the Company's Audit Committee and that if only one
Monsanto Nominee serves as a member of the Board of Directors, such Monsanto
Nominee will serve as a member of the Company's Executive Committee. Monsanto
Nominees will not be paid director fees or meeting fees but will be reimbursed
for reasonable expenses of attending meetings.
During a Director Representation Period, Monsanto will have the right to
designate any replacement for a Monsanto Nominee upon the death, resignation,
retirement, disqualification or removal from office for cause of such Monsanto
Nominee, such replacement to be reasonably satisfactory to the Company. The
Company has agreed to use all reasonable efforts to cause each person so
designated by Monsanto to be promptly appointed or elected to the Board of
Directors. During any period in which Monsanto is entitled to designate a
Monsanto Nominee but no Monsanto Nominee is then serving on the Board of
Directors (if Monsanto shall have designated such a person within a reasonable
period of time), the Board may not amend the Bylaw provisions required to be
adopted by the Company pursuant to the Investment Agreement without the consent
of Monsanto. See "-- Amendment of Bylaws of the Company."
The Company has agreed to use all reasonable efforts to assure that during
a Director Representation Period there will be at least three Independent
Directors on the Board of Directors. As defined in the Investment Agreement, an
Independent Director is any individual who (i) is not (apart from such
directorship): an officer or employee of the Company or any affiliate of the
Company, (ii) is not a director, officer or employee of Monsanto or any
affiliate of Monsanto, (iii) is not a Major A Stockholder (as defined herein
under "Shareholder Agreements"), an affiliate of a Major A Stockholder or a
Permitted Transferee (as defined in the Monsanto Stockholders' Agreement
described herein under "Shareholder Agreements -- Monsanto Stockholders'
Agreement") of a Major A Stockholder, (iv) did not in either of the last two
completed calendar years receive, and is not an officer, director, employee,
stockholder holding more than 10% of the voting interest of, a partner or
affiliate of any entity that in either of such entity's two most recent fiscal
years, received, more than (A) $350,000 in revenues or other compensation or (B)
20% of such entity's total revenues from the Company, Monsanto, a Major A
Stockholder or a Permitted Transferee or an affiliate of any of the foregoing;
provided, no person who is serving as a director of the Company as of the date
of the Investment Agreement will be excluded pursuant to this clause (iv) unless
such person is also excluded pursuant to clauses (i), (ii), (iii) or (v) of the
definition; or (v) is not a voting trustee under the Voting Trust Agreement
described herein under "Shareholder Agreements -- Voting Trust Agreement;" but
does not include any Monsanto Nominee.
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AMENDMENT OF BYLAWS OF THE COMPANY
The obligation of Monsanto to consummate the transactions contemplated to
occur at the Closing, including purchase and sale of the Newly Issued Shares, is
conditioned upon, among other things, the Company amending its Bylaws to: (i)
state that the Primary Business of the Company is the research-based production,
marketing, licensing and sale of agronomic seed, including both technology
related thereto and products derived therefrom; (ii) state that the use of
voting securities of the Company to facilitate strategic collaborations is in
the Company's best interest, but as to any one strategic collaboration, the
maximum amount of voting securities of the Company to be issued to any
individual, entity or Group (as defined in Section 13(d)(3) of the Exchange Act)
will not exceed 10% of the voting securities of the Company then outstanding;
and (iii) prohibit the Company from acquiring any business or assets outside of
the Primary Business of the Company that would constitute more than 25% of the
total consolidated assets of the Company as shown on the Company's consolidated
balance sheet as of the end of the most recent fiscal quarter ending prior to
the time the determination is made. Notwithstanding the immediately preceding
sentence, the required Bylaw amendments would permit the Company to change its
Primary Business, issue voting securities to facilitate a strategic
collaboration or acquire any business outside of the Primary Business unless
three (two prior to the Company's 1997 annual meeting of stockholders) of the
members of the Board of Directors vote against the resolution of the Board of
Directors relating to such change or transaction. The amendments described in
this paragraph may not be further amended if at least two (one prior to the
Company's 1997 annual meeting of stockholders) of the members of the Board of
Directors vote against such further amendment.
RESTRICTIONS ON TRANSFER
The Investment Agreement provides that, prior to the earliest of (i) the
third anniversary of the Closing, (ii) the termination or expiration of the
Collaboration Agreement (except if the Collaboration Agreement is terminated by
reason of a material breach of its terms by Monsanto), (iii) the issuance by a
Government Authority of a final, non-appealable order (a "Final Governmental
Order") requiring Monsanto to divest any or all shares of Common Stock of the
Company, securities of the Company convertible into such shares, or options,
warrants or other rights to acquire such shares (collectively, "Equity") or (iv)
the agreement of the Company to enter into a Business Combination (as
hereinafter defined) with a person other than Monsanto or any of its affiliates,
neither Monsanto nor any of its United States subsidiaries may transfer any
Equity except for: (1) subject to certain conditions, a transfer by Monsanto to
one of its United States subsidiaries; (2) a transfer to the Company or one of
its subsidiaries; (3) a transfer pursuant to a merger or consolidation that is
recommended by the Board of Directors in which the Company is a constituent
corporation; (4) a transfer pursuant to a bona fide third party tender offer or
exchange offer, which was not induced directly or indirectly by Monsanto or any
of its affiliates, that is recommended by the Board of Directors or pursuant to
which Major A Stockholders tender or exchange shares equal to a majority of the
total voting power of the Company (and do not withdraw the same on or before the
business day immediately prior to the expiration date of such offer), subject to
the Company's right of first refusal under the Investment Agreement (the "Right
of First Refusal"), (see, "-- Right of First Refusal"); or (5) a transfer of
Class B Stock tendered on the expiration date of a bona fide third party tender
offer or exchange offer, which was not induced directly or indirectly by
Monsanto or any of its affiliates, of a number of shares of Class B Stock equal
to the aggregate number of shares of Common Stock tendered by all Major A
Stockholders (and not withdrawn by such Major A Stockholders prior to the close
of business on the business day immediately prior to such expiration date),
provided Monsanto shall have received written notice from the third party making
such tender or exchange offer certifying that such Major A Stockholders shall
have tendered and not withdrawn such shares as of the close of business on the
business day prior to such expiration date, subject to the Right of First
Refusal.
The Investment Agreement further provides that after the earliest to occur
of the events described in clauses (i) through (iv) of the immediately preceding
paragraph, neither Monsanto nor any of its United States subsidiaries may
transfer any Equity except for a transfer (a "Monsanto Permitted Transfer")
which is either (x) permitted by the provisions described in the immediately
preceding paragraph or (y) made by Monsanto or any of its United States
subsidiaries of Class B Stock for cash (1) in private sales to financial or
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institutional buyers other than for or on behalf of certain described
competitors of the Company, (2) in bona fide open market "brokers' transactions"
as permitted by Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or (3) in a bona fide public offering pursuant to the
Registration Rights Agreement (any such public offering, a "Monsanto Permitted
Offering"), provided that in the case of a transfer described in clauses (1) or
(3), the Company has waived its Right of First Refusal, and provided, further,
that Monsanto or such subsidiaries, as the case may be, take all reasonable
steps to assure that, in connection with any such open market transactions or
Monsanto Permitted Offering, transfers not be made to any person or Group that
would, following such transfer, beneficially own more than 5% of the outstanding
voting stock of the Company or more than 5% of the outstanding Class B Stock or,
in the case of a private sale described in clause (1), more than 7.5% of the
outstanding voting stock of the Company or more than 7.5% of the outstanding
Class B Stock; and provided, further, in the case of a Monsanto Permitted
Offering which is not made pursuant to a firm underwriting commitment, such
transfers are completed within 60 days from the date such shares are first made
available for public sale.
As used in the Investment Agreement, "Business Combination" means a merger
or consolidation pursuant to which the Common Stock is convertible into or
exchanged for cash, securities or other property, or a sale of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole, or a sale of all or substantially all of the assets of the Company's
United States seed corn business, provided that a transaction in which the
beneficial ownership of the capital stock of the Company or of the sole
surviving corporation to the transaction (or of the ultimate parent of the
Company or of such sole surviving corporation) immediately after the
consummation of such transaction is substantially the same as the beneficial
ownership of the Company's capital stock immediately prior to the consummation
thereof will not be deemed a Business Combination unless such transaction
results in the sale of all or substantially all of the assets of the Company and
its subsidiaries taken as a whole or all or substantially all of the asset of
the Company's United States seed corn business.
If Monsanto disposes of beneficial ownership of any Equity prior to the
tenth anniversary of the Closing Date as described above as a result of a Final
Governmental Order which arises out of or results from the acquisition or
attempted acquisition of Monsanto of assets or businesses not owned by Monsanto
or its affiliates on the date of the Investment Agreement other than the
transactions contemplated by the Investment Agreement (an "Acquisition"), then
the terms of the Collaboration Agreement and the License Agreements will be
amended as provided therein and (i) Monsanto will be required to reimburse the
Company for all reasonable costs and expenses incurred by the Company in
connection with any registrations effected by the Company to permit such
disposition of Equity, whether or not required to be borne by the Company under
the Registration Rights Agreement and (ii) Monsanto will only be entitled to
dispose of that amount of Equity required to be disposed of pursuant to such
Final Governmental Order.
If Monsanto disposes of beneficial ownership of any Equity after the third
anniversary of the Closing Date and prior to the tenth anniversary of the
Closing Date other than (i) transfers permitted by the Investment Agreement as
described above, (ii) dispositions required after the issuance of a Final
Governmental Order, (iii) dispositions following termination or expiration of
the Collaboration Agreement (except if the same is terminated by reason of a
material breach of its terms by Monsanto), (iv) dispositions by reason of a
decrease in the Company's share of the United States seed corn market to less
than 7% as determined by annual gross units sold or licensed in any two
consecutive fiscal years or the incurrence by the Company of net operating
losses in any two consecutive fiscal years or (v) dispositions following the
agreement of the Company to enter into a Business Combination with a person
other than Monsanto or any of its affiliates, then the terms of the
Collaboration Agreement and the License Agreements will be amended as provided
therein and Monsanto will be required to reimburse the Company for all
reasonable costs and expenses incurred by the Company in connection with any
registrations effected by the Company to permit such disposition of Equity
whether or not required to be borne by the Company under the Registration Rights
Agreement.
If Monsanto disposes of beneficial ownership of any Equity prior to the
tenth anniversary of the Closing Date as described above as a result of a Final
Governmental Order which arises out of or results from the acquisition or
attempted acquisition by the Company of assets or businesses not owned by the
Company or its affiliates on the date of the Investment Agreement, other than as
contemplated by the Investment Agreement,
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then the terms of the Collaboration Agreement and the License Agreements will be
amended as provided therein and the Company will be required to reimburse
Monsanto for all reasonable costs and expenses, including underwriting discounts
and commissions, incurred by Monsanto in connection with any registrations
effected by the Company on behalf of Monsanto to permit such disposition of
Equity, whether or not required to be borne by Monsanto under the Registration
Rights Agreement.
RIGHT OF FIRST REFUSAL
Until the tenth anniversary of the Closing, prior to any transfer by
Monsanto or any of its United States subsidiaries: (i) of Class B Stock for cash
in a private sale to a financial or institutional buyer other than for or on
behalf of specified competitors of the Company, (ii) of Equity in a Monsanto
Permitted Offering, (iii) pursuant to a bona fide third party tender offer or
exchange offer, which is not induced directly or indirectly by Monsanto or any
of its affiliates and which is not recommended by the Board of Directors: (a)
pursuant to which Major A Stockholders tender or exchange shares equal to a
majority of the total voting power of the Company or (b) of a number of shares
of Class B Stock equal to the aggregate number of shares of Common Stock
tendered by all Major A Stockholders in such third party tender offer or
exchange offer, Monsanto is obligated to offer to the Company by written notice
(the "Offer Notice"), such Class B Stock or Equity of the Company, which Offer
Notice is required to specify, among other things, the number, amount and
description of the Equity to be sold or otherwise transferred, the offer price,
determined in accordance with the Investment Agreement (the "Offer Price") and
any other proposed terms of the transfer.
The Company may elect to purchase all, or in the case of a Monsanto
Permitted Offering, any portion of, the offered securities at the Offer Price
and upon the terms and conditions specified in the Offer Notice, provided, that,
if in connection with a Monsanto Permitted Offering the Company elects to
purchase less than all of the offered securities, the number of offered
securities that the Company elects to purchase will be subject to a reduction
(determined by the managing underwriter after consultation with a financial
advisor selected by Monsanto) to the extent such managing underwriter (after
consultation with Monsanto's financial advisor) determines that the amount of
such offered securities that the Company has elected to purchase would so reduce
the amount of Equity to be sold pursuant to the Monsanto Permitted Offering as
to have a material adverse effect on such offering as contemplated by Monsanto
(including the price at which Monsanto proposes to sell such securities). Upon
any such reduction, the Company will be given the opportunity to make a further
election to either purchase the amount of Equity as so reduced, to purchase all
of such purchase offered securities or to withdraw the Company's earlier
election.
The Company may assign the rights described in the preceding paragraphs to
any person. If the Company does not respond to the Offer Notice within the
required period or elects not to purchase the offered securities, Monsanto or
its United States subsidiary, as the case may be, will be free to complete the
proposed transfer in accordance with the terms of the Investment Agreement.
EQUITY PURCHASE RIGHTS
From the Closing Date, while Monsanto beneficially owns either 5% of the
Class A Stock or 20% of the Class B Stock, if the Company proposes to issue for
cash (subject to specified limitations and excluding certain issuances relating
to, among other things, the Stock Plans, certain stock options, certain small
offerings and the reissuance of Common Stock purchased by the Company after the
Closing) any Equity ("Additional Equity"), the Company is required to give
Monsanto at least ten days' prior written notice (the "Issuance Notice") of such
intention, describing the type of Equity, the estimated price and the other
terms upon which the Company proposes to issue the Additional Equity and the
estimated date of such issuance. Monsanto will have no more than 20 days from
the date the Issuance Notice is received to agree to purchase all or any portion
of its Pro Rata Share (as hereinafter defined) of the Additional Equity by
giving written notice to the Company of its desire to purchase the Additional
Equity (the "Response Notice").
Pro Rata Share means the amount of Additional Equity necessary to permit
Monsanto to maintain its Outstanding Interest (as hereinafter defined)
immediately prior to the issuance of the Additional Equity. Outstanding Interest
means the respective aggregate percentages of the outstanding shares of Class A
Stock or
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Class B Stock beneficially owned from time to time by Monsanto and its United
States subsidiaries, including as Class A Stock or Class B Stock any Equity
convertible into or entitling the holder to acquire the same, as the case may be
(except by virtue of the conversion of Class A Stock into Class B Stock),
excluding in each case stock options or other rights to acquire Class A Stock or
Class B Stock granted under Stock Plans or under any stock option plan or any
stock-based incentive compensation plan adopted in the future and Monsanto's
rights under the Investment Agreement with respect thereto. Monsanto will be
entitled to purchase only the type or class of Equity issued or proposed to be
issued which entitles Monsanto to a Pro Rata Share.
From the Closing Date and for so long as Monsanto beneficially owns either
5% of the Class A Stock or 20% of the Class B Stock, with respect to the
issuance of shares of Class A Stock or Class B Stock pursuant to the exercise of
stock options or other rights to acquire Class A Stock or Class B Stock granted
under the Stock Plans, or under any other stock option or stock-based incentive
compensation plan that the Company may adopt in the future, Monsanto has the
right, in respect of each fiscal year of the Company beginning with its fiscal
year ending August 31, 1996, to purchase from the Company all or any portion of
the number of shares of Class A Stock or Class B Stock which is necessary for
Monsanto to purchase in order to maintain the same percentage of ownership of
issued and outstanding shares of Class A Stock and Class B Stock that Monsanto
owned as of the last day of such fiscal year without regard to shares of Class A
Stock and Class B Stock issued pursuant to the exercise of stock options during
that fiscal year (or in the case of the Company's fiscal year ending August 31,
1996, after the Closing Date).
STANDSTILL
Monsanto has agreed that prior to the tenth anniversary of the Closing
Date: (i) none of Monsanto's affiliates except for its United States
subsidiaries will beneficially own (subject to certain exceptions) any Equity,
(ii) neither Monsanto nor its affiliates will acquire any beneficial ownership
of any Equity except as permitted by the Investment Agreement and (iii) neither
Monsanto nor any of its affiliates will acquire beneficial ownership of any
additional Equity such that the Equity beneficially owned by Monsanto and its
affiliates would represent in the aggregate more than (a) 10% of the total
voting power of the Company, (b) the Class B Limitation Percentage (as
hereinafter defined), or (c) 40% of the outstanding Common Stock of the Company
(each such percentage, a "Percentage Limitation") unless (i) Monsanto receives
from a Major A Stockholder an offer to purchase shares of Class A Stock
beneficially owned by such Major A Stockholder pursuant to any rights granted by
such Major A Stockholder to Monsanto in the Monsanto Stockholders' Agreement, in
which event Monsanto will be entitled to acquire beneficial ownership from such
Major A Stockholder of such additional shares of Class A Stock, and (ii) no
later than 60 days after acquisition of beneficial ownership of a majority of
the total voting power of the Company in accordance with the terms of the
Investment Agreement, Monsanto will be required to make a Permitted Acquisition
Proposal (as hereinafter defined).
Class B Limitation Percentage means the percentage of Class B Stock
determined by dividing (i) the number of shares of Class B Stock beneficially
owned by Monsanto after: (a) the acquisition of the Newly Issued Shares, (b) the
acquisition of Class B Stock pursuant to the Offer and (c) the acquisition of
any additional Class B Stock acquired pursuant to the provisions described under
"-- Additional Market Purchases of Class B Stock" by (ii) the total number of
shares of Class B Stock outstanding on the first anniversary of the Closing
Date.
A Permitted Acquisition Proposal means an Acquisition Proposal which (i) is
made to the Board of Directors and, unless and until approved as described in
clause (ii), not made directly to the stockholders of the Company, (ii) is
subject to the approval of a majority of the Independent Directors prior to the
execution of any definitive agreement in connection with a transaction involving
the Company or the making of any tender or other offer to purchase Common Stock
from any stockholders of the Company who are not Major A Stockholders, and (iii)
would result, if successful, in the acquisition by Monsanto of beneficial
ownership of not less than 100% of the outstanding capital stock of the Company
at a price per share not less than the highest price at which Monsanto has
acquired (or proposes to acquire in connection with the transaction) beneficial
ownership of any Common Stock from a Major A Stockholder within the preceding
two years and
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for cash and/or the same form of consideration if other than cash as paid or
offered to be paid to the Major A Stockholders. An Acquisition Proposal means
any tender offer or exchange offer or proposal with respect to a Business
Combination or a sale of 10% or more of the outstanding capital stock of the
Company.
If Monsanto acquires a majority of the total voting power of the Company
but not 100% of the outstanding capital stock of the Company, Monsanto is
required to: (i) use all reasonable efforts to assure that at all times
thereafter there will be three Independent Directors on the Board of Directors
until such time as Monsanto has acquired 100% of the outstanding capital stock
of the Company; and (ii) not acquire additional capital stock of the Company
(other than from a Major A Stockholder) or implement any Acquisition Proposal
with regard to the Company or enter into any commercial transaction with the
Company (not previously in existence) involving a value to the Company as
approved in good faith by a majority of the Independent Directors of less than
$1,000,000 unless such offer, Acquisition Proposal or commercial transaction is
approved by a majority of the Independent Directors.
Neither Monsanto nor any of its affiliates will be deemed in violation of a
Percentage Limitation if their beneficial ownership of Equity exceeds such
Percentage Limitation solely as a result of: (i) an acquisition of Common Stock
by the Company that, by reducing the number of securities outstanding, increases
the proportionate amount of Common Stock beneficially owned by Monsanto and its
affiliates in the aggregate to more than any of the Percentage Limitations or
(ii) the exercise by third parties of the right to convert Class A Stock into
Class B Stock, provided, that in each case such Percentage Limitation will be
deemed violated if Monsanto or any of its affiliates thereafter becomes the
beneficial owner of any additional Equity unless: (i) Monsanto is permitted to
acquire such Common Stock as described in the previous paragraph or (ii) upon
the consummation of the acquisition of such additional Equity Monsanto and its
affiliates do not beneficially own in the aggregate more than the applicable
respective Percentage Limitation.
If the Company receives an Acquisition Proposal (including an indication of
interest in making such a proposal) from a third party which has not been
solicited from the Board of Directors and which, if consummated, would result in
a Business Combination (an "Unsolicited Proposal"), the Company is required to
notify Monsanto in writing (the "Company Notice") of the material terms of such
Unsolicited Proposal, including without limitation any specified consideration.
If: (A) the Board of Directors determines to enter into negotiations with regard
to an Unsolicited Proposal and Monsanto shall not have advised the Company
subsequent to the receipt of the Company Notice that it is not interested in
submitting a Monsanto Proposal (as hereinafter defined), or (B) in the absence
of receipt of an Unsolicited Proposal, the Company invites any third party to
make an Acquisition Proposal which if consummated would lead to a Business
Combination (the "Company Proposal"), then the Company is required to promptly
invite Monsanto to submit a proposal (a "Monsanto Proposal") for a Business
Combination which would result in the acquisition of an equal or greater amount
of assets or shares of Common Stock than the Unsolicited Offer or the Company
Proposal (which may include all or substantially all the assets or all of the
Common Stock of the Company). Thereafter, if Monsanto shall have submitted a
Monsanto Proposal, the Company is required to conduct the solicitation and
negotiation process as an open process available to all bidders, and provide
Monsanto and the other interested parties with further information with regard
to the terms of any offers received and the opportunity to submit further offers
to the extent approved by a committee of directors consisting of an equal number
of (A) non-employee or officer Major A Stockholder directors (if such directors
agree to serve on such committee) including the Chairman of the Board and (B)
Independent Directors; provided, however, that the Board of Directors is not
required to conduct such process in a manner which, after advice of special
independent outside counsel and its financial advisors, the Board determines is
inconsistent with its fiduciary duties. If Monsanto does not submit a Monsanto
Proposal or withdraws any such proposal and advises the Company that it is not
interested in submitting a further proposal, the Company will conduct the
negotiation and sale process in such manner as the Board of Directors
determines.
Solely for purposes of the provisions of the Investment Agreement described
in the preceding paragraph, a Business Combination will include a transaction
with respect to which the Company receives or solicits from a third party or
enters into negotiations with respect to, a proposal (the "Limited Proposal")
which (A) contemplates the acquisition of a portion of the Company's
international seed business or the Company's North American seed business that
would be equal to or greater in amount than 25% of the average revenues
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derived from such international seed business or North American seed business,
respectively, in the Company's most recently completed two fiscal years, and (B)
would not otherwise be described by the previous paragraph, provided, that
Monsanto will not in such case be entitled to make a proposal which would
involve the acquisition of a greater amount of assets or ownership interest than
the Limited Proposal.
Prior to the earlier of (a) the tenth anniversary of the Closing Date and
(b) such date as Monsanto and its subsidiaries acquire a majority of the total
voting power of the Company, in accordance with the terms of the Investment
Agreement, neither Monsanto nor any of its affiliates may: (i) seek to have the
Company waive, amend or modify any of the restrictions described above under the
caption "-- Standstill," the Restated Certificate of Incorporation of the
Company or the Bylaws of the Company (other than the amendment contemplated by
the Investment Agreement), (ii) make any Acquisition Proposal or proposal with
respect to a Business Combination, (iii) take any initiatives involving the
Company that would otherwise require the Company to make a public announcement,
or make any public comment or proposal with respect to any Acquisition Proposal,
(iv) become a member of a Group (other than a group composed solely of Monsanto
and any of its wholly owned direct or indirect subsidiaries), (v) solicit, or
encourage any other person to solicit, proxies or become a participant or
otherwise engage in a solicitation (as such terms are defined or used in
Regulation 14A under the Exchange Act) in opposition to a recommendation of a
majority of the directors of the Company with respect to any matter; seek to
advise or influence any person (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to the voting of any securities of the Company; or
execute any written consent in lieu of a meeting of holders of securities of the
Company or any class thereof, (vi) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to the Company, as described in Rule 14a-8 under the Exchange Act, (vii) deposit
any of its Equity into a voting trust, or subject any of such Equity to any
agreement or arrangement other than the Monsanto Stockholders' Agreement with
respect to the voting of the issued and outstanding shares of Common Stock or
any agreement having similar effect; or (viii) enter into any discussions,
negotiations, arrangements or understandings with any third party with respect
to any of the foregoing ("Contacts") or otherwise seek to control or influence
the Company other than Contacts with one or more Major A Stockholders if such
Major A Stockholders have given Monsanto a notice that such Major A Stockholders
desire to transfer their voting stock of the Company pursuant to the Monsanto
Stockholders' Agreement or has otherwise initiated such Contact, provided,
however, that: (A) Monsanto may make any proposal which it is permitted to make
pursuant to the provisions of the Investment Agreement as described above under
the caption "-- Standstill," (B) if Monsanto shall, in good faith, determine to
accept any offer from a Major A Stockholder to purchase shares of Class A Stock
beneficially owned by such Major A Stockholder or to make a counter proposal to
such Major A Stockholder as permitted by and in accordance with the terms of the
Monsanto Stockholders' Agreement, as a result of which Monsanto would acquire
beneficial ownership of a majority of the total voting power of the Company,
Monsanto will be permitted to make any Permitted Acquisition Proposal to the
Board of Directors which it is permitted or required to make as described above
under the caption "-- Standstill," and (C) actions taken by any representative
of Monsanto serving on the Board of Directors, acting solely in his or her
capacity as such director, will not be deemed to violate the restrictions
described in this paragraph.
TERMINATION
The Investment Agreement may be terminated at any time prior to the Closing
Date: (i) by mutual consent of the Company and Monsanto, (ii) by either the
Company or Monsanto by written notice to the other at any time after June 30,
1996 if any condition contained in the Investment Agreement is not waived or
satisfied within such period; provided, however, that if any such condition has
not been waived or satisfied within such period due to the willful act or
omission of one of the parties, that party may not terminate the Investment
Agreement, (iii) by either the Company or Monsanto if consummation of the
issuance and sale by the Company of the Newly Issued Shares as contemplated by
the Investment Agreement violates any final non-appealable order, decree or
judgment of any court or governmental body having competent jurisdiction, or
(iv) by either the Company or Monsanto if the other shall have failed to perform
or comply in any material respect with any agreement or covenant contained in
the Investment Agreement that is required to be
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performed or complied with by it on or before the Closing Date after the party
seeking termination provides the other party of written notice of, and a
reasonable opportunity to cure, such failure.
The Investment Agreement, with the exception of the provisions described
above under "-- Standstill," will terminate at any time after the Closing Date
if Monsanto and its affiliates beneficially own less than (i) five percent of
the total voting power of the Company and (ii) less than ten percent of the
outstanding Common Stock of the Company. Monsanto is required to promptly notify
the Company in writing at any time that it believes it no longer owns such
amounts.
CONFIDENTIALITY
Except as required by law, each of the Company and Monsanto has agreed to
hold, and cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold in
confidence any nonpublic information obtained from the other pursuant to the
letter agreement between Monsanto and the Company, dated May 16, 1995 or from
time to time after the date of the Investment Agreement as may be disclosed to
the Company, Monsanto or any Monsanto Nominees until such time as such
information becomes publicly available (otherwise than through the wrongful act
of any such person) and to use all reasonable efforts to cause such persons not
to disclose such information to others without the prior written consent of the
Company or Monsanto, as the case may be. In the event of the termination of the
Investment Agreement for any reason, each party is required to promptly return
or destroy all documents containing nonpublic information so obtained from the
other or any of its subsidiaries and any copies made of such documents.
CORPORATE POWERS
Nothing in the Investment Agreement shall be construed to relieve the
directors and officers of the Company or its subsidiaries from the performance
of their respective fiduciary duties or limit the exercise of their powers in
performance of their duties thereunder and the obligations of the Company
therein shall be subject to such fiduciary duties.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement requires that, subject to certain
restrictions, at any time on or after the earlier of the third anniversary of
the Closing Date and the date as of which Monsanto is entitled to make a
Monsanto Permitted Transfer of shares of Class B Stock (the earlier of such
dates being referred to as a "Registration Date"), upon the request of Monsanto,
the Company will (i) file a registration statement with the Commission under the
Securities Act with regard to the Registrable Securities (as defined below) held
and designated by Monsanto, (ii) use its reasonable efforts to have such
registration statement declared effective under the Securities Act and (iii) use
its reasonable efforts to keep such registration statement continuously
effective under the Securities Act for up to 90 days or until such earlier date
as the securities subject to such registration statement are disposed of in the
manner described in such registration statement. Monsanto may make up to two
such requests for registration.
The Registration Rights Agreement also provides that if, at any time after
the Registration Date, the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders of the Company
other than Monsanto) securities under the Securities Act in connection with the
public offering solely for cash on Form S-1, S-2 or S-3, the Company will
promptly give Monsanto written notice of such registration. Upon the written
request of Monsanto given within 20 days following the date of such notice, the
Company will cause to be included in such registration statement and use its
reasonable efforts to be registered under the Securities Act all the Registrable
Securities that Monsanto has requested to be registered; provided, however, that
such right of inclusion will not apply to any registration statement covering an
underwritten offering of convertible debt securities. Monsanto may make up to
five such requests for registration. If the underwriters' representative or
agent advises the Company in writing that, in its opinion, the amount of
Registrable Securities requested to be included in any registration would
materially adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the amount and class
which the Company is so advised can be sold without such material adverse effect
in
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such offering: first, all securities proposed to be sold by the Company for its
own account, second, the Registrable Securities requested to be included in such
registration by Monsanto pursuant to the Registration Rights Agreement and
third, other securities being registered other than on behalf of the Company or
Monsanto.
For purposes of the Registration Rights Agreement, the term "Registrable
Securities" will include: (i) the Class B Stock which Monsanto acquires pursuant
to the Investment Agreement (including by way of the Offer and any open market
purchases permitted by the Investment Agreement), (ii) any Class B Stock which
Monsanto acquires upon exchange of Class A Stock acquired by Monsanto pursuant
to the Investment Agreement and (iii) any shares of capital stock of the Company
issued by the Company in respect of or in exchange for shares of Class A Stock
or Class B Stock in connection with any stock dividend or distribution, stock
split-up, recapitalization, recombination or exchange by the Company generally
of shares of Class A Stock or Class B Stock; provided, however, that Registrable
Securities will not include any securities acquired by Monsanto in violation of
an express covenant of Monsanto contained in the Investment Agreement and,
provided, further, that the Company will have no obligation under the
Registration Rights Agreement to register any Registrable Securities if the
Company delivers an opinion of counsel to the effect that the proposed sale or
disposition of all of the Registrable Securities for which registration was
requested does not require registration under the Securities Act for a sale or
disposition in a single public sale, and offers to remove any and all legends
restricting transfer from the certificates evidencing such Registrable
Securities.
The rights of Monsanto with respect to Registrable Securities may not be
transferred by Monsanto except to a wholly owned direct or indirect subsidiary
of Monsanto to whom Monsanto shall have transferred the Registrable Securities
as permitted by the Investment Agreement.
COLLABORATION AGREEMENT AND LICENSE AGREEMENTS
Monsanto and the Company have also entered into the Collaboration
Agreement, in which they have agreed to a long-term research and development
collaboration for the development of new transgenic products in the field of
agricultural biotechnology. A variety of crops is contemplated under the
Collaboration Agreement, including corn, soybean and others. Monsanto and the
Company have further entered into the License Agreements to commercialize
genetically engineered corn hybrids incorporating Bacillus thuringiensis
tolerance to lepidopteran insects such as the European Corn Borer (YIELDGARD(TM)
Bt insect resistant corn), corn hybrids that are tolerant of glyphosate
herbicide (ROUNDUP READY(TM) glyphosate-tolerant corn), and corn hybrids that
are tolerant of glufosinate herbicides. The License Agreements define specific
areas of commercial interest between Monsanto and the Company in Bt corn and in
herbicide tolerant corn, while the Collaboration Agreement covers broadly all
other fields of agricultural biotechnology in a spectrum of crops. The
Collaboration Agreement and each of the License Agreements contemplates a
worldwide territory.
THE COLLABORATION AGREEMENT
The Collaboration Agreement is the mechanism by which Monsanto and the
Company will share their respective technologies and intellectual property
rights, for research and in the development of new products in the Field of
agricultural biotechnology. The initial term of the Collaboration Agreement is
10 years, with any extensions to be renegotiated in good faith and includes a
series of cash payments from Monsanto to the Company aggregating $19.5 million
over the initial term of the Collaboration Agreement.
An aim of the Collaboration is to facilitate collaborative projects between
Monsanto scientists and those of the Company. This goal is to be achieved in
part by allowing each company access to proprietary rights of the other, for use
in collaborative undertakings. The companies cross license to each other their
respective rights in licenses, sublicenses, and patents and patent applications,
as well as those of any wholly owned affiliate, for research and development
within the Field. The grants also include a cross license of rights in each
company's non-patented technology, know-how, methods and biological materials,
for research and development. However, no rights are granted either Monsanto or
the Company in the proprietary varieties, inbreds or hybrids of the other.
The Collaboration Agreement recognizes a distinction between products that
result from an Independent Effort, and those that result from a Collaborative
Effort. A Collaborative Effort is a project that Monsanto and
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the Company agree upon in writing for carrying out a defined collaborative
research and development project in a selected subject area. An Independent
Effort is any project of either Monsanto or the Company that is not a
Collaborative Effort. In the case of projects of Independent Efforts, the
companies grant each other the right to commercialize products that result from
the Independent Effort of the other party, on a preferential royalty paying
basis. The right to commercialize a product of the other's Independent Effort
carries with it certain rights to sublicense affiliates, Business Associates and
International Associates. Each of these entities are defined in the subject
agreement, but include generally those entities that are controlled by or at
least 50% owned by Monsanto or the Company, a third party with which the party
has an extensive business relationship ("Business Associate") or a foreign-based
entity that is licensed to sell or distribute branded products of Monsanto or
the Company, respectively ("International Associate"). The Collaboration
Agreement and each License Agreement provide that no sublicensee may further
sublicense any rights thereunder.
The grant of rights with respect to the commercialization of products
developed under the agreement, whether one resulting from an Independent Effort
or Collaborative Effort, is limited to the licensee party's "Crops." The
Company's designated Crops include corn. Thus, Monsanto will have the right to
commercialize products resulting from the Company's Independent Efforts in its
designated Crops, and the Company will have the right to commercialize products
resulting from Monsanto's Independent Efforts in its Crops.
The Collaboration Agreement contemplates that Monsanto and the Company will
enter into Collaborative Efforts in which the parties will define the scientific
parameters of the collaboration in writing, and will designate one party as the
Lead Collaborator. The Lead Collaborator will own legal title to the
intellectual property that arises out of the collaboration, and will have the
right to sublicense products to seed companies. Typically, the Lead Collaborator
will be that party whose Crops are not included in the particular Collaborative
Effort, but the parties may agree otherwise. In the case of any particular
Collaborative Effort, the party that is not the Lead Collaborator has the right
to apply to the Lead Collaborator for a preferred status regarding rights that
result from a Collaborative Effort. Among other warranties, the parties warrant
each other that they will not enter into a transaction which is in conflict with
the rights granted under the agreement.
Monsanto and the Company will typically divide the value realized from
products resulting from any given Collaborative Effort and the parties may agree
that the value should be divided in a different manner, including instances
where the Collaborative Effort is also an Existing Project of either Monsanto or
the Company. However, each party will receive a significant portion of value
derived from such Collaborative Effort. An Existing Project is one in which
either Monsanto or the Company has made substantive developmental progress as of
the effective date of the Collaboration Agreement.
If the Investment Agreement terminates prior to the Collaboration Agreement
as the result of actions of either party that result in a government order that
Monsanto must dispose of its securities or terminate the Collaboration
Agreement, or if Monsanto terminates other than for cause, then the division of
value for products of any Collaborative Effort under the Collaboration Agreement
and under each of the License Agreements will be adjusted in favor of the
non-terminating party, and against the terminating party. Any change of control
of the Company, other than one where Monsanto becomes the controlling party,
will result in a similar shift in the ratios in Monsanto's favor; any change of
control of Monsanto will result in a shift in the Company's favor.
THE CORN BORER-PROTECTED CORN LICENSE AGREEMENT
Monsanto and the Company have entered into the Corn Borer-Protected Corn
License Agreement, in which the parties cross license their intellectual
property rights and proprietary technology in the Field of "transgenic corn that
exhibits tolerance to lepidopteran insects by expression of an insect control
protein derived from Bacillus thuringiensis" ("Bt Corn"). As in the
Collaboration Agreement, Monsanto and the Company cross license each other their
respective rights in licenses, sublicenses, and patents and patent applications,
as well as those of any wholly owned affiliate, to commercialize products within
the Field. The grants also include certain cross license rights in each
company's non-patented technology, know-how, methods, genes and genetic
elements. Again, no rights are granted either Monsanto or the Company in the
proprietary varieties, inbreds or hybrids of the other. The agreement terminates
upon the expiration of the last to expire patent of either party within the
Field.
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The Company receives the right to make, have made, use or sell products
covered by the foregoing Monsanto proprietary rights, with the right to
sublicense the Company's affiliates and International Associates. While Monsanto
receives no right to sell directly any products covered by the Company's
proprietary rights, Monsanto does receive the right to make, have made and to
use such products, as well as the right to sublicense certain hybrid seed
companies, and Monsanto's affiliates and International Associates, to make, have
made, use and sell such products. Products will be marketed under a Monsanto
trademark, with the proviso that the Monsanto trademark will be used in
conjunction with Monsanto's and the Company's names being employed in equal
prominence.
Monsanto and the Company will share certain revenue realized through both
Monsanto's and the Company's licensing of Bt Corn.
THE GLYPHOSATE-PROTECTED CORN LICENSE AGREEMENT
Monsanto and the Company have also entered into the Glyphosate-Protected
Corn License Agreement, in which the parties agree to cross license their
intellectual property rights and proprietary technology in the Field of
"transgenic corn which exhibits Commercial Tolerance against Glyphosate by
expression of one or more glyphosate tolerance protein(s)" ("Glyphosate tolerant
corn"). Monsanto and the Company cross license each other their respective
rights in licenses, sublicenses, and patents and patent applications, as well as
those of any wholly owned affiliate, to commercialize products within the Field.
The grants also include a cross license of rights in each company's non-patented
technology, know-how, methods, genes and genetic elements. No rights are granted
either Monsanto or the Company in the proprietary varieties, inbreds or hybrids
of the other. The agreement terminates upon the expiration of the last to expire
patent of either party within the Field.
The Company receives the right to make, have made, use or sell products
covered by the foregoing Monsanto proprietary rights, with the right to
sublicense the Company's affiliates and International Associates. While Monsanto
receives no right to sell directly any products covered by the Company's
proprietary rights, Monsanto does receive the right to make, have made and to
use such products, as well as the right to sublicense certain hybrid seed
companies, and Monsanto's affiliates and International Associates, to make, have
made, use and sell such products under the Gene Agreement program outlined
below. Products will be marketed under a Monsanto trademark, ROUNDUP READY(TM)
glyphosate tolerant corn.
The ROUNDUP READY(TM) glyphosate tolerant corn will be marketed by Monsanto
through a ROUNDUP READY(TM) Gene Agreement, in which hybrid seed companies are
sublicensed to sell the product to farmers that pay a separate gene use fee.
Monsanto and the Company will share all revenue realized through Monsanto's
licensing of the ROUNDUP READY(TM) glyphosate tolerant corn. The Company will
pay to Monsanto the Gene Agreement revenue that it realizes through its own
sales, as well as those of its affiliates, International Associates and
sublicensees. This revenue will also be shared between Monsanto and the Company.
THE CAMV PROMOTER LICENSE AGREEMENT
Monsanto and the Company have entered into the CaMV Promoter License
Agreement, in which Monsanto licenses to the Company its intellectual property
rights relating to the CaMV promoter, as well as other proprietary technology,
for use in the Field of "transgenic corn which exhibits protection against
Glufosinate herbicide." (A CaMV promoter is a genetic element useful in
permitting engineered corn plants to express a given trait, in this case,
protection against glufosinate herbicide.) The rights conveyed to the Company
under the CaMV agreement include Monsanto's licenses, sublicenses, and patents
and patent applications, as well as those of any wholly-owned affiliate, to
commercialize products for use in the Field of glufosinate tolerant corn. The
grant also includes a license of rights to Monsanto's non-patented technology,
know-how, methods, genes and genetic elements. No rights are granted either
Monsanto or the Company in the proprietary varieties, inbreds or hybrids of the
other. The agreement terminates upon the expiration of the last to expire patent
of either party within the Field.
The Company receives the right to make, have made, use or sell products
covered by the foregoing Monsanto proprietary rights, with the right to
sublicense the Company's affiliates and International
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Associates, as well as the right to sublicense certain hybrid seed companies.
Monsanto receives no reciprocal licensing rights from the Company under the CaMV
agreement.
Products will be marketed and licensed by the Company through a "Grower
Agreement" program. Under the Grower Agreement, hybrid seed companies are
licensed to sell the product to farmers that pay a separate grower use fee.
Monsanto and the Company will share all Grower Agreement revenue realized
through the Company's licensing of the glufosinate tolerant corn.
SHAREHOLDER AGREEMENTS
On January 31, 1996, holders of Class A Stock, individually and as trustees
of trusts created for the benefit of their spouses or children (such holders and
such trusts being referred to as the "Major A Stockholders") executed and
delivered (i) a Voting Trust Agreement (the "Voting Trust Agreement") among the
Major A Stockholders, (ii) a Roberts Family Shareholder Agreement (the "Family
Shareholder Agreement") among the Major A Stockholders and (iii) a Stockholders'
Agreement (the "Monsanto Stockholders' Agreement") among the Major A
Stockholders and Monsanto. The following summaries of the Voting Trust
Agreement, the Family Shareholder Agreement and the Monsanto Stockholders'
Agreement do not purport to be complete and are qualified in their entirety by
reference to such agreements.
VOTING TRUST AGREEMENT
Pursuant to the terms of the Voting Trust Agreement, an aggregate of
445,275 shares of Class A Stock (representing approximately 52% of the
outstanding Class A Stock after the issuance of the Newly Issued Class A Shares
and without regard to and conversions of Class A Stock to Class B Stock,
including conversions to effect tenders pursuant to the Offer) were transferred
to five of the individual Major A Stockholders, as voting trustees (the "Voting
Trustees"), for deposit pursuant to the Voting Trust Agreement. The Voting
Trustees are required to issue trust certificates ("Trust Certificates") for the
shares of Class A Stock deposited pursuant to the Voting Trust Agreement. Any
Major A Stockholder who subsequently acquires any shares of Class A Stock will
deposit such shares with the Voting Trustees to be held pursuant to the Voting
Trust Agreement (any shares deposited with the Voting Trustees pursuant to the
Voting Trust Agreement are referred to as "Subject Shares"). The Voting Trustees
are not required to recognize any transfer of any Trust Certificate not made in
accordance with the Family Shareholder Agreement and the Monsanto Stockholders'
Agreement.
The Voting Trust Agreement provides that the Voting Trustees will have full
right and power to vote all Subject Shares upon all matters submitted to a vote
or consent of shareholders of the Company. The Voting Trustees will vote all
Subject Shares as a unit in accordance with the determination of a majority of
the Voting Trustees (or, if only two Voting Trustees are acting, as they agree),
except that the Voting Trustees will vote in accordance with the instructions of
holders of Trust Certificates (or, if no instructions are given, in accordance
with the recommendation of the Board of Directors of the Company) with respect
to any Business Combination, the election of any Monsanto Nominee, any amendment
of the provisions of the Company's By-Laws described under "Investment Agreement
- -- Amendment of Bylaws of the Company" or any proposed amendment to the
Company's certificate of incorporation to increase the Company's authorized
capital stock, which amendment is required in order for the Company to comply
with the provisions of the Investment Agreement described under "Investment
Agreement -- Equity Purchase Rights."
All dividends or distributions upon the Subject Shares will be paid by the
Voting Trustees to the holders of Trust Certificates ratably based on the number
of Subject Shares reflected on the Trust Certificates, except that any dividend
or distribution of voting stock of the Company will be deposited pursuant to the
Voting Trust Agreement.
The Voting Trustees have no power to sell or otherwise dispose of any
Subject Shares, except that the Voting Trustees are required to tender or
exchange Subject Shares in accordance with the terms of any tender or exchange
offer if (i) the Voting Trustees are so instructed by the holder of the Trust
Certificate for such Subject Shares and (ii) such tender or exchange offer, if
consummated, would result in the beneficial
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ownership by a person or Group of all of the shares of Class A Stock and all of
the shares of Class B Stock and the Company has previously published its
position or recommendation with respect to such tender or exchange offer
pursuant to applicable rules under the Exchange Act (any such tender or exchange
offer described in this clause (ii) being referred to as a "Qualifying Tender
Offer").
The Voting Trust Agreement will terminate with respect to any Subject Share
on the earliest to occur of (i) the withdrawal of such Subject Share in
accordance with the provisions of the Family Shareholder Agreement, (ii) the
written agreement of all Voting Trustees and (iii) when the voting of such
Subject Share ceases to be vested in the Voting Trustees.
FAMILY SHAREHOLDER AGREEMENT
The Family Shareholder Agreement provides that no Major A Stockholder will
sell, withdraw from the Voting Trust Agreement or otherwise dispose of any
interest in Subject Shares except as provided in the Family Shareholder
Agreement. Each Major A Stockholder has agreed not to sell, convey, transfer,
assign or otherwise dispose of ("transfer") any interest in any Class A Stock or
other voting common or voting preferred stock of the Company, any option,
warrant or other right to acquire Class A Stock or such other voting stock or
any security exchangeable for or convertible into Class A Stock or such other
voting stock (collectively, "Company Voting Stock"), unless such Major A
Stockholder has withdrawn the Subject Shares from the Voting Trust Agreement
after compliance with the procedures described in the following paragraph.
Any Major A Stockholder desiring to withdraw Subject Shares from the Voting
Trust Agreement must give written notice to the other Major A Stockholders, each
of whom will then have an option to purchase his or her pro rata portion of such
Subject Shares at a market price based on a thirty day average of the daily
closing prices for the Class B Stock on The Nasdaq National Market (or, if there
is no such market price, an appraised value for such Subject Shares). If such
other Major A Stockholders have not elected to acquire all of such Subject
Shares, then each Major A Stockholder who elected to acquire Subject Shares will
have a further option to purchase his or her pro rata portion of the Subject
Shares which such other Major A Stockholders have not elected to acquire. Any
Subject Shares not acquired by such other Major A Stockholders after such
further option may be withdrawn from the Voting Trust Agreement and will no
longer be subject to the Family Shareholder Agreement.
The Family Shareholder Agreement provides that the restrictions on transfer
therein will not apply to certain permitted transfers ("Permitted Transfers")
specified therein, including (i) certain pledges of Company Voting Stock, (ii) a
transfer of Company Voting Stock to other Major A Stockholders or other spouses,
descendants or certain other trusts or other entities, (iii) any exchange,
conversion or transfer of Company Voting Stock in connection with a Business
Combination other than any agreement to transfer prior to the Company's
execution of an agreement with respect to such Business Combination or (iv) any
tender or exchange in accordance with the terms of a Qualifying Tender Offer.
The Family Shareholder Agreement will terminate on January 31, 2006.
MONSANTO STOCKHOLDERS' AGREEMENT
The Monsanto Stockholders' Agreement provides that each Major A Stockholder
will use best efforts to attend each stockholder meeting for purposes of
establishing a quorum and will vote all of its shares of Company Voting Stock in
favor of any Monsanto Nominee recommended by the Board of Directors of the
Company, provided that such Monsanto Nominee is reasonably satisfactory to the
Company. In addition, the Monsanto Stockholders' Agreement provides that each
Major A Stockholder will not, without the consent of Monsanto, initiate any
action that would result in the amendment of the provisions of the Company's
By-Laws described under "Investment Agreement -- Amendment of Bylaws of the
Company," and that each Major A Stockholder will vote its Company Voting Stock
in favor of any proposed amendment to the Company's certificate of incorporation
to increase the Company's authorized capital stock, which amendment is required
in order for the Company to comply with the provisions of the Investment
Agreement described under "Investment Agreement -- Equity Purchase Rights."
Monsanto has agreed to indemnify the Major A Stockholders and related persons
from and against all claims, losses and liabilities which arise from or in
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connection with actions or inactions in the performance of the obligations of
the Major A Stockholders under the provisions described in this paragraph.
The Monsanto Stockholders' Agreement provides that except for Permitted
Transfers (i) no Major A Stockholder may transfer any interest in its Company
Voting Stock except as provided by the Monsanto Stockholders' Agreement, (ii)
with limited exceptions, no Major A Stockholder will convert any Class A Stock
to Class B Stock until such time as such Major A Stockholder has entered into a
binding agreement to sell or convey such Class B Stock to a third party and
(iii) no Major A Stockholder will tender any of its Company Voting Stock in the
Offer.
If any Major A Stockholder desires to transfer any interest in its Company
Voting Stock (other than a Permitted Transfer) such Major A Stockholder will
make a written offer to Monsanto (a "Shareholder Offer") to purchase such
Company Voting Stock and Monsanto will have the option to purchase all but not
less than all of such Company Voting Stock for the price and upon the terms upon
which such Major A Stockholder proposes to transfer such Company Voting Stock.
If Monsanto rejects the Shareholder Offer, Monsanto has the exclusive right for
a period of time to propose alternative terms for such purchase. If Monsanto
does not accept the Shareholder Offer and Monsanto and such Major A Stockholder
have not otherwise reached an agreement regarding such purchase within such time
period, then such Major A Stockholder may offer and sell such Company Voting
Stock to any person or entity on terms, considered as a whole, that are at least
as favorable to such Major A Stockholder as either those set forth in the
Shareholder Offer or those offered by Monsanto in any counter offer.
In the event of any involuntary transfer of any Company Voting Stock (other
than a Permitted Transfer), Monsanto will have an exclusive option to purchase
all but not less than all of the Company Voting Stock in cash at a purchase
price (i) based on a thirty day average of the daily closing prices for the
Class B Stock on The Nasdaq National Market or (ii) if the Company Voting Stock
is not Class A Stock or if the Class B Stock is not publicly traded, based on
the fair market value thereof determined by an investment banking firm.
The Monsanto Stockholders' Agreement will be effective until the earliest
of (i) the termination of the Collaboration Agreement (except if it is
terminated by reason of a material breach thereof by the Company or by reason of
a governmental decree caused by voluntary action of the Company), (ii) Monsanto
owning less than 5% of the outstanding Class A Stock or less than 50% of the
highest percent of the outstanding Common Stock beneficially owned by Monsanto
after completion of the Offer, the Closing and any purchases by Monsanto in the
market described under "Investment Agreement -- Additional Market Purchases of
Class B Stock," (iii) the termination of the Investment Agreement and (iv) the
eleventh anniversary of the Closing or any subsequent anniversary of the Closing
upon notice by Monsanto or a majority in interest of the Company Voting Stock by
persons who are then Major A Stockholders.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a meeting held January 31, 1996, the Board of Directors unanimously
(i) approved the Investment Agreement and the Ancillary Agreements; (ii)
determined that the Investment Agreement, the Ancillary Agreements and the
transactions contemplated thereby, including the Offer (the "Transactions"),
taken together, are fair to and in the best interest of the Company and its
shareholders; and (iii) resolved to recommend the Offer to holders of Class B
Stock who desire an opportunity to sell all or a portion of their shares for
cash at this time.
A letter to the Company's shareholders, communicating the Board's
recommendation, is filed herewith as Exhibit 10 and is incorporated herein by
reference.
(b) In reaching its conclusions and recommendations described above, the
Board of Directors considered a number of factors, which principally consisted
of the following:
Opportunity for Sale at Premium. The Board believes that the Offer provides
shareholders an opportunity to sell all or a portion of their shares at a price
which represents a premium of approximately 20% over $59 1/4, the closing market
price per share of Class B Stock on the last full trading day prior to the
initial public announcement of the Offer, and approximately 39% over $51, the
average of the closing market prices per
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share for the 30 trading days prior to such initial public announcement. In
addition, the trading market for the shares of Class B Stock is characterized by
relatively limited daily trading volume. Accordingly, shareholders might be
unable to sell substantial amounts of shares of Class B Stock in a relatively
short period of time without adversely affecting the price for such shares. The
Offer provides shareholders, particularly those holding a substantial number of
shares, an opportunity to sell their shares at the Offer Price of $71.00 per
share outside of the ordinary trading market for the shares and without paying
brokerage fees or commissions.
Benefits from the Collaboration and Licenses. In approving the Investment
Agreement, the Board of Directors concluded that the Collaboration Agreement and
License Agreements provide the Company and its shareholders with an enhanced
opportunity to participate in future growth of the market for transgenic corn
and other seed products. In evaluating such enhanced opportunity, however,
shareholders should consider that seeds with transgenic traits to which the
License Agreements relate have not yet come to market, that significant
technical, regulatory, patent (freedom to operate) and public acceptance issues
must be overcome so that the volumes and prices at which these products can be
sold and the benefits to be derived therefrom are as yet undetermined. Moreover,
the success of the Collaboration in the development of new products will only be
determined over a period of several years.
First, The Board of Directors believes that the Collaboration offers the
Company an opportunity to join forces in the development of new agronomic seed
products with a research partner bringing complementary skills to those already
possessed by the Company in the transformation and development of elite
germplasm and the production, marketing and sale of seed. Although it is not yet
proven whether biotechnology will improve classical breeding approaches, the
Company believes that Monsanto possesses substantial intellectual property
resources and larger funding capabilities than the Company in the field of
biotechnology gene and trait discovery and development and brings significant
global regulatory expertise beyond that which an enterprise of the Company's
size has the time or resources to develop internally. The Company believes that
Monsanto's recognized experience in the fields of gene and trait discovery and
significant library of information with regard to genes could yield significant
benefits to the Company in development and bringing to market of new products
over the term of the Collaboration. The Company believes that the synergy of
combining the talent and intellectual property assets which the Collaboration
Agreement envisions should enable a faster rate of innovation in the new and
highly competitive field of transgenic seeds with desirable traits. Finally, the
Company believes that the opportunity to share in future royalties from fruits
of the Collaboration, including the right to license on a favorable basis
intellectual property developed independently by Monsanto for corn and other
crops provides the Company with additional opportunities to share in the
economic benefits of the Collaboration.
Second, the Licenses for patents, proprietary material and know-how provide
the Company with an opportunity to cross license, on a non-exclusive basis, its
own valuable intellectual property assets consisting of transgenic lines,
patents and other proprietary information with regard to pest-resistant and
herbicide-tolerant seed with a partner that also possesses significant
intellectual property resources, marketing and regulatory skills and a
well-known brand name in related fields. In so doing, the Company believes that
it will improve its freedom to operate and ability to compete in the emerging
new field of elite agronomic seeds with traits of pest and herbicide resistance.
The sharing of future royalty proceeds from property and product licensed to
others should also provide the Company with the opportunity to benefit from the
efforts of both parties with regard to the cross-licensed intellectual property.
The Company believes that the License Agreements should enable the Company to
market its own seed with desirable herbicide-resistant and pest-resistant
characteristics and to share in licensing revenues from sales of such seeds by
others and from industry participants in related areas.
In approving the Collaboration and License Agreements, the Board recognized
that the Company will also be sharing the economic benefits of its own valuable
intellectual property resources with a third party. Moreover, the seed with
transgenic traits to which the License Agreements relate have not come to market
so that the prices at which these products can be sold or licensed to others and
the benefits to be derived therefrom are as yet undetermined. Finally, the
benefits of the Collaboration will depend on the degree of cooperation and the
synergies which develop as the parties work together over several years.
Nevertheless, considering the agreements as a whole, including the benefits
provided from the equity investment described
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below, the Board concluded that the transactions, taken as a whole, were fair to
and in the best interests of the Company and its shareholders.
Opportunity for Issuance of New Equity. The Investment Agreement provides
that the Company will issue and Monsanto will purchase newly issued shares of
Class A Stock which will represent approximately 10% of the Class A Stock
outstanding after completion of the Offer and 378,000 newly issued shares of
Class B Stock, each at a purchase price of $65.00 per share, which should
provide net proceeds to the Company of approximately $30 million. The Company
intends to apply these funds to support its growing seed business. The Company
has such investments in process and has considered from time to time the
issuance and sale of shares of Class B Stock as an attractive means of financing
such investments. The Board believes that the Investment Agreement offers the
opportunity to provide such financing at an attractive price in relation to
market alternatives. In reaching that conclusion it considered, among other
factors, the Company's existing debt obligations and the protections afforded by
the Investment Agreement with regard to limitations on total beneficial
ownership by Monsanto of Class A Stock, Class B Stock and Common Stock.
Opinion of Financial Advisor. In connection with its consideration of the
Transactions, the Board of Directors received the written opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), dated January 31,
1996, that as of such date, the Transactions, taken as a whole, were fair to the
Company and its shareholders from a financial point of view. Merrill Lynch's
opinion does not constitute a recommendation to the Company's shareholders as to
whether they should tender their shares of Class B Stock pursuant to the Offer.
A copy of such written opinion of Merrill Lynch, which sets forth certain
assumptions made, matters considered and limits of the review by Merrill Lynch
in rendering such opinion is attached hereto as Exhibit A and filed as Exhibit
11 to this statement. The Company's shareholders are urged to read this opinion
in its entirety.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated January 16, 1996 between the Company
and Merrill Lynch (the "Engagement Letter"), Merrill Lynch was engaged to act as
the Company's exclusive financial advisor in connection with the Transactions
and to render an opinion to the Board of Directors as to the fairness from a
financial point of view of the Transactions taken as a whole.
Merrill Lynch is entitled to be paid $1,600,000 in cash in accordance with
the Engagement Letter upon the Closing or upon the first purchase of shares
pursuant to the Offer. The Company has also agreed to reimburse Merrill Lynch
for certain out-of-pocket expenses. In addition, the Company has agreed to
indemnify Merrill Lynch and its affiliates and their respective directors,
officers, employees, agents and controlling persons from and against certain
losses, claims, damages and liabilities, including liabilities arising under
federal securities laws, relating to or arising out of the Transactions or the
engagement of Merrill Lynch under the Engagement Letter. If such indemnification
is not available, the Company has agreed to contribute to such losses, claims,
damages and liabilities in the proportion that the relevant financial benefit to
the Company bears to the relevant financial benefit to Merrill Lynch.
Merrill Lynch has, in the past, provided financial advisory and financing
services to the Company and Monsanto and has received fees for the rendering of
such services. In the ordinary course of Merrill Lynch's business, it may
actively trade the securities of the Company and Monsanto for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Other than as described in Item 3(b)(1) with respect to the grant of
stock options and in Item 3 under the caption "Shareholder Agreements" and
except as described in this Item 6(a), no transactions in shares of Class B
Stock or in shares of Class A Stock have been effected during the past 60 days
by the Company or by any executive officer, director, affiliate or subsidiary of
the Company.
On December 18, 1995, Charles C. Roberts and Mary R. Roberts, as
co-trustees of a trust of which they are the sole beneficiaries, exchanged: (i)
4,800 shares of Class A Stock for 4,800 shares of Class B Stock held by Douglas
C. Roberts, as sole trustee of a trust of which he is the sole beneficiary; (ii)
4,800 shares of Class A Stock for 4,800 shares of Class B Stock held by Virginia
Roberts Holt, as sole trustee of a trust of
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which she is the sole beneficiary; and (iii) 4,833 shares of Class A Stock for
4,833 shares of Class B Stock held by John T. Roberts, as sole trustee of a
trust of which he is the sole beneficiary.
(b) As described above, each of the Major Class A Stockholders has agreed
not to tender shares in the Offer. To the best of the Company's knowledge, no
other executive officers, directors or affiliates of the Company intend to
tender to Monsanto, pursuant to the Offer, shares of Class B Stock which are
held of record or beneficially owned by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Item 3(b) or 4 above (the provisions of which
are hereby incorporated by reference), no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company, (iii) a tender offer for or other acquisition of securities by or of
the Company, or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 3(b) or 4 above (the provisions of which
are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
Exhibit 1. Investment Agreement dated as of January 31, 1996 between the Company and
Monsanto (incorporated herein by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated January 31, 1996).
Exhibit 2. Press Release dated February 1, 1996 (incorporated herein by reference to
Exhibit 99.2 to the Company's Current Report on Form 8-K dated January 31,
1996).
Exhibit 3. Pages 3, 4, 6, 7 and 9 through 12 of the Proxy Statement, dated December 4,
1995, of the Company.
Exhibit 4. Registration Rights Agreement dated as of January 31, 1996 between the Company
and Monsanto.
Exhibit 5. * Collaboration Agreement and License dated as of January 31, 1996 between the
Company and Monsanto.
Exhibit 6. * Corn Borer-Protected Corn License Agreement dated as of January 31, 1996
between the Company and Monsanto.
Exhibit 7. * Glyphosate-Protected Corn License Agreement dated as of January 31, 1996
between the Company and Monsanto.
Exhibit 8. * CaMV Promoter License Agreement dated as of January 31, 1996 between the
Company and Monsanto.
Exhibit 9. Confidentiality Agreement dated May 16, 1995.
Exhibit 10.** Form of letter to shareholders of the Company dated February 7, 1996.
Exhibit 11.** Opinion of Merrill Lynch dated January 31, 1996.
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* Agreement subject to a request for confidential treatment.
** Included in copies mailed to stockholders of the Company.
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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.
By: /s/ THOMAS R. RAUMAN
------------------------------------
Name: Thomas R. Rauman
Title: Chief Financial Officer
Dated: February 7, 1996
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EXHIBIT A
Investment Banking Group
5500 Sears Tower
Chicago, Illinois 60606
312 906 6200
FAX 312 906 6262
[Merrill Lynch Logo]
January 31, 1996
Board of Directors
DEKALB Genetics Corporation
3100 Sycamore Road
DeKalb, Illinois 60115
Gentlemen:
DEKALB Genetics Corporation (the "Company") and Monsanto Company (the
"Partner") propose to enter into certain agreements pursuant to which (i) the
Company will issue shares of Class A voting stock, without par value (the "Class
A Stock"), at a purchase price of $65 per share in cash (such shares to
represent 10% of the outstanding shares of Class A Stock after expiration of the
Offer and after giving effect to the issuance thereof) and 378,000 shares of
Class B non-voting stock, without par value (the "Class B Stock"), at a purchase
price of $65 per share in cash to the Partner pursuant to an Investment
Agreement, dated January 31, 1996, between the Company and the Partner (the
"Investment Agreement"); (ii) the Partner will make a tender offer to the
holders of shares of Class B Stock for up to 1.8 million shares of the Class B
Stock, at $71 per share, net to such holders in cash pursuant to the terms and
conditions of the Investment Agreement; and (iii) the Company and the Partner
will collaborate in the development and marketing of certain products pursuant
to certain Collaboration and Licensing Agreements, dated January 31, 1996,
between the Company and the Partner (the "Collaboration Agreements"). The
transactions contemplated by the Investment Agreement and the Collaboration
Agreements are collectively referred to herein as the "Transactions."
You have asked us whether, in our opinion, the Transactions, taken as a
whole, are fair to the Company and its shareholders from a financial point of
view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended August 30, 1995;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company, furnished to us by the Company;
(3) Conducted discussions with members of senior management of the
Company concerning its businesses and prospects and the prospects of the
relevant assets of the Partner;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be reasonably similar to the Company;
30
(5) Compared the results of operations of the Company with that of
certain companies which we deemed to be reasonably similar to the Company;
(6) Compared the proposed financial terms of the Transactions with the
financial terms of certain other strategic alliances which we deemed to be
relevant;
(7) Reviewed drafts of the Collaboration Agreements and Investment
Agreement dated January 31, 1996; and
(8) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary.
In preparing our opinion, we have assumed and relied upon the accuracy and
completeness of all information that was available to us from public sources and
that was supplied or otherwise made available to us by the Company. We have not
assumed any responsibility for independent verification of such information or
any independent valuation or appraisal of any of the tangible or intangible
assets of the Company. With respect to the financial forecasts furnished by the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Company's management as
to the expected future financial performance of the Company and the financial
effects of the Collaboration Agreements. In connection with the preparation of
this opinion, we have not been authorized to solicit, nor have we solicited or
evaluated, any alternative transactions with third parties. Our opinion is based
upon market, economic, financial and other conditions as they exist and can be
evaluated as of the date hereof.
Our opinion set forth below is directed to the Board of Directors of the
Company and does not constitute a recommendation to any stockholder of the
Company with respect to the Transactions or as to whether they should tender
their shares of Class B Stock pursuant to the Offer.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Transactions and will receive a fee for our services,
which is conditioned upon the completion of the Transactions. In the ordinary
course of our business, we and our affiliates may actively trade the debt and
equity securities of the Company and the Partner for our or their own accounts
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities. We have, in the past, also provided
financial advisory services to the Company and the Partner and have received
fees for the rendering of such services.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the proposed Transactions, taken as a whole, are fair to
the Company and its shareholders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Barbara Heffernan
------------------------------------
Investment Banking Group
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
Exhibit 1. Investment Agreement dated as of January 31, 1996 between the Company and
Monsanto (incorporated herein by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated January 31, 1996).
Exhibit 2. Press Release dated February 1, 1996 (incorporated herein by reference to
Exhibit 99.2 to the Company's Current Report on Form 8-K dated January 31,
1996).
Exhibit 3. Pages 3, 4, 6, 7 and 9 through 12 of the Proxy Statement, dated December 4,
1995, of the Company.
Exhibit 4. Registration Rights Agreement dated as of January 31, 1996 between the Company
and Monsanto.
Exhibit 5. * Collaboration Agreement and License dated as of January 31, 1996 between the
Company and Monsanto.
Exhibit 6. * Corn Borer-Protected Corn License Agreement dated as of January 31, 1996
between the Company and Monsanto.
Exhibit 7. * Glyphosate-Protected Corn License Agreement dated as of January 31, 1996
between the Company and Monsanto.
Exhibit 8. * CaMV Promoter License Agreement dated as of January 31, 1996 between the
Company and Monsanto.
Exhibit 9. Confidentiality Agreement dated May 16, 1995.
Exhibit 10.** Form of letter to shareholders of the Company dated February 7, 1996.
Exhibit 11.** Opinion of Merrill Lynch dated January 31, 1996.
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* Agreement subject to a request for confidential treatment.
** Included in copies mailed to stockholders of the Company.