SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-K
                                  ANNUAL REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(MarkOne)
[ ]  Annual  report  pursuant to section 13 or 15(d) of the  Securities
     Exchange Act of 1934 [Fee Required] For the fiscal year ended June 30, 1996
     or
[X]  Transition  report pursuant to section 13 or 15(d) of the Securities
     Exchange  Act of 1934 [No Fee  Required]  For the  transition  period  from
     7/1/96 to 12/31/96.

         For the Fiscal Period Ended                 Commission File Number
               December 31, 1996                             0-14802

                                  CALGENE, INC.
                                  (Registrant)

                  Delaware                            68-0369863
       (State or other jurisdiction               (I.R.S. Employer
              of incorporation)                  Identification No.)

                       1920 Fifth Street, Davis, CA 95616
               (Address of principal executive offices) (Zip Code)

        Registrants telephone number, including area code: (916) 753-6313

          Securities registered pursuant to Section 12 (b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  and Exchange Act
of 1934  during the  preceding  12 months (or for such  shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes  X    No
                                        ---      ---
     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )

     The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $222,161,000 as of January 31, 1997, based upon the
closing  price on the NASDAQ  National  Market  System  reported  for such date.
Shares of Common  Stock held by each officer and director and by each person who
owns 5% or more of the outstanding  Common Stock have been excluded in that such
persons may be deemed to be affiliates.  This  determination of affiliate status
is not necessarily a conclusive determination for other purposes.

          66,729,861 shares of Common Stock were Issued and Outstanding
                            as of February 28,1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

Overview

     Calgene is a  biotechnology  company  that is  developing  a  portfolio  of
genetically  engineered  plants  and  plant  products  for the  food,  seed  and
oleochemical industries. The Company's research and business efforts are focused
in three core crop  areas--fresh  produce  (tomato and  strawberry),  edible and
industrial plant oils (canola) and cotton--where Calgene believes  biotechnology
can provide substantial added commercial value in consumer,  industrial and seed
markets.

     In March 1996,  Calgene and Monsanto  Company  ("Monsanto")  entered into a
transaction  (the  "Monsanto  Transaction")  under  which  Monsanto  contributed
Gargiulo,  Inc.  ("Gargiulo"),  $30 million and certain oils and produce related
technology  to Calgene in  exchange  for a 49.9%  equity  interest  in  Calgene.
Gargiulo is a grower, packer, marketer and distributor of tomatoes, strawberries
and other  produce with  operations  in Florida,  California,  Mexico and Puerto
Rico.  In November  1996,  Calgene and  Monsanto  closed a  transaction  whereby
Monsanto purchased 6,250,000 shares of Calgene common stock for $50 million. The
transaction  brought  Monsanto's  equity  investment in Calgene to approximately
54.6%. In January 1997,  Calgene received an unsolicited  proposal from Monsanto
Company to acquire all of the  outstanding  shares of Calgene that Monsanto does
not  already  own  at a  price  of  $7.25  per  share.  The  proposal  is  under
consideration by a special committee of three disinterested Directors.

     Fresh Produce.  The Company is currently  growing,  packing,  marketing and
distributing  traditionally  developed  tomatoes,  strawberries  and other fresh
fruits and vegetables  through its Gargiulo  subsidiary.  Calgene scientists are
using  genetic  engineering  and plant  breeding  techniques  to develop  tomato
varieties  with increased  sweetness and delayed  softening in order to market a
premium quality product.  Calgene  scientists are also seeking to develop tomato
varieties  with  higher  yield  and  virus  resistance  in an  effort  to reduce
production costs. In May 1994, after FDA action, Calgene began commercialization
of the FLAVR SAVR tomato,  the world's first  genetically  engineered whole food
product.  Calgene has also received  regulatory  clearance to commercialize  the
FLAVR SAVR  tomato in Canada,  Mexico and the United  Kingdom.  In fiscal  1995,
Calgene curtailed  production of the FLAVR SAVR tomato and began introducing the
FLAVR SAVR gene into Gargiulo varieties using traditional plant breeding methods
in an  effort to  develop  agronomically  suitable  varieties.  Calgene  is also
seeking to develop  strawberry  plants that resist  diseases and produce berries
with increased sweetness.

     Plant Oils. Calgene is developing genetically engineered canola oils with a
broad  range  of food  and  industrial  applications.  Calgene  scientists  have
genetically  engineered canola varieties that produce substantial  quantities of
laurate,  an important food ingredient and an ingredient in soap,  detergent and
personal  care  products.  Laurate is not  naturally  present in canola or other
non-tropical  oil plants.  To date,  the Company has sold one million  pounds of
Laurical(TM) canola oil and is currently planning for approximately 70,000 acres
of  commercial  production  for  harvest in 1997.  The  Company is also in field
trials with canola plants that have been  genetically  engineered to produce oil
with increased stearate levels, creating a potential substitute for hydrogenated
oils in margarine,  fluid shortening and confectionery  products.  The Company's
subsidiary,  Calgene  Chemical,  manufactures  and  distributes  plant oil-based
chemicals.  Calgene is in the early stage of  developing  polyunsaturated  fatty
acids   ("PUFAs")  in  canola  plants  to  be  sold  to  food   ingredient   and
medical/nutritional markets based on health benefits.

     Cotton.  The Company is currently  selling  genetically  engineered  BXN(R)
cotton  seed and  traditionally  developed  cotton  seed  varieties  through its
subsidiary   Stoneville   Pedigreed  Seed  Company.   Calgene's  cotton  genetic
engineering  program  focuses on reducing  farmers'  growing  costs  through the
development  of  cotton  varieties  that  require  less  pesticides  and  cotton
varieties that produce natural colors.  Herbicide resistant and insect resistant
cotton  varieties have the potential to enable cotton  farmers to  significantly
reduce the total volume of herbicides  and  insecticides  applied,  resulting in
substantial  savings in production  costs,  added  flexibility in crop rotation,
improved yields and benefits to the environment.  The Company  commercially sold
its  genetically  engineered  BXN cotton,  which is resistant  to the  herbicide
Bromoxynil(R)  in 1995  and  1996 at a  price  premium  in  excess  of 41%  over
Calgene's non-genetically  engineered cotton seed. Calgene plans to commercially
introduce cotton varieties  genetically  engineered to contain both the BXN gene
and a Bt gene for resistance to Heliothis,  the principal cotton insect pest, in
1998.  Company  scientists  are in the  early  stages of a  development  program
designed to create cotton  varieties  having  natural fibers which may reduce or
eliminate  the need for dyeing and  provide  unique  color-fastness.  Calgene is
seeking to produce  identity-preserved  genetically  engineered  cotton and sell
premium-priced  colored  cotton  fiber  to the  fabric,  apparel  and  houseware
manufacturers.
<PAGE>

Business Strategy

     Calgene's  business  strategy is to build and grow operating  businesses in
its three core crop areas to facilitate the market  introduction  of genetically
engineered  proprietary  products and to maximize the long-term financial return
from such  products.  Implementation  of this  strategy will provide the Company
with  direct  access to  markets  where it will sell fresh and  processed  plant
products  having improved  quality traits and/or cost of production  advantages,
and to markets where it will sell seed that has been engineered with value-added
agronomic  traits.  Calgene has selected fresh produce (tomato and  strawberry),
edible and  industrial  plant oils  (canola) and cotton as its core crops on the
basis of the following criteria:

     o   Calgene has efficiently  transformed  and regenerated  these crops with
         proven plant transformation methods,  thereby making the crops suitable
         candidates for genetic engineering.

     o   These  crops  offer  significant  long-term  profit  opportunities  for
         genetically  engineered  products  in seed  (input) or crop and product
         (output) markets, or both.

     o   Market  characteristics  offer the Company a realistic  opportunity  to
         attain a leading market share in the input or output markets, or both.

     Calgene  addresses its core crop  opportunities  through a  combination  of
operating  subsidiaries and commercial  partnerships.  The Company is developing
genetically engineered,  premium quality, fresh market tomatoes and strawberries
through its Gargiulo subsidiary. In plant oils, the Company has developed and is
growing  genetically  engineered laurate canola and is developing a portfolio of
genetically  engineered  canola oils, some of which it intends to distribute and
process through its Calgene  Chemical  subsidiary.  Calgene  Chemical  currently
distributes  industrial and edible  vegetable oils, and  manufactures  vegetable
oil-based  specialty  chemicals.  In certain  market  segments where the capital
investment and other commitments  required to serve the markets exceed Calgene's
resources,  the Company has established  relationships  with major  corporations
which have  leading  positions  in the  targeted  segments.  These  arrangements
provide for the other  company to pay  Calgene  royalties  based on  genetically
engineered  product  sales or usage,  to  purchase  genetically  engineered  and
nongenetically engineered plant-based raw materials from Calgene or to assist in
Calgene's product and market  development.  In cotton,  the Company is currently
developing and marketing  conventional seed varieties and genetically engineered
herbicide  resistant  seed varieties  through its  Stoneville  subsidiary and is
developing and intends to market genetically  engineered insect resistant cotton
varieties.

Products and Product Development

     The following table sets forth  Calgene's  primary  genetically  engineered
products and products under development,  the potential commercial  applications
for such products, and the development status of such products:

<TABLE>
<CAPTION>
                                                                                        Product
            Product                          Applications                          Development Status

PRODUCE
<S>                             <C>                                     <C>
FLAVR SAVR Tomato               High quality fresh market tomato with   Commercialization began on a limited
                                delayed fruit degradation               basis in 1994. Varieties with improved
                                                                        agronomic characteristics are currently
                                                                        being developed.

High sweetness tomato           High quality fresh market tomato        Initial target genes have been
                                                                        transformed into tomato plants and are
                                                                        being evaluated.

Virus resistant tomato          Improved crop yields and quality        Plants are currently in field trials for
                                                                        certain RNA viruses.
</TABLE>



<PAGE>



<TABLE>
<CAPTION>
                                                                                        Product
            Product                          Applications                          Development Status

<S>                             <C>                                     <C>
Disease resistant strawberry    Improved  crop yields and longer shelf  Target genes are identified and are
                                life                                    currently being transformed into
                                                                        strawberry plants.

High sweetness strawberry       High quality fresh strawberry           Target genes are identified and are
                                                                        currently being transformed into
                                                                        strawberry plants.

PLANT OILS
Laurical(R)                     Confectionery and other food products   Test market began in 1995.
                                with improved functionality.
                                Alternative source of raw materials
                                for soaps and detergents.

High Stearate Oil               Margarine and shortening ingredient     Rapeseed plants with over 30% stearate
                                that requires no hydrogenation.         in the oil have been produced and are in
                                Liquid shortening.                      field trials.

High Myristate Oil              Butter replacers for baking.  Less      Rapeseed   plants   containing   40%
                                expensive  and more  abundant  source   myristate in oil have been produced in the
                                of raw  materials  for milder soaps     greenhouse.
                                and personal care products.

Medium Chain Fatty Acids/       Less expensive source of raw            Rapeseed plants with  up  to  28%  medium
Medium  Chain   Triglycerides   materials for  high  performance        chain fatty acids have been produced in
                                lubricants, nutritional formulas        the greenhouse.
                                and high energy foods

COTTON
BXN Cotton                      Cotton plants that require less         Commercialization began in 1995.
                                chemical herbicide usage

BXN plus Bt Cotton              Cotton plants that require less         Initial varieties have been developed.
                                chemical herbicide and insecticide      Commercial introduction planned for 1998.
                                usage
</TABLE>

Fresh Produce

     The Company's tomato  operations are conducted through Gargiulo Inc., which
was  contributed  by  Monsanto  to  Calgene  in 1996  as  part  of the  Monsanto
Transaction.   Gargiulo   engages  in  the  growing,   packing,   marketing  and
distribution of tomatoes and strawberries  and, to a lesser extent,  other fresh
fruits and vegetables.  Gargiulo also engages in breeding  research with respect
to tomatoes and, to a lesser extent,  strawberries.  Gargiulo's tomato producing
operations are conducted principally in Florida,  California,  Mexico and Puerto
Rico.  Gargiulo's  berry  production  operations  are conducted  principally  in
northern  California.  Tree  fruits  are grown in  Chile,  and  potatoes,  which
Gargiulo began producing, packing and distributing for the first time in January
1995, are grown in southwest Florida. In order to diversify the product line, in
the early  1980's  Gargiulo's  predecessor  companies  commenced an operation to
grow, cool, market and distribute strawberries in northern California.

     In February 1996,  Gargiulo  acquired  substantially  all of the assets and
certain  specified  liabilities  of the produce  business  conducted  by certain
affiliates  of  Collier  Enterprises  under the trade name of  "Collier  Farms."
Collier Farms is an agricultural producer of fresh tomatoes and other vegetables
in southwest Florida, and engages in the packing,  marketing and distribution of
those products into the commodity markets.
<PAGE>

     Gargiulo  believes  it has  achieved  recognition  among  the  wholesalers,
retailers, brokers and food service entities which it serves, as a reputable and
reliable  supplier  of tomatoes  and  berries.  Gargiulo  intends to continue to
concentrate its efforts in this business and to capitalize,  whenever  possible,
on the  opportunities  to profit in the commodity fruit and vegetable  business.
With its vertically  integrated  structure,  management,  marketing and research
capabilities and its established distribution channels, Gargiulo believes its is
well  positioned to take advantage of  opportunities  in the commodity fruit and
vegetable markets.

     Calgene scientists have genetically engineered the patented FLAVR SAVR gene
into flavorful  tomato  varieties to delay softening so that these varieties can
remain on the vine  longer to allow full  flavor and  texture to develop  before
harvest and be distributed with relatively low rates of spoilage. In view of the
production scale-up difficulties that it has encountered,  Calgene curtailed its
FLAVR SAVR tomato  growing  operations in the Spring of 1996 until it is able to
complete the  development of varieties of FLAVR SAVR tomatoes that have enhanced
commercial  agronomic  qualities.  Calgene,  through  its  Gargiulo  subsidiary,
intends to focus its tomato operations on plant breeding activities necessary to
develop such  enhanced  varieties of its  genetically-engineered  tomatoes,  but
there can be no assurance  that such efforts will be  successful  or will not be
discontinued  by  Calgene.  There  can be no  assurance  that  Calgene  will  be
successful  in  developing  genetically  engineered  tomatoes with the agronomic
characteristics   necessary  for  commercial  production  or  that  it  will  be
successful  in  marketing  a branded  tomato  line.  See  "Risk  Factors - Risks
Applicable to the Branded Tomato  Strategy" and "Risk Factors - Risks Associated
with Production of Genetically Engineered Tomatoes."

     Tomatoes. Gargiulo's principal product is fresh tomatoes. For the six month
period ended December 31, 1996,  Gargiulo packed and shipped  approximately  150
million  pounds of fresh  tomatoes,  which it  produced  through its own farming
operations,  through joint  ventures or  partnerships  with other  growers.  For
Gargiulo's  and its  predecessors'  fiscal years ended June 30, 1994,  1995 and,
1996 and the six month period ended  December 31, 1996,  product  revenues  from
Gargiulo's tomato operations were  approximately  $50.3 million,  $60.1 million,
$77.3 million and $32.1 million, respectively.

     Gargiulo's tomato operations are vertically  integrated with seed research,
production, packing, repacking, distribution, marketing, and sales capabilities.
With  production  available  year round  from its  various  locations,  Gargiulo
believes it is well  positioned for consistent  year round supply of tomatoes to
customers throughout the United States and Canada.

     Approximately 80% of the tomatoes produced by Gargiulo during calendar 1996
were  harvested and processed as green  tomatoes.  Green  tomatoes are typically
packed  into 25 pound boxes and then stored at  65(degree)F  in the  presence of
ethylene gas for one to four days.  This process  allows the tomato to achieve a
deep red color  acceptable  to the retail  consumer  and results in a sufficient
shelf-life  so that the tomato  reaches  the retail  consumer  in an  acceptable
condition.  The vast  majority  of tomatoes  produced  in the United  States are
harvested   green  and   processed  in  this  manner.   Gargiulo,   through  its
participation in a joint venture with a Mexican  partner,  has the capability to
produce  tomatoes  which are ripened on the vine,  packed and then shipped.  The
Mexican  climate  allows for vine ripening  which many retail  consumer  believe
results in a better  tasting  tomato than  tomatoes  which are picked  green and
ripened off the vine.

     Pursuant to a plan approved by Calgene's  Board of Directors in the quarter
ended December 31, 1996,  Gargiulo intends to  significantly  reduce its produce
acreage in  southwest  Florida.  The  reduction  in acreage  is in  response  to
increased competitive pressure from Mexico produce.

     Gargiulo  intends to embark  upon a branded  tomato  program to produce and
market a premium  tomato  under the  Gargiulo  name.  The success of the branded
tomato strategy will depend in large measure on Gargiulo's ability (i) to induce
customers to identify  Gargiulo's premium tomato with the Gargiulo name, (ii) to
induce consumers to pay a premium price for that superior  tomato,  and (iii) to
be able to produce and deliver that tomato to  customers on a consistent  basis.
Based on market research performed by Gargiulo and Calgene's experience with the
FLAVR SAVR tomato,  Gargiulo  believes that there is a sufficient  customer base
willing to pay a premium price for a superior  tomato to justify the significant
amount of money that will be required for marketing and advertising necessary to
promote the branded tomato. Ultimately, Gargiulo's branded tomato strategy is to
provide  advertising,  marketing and promotional  services directly to the major
retail  grocery  chains.  Gargiulo  believes that  retailers  would embrace this
service because it would  contribute to their profit.  It would benefit Gargiulo
by  providing  a  consistent  source of sales  for  Gargiulo's  tomatoes  and by
reducing  Gargiulo's  reliance  on the  commodity  markets.  As  one of the  few
vertically  integrated  commercial fruit and vegetable  growers in the industry,
Gargiulo  intends to use its plant  research  capabilities,  year  round  supply

<PAGE>

capabilities,  geographic and product line diversification and operational skill
to enable it to  produce  tomatoes  suitable  for sale  directly  to the  retail
market.  There can be no  assurance  that  Gargiulo's  efforts  with the branded
tomato will be successful.  See "Risk Factors--Risks Associated with the Branded
Tomato Strategy."

     Berries. During the six month period ended December 31, 1996, Gargiulo grew
approximately 2.1 million flats of fresh  strawberries and cooled  approximately
500,000  flats of fresh  strawberries  through  its own farming  operations  and
pursuant to relationships  with contract growers.  On a smaller scale,  Gargiulo
also cools and markets raspberries, grown by itself and others, and blackberries
and blueberries grown by others.  For the fiscal years ended June 30, 1994, 1995
and 1996,  and the six month period ended  December 31, 1996,  product  revenues
from  Gargiulo's  berry  operations  were  approximately,  $20.8 million,  $23.4
million, $30.8 million, and $16.1 respectively.

     Other Produce. Gargiulo grows red potatoes in southwest Florida. Gargiulo's
strategy is to position  itself to produce  and market  high  quality  fresh red
potatoes  during  the  winter  and  to  take  advantage  of  market  timing  and
potentially  stronger prices in competition with potatoes  obtained from storage
by other producers. As part of its joint venture with a Mexican grower, Gargiulo
produces and distributes  red, yellow and green peppers from Mexico from January
through May. Since the mid 1980's,  Gargiulo and its predecessor  companies have
imported and sold during the winter in the United States,  apricots,  asparagus,
grapes, nectarines,  pears, plums and raspberries from Chile and other South and
Central  American  countries.  Gargiulo,  through  its Chilean  subsidiary,  has
interests,  together with its Chilean partners, in grape vineyards and nectarine
orchards  located in Chile.  Gargiulo's  focus is on importing and  distributing
high quality fruit during the winter months in the United States and Canada.

Plant Oils

     The primary focus of Calgene plant oils  business is the  development  of a
specialty lipid food  ingredient  business that will leverage  Calgene's  unique
genetically  engineered  oils.  Initial  efforts  in this  area are aimed at the
commercialization of Calgene's cornerstone product,  Laurical(R),  a genetically
engineered canola oil containing lauric acid.  Calgene's  secondary focus is the
development   and   commercialization   of  oils   that   contain   long   chain
polyunsaturated fatty acids for food ingredient and  medical/nutrition  markets.
The final area of focus is the  development  and  commercialization  of oils for
industrial markets, in particular,  the oleochemical and oleochemical derivative
markets.

     Specialty Food Ingredients

     In 1996 over 14.7 billion  pounds of plant oils and oil based products with
a value of $3.7 billion were used in U.S.  food  products and  approximately  17
billion  pounds with a value of $4.25 billion were used in Europe.  The majority
of oil markets are commodity based, with purchases driven almost  exclusively by
price. These markets are served primarily by soybean,  sunflower,  canola,  palm
and other  commodity  oils. At any given time,  the prices for these oils seldom
differ by more than $0.05 per pound,  although the entire  commodity oil complex
rises and falls as a function of macro supply and demand conditions.

     Approximately  5% of the edible plant oils market  consists of  specialized
applications  where  ingredients  are  selected  principally  to  meet  specific
functional  requirements.  These specialty lipid markets are served primarily by
fractionated oil products and formulated ingredients  (emulsified oils processed
to achieve specific physical properties).  Each specialty lipid market is served
by a  spectrum  of  products.  In  contrast  to  commodity  markets,  there  are
significant price  differences among these products,  which can range from $0.50
to $2.00 per pound,  but typically do not vary as much over time as do commodity
prices. Functionality of the oil is important in these markets.

     Calgene is  developing a series of  structured  triglyceride  products with
specific saturated fatty acids for the food industry.  These products are unique
because  they produce  combinations  of fatty acids and  triglyceride  structure
which are not available from either natural or cost effective synthetic sources.
Calgene  believes  oils  consisting of these  triglycerides  are, at their price
points,   functionally  superior  to  current  products  in  many  cases.  These
functional  advantages  include  better flavor  release,  mouthfeel,  emulsifier
functionality,  light  reflectance  (allows reduced fat usage in opaque systems)
and air retention in whipped  products.  Upon  development  of an oil prototype,
Calgene  intends to generate the  applications  data  required for  customers to
derive full product benefits.  These data, along with competitive  product data,
should  allow the  determination  of optimum  product  formulation  (crude  oil,
formulated  ingredient,  etc.)  and  positioning  in  each  addressable  market.
Calgene's  strategy  is to  become  a  fully  integrated  specialty  lipid  food

<PAGE>

ingredient  supplier,  either  alone or in  partnership  with an  existing  food
ingredient  company.  The specialty food  ingredient  products  currently  being
developed  and further  described  below include high laurate oil, high stearate
oil, high myristate oil, and medium chain triglycerides.

     Polyunsaturated Fatty Acids

     Polyunsaturated  fatty acids  ("PUFA") are long chain fatty acids which are
produced by a variety of organisms  including algae and fungi. These fatty acids
are also found in fish oil. Recent clinical studies have shown that certain PUFA
have  significant  medical  benefits,  such as  cholesterol  control  and infant
nutrition.  Existing commercial sources of PUFA are fish oils, which are costly,
can contain toxins,  and often cannot be used as food additives due to poor odor
and  taste.  Calgene  has begun a  research  program  to clone the genes that it
believes  will allow  canola  plants to produce  PUFA.  If  successful,  Calgene
intends to sell PUFA products to food ingredient and medical/nutritional markets
based on the oil's health benefits.  PUFA are currently available primarily from
non-crop  sources (fish oils and  fermentation)  but are very  expensive.  Plant
produced PUFA will have a tremendous cost advantage. Also, the research required
to develop PUFA oils has a high level of technical  risk.  Calgene has therefore
chosen to work with strategic  partners who will fund PUFA oil  development  and
provide  the  necessary  clinical  and  marketing   capabilities   required  for
commercialization.

     Industrial Oils

     Approximately  10% of the world's  plant oil  production is consumed by the
oleochemical  industry.  In  particular,  coconut  and palm  kernel oils are key
feedstocks  because  they  contain  laurate,  a fatty acid which  offers  unique
cleansing  and  foaming  properties.  Laurate  based  surfactants  are a primary
ingredient  in the  manufacture  of soap,  detergent  and personal care products
worldwide.  The U.S. oleochemical industry consumed nearly 826 million pounds of
lauric oils worth $350 million in 1995 and 1.4 billion pounds worth $550 million
were  consumed  in Europe.  All of these oils were  imported  because  there are
currently no non-tropical sources of laurate.

     Where applicable,  the Company intends to market its genetically engineered
oils to the  oleochemical  and  oleochemical  derivative  industries  using oils
developed  for  Calgene's  food  ingredient  products.  In the  U.S.,  Calgene's
oleochemical  subsidiary,  Calgene  Chemical,  intends to  develop  oleochemical
derivatives  that  leverage the unique fatty acid  composition  of the Company's
engineered oils. Calgene Chemical develops, manufactures and markets a wide line
of specialty esters,  surfactants,  ethoxylates and other  oleochemicals for the
food,  cosmetic,  soap and  detergent,  sugar,  lubricant  and textile  markets.
Industrial  oil  products  developed or currently  being  developed  and further
described  below include high laurate oil,  high  myristate oil and medium chain
fatty acids.

     Genetically Engineered Oil Programs

     The  discussion  below  describes  the  targets  of  Calgene's  genetically
modified oil programs and the estimated size of the current  product markets for
which  Calgene's  products,   if  developed,   could  serve  as  equivalents  or
substitutes. It should be recognized that Calgene's potential products might not
be competitive with the entire market  identified due to performance and pricing
considerations.  With the  exception of the  Company's  initial  laurate  canola
(Laurical(R))  product  currently being  commercialized,  Calgene's  genetically
modified oil  products  are in various  stages of  development.  These  projects
involve  substantial  technical  challenges  and some are still in the "proof of
concept" phase.  Most of Calgene's  genetically  engineered oil products are not
expected to be commercially  available for several years, and their availability
will  depend  upon,  among  other  things,   achievement  of  certain  technical
objectives in the product development process. See "Research."

     Laurical(R). Calgene has developed and introduced Laurical(R), a novel high
value  structured   triglyceride   with  broad   application  in  food  markets.
Laurate-based  fats  are  used  in  confectionery  applications  that  are  cost
sensitive or require specialized  melting  properties.  Laurate or C12 is also a
key raw  material  for the soap,  detergent,  oleochemical,  and  personal  care
industries.  Currently, commercial sources of laurate are limited to coconut and
palm kernel oils,  which are imported  into the U.S.  primarily  from  Southeast
Asia.  Calgene has isolated and patented a C12 thioesterase gene responsible for
producing  laurate.  DNA constructs  containing this thioesterase gene have been
genetically  engineered  into  canola  plants,  some of which have more than 40%
laurate in the oil. The Company began  commercial  sales of its high laurate oil
in 1995  and  has  sold  the  Laurical  oil to one of the  largest  laurate  oil
consumers  in the U.S.  Calgene  is  currently  evaluating  the  functional  and
commercial  value of its  laurate  canola  oil in edible  applications.  Using a
different gene that they have cloned,  Calgene scientists are also attempting to
further  elevate  the  percentage  of  laurate  in canola  oil to  increase  its
commercial usefulness, particularly for industrial applications.
<PAGE>

     High  Stearate  Oil.  Margarines,   shortenings  and  many  fat-based  food
ingredients are currently  manufactured  from vegetable oils that are chemically
processed  by  hydrogenation  to  increase  the level of solid fat in the oil to
provide  suitable  texture  and  consistency.  Calgene  has  engineered  genetic
constructs into canola plants to increase the levels of the fatty acid stearate.
These high  stearate  oils could have  superior  functionality  with  respect to
melting  point,  taste and  texture  and  other  characteristics.  In  addition,
Calgene's high stearate oils are free of the trans-fatty  acids  associated with
hydrogenation,   which  some   scientists   believe  promote  the  formation  of
cholesterol.  The high level of stearate  will also allow for the  production of
food products without chemical processing (hydrogenation). Calgene is evaluating
these  genetically  engineered  canola  plants  in  both  field  trials  and  in
greenhouses.  Company  scientists  are  currently  attempting  to  increase  the
functionality  of its  high  stearate  oils  for  potential  use in  margarines,
shortenings  and food  ingredients.  The  Company  estimates  that  annual  U.S.
consumption of vegetable oils used in premium  margarines and  shortenings is in
excess of several hundred million pounds. Calgene believes that it could capture
a portion  of that  market  by  producing  canola  oil with  elevated  levels of
stearate  without the expense of  hydrogenation  and the  resultant  trans-fatty
acids.

     High  Myristate  Oil.  Myristate  and its  derivatives  are  potential  raw
materials  for soaps and  detergents  because  they  show  improved  performance
properties  as compared to laurate in certain uses.  Currently  myristic acid is
only available in limited  quantities  and is expensive  compared to other fatty
acids.  Using  a  variety  of  thioesterase   genes,   Calgene  scientists  have
genetically  engineered  canola  plants  that  produce oil  containing  over 40%
myristate.  Efforts are  underway to further  elevate the level of  myristate to
commercial significance.

     Medium  Chain  Fatty  Acids.  Calgene  has  isolated  and  cloned  a C8/C10
thioesterase  gene  responsible for producing Medium chain fatty acids ("MCFA").
DNA  constructs   containing  this   thioesterase  gene  have  been  genetically
engineered  into  canola  plants,  some of which have up to 28% MCFA in the oil.
Efforts  are  currently  underway  to  further  elevate  the  level  of  MCFA to
commercial significance.

     Medium  chain  triglycerides  ("MCT"),  which  are  currently  produced  by
resynthesizing MCFA into triglycerides,  are used as nutritional  supplements to
treat  dietary  disorders  and to provide a ready  source of energy for hospital
patients  recovering from post-surgical  trauma. MCT have also been incorporated
into  an  increasing  number  of  high-oleochemical  feed  stocks  derived  from
genetically  engineered  canola. The Company estimates that world consumption of
MCT are  approximately  22 million  pounds.  Recent  average  prices for MCT are
approximately $1.55 per pound.

     MCFAs  are  also  components  of  high  performance   synthetic   lubricant
ingredients  called  polyolesters.  Currently  available  MCFA are byproducts of
splitting and fractionation of coconut and palm kernel oil for the production of
other fatty acids,  which limits the supply of MCFA. The limited supply and high
cost of MCFA preclude the use of polyolesters in high volume  applications  such
as automotive  lubricants,  for which petroleum  derivatives are currently used,
even  though  polyolesters  often  provide  better  functionality.  The  Company
estimates that annual U.S.  consumption of polyolesters  and of similar products
exceeds 200 million  pounds.  Recent average  prices for MCFA are  approximately
$.90 per pound.

     Genetically Engineered Oil Production

     To  ensure  that  it  will be able to  produce  its  transgenic  oils  cost
effectively in the U.S., Calgene, is developing canola varieties adapted to U.S.
growing regions.  In addition to its own breeding program,  the Company accesses
advanced germplasm through joint breeding and commercial agreements with leading
canola companies in Denmark,  Germany,  France,  Canada and Australia.  Over the
past three years, farmers under contract to Calgene planted over 35,000 acres of
genetically engineered Laurical Canola. Calgene contracted with third parties to
collect  and crush the canola crop and  thereafter  sold the  resulting  oil and
meal.  The objective of this program is to  demonstrate  the  Company's  ability
eventually  to  produce  identity-preserved   genetically  modified  oils  under
contract at a reasonable cost compared with commodity oils. Calgene is currently
growing  16,000  acres of  Laurical  Canola  under  identity-preserved  contract
production for harvest in 1997 and expects to contract for an additional  60,000
acres.

     In December 1996,  Calgene and  Saskatchewan  Wheat Pool ("SWP") executed a
broad  agreement  encompassing  the  development  and  production of value-added
genetically engineered oil products in Canada. SWP will use its breeding program
to develop Canadian adapted,  specialty canola varieties by combining  Calgene's
genetically  engineered oils traits with SWP's germplasm.  SWP will then utilize
its extensive  distribution and crop-handling systems to produce crops in Canada
for Calgene using these varieties.
<PAGE>

     Monsanto Strategic Alliance

     In May  1996,  Calgene  and  Monsanto  executed  a  broad  strategic  cross
licensing  agreement  encompassing the two companies' oilseed research programs.
Under the  agreement,  Calgene  received a royalty  free  license to current and
future  Monsanto  agronomic  technology  for use in  combination  with Calgene's
proprietary oils modification  genes for use in developing  specialty canola oil
product.  Monsanto  received a royalty bearing license to Calgene  technology to
develop  agronomically  superior corn,  soybean,  canola and sunflower crops. In
addition,  Monsanto paid $7 million to Calgene and will pay  royalties  based on
sales of  insect  resistant  corn,  soybean,  canola  and  sunflower  seed  with
increased  oil  content  and  modified  meal   composition   utilizing   Calgene
technology.  Also a part of the  agreement  Monsanto paid Calgene $10 million in
cash to help fund oilseed research and development.  In exchange,  Monsanto will
receive a portion of the future profits from Calgene's specialty oils business.

     Kelco Agreement

     In January  1997,  Calgene  and The Nutra  Sweet  Kelco  Company  ("Kelco")
entered into an agreement to  collaborate  on the  development  of two specialty
vegetable oil products.  Kelco is a wholly owned subsidiary of Monsanto Company.
As part of the agreement, Kelco purchased from Calgene a nonexclusive license to
certain Calgene technology for use in research purposes, an option to expand the
reserach  license to  include  commercialization  rights,  and  certain  product
distribution rights.

Cotton

     Calgene's cotton genetic  engineering program is focused on the development
of  herbicide  resistant  and insect  resistant  cotton  varieties.  The Company
believes that such products will enable cotton farmers to  significantly  reduce
the total  quantities of herbicides  and  insecticides  applied to cotton in the
field. As a result,  Calgene expects significant  environmental benefits as well
as  substantial  reductions in farmers'  production  costs and improved  yields.
Calgene  believes that such cost savings to farmers will enable Calgene to price
genetically engineered seed varieties at a premium to current cotton seed market
prices. In addition, Company scientists are in the early stages of a development
program  designed to create cotton  varieties that produce  colored  fiber.  See
"Research."

     Fourteen  million acres of cotton were planted in the United States in 1996
making it the nation's  fifth largest field crop.  Of this total  acreage,  over
eight  million  acres of "upland  picker"  cotton are  planted in the  southern,
southeastern  and  southwestern  U.S., the balance being lower value  "stripper"
cotton  planted in the high  plains of Texas and  Oklahoma  (approximately  five
million  acres) and specialty  "acala" and "pima" cotton grown in California and
Arizona (one to one and one-half million acres). Calgene estimates that the U.S.
cotton seed market  exclusive of  genetically  engineered  traits has a value in
excess of approximately $100 million per year and produces cotton fiber having a
value in excess of $5  billion  per year at the farm  level.  Cotton  production
requires  the most  intensive  use of  agricultural  chemicals of any major U.S.
field crop.  Cotton  farmers spend over $200 million per year on herbicides  and
$225 to $400 million per year on  insecticides.  The majority of these herbicide
and insecticide costs occur in areas planted with upland picker cotton.  Despite
these costs the U.S. Cotton Council estimates that U.S. cotton growers lose crop
valued at over one billion dollars to weed and insect damage each year.

     Calgene has genetically  engineered varieties of upland picker cotton to be
resistant to the herbicide bromoxynil (BXN cotton).  Rhone-Poulenc  manufactures
and sells bromoxynil under its Buctril(R)  label.  Farmers currently use Buctril
for  broadleaf  weed  control  in  growing  corn and wheat  which are  naturally
resistant to bromoxynil.  However,  cotton,  a broadleaf plant, is not naturally
resistant  to  bromoxynil  and is killed by the  doses of  bromoxynil  which are
administered  to control  broadleaf  weeds.  Weed  control  in cotton  fields is
currently constrained by the lack of post-emergent broadleaf herbicides, such as
bromoxynil,  which are effective at low  application  rates.  Cotton farmers are
therefore limited to using other herbicides,  at high application  rates,  often
resulting  in crop  damage.  Buctril  is  effective  at low doses,  and  rapidly
degrades  in the  environment  in  less  than  two  weeks,  depending  on  field
conditions.

     In April  1995 the  Company  commercially  introduced  its first BXN cotton
varieties,  selling 225 tons of seed. Supply limited,  in April 1996 the Company
sold BXN cotton  seed that was grown on over 50,000  acres.  The BXN cotton seed
was sold at a 41% premium over Calgene's non-genetically engineered cotton seed.
Fiscal 1997  commercial  seed sales are  currently  in progress  with enough BXN
cotton seed to supply up to 400,000 acres.
<PAGE>

     Calgene has transformed  certain of its proprietary  cotton  varieties with
both a gene from a strain of the Bacillus  thuringiensis  ("Bt") and BXN.  These
plants  produce  a Bt  toxin  that  has  demonstrated  the  ability  to  achieve
significant  levels of control of Heliothis (the principal  cotton insect pests)
in  laboratory,  greenhouse  and field  tests.  U.S.  field  trials  with cotton
containing  the Bt genes  have  been  conducted  since  1994.  Calgene  plans to
commercially introduce cotton varieties with both BXN and Bt traits in 1998.

     Calgene  scientists are also genetically  engineering cotton varieties that
produce high quality cotton fiber having unique natural colors.  If successfully
developed,  these  fibers  could  reduce or  eliminate  the need for  dyeing and
provide unique  color-fastness while retaining superior spinning qualities.  The
annual  U.S.  market for dyed cotton  used in apparel  and home  furnishings  is
estimated  to be in excess of $4 billion.  If  successfully  developed,  Calgene
plans to market these cotton fibers directly to textile mills at a premium price
over traditional cotton fiber.

     Stoneville,   Calgene's   cotton  seed   subsidiary   with   operations  in
Mississippi,  Arizona and South Carolina,  holds the second largest share of the
U.S. upland picker cotton seed market with  approximately 9.4% U.S. market share
in 1996. See  "Competition."  Since it was acquired by Calgene in December 1986,
Stoneville  has  expanded  its cotton seed  processing  capacity by acquiring an
Arizona  based  delinting  and  processing  facility  in  1987,  and in  1989 by
constructing  a  highly  efficient   delinting   facility   constructed  at  its
Mississippi  headquarters.  In 1990,  Stoneville  acquired the cotton  assets of
Northrup King Co.,  which  include the Coker  Pedigreed  Seed Company  ("Coker")
cotton seed label,  the Coker  cotton  breeding  program and Coker  cotton sales
accounts, located primarily in the southeastern U.S. and in Spain.

     Stoneville  maintains a conventional cotton breeding program to develop new
cotton varieties with improved yield, earliness,  fiber characteristics,  insect
and  disease  resistance,   and  other  important   agronomic   characteristics.
Stoneville's  newest  variety ST 495,  which was  developed  by  Stoneville  and
introduced  in 1995,  combines  excellent  yield with "smooth  leaf" traits that
improve fiber grades. ST 474, which was introduced in 1994, continues to produce
superior  yields  and  exceptional  yield  stability  across  different  growing
regions. In 1993,  Stoneville  introduced  varieties ST 132 and LA 887 (licensed
from Louisiana State University),  which have demonstrated  excellent  agronomic
performance and superior fiber characteristics.

Research

     Overview

     Calgene believes that it has one of the world's leading  research  programs
in the  application of recombinant  DNA technology to plants.  Over the past ten
years, some of the most significant  advances in plant  biotechnology  have been
reported by Calgene's science team, which at December 31, 1996, was comprised of
168 research  and product  development  scientists  and support  personnel.  The
expertise of the Company's  research  scientists covers cell biology,  molecular
biology,  biochemistry,  plant physiology,  plant pathology,  plant breeding and
microbiology.  Calgene  currently  holds 47 issued U.S.  utility  patents and 20
foreign utility patents and has over 187 utility patent  applications  currently
pending in the U.S. and abroad.  See "Patents and Trade Secrets." Total research
and  development  expenses for the six month period ended December 31, 1996, and
for fiscal years ended June 30, 1996,  1995 and 1994,  were  approximately  $8.4
million, $14.0 million, $15.4 million and $15.6 million, respectively.  Research
and development  expenses  incurred under contract with others for the six month
period ended December 31, 1996,  and for fiscal years ended June 30, 1996,  1995
and 1994,  were $1.7  million,  $4.2  million,  $3.4  million and $2.7  million,
respectively.

     Calgene's  research  strategy has been to establish  itself as a recognized
world leader in the  application  of  recombinant  DNA  technology  to plants by
concentrating  its research efforts and resources on (i) developing  broad-based
expertise in  modification of the plant oils  biosynthesis  pathway and in fruit
and vegetable postharvest  physiology;  (ii) building a portfolio of potentially
useful  agronomic  genes from both internal  discovery  and external  licensing;
(iii)  developing  the most  effective and efficient  plant  transformation  and
regeneration  systems and gene  expression  systems  applicable to targeted core
crops;  and (iv) being the most proficient at integrating  molecular  techniques
with conventional plant breeding.

     The plant  genetic  engineering  process can generally be divided into five
major  phases:  (i)  identification  and  isolation  (cloning) of genes and gene
promoters  (sequences of DNA that regulate gene  expression);  (ii) transfer and
integration  of a gene or  genes  into the  chromosomes  of the  recipient  cell
(transformation); (iii) selection and regeneration of the transformed cells into
whole plants using cell culture methods;  (iv)  verification  that the expressed

<PAGE>

genes  confer  the  desired  trait  (phenotype);  and (v)  genetic  analysis  to
determine  that  successive  generations  consistently  inherit  and express the
desired trait.  Calgene scientists have developed efficient plant transformation
and regeneration systems for tomato,  strawberries,  cotton and canola.  Calgene
has received patents on promoters which  selectively  express plant genes in the
tissue of ripening tomatoes and promoters which selectively  express plant genes
in the seeds of canola plants. These technical tools are necessary to assure the
proper  expression of recombinant  genes.  The Company  believes that patents on
these promoters may provide Calgene with a competitive advantage.

     Calgene is  investigating  a novel method of plant  transformation,  termed
"plastid  transformation."  This  method  allows a high  number of foreign  gene
copies to be  introduced  into plant cells  resulting in a high level of foreign
gene  expression.  Such high protein  levels are desired for a diverse  array of
potential  applications  in  transgenic  plants,  including the  enhancement  of
agronomic  traits.  One advantage of this technology  derives from the fact that
plastid-borne genes are inherited exclusively from the maternal parent, and thus
there is no pollen transmission.  This eliminates any possibility of outcrossing
of  inserted  genes,  and  thereby   facilitates  hybrid  breeding   strategies.
Researchers  at Calgene  have used this  technology  to obtain  foreign  protein
expression levels that constitute 40% of the total soluble protein in the leaves
of transgenic  plants.  Although  plastid  transformation  generally  results in
plants containing the foreign gene in every plant cell,  Calgene scientists have
developed a method to selectively  express  foreign  plastid-borne  genes.  Such
selective  gene  expression  permits the use of this  technology  with a greater
range of gene candidates.  Opportunities in each of Calgene's core crops for the
plastid transformation method have been identified.  In August 1996, Calgene was
granted  two  patents for plastid  transformation  in plants.  The first  patent
provides a method  for  enhancing  expression  of a gene in a plastid by using a
gene sequence  preferred by the plant plastid.  The second patent is co-owned by
Calgene and Rutger's  University  which  covers  expression  of Bt  insecticidal
protein in  chloroplasts.  In  December  1996,  Calgene was granted a third U.S.
patent  for the  system  for the  expression  of  foreign  genes  introduced  in
plastids, and describes expression levels higher than those previously achieved.

Fresh Produce

     Calgene  has  identified  and cloned or acquired  rights to a portfolio  of
genes which  influence  the ripening and post harvest  physiology of many fruits
and  vegetables.  Calgene  scientists  were among the first to  demonstrate  the
ability  to  repress   endogenous   plant  genes  using  antisense   technology.
Specifically,  they have  achieved up to a 99%  reduction  of  polygalacturonase
("PG"),  a  naturally-occurring  enzyme  involved in the  softening of tomatoes,
resulting  in  tomatoes  with  delayed  degradation  and  spoilage   properties.
Calgene's  efforts in this area have  resulted in the issuance of a U.S.  patent
covering  antisense PG in tomatoes as well as a U.S.  patent  covering the broad
use of antisense  technology  in plants.  See "Risk  Factors--Patents  and Trade
Secrets."

     Under a research  collaboration with scientists from  Rousell-Uclaf,  S.A.,
Calgene  scientists  have  cloned a high  activity  gene for  sucrose  phosphate
synthase,  which is believed to play a major role in the production and transfer
of  photosynthate  (sugar) in plant  leaves to  storage in the fruit,  tubers or
roots.  This gene is being  applied to alter the  amount  and  quality of stored
sugars in tomato,  and is  applicable  to a broad range of crops.  In  addition,
Calgene has entered  into  research  agreements  with  several  Universities  to
genetically  engineer  tomato  plants to be  resistant  to a wide range of viral
diseases.  Viral  diseases  are a major  cause of low tomato crop yield and poor
fruit quality.

     Gargiulo began  investing in research and  development in the early 1980's.
At its inception,  the primary focus of the reserach and development  effort was
the seed  development  program,  designed to increase  tomato yield and increase
fruit size.  Research efforts remain  concentrated on obtaining better yield per
acre, and producing a tomato with attributes  such as better taste,  texture and
color. Other tomato research goals include the development of tomatoes which are
resistant to insects,  fungal and bacterial disease, which have high temperature
fruit  set  and  which  have  improved  flavor,  firmness  and  color,  and  the
development  of seeds  designed  to grow best in the diverse  climatic  areas in
which Gargiulo  operates.  The research program has produced  varieties that are
grown by Gargiulo and which Gargiulo believes have resulted in higher yields per
acre than varieties  available from competing seed companies.  Gargiulo believes
that one of the competitive  strengths of its tomato research effort lies in the
ownership of its own seed production  facility in Chile and its tight linkage to
its commercial operations. This affords Gargiulo the opportunity to screen large
numbers of potential commercial varieties in commercial field trials with direct
feedback from the market.
<PAGE>

     Calgene is conducting a research program to genetically engineer strawberry
plants to resist Botrytis, a fungal disease which reduces crop yields and resist
verticillium  and phytopthora to reduce the current reliance on soil fumigation.
Calgene  scientists are also working to genetically  engineer  strawberries with
increased sweetness.

     Plant Oils

     Calgene believes that it has a leading research program to modify plant oil
composition.  Calgene has allocated  the largest  percentage of its research and
development  expenditures to develop a portfolio of genetically  modified canola
oils. Calgene selected canola because of its efficient oil producing  capability
and its  adaptability  to a broad range of North  American and European  growing
regions. Canola also has certain biological  characteristics that make it a good
candidate for genetic engineering.  The primary focus of Calgene's oils reserach
effort  is the  manipulation  and  control  of plant  oil  biosynthesis  through
identification, isolation and use of the genes necessary for specific changes in
plant oil  composition.  These genes can be used in a variety of oilseed  crops.
For certain products,  soybean is currently being evaluated as an alternative to
canola. It is anticipated that Calgene will leverage Monsanto's  capabilities in
these  other  crops.  Calgene's  oils  research  are  working  in three  areas -
modification  of saturate  levels,  modification  of fatty acid chain length and
control of triglyceride  structure. To cost effectively produce its modified oil
products,  Calgene uses plant breeding to convert the plant prototypes developed
by the  research  group  into  agronomically  competitive  cultivars.  The plant
breeding  strategy  calls for the  coordination  of Calgene's own plant breeding
program with leading plant breeding programs in target  production  geographies.
Calgene's  internal plant breeding program focuses on using research  prototypes
to produce breeding lines for use in final variety development. In this process,
Calgene's  plant  breeders  fine  tune  the  chemical  composition  of the  oil,
stabilize  the oil  trait,  and  ensure  that the  breeding  lines have no gross
agronomic  deficiencies.  Calgene's  breeding  partners then use these  breeding
lines  to  develop   agronomically   competitive   cultivars  for  the  targeted
geographies.  Calgene  also has  royalty  free  access to  Monsanto's  agronomic
technology for use in developing specialty oil varieties,  and will utilize this
technology on a broad basis in its product development programs.

     In 1990, Calgene cloned a gene for stearoyl-ACP desaturase, a key enzyme in
the formation of plant oils used in both food and industrial  applications.  The
Company  has  introduced  the  stearoyl-ACP  desaturase  gene into  canola in an
antisense  orientation  and increased the level of the saturated fat stearate in
the oil by more than ten  times.  This was the first  reported  modification  of
vegetable  oil by genetic  engineering.  Calgene is currently  conducting  field
trials to evaluate genetically  engineered canola plants with elevated levels of
stearates.  Trials have been  conducted in Michigan,  Georgia,  South  Carolina,
Alabama and  California,  as well as in Canada and  Scotland.  Rapeseed oil with
higher levels of stearates could be a potential substitute for hydrogenated oils
in margarine, shortening and confectionery products.

     In 1991,  Calgene cloned the gene for lauroyl-ACP  thioesterase,  an enzyme
that plays an important  role in the  synthesis  of laurate,  a medium chain C12
fatty  acid  used in  food  industries  and in  soap,  detergent,  oleochemical,
personal care. Oil containing  laurate is naturally  produced by coconut and oil
palm trees,  but is absent in major  European and North  American  oilseed crops
such as canola and soybean.  Calgene has genetically  engineered the lauroyl-ACP
thioesterase  gene into canola and developed  plants that produce oil containing
over 40% laurate.  This was the first  reported  development of an oilseed plant
producing a fatty acid not  naturally  present in the seed.  Calgene  received a
U.S.  patent on the lauroyl-ACP  thioesterase  gene in March 1994. An additional
U.S.  patent was granted to Calgene in May 1996 that expands the coverage of the
thioesterase  gene.  Calgene is currently working to further elevate the laurate
level in canola oil and increase the commercial usefulness.

     In  February  1993,  Calgene  was  granted  a U.S.  patent  to  genetically
engineered Brassica cells and in August 1993 to genetically  engineered Brassica
cells in  Europe.  Brassica  is the  genus  name for a family  of  plants  which
includes  canola,  broccoli,  cauliflower,  cabbage and brussel  sprouts.  These
patents cover the most efficient  transformation  method for Brassica species in
the industry and is a key technology of Calgene's  proprietary  vegetable  oils.
Calgene has sold  licenses  to other  companies  for use of this  transformation
method in areas outside the Company's  core crop areas.  The European  patent is
currently being challenged in opposition proceedings.

     In June 1994, Calgene scientists announced the cloning of a gene encoding a
ketoacyl-CoA  synthase  which was used to convert  canola  rapeseed  to rapeseed
producing a high erucic oil. Calgene believes that this and similar genes can be
used to develop oilseed varieties  enriched in long chain fatty acids which have
value for industrial and edible applications.
<PAGE>

     In June 1994, Calgene scientists  announced the purification and cloning of
the coconut gene lysophosphatidic acid acyl transferases ("LPAAT").  This enzyme
is  efficient  at placing  short  chain  saturated  fatty  acids into the middle
position of triacylglycerol  molecules during their biosynthesis.  Most oilseeds
including  canola,  soybean,  sunflower and others cannot build  triacylglycerol
molecules with saturated fatty acids in the middle position. Calgene anticipates
that use of the LPAAT gene could  result in the  development  of  oilseeds  with
levels of laurate,  myristate, and medium chain fatty acids at levels as high as
75%. In October 1996 Calgene was granted a U.S.  patent that covers medium chain
LPAAT.

     Using a variety of thioesterase genes,  Calgene scientists have genetically
engineered  canola  plants that produce oil  containing  over 40%  myristate,  a
medium chain C14 fatty acid.  Myristate  and its  derivatives  are potential raw
materials  for soaps and  detergents.  In October  1995,  Calgene  was granted a
patent covering the myristol  thioesterase gene which is potentially  useful for
the development of plants rich in myristate.

     Calgene has isolated and cloned a C8/C10  thioesterase gene responsible for
producing  MCFA.  DNA constructs  containing  this  thioesterase  gene have been
genetically  engineered into canola plants, some of which have up to 28% MCFA in
the oil. MCFA are components of high performance synthetic  lubricants.  Efforts
are underway to further elevate the level of MCFA to commercial significance. In
May 1996 Calgene was granted  patents  encompassing  synthase genes which may be
responsible for increasing the production of C8/C10.

     In May 1995,  Calgene  was  granted  a patent  covering  the seed  specific
promoter  napin,  which is a key  element in many of the  Company's  genetically
engineered plant oils products. Seed specific promoter technology is relevant to
almost every  genetically  modified  oil and meal  product by allowing  specific
control of genes introduced into plant cells by genetic engineering. In the case
of oil modification, seed specific promoters ensure that only plant storage oils
are effected by transgenic oils genes,  without  otherwise  affecting the plant.
Because of the timing and strength of expression, the napin promoter is the most
common promoter used in plant oils genetic  engineering  research.  In July 1996
Calgene was granted a U.S. patent covering the seed specific  promoter BCE4. The
BCE4 gene was isolated to take  advantage of its ability to express  genes early
in canola seed development.

     Cotton

     Under  a  research  collaboration  with  Rhone-Poulenc,   in  1986  Calgene
scientists cloned the BXN gene which encodes an enzyme that degrades bromoxynil,
a broadleaf  herbicide  produced and sold by Rhone Poulenc.  For cotton farmers,
broadleaf weed control is currently inefficient and costly because post-emergent
broadleaf herbicides such as bromoxynil,  which are effective at low application
rates,  are lethal to cotton,  a broadleaf  plant.  Cotton farmers are therefore
limited to using other herbicides at high application  rates, often resulting in
crop damage.  Calgene proprietary cotton varieties  engineered with the BXN gene
show no adverse  effects when  bromoxynil is applied at up to ten times expected
field rates.  By using BXN cotton seed and bromoxynil,  Calgene  believes cotton
farmers will reduce herbicide usage and crop damage and have more effective weed
control.  Rhone-Poulenc owns the BXN gene patent,  which is licensed exclusively
to Calgene for use in cotton.  Stoneville,  Calgene's  cotton  seed  subsidiary,
commercially  introduced its first BXN cotton varieties to U.S. growers in April
1995.

     Calgene has transformed  certain of its proprietary cotton varieties with a
BXN gene linked to a gene from a strain of Bt. These plants produce a toxin that
has  demonstrated  the  ability  to  achieve  significant  levels of  control of
Heliothis,  the principal cotton insect pests. Cotton plants containing both BXN
and Bt were developed by Calgene in 1990 and first field tested in 1991. Patents
covering Bt technology  have been applied for by other  companies,  two of which
have granted Calgene the right to obtain licenses to their technology.

     Calgene is also  conducting  a research  program  to  genetically  engineer
cotton plants to produce fiber with improved or unique characteristics. Research
targets include  developing  colored cotton fibers that require little or no dye
while maintaining its quality spinning characteristics.  Calgene scientists have
demonstrated  from  initial  test  results  that they have  altered the color of
cotton fiber.  Further  research is focusing on enhancing the shade of color. In
July 1996, Calgene was granted a patent covering a gene construct for expression
of the pigmentation gene, melanin, in cotton fiber.

Patents and Trade Secrets

     Calgene  currently  holds 47 issued  U.S.  utility  patents  and 20 foreign
utility patents, three of which have been assigned to contract partners. Calgene
has 187 utility patent applications currently pending in the U.S. and abroad and

<PAGE>

will  continue  to file  patent  applications  in  order to  obtain  proprietary
protection  of  certain  genes,  gene  constructs,  uses of  genes  in  specific
applications  and  methods  for  genetic  engineering  of  plants.  There  is no
assurance that patents can be obtained in a timely fashion,  or if issued,  will
afford Calgene any significant protections.

     In April  1992,  Calgene  was  granted a U.S.  patent  covering  the use of
antisense technology in plants. Calgene is involved in litigation with Enzo, the
licensee of other patents intending to cover the use of antisense  technology in
all cells.  Calgene and the other company have each  challenged  the validity of
the other's patents.  See "Legal  Proceedings." In Europe, a patent intending to
cover  antisense  in all cells has been  granted to Enzo.  Calgene  has filed an
opposition  to the grant of that patent.  Agracetus  has been granted a European
patent  with  claims  intending  to cover the use of  antisense  in all  plants.
Calgene  has  filed an  opposition  to the  grant of that  patent.  In May 1996,
Monsanto  Company  purchased the plant  biotechnology  assets of Agracetus along
with related intellectual property.

     Also  related to  antisense  technology,  Calgene  is a licensee  under the
patent rights held by the Fred Hutchinson Cancer Research Center ("FHCRC").  The
patent application is pending and is seeking to provoke an interference with the
issued Enzo U.S.  patent.  As part of its agreement with the FHCRC,  Calgene has
agreed to indemnify certain patent and litigation costs incurred by FHCRC.

     Calgene's  research  efforts  resulted  in the  issuance  of a U.S.  patent
covering the PG gene which  Calgene  refers to as the FLAVR SAVR gene. In August
1991,  Campbell  licensed  to Calgene the  exclusive  North  American  rights to
produce  and sell fresh  market  tomatoes  containing  the FLAVR  SAVR gene.  In
February 1994,  Calgene,  Campbell and Zeneca A.V.P.,  another  company using PG
gene  technology,  entered  into  an  agreement  under  which  Calgene  acquired
exclusive  worldwide  rights to produce and sell fresh market  tomatoes with the
FLAVR SAVR gene. In November,  1986, Calgene licensed to Kirin Brewery Co., Ltd.
exclusive  commercial rights to the FLAVR SAVR gene in fresh market tomatoes for
Japan, Korea and Taiwan.

     In April 1993,  Calgene  announced the signing of several  cross  licensing
agreements with Monsanto  Company.  The agreements  resolved several current and
potential  patent  conflicts  between the two companies.  Under the  agreements,
Calgene received licenses to Monsanto's patent and patent  applications  pending
in the areas of plant transformation  technologies,  and selectable markers; and
the  right to  obtain  certain  licenses  to  Monsanto's  Bt  insect  resistance
technology for use in cotton.  Monsanto  received  licenses to Calgene's patents
and patents pending in the areas of plant  transformation  of certain plants and
antisense RNA  technology.  Calgene and Monsanto  granted each other licenses to
certain of their respective patents pending in the area of ethylene  repression,
and settled an interference  proceeding at the U.S. Patent and Trademark  Office
directed   toward  CaMV  promoters   which  are  broadly  used  by  agricultural
biotechnology  companies to control gene  expression in  genetically  engineered
plants.  In  January  1994,  Calgene  acquired  rights to obtain a license to Bt
technology owned by Plant Genetic Systems N.V.

     In September 1995,  Calgene and Monsanto entered into an agreement  whereby
Calgene will participate in Monsanto's direct licensing program for Bt cotton in
the U.S.,  subject to the  issuance of a patent to Monsanto  which covers the Bt
gene currently  used by Calgene in its product  development  efforts.  If one or
more patents issue to a party other than Monsanto covering use of the Bt gene(s)
used in Calgene's Bt products,  it may be necessary  for either  Calgene  and/or
Monsanto  to  obtain a license  in order for  Calgene  to  commercialize  its Bt
products.  There is no  assurance  that it will be possible  to obtain  licenses
under such third party patents on commercially reasonable terms, if at all.

     Other patent applications filed by Calgene competitors and others could, if
patents are issued,  preclude Calgene from using, without a license,  technology
and  techniques  basic  to  genetic  engineering  and  to  areas  of  particular
importance  to Calgene.  The extent to which  Calgene may be required to license
such  patents  and the cost and  availability  of such  licenses  are  currently
unknown.

     Some of the Company's  product  development  contracts  require  Calgene to
transfer  intellectual  property  rights,  including  patents,  to the  contract
sponsors, and for Calgene to receive certain license rights.

     Plant varieties may also be protected under USDA's Plant Variety Protection
("PVP") program.  Calgene has several PVP certificates issued and additional PVP
applications pending.

     Calgene also seeks to  strengthen  its  intellectual  property  position by
licensing technology  developed at universities and other corporations.  In some
instances, such licenses are necessary to enable the practice of fundamental DNA

<PAGE>

technology.  In other  instances,  licenses are used to obtain a competitive  or
proprietary position or to enhance Calgene's technology.

     In  addition  to patents,  the  Company  seeks to protect  its  proprietary
know-how as trade  secrets.  Although  Calgene takes  precautionary  measures to
maintain the  confidentiality  of its trade secrets,  there is no assurance that
competitors will not gain access to Calgene's know-how or independently  develop
substantially equivalent know-how.

Competition

     The plant biotechnology industry is highly competitive. Competitors include
independent companies that specialize in biotechnology; chemical, pharmaceutical
and food  companies  that have  biotechnology  laboratories;  universities;  and
public  and  private  research  organizations.   Some  of  these  companies  and
organizations  have greater  financial,  technical and marketing  resources than
Calgene.  Calgene  believes that  maintaining  its leadership  position in plant
biotechnology  will require achieving and retaining  technological  superiority,
attracting  and  retaining  qualified  personnel,   developing   production  and
marketing expertise and developing proprietary products or processes.

     Other    companies   are   developing   and   seeking   to    commercialize
premium-quality,  fresh market tomatoes  developed with recombinant DNA or other
technologies.  DNA  Plant  Technology  Corporation,  a  competing  biotechnology
company has  developed a  vine-ripened  tomato using one such other  technology,
somoclonal  variation,  which it is currently selling.  Competition in the fresh
tomato  market is  expected  to  intensify  as  additional  companies  introduce
tomatoes  developed  through  biotechnology  and as existing  "gas green" tomato
producers react to competitive pressures by growing and marketing  traditionally
developed vine-ripe tomatoes.

     The  tomato  and  berry  markets  in  which  Calgene  competes  are  highly
competitive. In addition to competition from other domestic growers many of whom
have  greater  resources  and are able to produce at lower  costs than  Calgene,
there is increasing  competition from foreign  producers,  particularly  Mexican
growers who are able to compete both on the basis of quality and price. The more
arid  climates in which the Mexican  tomatoes  are grown are  conducive  to vine
ripening.  By contrast,  the wetter  climates in which tomatoes are grown in the
southeastern  United  States  require  that they be picked while still green and
exposed to ethylene gas to promote ripening. Many retail consumers perceive vine
ripened  tomatoes to have  better  flavor than  standard  "gas green"  tomatoes.
Accordingly,  vine  ripened  tomatoes  produced in Mexico may be able to compete
effectively  against gas green  tomatoes  which are the  predominant  product of
Gargiulo.  Although Calgene produces vine ripened tomatoes in Mexico and Irvine,
California, such tomatoes represented only approximately 20% of Gargiulo's total
tomatoes  produced  during  calendar 1996. In addition,  Gargiulo  believes that
certain provisions in the North American Free Trade Agreement,  coupled with the
sharp  devaluation of the Mexican peso, are primarily  responsible for the below
production-cost  prices that Florida tomato growers  received for their tomatoes
during the 1995/1996  winter season in the United States.  Although  Gargiulo is
not able to predict the  financial  effect  which the surge of Mexican  tomatoes
into the U.S.  will have on its  revenues,  it  expects  that the large  supply,
combined with the  vine-ripening  characteristics  that some consumers find more
attractive than gas green tomatoes,  will continue to have a significant adverse
impact  on  the  revenues  of  Florida  tomato  growers,   including   Gargiulo.
Furthermore,  in the event the branded tomato strategy is successful,  there can
be no assurance that Calgene's competitors, many of whom have greater resources,
will not be able to duplicate  such  strategy and produce  branded  tomatoes for
sale at premium prices.  In such event, the success of Calgene's  branded tomato
strategy may he adversely affected.  See "Risk Factors --Potential  Inability to
Successfully Produce or Market the Branded Tomato."

     Stoneville  sells upland picker cotton seed which is grown in the southern,
southeastern  and  southwestern  U.S.,  areas  which  constitute   approximately
one-half of the U.S. cotton acreage.  Stoneville's  primary  competitor is Delta
and Pine  Land  Company,  which  the  Company  believes  has a  market  share of
approximately  65%.  Stoneville  has the  second  largest  market  share.  Other
competitors  have  smaller  market  shares.  Calgene  believes  that a  farmer's
decision to purchase a particular  variety of cotton seed has traditionally been
based upon both price and performance  criteria,  including yield, fiber length,
strength and  maturity.  Calgene  expects  that the  herbicide  and  insecticide
resistant  characteristics  of its  BXN and Bt  cotton  varieties  will  also be
important factors in the farmer's decision.

     Calgene  Chemical  manufactures  and markets  specialty  oleochemicals  and
surfactants and food ingredient  products which are price sensitive.  The market
for such products is highly competitive.



<PAGE>


Government Regulation

     Regulation by federal,  state and local government  authorities in the U.S.
and by foreign  governmental  authorities  will be a  significant  factor in the
future production and marketing of Calgene's  genetically  engineered plants and
plant products.

     The  federal  government  has  implemented  a  coordinated  policy  for the
regulation of biotechnology  research and products. The USDA has primary federal
authority  for the  regulation of specific  research,  product  development  and
commercial  applications of certain  genetically  engineered plants. The FDA has
principal  jurisdiction  over plant  products  that are used for human or animal
food. The EPA has jurisdiction over the field testing and commercial application
of plants genetically  engineered to contain pesticides.  Other federal agencies
have jurisdiction over certain other classes of products or laboratory research.

     The USDA  regulates  the growing  and  transportation  of most  genetically
engineered  plants and plant products.  In October 1992 following a request from
Calgene, the USDA issued a determination that allows the growing and shipping of
the initial  varieties of the FLAVR SAVR tomato anywhere in the U.S. in the same
manner as conventionally  developed  tomato.  Laurate canola was de-regulated by
the USDA in October 1994.

     In February 1994, the USDA deregulated  Calgene's herbicide resistant (BXN)
cotton,  allowing  the Company to grow and ship seed of these  varieties  in the
same  manner  as  conventionally   developed  cotton.  The  Company  intends  to
commercialize  cotton with both BXN and Bt in 1998.  Three federal agencies have
authority over this product in the U.S., the  Environmental  Protection  Agency,
the Department of Agriculture and the Food and Drug Administration.  The Company
expects to complete  the review  process with these  agencies  prior to the 1998
season.

     Certain  Calgene  products  will  require  international  approvals as such
products  are either  imported  from the U.S. or grown and  produced in specific
countries.  Europe, through the European Union (EU), Japan and Australia are the
three  regions with defined  regulatory  processes  for  genetically  engineered
products.  Calgene is working with the regulatory agencies in these countries in
an effort to gain approval for its current genetically engineered products.

     In May  1992,  the FDA  announced  its  policy on foods  developed  through
genetic  engineering  (the "FDA Policy").  The FDA Policy  provides that the FDA
will apply the same  regulatory  standards to foods  developed  through  genetic
engineering as applied to foods developed  through  traditional  plant breeding.
Under the FDA Policy,  the FDA will not ordinarily  require  premarket review of
genetically  engineered  plant  varieties  of  traditional  foods  unless  their
characteristics  raise significant safety questions,  such as elevated levels of
toxicants,  or the presence of  allergens,  or they are deemed to contain a food
additive.

     In May 1994,  the FDA announced its  determination,  based on its review of
extensive  data  submitted  by Calgene,  that the FLAVR SAVR tomato has not been
significantly altered with respect to safety or nutritive value when compared to
conventional tomatoes. The FDA also issued a food additive regulation permitting
the use of the  kanr  selectable  marker  gene,  which  encodes  for the  enzyme
APH(3')11 in genetically engineered tomatoes, cotton and canola.

     Calgene has  completed  its  consultation  with the FDA on issues of safety
concerning  BXN cotton and laurate  canola.  The FDA Policy does not require the
submission of data  supporting the safety of a genetically  engineered  product,
but does require that the  developing  company  ensure the safety of the product
guided by the FDA Policy and  consultation  with the FDA. The generation of data
supporting both products' safety has been completed.

     The FDA Policy does not require  that  genetically  engineered  products be
labeled  as such,  provided  that  such  products  are as safe and have the same
nutritional  characteristics as conventionally  developed products. There can be
no assurance that the FDA will not  reconsider  its position,  or that local and
state  authorities will not enact labeling  requirements,  either of which could
have a material adverse effect on marketing of some future products.

     In June 1994,  Calgene filed a request with Health Canada for permission to
sell FLAVR SAVR tomatoes in Canada. The request was filed pursuant to a proposed
Health  Canada  review  process in which Health  Canada is notified of Calgene's
intention  to sell and to  advertise  for sale  FLAVR SAVR  tomatoes  in Canada.
Canada  notified  Calgene  in  February  1995 that it has no  objections  to the
importation  and sale of the FLAVR SAVR tomato.  Calgene also received  approval
from  Agriculture and Agri-Foods  Canada in February 1996 and from Health Canada
in April 1996 which allows the growing and  commercialization  of Laurate canola

<PAGE>

in  Canada.  Calgene  has  received  permission  from  the  Mexican  Health  and
Agriculture authorities to grow and sell the FLAVR SAVR tomato in Mexico.

     In March 1996,  Calgene received  approval from the United Kingdom Ministry
of  Agriculture,  Fisheries and Food that ten different  lines of fresh tomatoes
containing  the  FLAVR  SAVR gene are safe for  consumption.  This was the first
clearance of an unprocessed genetically modified food anywhere in Europe.

     Commercialization  of BXN cotton  required  clearance from the EPA to allow
use of the  herbicide  bromoxynil on cotton  plants.  Bromoxynil is produced and
sold by Calgene's  strategic  partner,  Rhone  Poulenc.  These  clearances  were
received by Rhone-Poulenc on May 5, 1995.

     Calgene's  activities  will be subject to general FDA food  regulations and
are, or may be, subject to regulation  under various other laws and  regulations
including,  among  others,  the  Occupational  Safety and Health Act,  the Toxic
Substances  Control Act, the National  Environmental  Policy Act,  other Federal
water  air and  environmental  quality  statutes,  export  control  legislation,
antitrust  and other  laws.  At the  present  time.  most  states are  generally
deferring to federal  agencies  (USDA or EPA) for the approval of field  trials,
although  all states are  provided a review  period  prior to the  issuance of a
field trial permit.  Failure to comply with applicable  regulatory  requirements
could result in enforcement action,  including withdrawal of marketing approval,
seizure or recall of products, injunction or criminal prosecution.

     The federal regulatory  agencies most involved in the predominant  business
of Gargiulo--the production and marketing of fresh fruit and vegetables--are the
USDA and the FDA.  The USDA sets  standards  for raw  produce  and  governs  its
inspection and certification.  Under the Perishable Agricultural and Commodities
Act ("PACA"),  the USDA exercises broad control over the marketing of produce in
domestic  and  foreign   commerce,   sets   standards  of  fair  conduct  as  to
representations,  sales, delivery,  shipment and payment for goods and regulates
the licensing of produce merchants and brokers.  Gargiulo's  growing  operations
are also subject to substantial oversight by the Environmental Protection Agency
(the "EPA") in matters ranging from the use of fertilizers and pesticides to the
condition of farmland and wetlands  protection.  Of  particular  concern in this
regard  is  the  current  investigation  by  the  EPA  and  other  environmental
regulators  into the  possible  harmful  effects  on the  ozone  layer of methyl
bromide,  a chemical widely used by Gargiulo and other  agricultural  producers.
The USDA also has specific authority, under the Federal Seed Act, to oversee the
quality and labeling of commercial  seed  products,  such as those  developed by
Gargiulo.

     Through its extensive use of farm labor in its growing operations, Gargiulo
is subject to supervision by the United States  Department of Labor,  under both
the Fair Labor Standards Act and the Occupational Safety and Health Act; and the
prevalence  of  foreign   workers  in  this  sector  of  Gargiulo's  work  force
necessarily involves oversight by the Immigration and Naturalization Service.

     Almost every aspect of federal  regulation is  accompanied by regulation on
the state level, in each jurisdiction where Gargiulo has growing and/or research
operations.  In  particular  in  Florida,  the South  Florida  Water  Management
District  regulates  surface water management and irrigation water  withdrawals.
Gargiulo must also, in its Mexican  operation,  comply with the  requirements of
Mexican law, most importantly Mexico's environmental protection law.

Human Resources

     At December 31, 1996 Calgene employed a total of 745 regular employees,  of
whom 168 were research and product development scientists and support personnel,
366 were  production,  farm and  packing  house  employees,  44 were  sales  and
marketing  personnel  and 167  were in  administrative  and  general  management
positions.  In addition Calgene employed  approximately  1,809 seasonal workers.
None of  Calgene's  work  force is  presently  unionized,  although  there is no
assurance that unions,  especially for farm workers,  may not unionize Calgene's
workers in the future.  Calgene  believes its  relations  with its employees are
good.



<PAGE>


Executive Officers

     The executive officers of the Company are as follows:
<TABLE>
<CAPTION>

     Name                Age                            Position                                   Since
     ----                ---                            --------                                   -----
<S>                              <C>
Lloyd M. Kunimoto........43      Acting Chief Executive Officer.....................................1996
Richard J. Stonard.......42      Senior Vice President and Chief Technical Officer..................1995
Christian Leleu..........43      Senior Vice President and Chief Financial Officer..................1996
Andrew Baum..............40      Vice President and President of Oils Division......................1987
William Higgins..........57      Vice President of Human Resources..................................1994
Thomas Hughes............38      President, Stoneville Pedigreed Seed Co............................1992
Michael J. Motroni.......41      Vice President of Finance and Secretary............................1992
Jeffrey D. Gargiulo......45      Chief Executive Officer, Gargiulo, Inc.............................1996
</TABLE>

     The  executive  officers are elected by and serve at the  discretion of the
Board of Directors of the Company.

     Mr.  Kunimoto has been the  President  and Acting Chief  Executive  Officer
since  July  1996.  From  June  1995 to July  1996 Mr.  Kunimoto  served as Vice
President of Strategic Planning and Business Development.  From November 1983 to
June 1995, Mr. Kunimoto served in several senior  management  positions with the
Company.

     Dr. Stonard  joined  Calgene as Senior Vice  President and Chief  Technical
Officer in 1996. Since 1982 Dr. Stonard worked in various  positions at Monsanto
Company,  most recently as Director of Crop Protection  Research for Ceregen,  a
unit of Monsanto.

     Mr. Leleu joined the Company as Senior Vice  President and Chief  Financial
Officer in 1996. Mr. Leleu worked in various positions at Monsanto Company, most
recently as Director of Business Analysis for Crop Protection.

     Mr. Baum joined  Calgene as Director  of  Operations  in 1981,  became Vice
President of Operations  in 1987 and became Senior Vice  President of Operations
in 1991.  Since November 1992, Mr. Baum has been the President of Calgene's Oils
Division.  Mr. Baum is a founding member and is currently  Secretary of the U.S.
Canola Association.

     Mr. Higgins joined Calgene in January 1994 as Human Resources  Director and
was elected  Vice  President of Human  Resources  in May 1994.  Prior to joining
Calgene,  Mr. Higgins  served as Vice  President of Human  resources for Tenera,
L.P. from January 1992 through  December 1993. From April 1988 through  December
1991 Mr. Higgins was President of Consultants in Managing Change.  From February
1982  through  March 1988 he served as Vice  President  of Human  Resources  for
Genetech, Inc.

     Mr. Hughes joined Stoneville Pedigreed Seed Co. in 1988 as Plant Operations
Manager and became  President in 1992. Mr. Hughes is Director of the Mississippi
Seedmen's Association, President of the Mississippi Seed Improvement Association
and is an active member of the Delta Council, Cotton Foundation (National Cotton
Council), and the American Seed Trade Association.

     Mr. Motroni joined the Company in August 1983 and became Controller in July
1986. He was elected Vice President of Finance and Secretary in May 1992.

     Mr. Gargiulo has been Chairman and Chief Executive Officer of Gargiulo L.P.
since 1981 and since March 1996 Chief Executive  Officer of Gargiulo,  Inc., the
successor company to Gargiulo L.P.

Risk Factors

     Management  and  Coordination  of  Operations.  In March 1996,  Calgene and
Monsanto  consummated a transaction under which Monsanto  contributed  Gargiulo,
$30 million and certain oils and produce  related  technology  in exchange for a
49.9% interest in Calgene.  In November 1996,  Monsanto  purchased an additional
6,250,000  shares  of  Calgene  common  stock  at a price of $8 per  share.  The

<PAGE>

transaction  increased  Monsanto's  equity  ownership  interest to approximately
54.6%. The achievement of the anticipated  benefits of the Monsanto  Transaction
will depend in part upon whether the  businesses  of Calgene and Gargiulo can be
managed and coordinated in an efficient and effective  manner,  and there can be
no assurance that this will occur. The difficulties of managing and coordinating
the  businesses  of Calgene and  Gargiulo  may be  increased  by the  geographic
separation of the organizations and their decentralized managements.

     Significant  Influence  by Monsanto  and  Possible  Conflicts  of Interest.
Monsanto owns 54.6% of the outstanding  shares of Common Stock and has the right
to designate  five of the nine members of the Calgene Board under a Stockholders
Agreement.  Monsanto has the right to designate additional directors if and when
its percentage ownership of Calgene Common Stock increases. In addition, certain
actions may not be taken by Calgene  without the  approval  of  Monsanto.  Also,
Monsanto is obligated,  subject to certain terms and  conditions,  to lend up to
$40 million to Gargiulo,  and up to $15 million annually for the two year period
ended September 30, 1998,  although not more than $15 million may be outstanding
thereunder  at any one time.  As of December 31, 1996,  $24.8 million of the $40
million credit facility was  outstanding.  The credit  facility  agreements each
contain various  covenants  precluding  Calgene and its subsidiaries from taking
certain  actions  without the  approval  of  Monsanto.  Also,  in the event of a
default by Calgene under the Calgene credit  facility  agreements,  Monsanto has
certain  rights to convert the  outstanding  principal  and interest  under such
agreements  into  additional  shares of Calgene  Common Stock at the then market
value of the Calgene Common Stock, and any such conversion  could  substantially
dilute the  ownership  interests of other Calgene  stockholders.  It is possible
that  Monsanto's  interest  as a  stockholder  of Calgene  may  differ  from its
interest  as a lender,  and  there can be no  assurance  that  actions  taken by
Monsanto  pursuant to the exercise of its various rights under the  Stockholders
Agreement,  and the credit facility  agreements will be in the best interests of
all other stockholders of Calgene.

     Possible Need for Additional  Financing.  Calgene  expects its current cash
balances and the proceeds of the credit facility agreements and other bank lines
of credit  expected to be available to Calgene,  will be  sufficient to fund its
operations for the foreseeable  future.  However,  such  expectation is based in
part on the  achievement  of the operating  plans of Calgene and there can be no
assurance such operating plans will be achieved. Also, there can be no assurance
that all of Calgene's  expected sources of funds will be available.  On February
28,  1997,  the Company  replaced a $13 million  line of credit with Harris Bank
with a $20 million  line of credit  with Bank of America ("B of A").  The B of A
facility  expires on December 1, 1999.  Credit  increases  to $30 million  after
December 31, 1997 and to $40 million  after  December 31, 1998,  are  available.
While  Monsanto  has agreed to make a $40 million  loan  available  to Gargiulo,
further  advances  under  such loan are  subject to the  achievement  of certain
milestones,  and are to be used solely to fund the branded  tomato  strategy and
are  repayable  out of specified  portions of the  cumulative  free cash flow of
Gargiulo.  While  Monsanto  has agreed to advance up to $15 million  annually to
Calgene until  September 30, 1998,  not more than $15 million may be outstanding
thereunder  at  any  one  time.  Except  as  described  above,  Monsanto  has no
obligation to loan or otherwise  contribute  additional cash to Calgene. For all
the foregoing  reasons,  there can be no assurance  that Calgene will be able to
obtain any future required financing on favorable terms, if at all.

     History of Losses;  Uncertainty of Future  Financial  Results.  Calgene has
incurred  aggregate net losses of  approximately  $338 million from inception in
1981 through December 31, 1996,  including research and development  expenses in
excess of $208  million.  The net loss for Calgene in the six month period ended
December 31, 1996 was $63.9 million,  including  asset  write-downs and reserves
totaling  $32.6  million  pursuant  to a plan  approved  by  Calgene's  Board of
Directors  to  significantly  reduce  Gargiulo's  produce  acreage in  Southwest
Florida.  The  reduction  in acreage is in  response  to  increased  competitive
pressure from Mexico produce.  Calgene expects to incur a net loss in the fiscal
year ended  December  31, 1997.  There is no  assurance  that some or all of the
factors  which  caused  these  historical  losses  will not be present in future
periods or that  Calgene  will be able to overcome  these or other  problems and
achieve  profitability  in the highly  unpredictable  and volatile fresh produce
business.

     Potential  Inability to Successfully  Produce or Market the Branded Tomato.
Calgene  intends to market a premium  quality  branded tomato under the Gargiulo
brand name, as part of its branded  tomato  strategy.  A branded  tomato program
requires the production of a tomato which consistently and uniformly combine the
characteristics  and  attributes  retail  consumers  generally  look  for in the
tomatoes they purchase,  such as pleasing flavor, tempting color, and good size,
shape and  firmness.  Calgene  believes  that  such  tomatoes,  if  successfully
produced and marketed, would gain brand recognition and that a sufficient number
of retail  consumers  would be willing to pay a premium price for such tomatoes.
However, to date, no grower or shipper has successfully  produced and supplied a
branded tomato on a nationwide basis.  While Calgene believes the development of

<PAGE>

a successful  branded  tomato  program is  achievable,  it recognizes  that such
development will take a significant amount of time, effort and capital.  Even if
Calgene is able to produce tomatoes suitable for a branded program, there can be
no assurance that retail  consumers will be willing to consistently  pay premium
prices for such tomatoes.  Because Gargiulo has been principally  engaged in the
commodity  tomato  business,  and has  little  experience  in the  fresh  tomato
business,  Calgene  will have  little  or no  marketing  experience  of the type
required for a branded tomato program. There can be no assurance that Calgene' s
marketing efforts will be successful.

     Funding of Branded  Tomato  Strategy.  Upon the terms and conditions of the
Gargiulo  Credit  Facility  Agreement,  Monsanto has made available to Calgene a
revolving credit facility of up to $40 million.  The proceeds of loans under the
Gargiulo Credit Facility  Agreement are to be used solely to support the branded
tomato  strategy  (other than amounts used to finance $10 million of  borrowings
made by Gargiulo to finance the  Collier  Transaction  and to allow  Gargiulo to
make an approximate $2 million  payment to Monsanto  pursuant to the Development
Agreement).  In order to obtain an  advance  from  Monsanto  under the  Gargiulo
Credit  Facility   Agreement,   Calgene  must  provide   reasonably   acceptable
documentation  to Monsanto  verifying that certain  milestones have been reached
and certain goals have been  achieved,  all as set forth in the Gargiulo  Credit
Facility  Agreement.  In the event such  milestones  and goals are not achieved,
Monsanto  will have no obligation  to make  advances  under the Gargiulo  Credit
Facility  Agreement  and  Calgene  will  likely be  unable to obtain  sufficient
capital to  support  the  implementation  or  expansion  of the  branded  tomato
program.

     Risks  Associated  with  Production  of  Genetically-Engineered   Tomatoes.
Calgene  has   experienced   difficulties   in  scaling-up   production  of  its
genetically-engineered tomatoes and has temporarily curtailed its tomato growing
operations  until it is able to  complete  its  development  of  varieties  with
suitable agronomic characteristics.  There can be no assurance that Calgene will
be  able  to   accomplish   such   development   or   production   scale-up   of
genetically-engineered  tomatoes. Unless and until such time as Calgene develops
genetically-engineered  tomatoes with agronomic  characteristics  which it deems
sufficient for cost-effective  commercial production,  it will be dependent upon
the sale of tomatoes into the commodity markets.

     Agribusiness Risks. A variety of agribusiness risks affect all of the fresh
produce sold by Calgene, including, without limitation, the following:

     Supply and Demand. The fresh produce business is particularly  sensitive to
fluctuation in supply and demand. When the supply of tomatoes and berries in the
market  exceeds the demand for such  products the market price for fresh produce
may be driven down significantly, in some instances below the cost of harvesting
and  packing.  In such  situations  it may be  uneconomical  to  harvest a crop,
resulting in a total loss of the costs incurred in growing such crop.  Even when
market prices are sufficient to permit recovery of direct harvesting and packing
costs,  prices may not be high enough to permit recovery of growing costs and/or
overhead and other indirect costs.  In addition,  oversupply can also affect the
prices obtained for premium quality  produce.  See "--Risks  Associated with the
Branded Tomato Strategy."

     Limited  Barriers to Entry.  The  relatively low capital  requirements  for
farming permit relatively easy entrance into the fresh produce  business,  which
in turn can result in over-supply.

     Weather. Weather conditions greatly affect the amount of fresh produce that
is brought to market.  and  accordingly,  the prices  received for such produce.
Storms,  frosts,  droughts,  and particularly  floods. can destroy crop and less
severe weather conditions, such as excess precipitation,  cold weather and heat,
can  kill  or  damage  significant  portions  of a  crop,  rendering  much of it
unpackable and unsalable.

     Crop  Disease  and   Pestilence.   Crop  disease  and   pestilence  can  be
unpredictable  and can  have a  devastating  effect  on  crops,  rendering  them
unsalable  and  resulting in the loss of all or a major  portion of the crop for
that  harvest  season.  Even  when only a portion  of the crop is  damaged,  the
profits a grower could have made on the crop will be severely  disrupted because
the costs to plant  and  cultivate  the  entire  crop  will  have been  incurred
although  only a  portion  of it can be  sold.  While  some  crop  diseases  and
pestilence are  preventable  or treatable.  the costs of prevention or treatment
may be high.  Calgene is  attempting  to develop  insect and  disease  resistant
strains  of  tomatoes,  other  produce  and  cotton.  However,  there  can be no
assurance that these efforts will be successful.

     Labor  Shortages  and Union  Activity.  The  production of fresh produce is
heavily  dependent upon the availability of a large migrant labor force in order
to harvest crops. The turnover rate among the migrant labor force is high due to
the strenuous  work,  long hours,  necessary  relocation and relatively low pay.
Further the pool of such workers  willing and able to do such  unskilled  manual

<PAGE>

labor is  shrinking.  To the extent it becomes  necessary to pay more to attract
unskilled  labor to migrant farm work,  labor costs can be expected to increase.
In addition,  compliance with more stringent  immigration laws has increased and
is likely to continue to increase migrant labor costs.

     The  migrant  worker work force has not been  unionized  for the most part,
though  significant  efforts  to form  collective  bargaining  units  or to have
existing ones  recognized has occurred in the past,  particularly  in California
and to a lesser extent,  Southwest Florida.  There can be no assurance that such
union  organizing  activities  will not occur in the future.  If such organizing
efforts  were to occur and be  successful  on a large  scale  labor  costs would
likely increase and there could be work  stoppages,  which would be particularly
damaging in an industry where harvesting crops at peak times and getting them to
market on a timely basis is critical.  The majority of fresh  produce is shipped
by truck and is  therefore  susceptible  to labor  disturbances  in the trucking
industry.  Labor  disturbances in the trucking industry can limit the ability to
get fresh produce to market before it spoils.  Although  Gargiulo has never been
affected  by a  nationwide  truckers  strike,  it has been  affected by regional
strikes  and there can be no  assurance  that  Calgene  will not be  affected by
national or regional labor disruptions in the trucking industry in the future.

     Availability  of  Farmland in Florida and  California.  Calgene  intends to
lease  the  majority  of the  land on which it  grows  its  crops,  particularly
tomatoes.  These leases are generally short term, and as a result,  Calgene will
likely be required to renegotiate many of its leases on an annual basis, thereby
subjecting itself to the possibility of increased rental payments.  In addition,
a  significant  amount  of the  available  land  in  Florida  is  classified  as
"wetlands"  and  subject  to  significant  restrictions  on use.  While  Calgene
believes that the acquisition of Collier Farms by Gargiulo  reduces this risk in
part,  there  can be no  assurance  that  Calgene  will  enjoy the  benefits  it
anticipates as a result of the Collier Transaction.

     Risks  similar to those set forth above are  associated  with the continued
leasing of farmland for the growing of strawberries in California. Additionally,
farmland  along the  California  coast is subject  to the  problem of salt water
intrusion which would be adverse to the growing of strawberries.

     Seed  Sales.  Seed sales can be affected  by U.S.  government  agricultural
policy.   There  is  no  assurance  that  current  or  future  U.S.   government
agricultural  policies  will not have a  material  adverse  effect on  Calgene's
financial results.

     Technological  Change.  The  application  of  recombinant  DNA and  related
technologies  to plants is  complex  and  subject to rapid  change.  A number of
companies  are  engaged in  research  related to plant  biotechnology  including
companies  that rely on the use of  recombinant  DNA as a  principal  scientific
strategy and companies that rely on other technologies.  Technological  advances
by  others  could  render  Calgene  products  less  competitive.  Many of  these
companies,  as  well  as  competitors  that  supply  non-genetically  engineered
products have substantially greater resources than Calgene.  Other companies are
developing and seeking to commercialize  premium quality,  fresh market tomatoes
developed  with  recombinant  DNA  or  other  technologies.   One  of  Calgene's
competitors.  a biotechnology company, has developed a vine-ripened tomato using
one such other technology, somoclonal variation, which it is currently selling.

     Product  Development  Uncertainties.  Although  Calgene has  completed  the
genetic  engineering  of BXN cotton,  BXN cotton  with Bt, and  laurate  canola,
Calgene's  other  genetically  engineered  products  are at  various  stages  of
development. There are difficult scientific objectives to he achieved in certain
product  development  programs  before  the  technological  feasibility  of such
products can be  demonstrated.  Even the more advanced  programs could encounter
technological  problems  that  could  significantly  delay  or  prevent  product
development or product introduction.

     Patents  and  Trade  Secrets.  Since  1992,  Calgene  has been  engaged  in
litigation  with Enzo Biochem  ("Enzo") a company  licensed  under three related
U.S. patents and counterpart  foreign patents (the "Enzo Patents") which purport
to cover the use of antisense  technology in all cells,  including  plant cells.
Some of  Calgene's  products,  including  the FLAVR SAVR tomato,  use  antisense
technology. Enzo claimed that Calgene infringed the Enzo Patents. Calgene denied
infringement  and  challenged  the validity of the Enzo Patents.  On February 2,
1996, the District  Court ruled that the Enzo Patents are invalid.  In addition,
the  validity of a patent  owned by Calgene  directed to the use of antisense in
plant cells was upheld by the District Court.  Meanwhile,  Calgene  subsequently
requested that the court clarify certain aspects of the infringement  portion of
its  decision  and the court has agreed to  reconsider  on this basis.  Enzo has
indicated that it intends to appeal the decision.  If on reconsideration or as a
result  of an  appeal  a court  were to  determine  that one or more of the Enzo
Patents  validly  covers  plant  cells and that such  patents are  infringed  by
Calgene's sales of products  incorporating  such antisense  technology,  Calgene

<PAGE>

could he held  liable  for  significant  damages  and  could be  precluded  from
producing and selling the FLAVR SAVR tomato, as well as other products currently
under development.  There is no assurance that a license, if necessary, could be
obtained by Calgene on commercially  acceptable  terms, if at all. See "Item 3 -
Legal Proceedings."

     The  European  Patent  Office (the "EPO") has granted a patent to Enzo with
respect to claims which are intended to cover the use of antisense in all cells,
including plant cells.  The EPO has also granted a patent to Agracetus,  Inc., a
plant  biotechnology  company  ("Agracetus"),  with claims which are intended to
cover the use of antisense technology in all plants. A preliminary decision from
the EPO indicates that Calgene's opposition to Enzo's patent should be rejected.
Calgene has filed  supplemental  arguments  with the EPO responding to the EPO's
reasoning and providing  additional grounds for invalidation based upon evidence
which surfaced during the course of the U.S.  litigation.  If these  proceedings
are not successful in limiting the scope of the claims of the Enzo patent and if
Calgene is unable to obtain a license to use such antisense technology,  Calgene
could be  prevented  from  expanding  some of Calgene's  genetically  engineered
products,  including tomatoes  engineered with the FLAVR SAVR gene, into Europe.
There  is no  assurance  that  a  license  could  be  obtained  on  commercially
reasonable  terms, if at all. In May 1996,  Monsanto Company purchased the plant
biotechnology assets of Agracetus along with related intellectual property.

     Other companies have applied for patents covering Bt technology. If patents
were to be issued to other  companies,  Calgene  would be  required  to obtain a
license to employ the Bt gene in commercial products. There is no assurance that
such 1icenses could be obtained on  commercially  reasonable  terms,  if at all.
Calgene has rights to obtain  certain  licenses to Monsanto's Bt technology  and
has licensed Plant Genetics systems issued Bt patent.

     U.S.  patents  have been  issued to  Agracetus  for the  transformation  of
cotton.  Calgene has obtained a license from  Agracetus for non-fiber  uses. The
patents are now in  reexamination  before the U.S. Patent Office and some claims
have been  indicated as allowable by the  Examiner.  Once the  reexamination  is
completed,  Calgene may  determine  that a license under these patents is needed
for its genetically engineered cotton fiber products. There is no assurance that
such a license could be obtained on commercially  reasonable terms if at all. In
May 1996,  Monsanto  Company  acquired from  Agracetus its technology for cotton
fiber improvement.

     A U.S. patent has been issued to a competitor for a genetic component which
is  currently  used in Calgene  FLAVR SAVR  tomato.  Although  alternatives  are
available,  in the event Calgene would be prevented  from utilizing this genetic
element,  it would cause  disruption in the  production of FLAVR SAVR  tomatoes.
Analysis  of  this  patent  is  currently  underway.  In the  event  that  it is
determined that a license is necessary, there is no assurance that a license can
be obtained on commercially reasonable terms, if at all.

     Patent  applications  filed in the United States are not publicly available
for examination.  Patent  applications filed outside of the United States may be
available for examination, but may not accurately reflect the applications filed
in the United States on the same claimed inventions. Patent application filed or
to be filed in the future by Calgene's  competitors or others could,  if patents
are issued,  preclude  Calgene  from  using.  in the patent  issuing  countries,
technology  and  techniques  basic  to  genetic  engineering  and  to  areas  of
particular importance to Calgene. If Calgene is unable to obtain licenses to use
such technology, there could be a delay in the introduction of some of Calgene's
genetically engineered products in those countries. Whether such patents will be
issued,  the extent to which  Calgene  would be required to license such patents
and the availability and cost of such licenses are currently unknown.

     Calgene has  received  U.S. and foreign  utility  patents and has filed and
will  continue  to file  patent  applications  in  order to  obtain  proprietary
protection  of  certain  genes,  gene  constructs,  uses of  genes  in  specific
applications  and  methods  for  genetic  engineering  of  plants.  There  is no
assurance  that  future  patents  call he  obtained  in a timely  fashion or, if
issued,  will afford  Calgene  significant  protection.  In addition to patents,
Calgene seeks to protect its  proprietary  know-how as trade  secrets.  Although
Calgene  takes  precautionary  measures to maintain the  confidentiality  of its
trade secrets,  there is no assurance that  competitors  will not gain access to
Calgene's know-how or independently develop substantially equivalent know-how.

     Public  Acceptance  of  Genetically  Engineered  Products.  The  commercial
success of  Calgene's  genetically  engineered  products  will depend in part on
public  acceptance of the cultivation and consumption of genetically  engineered
plants and plant  products.  Public  attitudes  may be influenced by claims that
genetically  engineered  plant  products  are unsafe for  consumption  or pose a
danger to the  environment.  There is no assurance  that  Calgene's  genetically
engineered products will gain public acceptance.
<PAGE>

     Government  Regulation.  The field  testing,  production  and  marketing of
genetically  engineered  plants  and plant  products  by  Calgene  is subject to
federal, state, local and foreign governmental regulation. There is no assurance
that  regulatory  agencies  administering  existing  or  future  regulations  or
legislation will allow Calgene to produce and market its genetically  engineered
products  in a timely  manner  or under  technically  or  commercially  feasible
conditions. In addition, regulatory action or private litigation could result in
expenses,  delays or other impediments to Calgene's product development programs
or the commercialization of resulting products.

     Although the U.S. Food and Drug Administration (the "FDA") has announced in
a policy  statement  that it will apply the same  regulatory  standards to foods
developed  through  genetic  engineering as applied to foods  developed  through
traditional plant breeding, genetically engineered food products will be subject
to  premarket  review if they raise  safety  questions  or are deemed to be food
additives. Calgene has completed the safety assessment of its FLAVR SAVR tomato,
BXN(TM)  cotton and laurate canola  products in accordance  with the FDA policy.
There is no  assurance  that  future  Calgene  products  will not be  subject to
lengthy FDA reviews and  unfavorable  FDA  determinations  if they raise  safety
questions or are deemed to be food additive.

     The FDA has announced in a policy  statement  that it will not require that
genetically  engineered products he labeled as such, provided that such products
are as safe, and have the same  nutritional  characteristics  as  conventionally
developed  products.  There can be no assurance that the FDA will not reconsider
its  position,  or that  local and  state  authorities  will not enact  labeling
requirements, either of which could have a material adverse effect on Calgene.

     International regulatory requirements for genetically engineered plants and
plant  products  are only  partially  in  place.  Consequently,  there can be no
assurance  that  additional  data,  labeling or other  requirements  will not be
required in countries  where Calgene  intends to grow and/or  commercialize  its
genetically  engineered  products.  Foreign  regulatory  agencies  could require
Calgene to conduct  further safety  assessments  and  potentially  delay product
development programs or commercialization of resulting products. In addition the
Mexican health and agriculture  authorities  and Health Canada could  reconsider
their respective  positions regarding the marketing of the FLAVR SAVR tomato and
laurate canola.

     The  United  States   Department  of  Agriculture  (the  "USDA")  prohibits
genetically  engineered plants from being grown and transported  except pursuant
to  a   deregulation,   or  under   controls   so   burdensome   as  to   render
commercialization  impracticable.  The only Calgene plants currently exempted by
the USDA are Calgene's  initial tomato varieties  engineered with the FLAVR SAVR
gene,  the BXN cotton  varieties and laurate  canola.  No assurance can be given
that additional Calgene products will be exempted by the USDA.

ITEM 2.  PROPERTIES

     Calgene's principal research and development,  executive and administrative
offices are located in three adjacent buildings in Davis,  California,  totaling
approximately  71,000 square feet.  Each of the  buildings is leased.  Including
options to extend,  the leases expire on 57,000 square feet in the year 2015 and
on 14,000  square feet in the year 2003.  The company owns a 24,000  square foot
greenhouse  facility located on ten acres near its main facility.  An additional
54,000  square  feet of  greenhouse  space  is  leased  near  Galt,  California.
Including options to extend,  the two leases in Galt expire in November 1997 and
July 1998, respectively.

     In Georgia,  the Company leases  approximately  9,300 square feet of office
and laboratory space. With options to extend, the lease expires in March 2002. A
3,000 square foot greenhouse was constructed in 1994 by the Company.

     At Stoneville,  Mississippi,  the Company owns approximately 182,000 square
feet of  production  and  warehouse  space,  including a 16,000 square foot seed
delinting production facility. In addition,  the Company also owns approximately
47,450 square feet of  administrative  and research and development  facilities,
and 123 acres of research land. The Company's Arizona  operations are located on
15 acres of leased land which,  including options to extend,  expire in the year
2018. The Company owns 107,000 square feet of production and warehouse  space on
this leased land.  The  Company's  Stoneville  and Arizona  facilities  have the
capacity to process up to 20,000 tons of bulk cotton seed.

     At its Calgene  Chemical  facility in Illinois,  the Company leases office,
production,  laboratory and warehouse space located on approximately  4.5 acres.
Including options to extend, the lease expires in 2017.
<PAGE>

     Gargiulo's  principal properties presently consist of its executive offices
and sales  offices  and  related  tomato  packing  facility  located  in Naples,
Florida; a research facility in Bonita Springs, Florida; a transplant nursery in
Immokalee, Florida; tomato packing facilities in Quincy, Florida; Santa Isabela,
Puerto Rico; and Firebaugh,  California; a sales office in Nogales, Arizona; and
various  owned and leased  farmland.  Gargiulo  owns or leases  farmland  in and
around Naples and Quincy, Florida; Watsonville, Oxnard, Santa Maria, Irvine, and
Firebaugh,  California;  Santa Isabela,  Puerto Rico. The majority of Gargiulo's
land is leased.

     The Company's facilities are suitable for their respective uses and are, in
general,  adequate  for its needs,  at least  through  1997.  The  research  and
development,  executive and  administrative  offices at the Davis  facility will
accommodate planned growth beyond 1997.


ITEM 3.  LEGAL PROCEEDINGS

     On or about  January  29,  1997,  Hanna  Obstfeld  filed  suit in  Delaware
Chancery  Court  against  the  Company  and  certain of its  directors  alleging
unfairness in connection  with the proposed  acquisition by Monsanto  Company of
those shares of the Company's  common stock which  Monsanto does not own.  After
Ms. Obstfeld brought her suit, other  essentially  identical  actions  followed,
none of which have as yet been served upon the Company.  It is anticipated  that
the complaints will shortly be consolidated and the Company has no obligation to
answer, move or otherwise plead until such time as a consolidated  complaint has
been filed and served.  No discovery  has  occurred to date in this action.  The
Company believes it has meritorious defenses to the allegations set forth in the
pending complaints.

     On February 11, 1997, three named Plaintiffs filed a Class Action Complaint
against  Gargiulo,  Inc. in the United  States  District  Court for the Northern
District  of  California,  San  Jose  Division.  The  Complaint  arose  from the
employment  relationship  between the named and unnamed Plaintiffs and Gargiulo,
Inc.  The  Plaintiffs  allege  certain  violations  of the Migrant and  Seasonal
Agricultural  Worker  Protection Act ("MSPA"),  California's IWC Wage Order, the
California  Labor Code and the  California  Business and  Professions  Code; and
Breach of Contract.  The  Plaintiffs  seek damages  including  all unpaid wages,
statutory  damages under the California  Labor Code; a declaration that Gargiulo
violated MSPA,  monetary  damages  pursuant to MSPA; and for an order  enjoining
Gargiulo,  Inc. from  violations  of MSPA.  Gargiulo's  insurance  carriers were
contacted  regarding this lawsuit.  As of March 27, 1997,  Gargiulo has answered
the  Class  Action  Complaint,  and  is  initiating  discovery  regarding  class
certificaiton.  Gargiulo,  Inc.  is also  waiting  for  the  response  from  its
insurance  carrier.  While the results of the Class Action  Complaint  cannot be
predicted,  the  Company  believes  that the  ultimate  outcome  will not have a
material  adverse  effect on the Company's  consolidated  financial  position or
results of operations.

From 1992 through early 1996, Calgene was engaged
in a litigation with Enzo Biochem,  Inc. ("Enzo") a company licensed under three
related U.S. patents and counterpart  foreign patents (the "Enzo Patents") which
purported to cover the use of antisense technology in all cells, including plant
cells.  Some of  Calgene's  products,  including  the  FLAVR  SAVR  tomato,  use
antisense technology.  Enzo had claimed that Calgene infringed the Enzo Patents.
Calgene denied  infringement and challenged the validity of the Enzo Patents. On
February 2, 1996, the District Court ruled that the Enzo Patents are invalid. In
addition,  the  validity  of a patent  owned by Calgene  directed  to the use of
antisense in plant cells was upheld by the District Court.  Calgene subsequently
requested that the court clarify certain aspects of the infringement  portion of
its decision,  and the court has agreed to reconsider on this basis. There is no
indication  that the court  would  reverse  any aspect of its  original  ruling.
Meanwhile, Enzo has indicated that it intends to appeal the decision.

     Although  the trial  court has the  option of  altering  any  aspect of its
decision  upon  reconsideration,  and Enzo may  appeal  the  decision  after its
publication,   Calgene  believes  that  further  proceedings  will  not  have  a
materially  adverse effect on its consolidated  financial position or results of
operations,  based on the trial court's determination that the SUNY/Enzo Patents
are invalid and not infringed by Calgene and that the Calgene  Antisense  Patent
is valid.

     Nevertheless,  if on  reconsideration  or as a result  of an appeal a court
were to  determine  that one or more of the Enzo  Patents  validly  covers plant
cells and that  such  patents  are  infringed  by  Calgene's  sales of  products
incorporating  such  antisense  technology,  Calgene  could be held  liable  for
significant  damages and could be precluded from producing and selling the FLAVR
SAVR tomato, as well as other products currently under development.  There is no
assurance  that a  license,  if  necessary,  could be  obtained  by  Calgene  on
commercially  acceptable  terms,  if at all. If the court were to determine that
the  Calgene  Antisense  Patent is invalid or  unenforceable,  Calgene  would be
deprived of the  competitive  and licensing  advantages  afforded by its patent.
Moreover,  the Company would have to expense the capitalized  legal fees related
to  the  defense  of  the  Calgene's   Antisense   Patent,   which  amounted  to
approximately $5.7 million at December 31, 1996.
<PAGE>

     On October 18, 1995,  two groups of Plaintiffs  filed  separate  complaints
against  various  Defendants  including  Gargiulo  &  Associates  in the  United
StatesDistrict  Court for the Eastern  District of California.  Both  complaints
arose from the same set of facts and allege the same three theories of recovery.
These  actions were  consolidated.  The cases  involve  personal  injury  claims
relating to vehicle  accident in which  numerous  migrant  labor  workers  being
transported to the farm of Gargiulo & Dresick Associates (which was being farmed
under  contract by Dresick Farms,  Inc.) were killed or injured.  The two cases,
Albertano Alberto Jimenez;  et al. v. Gargiulo & Associates;  Pat Kreger,  Inc.,
Manuel Vegas;  Robles Rios;  Jesus Loza and Samuel  Santiago  Vasquez,  and Jose
Vasquez; et al. v. Gargiulo & Associates; Pat Kreger, Inc., Manuel Vegas; Robles
Rios;  Jesus Loza and Samuel  Santiago  Vasquez,  were both filed on October 18,
1995. The plaintiffs sought general damages, including compensation for pain and
suffering; special damages, including past, present and future medical expenses;
compensation for the loss of past and future income;  and punitive damages in an
unspecified amount.  Gargiulo's insurance carriers have been contacted regarding
these  lawsuits.  As of March 12,  1997,  Gargiulo  was  granted  its Motion for
Summary  Judgment as to all of the claims against it. This matter is now subject
to appeal  which must be filed by no later  than 30 days from entry of  judgment
which will not occur for a few weeks.

     The Company is party to other pending litigation incidental to its business
and has from time to time  been  notified  of  various  claims  that are not the
subject of pending litigation. While the results of litigation and claims cannot
be predicted with certainty,  the Company believes that the final outcome of all
such other  litigation  matters  and claims will not have a  materially  adverse
effect on its consolidated financial position or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual  Meeting of  Shareholders  was held on November  12,  1996.  The
following table shows voting information for each item voted upon:

Nominees for Election as Directors

                                              For               Withheld
                                              ---               --------
         Patrick J. Fortune                56,946,111          1,435,104
         Robert T. Fraley                  56,936,666          1,444,549
         Michael R. Hogan                  56,947,316          1,433,899
         Lloyd M. Kunimoto                 56,974,189          1,407,026
         Howard D. Palefsky                56,929,176          1,452,039
         John E. Robson                    56,978,916          1,402,299
         Roger H. Salquist                 56,800,715          1,580,500
         Allen J. Vangelos                 56,979,186          1,402,029
         Hendrick A. Verfaillie            56,962,636          1,422,216

     With respect to the approval of the Stock  Purchase  Agreement  dated as of
September 27, 1996 ("Stock  Purchase  Agreement")  between  Calgene and Monsanto
Company,  a Delaware Company  ("Monsanto"),  pursuant to which (i) Calgene would
issue  6,250,000  shares of Common  Stock to Monsanto for $8.00 per share for an
aggregate purchase price of $50 million, thereby increasing Monsanto's ownership
interest in shares of Calgene  Common  Stock from 49.9% to  approximately  54.6%
(without  giving effect to the exercise of outstanding  options),  (ii) Monsanto
and  Calgene  would  enter into a  Restated  Stockholders  Agreement  ("Restated
Stockholders Agreement") amending and restating the Stockholders Agreement dated
March 31,  1996  ("Stockholders  Agreement")  and (iii) the  Company's  Restated
Certificate of  Incorporation  would be amended to reflect the amendments to the
Stockholders Agreement contemplated by the Restated Stockholders Agreement,  the
vote  was:  For,  44,639,801;   Against;  1,283,791;  Abstain,  410,793;  Broker
Non-Vote, 12,049,830.

     With  respect to the  approval of an increase in the  authorized  number of
shares of Common  Stock  from  80,000,000  to  100,000,000,  the vote was:  For,
54,814,037; Against, 2,323,281; Abstain, 222,158; Broker Non-Vote, 1,021,739.

     To  confirm  the  appointment  of  Ernst  &  Young  LLP  as  the  Company's
independent auditors, the vote was: For, 57,989,243;  Against, 237,423; Abstain,
154,549.




<PAGE>


ITEM 5.  MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
         STOCKHOLDERS MATTERS

     Calgene's  Common Stock is traded  over-the-counter  on the NASDAQ National
Market under the symbol  CGNE.  The  following  table sets forth for the periods
indicated  the high and low sale  prices  of the  Common  Stock as  reported  by
NASDAQ.

                                                          High             Low
                                                          ----             ---
Fiscal 1996
     Quarter ended September 30, 1995 ....................8.125           6.625
     Quarter ended December 31, 1995......................7.250           4.250
     Quarter ended March 31, 1996.........................7.375           4.500
     Quarter ending June 30, 1996.........................6.875           5.375

Six Months Ended December 31, 1996
     Quarter ended September 30, 1996 ....................6.875           4.250
     Quarter ended December 31, 1996......................6.000           4.375

     As of March 10, 1997, there were  approximately  2,989 holders of record of
the Calgene Common Stock.  Calgene believes that the number of beneficial owners
of Calgene Common Stock is in excess of 31,000.

     All  stockholders of Calgene are urged to obtain a current market quotation
for the Calgene Common Stock.

     Calgene has never  declared or paid cash  dividends  and does not intend to
pay cash dividends in the foreseeable  future.  Future cash  dividends,  if any,
will be determined by the Calgene Board and will be based upon Calgene's  future
earnings,  capital  requirements,  financial  condition and other factors deemed
relevant  by the  Calgene  Board.  In  addition,  the  ability of Calgene to pay
dividends would be restricted by the terms of certain indebtedness of Calgene as
well as the terms of the Calgene  Credit  Facility  Agreement  and the  Gargiulo
Credit Facility Agreement the Company has with Monsanto Company.

Recent Sales of Unregistered Securities

     On November 12, 1996,  Calgene issued to the Monsanto  Company an aggregate
of 6,250,000  shares of Calgene's  Common Stock at a price of $8 per share.  The
shares were issued in reliance upon the exemption from registration set forth in
Section 4(2) under the Securities Act of 1933, as amended.



<PAGE>

ITEM 6.       SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                       SELECTED FINANCIAL DATA
                                                               (In thousands, except per share amounts)

                                              Six Months Ended(4)                        Fiscal Year Ended June 30
                                            ----------------------    -------------------------------------------------------------
                                           December 31,  December 31,
                                              1996         1995         1996         1995         1994         1993         1992
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------

Consolidated statement of
operations data (1):
<S>                                         <C>          <C>          <C>          <C>          <C>          <C>          <C>

Revenues:
     Product sales                          $  69,780    $  19,940    $  95,723    $  48,972    $  35,408    $  24,675    $  18,211
     Product development                          729          850        9,272        6,459        3,025        2,562        3,666
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
          Total revenues                    $  70,509    $  20,790    $ 104,995    $  55,431    $  38,433    $  27,237    $  21,877

Loss from continuing operations             $ (63,934)   $ (16,104)   $ (97,014)   $ (30,602)   $ (42,801)   $ (25,223)   $ (18,616)

Net loss                                    $ (63,934)   $ (16,104)   $ (97,014)   $ (30,602)   $ (42,801)   $ (25,623)   $ (19,916)

Net loss per share (2):
     Loss from continuing operations        $   (1.03)   $    (.53)   $   (2.56)   $   (1.04)   $   (1.71)   $   (1.11)   $   (1.34)
     Net loss                               $   (1.03)   $    (.53)   $   (2.56)   $   (1.04)   $   (1.71)   $   (1.13)   $   (1.42)

Consolidated balance sheet
data:

     Total assets                           $ 173,880    $  78,960    $ 233,302    $  89,231    $  78,312    $  88,401    $  85,223
     Long-term obligations                  $  54,727    $  23,853    $  57,912    $  15,421    $   5,704    $   3,694    $   4,378
     Preferred stock (3)                    $     --     $      --    $      --    $      --    $      --    $      --    $  29,506
     Common stock and additional
         paid-in capital                    $ 417,648    $ 223,329    $ 367,554    $ 223,191    $ 190,961    $ 169,506    $ 111,119



(1) As described elsewhere herein,  acquisitions during 1993 and 1996 affect the comparability  of the selected  financial  data.
(2) Applicable  to holders of common stock.
(3) Includes  additional  paid-in-capital  allocable to Preferred Stock.  Substantially  all the Preferred  Stock was converted to
    Common Stock in July 1992.
(4) Effective January 1, 1997, the Company changed its fiscal year end from June 30 to December 31.

</TABLE>
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

Results of Operations

     Overview

     On March 31, 1996, Calgene and Monsanto Company ("Monsanto") entered into a
transaction under which Monsanto  contributed  Gargiulo Inc.  ("Gargiulo"),  $30
million cash and certain oils and produce  related  technology in exchange for a
49.9% equity  interest in Calgene.  Gargiulo is a grower,  packer,  marketer and
distributor  of  tomatoes,  strawberries  and  other  produce.  Gargiulo  tomato
producing operations are conducted  principally in Florida,  California,  Puerto
Rico and Mexico.  Gargiulo berry production operations are conducted principally
in northern  California.  On February 29, 1996, Gargiulo and Collier Enterprises
consummated an asset purchase agreement whereby Gargiulo acquired  substantially
all the assets subject to the assumption of certain specified liabilities of the
produce business  conducted by certain  affiliates of Collier  Enterprises under
the trade name Collier Farms ("Collier"). Collier is an agricultural producer of
tomatoes  and  other  vegetables  in  Florida,  and  engages  in the  packaging,
marketing  and  distribution  of those  products in the commodity  markets.  The
Company's tomato  operations  consist of the combined business of Calgene Fresh,
which was  organized  in 1992 to  develop  and  produce  genetically  engineered
premium tomatoes, and Gargiulo.

     Effective January 1, 1997,  Calgene changed its fiscal year from June 30 to
December 31. Accordingly,  the financial presentation in this report for 1996 is
for the six month period from July 1, 1996,  to December 31, 1996.  Prior fiscal
year's  operations  are as  previously  reported and cover twelve month  periods
ended June 30, 1996, 1995 and 1994.

     Revenues

     Calgene's  product  sales in the six month period  ended  December 31, 1996
increased 250% to $69.8 million from $19.9 million in the  comparable  period of
the prior year.  The increase is due to the inclusion of  Gargiulo's  operations
which resulted in higher fresh market  produce sales of $50.4  million.  Product
sales in fiscal 1996  increased  95.5% to $95.7  million  from $49.0  million in
fiscal 1995.  The increase  resulted from the  inclusion of  Gargiulo's  product
sales of $48.3  million in the fourth  quarter of fiscal 1996.  Product sales in
fiscal 1995 increased  38.3% to $49.0 million from $35.4 million in fiscal 1994.
The increase  reflects $6.8 million  higher tomato  sales,  $4.2 million  higher
cotton seed sales, and $2.3 million higher specialty oleochemical sales.

     Product  development  revenues in the six month period  ended  December 31,
1996 decreased by 14.2% to $729,000 from $850,000 in the corresponding period of
the  prior  year due to the  conclusion  of  several  research  contracts  and a
$125,000  benchmark  milestone  payment which was  recognized in the prior year.
This  decrease  was  partly  offset by the  addition  of  several  new  research
contracts.  Product  development  revenues in fiscal 1996  increased by 43.6% to
$9.3 million from $6.5 million in the prior fiscal year. The increase was due to
a $3.3 million increase in technology license sales reflecting the net impact of
non-recurring  sales of $7.0  million and $3.8  million in fiscal 1996 and 1995,
respectively. Product development revenues in fiscal 1995 increased by 113.5% to
$6.5  million  from $3.0  million in the prior  fiscal  year.  The  increase was
primarily due to a $3.4 million increase in technology license sales.

     Gross Profit

     Calgene's  gross profit on net product  sales was negative  $2.3 million in
the six month  period ended  December  31, 1996 as compared to a negative  gross
profit of $2.2 million in the comparable  period of the prior year primarily due
to the Company's produce  operations.  Tomato production yields were reduced due
to adverse weather  conditions in several growing  regions,  and gross profit on
strawberry  production  was  negatively  impacted  by  exceptionally  low prices
experienced  by the  industry.  Calgene's  gross profit on net product sales was
$5.3  million in fiscal  1996 as  compared  to a negative  gross  profit of $4.7
million in fiscal 1995. The $10.0 million improvement is attributable to a $10.4
million  reduction of negative gross profit at Calgene Fresh,  and the inclusion
of Gargiulo  fourth quarter gross profit of $2.1 million.  This  improvement was
partly offset by a $2.1 million decrease in gross profit from cotton  operations
primarily due to surplus  inventory write downs and higher product costs.  Gross
profit in fiscal 1995 was negative $4.7 million as compared to a negative  gross
profit of $8.6 million in fiscal 1994. The negative gross profit is attributable
to the  Company's  fresh market  tomato  operations.  The positive  gross profit

<PAGE>

variance  of $3.9  million  in  fiscal  1995 is  largely  due to a gross  profit
increase of $2.3 million in cotton  operations  primarily  reflecting  increased
domestic seed sales. In addition,  tomato sales incurred a negative gross profit
of $14.9 million in fiscal 1995,  compared with a negative gross profit of $16.4
million in fiscal 1994.

     Research and Development Expenses

     Research and development expenses increased by $1.9 million or 29.2% in the
six month period ended December 31, 1996 as compared to the corresponding period
of the prior year.  The  increase  was  primarily  due to the  inclusion of $1.3
million of Gargiulo variety development expenses,  and higher costs incurred for
expanded  research  programs in the areas of produce and  modified  canola oils.
Research  and  development  expenses  decreased by $1.4 million or 8.8% to $14.0
million in fiscal  1996 as  compared  to fiscal  1995.  The  decrease  primarily
reflects  the full year  impact  of the  Company's  third  quarter  fiscal  1995
implementation  of a program to reduce ongoing research  expenses.  This program
included staff reductions of approximately 10% of the Company's 320 regular full
time  employees,  and reflected a shift in resources  from research into product
development  to  focus  on  commercialization   of  the  Company's   genetically
engineered  products.  In addition,  the decrease  reflects  lower  expenses for
licensing  activities.  The lower  research and  development  expense was partly
offset from the inclusion of Gargiulo  research and development  expenses in the
fourth quarter.  Research and development  expenses decreased $195,000 in fiscal
1995 to $15.4 million as compared to $15.6 million in fiscal 1994  primarily due
to lower distribution  testing,  consulting and product development  expenses in
the Company's  tomato  operations.  These decreases were partly offset by higher
expenses for licensing  activities and higher product  development  expenses for
genetically modified canola oils.

     Selling, General and Administrative Expenses

     Calgene's selling,  general and administrative  expenses increased by $12.2
million or 162% to $19.7 million in the six month period ended December 31, 1996
as compared to the corresponding period of the prior year. The increase reflects
$9.6  million  in  higher  expenses  for  the  Company's  fresh  market  produce
operations attributable to the inclusion of Gargiulo. The increase also reflects
a corporate  severance  expense of $905,000,  higher  cotton  selling  expenses,
higher marketing and application development expenses for genetically engineered
plant  oils,  and  higher  general  corporate  expenses.  Selling,  general  and
administration  expenses  increased by $5.6 million or 35.0% to $21.7 million in
fiscal 1996 as compared to fiscal 1995.  The increase  reflects  $5.3 million in
higher expenses for the Company's fresh market produce  operations  attributable
to the inclusion of Gargiulo  expenses in the fourth quarter.  Selling,  general
and administration  expenses decreased by $5.2 million or 24.4% to $16.1 million
in fiscal 1995 as compared to fiscal 1994. The decrease primarily reflects lower
sales and marketing  expenses and lower payroll and  consulting  expenses in the
Company's tomato  operations.  In addition,  fiscal 1994 reflects a $1.0 million
scale-back charge  attributable to the reduction of  non-genetically  engineered
tomato  marketing  operations.  The fiscal 1995  decrease  was partly  offset by
higher general  corporate  expenses which include a $483,000  write-off of costs
associated  with  Calgene's  decision to conclude  discussions  with a potential
strategic partner.

     In-process Research & Development Acquired

     In connection with Calgene's transaction with Monsanto,  Calgene engaged an
independent  appraiser to provide the Company with  recommendations of value for
certain  assets  acquired  from  Monsanto,  including  Gargiulo.  Based  on  the
valuation  analysis,  Calgene  assigned  $59.2 million of the purchase  price to
in-process  research and development.  Because the technological  feasibility of
the acquired  in-process  research and development has not been  established and
has no  alternative  future uses, it was expensed in the third quarter of fiscal
1996.  Although  the Company is in the process of  evaluating  its  research and
development  projects,  it is  expected  that  future  expenditures  of over $20
million will be necessary to develop the  acquired  in-process  technology  into
commercial products.

     Write-off of Assets and Restructure Expenses

     Pursuant to a plan approved by Calgene's  Board of Directors in the quarter
ended December 31, 1996,  Gargiulo intends to  significantly  reduce its produce
acreage in  Southwest  Florida.  The  reduction  in acreage  is in  response  to
increased  competitive  pressure  from  Mexico  produce  and is  expected  to be
accomplished  over the next two to three  years.  As a  consequence,  during the
quarter ended December 31, 1996, the Company  recorded a charge of approximately
$32.6 million for the write-off of assets,  and other  reserves.  The write-offs
include $9.4 million for the  write-down  of tomato  germplasm,  an $8.3 million
asset  impairment  charge due to further  consolidation  of the Company's tomato
packing  facilities,  and a $10.4 million charge related to the excess  purchase
price of net assets acquired allocated to the asset write-downs.  The Company is
actively seeking buyers for the packing  facilities.  In addition,  a reserve of
$4.5 million relating to other restructuring costs was recorded.
<PAGE>


     During  fiscal 1996 the Company  recorded a charge of $15.6 million for the
write-off of assets as compared to $1.1  million in the prior  fiscal year.  The
write-off for fiscal year 1996 includes $10.4 million  primarily  related to the
merger of Calgene's  tomato  operations  into Gargiulo.  The write-off of tomato
assets  primarily  reflects a $5.4 million  asset  impairment  charge due to the
consolidation  of  facilities  and  equipment  and a $2.5  million  write-off of
obsolete  technology  licenses.  The Company also  recorded $1.5 million for the
write-off of its  investment in a majority  owned potato joint  venture  (before
minority  interest),  and $1.0 million for the write-off of a technology license
option  the  Company  does not  intend  to  exercise.  As a  consequence  of the
Company's decision in the third quarter of fiscal 1996 to reduce its emphasis on
commodity  distribution products at Calgene Chemical,  the excess purchase price
of net assets acquired associated with the commodity  distribution  business was
written-down to net realizable  value resulting in a $1.2 million  expense.  The
$1.1 million expense in fiscal 1995 reflects the write-off of obsolete assets by
Calgene Fresh.

     Interest Expense

     Interest expense,  which reflects the Company's borrowings on its bank line
of credit, Monsanto credit facilities, and long-term debt obligations, increased
by $2.5 million to $3.8 million in the six month period ended  December 31, 1996
as compared to $1.3 million in the  corresponding  period of the prior year. The
increase was due to interest of $3.2 million  attributable  to  Gargiulo's  debt
obligations.  This  increase  was  partly  offset by a lower  borrowings  on the
Company's  credit facility with Monsanto,  and lower borrowings on its bank line
of credit.  Interest  expense  increased  $2.5 million to $3.4 million in fiscal
1996 as compared to $924,000 in fiscal 1995.  The increase was  primarily due to
interest expense of $1.7 million attributable to Gargiulo's debt obligations. In
addition,  the increase  includes higher interest  expense incurred due to a $23
million loan made by Monsanto in the form of a  subordinated  convertible  note.
The note was  converted  into equity on March 31, 1996  pursuant to the terms of
the  Reorganization   Agreement  (see  Note  4  to  the  consolidated  financial
statements).  Interest expense increased  $195,000 to $924,000 in fiscal 1995 as
compared to $729,000 in the prior fiscal year. The increase was primarily due to
higher interest rates and higher borrowings on the Company's bank line of credit
used to finance inventories and receivables.

     Other Income (Expense), Net

     Other income in the six month period ended December 31, 1996 increased $1.6
million to $2.2 million as compared to $541,000 in the  corresponding  period of
the prior year.  The increase is primarily due to a $1.5 million gain  resulting
from the Company's sale of assets. This gain included $1.2 million realized from
the sale of a leased  asset  with a net book value of $2.9  million  for a gross
sales price of $4.1 million.  Commensurate with the sale, the Company paid off a
capitalized  lease  obligation of $3.1 million.  Other income in fiscal 1996 was
$2.3 million as compared to $1.1 million in fiscal 1995. The increase reflects a
$595,000  increase in the minority  partner's  interest  share of the higher net
losses from a potato joint venture as a consequence of management's  decision to
cease its  operation  and sell  remaining  assets.  In  addition,  the  increase
reflects a $238,000 gain realized from an insured  casualty loss. In fiscal 1995
other  income  increased  $747,000  as compared to the prior  fiscal  year.  The
increase  was  primarily  due to a  $370,000  reduction  in the  net  loss of an
affiliate, and $352,000 in higher interest income.

     Pre-Tax Losses from Operations

     During the six month period ended  December  31, 1996,  Calgene  incurred a
pre-tax loss of $63.9  million as compared to a pre-tax loss of $16.1 million in
the corresponding period of the prior year. The increased six month pre-tax loss
of $47.8 million  reflects  non-cash asset  write-downs and other  restructuring
expenses  totaling  $32.6 million at Gargiulo.  In addition,  the higher pre-tax
loss  reflects  higher  selling,  general and  administrative  expenses,  higher
interest expense,  and higher research expenses,  primarily due to the inclusion
of Gargiulo. These factors were partly offset by an increase in other income due
primarily to a gain realized on sale of assets. In fiscal 1996, Calgene incurred
a pre-tax loss of $97.0  million as compared to a pre-tax loss of $30.6  million
in the prior  fiscal  year.  The  increased  fiscal 1996  pre-tax  loss of $66.4
million   reflects   non-recurring   charges   associated   with   closing   the
Reorganization  Agreement including $59.2 million for the purchase of in-process
research and  development,  and $15.6  million for the  write-off of assets.  In
addition,  the higher loss reflects higher selling,  general, and administrative
expenses  and  higher  interest   expense  due  the  to  inclusion  of  Gargiulo
operations.  These factors were partly offset by a gross profit improvement from
net product sales,  higher product  development  revenues,  an increase in other
income,  and lower research and development  expenses.  In fiscal 1995,  Calgene
incurred a pre-tax loss of $30.6  million as compared to a pre-tax loss of $42.7
million in the prior  fiscal  year.  The  decreased  fiscal 1995 pre-tax loss is

<PAGE>

primarily attributable to lower selling,  general and administration expenses at
Calgene  Fresh  and  higher  product  development  revenues.  In  addition,  the
decreased pre-tax losses reflect increases in gross profits on net product sales
from cotton seed and oleochemical  sales, and a reduction in gross losses on net
product  sales at Calgene  Fresh.  These  factors  were partly  offset by higher
selling, general and administrative expenses for general corporate purposes, and
the loss on disposition of obsolete assets.

     Provision for Income Taxes

     For federal income tax return purposes, as of December 31, 1996 the Company
has a net operating loss carryover of  approximately  $234 million which expires
between  1997  and  2012,  and  a  general  business  tax  credit  carryover  of
approximately $4 million which expires between 1997 and 2012. In addition, as of
December  31,  1996  the  Company  has  a  net  operating   loss   carryover  of
approximately  $143 million for state income tax purposes which expires  between
1997 and 2012. Approximately $20 million and $3 million of the federal and state
net  operating  loss  carryovers,  respectively,  and  $700,000  of the  general
business tax credit carryover, are available only to offset the separate federal
and state taxable  income,  if any, of Calgene  Fresh.  For financial  reporting
purposes,  a  valuation  allowance  of  approximately  $118.4  million  has been
recognized at December 31, 1996 to offset the deferred tax assets related to all
of the aforementioned carryforwards.

     Because of the "change in  ownership"  provisions  of the Tax Reform Act of
1986,  a portion of the  Company's  federal  net  operating  loss and tax credit
carryovers will be subject to an annual  limitation  regarding their utilization
against  taxable income in future  periods.  The Company expects that the annual
limitation will not have a material  adverse effect on the Company's  ability to
utilize the net operating loss and credit  carryovers prior to the expiration of
the carryover periods.

     Seasonality

     Tomato  prices are  generally  higher and unit volume lower  during  winter
months due to adverse  weather  conditions.  The opposite  effects  occur in the
summer  months.  Sales  of  planting  seed  are  seasonal,  causing  significant
fluctuations  in product  sales and working  capital  requirements.  Cotton seed
sales are  concentrated in the quarters ending March 31 and June 30.  Strawberry
sales  occur  predominantly  in the  quarters  ended June 30 and  September  30.
Specialty oleochemical sales are generally not seasonal.

     Litigation

     See "Legal Proceedings."

     Government Farm Legislation

     Cotton seed sales are affected by changes in U.S.  government  agricultural
policy,  which may impose  limitations  on planting  acreage as a criterion  for
farmers'  eligibility to receive government subsidy payments and other benefits.
An increase in the acreage set-aside for a subsidized crop will generally reduce
farmer  demand for seed for that  crop,  and a decrease  in the  set-aside  will
generally  increase demand for the seed. In situations where growing  conditions
give farmers the alternative of planting either of two crops, an increase in the
set-aside  for one crop will tend to increase  farmer demand for the seed of the
competing crop.

     Inflation and Price Fluctuations

     The market price for fresh produce can experience substantial  fluctuations
in short periods.  When the supply of tomatoes and berries on the market exceeds
the demand for such products, the market price may be driven down significantly,
in some instances  below the cost of harvesting and packing.  In such situations
it may be uneconomical to harvest a crop, resulting in a total loss of the costs
incurred in growing such crop.  Even when market prices are sufficient to permit
recovery of direct  harvesting and packing costs,  prices may not be high enough
to permit  recovery of growing costs and/or  overhead and other indirect  costs.
Calgene's  plant oil and cotton  operations  can also be  affected by changes in

<PAGE>

prices of  commodity  plant oil and  cottonseed  oil and meal.  The  effects  of
general  inflation  have not had a  material  impact on  Calgene's  consolidated
results of operations.

Liquidity and Capital Resources

     At  December  31,  1996  Calgene  had cash and  equivalents  and short term
available-for-sale  securities of approximately $3.3 million, excluding $878,000
in securities pledged as collateral for certain obligations. This was a decrease
of $25.3 million from June 30, 1996.  Uses of cash in the six month period ended
December 31, 1996 include  financing the Company's net loss (excluding  non-cash
expenses of $28.0 for the  write-off of assets and $6.4 million in  depreciation
and amortization expense);  payments of $26.6 million on long-term debt; a $12.9
million decrease in operating liabilities;  a $7.4 million net decrease in notes
payable; the acquisition of $3.8 million in property, plant and equipment; and a
$3.2 million increase in operating assets. Sources of cash include the Company's
November 1996 offering of common stock to Monsanto which contributed $50 million
in net proceeds  and $7.1  million  received in proceeds for the sale of assets.
The  Company's  investment  policy is to  invest  excess  cash in high  quality,
liquid, short-term fixed income securities.

     Inventories  at December 31, 1996 increased by $13.4 million as compared to
June 30, 1996  primarily due to seasonal  buildup of bulk  cottonseed and higher
tomato growing costs.  Accounts receivable  decreased by $9.4 million due to the
seasonality  of sales at Gargiulo,  and a $1.1 million  reduction in receivables
for research contracts and corporate reimbursements.

     Current  liabilities  decreased $42.4 million in the six month period ended
December  31, 1996 as compared to June 30, 1996  largely due to a $17.7  million
decrease in current portion of long term debt; a $7.4 million  decrease in notes
payable;  a $6.2  million  decrease in trade  accounts  payable;  a $4.7 million
decrease in amounts due  customers;  a $3.4  million  decrease in other  current
liabilities;  and a $3.2 million decrease in accrued restructure  expenses.  The
decreases in current  portion of long-term  debt and notes  payable  reflect the
repayment  by  Gargiulo  of a  line  of  credit  and  four  mortgage  loans  due
NationsBank  which totaled $23.1 million at June 30, 1996.  The decrease of $4.7
million  in  amounts  due  customers   reflects  seasonal  cotton  seed  returns
consistent with industry practice.

     Net working  capital  increased  $20.3 million from a negative  $959,000 at
June 30, 1996 to a positive  $19.3 million at December 31, 1996 primarily due to
a $42.4 million decrease in current  liabilities and a $13.4 million increase in
inventories. This increase was partly offset by a $25.3 million decrease in cash
and equivalents and available for sale  securities,  and a $9.4 million decrease
in accounts receivable.

     In the normal course of business,  the Company  enters into various  grower
contracts with third party  growers.  Pursuant to these  contracts,  the Company
contracts  with  growers to  purchase  their  crop,  subject to certain  quality
standards,  at the end of the  growing  cycle which is  generally  less than one
year. The amount of outstanding  grower contract  commitments was  approximately
$4.4 million at December 31, 1996.

     The Company has  capitalized  the legal fees  incurred in its lawsuit  with
Enzo Biochem,  Inc.  related to Calgene's  defense of its antisense  patent.  On
February  2,  1996,  the  court  ruled on behalf  of the  Company  and held that
Calgene's  patent was valid. If the defense of Calgene's  patent is unsuccessful
as a result of potential appeals, the Company would have to expense all of these
unamortized  legal costs. At December 31, 1996, the amount of these  unamortized
costs was $5.7 million.

     On  November  12,  1996,   Calgene  and  Monsanto  Company   consummated  a
transaction  whereby Monsanto purchased 6,250,000 shares of Calgene Common Stock
at a price of $50 million or $8 per share. The transaction  increased Monsanto's
equity ownership  interest in Calgene to  approximately  54.6% and gave Monsanto
the right to designate five of the nine members of the Board.

     Monsanto is obligated,  subject to certain terms and conditions, to lend up
to $40 million to Gargiulo  ("Gargiulo Credit Facility"),  and up to $15 million
annually to Calgene  until  September  30,  1998  ("Calgene  Credit  Facility"),
although  not more than $15 million  may be  outstanding  thereunder  at any one
time. As of December 31, 1996, $24.8 million of the Gargiulo Credit Facility was
outstanding.  In addition,  $1.9 million in interest  payable  under this credit
facility has been accrued.  The credit facility  agreements each contain various
covenants  precluding  Calgene and its subsidiaries  from taking certain actions
without the  approval of  Monsanto.  Also,  in the event of a default by Calgene
under the Garguilo Credit Facility and the Calgene Credit Facility, Monsanto has
certain  rights to convert the  outstanding  principal  and interest  under such

<PAGE>

agreements  into  additional  shares of Calgene  Common Stock at the then market
value of the Calgene Common Stock, and any such conversion  could  substantially
dilute the ownership interests of other Calgene stockholders.

     During the six month  period ended  December 31, 1996,  and the fiscal year
ended June 30,  1996,  Calgene had a $13 million line of credit with Harris Bank
(the "Harris Credit  Facility")  which expired on February 28, 1997.  Borrowings
under the line of credit bore  interest at the greater of one half  percent over
the bank's prime rate or two and one half  percent over the federal  funds rate.
On December 31, 1996 the bank's prime rate was 8.25% and the federal  funds rate
was 6.26% The effective  annual interest rates for the line of credit were 8.62%
and 8.90% for the six month period  ended  December 31, 1996 and the fiscal year
ended 1996, respectively.  As of December 31, 1996, $6.5 million of indebtedness
was outstanding of the bank line of credit. Subsequent to December 31, 1996, the
Company  replaced this line of credit with a $20 million working capital line of
credit with Bank of America ("B of A"). The B of A facility  expires on December
1, 1999.  Available  credit increases to $30 million after December 31, 1997 and
to $40 million after December 31, 1998.

     A $3.5  million  line of  credit  with a bank is  used to  finance  working
capital requirements at Gargiulo's Puerto Rico operations.  Borrowings under the
line bear  interest at prime.  The credit line expires on September 30, 1997. On
December  31, 1996,  the bank's  prime rate was 8.25%.  As of December 31, 1996,
there was $2.5 million outstanding on the line of credit.

     While Monsanto has agreed to make a $40 million loan available to Gargiulo,
further  advances  under  such loan are  subject to the  achievement  of certain
milestones,  and are to be used solely to fund the branded  tomato  strategy and
are  repayable  out of specified  portions of the  cumulative  free cash flow of
Gargiulo.  While  Monsanto  has agreed to advance up to $15 million  annually to
Calgene until  September 30, 1998,  not more than $15 million may be outstanding
thereunder  at  any  one  time.  Except  as  described  above,  Monsanto  has no
obligation to loan or otherwise contribute additional cash to Calgene.

     Calgene  believes its current cash  balances  together with the proceeds of
the credit  facility  agreements  and other bank lines of credit  expected to be
available to Calgene, will be sufficient to fund its operations for at least the
next  twelve  months.  However,  such  expectation  is  based  in  part  on  the
achievement of the operating plans of Calgene and there can be no assurance such
operating  plans will be achieved.  Also,  there can be no assurance that all of
Calgene's expected sources of funds will be available. Accordingly, there can be
no assurance that Calgene will not be required to obtain  additional  sources of
financing or that any future  required  financing will be available on favorable
terms, if at all.


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   Index to Consolidated Financial Statements
                             and Supplementary Data
                                                                          Page

Report of Independent Auditors.............................................33

Consolidated Balance Sheets - December 31, 1996 and
June 30, 1996 and 1995.....................................................34

Consolidated Statements of Operations -  Six months
ended December 31, 1996 and years ended June 30, 1996,
1995 and 1994..............................................................36

Consolidated Statements of Shareholders' Equity -
Six months ended December 31, 1996 and years ended
June 30, 1996, 1995 and 1994...............................................37

Consolidated Statements of Cash Flows - Six months
ended December 31, 1996 and years ended June 30, 1996,
1995 and 1994..............................................................38

Notes to Consolidated Financial Statements.................................39

Supplementary Data (Unaudited).............................................60


<PAGE>





                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Shareholders
Calgene, Inc.

We have audited the accompanying consolidated balance sheets of Calgene, Inc. as
of  December  31,  1996,  June 30, 1996 and 1995,  and the related  consolidated
statements  of  operations,  shareholders'  equity,  and cash  flows for the six
months ended  December 31, 1996, and each of the three years in the period ended
June 30, 1996. Our audits also included the financial  statement schedule listed
in the Index at Item 14(a)2.  These  financial  statements  and schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Calgene, Inc. at December 31, 1996, June 30, 1996 and 1995, and the consolidated
results of its  operations  and its cash flows for the six months ended December
31,  1996,  and each of the three years in the period  ended June 30,  1996,  in
conformity with generally accepted accounting principles.  Also, in our opinion,
the related financial statement schedule,  when considered in relation to be the
basic  financial  statements  taken as a whole,  presents fairly in all material
respects the information set forth therein.

                                                               ERNST & YOUNG LLP

Sacramento, California
February 24, 1997


<PAGE>


                                 CALGENE, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                              ASSETS                              December 31,         June 30,            June 30,
                              ------                                  1996               1996                1995
                                                                  -----------         -----------        -----------

<S>                                                               <C>                 <C>                <C>
     Current assets:
          Cash and equivalents                                    $     1,908         $    17,674        $    11,753
          Available-for-sale securities                                 1,382              10,919             10,283
          Accounts  receivable,  primarily  trade,
            net of allowance for doubtful accounts
            of $707, $487 and $346 at December 31, 1996
            and June 30, 1996 and 1995, respectively                   16,748              26,133              6,697
          Inventories                                                  37,272              23,865              8,148
          Prepaid expenses and other
            current assets                                              1,327               2,174              1,699
                                                                  -----------         -----------        -----------
            Total current assets                                       58,637              80,765             38,580

     Property, plant and equipment:
          Land                                                         18,258              22,755                763
          Buildings                                                    18,418              23,083              3,743
          Leasehold improvements                                        8,330               8,556              9,643
          Furniture, fixtures and equipment                            33,971              40,398             22,436
          Construction in progress                                      1,411               1,676              1,459
                                                                  -----------         -----------        -----------
                                                                       80,388              96,468             38,044

          Less accumulated depreciation and amortization               19,642              16,481             15,524
                                                                  -----------         -----------        -----------
            Property, plant and equipment, net                         60,746              79,987             22,520

     Product rights, patents and other
            intangible assets, less accumulated
            amortization of $4,046, $3,060 and $2,507
            at December 31, 1996 and June 30, 1996 and 1995,
            respectively                                               20,461              30,642             16,199

     Costs in excess of fair values assigned
          to net  assets  acquired,  less  accumulated
          amortization  of $5,440, $4,612 and $4,145 at
          December 31, 1996 and June 30, 1996 and 1995,
          respectively                                                 25,680              36,219             10,025

     Assets held for sale                                               5,185                 963                 --

     Other non-current assets                                           3,171               4,726              1,907
                                                                  -----------         -----------        -----------
                                                                  $   173,880         $   233,302        $    89,231
                                                                  ===========         ===========        ===========


</TABLE>


                                              See accompanying notes.


<PAGE>


                                  CALGENE, INC.
                     CONSOLIDATED BALANCE SHEETS (continued)
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

LIABILITIES AND SHAREHOLDERS' EQUITY                          December 31,         June 30,           June 30,
------------------------------------                              1996               1996               1995
                                                              -----------        -----------         -----------

<S>                                                           <C>                <C>                 <C>
     Current liabilities:
          Notes payable                                       $     9,402        $    16,789         $     7,761
          Accounts payable                                         13,920             20,111               6,487
          Accrued payroll and related expenses                      3,470              3,252               2,049
          License contract payable                                     --                750               1,500
          Accrued grower payments                                   1,364                615                 942
          Amounts due customers                                       317              5,028               4,596
          Accrued restructure expenses                              2,525              5,770                  --
          Other current liabilities                                 3,193              6,559               2,930
          Current portion of long-term debt                         5,139             22,850               1,494
                                                              -----------        -----------         -----------

          Total current liabilities                                39,330             81,724              27,759

     License contract payable, long-term                               --                 --                 750
     Research and development advance from affiliate               10,000             10,000                  --
     Note payable to affiliate                                     24,760             24,760                  --
     Interest payable to affiliate                                  1,912                509                  --
     Accrued restructure expenses, long-term                        3,860                 --                  --
     Long-term debt                                                14,195             22,643              14,671

     Commitments and contingencies (Note 9)

     Minority interest                                                263                266                  --

     Shareholders' equity:
          Preferred stock, $.001 par value; 5,000,000
              authorized, no shares issued and outstanding             --                 --                  --
          Common stock, $.001 par value; 100,000,000
              shares authorized, 66,714,636, 60,443,115
               and 30,244,226 shares issued and
              outstanding at December 31, 1996
              and June 30, 1996 and 1995, respectively                 67                 60                  30
          Additional paid-in capital                              417,581            367,494             223,161
          Accumulated deficit                                    (338,088)          (274,154)           (177,140)
                                                              ------------       ------------        ------------

          Total shareholders' equity                               79,560             93,400              46,051
                                                              -----------        -----------         -----------

                                                              $   173,880        $   233,302         $    89,231
                                                              ===========        ===========         ===========



</TABLE>

                                              See accompanying notes.


<PAGE>


                                  CALGENE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>


                                                               Six Months                        Years Ended June 30,
                                                                 Ended         ----------------------------------------------------
                                                             December 31,
                                                                 1996                1996                1995              1994
                                                           ----------------    ---------------     ----------------    ------------
<S>                                                        <C>                 <C>                 <C>                 <C>
Revenues:
     Product sales, net                                    $     69,780        $     95,723        $     48,972        $     35,408
     Product development revenues                                   729               9,272               6,459               3,025
                                                           ------------        ------------        ------------        ------------
                                                                 70,509             104,995              55,431              38,433

Costs and expenses:
     Cost of goods sold                                          72,042              90,403              53,678              43,982
     Research and development:
       Contract                                                   1,672               4,222               3,436               2,721
       Other                                                      6,743               9,801              11,937              12,847
     Selling, general and administrative                         19,677              21,705              16,081              21,279

     In-process research and development
       acquired                                                    --                59,200                --                  --

     Write-off of assets and restructure
       expenses                                                  32,605              15,574               1,098                --
                                                           ------------        ------------        ------------        ------------
                                                                132,739             200,905              86,230              80,829

Interest expense                                                 (3,822)             (3,428)               (924)               (729)
Other income, net                                                 2,163               2,345               1,136                 389
                                                           ------------        ------------        ------------        ------------

Loss from operations before provision
     for income taxes                                           (63,889)            (96,993)            (30,587)            (42,736)
Provision for income taxes                                          (45)                (21)                (15)                (65)
                                                           ------------        ------------        ------------        ------------

Net loss                                                   $    (63,934)       $    (97,014)       $    (30,602)       $    (42,801)
                                                           ============        ============        ============        ============

Net loss per share                                         $      (1.03)       $      (2.56)       $      (1.04)       $      (1.71)
                                                           ============        ============        ============        ============

Shares used in per share calculations                        62,155,384          37,883,871          29,439,008          24,987,513

</TABLE>











                                              See accompanying notes.


<PAGE>
<TABLE>
<CAPTION>
                                                                           CALGENE, INC.
                                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                         Six months ended December 31, 1996 and Years Ended June 30, 1996, 1995 and 1994
                                                                      (Dollars in thousands)

                                                                     Common stock
                                                               ------------------------    Additional                      Total
                                                                                            paid-in      Accumulated   shareholders'
                                                                 Shares        Amount       capital        deficit         equity
                                                               ----------    ----------    ----------     ----------     ----------

<S>                                                            <C>           <C>           <C>            <C>            <C>
Balance at June 30, 1993                                       24,411,782    $       24    $  169,482     ($ 103,737)    $   65,769

Net loss                                                             --            --            --          (42,801)       (42,801)
Sale of common stock, net of expenses                           1,845,000             2        19,150           --           19,152
Options exercised                                                 249,530             1         1,605           --            1,606
Stock compensation                                                   --            --             697           --              697
                                                               ----------    ----------    ----------     ----------     ----------

Balance at June 30, 1994                                       26,506,312            27       190,934       (146,538)        44,423

Net loss                                                             --            --            --          (30,602)       (30,602)
Sale of common stock, net of expenses                           3,683,262             3        31,419           --           31,422
Options exercised                                                  54,652          --             340           --              340
Stock compensation                                                   --            --             452           --              452
Unrealized gain on available-for-sale securities                     --            --              16           --               16
                                                               ----------    ----------    ----------     ----------     ----------

Balance at June 30, 1995                                       30,244,226            30       223,161       (177,140)        46,051

Net loss                                                             --            --            --          (97,014)       (97,014)
Sale of common stock, primarily  for acquisition
     of Gargiulo                                               30,192,707            30       144,343           --          144,373
Options exercised                                                   6,182          --              40           --               40
Unrealized loss on available-for-sale securities                     --            --             (50)          --              (50)
                                                               ----------    ----------    ----------     ----------     ----------

Balance at June 30, 1996                                       60,443,115            60       367,494       (274,154)        93,400

Net loss                                                             --            --            --          (63,934)       (63,934)
Sale of common stock, net of expenses                           6,271,521             7        50,071           --           50,078
Unrealized gain on available-for-sale securities                     --            --              16           --               16
                                                               ----------    ----------    ----------     ----------     ----------

Balance at December 31, 1996                                   66,714,636    $       67    $  417,581     ($ 338,088)    $   79,560
                                                               ==========    ==========    ==========     ==========     ==========


                                                                      See accompanying notes.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                               CALGENE, INC.
                                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                Increase (Decrease) in Cash and Equivalents
                                                           (Dollars in thousands)

                                                                                                Years Ended June 30,
                                                               Six Months Ended   --------------------------------------------------
                                                                 December 31,
                                                                     1996              1996             1995             1994
                                                               ------------------ ---------------- ---------------- ----------------
<S>                                                               <C>                <C>              <C>              <C>
Cash flows from operating activities:
     Net loss                                                     $(63,934)          $(97,014)        $(30,602)        $(42,801)
     Adjustments to reconcile net loss to net cash
         used in operating activities:
              Minority interest in net loss                             --               (787)            (116)             (46)
              Depreciation and amortization                          6,371              6,989            4,957            4,099
              In-process research and development acquired              --             59,200               --               --
              Gain on sale of assets                                (1,536)                --               --               --
              Write-off of assets and restructure expenses          28,039             15,574            1,098               --
              Equity in net (gain) loss of affiliate                    (3)                 1              213              583
              Stock compensation                                        --                 --              452              697
     Net changes in operating assets and liabilities,
         excluding effect of acquisition of subsidiaries:
              Accounts  receivable                                   9,165              8,912           (1,992)          (1,658)
              Inventories                                          (13,407)             6,455           (2,003)           1,320
              Accounts payable                                      (6,191)            (1,903)          (1,429)           2,589
              Amounts due customers                                 (4,711)               432            1,268            1,740
              Accrued restructure expenses                           1,949                 --               --               --
              Other accrued liabilities                             (3,366)            (6,736)             612            1,637
              Interest payable to affiliate                          1,403                509               --               --
              Other                                                  1,284              2,614              146              279
                                                                  ---------          --------         --------         --------

          Net cash used in operating activities                    (44,937)            (5,754)         (27,396)         (31,561)
                                                                  ---------          ---------        ---------        ---------

Cash flows from investing activities:
     Proceeds from sales of available-for-sale securities           10,515             11,787           22,904           24,904
     Purchase of available-for-sale securities                        (955)           (12,473)         (17,714)         (15,588)
     Collection of notes receivable                                     --                 --               --            1,709
     Investment in affiliate                                            --                 19              (73)            (579)
     Capital expenditures for property,
         plant and equipment                                        (3,800)            (3,887)          (5,649)          (4,437)
     Payment for purchase of subsidiaries, net of cash
         and equivalents acquired                                       --             (1,436)             (90)             (12)
     Purchases of product rights, patents and other
         intangible assets                                          (1,343)            (1,397)          (4,782)          (4,843)
     Proceeds from sale of assets                                    7,136                489               38               69
     Other noncurrent assets                                         1,366                 --               --               --
                                                                  --------           --------         --------         --------

          Net cash provided by (used in) investing activities       12,919             (6,898)          (5,366)           1,223
                                                                  --------           ---------        ---------        --------

Cash flows from financing activities:
     Proceeds from notes payable                                    36,364              8,453           19,398           14,214
     Payments on notes payable                                     (43,751)           (19,489)         (20,322)         (13,161)
     Decrease in securities-pledged                                    164                214              159              136
     Increase in borrowings of long-term debt                           --             25,057           10,000               --
     Principal payments on long-term debt                          (26,603)           (15,549)          (1,768)          (1,332)
     Proceeds on notes payable to affiliate                         15,000              2,680               --               --
     Payments on notes payable to affiliate                        (15,000)                --               --               --
     Sale of common stock                                           50,078              7,207           31,762           20,758
     Research and development advance from affiliate                    --             10,000               --               --
                                                                  --------           --------         --------         --------

          Net cash provided financing activities                    16,252             18,573           39,229           20,615
                                                                  --------           --------         --------         --------

Net increase (decrease) in cash and equivalents                    (15,766)             5,921            6,467           (9,723)

Cash and equivalents at beginning of year                           17,674             11,753            5,286           15,009
                                                                  --------           --------         --------         --------

Cash and equivalents at end of year                               $  1,908           $ 17,674         $ 11,753         $  5,286
                                                                  ========           ========         ========         ========

                                                          See accompanying notes.

</TABLE>
<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


1.   Summary of Significant Accounting Policies

     Change in fiscal year

          The  Company  has changed its fiscal year end from June 30 to December
     31,  beginning  with the period ended December 31, 1996 to conform with the
     fiscal year end of the Monsanto  Company which holds an equity ownership in
     Calgene of approximately 54.6% (Note 13).

          Accordingly, the financial presentation in this report for 1996 is for
     the six month period from July 1, 1996 to December  31, 1996.  Prior fiscal
     year's operations are as previously reported and cover twelve month periods
     ended June 30.

          Unaudited  comparative  information  for the six months ended December
     31, 1995, is as follows (in thousands, except per share amounts):

                   Revenues                       $   20,790
                   Gross profit (loss)                (1,309)
                   Net loss                          (16,104)
                   Net loss per share                  (0.53)

     Organization and Business

          Calgene is a  biotechnology  company that is developing a portfolio of
     genetically  engineered  plants and plant  products for the food,  seed and
     oleochemical  industries.  The Company's  research and business efforts are
     focused in three core crop  areas--fresh  produce (tomato and  strawberry),
     edible  and  industrial  plant  oils  (canola)  and  cotton--where  Calgene
     believes  biotechnology  can provide  substantial added commercial value in
     consumer, industrial and seed markets.

     Consolidation and Equity Accounting

          The consolidated financial statements include the accounts of Calgene,
     its  wholly-owned   subsidiaries  and  its  majority  owned  joint  venture
     (together  the  "Company").   All  significant  intercompany  balances  and
     transactions have been eliminated in consolidation.

          Calgene uses the equity method to account for its  investments  in its
     50 percent or less owned joint ventures.  Under the equity method,  Calgene
     recognizes its proportionate share of the net income or loss of these joint
     ventures  currently,   rather  than  when  realized  through  dividends  or
     disposal.

     Cash Equivalents and Available-for-sale Securities

          Cash  equivalents  and   available-for-sale   securities,   consisting
     principally of certificates  of deposit,  bankers  acceptances,  commercial
     paper,  U.S.  treasury and agency  securities,  and money market funds, are
     stated at fair market value,  and are adjusted for amortization of premiums
     and accretion of discounts, which are recognized as adjustments to interest
     income.  Unrealized  gains and losses,  net of tax,  on  available-for-sale
     securities are reported in shareholders'  equity.  Gross realized gains and
     losses  on  available-for-sale  securities  were not  material  during  the
     periods presented. The aggregate fair market value of available-for-sale


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


1.   Summary of Significant Accounting Policies (continued)

     Cash Equivalents and Available-for-sale Securities (continued)

     securities  at December 31, 1996 is  $1,960,000  of which  $578,000 is
     included  in cash and  equivalents.  The  aggregate  fair  market  value of
     available-for-sale  securities  at June 30,  1996 is  $28,288,000  of which
     $17,369,000 is included in cash and equivalents.  The aggregate fair market
     value of  available-for-sale  securities at June 30, 1995 is $20,276,000 of
     which  $9,993,000  is included  in cash and  equivalents.  The  contractual
     maturities  of  available-for-sale  securities  at December 31, 1996 are as
     follows: $1,409,000 in 1997, $313,000 in 1998, and $238,000 in 2002.

     Inventories

          Inventories are stated at the lower of cost, determined on a first-in,
     first-out basis, or market value.

     Property, Plant and Equipment

          Property,  plant and equipment are stated at cost and  depreciated  or
     amortized on a straight-line  basis over the estimated  useful lives of the
     assets or the capital lease term,  whichever is less. The estimated  useful
     lives range from 3 to 30 years.

     Product Rights, Patents and Other Intangible Assets

          Product  rights of  approximately  $3,939,000  at December  31,  1996;
     $3,042,000  at June 30, 1996 and  $7,827,000 at June 30, 1995 are stated at
     cost and are  amortized on a  straight-line  basis over the lesser of their
     contractual  lives or their  estimated  useful  lives  (generally  10 to 20
     years).

          External  costs  incurred in obtaining  patents are  capitalized.  The
     costs of successful  patent  applications  are amortized on a straight-line
     basis over the lesser of their statutory  lives or their  estimated  useful
     lives  (generally 17 years).  External costs incurred in defense of patents
     are capitalized  and amortized on a straight-line  basis over the remaining
     life of the patent. The costs of unsuccessful patent applications or patent
     defense  are  charged  to  expense  in  the  period  in  which  the  patent
     applications are denied or the patent defense is unsuccessful. The net book
     value of capitalized  patent  related costs is  $7,950,000,  $7,908,000 and
     $8,372,000 at December 31, 1996 and June 30, 1996 and 1995, respectively.

          Other intangible assets consist primarily of the seed library acquired
     in connection  with the  acquisition  of Gargiulo  (Note 4), which is being
     amortized  over its  estimated  useful life of 15 years.  See  write-off of
     other intangible assets in Note 7.

          Costs in excess of fair  values  assigned to net assets  acquired  are
     capitalized and amortized on a straight-line basis over periods of 10 to 25
     years.

     Revenue Recognition and Product Development Arrangements

          Revenue  from  product  sales is  recognized  primarily at the time of
     shipment net of estimated  product returns.  The Company performs  research
     under contracts for the development of certain products for other entities.
     Revenue from product development  contracts is recognized  according to the
     percentage of completion


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


1.   Summary of Significant Accounting Policies (continued)

     Revenue Recognition and Product Development Arrangements (continued)

     method.  Funding received in advance of research performed under these
     contracts is recorded as deferred  revenue.  Related contract  expenses are
     charged to expense as incurred.

     Income Taxes

          The liability  method is used to account for income taxes.  Under this
     method,  deferred  tax  assets  and  liabilities  are  determined  based on
     differences  between the  financial  reporting  and tax bases of assets and
     liabilities and are measured using the enacted tax rates and laws that will
     be in effect when the differences are expected to reverse. General business
     tax credits  will be accounted  for as a reduction of federal  income taxes
     payable under the flow-through method.

     Net Loss Per Share

          Net loss per share has been  computed by dividing  the net loss by the
     weighted  average number of common shares  outstanding  during each period.
     Common  equivalent  shares related to stock options have been excluded from
     the  computation  of net loss per  share  since  their  inclusion  would be
     antidilutive.

     Statement of Cash Flows

          For purposes of the consolidated  statement of cash flows, the Company
     considers  highly  liquid  investments  with  original  maturities of three
     months or less to be cash  equivalents.  During the six month  period ended
     December  31, 1996 and fiscal year 1996,  1995 and 1994,  the Company  paid
     cash for interest and income taxes as follows:

                                                    (In thousands)
                                      1996          1996       1995        1994
                                      ----          ----       ----        ----
                                  (six months)

                  Interest           $3,282        $1,619      $895        $621
                  Income taxes           17            83        91          53

          The  Company   maintains  its  cash  and  equivalents  and  short-term
     investments in several different instruments.  This diversification of risk
     is consistent  with the Company's  policy to maintain  liquidity and ensure
     the safety of principal.

     Accounting  for the  Impairment  of  Long-Lived  Assets and for  Long-Lived
     Assets to Be Disposed Of

          During the quarter ended  September 30, 1996, the Company  adopted the
     provisions  of  the  Financial  Accounting  Standards  Board  Statement  of
     Financial  Accounting No. 121, "Accounting for the Impairment of Long-Lived
     Assets and for Long-Lived  Assets to Be Disposed Of" ("SFAS 121"). SFAS 121
     requires  impairment  losses to be  recognized  for  long-lived  assets and
     identifiable  intangibles  used in operations when indicators of impairment
     are present and the estimated undiscounted cash flows are not sufficient to
     recover the assets'  carrying  amount.  The impairment  loss is measured by
     comparing the fair value of the asset to


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


1.   Summary of Significant Accounting Policies (continued)

     Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
     Assets to Be Disposed Of (continued)

     its carrying  amount.  Costs in excess of fair values  assigned to net
     assets  acquired  in  purchase   business   combinations  are  included  in
     impairment evaluations when events or circumstances exist that indicate the
     carrying  amount of the acquired  assets may not be  recoverable.  SFAS 121
     also  requires  that  assets  held for  disposal  be valued at the lower of
     carrying amount or fair value less cost to sell.

     Accounting for Stock Based Compensation

          The Company accounts for its stock option plans and its employee stock
     purchase  plan  in  accordance   with  the  provisions  of  the  Accounting
     Principles Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to
     Employees."  In 1995,  the Financial  Accounting  Standards  Board released
     Statement of Financial Accounting Standard No. 123 (SFAS 123),  "Accounting
     for Stock Based  Compensation."  SFAS 123 provides an alternative to APB 25
     and is effective for fiscal years  beginning  after  December 15, 1995. The
     Company  expects to continue  to account for its stock plans in  accordance
     with APB 25.  Accordingly,  SFAS  123 is not  expected  to have a  material
     impact on the Company's financial position or results of operations.

     Fair Values of Financial Instruments

          The  carrying  amounts  reported  in the  balance  sheet  for cash and
     equivalents and available-for-sale securities approximates their respective
     fair values.  The carrying  amounts of the Company's  borrowings  under its
     debt  agreements  approximate  their  fair  value.  The fair  values of the
     Company's long-term debt are estimated using discounted cash flow analysis,
     based on the  Company's  current  incremental  borrowing  rates for similar
     types of borrowing arrangements.

     Use of Estimates and Certain Risks

          The  preparation of financial  statements in conformity with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the amounts  reported to the financial  statements
     and accompanying  notes.  Actual results could differ from those estimates.
     Among other  things,  the Company is subject to risks from  changes in farm
     legislation,  market price  fluctuations  for the Company's  products,  and
     adverse  weather  conditions  which may effect the ultimate  realization of
     certain of its inventories.

     Reclassifications

          Certain  amounts  reported for prior years have been  reclassified  to
     conform  with  the   presentation   of  the  December  31,  1996  financial
     statements.



<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


2.   Receivables

     Receivables consist of the following:
<TABLE>
<CAPTION>

                                                                    (In thousands)

                                       December 31, 1996                    June 30, 1996               June 30, 1995
                                ---------------------------------  ---------------------------------  ------------------
                                     Trade        Related Party         Trade        Related Party          Trade
                                ----------------  ---------------  ----------------  ---------------  ------------------
<S>                                <C>               <C>              <C>               <C>              <C>
          Customer                 $ 13,771          $    --          $ 18,808          $    --          $  6,708
          Grower advances             2,993               --             5,917               --                --
          Other                         452              239               923              972               335
                                   --------          -------          --------          -------          --------
               Total                 17,216              239            25,648              972             7,043
          Less allowance for
          doubtful amounts             (707)              --              (487)              --              (346)
                                   ---------         -------          ---------         -------          --------
               Total               $ 16,509          $   239          $ 25,161          $   972          $  6,697
                                   ========          =======          ========          =======          ========
</TABLE>

3.   Inventories

          Inventories consist of the following at December 31, 1996 and June 30,
     1996 and 1995:
<TABLE>
<CAPTION>

                                                                             (In thousands)

                                                        December 31, 1996      June 30, 1996        June 30, 1995
                                                        -----------------      -------------        -------------
<S>                                                           <C>                <C>                  <C>
                  Growing crops                               $17,958            $11,208              $2,368
                  Supplies and seeds inventories                5,836             10,136               1,123
                  Finished goods                                5,689              1,415               1,942
                  Work in progress                              2,631                596               2,245
                  Raw materials                                 5,158                510                 470
                                                             --------           --------             -------
                                                              $37,272            $23,865              $8,148
                                                              =======            =======              ======
</TABLE>

4.   Strategic Alliance

          On  March  31,  1996,   Calgene  and  Monsanto  Company   ("Monsanto")
     consummated an Agreement and Plan of  Reorganization  (the  "Reorganization
     Agreement")  and related  Plan of Merger under which  Monsanto  contributed
     Gargiulo,  Inc.  ("Gargiulo"),  $30 million  and  certain  oils and produce
     related  technology  in exchange  for a 49.9%  equity  interest in Calgene.
     Gargiulo is a grower,  packager,  marketer  and  distributor  of  tomatoes,
     strawberries  and other  produce with  operations  in Florida,  California,
     Puerto Rico and Mexico.  The acquisition of Gargiulo was accounted for as a
     purchase.

          In connection with the Reorganization  Agreement a total of 30,161,114
     shares of Calgene  common stock were issued with an aggregate fair value of
     approximately  $144,206,000.  The per share value of Calgene  common  stock
     assigned to the  transaction was based on the last trade as reported on the
     National Market System on the day the Company's  negotiations with Monsanto
     concluded.  The common  stock  trade  price was  discounted  to account for
     Monsanto's liquidity  restrictions based on an independent  appraisal.  The
     purchase price consists of the following:


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


4.   Strategic Alliance (continued)

                                                                 (In thousands)

              30,161,114 shares of common stock                   $   144,206
              Acquisition costs, consisting primarily of
                 financial advisory, legal and accounting fees          1,530
              Less cash received                                      (30,000)
                                                                  -----------
                                                                  $   115,736
                                                                  ===========

          A summary of the purchase price allocation is as follows:

                                                                 (In thousands)

               Net assets acquired                                $    11,506
               Identified intangible assets                            21,680
               Excess purchase price over net assets acquired          23,350
               In-process research and development                     59,200
                                                                  -----------
                                                                  $   115,736
                                                                  ===========

          Intangible assets include completed  technology,  assembled  workforce
     and costs in excess of fair  values  assigned to net assets  acquired.  The
     estimated  useful lives are  expected to range from 5 to 15 years.  Because
     the  technological  feasibility  of the  acquired  in-process  research and
     development has not been  established  and has no alternative  future uses,
     the $59.2 million allocated to in-process research and development has been
     expensed.

          Between June 29, 1995 and March 19, 1996 Calgene  received $23 million
     in advances  toward the $30 million  proceeds in the form of a subordinated
     promissory  note.  The  subordinated  note was  converted  to  equity  upon
     consummation of the transaction.  The additional $7 million was received on
     April 1, 1996.

          On November  12,  1996,  the  Company  entered  into a Stock  Purchase
     Agreement with Monsanto (the "Stock Purchase Agreement"), pursuant to which
     (i) the  Company  sold and  issued  to  Monsanto,  and  Monsanto  purchased
     6,250,000 shares of Common Stock of the Company (the "Additional  Shares"),
     at $8.00 per share, for an aggregate purchase price of $50 million, thereby
     increasing  Monsanto's ownership interest in shares of Calgene Common Stock
     from 49.9% to approximately 54.6% (without giving effect to the exercise of
     outstanding  options and  warrants),  (ii)  Monsanto and Calgene  agreed to
     enter  into  a  Restated  Stockholders  Agreement  ("Restated  Stockholders
     Agreement")  amending and restating the Stockholders  Agreement dated March
     31, 1996 ("Stockholders Agreement"),  and (iii) the Restated Certificate of
     Incorporation  was amended to reflect the  amendments  to the  Stockholders
     Agreement  contemplated  by  the  Restated  Stockholders  Agreement.  As  a
     consequence of the  transaction,  Monsanto owned  approximately  36,396,114
     shares of Common Stock of the Company,  representing approximately 54.6% of
     the issued and outstanding shares of Common Stock of the Company.


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


4.   Strategic Alliance (continued)

     Acquisition of Collier Farms

          On February 29, 1996, Gargiulo and Collier Enterprises  consummated an
     asset purchase  agreement whereby Gargiulo  acquired  substantially all the
     assets, subject to the assumption of certain specified liabilities,  of the
     produce  business  conducted by certain  affiliates of Collier  Enterprises
     under the trade name Collier Farms ("Collier").  Collier is an agricultural
     producer of tomatoes and other  vegetables  in Florida,  and engages in the
     packaging,  marketing and  distribution  of those products in the commodity
     markets.

          The purchase  price  consists of $10 million in cash and a $10 million
     promissory  note,  plus an earn-out  payment based upon  achieving  certain
     earnings of the  combined  operations  of Gargiulo and Collier in Southwest
     Florida.  Gargiulo  also  acquired  Collier's  1995-1996  crop and  assumed
     liabilities  related thereto,  and committed to lease certain farmland from
     affiliates of Collier. The acquisition was accounted for as a purchase. The
     purchase price consists of the following:

                                                                 (In thousands)

               Cash                                                 $10,000
               Promissory note                                       10,000
               Investment in 1995-1996 crop                          12,127
               Acquisition costs, consisting primarily
                 of financial advisory, legal and accounting fees       200
                                                                    -------
                                                                    $32,327
                                                                    =======

     A summary of the purchase price allocation is as follows:

                                                                 (In thousands)

                Net assets acquired                                 $23,500
                Excess purchase price over net assets acquired        8,827
                                                                    -------
                                                                    $32,327
                                                                    =======

     Unaudited Proforma Combined Results of Operations

          Unaudited  proforma  combined results of operations for the year ended
     June 30, 1996, giving effect to certain  adjustments as if the Gargiulo and
     Collier  acquisitions  occurred  on  July  1,  1995  are  displayed  in the
     following  table.  These  unaudited  proforma  combined  results  have been
     prepared for comparative  purposes only and do not purport to be indicative
     of the results of  operations  which  actually  would have resulted had the
     acquisition  been in  effect  on July 1,  1995 or which  may  result in the
     future.

                                                    (In thousands,
                                                   except per share
                                                       amounts)

          Revenue                                      $182,041
          Net loss                                    $(128,115)
          Net loss per share                             $(2.12)


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


5.   Oilseed Cross Licensing Agreement

          In May  1996,  the  Company  entered  into  a  broad  cross  licensing
     agreement with Monsanto  encompassing  the two companies'  oilseed research
     programs. The agreement has an initial term of 15 years.

          Under the agreement Calgene received a royalty free license to current
     and  future  Monsanto  agronomic  technology  for use in  combination  with
     Calgene's  proprietary oils modification genes for development of specialty
     canola oil  products.  Calgene also  received $10 million from Monsanto for
     best-efforts research and development activities to be performed by Calgene
     over  a  three  year  period  relating  to  further  development  of  plant
     expression  or oil  modification  technologies.  In exchange for the above,
     Calgene  will pay  royalties  to  Monsanto  based on a  portion  of the net
     profits of Calgene's  oils division.  The Company  recorded the $10 million
     research  and  development   funding  as  a  long-term   liability  in  the
     accompanying  balance  sheet.  Royalties  payable to Monsanto as  described
     above will be charged against the liability in the period incurred.  In the
     event the aggregate royalties to Monsanto exceeds $10 million, such amounts
     will be charged to expense as incurred.

          In  exchange  for a $7  million  non-refundable  license  fee  paid to
     Calgene,  Monsanto received a royalty bearing license to Calgene technology
     to develop  agronomically  superior  corn,  soybean,  canola and  sunflower
     crops. The license fee was recorded as product  development  revenue in the
     accompanying Statement of Operations.

6.   PGI-Kirin Partnership

          In March 1990 the  Company and Kirin  Brewery  Co.,  Ltd.  established
     PGI-Kirin Partnership ("PGK"), a joint venture to develop and commercialize
     new potato  varieties.  In  January  1996  management  decided to cease PGK
     operations and sell its remaining assets. Consequently, Calgene recorded an
     estimated net  write-off of its  investment in PGK of $982,000 in the third
     fiscal  quarter of fiscal  1996.  PGK's  revenues in fiscal 1996 and fiscal
     1995 were $1.6 million and $1.5, respectively.

7.   Write-off of Assets and Restructuring Expenses

          During the fiscal year ended June 30,  1996,  the  Company  recorded a
     charge  of  approximately  $15.6  million  for  the  write-off  of  assets,
     including $10.4 million primarily related to the merger of Calgene's tomato
     operations into Gargiulo. The write-off of tomato assets primarily reflects
     a  $5.4  million  asset  impairment  charge  due to  the  consolidation  of
     facilities  and  equipment  and  a  $2.5  million   write-off  of  obsolete
     technology  licenses.  The  Company  also  recorded  $1.5  million  for the
     write-off of its investment in PG-K (before  minority  interest),  and $1.0
     million for the write-off of an option to a technology  license the Company
     does not intend to exercise.  As a consequence of the Company's decision in
     the third  quarter  of fiscal  1996 to reduce  its  emphasis  on  commodity
     distribution products at Calgene Chemical, the excess purchase price of net
     assets  acquired  associated with the commodity  distribution  business was
     written-down to net realizable value resulting in a $1.2 million expense.

          Pursuant to a plan  approved by  Calgene's  Board of  Directors in the
     quarter ended December 31, 1996,  Gargiulo intends to significantly  reduce
     its produce  acreage in Southwest  Florida.  The reduction in acreage is in
     response to  increased  competitive  pressure  from  Mexico  produce and is
     expected  to be  accomplished  over  the  next  two to  three  years.  As a
     consequence,  during the  quarter  ended  December  31,  1996,  the Company
     recorded a charge of  approximately  $32.6  million  for the  write-off  of
     assets,  and other  reserves.  The write-offs  include $9.4 million for the
     write-down of tomato germplasm, an $8.3 million asset impairment charge due
     to further consolidation of the Company's tomato packing facilities,  and a
     $10.4 million  charge  related to the excess  purchase  price of net assets
     acquired  allocated  to the asset  write-downs.  The  Company  is  actively
     seeking buyers for the packing facilities.  In addition,  a reserve of $4.5
     million relating to other restructuring costs was recorded.


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


8.   Long-term Debt and Notes Payable

          Long-term debt consists of the following at December 31, 1996 and June
     30, 1996 and 1995:
<TABLE>
<CAPTION>

                                                                                             (In thousands)

                                                                             December 31,       June 30,          June 30,
                                                                                 1996             1996              1995
                                                                             ------------       --------          --------

              <S>                                                              <C>               <C>              <C>
              Note payable to bank; due in monthly
              installments of approximately $3,000  including
              interest  at 11.8%  per  annum,  through  2004;
              secured by a $220,000 certificate of deposit and
              guaranteed by the Small Business Administration.                 $   213           $   221          $   235

              Mortgage  notes  payable;   due  in  quarterly
              installments   of approximately  $31,000  including
              interest  at  8.5%  per  annum, through 1998;  secured
              by land and buildings with a net book value of
              approximately $531,400 at December 31, 1996.                         255               280              377

              Capitalized  lease  obligations;  due in monthly
              installments  of approximately  $86,000  including
              interest imputed at 5.4% to 11% per annum,
              through  2001;  secured by  equipment  with a net
              book value  of  approximately  $2,710,000  at
              December  31,  1996  and supported by a $150,000 which
              is secured by a $150,000 certificate ofdeposit.                    2,581             6,030            2,960

              Note payable to the former owner of an acquired
              business;  due in an annual  installment of
              $338,000 at July 17, 1997; plus interest on the
              unpaid  principal  balance  at the  prime  rate (8.25%
              at December 31, 1996) over the term of the loan;
              secured by a $338,000 certificate of deposit.                       338               592              705

              Non-interest bearing note payable to the former
              owner of an acquired business; due in monthly
              installments of $14,083 through June 30, 1997.                       84               169              338

              Mortgage note payable; interest only payable in
              monthly installments of approximately $3,800,
              current interest at 9.0% per annum.  Interest is
              adjustable  effective each November 1 to prime
              plus 1%, rate not to exceed 9% or be lower than
              6% during the term of the note.  Final payment of
              $506,000  plus unpaid  interest due November 1,
              1999; secured by land with a net book value of
              approximately $605,000 at December 31, 1996.                        506               506              506

</TABLE>

<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


8.   Long-term Debt and Notes Payable (continued)

<TABLE>
<CAPTION>

                                                                                             (In thousands)

                                                                             December 31,       June 30,          June 30,
                                                                                 1996             1996              1995
                                                                             ------------       --------          --------

              <S>                                                              <C>               <C>              <C>
              Note  payable  to  a  bank;   due  in  monthly
              installments of approximately  $2,200  including
              interest  at  8.59%  per  annum, through 2000;
              secured by equipment with a net book value of
              approximately $195,500 at December 31, 1996.                     $   137           $   144          $    --

              Note  payable  to  a  bank;   due  in  monthly
              installments  of approximately  $22,500  monthly
              including  interest at prime plus 1.25%
              (aggregating 9.50% at December 31, 1996) per
              annum,  through 2005,  secured by buildings and
              equipment with a net book value of approximately
              $2,372,000 at December 31, 1996.                                   1,566             1,644               --

              Mortgage  loan  payable to former  owner of an
              acquired  business, payable in  quarterly  principal
              installments  of  $280,966  plus interest at prime
              (8.25% at December 31,  1996)  through  February
              28, 2001, secured by assets with a net book value
              of approximately $11,537,000 at December 31, 1996                  4,688             5,338               --

              Mortgage  loan  payable to former  owner of an
              acquired  business, payable in  quarterly  principal
              installments  of  $219,034  plus interest at prime
              (8.25% at December 31,  1996)  through  February
              28, 2001, secured by assets with a net book value
              of approximately $11,537,000 at December 31, 1996                  3,724             4,162               --

              Mortgage loan, payable in monthly principal and
              interest installments  of $9,595 with  interest at
              prime (8.25% at December 31, 1996), secured  by
              assets with a net book value of approximately
              $753,000 at December 31, 1996                                      1,108             1,191               --

              Mortgage loans payable in monthly principal and
              interest installments of $40,237 with interest
              ranging from 6.63% to prime (8.25% at December
              31, 1996), secured by assets with a net book value
              of approximately $1,184,000 at December 31, 1996                   1,175             1,377               --

</TABLE>

<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


8.  Long-term Debt and Notes Payable (continued)

<TABLE>
<CAPTION>

                                                                                             (In thousands)

                                                                             December 31,       June 30,          June 30,
                                                                                 1996             1996              1995
                                                                             ------------       --------          --------

              <S>                                                              <C>               <C>              <C>
              Term loan payable to former partner in acquired
              business, monthly principal and interest payments
              of $37,981, with interest at 10%                                 $   975           $ 1,149          $    --

              Note payable to a corporate lender, due in monthly
              installments of $25,550  including  interest at
              10.38% per annum,  through  1999, secured by
              assets with a net book value of approximately
              $481,000 at December 31, 1996                                        267               417              673

              Various term loans  payable with interest at rates
              that range from 8% to 12%.  Maturity dates
              ranging from June 1998 through November 2001,
              secured by assets with a net book value of
              approximately $541,000 at December 31, 1996                        1,717             1,794               --

              Note payable to a corporate lender, due in quarterly
              installments of $30,938 including interest imputed
              at 22.29% per annum, through June 1, 1998                             --               279              371


              Note  payable  to former  owner of an  acquired
              business  for the purchase of growing crops,
              principal due upon  collection of crop receivable,
              plus interest at 7%                                                   --             9,070               --

              Mortgage loan, payable in annual principal
              installments of $1,000,000 through August 1999,
              with interest at prime                                                --             4,000               --

              Mortgage loan, payable in annual principal
              installments of $175,000, balance due November
              30, 1996                                                              --             3,325               --

              Mortgage loan, payable in annual principal
              installments of $153,333, balance due November
              30, 1996                                                              --             2,147               --

              Mortgage loan, payable in annual principal
              installments of $273,200, balance due on November
              30, 1996                                                              --             1,658               --

              Convertible note payable to a corporate lender;
              converted to equity on March 31, 1996 (Note 4).                       --                --           10,000
</TABLE>


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


8.   Long-term Debt and Notes Payable (continued)

<TABLE>
<CAPTION>

                                                                                             (In thousands)

                                                                             December 31,       June 30,          June 30,
                                                                                 1996             1996              1995
                                                                             ------------       --------          --------

              <S>                                                              <C>               <C>              <C>
              Note payable to affiliate consists of the following:

              Advances under a $40,000,000  convertible term
              loan with a balloon payment due March 31, 2000
              interest at prime plus 2% (aggregating 10.25% at
              December 31, 1996)                                               $24,760           $24,760          $    --
                                                                               -------           -------          -------

                                                                                44,094            70,253           16,165

              Less note payable to affiliate                                    24,760            24,760               --

              Less amount due within one year                                    5,139            22,850            1,494
                                                                               -------           -------          -------

              Long-term debt                                                   $14,195           $22,643          $14,671
                                                                               =======           =======          =======
</TABLE>

          The  capitalized  lease  obligations   listed  above  contain  certain
     restrictive  covenants  which,  among other things,  require the Company to
     maintain a specified level of working  capital.  In addition,  certain debt
     and capital lease obligations prohibit the Company from paying dividends on
     common stock.

          At December 31, 1996 aggregate  future  principal  payments by year on
     long-term debt and note payable to affiliate are due as follows:

                                                            (In thousands)

                                    1997                         $5,139
                                    1998                          3,848
                                    1999                          4,580
                                    2000                         27,795
                                    2001                            797
                                    Thereafter                    1,935
                                                               --------
                                                                $44,094

     Notes Payable

          A $13  million  bank line of credit  is used to help  finance  working
     capital  requirements  for  Calgene's  subsidiaries,   excluding  Gargiulo.
     Borrowings  under the line bear  interest  at the  greater  of one  quarter
     percent  over the bank's  prime rate or two and one half  percent  over the
     federal  funds rate.  On December  31, 1996 the bank's prime rate was 8.25%
     and the federal funds rate was 6.26%.  The weighted average annual interest
     rate under the line of credit was 8.62%, 8.90%, and 8.92% for the six month
     period ended December 31, 1996 and for the fiscal year ended June 30, 1996,
     and  1995,  respectively.  Borrowings  are  subject  to  certain  financial
     covenants which include  prohibiting the Company from paying cash dividends
     on its


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


8.   Long-term Debt and Notes Payable (continued)

     Notes Payable (continued)

     common stock. Borrowings are secured by qualifying accounts receivable
     and  inventory  and must be repaid on a monthly  basis to the  extent  they
     exceed  qualifying  accounts  receivable and inventory.  As of December 31,
     1996, and June 30, 1995 there was $6,500,000 and $5,973,000,  respectively,
     outstanding on the line of credit.

          During  fiscal year 1996 the Company  entered  into a credit  facility
     agreement  with Monsanto.  Monsanto is obligated,  subject to certain terms
     and  conditions,  to lend up to $15 million  annually for a period of three
     years to Calgene,  although not more than $15 million may be outstanding at
     any one time. The credit  facility  agreement  contains  various  covenants
     precluding Calgene and its subsidiaries from taking certain actions without
     the  approval  of  Monsanto.  Also,  in the event of a default by  Calgene,
     Monsanto  has  certain  rights to convert  the  outstanding  principal  and
     interest  under such  agreement  into  additional  shares of Calgene Common
     Stock,  not to exceed  3,000,000  shares.  The outstanding  balance of this
     credit  facility  shall bear  interest at two percent  above the prime rate
     (aggregating  10.25% at December 31, 1996). This credit facility expires on
     September 30, 1998. As of December 31, 1996,  the Company's  advances under
     this credit facility had been paid in full.

          A $3.5 million  line of credit with a bank is used to finance  working
     capital requirements at Gargiulo's Puerto Rico operations. Borrowings under
     the line bear  interest at prime.  The credit line expires on September 30,
     1997. On December 31, 1996, the bank's prime rate was 8.25%. As of December
     31, 1996, there was $2,500,000 outstanding on the line of credit.

9.   Commitments and Contingencies

     Leasing Arrangements

          The Company  leases certain  research and office  equipment as well as
     office and research space. These leases are accounted for as follows in the
     accompanying consolidated financial statements:

     Capital Leases

          The following amounts are included in property, plant and equipment as
     assets recorded under capital leases:

                                               (In thousands)

                          December 31, 1996     June 30, 1996     June 30, 1995
                          -----------------     -------------     -------------
         Cost                  $4,235               $6,847            $4,192
         Less accumulated
           depreciation         1,525                1,245             1,113
                              -------              -------           -------
                               $2,710               $5,602            $3,079
                               ======               ======            ======

          Depreciation  expense charged to operations  pursuant to these capital
     leases amounted to approximately $294,000,  $482,000, $537,000 and $462,000
     during the six month  period  ended  December  31, 1996 and the years ended
     June 30, 1996, 1995 and 1994 respectively.


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


9.   Commitments and Contingencies (continued)

     Capital Leases (continued)

          During the six month  period  ended  December  31,  1996 and the years
     ended June 30, 1996,  1995 and 1994, the Company  capitalized  equipment of
     approximately  $334,000,  $489,000,  $1,506,000 and $773,000,  respectively
     which  represents  the present value of the net minimum  lease  payments of
     capital lease obligations entered into during such fiscal periods.

          The future minimum lease payments by fiscal year under capital leases,
     together with the present  value of the net minimum  lease  payments are as
     follows at December 31, 1996:

                                                         (In thousands)

               1997                                          $1,322
               1998                                             621
               1999                                             445
               2000                                             555
               2001                                              71
                                                            -------
                                                              3,014

               Less amount representing interest                433

               Present value of net minimum lease payments
               (Note 8)                                      $2,581
                                                             ======

     Operating Leases

          Future minimum payments by fiscal year under non-cancelable  operating
     leases are as follows at December 31, 1996:

                                                         (In thousands)

                1997                                       $  6,379
                1998                                          3,732
                1999                                          3,153
                2000                                          2,815
                2001                                          1,436
                Thereafter                                      637
                                                           --------
                                                           $ 18,152
                                                           ========

          Rental  expense  charged to operations  for all  operating  leases was
     approximately $3,445,000, $3,971,000, $3,259,000 and $1,761,000 for the six
     month  period  ended  December  31, 1996 and the years ended June 30, 1996,
     1995 and 1994,  respectively.  Rent expense  related to leases with related
     parties was approximately  $202,000 for the six month period ended December
     31, 1996 and $143,000 for the year ended June 30, 1996.


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


9.   Commitments and Contingencies (continued)

     Inventory Purchase Commitments

          In the normal course of business, the Company has entered into various
     grower contracts with third party growers. Pursuant to these contracts, the
     Company  has agreed to  purchase  the  resulting  crop,  subject to certain
     quality standards,  at the end of the growing cycle which is generally less
     than one year. The amount of  outstanding  grower  contract  commitments is
     approximately $4.4 million at December 31, 1996.

     Patents

          Certain  institutions  and companies  have been issued  patents,  have
     patent applications  pending or have otherwise obtained  proprietary rights
     to technology necessary or potentially useful to Calgene.  These patents or
     patent   applications,   if  patents  are  issued,   could  delay   product
     introduction  or  preclude  Calgene  from using this  technology  without a
     license.  The extent to which  Calgene  would be required  to license  such
     patents and cost and availability of such licenses are currently unknown.

     Legal Proceedings and Other Contingencies

          On or about January 29, 1997,  Hanna  Obstfeld  filed suit in Delaware
     Chancery  Court against the Company and certain of its  directors  alleging
     unfairness in connection with the proposed  acquisition by Monsanto Company
     of those shares of the Company's  common stock which Monsanto does not own.
     After Ms. Obstfeld brought her suit, other  essentially  identical  actions
     followed,  none of which have as yet been  served upon the  Company.  It is
     anticipated  that the  complaints  will  shortly  be  consolidated  and the
     Company has no  obligation  to answer,  move or otherwise  plead until such
     time as a  consolidated  complaint has been filed and served.  No discovery
     has  occurred  to  date  in  this  action.  The  Company  believes  it  has
     meritorious   defenses  to  the   allegations  set  forth  in  the  pending
     complaints.

          On February  11,  1997,  three named  Plaintiffs  filed a Class Action
     Complaint  against  Gargiulo,  Inc. in the United States District Court for
     the Northern District of California, San Jose Division. The Complaint arose
     from the employment  relationship  between the named and unnamed Plaintiffs
     and Gargiulo,  Inc. The Plaintiffs allege certain violations of the Migrant
     and Seasonal Agricultural Worker Protection Act ("MSPA"),  California's IWC
     Wage Order,  the  California  Labor Code and the  California  Business  and
     Professions  Code;  and Breach of  Contract.  The  Plaintiffs  seek damages
     including all unpaid wages,  statutory  damages under the California  Labor
     Code; a declaration that Gargiulo violated MSPA,  monetary damages pursuant
     to MSPA; and for an order enjoining Gargiulo, Inc. from violations of MSPA.
     Gargiulo's  insurance carriers were contacted regarding this lawsuit. As of
     March 27, 1997,  Gargiulo has answered the Class Action  Complaint,  and is
     initiating discovery regarding class certificaiton.  Gargiulo, Inc. is also
     waiting for the response from its insurance  carrier.  While the results of
     the Class Action Complaint  cannot be predicted,  the Company believes that
     the  ultimate  outcome  will  not have a  material  adverse  effect  on the
     Company's consolidated financial position or results of operations.

          From 1992 through early 1996, Calgene was engaged in a litigation with
     Enzo Biochem,  Inc.  ("Enzo") a company  licensed  under three related U.S.
     patents  and  counterpart   foreign  patents  (the  "Enzo  Patents")  which
     purported to cover the use of antisense technology in all cells,  including
     plant cells. Some of Calgene's  products,  including the FLAVR SAVR tomato,
     use antisense technology.  Enzo had claimed that Calgene infringed the Enzo
     Patents.  Calgene  denied  infringement  and challenged the validity of the
     Enzo Patents.  On February 2, 1996,  the District Court ruled that the Enzo
     Patents are invalid. In addition, the validity of a patent owned by Calgene
     directed to the use of  antisense in plant cells was upheld by the District
     Court.  Calgene  subsequently  requested  that the  court  clarify  certain
     aspects  of the  infringement  portion of its  decision,  and the court has
     agreed to reconsider on this basis.  There is no indication  that the court
     would  reverse  any  aspect of its  original  ruling.  Meanwhile,  Enzo has
     indicated that it intends to appeal the decision.

          Although  the trial court has the option of altering any aspect of its
     decision upon  reconsideration,  and Enzo may appeal the decision after its
     publication,  Calgene  believes  that further  proceedings  will not have a
     materially adverse effect on its consolidated financial position or results
     of operations,  based on the trial court's determination that the SUNY/Enzo
     Patents  are  invalid  and not  infringed  by Calgene  and that the Calgene
     Antisense Patent is valid.

          Nevertheless,  if on  reconsideration  or as a result  of an  appeal a
     court were to determine that one or more of the Enzo Patents validly covers
     plant  cells and that such  patents are  infringed  by  Calgene's  sales of
     products  incorporating  such antisense  technology,  Calgene could be held
     liable for  significant  damages and could be precluded  from producing and
     selling the FLAVR SAVR tomato,  as well as other products  currently  under
     development.  There is no assurance that a license, if necessary,  could be
     obtained by Calgene on  commercially  acceptable  terms,  if at all. If the
     court were to  determine  that the Calgene  Antisense  Patent is invalid or
     unenforceable,  Calgene would be deprived of the  competitive and licensing
     advantages  afforded by its  patent.  Moreover,  the Company  would have to
     expense the capitalized  legal fees related to the defense of the Calgene's
     Antisense Patent,  which amounted to approximately $5.7 million at December
     31, 1996.

          On  October  18,  1995,  two  groups  of  Plaintiffs   filed  separate
     complaints  against various  Defendants  including Gargiulo & Associates in
     the United States  District  Court for the Eastern  District of California.
     Both complaints  arose from the same set of facts and allege the same three
     theories of recovery.  These actions were  consolidated.  The cases involve
     personal  injury  claims  relating to vehicle  accident  in which  numerous
     migrant labor workers being  transported  to the farm of Gargiulo & Dresick
     Associates  (which was being farmed under contract by Dresick Farms,  Inc.)
     were killed or injured. The two cases, Albertano Alberto Jimenez; et al. v.
     Gargiulo & Associates;  Pat Kreger,  Inc., Manuel Vegas; Robles Rios; Jesus
     Loza and Samuel Santiago  Vasquez,  and Jose Vasquez;  et al. v. Gargiulo &
     Associates;  Pat Kreger,  Inc.,  Manuel Vegas;  Robles Rios; Jesus Loza and
     Samuel  Santiago  Vasquez,  were  both  filed  on  October  18,  1995.  The
     plaintiffs  sought general  damages,  including  compensation  for pain and
     suffering;  special  damages,  including  past,  present and future medical
     expenses; compensation for the loss of past and future income; and punitive
     damages in an unspecified amount.  Gargiulo's  insurance carriers have been
     contacted  regarding  these  lawsuits.  As of March 12, 1997,  Gargiulo was
     granted its Motion for Summary Judgment as to all of the claims against it.
     This matter is now  subject to appeal  which must be filed by no later than
     30 days from entry of judgment which will not occur for a few weeks.

          The Company is party to other  pending  litigation  incidental  to its
     business and has from time to time been notified of various claims that are
     not the subject of pending litigation.  While the results of litigation and
     claims cannot be predicted with  certainty,  the Company  believes that the
     final outcome of all such other litigation matters and claims will not have
     a  materially  adverse  effect on its  consolidated  financial  position or
     results of operations.

     Employment Agreements

          Calgene has various employment and consulting  agreements with certain
     key  individuals.  The aggregate fixed commitment under these agreements is
     $2,125,000.  In addition,  one employment agreement provides for additional
     compensation based on a percentage of the net profit of Gargiulo.

10.  Shareholders' Equity

     Stock Options

          At December 31, 1996, the Company has three  stock-based  compensation
     plans,  which are described  below.  The Company applies APB 25 and related
     interpretations  in accounting for its stock options because,  as discussed
     below, the alternative  fair value  accounting  provided for under SFAS 123
     requires use of option  valuation models that were not developed for use in
     valuing the stock options. Under APB 25, because the


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


10.  Shareholders' Equity (continued)

     Stock Options (continued)

     exercise price of the Company's  stock options equals the market price
     of the underlying  stock on the date of grant, no  compensation  expense is
     recognized.

          The Company  established  stock  option  plans in June 1991 (the "1991
     Plan")  and March  1996  (the  "1996  Plan"),  under  which  all  officers,
     employees and directors of the Company may  participate.  Either  incentive
     stock  options or  non-qualified  stock  options can be granted  under both
     plans.  2,500,000 and 5,000,000  shares of the Company's  common stock have
     been  reserved  for  issuance  under  the 1991  Plan,  and the  1996  Plan,
     respectively.  Options granted under the plans generally have a term of ten
     years from the date of grant. The exercise price of incentive stock options
     granted  under the plans may not be less that 100% of the fair market value
     of Calgene's common stock on the date of grant.

          The administrative  committee of the option plans has the authority to
     provide  that  options  issued may be  exercised  by either  (1) cash,  (2)
     surrender by the optionee of other shares of common stock of the Company of
     a value equal to the exercise price of the shares as to which the option is
     being  exercised,  or (3) the optionee's  issuance of an  interest-bearing,
     full-recourse promissory note.

          The Company also has a 1981 Stock  Option Plan having terms  generally
     similar to the 1991 Plan. The 1981 Plan has been terminated  subject to the
     rights of holders of outstanding options.

          Pro  forma  information  regarding  net loss and net loss per share is
     required  by  SFAS  123,  which  also  requires  that  the  information  be
     determined as if the Company has  accounted for its employee  stock options
     granted  subsequent  to June 30,  1995 under the fair value  method of that
     Statement.  The fair value of each option grant is estimated on the date of
     grant  using the  Black-Scholes  option  pricing  model with the  following
     weighted-average  assumptions for the year ended June 30, 1996, and the six
     month period  ended  December 31,  1996:  dividend  yield of 0;  volatility
     factors of the expected market price of the Company's  common stock of .44;
     risk-free  interest rate of 6.6%; and a  weighted-average  expected life of
     the options of 3.5 years for certain  option holders and five years for all
     other option holders.

          The  Black-Scholes  option  valuation  model was  developed for use in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected  stock price  volatility.  Because the  Company's  employee  stock
     options have characteristics  significantly  different from those of traded
     options,  and  because  changes in the  subjective  input  assumptions  can
     materially  affect the fair value estimate,  in management's  opinion,  the
     existing models do not necessarily provide a reliable single measure of the
     fair value of its employee stock options.

          For purposes of pro forma disclosures, the estimated fair value of the
     options is  amortized  to expense over the  options'  vesting  period.  The
     Company's pro forma information,  which includes the stock option plans and
     the Employee Stock Purchase Plan, follows (in thousands except for net loss
     per share information):

                                            Six Months Ended       Year Ended
                                            December 31, 1996     June 30, 1996
                                            -----------------     -------------
          Net loss - actual                    $  (63,934)        $  (97,014)
          Net loss - pro forma                    (65,085)           (97,564)
          Net loss per share - actual               (1.03)             (2.56)
          Net loss per share - pro forma            (1.05)             (2.58)



<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


10.  Shareholders' Equity (continued)

     Stock Options (continued)

          Because SFAS 123 is applicable only to options  granted  subsequent to
     June 30, 1995, its pro forma effect will not be fully reflected until 1999.

          A  summary  of the  status of the  Company's  stock  option  plans and
     changes during the periods is presented below:
<TABLE>
<CAPTION>
                                                                        Options
                                                                       ---------
<S>                                                                    <C>                <C>
                  Outstanding at June 30, 1993                         1,461,025
                           Granted                                       499,000
                           Canceled                                     (13,759)
                           Exercised (at $5.25 to $12.375)             (268,588)
                                                                       ---------
                  Outstanding at June 30, 1994                         1,677,678
                           Granted                                       769,025
                           Canceled                                    (119,968)          Weighted-Average
                           Exercised (at $5.875 to $12.375)             (61,457)           Exercise Price
                                                                     -----------           --------------
                  Outstanding at June 30, 1995                         2,265,278               $ 7.57
                           Granted                                     2,000,929                 5.72
                           Canceled                                    (567,502)                 7.47
                           Exercised (at $6.50)                          (6,182)                 6.50
                                                                     -----------
                  Outstanding at June 30, 1996                         3,692,523                 6.56
                           Granted                                     1,386,350                 5.25
                           Canceled                                    (135,327)                 6.63
                                                                       ---------
                  Outstanding at December 31, 1996                     4,943,546                 6.18
                                                                       =========
</TABLE>

          The  weighted-average  fair  value of options  granted  during the six
     month period ended December 31, 1996, and the year ended June 30, 1996, was
     $2.37 and  $2.54,  respectively.

          The following  table  summarizes  information  about the stock options
     outstanding at December 31, 1996:
<TABLE>
<CAPTION>

                                                   Options Outstanding                       Options Exercisable
                                      -----------------------------------------------   ------------------------------
                                                          Weighted-      Weighted-                          Weighted-
                                                           Average        Average                            Average
                                         Number of       Contractual      Exercise        Number of         Exercise
           Range of Exercise Prices       Options            Life          Price           Options           Price
           -------------------------  -----------------  -------------  -------------   ---------------  -------------
                <S>                       <C>                <C>           <C>             <C>               <C>
                $4.63 - $5.49              1,645,587          9.37          $5.23           225,147          $5.22
                 5.50 - 5.99               1,647,082          9.31           5.76           311,044           5.75
                 6.00 - 6.99                 304,973          5.35           6.67           212,403           6.76
                 7.00 - 7.99               1,187,586          6.91           7.50           710,719           7.51
                  8.00-15.25                 158,318          6.50           9.65           124,558           9.92
                                          ----------                                       --------

                                           4,943,546                         6.18         1,583,871           6.93
                                           =========                                      =========
</TABLE>


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


10.  Shareholders' Equity (continued)

     Stock Options (continued)

          At June 30, 1995,  814,421 options were  exercisable at prices ranging
     from $5.25 to $15.25 per share.  At June 30, 1996,  1,088,775  options were
     exercisable at prices  ranging from $4.75 to $15.25 per share.  At December
     31, 1996, there are 404,917 shares and 2,138,072 shares available for grant
     under the 1991 plan and 1996 plan, respectively. Of the options outstanding
     at December 31, 1996, options to purchase 1,583,871 shares were immediately
     exercisable  at prices  ranging  from  $4.75 to  $15.25  per share on dates
     ranging from 1996 to 2006.

          In November 1994, the Board of Directors  approved an amendment to all
     outstanding  options held by  employees of the Company  under the 1991 plan
     with exercise  prices in excess of $7.50 per share.  The amendment  allowed
     employees to elect to reduce the option  exercise  price to $7.50 per share
     in exchange for an extended  vesting period.  A total of 1,268,081  options
     with option prices ranging from $7.75 to $16.00 were repriced.

     Employee Stock Purchase Plan

          The Company established a stock purchase plan in March 1990 (the "1990
     Plan") under which most employees of the Company may  participate.  A total
     of 500,000  shares of the  Company's  common  stock have been  reserved for
     issuance under the 1990 Plan. The 1990 Plan is administered by the Board of
     Directors or by a committee appointed by the Board of Directors.  Employees
     can elect to have from two to ten  percent of their  monthly  gross  salary
     deducted  during each offering period and applied to the purchase of stock.
     The purchase  price is an amount equal to 85% of the fair market value of a
     share of  common  stock of the  Company  on the  enrollment  date or on the
     purchase date,  whichever is lower.  During the fiscal years ended December
     31, 1996,  June 30, 1996,  1995 and 1994, the Company sold 21,521 shares of
     common  stock for  $91,464,  31,593  shares of common  stock for  $166,183,
     31,462  shares of common stock for  $216,179,  and 23,045  shares of common
     stock for $223,144, respectively. For purposes of calculating the pro forma
     disclosures required by SFAS 123, the fair value of the employees' purchase
     rights was estimated using the Black-Scholes  option pricing model with the
     following  assumptions for the six month period ended December 31, 1996 and
     the year ended  June 30,  1996:  dividend  yield of 0;  expected  life of 6
     months;  expected  volatility of .33; and risk-free interest rate of 5.81%.
     The weighted-average fair value of those purchase rights granted during the
     six month period ended  December 31, 1996 and the year ended June 30, 1996,
     was $1.60 and $1.97, respectively.

11.  Income Taxes

          The income tax provision  for the six month period ended  December 31,
     1996  and  years  ended  June 30,  1996,  and  1995 is  comprised  of state
     franchise  taxes.  Significant  components  of the  Company's  deferred tax
     assets and liabilities for federal and state income taxes are as follows:


<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


11.  Income Taxes (continued)
<TABLE>
<CAPTION>

                                                                                   (In thousands)

                                                                 ---------------------------------------------------
                                                                  December 31,        June 30,         June 30,
                                                                      1996              1996             1995
                                                                 ----------------  ---------------  ----------------
                  <S>                                               <C>               <C>              <C>
                  Deferred tax assets:
                  Net operating loss carryforwards                  $ 85,200          $ 70,600         $ 66,200
                  Research and other credits                           3,800             3,800            3,800
                  Capitalized research and development                   400               400              400
                  Inventory reserves and allowances                    1,000             1,500               --
                  Facility writedowns and restructuring                9,400             6,400              300
                  Development fee                                      4,000             4,000               --
                  Capitalized license fees                               400               600              700
                  Increase in tax value of net assets from
                    business acquisition                              15,000             4,200               --
                  Other, net                                             800             1,800            1,600
                                                                    --------          --------         --------
                  Total deferred tax assets                          120,000            93,300           73,000
                  Valuation allowance for deferred tax assets       (118,400)          (91,500)         (72,800)
                                                                    ---------         ---------        ---------

                  Net deferred tax assets                           $  1,600          $  1,800         $    200
                                                                    ========          ========         ========

                  Deferred tax liabilities:
                       Depreciation                                 $  1,600          $  1,800         $     --
                       Other, net                                         --                --              200
                                                                    --------          --------         --------

                  Total deferred tax liabilities                    $  1,600          $  1,800         $    200
                                                                    ========          ========         ========
</TABLE>

          At June 30, 1994 the  valuation  allowance for deferred tax assets was
     $61.1 million.

          For federal income tax return  purposes,  as of December 31, 1996, the
     Company has a net operating  loss carryover of  approximately  $234 million
     which  expires  between  1997 and 2012 and a general  business  tax  credit
     carryover of  approximately $4 million which expires between 1997 and 2012.
     In addition,  as of December 31, 1996, the Company has a net operating loss
     carryover of approximately $143 million for state income tax purposes which
     expires between 1997 and 2012.

          Approximately  $20 million and $3 million of the federal and state net
     operating  loss  carryovers,  respectively,  and  $700,000  of the  general
     business tax credit  carryover,  were  generated by Plant Genetics prior to
     its merger with Calgene.  Such net operating loss and general  business tax
     credit  carryovers  are available  only to offset the separate  federal and
     state taxable income,  if any, of Calgene Fresh (Plant Genetics was renamed
     Calgene  Fresh in January,  1992).  For  financial  reporting  purposes,  a
     valuation allowance of approximately  $118.4 million has been recognized to
     offset  the  deferred  tax  assets  related  to all  of the  aforementioned
     carryforwards.



<PAGE>


                                  CALGENE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               December 31, 1996 and June 30, 1996, 1995 and 1994


11.  Income Taxes (continued)

          Because of "change in  ownership"  provisions of the Tax Reform Act of
     1986,  a portion of the  Company's  federal net  operating  loss and credit
     carryovers  will  be  subject  to  an  annual  limitation  regarding  their
     utilization  against taxable income in future periods.  The Company expects
     that this annual  limitation will not have a material adverse effect on the
     Company's  ability to utilize the net operating loss and credit  carryovers
     prior to the expiration of the carryover periods.

12.  Tax Deferred Investment Plan

          Substantially  all full-time  employees of the Company are eligible to
     participate  in a tax deferred  investment  plan (the "401(k)  Plan").  The
     401(k) Plan permits each employee to  contribute 2% to 15% of  compensation
     on a pre-tax  basis,  to a maximum  amount per calendar  year.  For the six
     month  period  ended  December  31, 1996 and the years ended June 30, 1996,
     1995  and  1994,  matching  contributions  by the  Company  were  $118,000,
     $227,000, $179,000 and $151,000, respectively.

13.  Subsequent Events

          In January 1997,  the Company  received an  unsolicited  proposal from
     Monsanto to acquire all of the  outstanding  shares of the Company's  stock
     that Monsanto does not already own at a price of $7.25 per share.  Monsanto
     currently owns approximately 54.6% of the Company's outstanding shares. The
     proposal  is  under   consideration   by  a  special   committee  of  three
     disinterested Calgene Directors.

          In February  1997,  the Company  replaced its $13 million bank line of
     credit with a $20 million  bank line of credit with a different  bank.  The
     bank line is used to help finance working capital requirements for Calgene.
     Borrowings are secured by accounts receivable, inventory and equipment. The
     line of credit expires on December 1, 1999.  Available  credit increases to
     $30 million after  December 31, 1997 and to $40 million after  December 31,
     1998.


<PAGE>
<TABLE>
<CAPTION>
                                                           CALGENE, INC.
                                              SELECTED QUARTERLY FINANCIAL DATA
                                                            Unaudited

          Six Month Period Ended
             December 31, 1996
--------------------------------------------
(In thousands, except per share amounts)
                                                           Quarter Ended
                                                 ----------------------------------
                                                    Sep 30              Dec 31
                                                 --------------     ---------------
<S>                                                 <C>                <C>                 <C>                <C>
Revenues:
         Product sales                              $  36,821          $  32,959
         Product development                              359                370
                                                    ---------          ---------
              Total revenues                        $  37,180          $  33,329
Cost of goods sold                                  $  38,883          $  33,159
Net loss                                            $ (17,854)         $ (46,080)
Net loss per share                                  $    (.30)         $    (.72)

                Fiscal 1996
--------------------------------------------
(In thousands, except per share amounts)
                                                                              Quarter Ended
                                                 -------------------------------------------------------------------------
                                                    Sep 30              Dec 31             Mar 31             June 30
                                                 --------------     ---------------     --------------     ---------------
Revenues:
         Product sales                              $   8,812          $  11,128           $  17,326          $  58,457
         Product development                              300                550                 225              8,197
                                                    ---------          ---------           ---------          ---------
              Total revenues                        $   9,112          $  11,678           $  17,551          $  66,654
Cost of goods sold                                  $  12,141          $   9,958           $  13,173          $  55,131
Net loss                                            $ (10,374)         $  (5,730)          $ (76,955)         $  (3,955)
Net loss per share                                  $    (.34)         $    (.19)          $   (2.52)         $   (0.07)

                Fiscal 1995
--------------------------------------------
(In thousands, except per share amounts)
                                                                              Quarter Ended
                                                 -------------------------------------------------------------------------
                                                    Sep 30              Dec 31             Mar 31             June 30
                                                 --------------     ---------------     --------------     ---------------
Revenues:
         Product sales                              $   6,263          $   8,850           $  18,399          $  15,460
         Product development                              267              4,166                 797              1,229
                                                    ---------          ---------           ---------          ---------
              Total revenues                        $   6,530          $  13,016           $  19,196          $  16,689
Cost of goods sold                                  $   8,719          $  10,336           $  15,039          $  19,584
Net loss                                            $  (9,538)         $  (5,648)          $  (4,459)         $ (10,957)
Net loss per share                                  $    (.35)         $    (.19)          $    (.15)         $    (.36)


</TABLE>


<PAGE>


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.

     Not applicable.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The Board of Directors of Calgene, Inc. (the "Company") is as follows:
<TABLE>
<CAPTION>

       Name                Age                         Principal Occupation                         Director Since

<S>                             <C>                                                                       <C>
Patrick J. Fortune.........49   Chief Information Officer of Monsanto Company                             1996

Robert T. Fraley...........43   President of Ceregen (a business unit of Monsanto Company)                1996

Michael R. Hogan...........43   Vice President and Corporate Controller of Monsanto Company               1996

Lloyd M. Kunimoto..........43   President and Acting Chief Executive Officer of the Company               1996

Howard D. Palefsky.........49   Chairman of Collagen Corporation                                          1986

John E. Robson.............66   Senior Advisory of Robertson, Stephens & Company                          1996

Roger H. Salquist          55   Principal of the Craves Group; Former Chairman and Chief Executive
                                Officer of the Company                                                    1981

Allen J. Vangelos..........64   President and Chief Executive Officer of Calavo Growers of                1994
                                California

Hendrik A. Verfaillie......51   Executive Vice President of Monsanto Company                              1996
</TABLE>

     There is no family relationship between any director and any other director
or executive officer of the Company.

     Mr. Fortune was appointed Corporate Vice President,  Information Technology
and Chief  Information  Officer of Monsanto Company in October 1995. From August
1994 to August 1995,  Mr. Fortune was president and Chief  Operating  Officer of
Coram-Healthcare Corporation, whose business is home infusion therapy for cancer
and AIDS patients.  From 1991 to 1994, Mr. Fortune was Corporate Vice President,
Information Management for Bristol-Meyers Squibb. From 1989 to 1991, Mr. Fortune
was Senior  Vice  President  and General  Manager of  Packaging  Corporation  of
America,  prior to which he served as Vice President,  Information  Services and
Corporate Vice President of the Parenterals Group of Baxter International. He is
also a member of the Board of  Directors  of  Parexel  Corporation,  a  clinical
research  organization,  and  serves on the Board of  Visitors  of the School of
Physical Sciences at the University of Chicago.

     Mr. Fraley was named President of Ceregen, a business unit of Monsanto,  in
1995. From 1993 to 1995, Mr. Fraley was Vice President,  New Products  Division,
of the Monsanto  Agricultural  Products Group. From 1990 to 1993, Mr. Fraley was
Vice President, Research and Development, New Products Division, of the Monsanto
Agricultural  Products Group. Mr. Fraley is a director of Dekalb Genetics Corp.,
an agricultural products company.

     Mr. Hogan was appointed  Corporate Vice President and Corporate  Controller
of Monsanto  Company in January 1996. From 1986 to 1995, Mr. Hogan was Executive
Vice  President of General  American  Life and while  holding such position also
served as  president  and  Director  of Gencare  Health  Systems,  Inc.  and its
predecessor organization from 1990 through 1994.
<PAGE>

     Mr. Kunimoto has been the President and Acting Chief  Executive  Officer of
the Company since July 1996. From June 1995 to July 1996, Mr. Kunimoto served as
Vice  President of Strategic  Planning and Business  Development.  From November
1983 to June 1995, Mr.  Kunimoto served in several senior  management  positions
with the Company.

     Mr. Palefsky has been Chairman of Collagen Corporation,  a medical products
company,  since  1995.  Mr.  Palefsky  was Chief  Executive  Officer of Collagen
Corporation,  from 1978 to 1997 and served as president from 1978 to 1995. He is
also a director of Target Therapeutics,  Inc. and Innovasive Devices, Inc., both
medical products companies.

     Mr. Robson has been a Senior Advisor of Robertson, Stephens & Company since
1993.  From 1989 to 1992,  Mr. Robson was Deputy  Secretary of the United States
Treasury.  Mr.  Robson is also a director  of  Monsanto  Company,  a  chemicals,
pharmaceuticals and agricultural products company, Northrop Grumman Corporation,
an aerospace and defense company,  and Security Capital Industrial Trust, a real
estate investment trust.

     Mr.  Salquist has been a principal of the Craves Group, a private  merchant
bank since  February 1997.  Mr.  Salquist had previously  served as an executive
officer of the Company  since  September  1983 and its Chief  Executive  Officer
since  November  1985.  Mr.  Salquist is a director of Collagen  Corporation,  a
medical products company.

     Mr. Vangelos has been the President and Chief  Executive  Officer of Calavo
Growers of California  since September  1986,  prior to which he held management
positions at Castle & Cooke,  including  Vice  President and General  Manager of
Processed Products and President of International Diversified Business and Fresh
Marketing.  From  1980 to 1984,  he was the  Chief  Executive  Office  of Impact
corporate Group, a food brokerage company. Mr. Vangelos was the 1993 Chairman of
the Board of  Directors of the  Agricultural  Council of  California  and a past
Chairman of the United Fresh Fruit and Vegetable Association.

     Mr.  Verfaillie  was  appointed  an  Executive  Vice  President of Monsanto
Company in July 1995.  Prior to this he served as President of The  Agricultural
Group, Vice President and Advisory Director--Monsanto Company from 1993 to 1995,
Vice President and General Manager,  Roundup  Division--The  Agricultural  Group
from  1990  to  1993,   and  Vice   President-Commercial   Development--Monsanto
Agricultural Company from 1986 to 1990.

Board Meetings, Committees and Director Compensation

     The Board of  Directors  of the Company (the  "Board")  held five  meetings
during the six month fiscal period ended December 31, 1996. No nominee  attended
fewer than 75% of the meetings of the Board of Directors and of the committee of
the Board on which he served that were held during the period of the  director's
service.

     The  Board  has an  Audit  Committee,  a Human  Resources  Committee  and a
Replacement/Retention  Committee.  From  time to time,  the  Board  has  created
various ad hoc committees for special purposes.

     The Audit Committee  consists of Messrs.  Salquist,  Fortune,  Fraley,  and
Hogan.  The Audit  Committee held three meetings in the last fiscal period.  The
Audit Committee recommends  engagement of the Company's independent auditors and
is primarily  responsible for approving the services  performed by the Company's
independent  auditors and for reviewing and evaluating the Company's  accounting
principles and its system of internal accounting controls.

     The Human Resources  Committee  consists of Messrs.  Vangelos,  Verfaillie,
Palefsky and Robson. The Human Resources  Committee held two meetings during the
fiscal period. The Human Resources Committee considers and makes recommendations
to the Calgene Board of Directors concerning general  compensation  policies and
employee  benefit  plans and  specifically  recommends  salary  levels and bonus
awards for certain  senior  executive  officers,  including the Chief  Executive
Officer.  The Human Resources Committee also administers  Calgene's stock option
plans and has sole authority to grant options to officers.

     The   Retention/Replacement   Committee   consists  of  Messrs.   Palefsky,
Verfaillie and Robson.  The  Retention/Replacement  Committee is responsible for
the  retention  and/or  replacement  of  all of the  executive  officers  of the
Company.   Under  the  terms  of  the  Restated  Stockholders   Agreement,   the
Retention/Replacement  Committee was eliminated,  thus leaving the Calgene Board
of Directors thereafter  responsible for the retention and/or replacement of all
of the executive officers of the Company.
<PAGE>

     Directors  who are not also  employees  of the Company or Monsanto or their
subsidiaries  receive a fee of $1,000 per meeting ($250 per  telephone  meeting)
attended, $500 per Board committee meeting attended (unless held on the same day
as a Board meeting) and a monthly retainer of $1,000, plus out-of-pocket  travel
expenses. Prior to April 1, 1996 directors received an annual retainer of $3,000
(accruing  and  payable  $250 per  month).  Under the 1996  Stock  Option  Plan,
non-employee  directors  (excluding  directors  employed by Monsanto) receive an
option to purchase  10,000  shares of Common Stock at the time of their  initial
election to the Board, and receive annually thereafter options to purchase 3,000
shares of Common Stock. These  automatically  granted options have terms of five
years (subject to continued service on the Board),  become  exercisable in equal
monthly  increments over the twelve months  following the respective grant dates
and have  exercise  prices equal to the fair market value of the Common Stock on
their dates of grants.  On March 25, 1996,  annual  options  were  automatically
granted to each of the nonemployee  directors then serving (excluding  directors
employed by Monsanto) at an exercise price of $6.00 per share.

     There we no  consulting  fees paid to  directors  in the six  month  fiscal
period ended December 31, 1996.

     In addition to the fees listed above,  Monsanto Company  transferred to Mr.
Robson 15,000  shares of Common Stock of the Company  pursuant to the terms of a
letter agreement dated May 6, 1996 between John E. Robson and Monsanto  Company.
Such shares are subject to a three-year  vesting period,  under which 33 1/3% of
the total number of shares  originally  granted become  non-forfeitable  on each
March 31 commencing March 31, 1997.


ITEM 11.   EXECUTIVE COMPENSATION

Summary of Cash and Other Compensation

     The  following  table  provides  certain  summary  information   concerning
compensation  earned  during the last two fiscal  years and the six month fiscal
period ended December 31, 1996 by the Company's Chief Executive Officer and each
of the four other most highly compensated  executive officers of the Company who
were serving at December 31, 1996 (the "named  executive  officers").  The table
also includes such information for one former executive  officer who at December
31, 1996 was no longer employed by the Company or a subsidiary of the Company.
<PAGE>

                                            SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                            Long-Term
                                                                                          Compensation
                                                          Compensation (1)                   Awards
                                              -----------------------------------------  ----------------
                                                                        Other Annual       Securities         All Other
                                 Fiscal         Salary       Bonus      Compensation       Underlying        Compensation
 Name and Principal Position   Period (7)         ($)         ($)            ($)           Options (#)           $(2)
 ---------------------------  --------------  ------------  ---------  ----------------  ----------------  -----------------
<S>                            <C>              <C>           <C>          <C>               <C>                 <C>
Roger H. Salquist (3)(4)       Transition        61,346           --       905,000                --               423
   Former Chairman of the         1996          275,577           --            --                --             3,596
   Board and Chief Executive      1995          242,404           --            --           100,000             1,212
   Officer                        1994          225,865           --            --           104,762                --

Andrew M. Baum                 Transition        81,231           --            --                --               738
   Vice President                 1996          160,046           --            --            40,000             3,280
                                  1995          162,600       10,000            --            25,000               840
                                  1994          154,592           --            --                --                --

Jeffrey D. Gargiulo            Transition       165,125           --            --                --                --
   Chief Executive Officer        1996           75,000           --            --           100,000                --
   Gargiulo, Inc.

Lloyd M. Kunimoto (5)          Transition        97,615           --            --                --               985
   Chief Executive Officer        1996          140,000       50,000            --            50,000             2,800
                                  1995          140,538       10,000            --            25,000               754
                                  1994          135,519        4,808            --                --                --

Christian Leleu (6)            Transition        73,673           --        23,321                --             1,227
   Chief Financial Officer        1996           35,000           --        90,834           100,000                --

Richard Stonard                Transition        76,154           --            --                --             1,500
   Chief Technical Officer        1996           37,500           --            --           100,000                --
</TABLE>

(1)  Includes  amounts  earned in the fiscal year even if paid in the subsequent
     fiscal year or deferred  pursuant to the  Company's  401(k)  savings  plan.
     Excludes  amounts  paid  during the fiscal year that were earned in a prior
     year.
(2)  Amounts  reported  as "All  Other  Compensation"  represent  the  Company's
     matching contributions under its 401(k) savings plan.
(3)  The  options  shown in the table as granted to Mr.  Salquist in fiscal 1994
     were  originally  granted in 1987 for a six-year term and extended for four
     additional years in fiscal 1994.
(4)  In August 1996,  Mr.  Salquist  resigned as Chairman of the Board and Chief
     Executive  Officer.  Mr. Salquist remains as a member of the Board and has
     also   become   a    consultant    to   the   Company.    See    "Executive
     Compensation--Change of Control Employment Agreements."
(5)  Since the resignation of Mr. Salquist,  Mr. Kunimoto served as Acting Chief
     Executive  Officer.  (6) Mr.  Leleu's  "other annual  compensation"  in the
     transition  period and fiscal 1996 consisted of reimbursement of relocation
     expenses.
(7)  The  "Transition"  fiscal period is for the six month period ended December
     31, 1996.

Change of Control Employment Agreements

     Mr. Salquist entered into a Change of Control Employment  Agreement,  dated
as of July 19, 1995, with the Company.  The agreement became effective only upon
a Change of Control  (as  defined)  of the Company  and  provides  that,  if the
employment  of the  officer  is  terminated  by the  Company  without  Cause (as
defined) or by the officer for Good Reason (as  defined)  within the  three-year
term  of the  agreement  or if he  resigns  upon  the  six-month  of  three-year
anniversaries of the effective date of the agreement,  the officer shall receive
severance  benefits  that include a payment  equal to 2.99 times his base salary
and  average  bonus for the prior  three  fiscal  years.  For  purposes  of such
agreements, a Change of Control included the closing of the transaction on March
31, 1996 pursuant to which Monsanto  Company acquired a 49.9% equity interest in
the Company.

     In connection  with his  resignation in August 1996,  Mr.  Salquist and the
Company entered into an amendment to his Change of Control Employment  Agreement

<PAGE>

pursuant to which Mr. Salquist  agreed that payments  required to be made to him
under such agreement  would be paid over a 13 month period rather than in a lump
sum.  The  amended  agreement  provided  for the  payment of  $315,000  upon Mr.
Salquist's  resignation  and  monthly  payments  of  $25,000  during  a 12 month
consulting  period and an  additional  payment of  $290,000 at the end of the 12
month period.

     On May 31, 1996, Mr.  Motroni and the Company  entered into an amendment to
his Change of Control Employment  Agreement pursuant to which Mr. Motroni agreed
to remain in the employ of the Company until the earlier of (i) May 31, 1997, or
(ii) the  occurrence,  after May 31, 1996,  of any event that  constitutes  Good
Reason (as defined) in consideration of the Company's  payment to Mr. Motroni or
$100,000.  In addition,  the amended  agreement  provides for the payment to Mr.
Motroni of $335,000 upon the earliest of (i) the cessation of his employment for
any reason after May 31, 1997,  (ii) the  termination of his employment  without
Cause (as defined) or by reason of death,  or (iii) his  resignation as a result
of the occurrence of any event that constitutes Good Reason.

Stock Option Tables

     No stock options were granted in the six month fiscal period ended December
31, 1996 to the named executive officers in the Summary Compensation Table.

Options Exercises and Fiscal Period-End Values

     The following  table shows stock options  exercised by the named  executive
officers in the Summary  Compensation  Table during the six month fiscal  period
ended December 31, 1996, the aggregate  value of gains on the dates of exercise,
the  number of shares  covered by both  exercisable  and  non-exercisable  stock
options as of fiscal year-end, and the year-end values for such options.
<TABLE>
<CAPTION>

                                  Aggregated Option Exercises in Last Fiscal Year
                                         and Fiscal Year End Option Values

                                                      Number of Shares Underlying         Value of Unexercised
                                                        Unexercised Options at          In-the-Money Options at
                                                         December 31, 1996 (#)          December 31, 1996 ($)(1)
                                                     ------------------------------  -------------------------------
                         Shares          Value
                       Acquired on      Realized
                      Exercise (#)       ($)(1)      Exercisable    Unexercisable    Exercisable     Unexercisable
                      --------------  -------------  -------------  ---------------  -------------  ----------------
<S>                        <C>             <C>         <C>               <C>              <C>             <C>
Roger Salquist             --              --          217,262           77,500           --              --

Andrew M. Baum             --              --           45,098           54,902           --              --

Jeffrey Gargiulo           --              --           11,667           88,333           --              --

Lloyd M. Kunimoto          --              --           35,848           64,152           --              --

Christian Leleu            --              --            6,667           93,333           --              --

Richard Stonard            --              --           18,333           81,667            930            3,720
</TABLE>

(1)    Value is based on market value of the Common Stock at exercise  date (for
       value  realized),  or at  December  31,  1996 (for  value of  unexercised
       options), minus the option exercise price.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth the beneficial  ownership of Common Stock of
the Company as of February 28, 1997, by each director, by each executive officer
shown in the Summary Compensation Table (see "Executive  Compensation"),  by all
directors  and  executive  officers as a group and by each  person  known by the
Company to be a beneficial owner of more than 5% of the shares outstanding.


<PAGE>


<TABLE>
<CAPTION>

                                                                        Shares Beneficially       Approximate
                                                                             Owned (1)         Percent Owned (2)
                                                                        ---------------------  -------------------
<S>                                                                          <C>                      <C>
Andrew M. Baum ..................................................                57,780                *
Patrick J. Fortune ..............................................                --                    --
Robert T. Fraley ................................................                --                    --
Jeffrey D. Gargiulo .............................................                16,667                *
Michael R. Hogan ................................................                --                    --
Lloyd M. Kunimoto ...............................................                42,226                *
Christian Leleu .................................................                30,833                *
Howard D. Palefsky ..............................................                17,000                *
John E. Robson ..................................................                30,000                *
Roger H. Salquist ...............................................               248,340                *
Richard Stonard .................................................                23,333                *
Allen J. Vangelos ...............................................                21,600                *
Hendrik A. Verfaillie ...........................................                --                    --
All executive officers and directors as a group (16 persons) ....               598,654                *
Monsanto Company.................................................            36,396,114               54.5%
     800 North Lindbergh Boulevard
     St. Louis, MO  63137
Travelers Group Inc..............................................             4,076,654                6.1%
     388 Greenwich Street
     New York, NY  10013(3)
</TABLE>

*    Less than 1%.
(1)  The Company  believes  that all  beneficial  owners named in the table have
     sole  voting  and  investment   power  with  respect  to  the  shares  they
     beneficially  own. The shares shown in the table to be  beneficially  owned
     include any shares that the person has the right to acquire  within 60 days
     of January 31, 1997,  by exercise of any stock option for which the Company
     has knowledge. The shares subject to such options are as follows: Mr. Baum;
     49,079: Mr. Gargiulo;  16,667: Mr. Leleu; 20,833: Mr. Stonard;  23,333: Mr.
     Kunimoto;  35,329: Mr. Palefsky;  17,000: Mr. Robson; 15,000: Mr. Salquist;
     224,762: Mr. Vangelos;  21,000: and all executive officers and directors as
     a group; 531,804.
(2)  Percent of the 66,729,861  outstanding shares of Common Stock,  counting as
     outstanding  for each named  person all shares  issuable  to such person on
     exercise of options that are included in the first column.
(3)  Based on a  Schedule  13G  filed on  January  22,  1997,  with  respect  to
     beneficial  ownership as of December 31, 1996. The total includes 4,076,654
     shares beneficially owned by Smith Barney Holdings Inc.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Agreements with Monsanto

    Reorganization  Agreement.  On October 13,  1995,  the Company and  Monsanto
entered  into  an  Agreement   and  Plan  of   Reorganization   ("Reorganization
Agreement") and certain other agreements whereby Monsanto contributed all of the
outstanding  shares of capital stock of Tomato  Investment  Associates,  Inc., a
wholly-owned  subsidiary  of Monsanto  ("TIA"),  whose  principal  asset was the
entire  equity  interest  in  Gargiulo,  L.P.,  $30  million in cash and certain
technology  licenses in exchange for a 49.9% equity interest in the Company.  In
connection with the  Reorganization  Agreement,  a total of 30,146,114 shares of

<PAGE>

Common  Stock  of the  Company  were  issued  to  Monsanto.  The  Reorganization
Agreement was approved by the  stockholders of the Company on March 25, 1996. On
March 31, 1996 (the "Effective Time"), the Company and Monsanto  consummated the
transactions   contemplated  by  the  Reorganization  Agreement  which  included
entering into the agreements discussed below.  Subsequent to the Effective Date,
Gargiulo L.P. was merged into TIA and TIA changed its name to "Gargiulo, Inc."

    Stock Purchase Agreement.  On September 27, 1996, the Company entered into a
Stock  Purchase  Agreement  with  Monsanto  (the  "Stock  Purchase  Agreement"),
pursuant  to which (i) the Company  sold and issued to  Monsanto,  and  Monsanto
purchased  6,250,000  shares of Common  Stock of the  Company  (the  "Additional
Shares"),  at $8.00 per share,  for an aggregate  purchase price of $50 million,
thereby  increasing  Monsanto's  ownership  interest in shares of Calgene Common
Stock from 49.9% to  approximately  54.6% (without giving effect to the exercise
of outstanding options and warrants),  (ii) Monsanto and Calgene agreed to enter
into a  Restated  Stockholders  Agreement  ("Restated  Stockholders  Agreement")
amending  and  restating  the  Stockholders   Agreement  dated  March  31,  1996
("Stockholders Agreement"),  and (iii) the Restated Certificate of Incorporation
was amended to reflect the amendments to the Stockholders Agreement contemplated
by the Restated  Stockholders  Agreement.  As a consequence of the  transaction,
Monsanto owned  approximately  36,396,114 shares of Common Stock of the Company,
representing  approximately 54.6% of the issued and outstanding shares of Common
Stock of the Company.

     Stockholders  Agreement and Restated Stockholders  Agreement.  On March 31,
1996,  the  Company and  Monsanto  entered  into a  Stockholders  Agreement.  On
November 12, 1996,  Calgene and Monsanto entered into the Restated  Stockholders
Agreement  which amends and restates the existing  Stockholders  Agreement.  The
following is a summary of the Stockholders  Agreement as amended by the Restated
Stockholders Agreement ("the Stockholders Agreement").

Composition of the Calgene Board.

     Composition  of the  Calgene  Board  and the  manner of  selecting  members
thereof shall be as follows:

         (a)  Until   otherwise   changed  in   accordance   with  the  Restated
     Stockholders  Agreement,  the  Board  of  Directors  of  Calgene  shall  be
     comprised of nine Directors  consisting of one Company Management Director,
     three Independent  Directors and five Directors designated by Monsanto,  at
     least one of which shall be an Independent Director.

         (b) At any time that Monsanto's Percentage Interest is at least seventy
     percent  (70%),  Calgene  shall  nominate (i) six  directors  designated by
     Monsanto  which shall consist of one Company  Management  Director and five
     Monsanto directors  (including at least one Independent  Director) and (ii)
     three Independent Directors. At such time as Monsanto's Percentage Interest
     is  at  least  ninety-nine  percent  (99%),  Calgene  shall  nominate  nine
     directors designated by Monsanto.

     If an when Monsanto's Percentage Interest is less than 40%, 20%, 10% or 5%,
the number of directors designated by Monsanto is reduced to three, two, one and
zero, respectively.

     The  Stockholders  Agreement also provides that the Board of Directors,  by
unanimous action, may increase the number of directors  comprising the Board and
may elect,  or nominate for  election,  the  director(s)  to fill the vacancy or
vacancies created by such increase.

     Registration  Rights.  The  Stockholders  Agreement  provides  Monsanto and
certain  assignees may, subject to certain  conditions and limitations,  require
Calgene,  whether or not Calgene proposes to register its Common Stock for sale,
to register  with the  Securities  and  Exchange  Commission  all or part of the
shares held by Monsanto.  The Restated Stockholders  Agreement provides that the
Additional Shares acquired by Monsanto pursuant to the Stock Purchase  Agreement
shall also be entitled to these registration rights.  Calgene is not required to
effect such a  registration  prior to  September  30,  1998,  unless an event of
default has occurred and is continuing under the Credit Agreements. See "Certain
Transactions--Credit Agreements."

     Anti-Dilution  Rights.  If at any time  Calgene  agrees  to sell  shares of
Calgene Common Stock or other  securities  having the right to vote generally in
any election of directors of Calgene  (collectively,  "Calgene Securities") in a
private or public  offering (other than pursuant to Calgene stock option plans),
Monsanto is entitled to notice of such proposed sale and has the right,  but not

<PAGE>

the  obligation,  to acquire all or any portion of the Calgene  Securities to be
offered for sale sufficient for Monsanto to maintain,  after the consummation of
the proposed offering, the same percentage of ownership of Calgene Securities as
Monsanto possessed immediately prior to such offering. With respect to shares of
Calgene  Securities  issued pursuant to Calgene's  stock option plans,  Monsanto
shall  have the  right to  maintain  its  percentage  ownership  of  issued  and
outstanding  Calgene  Securities  by making open market  purchases in accordance
with the  Stockholders  Agreement.  This  provision is unchanged by the Restated
Stockholders Agreement.

     Limitations on Monsanto's Ownership of Calgene Securities. The Stockholders
Agreement  provides that until  September 30, 1998 Monsanto may not increase its
Percentage Interest above 54.6% except in limited circumstances such as:

     (a) conversion of principal and/or interest under the Credit Agreements;

     (b) issuance of Calgene Securities in an asset sale by Monsanto to Calgene;

     (c) A tender offer for 100% of the publicly held shares,  provided that the
         price must be approved by  disinterested  directors  and supported by a
         fairness opinion by an investment banking firm.

     Limitations on Monsanto's Resale of Calgene Securities. Monsanto shall not,
directly or indirectly, sell any Calgene Securities (other than to an affiliate)
except as follows:  (a) on and after March 31,  1997,  Monsanto may sell Calgene
Securities  (i)  as  part  of  a  joint  venture,  merger  or  sale  of  all  or
substantially all of its current Crop Protection business unit, as such business
may be subsequently  renamed or reorganized,  or (ii) pursuant to a tender offer
by a third party to the  stockholders of Calgene;  (b) after September 30, 1998,
in  addition  to the rights set forth in (a) above,  Monsanto  may sell  Calgene
Securities  (ii) in a registered  public offering  pursuant to the  registration
rights granted to Monsanto under the Stockholders Agreement;  (ii) through sales
pursuant to Rule 144 under the  Securities Act of 1933 (the  "Securities  Act");
(iii)  through  sales of not more than 10% of the total  issued and  outstanding
Calgene Securities to a Non-Financial  Purchaser (as defined in the Stockholders
Agreement);  or (iv) through  sales to a Financial  Purchaser (as defined in the
Stockholders Agreement); (c) after September 30, 1999, in addition to the rights
set forth in (a) and (b) above,  Monsanto may sell Calgene  Securities through a
private  sale  of 35% or  more  of the  total  issued  and  outstanding  Calgene
Securities to a  Non-financial  Purchaser under  circumstances  where such third
party  assumes  the  applicable  and  proportionate  rights and  obligations  of
Monsanto under the Stockholders Agreement and the other transaction  agreements;
and (d)  notwithstanding  the foregoing,  at any time, Monsanto may sell Calgene
Securities  issued to Monsanto  upon  conversion  by Monsanto  of  principal  or
accrued interest under the Credit Agreements after the occurrence of an event of
default (see "Certain Transactions--Credit Agreements" ).

     Approval Required for Certain Actions.

     The Restated Stockholder Agreement provides that:

     (a) Until the earlier of (i) March 31, 1999 or (ii) such time as Monsanto's
         Percentage  Interest is at least seventy  percent  (70%), a majority of
         the Calgene Board,  including at least two Company Directors,  shall be
         required to approve any of the following:  (i) the entry by the Company
         or any of its  Affiliates  into  any  merger  or  consolidation  or the
         acquisition  by the Company or any of its Affiliates of any business or
         assets  that  would  constitute  more than 10% of the  Company's  total
         assets determined on a consolidated basis (a "Substantial  Part"); (ii)
         the sale, pledge, grant of security interest in transfer, retirement or
         other disposal of a Substantial Part of the Company, except pursuant to
         a security  interest  granted in connection with  borrowings  permitted
         under the Restated Stockholders  Agreement or the pledge or granting of
         a security interest in certain intangible property as further described
         in the Restated Stockholders Agreement;  (iii) the establishment of any
         new  committees of the Calgene Board or new or revised  delegations  of
         Calgene Board  authority to any Calgene  Board  committee or changes or
         revisions  to general  delegations  of  authority  to officers or other
         persons for categories of expenditures;  (iv) the election, appointment
         or removal of the Chief Executive  Officer,  Chief Operating Officer or
         Chief  Financial  Officer of the  Company  and its  successors  and the
         establishment  of  its  annual  or  long-term  compensation  level  and
         benefits  (other  than  agreements  in effect at the  Effective  Time);
         provided,  however,  that  Monsanto  shall have the right to select the
         Chief  Technical  Officer of the Company and a controller  reporting to
         the  Chief  Financial  Officer  of the  Company;  (v)  approval  of the
         Operating Plan and Strategic Plan of the Company and its Affiliates, as

<PAGE>

         well as the annual operating plan and long-term  strategic plan for the
         Gargiulo  business,  to be submitted to the Calgene Board  annually for
         approval,  and any material changes  thereto;  (vi) any modification of
         the  Transaction  Agreements;  or (vii)  any  transaction  between  the
         Company (and its Affiliates) and Monsanto or any Affiliate of Monsanto.

     (b) From and after March 31, 1999, and until Monsanto's Percentage Interest
         is at least 99%, neither Monsanto nor any of the Affiliates shall enter
         into any transaction with Calgene or any of its Affiliates  without the
         approval of at least two Company Directors.

Credit Agreements

    Calgene Credit Facility Agreement

    On March 31,  1996,  Monsanto and Calgene  entered  into the Calgene  Credit
Facility  Agreement  pursuant to which  Monsanto  shall,  during the  Commitment
Period  (as  hereinafter  defined),  and  subject  to the terms  and  conditions
contained therein,  make, at the request of Calgene,  three consecutive one-year
loans of up to $15 million each (each a "Calgene Loan" and together the "Calgene
Loans"),  collectively totaling not more than $45,000,000.  At no time shall the
outstanding  principal of all Calgene  Loans  exceed $15  million.  Prior to the
occurrence  of an Event of Default (as defined in the  Calgene  Credit  Facility
Agreement), Calgene may borrow, repay and reborrow under each Calgene Loan, each
such borrowing or reborrowing being an "Advance." The "Commitment  Period" began
on March 31, 1996 and ends on the earlier of September 30, 1998, or such earlier
time that Monsanto terminates its obligations to make further Advances under the
Calgene  Credit  Facility  Agreement.  The  Calgene  Loans made  pursuant to the
Calgene  Credit  Facility  Agreement  are to be secured by the joint and several
guaranty of the subsidiaries of Calgene.

    Prior to the  occurrence  of an Event of  Default,  the  Calgene  Loans bear
interest at the per annum rate equal to 2.00% above  Citibank's  published prime
rate (the  "Calgene  Base Rate"),  and  following an Event of Default at the per
annum rate equal to 3.00% above the Calgene Base Rate. During the continuance of
an Event of  Default,  Calgene  shall have no right to obtain  any new  Advances
under this  Agreement.  The Calgene  Loans may be prepaid in whole or in part at
any time after giving at least three days prior written notice to Monsanto.

    In lieu of repayment of outstanding  principal and accrued  interest on each
Calgene Loan,  Calgene,  subject to Monsanto's  right to require Calgene to sell
shares and pay cash, as provided below,  may elect to convert all or any portion
of the principal and accrued interest due under the applicable Calgene Loan (the
"Conversion  Amount") into shares of Calgene  Common Stock at the average of the
closing market price for such shares during the thirty trading days  immediately
preceding the applicable maturity date for such Calgene Loan.

     Monsanto  may, in its sole  discretion  and within five business days after
its receipt of notice from Calgene that  Calgene  intends to exercise  Calgene's
rights to convert the Conversion Amount,  give written notice to Calgene stating
that (i) all or any part of the Conversion  Amount shall be payable in cash (the
"Alternative  Conversion  Amount"),  (ii) Calgene  shall,  at its expense,  sell
publicly  such  number of shares of its  common  stock as  Monsanto  would  have
received if the  Alternative  Conversion  Amount had been converted as described
above and (iii)  the net  proceeds  of such  sale  shall be paid by  Calgene  to
Monsanto in full payment and satisfaction of such Alternative Conversion Amount.

     Upon any such conversion,  the Conversion  Amount shall first be applied to
reduce  the  accrued  interest  due on the  applicable  Calgene  Loan  as of the
applicable  maturity  date, and any remaining  portion of the Conversion  Amount
shall be applied to reduce the principal due on such Calgene Loan. In any event,
on each  annual  Maturity  Date  (as  defined  in the  Calgene  Credit  Facility
Agreement),  all  outstanding  principal  and accrued  interest not converted by
Calgene into shares of Calgene Common Stock shall be repaid in full to Monsanto.

     Upon the occurrence and during the continuation of an Event of Default, for
a period  of  thirty  (30) days  from the  occurrence  of the Event of  Default,
Calgene,  subject to Monsanto's  right to require Calgene to sell shares and pay
cash, as described  above,  may similarly elect to convert all or any portion of
the  principal  and accrued  interest  under any  outstanding  Calgene Loan into
shares of Calgene  Common  Stock.  If  Calgene  does not elect to  exercise  its
conversion  rights upon such an Event of Default,  Monsanto  may, in addition to

<PAGE>

its other remedies, elect to convert all or a portion of the remaining principal
and accrued interest under such Calgene Loan into shares of Calgene Common Stock
at the average of the closing  market  prices for such shares  during the thirty
days preceding such Event of Default. In no event, however, shall Monsanto elect
to convert  principal and accrued  interest into more than  3,000,000  shares of
Calgene  Common  Stock (as such number is adjusted  for stock  dividends,  stock
splits and similar events affecting holders of Calgene's common stock).

     The  obligation  of  Monsanto  to  provide   Advances  is  subject  to  the
fulfillment of certain  conditions,  including,  among others: (i) the continued
accuracy  of  all  representations  and  warranties  made  by  Calgene  and  its
subsidiaries;  (ii) the compliance  with all covenants  contained in the Calgene
Credit  Facility  Agreement;  (iii) no event  shall have  occurred  which  would
constitute an Event of Default or Potential  Event of Default (as defined in the
Calgene Credit  Facility  Agreement);  or (iv) there shall not have occurred any
circumstance  which could  reasonably  be  expected  to have a material  adverse
effect on (A) the business, assets, operations or financial condition of Calgene
and its  subsidiaries,  taken as a whole,  or (B) the ability of the Company and
its subsidiaries to perform their  obligations under the Calgene Credit Facility
Agreement.

     The covenants  contained in the Calgene Credit Facility  Agreement  require
Calgene  to  maintain  a  minimum  consolidated  net  worth of not less than $10
million and a minimum  consolidated working capital of not less than $5 million.
The  Calgene  Credit  Facility  Agreement  also  requires  that  Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the Calgene
Credit  Facility  Agreement  imposes a number of  limitations  on  Calgene  with
respect to future acquisitions, liens, mergers and the sale of assets, loans and
investments,  guaranties, capital expenditures, the payment of dividends and the
incurrence  of  indebtedness.  The  existence  of these  covenants  could  limit
Calgene's ability to finance the growth of its existing operations if cash flows
were to decrease  substantially  or if expenses were to increase  substantially.
These  covenants  would also  limit  Calgene's  ability to engage in  additional
acquisitions   that  would   significantly   increase  the  ratio  of  long-term
indebtedness to net worth following such acquisitions. The failure of Calgene to
satisfy  these  covenants  would  cause an Event of Default  which  could have a
material adverse effect on its business and results of operations.

     All of the  Calgene  Loans  shall be  subordinated  and subject in right of
payment to the prior payment in full of a certain senior indebtedness of Calgene
as more fully described in the Calgene Credit Facility Agreement.  No payment on
account of  principal  or interest on the Calgene  Loans shall be made if at the
time of such payment or immediately  after giving the effect thereto:  (i) there
shall  exist  a  default  in  any  payment  with  respect  to  any  such  senior
indebtedness or (ii) there shall have occurred an event of default (other than a
default in the payment of amounts due  thereon)  with respect to any such senior
indebtedness.

     As of December 31, 1996, there was no outstanding  balance of principal and
interest under the Calgene Credit Facility Agreement.

  Gargiulo Credit Facility Agreement

    On March 31,  1996,  Monsanto and Calgene  entered into the Gargiulo  Credit
Facility  Agreement  pursuant to which  Monsanto  shall,  during the  Commitment
Period  (as  hereinafter  defined),  and  subject  to the terms  and  conditions
contained  therein,  make available to Calgene a revolving credit facility of up
to $40 million (the "Gargiulo Loan").

    The Gargiulo Loan has been used to acquire  Collier Farms and to support the
branded  tomato  strategy of Gargiulo as  determined  by the  Gargiulo  Board of
Directors (other than amounts used to finance the acquisition of Collier Farms).
Prior to the  occurrence  of an Event of Default  (as  defined  in the  Gargiulo
Credit Facility Agreement),  Gargiulo may borrow, repay and reborrow,  each such
borrowing or reborrowing being an " Advance." In order to obtain an Advance from
Monsanto under the Gargiulo  Credit  Facility  Agreement,  Gargiulo must provide
documentation  reasonably  acceptable  to Monsanto  verifying  that Gargiulo has
reached certain milestones and achieved certain goals as set forth therein.  The
maximum amount of each Advance is subject to certain limitations based upon such
milestones and goals.  The "Commitment  Period" began on March 31, 1996 and ends
on the earlier of the fourth  anniversary  or such  earlier  time that  Monsanto
terminates  its  obligations  to make further  Advances.  The  Gargiulo  Loan is
secured by the joint and several guaranty of the subsidiaries of Calgene.

    Prior to the occurrence of an Event of Default, the Gargiulo Loan shall bear
interest at the per annum rate equal to 2.00% above  Citibank's  published prime
rate (the  "Gargiulo  Base Rate"),  and following an Event of Default at the per
annum rate equal to 3.00% above the Gargiulo Base Rate.  During the  continuance
of an Event of Default,  Calgene shall have no right to obtain any new Advances.
The Gargiulo Loan may be prepaid in whole or in part at any time after giving at
least three days prior written notice to Monsanto.
<PAGE>

    The Gargiulo Loan is payable,  unless  extended as described  below,  in one
payment on the fourth anniversary of the Effective Time (the "Maturity Date") in
an amount  equal to the lesser of (i) the  Repayment  Portion of the  Cumulative
Free Cash  Flow (as  defined  in the  Gargiulo  Credit  Facility  Agreement)  of
Gargiulo from the Effective Time to the Maturity Date and (ii) the amount of the
outstanding  principal  and accrued  interest on the Gargiulo  Loan.  "Repayment
Portion"  means the sum of 20% of the first $10 million of Cumulative  Free Cash
Flow, 50% of the next $10 million and 80% of the remaining balance. In the event
that the Repayment  Portion is not sufficient to pay all of the then outstanding
principal  and accrued  interest at the Maturity  Date,  the maturity  date with
respect to the unpaid  amount of  outstanding  principal  and interest  shall be
extended to the sixth anniversary of the Effective Time (the "Extended  Maturity
Date").  In the event the  Repayment  Portion of the  Cumulative  Free Cash Flow
(less amounts  previously  paid) is not  sufficient to pay the then  outstanding
principal and accrued interest at the Extended Maturity Date,  Calgene shall pay
Monsanto such lesser amount and Monsanto,  at its sole option, may do any one or
combination  of the  following:  (i)  convert  all or any  portion  of the  then
outstanding  principal and accrued  interest into shares of Calgene Common Stock
at the average of the closing  market  prices for such shares  during the thirty
trading days  immediately  preceding the date of such  conversion,  (ii) further
extend the Final  Maturity  Date (as  defined in the  Gargiulo  Credit  Facility
Agreement)  upon the same terms as are contained in the Gargiulo Credit Facility
Agreement,  or (iii) as to any unpaid amount which is not converted under clause
(i) or for which payment is not extended  pursuant to clause (ii), cause Calgene
to sell publicly that number of shares of Calgene Common Stock as Monsanto would
have received if such amount has been converted  under clause (i) above with the
net  proceeds  of such sale being  delivered  to  Monsanto  in full  payment and
satisfaction of such amount.

     Upon the  occurrence  and during the  continuation  of an Event of Default,
Monsanto may, in addition to its other remedies,  similarly elect to convert all
or any portion of the  principal  and accrued  interest  under the Gargiulo Loan
(the  "Gargiulo  Conversion  Amount") into shares of Calgene Common Stock at the
average of the  closing  market  prices for such  shares  during the thirty days
preceding such Event of Default. In no event,  however,  shall Monsanto elect to
convert  principal  and  accrued  interest  into more than  8,000,000  shares of
Calgene  Common  Stock (as such number is adjusted  for stock  dividends,  stock
splits and similar events affecting holders of Calgene's common stock). Upon any
such conversion, the Gargiulo Conversion Amount shall first be applied to reduce
the accrued interest due on the Gargiulo Loan, and any remaining  portion of the
Gargiulo  Conversion Amount shall be applied to reduce the principal due on such
Gargiulo Loan.

     The  obligation  of  Monsanto  to  provide   Advances  is  subject  to  the
fulfillment of certain  conditions,  including,  among others: (i) the continued
accuracy  of  all  representations  and  warranties  made  by  Calgene  and  its
subsidiaries;  (ii) the compliance with all covenants  contained in the Gargiulo
Credit  Facility  Agreement;  (iii) no event  shall have  occurred  which  would
constitute an Event of Default or Potential  Event of Default (as defined in the
Gargiulo Credit Facility  Agreement);  or (iv) there shall not have occurred any
circumstance  which could  reasonably  be  expected  to have a material  adverse
effect on (A) the business, assets, operations or financial condition of Calgene
and its subsidiaries, taken as a whole or (B) the ability of the Company and its
subsidiaries  to perform their  obligations  under the Gargiulo  Credit Facility
Agreement.

     The covenants  contained in the Gargiulo Credit Facility  Agreement require
Calgene  to  maintain  a  minimum  consolidated  net worth of not less than $ 10
million and a minimum  consolidated working capital of not less than $5 million.
The  Gargiulo  Credit  Facility  Agreement  also  requires  that Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term  liabilities  to net worth  and a  current  ratio.  In  addition,  the
Gargiulo  Credit Facility  Agreement  imposes a number of limitations on Calgene
and each of its subsidiaries with respect to future acquisitions, liens, mergers
and the sale of assets, loans and investments, guaranties, capital expenditures,
the payment of dividends and the  incurrence of  indebtedness.  The existence of
these  covenants  could  limit  Calgene's  ability to finance  the growth of its
existing operations if cash flows were to decrease  substantially or if expenses
were to  increase  substantially.  These  covenants  would also limit  Calgene's
ability to engage in additional  acquisitions that would significantly  increase
the ratio of long-term  indebtedness to net worth  following such  acquisitions.
The  failure  of  Calgene to satisfy  these  covenants  would  cause an Event of
Default which could have a material  adverse  effect on its business and results
of operations.

     The Gargiulo Loan is to be subordinated  and subject in right of payment to
the prior  payment in full of  certain  senior  indebtedness  of Calgene as more
fully described in the Gargiulo Credit Facility Agreement. No payment on account
of principal  or interest on the  Gargiulo  Loan shall be made if at the time of
such payment or  immediately  after giving the effect  thereto,  (i) there shall
exist a default in any payment with respect to any such senior  indebtedness  or

<PAGE>

(ii) there shall have occurred an event of default  (other than a default in the
payment of amounts due thereon) with respect to any such senior indebtedness.

     As of December 31, 1996, the outstanding  balance of principal and interest
under the Gargiulo Credit Facility Agreement was $24.8 million.

License Agreements

      As part of the  Initial  Monsanto  Transaction  in  March  1996,  Monsanto
  contributed certain technology licenses to Calgene pursuant to various license
  agreements  and letter  agreements.  The  technologies  underlying the License
  Agreements are summarized below.

     ACC Synthase  and ACC  Deaminase.  ACC is a precursor of ethylene,  a plant
growth regulator that induces ripening in certain fruits. By reducing the amount
of ACC available  for  conversion  into  ethylene,  the ripening  process can be
delayed.  Control of the  ripening  process  may enable  Calgene to improve  the
efficiency  of  its  tomato  production  operations.  Calgene  will  be  granted
non-exclusive,  perpetual,  royalty-free  rights  to the  ACC  synthase  and ACC
deaminase  genes for use in certain  produce crops and shall be able to practice
under Monsanto's ACC Synthase license from the USDA.

    Fruit-specific Promoters.  Promoters control the expression of genes in each
plant cell.  In order for certain  genes to  function  in a  beneficial  manner,
expression  of these  genes must be  restricted  to certain  parts of the plant.
Fruit-specific  promoters  provide a means of limiting  gene  expression  to the
fruit.  For example,  these  promoters may be useful in regulating  carbohydrate
metabolism  (e.g.,  sugar  content)  in ripening  fruits  such as  tomatoes  and
strawberries.  Calgene has been granted non-exclusive,  perpetual,  royalty-free
rights to certain fruit-specific promoters for use in certain produce crops.

    Virus Resistance Genes. Virus infection is known to significantly reduce the
yields of certain crops,  including tomatoes.  Monsanto has developed methods of
interfering with viral  replication in engineered  plants,  which slows the rate
and  degree  of  infection,  and  reduces  the  yield  loss  resulting  from the
infection.  Calgene has been granted non-exclusive,  perpetual,  royalty-free or
royalty-bearing rights to certain aspects of Monsanto's patent estate related to
the engineering of virus resistance into certain produce crops.

    FAD 3 Gene. The FAD 3 gene controls the relative  amount of  polyunsaturated
fatty acids found in plant oils,  including  canola oil.  Calgene  believes that
reducing the expression of the FAD 3 gene in engineered canola plants may result
in an oil with reduced linoleic and linolenic acid content. Such an oil would be
a superior cooking oil, as well as a superior raw material for the production of
margarine  and  shortening.  Calgene  has  been  granted  exclusive,  perpetual,
royalty-bearing rights to the FAD 3 gene for use in certain oilseed crops.

    Insect   Resistance   Gene.   Monsanto  has  modified   genes  from  a  soil
microorganism  called Bacillus  thurengiensis  ("B.t.") the encode proteins that
are toxic to certain insects.  Use of insecticides to control insects is a major
cost in the  production  of tomatoes.  Calgene has been  granted  non-exclusive,
perpetual,  royalty-free  rights to  Monsanto's  B.t.  patent  estate for use in
certain produce crops.

    ADP  Glucose  Pyrophosphorylase("ADP  GPP")Gene.  The  ADP  GPP  gene  is  a
bacterial  gene involved in starch  biosynthesis.  By expression of this gene in
plants,  the starch and/or sugar  content of plants can be  increased.  This may
improve  the  flavor  or  sweetness  of  produce   crops  such  as  tomatoes  or
strawberries.  Calgene has been granted non-exclusive,  perpetual,  royalty-free
rights to Monsanto's patent estate related to ADP GPP for use in certain produce
crops.  Monsanto and Calgene are parties to an interference at the United States
Patent and Trademark Office relating to the ADP GPP gene.

    Oil Modification Technology. Monsanto has certain patent rights and know-how
related to the production of plants with altered oil compositions.  By modifying
oil  composition  it may be  possible  to provide  temperate  sources of certain
tropical  oils and the  production of novel oil  compositions.  The Monsanto oil
modification  genes  include  sucrose  phosphorylase,   cytochrome  b5  and  PEP
carboxylase.  Calgene has been  granted  nonexclusive,  perpetual,  royalty-free
rights under Monsanto's patents and know-how for use in certain oilseed crops.



<PAGE>


  Insect Protected Cotton Direct Grower Licensing Agreement

    Calgene has entered into an agreement with Monsanto under which Calgene will
participate  in the direct  licensing of  Monsanto's  B.t.  technology to cotton
growers.  Under the terms of this  agreement,  Monsanto has granted to Calgene a
non-exclusive,  royalty-free  U.S. license to use Monsanto's B.t.  technology in
Calgene's cottonseed products. Subject to the issuance of a Monsanto patent that
covers the B.t. gene that is currently  being  utilized in Calgene's  cottonseed
product development program,  Calgene would be obligated under applicable patent
law to end use of its current B.t. gene and is permitted under such agreement to
incorporate  Monsanto's  B.t. gene into its product  development  program over a
four-year period.

    Monsanto  intends to enter into  license  agreements  directly  with  cotton
growers.  Under the terms of these  agreements,  cotton  growers  would obtain a
one-time right to purchase a specified number of units of cottonseed  containing
Monsanto's  B.t.  gene in return for the payment of a license fee.  Monsanto has
agreed to pay to Calgene a specified percentage of the net license fees received
from licensed growers who subsequently  purchase Calgene's  cottonseed  products
containing Monsanto's B.t. gene. The material terms of Calgene's agreement shall
be modified to reflect any more favorable terms that may be granted to any other
cottonseed company that may participate in the direct licensing program.

    Oilseed Development Agreement

    In May 1996, Calgene and Monsanto executed a broad strategic cross-licensing
agreement  encompassing the two companies' oilseed research programs.  Under the
agreement,  Calgene  received  a royalty  free  license  to  current  and future
Monsanto agronomic technology for use in combination with Calgene's  proprietary
oils  modification  genes for use in  developing  specialty  canola oil product.
Monsanto  received a royalty  bearing  license to Calgene  technology to develop
agronomically  superior corn, soybean,  canola and sunflower crops. In addition,
Monsanto  paid $7 million to Calgene  and will pay  royalties  based on sales of
insect  resistant  corn,  soybean,  canola and sunflower seed with increased oil
content and modified meal composition utilizing Calgene technology. Also as part
of the agreement, Monsanto paid Calgene $10 million in cash to help fund oilseed
research and  development.  In exchange,  Monsanto will receive a portion of the
future profits from Calgene's specialty oils business.

     Kelco Agreement

     In January  1997,  Calgene  and The Nutra  Sweet  Kelco  Company  ("Kelco")
entered into an agreement to  collaborate  on the  development  of two specialty
vegetable oil products.  Kelco is a wholly owned subsidiary of Monsanto Company.
As part of the agreement, Kelco purchased from Calgene a nonexclusive license to
certain Calgene technology for use in research purposes, an option to expand the
reserach  license to  include  commercialization  rights,  and  certain  product
distribution rights.



<PAGE>



                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  1.   Financial  Statements.   The  following   Consolidated  Financial
               Statements  and Report of  Independent  Auditors  are included in
               Part II, Item 8, of this Report:

               Report of Independent Auditors.

               Consolidated  Balance  Sheets --  December  31, 1996 and June 30,
               1996 and 1995.

               Consolidated  Statements  of Operations -- Six month period ended
               December  31, 1996 and years ended June 30,  1996,  1995 and
               1994.

               Consolidated  Statements  of  Shareholders'  Equity  -- Six month
               period  ended  December  31,  1996 and years  ended June 30,
               1996, 1995 and 1994.

               Consolidated  Statements  of Cash Flows -- Six month period ended
               December  31, 1996 and years ended June 30,  1996,  1995 and
               1994.

          2.   Financial Statement Schedules.  The following financial statement
               schedule  of  Calgene,  Inc.  is filed as part of this Report and
               should be read in  conjunction  with the  Consolidated  Financial
               Statements of Calgene, Inc.

               Schedule for the six month  period  ended  December  31, 1996 and
               years ended June 30, 1996, 1995 and 1994:

               Schedule                                                   Page

          II   Valuation and Qualifying Accounts...........................75


               All  other  schedules  have  been  omitted  because  they are not
               applicable or because the required  information is disclosed
               in the consolidated financial statements and notes thereto.

          3.   Exhibits

               See index to exhibits.

     (b)   Reports on Form 8-K:

           None

     (c)   Separate Financial Statements of Fifty Percent or Less Owned Persons:

           None.



<PAGE>

<TABLE>
<CAPTION>
                                                                          CALGENE, INC.

                                                                          SCHEDULE II

                                                               VALUATION AND QUALIFYING ACCOUNTS

                                        Six Months Ended December 31, 1996 and Years ended June 30 1996, 1995 and 1994
                                                                         (In thousands)


                     COLUMN A                    COLUMN B                   COLUMN C                   COLUMN D          COLUMN E
----------------------------------------     ---------------   ---------------------------------   ---------------   ---------------

                                                                            Additions
                                                               ---------------------------------
                                                Balance at       Charged to        Charged to                         Balance at
                                               beginning of      costs and          other                               end of
         Description                              period          expenses         accounts         Deductions (1)      period
         -----------                          ---------------  ---------------  ---------------    ---------------  ---------------
<S>                                               <C>               <C>            <C>                  <C>              <C>

Six months ended December 31, 1996
----------------------------------
         Allowance for doubtful accounts          $487              $356              -                 $(136)           $707

Year ended June 30, 1996
------------------------
         Allowance for doubtful accounts          $346              $146           $540 (2)             $(545)           $487

Year ended June 30, 1995
------------------------
         Allowance for doubtful accounts          $173              $249              -                  $(76)           $346

Year ended June 30, 1994
------------------------
         Allowance for doubtful accounts          $221               $42              -                  $(90)           $173


(1)  Represents accounts recovered or written-off.

(2)  Represents the allowance for doubtful accounts acquired in connection with the acquisition of Gargiulo, Inc. in March 1996.


</TABLE>
<PAGE>




                                                    SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                              CALGENE, INC.



                                       By: /s/Christian Leleu
                                           ------------------------------
                                           Chief Financial Officer
Dated: March 31, 1997                      (Principal Financial and Accounting
       --------------                      Officer)



                                                 POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below   constitutes  and  appoints  Lloyd  M.  Kunimoto  and  Christian   Leleu,
substitution, for him in any and all capacities, to sign any amendments to other
documents in connection therewith,  with the securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact,  or his
substitute or substitutes, may do or cause to be done by virtue hereof.



<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


    Signature                        Title                          Date


                           Director and Acting Chief
/s/ Lloyd M. Kunimoto      Executive Officer (Principal
Lloyd M. Kunimoto          Executive Officer)                    March 31, 1997



/s/ Christian Leleu        Chief Financial Officer
Christian Leleu            (Principal Financial and              March 31, 1997
                           Accounting Officer)




Robert Fraley              Director                              March 31, 1997



/s/ John E. Robson
John E. Robson             Director                              March 31, 1997



/s/ Hendrik A. Verfaillie
Hendrik A. Verfaillie      Director                              March 31, 1997



/s/ Howard D. Palefsky
Howard D. Palefsky         Director                              March 31, 1997



/s/ Allen J. Vangelos
Allen J. Vangelos          Director                              March 31, 1997




Patrick Fortune            Director                              March 31, 1997



/s/ Roger H. Salquist
Roger H. Salquist          Director                              March 31, 1997



/s/ Michael Hogan
Michael Hogan              Director                              March 31, 1997


<PAGE>


                                INDEX TO EXHIBITS


       Exhibits                                                            Page
       --------                                                            ----
        2.1         Agreement and Plan of Reorganization Between
                    Calgene, Inc. and Monsanto Company dated as of
                    October 13, 1995.........................................(P)

        2.2         Stock Purchase Agreement dated as of September
                    27, 1996, between Calgene, Inc. and Monsanto
                    Company...................................................82

        3.1         Restated Certificate of Incorporation of the
                    Registrant, as amended....................................92

        3.3         By-Laws of the Registrant................................(P)

       10.0         Amended and Restated Stockholders Agreement
                    between the Registrant and Monsanto Company..............129

       10.1         Form of Credit Facility Agreement between the
                    Registrant and Monsanto Company..........................(P)

       10.2         Form of Gargiulo Credit Facility Agreement
                    between the Registrant and Monsanto Company..............(P)

       10.3         Form of ACC Deaminase License Agreement between
                    the Registrant and Monsanto Company......................(P)

       10.4         Form of ADPGPP License Agreement between the
                    Registrant and Monsanto Company..........................(P)

       10.5         Form of CMV License Agreement between the
                    Registrant and Monsanto Company..........................(P)

      *10.6         Form of FAD 3 License Agreement between the
                    Registrant and Monsanto Company..........................(P)

       10.7         Form of Fruit Specific Promoter License Agreement
                    between the Registrant and Monsanto Company..............(P)

       10.8         Form of Gemini Virus License Agreement between
                    the Registrant and Monsanto Company......................(P)

       10.9         Form of Insect Resistance License Agreement
                    between the Registrant and Monsanto Company..............(P)

       10.10        Form of Oil License Agreement between the
                    Registrant and Monsanto Company..........................(P)

       10.11        Form of Letter Agreement between Calgene, Inc.
                    and Monsanto Company with respect to license of
                    Recombinant ACC Synthase.................................(P)

       10.12        Form of Insect-Protected Cotton License and
                    Seed Services Agreement between Calgene, Inc.
                    and Monsanto Company.....................................(P)

       10.13        Second Amended and Restated Employment
                    Agreement dated October 16, 1995 between
                    Gargiulo, L.P. and Jeffrey D. Gargiulo...................(P)

       10.14        Joint Venture Agreement dated as of December 15,
                    1992 between Gargiulo, L.P. and Dresick Farms,
                    as amended June 1, 1993..................................(P)


<PAGE>


       Exhibits                                                             Page

       10.15        Joint Venture Agreement dated as of January 1,
                    1981 between Gargiulo L.P. and Harllee-Gargiulo,
                    Inc., as amended October 31, 1989 and October 31,
                    1994.....................................................(P)

       10.16        Joint Venture Agreement dated as of October 31,
                    1994 between Gargiulo Mexico, L.L.C. and Hermanos
                    Ley......................................................(P)

       10.17        Marketing Agreement dated as of September 1,
                    1988 between Gargiulo, Inc. and Harllee-Gargiulo, Inc....(P)

       10.18        Change of Control Employment Agreement dated
                    as of July 19, 1995, between Calgene, Inc.
                    and Roger H. Salquist....................................(P)

       10.19        Change of Control Employment Agreement dated as
                    of July 19, 1995 between Calgene, Inc.
                    and Roderick N. Stacey...................................(P)

       10.20        Change of Control Employment Agreement dated
                    as of July 19, 1995 between Calgene, Inc.
                    and Michael J. Motroni...................................(P)

       10.21        Asset Purchase Agreement dated as of December
                    29, 1995 between Gargiulo, L.P. and Collier
                    Enterprises..............................................(P)

      *10.22        Partnership Agreement dated January 31, 1986
                    between Registrant and Rhone-Poulenc Agrochimie,
                    together with Reserach Agreement dated March 15,
                    1984 and Amendment thereto dated January 31, 1985........(A)

      *10.23        Amendment One to the Partnership Agreement
                    dated January 31, 1986 between Registrant and
                    Rhone-Poulenc Agrochimie dated September 30, 1989........(B)

      *10.24        License Agreement between Registrant and
                    Rhone-Poulenc Agrochimie dated October 1, 1989...........(B)

      *10.25        Agreements dated March 21, 1985 between Registrant
                    and Roussel-Uclaf S.A....................................(A)

      *10.26        Agreement dated April 1, 1988 between Registrant
                    and Roussel-Uclaf S.A. which amend the Agreements
                    dated March 21, 1985 between Registrant and
                    Roussel-Uclaf S.A........................................(B)

      *10.27        Agreement dated August 1, 1984 and Agreement
                    dated August 26, 1985 amending the prior Agreement
                    between Registrant and Campbell Soup Company.............(A)

      *10.28        Tomato Research Agreement 1988 to 1990 between
                    Campbell Soup Company and Registrant effective
                    as of August 1, 1988 which supersedes the Agreements
                    of August 1, 1984 and August 26, 1985 between
                    Campbell Soup Company and the Registrant.................(B)

      *10.29        Agreement dated March 20, 1986 between Registrant
                    and The Procter and Gamble Company ......................(A)

       10.30        Commercial Lease dated August 17, 1987,
                    as amended, covering property  located  at  1910
                    and  1920  Fifth  Street,  Davis, California.............(C)

       10.31        Commercial Lease dated August 31, 1983, as
                    amended, covering property located at 1970
                    Fifth Street, Davis, California..........................(A)



<PAGE>


       Exhibits                                                             Page

       10.32        Commercial Lease dated August 22, 1983, as
                    amended, covering property inYolo County.................(A)

       10.33        Commercial Lease dated May 21, 1987, as amended,
                    covering property located at 1950 Fifth Street,
                    Davis, California........................................(C)

       10.34        Form of Directors and Officers Indemnification
                    Agreement................................................(C)

       10.35        401 (k) Tax Deferred Investment Plan.....................(D)

       10.36        Secured Revolving Credit Agreement Among
                    Registrant and Harris Trust and Savings Bank
                    and Caisse Nationale De Credit Agricole
                    Dated April 26, 1990.....................................(G)

       10.37        First Amendment to Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Registrant and Harris Trust and Savings
                    Bank dated January 31, 1992..............................(E)

       10.38        Second Amendment to Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Registrant and Harris Trust and Savings Bank
                    Dated January 31, 1993...................................(I)

       10.39        Third Amendment to Secured Revolving Credit
                    Agreement Among Registrant and Harris Trust and
                    Savings Bank Dated August 26,1993........................(O)

       10.40        Fourth Amendment to Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Registrant and Harris Trust and Savings
                    Bank Dated February 26, 1994.............................(O)

       10.41        Fifth Amendment to Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Registrant and Harris Trust and Savings
                    Bank Dated March 15, 1995................................(O)

       10.42        Sixth Amendment to Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Registrant and Harris Trust and Savings
                    Bank Dated August 8, 1995................................(O)

       10.43        Seventh Amendment to the Secured Revolving
                    Credit Agreement and Waiver 1995.........................(M)

       10.44        Eighth Amendment to the Secured Revolving
                    Credit Agreement and Secured Revolving Credit
                    Note Among Calgene, Inc. and Harris Trust and
                    Savings Bank dated January 23,1996.......................(M)

       10.45        Ninth Amendment to the Secured Revolving Credit
                    Agreement and Secured Revolving Credit Note
                    Among Calgene, Inc. and Harris Trust and
                    Savings Bank dated March 28, 1996........................(N)

       10.46        1989 Employee Stock Purchase Plan........................(G)

       10.47        Joint Venture and Partnership Agreement by
                    and between Kirin Brewery Co. Ltd. and
                    Registrant dated March 14, 1990..........................(G)

      *10.48        License Agreement between Registrant and
                    Campbell Soup Company dated August 9, 1991...............(J)



<PAGE>


       Exhibits                                                             Page

     **10.50        Oilseed Development Agreement between Registrant
                    and Monsanto Company dated May 8, 1996...................(Q)

       10.51        1981 Stock Option Plan as amended........................(B)

       10.52        1991 Stock Option Plan...................................(J)

       10.53        1996 Stock Option Plan...................................(P)

       10.54        Tenth Amendment to the Secured Revolving
                    Credit Agreement and Secured Revolving Credit
                    Note Among Calgene, Inc. and Harris Trust
                    and Savings Bank dated September 30, 1996................(R)

       10.57        Bank of America Revolver.................................168

       21.1         Subsidiaries of Registrant...............................(I)

       23.1         Consent of Independent Auditors..........................204

       27           Article 5 of Financial Data Schedule for the
                    Six Month Period ended December 31, 1996.................205




(A) Incorporated by reference to Registrant's Form S-1 Registration No. 33-5921
(B) Incorporated by reference to Registrant's Form 10-K dated September 30, 1989
(C) Incorporated by reference to Registrant's Form 10-K dated September 30, 1987
(D) Incorporated by reference to Registrant's Form 10-K dated September 30, 1988
(E) Incorporated by reference to Registrant's Form 10-K dated June 30, 1992
(F) Intentionally omitted
(G) Incorporated by reference to Registrant's Form 10-K dated June 30, 1990
(H) Intentionally omitted
(I) Incorporated by reference to Registrant's Form 10-K dated June 30, 1993, as
    amended
(J) Incorporated by reference to Registrant's Form 10-K dated June 30, 1991
(K) Intentionally omitted
(L) Incorporated by reference to Registrant's Form 8-K dated June 28, 1995
(M) Incorporated by reference to Registrant's Form 10-Q dated December 31, 1995
(N) Incorporated by reference to Registrant's Form 10-Q dated March 31, 1996
(O) Incorporated by reference to Registrant's Form 10-K/A dated October 30, 1995
(P) Incorporated by reference to Registrant's Registration Statement on Form S-4
    dated February 6, 1996
(Q) Incorporated by reference to Registrant's Form 10-K dated June 30, 1996
(R) Incorporated by reference to Registrant's Form 10-Q dated September 30, 1996

*   Confidential treatment of certain portions of these documents has been
    granted

**  Confidential treatment has been requested as to portions thereof