MEMORANDUM OF UNDERSTANDING
WHEREAS, there are now pending several consolidated putative class
action lawsuits in the Superior Court for the State of California, for the
County of San Diego (the "Court"), consolidated under the lead case of LESLIE
SUSSER V. MYCOGEN CORPORATION, ET AL., Case No. 720255 (the "Litigation"),
brought on behalf of the public, minority shareholders of Mycogen Corporation
("Mycogen" or the "Company");
WHEREAS, the Complaint in the Litigation challenges certain actions
allegedly taken or not taken by defendant Dow Agrosciences LLC ("DAS") the
majority shareholder of Mycogen, The Dow Chemical Company ("TDCC"), DAS's
parent, and certain members of Mycogen's Board of Directors, some of whom
are also affiliated with DAS and TDCC, in connection with DAS's April 30,
1998, request to the board of directors of Mycogen to execute a contractual
amendment to permit Mycogen to enter discussions with DAS regarding the
possible acquisition by DAS of all of the outstanding shares of Mycogen common
stock held by persons and entities other than DAS at a price of $20.50 per
share (the "Proposed Transaction");
WHEREAS, following announcement of the Proposed Transaction, the board
of directors of Mycogen formed a Special Committee of disinterested directors
to negotiate with TDCC and DAS regarding the Proposed Transaction, which
Special Committee retained legal and financial advisors to assist in
evaluations and negotiations regarding the Proposed Transaction;
WHEREAS, following the commencement of the Litigation and the filing of
the complaints, plaintiffs' attorneys continued their investigative efforts,
communicated at various times with counsel for the defendants, and, together
with their independent financial advisor, were provided by defendants'
counsel with, INTER ALIA, confidential financial evaluations,
analyses and projections prepared by DAS's financial advisor, Salomon Smith
Barney, and the Special Committee's financial advisor, Wasserstein Perella
and Company, pertaining to Mycogen and the Proposed Transaction, so that
plaintiffs, through their counsel, could convey their position as to a fair
price for Mycogen shares. Plaintiffs attorneys and their independent
financial advisor reviewed these materials and other publicly available
materials filed with the Securities and Exchange Commission with respect to
Mycogen in connection with their communications with defendants' counsel and
their financial advisors;
WHEREAS, the documents provided by defendants' counsel to plaintiffs'
counsel included a draft letter written in August 1997 by Dr. Jerry Caulder,
who had resigned in May 1997 as Chairman of the Board and Chief Executive
Officer of Mycogen, and Thomas J. Cable, a director of the Company, alleging
that TDCC and DAS had not acted in the best interest of the Company with
regard to certain transactions, and various other documents relating to the
matters discussed in the draft letter (collectively, the "Caulder
documents");
WHEREAS, after review of the materials provided by the defendants to
plaintiffs' counsel and their independent financial advisor, and plaintiffs'
counsel's independent review of other pertinent materials, plaintiffs'
counsel and their independent financial advisor, at the request of attorneys
for the defendants, met in person with attorneys and financial advisors for
TDCC, DAS and the Special Committee to discuss the Proposed Transaction and
the ongoing negotiations between TDCC and DAS and the Special Committee and
to present their views;
WHEREAS, the pendency of the Litigation and the communications between
counsel for plaintiffs and defendants and their respective financial advisors
with respect to the above matters, were among the material causal factors
that TDCC, DAS and the Special
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Committee took into account in the course of the negotiations regarding
enhancement of the terms of the Proposed Transaction;
WHEREAS, on August 31, 1998, Mycogen and DAS jointly announced the
execution of a definitive merger agreement (the "Merger Agreement") whereby
DAS, through an acquisition subsidiary, will make a tender offer to acquire
all of the shares of Mycogen common stock that DAS does not already own for a
price of $28.00 per share (the "Tender Offer") and, following the Tender
Offer, if DAS and the acquisition subsidiary obtain at least 90% of the total
shares of Mycogen (on a fully diluted basis), the acquisition subsidiary will
be merged into Mycogen and each remaining shareholder will receive $28.00 per
share for each remaining share of Mycogen common stock;
WHEREAS, plaintiffs' counsel, after consultation with their independent
financial advisor, and after a candid exchange of views with defendants and
their financial advisors, have agreed in principle, subject to the review of
final transaction documents and confirmatory discovery as further set forth
herein, that the enhanced terms of the transaction set forth in the Merger
Agreement result in a transaction that is fair to and in the best interests
of the plaintiffs and the minority shareholders of Mycogen, taking into
account all factors affecting or potentially affected the value and business
prospects of Mycogen;
WHEREAS, defendants deny that they have committed any wrongdoing but
nevertheless believe that is in their best interests to resolve the
Litigation on the basis set forth herein,
WHEREAS, counsel for the parties have reached an agreement in principle,
subject to confirmatory discovery by plaintiffs in the Litigation and the
other terms hereof,
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providing for the settlement of the Litigation (the "Settlement") between and
among plaintiffs, on behalf of themselves and the putative class of persons
on behalf of whom plaintiffs have brought the Litigation, and all defendants,
on the terms and subject to the conditions set forth below;
NOW THEREFORE, as a result of the foregoing and the negotiations among
counsel to the parties, the parties to the Litigation hereby agree as follows:
1. INCORPORATION OF RECITALS: The foregoing recitals are incorporated
into and expressly made a part of this Memorandum of Understanding.
2. STIPULATION AND OTHER SETTLEMENT DOCUMENTS: The parties to the
Litigation will attempt in good faith to agree upon and to execute as soon as
practicable an appropriate stipulation of settlement (the "Stipulation") and
such other documentation as may be required in order to obtain any and all
necessary or appropriate court approvals of the Stipulation and the
Settlement, upon and consistent with the terms set forth in this Memorandum
of Understanding. The Stipulation will expressly provide, INTER ALIA:
(1) CLASS CERTIFICATION: for class certification, conditional on
final Court approval (as defined herein) of the Settlement, pursuant to
Section 382 of the California Code of Civil Procedure of a class consisting
of all persons (other than defendants and their affiliates) who owned common
stock of Mycogen on April 30, 1998, and their successors in interest and
transferees, immediate and remote through and including the closing of the
Merger (the "Class");
(2) NO ADMISSION OF WRONGDOING: that all defendants have denied,
and continue to deny, that they have committed any violations of law and that
they are entering into
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the Stipulation because the proposed Settlement would eliminate the burden
and expense of further litigation;
(3) RELEASE OF ALL CLAIMS: for the release of all claims that
were asserted or could have been asserted in the Litigation by members of the
Class, or any or all of them, and any and all other or additional such claims
by or on behalf of Mycogen itself or the stockholders of Mycogen, against
TDCC, DAS, Mycogen, the Special Committee, each of the members thereof, each
of the current directors of Mycogen and any and all other defendants, as well
as each of their present or former officers, directors, employees, agents,
attorneys, accountants, financial advisors, commercial bank lenders,
investment bankers, representatives, affiliates, associates, parents,
subsidiaries, general and limited partners and partnerships, heirs,
executors, administrators, successors and assigns, whether known or unknown,
under state or federal law, and whether directly, derivatively,
representatively or in any other capacity, arising out of, relating to, or in
connection with, in whole or in part, the Proposed Transaction, the Tender
Offer, the Merger, the Merger Agreement, the Caulder documents or any of the
matters alleged in them, any disclosures made in connection with any of
these, or any other matter affecting or alleged to affect the sufficiency or
fairness of the consideration offered or paid in the Tender Offer or the
Merger on any basis whatsoever, except for statutory appraisal rights (the
"Settled Claims"). In addition, Mycogen shall release TDCC, DAS and each of
their present or former officers, directors, employees, agents,
representatives, affiliates, parents, subsidiaries, successors and assigns,
from any and all claims arising out of, relating to, or in connection with,
in whole or in part, their fiduciary duties as majority or controlling
shareholders or directors of Mycogen, including without limitation any of the
matters alleged in the Caulder documents.
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(4) DISMISSAL: for the dismissal of the Litigation and all Settled
Claims with prejudice and without costs to any party (except as set forth
below);
(5) OPT OUTS: that the defendants shall in their sole discretion
have the option to terminate the Settlement if potential class members
holding in excess of a certain number of shares of Mycogen (to be agreed upon
in advance by the parties and set forth in the Stipulation) request exclusion
from the class.
3. SUBMISSION TO THE COURT. The parties to the Litigation, through
their counsel, will present the Stipulation and Settlement to the Court for
hearing and approval as soon as practicable following appropriate notice to
the members of the Class and will use their best efforts to final Court
approval of the Stipulation and Settlement, including dismissal of the
Litigation with prejudice and the release of all claims as set forth above.
It is expressly acknowledged that the Tender Offer and the Merger may be
closed prior to final Court approval of the Settlement. As used in this
Memorandum of Understanding, "final COURT approval" of the Settlement means
that the Court has entered an Order approving the Settlement in accordance
with the Stipulation and that Order is finally affirmed on appeal or is no
longer subject to appeal.
4. SUSPENSION OF PROCEEDINGS. Pending the preparation of the
Stipulation and other documents and their presentation to the Court for its
approval, the plaintiffs agree that they shall not move for preliminary
injunction in the Litigation and all parties agree that all proceedings in the
Litigation shall be suspended, except for the confirmatory discovery provided
herein and any other matters as to which the parties may expressly agree.
5. CONFIRMATORY DISCOVERY. The parties shall conduct as expeditiously
as possible such reasonable additional discovery as the parties agree or the
Court orders is
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necessary and appropriate to confirm the fairness and reasonableness of the
terms of the Settlement. Plaintiffs presently anticipate that up to four
depositions will be required in addition to relevant document production in
response to the Request for Production of Documents previously served by
plaintiff's counsel. Plaintiffs reserve the right to withdraw from the terms
of this Memorandum of Understanding and the proposed Settlement in the event
that such discovery reveals that the Settlement is not fair and reasonable.
6. ATTORNEYS' FEES. Conditional upon a Stipulation of Settlement
being executed, Court approval of the Settlement (including the class
certification and release) being granted, and the Court dismissing the
Litigation with prejudice, all in accordance with the Stipulation of
Settlement, plaintiffs' counsel of record in the Litigation will jointly
apply at the settlement hearing to the Court for an award of attorneys' fees
and expenses (including, but not limited to, fees and expenses of plaintiffs'
counsels' independent financial advisor). The parties shall attempt in good
faith to agree on a maximum dollar amount of plaintiffs' counsel's fees
application and, in the event they so agree the fee application shall not
exceed that maximum dollar amount and the defendants will not oppose the
application. In the event the parties are unable to agree on a maximum
dollar amount, plaintiffs' counsel may make a fee petition in any amount,
without limitation, but the defendants shall reserve the rights to make any
and all objections to the petition, or any part thereof, on any relevant
grounds, plaintiffs shall reserve the right to oppose any and all such
objections and pursue any additional relevant discovery pertaining thereto,
and defendants shall reserve the right to oppose such discovery on any
applicable ground. Subject to the conditions set forth in this Memorandum of
Understanding and any order of the Court, any and all attorneys' fees and
expenses awarded by the Court to
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plaintiffs' counsel may be paid by any combination of TDCC, DAS, Mycogen
and/or their successors in interest on behalf of all defendants to the order
of Milberg Weiss Bershad Hynes & Lerach LLP, as receiving agent for
plaintiffs' counsel, within ten days after final Court approval of the
Settlement (as defined in paragraph 3 hereof) and dismissal, with prejudice
and without costs or fees (except as otherwise set forth in this paragraph),
of the Litigation. TDCC, DAS and/or Mycogen or their successors in interest
shall also cause the dissemination of notice of the Settlement to the Class
in such manner as the Court determines to be appropriate, and shall pay all
costs and expenses incurred in providing such notice to the members of the
Class.
7. CONDITIONS TO SETTLEMENT. The consummation of the Settlement is
subject to (a) the completion by plaintiffs' counsel of confirmatory
discovery as provided above; (b) confirmation by plaintiffs' counsel
following such confirmatory discovery that the Settlement is fair and
reasonable, (c) drafting and execution of the Stipulation and such other
documentation as may be required to obtain final Court approval of the
Settlement in a form satisfactory to the parties; (d) consummation of the
Tender Offer, and (e) final Court approval of the Settlement and the
Stipulation, including class certification, release, and dismissal with
prejudice as set forth above. The consummation of the Merger shall not be a
condition of this Memorandum of Understanding or of the Settlement. In the
event that the Settlement is not consummated for any reason, neither this
Memorandum of Understanding, anything contained herein, nor anything done or
disclosed by any person or party in connection herewith shall be deemed to
prejudice in any way the positions of any party with respect to the
Litigation. In such event, neither the existence of this Memorandum of
Understanding nor its contents shall be admissible in evidence or shall be
referred to for any purpose in the Litigation or in any other litigation or
proceeding.
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8. COUNTERPARTS. This Memorandum of Understanding may be executed in
counterpart by any of the signatories hereto, including by telecopier, and as
so executed shall constitute one agreement.
9. GOVERNING LAW. This Memorandum of Understanding and the Settlement
contemplated by it shall be governed by, and construed in accordance with,
the laws of the State of California, without regard to California's conflict
of law rules.
10. MODIFICATION. This Memorandum of Understanding may be modified or
amended only by a writing signed by the signatories hereto.
11. BINDING EFFECT. This Memorandum of Understanding shall be binding
upon and inure to the benefit of the parties and their respective agents,
executors, heirs, successors and assigns.
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12. CONFIDENTIALITY OF INFORMATION. All agreements by, between
or among the parties, their counsel and their other advisors as to the
confidentiality of information exchanged between or among them shall remain
in full force and effect, and shall survive the execution of this Memorandum
of Understanding and the consummation of the Settlement, if consummated,
without regard to any of the conditions of the Settlement.
Dated: September 3, 1998 MILBERG WEISS BERSHAD HYNES &
LERACH LLP
By: /s/ Steven G. Schulman
----------------------------------------
STEVEN G. SCHULMAN
SETH OTTENSOSER
One Pennsylvania Plaza, 49th Floor
New York, New York 10119
(212) 594-5300
MILBERG WEISS BERSHAD HYNES &
LERACH LLP
WILLIAM S. LERACH
STEVEN W. PEPICH
RANDALL J. BARON
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
ABBEY, GARDY & SQUITIERI, LLP
DATED: September 3, 1998 By: /s/ Mark C. Gardy
----------------------------------------
ARTHUR ABBEY
MARK C. GARDY
JAMES S. NOTIS
212 East 39th Street
New York, NY 10016
Telephone: 212/889-3700
CO-LEAD COUNSEL FOR PLAINTIFFS
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MAYER, BROWN & PLATT
DATED: September 3, 1998 By: /s/ Bennett W. Lasko
_______________________________________
HERBERT L. ZAROV
BENNETT W. LASKO
190 South La Salle Street
Chicago, IL 60603-3411
Telephone: 312/782-0600
MAYER, BROWN & PLATT
FREDERICK S. LEVIN
350 South Grand Avenue
25th Floor
Los Angeles, CA 90071
Telephone: 213/229-9500
ATTORNEYS FOR DEFENDANTS
DOW AGROSCIENCES, THE DOW CHEMICAL CO.
CARLTON J. EIBL, JOHN L. HAGAMAN,
NICKOLAS D. HEIN, LOUIS W. PRIBILA, G.
WILLIAM TOLBERT, J. PEDRO REINHARD,
ROY M. BARBEE, WILLIAM C. SCHMIDT AND
PERRY J. GEHRING
ALTHEIMER & GRAY
DATED: September 3, 1998 By: /s/ Theodore J. Low
----------------------------------------
THEODORE J. LOW
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
Telephone: 312/715-4000
GRAY, CARY, WARE & FREIDENRICH
ROBERT W. BROWNLIE
401 B Street, Suite 1700
San Diego, CA 92101-4297
Telephone: 619/699-2700
ATTORNEYS FOR DEFENDANTS
MYCOGEN CORP., JOSEPH P. SULLIVAN, AND
GEORGE KHACHATOURIANS
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