Ceres, Inc.

The Merger will be governed by Section 251(h) of the DGCL, with no stockholder vote required to consummate the Merger, provided that subject to the terms of the Merger Agreement, under certain circumstances Land O’Lakes may cause the Merger Agreement to be governed by Section 253 of the DGCL. The Company has granted to Merger Sub an irrevocable option (the “Top-Up Option”), if necessary, to purchase at a price per share equal to the Common Offer Price from the Company up to a number of shares of Company common stock (the “Top-Up Shares”) that, when added to the number shares of Company common stock already owned by Merger Sub as promptly as practicable after the Offer Acceptance Time, would represent at least ninety percent (90%) of the shares of Company common stock outstanding immediately after giving effect to the issuance of the Top-Up Shares. Merger Sub will exercise the Top-Up Option as promptly as practicable after the Offer Acceptance Time if (i) certain specified triggering events occur, (ii) the Offer Acceptance Time has occurred, (iii) the Minimum Condition has been satisfied, and (iv) Merger Sub does not hold shares of Company common stock representing at least ninety percent (90%) of the shares of Company common stock then outstanding. The parties have agreed that if the Top-Up Option is exercised, the parties will use their best efforts to cause the Merger to be completed in accordance with Section 253 of the DGCL as promptly as possible following the issuance of the Top-Up Shares on the same day as the closing of the purchase of the Top-Up Shares. At the closing of the purchase of the Top-Up Shares, the purchase price for the Top-Up Shares shall be paid to the Company, at Merger Sub’s option, either fully in cash or by (i) paying an amount in cash equal to not less than the aggregate par value of the Top-Up Shares and (ii) executing and delivering to the Company a promissory note having a principal amount equal to the aggregate purchase price of the Top-Up Shares less the amount paid in cash for the Top-Up Shares at the Top-Up Shares closing.

Following the commencement of the Offer, three putative class action lawsuits were filed challenging the proposed transaction. Each of these actions was filed in the Superior Court of the State of California, County of Los Angeles - Central District: Gary Stryder, Leo Nguyen and Rajesh Joshi, Individually and On Behalf of All Others Similarly Situated v. Ceres, Inc., Land O’Lakes, Inc., Roman Merger Sub, Inc., Cheryl P. Morley, Pascal Brandys, Richard Flavell, Robert Goldberg, and Richard Hamilton, Case No. BC626066 (filed July 5, 2016) (the “Stryder Action”); Knox Varela, On Behalf of Himself and All Others Similarly Situated v. Ceres, Inc., Cheryl P. Morley, Pascal Brandys, Richard Flavell, Robert Goldberg, Richard Hamilton, Land O’Lakes, Inc. and Roman Merger Sub, Inc., Case No. BC626611 (filed July 11, 2016) (the “Varela Action”); and Benjamin Roberts, Individually and On Behalf of All Others Similarly Situated v. Cheryl P. Morley, Pascal Brandys, Richard Flavell, Robert Goldberg, Richard Hamilton, and Ceres, Inc., Case No. BC626808 (filed July 13, 2016) (the “Roberts Action” and collectively, with the Stryder Action and the Varela Action, the “Actions”).

There is no assurance that the Offer or the Merger will be completed. Consummation of the Merger is subject to various conditions, including the satisfaction of the Minimum Condition and certain other conditions, including, among other things, the absence of laws or judgments prohibiting or restraining the Merger. We cannot predict with certainty whether and when any of these conditions will be satisfied. In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, a change in the recommendation of the Board or a termination of the Merger Agreement by us to enter into an agreement for a superior proposal, as defined in the Merger Agreement. If the Merger is not consummated, and there are no other parties willing and able to acquire us at a price of $0.40 per share of common stock or higher and on other terms acceptable to us, our stock price will likely decline, as our stock has recently traded at prices based on the proposed per share price for the Merger. We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, as well as the direction of management resources towards the Merger, for which we will have received little or no benefit if the closing of the Merger does not occur. Many of the expenses, fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than in connection with the Merger. A failed transaction may result in negative publicity and a negative impression of us in the investment community. If an insufficient number of holders of Company common stock accept the Offer and tender their shares of Company common stock to Land O’Lakes pursuant to the Offer, or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely affected. Furthermore, the Merger Agreement contains certain customary termination payments which may be incurred by us. If the Merger Agreement is terminated, under specified circumstances and on the terms and subject to the conditions set forth therein, we may be required to pay Land O’Lakes a termination fee, the amount of which, if and when payable, would be $695,000. The occurrence of any of these events individually or in combination could have a material adverse impact on our results of operations and our stock price.

In addition, based on the financial statements included in this Quarterly Report on Form 10-Q, the Company was not as of May 31, 2016, in compliance with the NASDAQ’s continuing listing standards for primary equity securities, as set forth in NASDAQ Listing Rule 5550(b). NASDAQ Listing Rule 5550(b) requires that we satisfy at least one of the following criteria: (1) stockholders’ equity of at least $2.5 million, (2) market value of listed securities of at least $35 million or (3) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years. Because our stockholders’ equity fell below $2.5 million during the fiscal quarter ended May 31, 2016, we no longer satisfy any of the criteria in NASDAQ Listing Rule 5550(b). We expect that NASDAQ will send us a notification of additional deficiency for failing to comply with the requirements of NASDAQ Listing Rule 5550(b) and requesting that we submit a plan of compliance. We understand that generally companies must submit plans of compliance within 45 days of receiving such a notice. There can be no assurance that we will be able to provide a plan of compliance in a timely manner, or that NASDAQ would accept such a plan of compliance.