<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1997
REGISTRATION NO. 333-38083
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of the Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 2075 41-0129150
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4666 FARIES PARKWAY
DECATUR, ILLINOIS 62526
(217) 424-5200
(Address and telephone number
of the Registrant's principal executive offices)
D. J. SMITH
VICE PRESIDENT, SECRETARY, AND GENERAL COUNSEL
ARCHER-DANIELS-MIDLAND COMPANY
4666 FARIES PARKWAY
DECATUR, ILLINOIS 62526
(217) 424-6183
(Name, address and telephone number of agent for service)
COPIES TO:
James E. Nicholson Delmer R. Mitchell
Steven C. Kennedy Schmiedeskamp, Robertson, Neu &
Faegre & Benson LLP Mitchell
2200 Norwest Center 525 Jersey
Minneapolis, Minnesota 55402 Quincy, Illinois 62301
(612) 336-3000 (217) 223-3030
Approximate date of commencement of proposed sale of the securities to the
public: Upon the Effective Time of the Merger described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
[MMC Letterhead]
December 10, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Moorman Manufacturing Company ("MMC") to be held at the Blessing Conference
Center, 28th and Chestnut Streets, Quincy, Illinois, on Tuesday,
December 30, 1997, at 10:00 a.m., local time.
At the Special Meeting you will be asked to vote on a proposal to approve
and adopt an Agreement and Plan of Merger dated as of September 12, 1997 (the
"Merger Agreement"), providing for the merger of ADM Acquisition Corp.
("ADMAC"), a wholly owned subsidiary of Archer-Daniels-Midland Company ("ADM"),
with and into MMC (the "Merger"). Upon consummation of the Merger, MMC will
become a wholly owned subsidiary of ADM, and MMC shareholders will be entitled
to receive a number of shares of ADM Common Stock (rounded to the nearest whole
share) for each share of MMC common stock held by them determined pursuant to
the exchange ratio set forth in the Merger Agreement.
The exchange ratio is calculated by dividing $5,400 (the "Base Value") by
the average of the per share closing sale prices of ADM Common Stock on the New
York Stock Exchange, Inc. Composite Tape for the twenty trading days immediately
prior to the third trading day before the closing date. The closing date will
be the later of the date of the Special Meeting or the date when all conditions
precedent to the Merger have been satisfied or waived. The Merger Agreement
provides for an adjustment to the exchange ratio if the shareholders' equity of
MMC 15 days before the closing date is less than $265 million. In that case,
the exchange ratio will be recalculated by reducing the Base Value by an amount
equal to the quotient of (1) the difference between $265 million and the actual
MMC shareholders' equity as of that date divided by (2) the total number of
outstanding shares of MMC common stock issued and outstanding; provided,
however, that the Base Value will not be lower than $5,126.13.
You will be asked also to vote on a proposal to approve certain existing
compensatory arrangements with members of MMC's senior management, under which
such persons would receive certain payments upon a change of control of MMC,
provided certain other conditions are fulfilled (collectively, the
"Change-of-Control Arrangements"). If consummated, the Merger would constitute
a change of control of MMC. The purposes of shareholder approval are (i) to
permit MMC to report the full amount of payments under the Change-of-Control
Arrangements as deductions for income tax purposes and (ii) to make it so that
members of MMC's senior management receiving such payments should not be
required to pay excise taxes on any portion of the payments. Shareholder
approval for the payments under the Change-of-Control Arrangements is not a
condition to either the consummation of the Merger or the payment by MMC of all
amounts due under the Change-of-Control Arrangements, since MMC is contractually
obligated to make such payments.
<PAGE>
ADDITIONAL INFORMATION REGARDING THE MERGER, THE MERGER AGREEMENT AND THE
CHANGE-OF-CONTROL ARRANGEMENTS IS SET FORTH IN THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE EXHIBITS THERETO, WHICH YOU ARE URGED TO READ
CAREFULLY IN ITS ENTIRETY.
The Board of Directors of MMC has carefully considered the terms and
conditions of the proposed Merger and the approval of the Change-of-Control
Arrangements for the tax purposes described above. In addition, in connection
with its approval of the proposed Merger with ADM, the Board of Directors of MMC
has received a written opinion from its financial advisor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, to the effect that the exchange ratio under
the Merger Agreement is fair to MMC shareholders from a financial point of view.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND THAT THE APPROVAL OF THE
CHANGE-OF-CONTROL ARRANGEMENTS ARE IN THE BEST INTERESTS OF MMC AND THE MMC
SHAREHOLDERS. ACCORDINGLY, THE BOARD RECOMMENDS THAT MMC SHAREHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER AND FOR THE
APPROVAL OF THE CHANGE-OF-CONTROL ARRANGEMENTS.
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of the holders of two-thirds of the outstanding shares of MMC
common stock. Approval, for tax purposes, of certain payments under the
Change-of-Control Arrangements requires the affirmative vote of the holders of
more than three-fourths of the outstanding shares of MMC common stock. Certain
principal MMC stockholders, who as of December 1, 1997, beneficially owned
in the aggregate approximately 52.4% of the outstanding MMC common stock, have
each agreed to vote or direct the vote of all MMC common stock over which they
have voting control in favor of the Merger Agreement and the Merger.
In view of the importance of the actions to be taken at the Special
Meeting, we urge you to review carefully the accompanying Notice of Special
Meeting of Shareholders and the Proxy Statement/Prospectus, including the
exhibits thereto, which also includes information on ADM, ADMAC and MMC.
Whether or not you expect to attend the Special Meeting, please complete, sign
and date the enclosed proxy and return it as promptly as possible.
Sincerely,
Thomas M. McKenna
President and Chief Executive Officer
<PAGE>
MOORMAN MANUFACTURING COMPANY
1000 NORTH 30TH STREET
QUINCY, ILLINOIS 62301
-------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 30, 1997
-------------------------
To the Shareholders of
Moorman Manufacturing Company:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Moorman
Manufacturing Company, an Illinois corporation ("MMC"), will be held on
Tuesday, December 30, 1997, at 10:00 a.m., local time, at the
Blessing Conference Center, 28th and Chestnut Streets, Quincy, Illinois, for the
following purposes:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger dated as of September 12, 1997 (the "Merger Agreement"),
among MMC, Archer-Daniels-Midland Company ("ADM") and ADM Acquisition Corp., a
wholly-owned subsidiary of ADM ("ADMAC"), pursuant to which, among other things,
(i) ADMAC will be merged with and into MMC with the result that MMC becomes a
wholly owned subsidiary of ADM (the "Merger"), and (ii) each outstanding share
of common stock, $1.00 par value per share, of MMC ("MMC Common Stock") will be
converted into a number of shares of ADM Common Stock, without par value, as
determined pursuant to the exchange ratio set forth in the Merger Agreement. A
copy of the Merger Agreement is attached as EXHIBIT A to the accompanying Proxy
Statement/Prospectus.
2. To consider and vote upon a proposal to approve, for tax purposes,
payments to members of MMC's senior management under certain existing
compensatory arrangements upon a change of control of MMC, provided certain
other conditions are fulfilled (collectively, the "Change-of-Control
Arrangements"). The purposes of the shareholder approval are (i) to permit MMC
to report the full amount of the payments under the Change-of-Control
Arrangements as deductions for income tax purposes and (ii) to make it so that
the members of MMC's senior management receiving such payments should not be
required to pay excise taxes on any portion of the payments. Shareholder
approval for the payments under the Change-of-Control Arrangements is not a
condition to either the consummation of the Merger or the payment by MMC of all
amounts due under the Change-of-Control Arrangements, since MMC is contractually
obligated to make such payments. If consummated, the Merger would constitute a
change of control of MMC. The Change-of-Control Arrangements include
change-of-control agreements, termination agreements, agreements entered into
pursuant to the MMC Restricted Stock Unit Plan, the MMC Restricted Stock Unit
Plan for Outside Directors and certain retirement benefits.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
<PAGE>
The Board of Directors has fixed the close of business on December 1,
1997 as the record date for the determination of the holders of MMC Common
Stock entitled to notice of, and to vote at, the meeting and adjournments or
postponements thereof. The affirmative vote of the holders of two-thirds of
the outstanding shares of MMC Common Stock entitled to vote at the meeting is
required to approve and adopt the Merger Agreement and the Merger. Approval
of the Change-of-Control Arrangements requires the affirmative vote of the
holders of more than three-fourths of the outstanding shares of MMC Common
Stock entitled to vote at the meeting.
Certain principal shareholders of MMC, who as of December 1, 1997
beneficially owned in the aggregate approximately 52.4% of the outstanding MMC
Common Stock, have agreed to vote in favor of the Merger and the Merger
Agreement. These shareholders have also orally indicated their intent to vote
in favor of the Change-of-Control Arrangements. If certain statutory conditions
are met, MMC shareholders will be entitled to demand dissenters' appraisal
rights under Illinois law. A discussion of these statutory conditions is set
forth in the accompanying Proxy Statement/Prospectus under the heading "The
Merger -- Dissenter's Rights" and the relevant statutes attached as Exhibit C to
the Proxy Statement/Prospectus.
Information regarding the Merger and Merger Agreement, the
Change-of-Control Arrangements and related matters is contained in the
accompanying Proxy Statement/Prospectus and the exhibits thereto, which is
incorporated by reference herein and forms a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IT IS IMPORTANT
THAT YOUR INTERESTS BE REPRESENTED AT THE MEETING.
THE BOARD OF DIRECTORS OF MMC HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND THAT THE APPROVAL OF THE
CHANGE-OF-CONTROL ARRANGEMENTS ARE IN THE BEST INTERESTS OF MMC AND THE MMC
SHAREHOLDERS. ACCORDINGLY, THE MMC BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT AND
APPROVAL OF THE CHANGE-OF-CONTROL ARRANGEMENTS.
By Order of the Board of Directors
Betty R. Schappaugh
Secretary
December 10, 1997
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME
<PAGE>
PROXY STATEMENT/PROSPECTUS
----------------------
PROXY STATEMENT OF MOORMAN MANUFACTURING COMPANY
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 30, 1997
----------------------
PROSPECTUS OF ARCHER-DANIELS-MIDLAND COMPANY
SHARES OF COMMON STOCK
----------------------
This Proxy Statement/Prospectus is being furnished to the shareholders of
Moorman Manufacturing Company, an Illinois corporation (MMC), in connection with
the solicitation of proxies by MMCs Board of Directors for use at the Special
Meeting of Shareholders (the Special Meeting) to be held at 10:00 a.m., local
time, on Tuesday, December 30, 1997, at the Blessing Conference
Center, 28th and Chestnut Streets, Quincy, Illinois and at any adjournments or
postponements thereof.
At the Special Meeting, MMC's shareholders will be asked to consider and
vote upon a proposal to approve and adopt the Agreement and Plan of Merger,
dated as of September 12, 1997 (the "Merger Agreement"), among MMC,
Archer-Daniels-Midland Company, a Delaware corporation ("ADM"), and ADM
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of ADM
("ADMAC"), under which ADMAC will be merged with and into MMC (the "Merger") and
the separate corporate existence of ADMAC will cease. Thereafter, MMC will
continue its operations as a wholly-owned subsidiary of ADM. A copy of the
Merger Agreement is attached to this Proxy Statement/Prospectus as EXHIBIT A and
is incorporated herein by reference.
Upon consummation of the Merger, each outstanding share of Common Stock,
$1.00 par value per share, of MMC ("MMC Common Stock") at the Effective Time (as
defined below) will be converted, without any action on the part of the holders
thereof, into the right to receive a number of shares (rounded to the nearest
whole share) of common stock, without par value, of ADM ("ADM Common Stock")
determined by an exchange ratio (the "Exchange Ratio"), which is calculated by
dividing $5,400 (the "Base Value") by the average of the per share closing sale
prices of ADM Common Stock on the New York Stock Exchange, Inc. ("NYSE")
Composite Tape for the 20 trading days immediately prior to the third trading
day before the Closing Date (the "Average Price"). The "Closing Date" is the
third business day after the date when all conditions precedent to the Merger
have been satisfied or waived. The final condition precedent to the Merger is
expected to be the vote of MMC's shareholders at the Special Meeting.
The Merger Agreement provides for an adjustment to the Exchange Ratio if
the shareholders' equity of MMC, determined under generally accepted accounting
principles as of the date 15 days before the Closing Date is less than $265
million. In that case, the Exchange Ratio will be recalculated by reducing the
Base Value by an amount equal to the quotient of (1) the difference between $265
million and the actual MMC shareholders' equity as of that date divided by (2)
54,770 (the number of shares of MMC Common Stock issued and outstanding);
provided, however, that the Base Value will not be lower than $5,126.13. See
"The Merger--General."
The consummation of the Merger is subject to obtaining the requisite
approval from MMC's shareholders, necessary regulatory approvals, and certain
other conditions, all as more fully described in this Proxy
Statement/Prospectus. See "General Information" and "The Merger--Conditions to
Consummation of the Merger."
<PAGE>
MMC's shareholders will also be asked to consider and vote upon a proposal
to approve, for tax purposes, payments to members of MMC's senior management
under certain existing compensatory arrangements effective upon a change of
control of MMC, provided certain other conditions are fulfilled (collectively,
the "Change-of-Control Arrangements"). The purposes of the shareholder approval
are (i) to permit MMC to report the full amount of the payments under the
Change-of-Control Arrangements as deductions for income tax purposes and (ii) to
make it so that the members of MMC's senior management receiving such payments
should not be required to pay excise taxes on any portion of the payments.
Shareholder approval for the payments under the Change-of-Control Arrangements
is not a condition to either the consummation of the Merger or the payment by
MMC of all amounts due under the Change-of-Control Arrangements, since MMC is
contractually obligated to make such payments. If consummated, the Merger would
constitute a change of control of MMC. The compensatory arrangements include
change-of-control agreements, termination agreements, agreements entered into
pursuant to the MMC Restricted Stock Unit Plan, the MMC Restricted Stock Unit
Plan for Outside Directors and certain retirement benefits.
THE BOARD OF DIRECTORS OF MMC HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
AND ADOPT THE MERGER AGREEMENT AND THE MERGER AND FOR THE PROPOSAL TO APPROVE
THE CHANGE-OF-CONTROL ARRANGEMENTS.
This Proxy Statement/Prospectus is being mailed or delivered to MMC's
shareholders on or about December 10, 1997. This Proxy
Statement/Prospectus also constitutes the prospectus of ADM with respect to
shares of ADM Common Stock to be issued to the MMC shareholders in the Merger.
On September 11, 1997, the last trading day before the public
announcement of the Merger, the closing sale price per share of ADM Common
Stock on the NYSE Composite Tape was $22.625. On December 8, 1997, the last
trading day for which closing sale prices were available at the time of the
printing of this Proxy Statement/Prospectus, the closing sale price per share
of ADM Common Stock on the NYSE Composite Tape was $21.25. See "Market Price
and Dividend Information." If the Average Price were equal to the closing
sale price per share of ADM Common Stock on December 8, 1997, MMC
shareholders who are to receive shares of ADM Common Stock would be entitled
to receive 254.118 shares of ADM Common Stock, having a market value of
$5,400, in exchange for each share of MMC Common Stock held by them (assuming
MMC shareholders' equity, as of the date 15 days prior to the closing, is at
least $265 million). The actual value of the consideration and number of
shares of ADM Common Stock to be issued in the Merger may differ from the
foregoing example, however, because the actual value and number of shares
will not be determined until the day of the Special Meeting or such other
date as is the third trading day before the Closing Date.
Certain capitalized terms used in this Proxy Statement/Prospectus are
defined under the caption "Glossary of Terms."
THE SHARES OF ADM COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS DECEMBER 10, 1997.
2
<PAGE>
AVAILABLE INFORMATION
ADM is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). These reports, proxy statements, and other
information may be inspected and copied at the SEC's public reference facility
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located at Seven World Trade Center, Suite 1300, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of these materials can be obtained by mail from the SEC's public
reference section at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain of these materials may
also be obtained via the SEC's Web site (http://www.sec.gov). In addition,
reports, proxy statements, and other information filed by ADM may be inspected
and copied at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
This Proxy Statement/Prospectus constitutes a part of a registration
statement on Form S-4 (the "Registration Statement") filed by ADM with the SEC
under the Securities Act of 1933, as amended (the "Securities Act"). This Proxy
Statement/Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement for further information with respect to ADM and the ADM Common Stock
offered hereby. Any statements contained herein concerning the provisions of
any document are not necessarily complete, and, in each instance, reference is
made to the copy of the document filed as an exhibit to the Registration
Statement or otherwise filed with the SEC. Each such statement is qualified in
its entirety by this reference.
____________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ADM, MMC, OR ANY OTHER
PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN THE
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
SALE MADE HEREUNDER, UNDER ANY CIRCUMSTANCES, CREATES ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF ADM OR MMC AFTER THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF
ANY TIME AFTER ITS DATE.
3
<PAGE>
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GLOSSARY OF TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Parties to the Merger. . . . . . . . . . . . . . . . . . . . . . . 10
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Required Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Recommendation of the MMC Board and Reasons for the Merger . . . . . . 12
Fairness Opinion with Respect to the Merger. . . . . . . . . . . . . . 12
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . . 15
Comparative Rights of MMC Shareholders Before and After the Merger . . 15
Share Price and Dividend Data. . . . . . . . . . . . . . . . . . . . . 16
Selected Historical Financial Data . . . . . . . . . . . . . . . . . . 17
Comparative Historical and Pro Forma Per Share Data. . . . . . . . . . 20
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Vote Required at Special Meeting . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . . . . 22
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 1. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
BACKGROUND OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 23
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED. . . . . . . 27
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Materials and Information Considered with Respect to the Merger. . . . 28
Analysis of Selected Comparable Publicly Traded Companies. . . . . . . 29
Comparable Transaction Analysis. . . . . . . . . . . . . . . . . . . . 29
Discounted Cash Flow Analysis. . . . . . . . . . . . . . . . . . . . . 30
Breakup Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ADM Common Stock Trading History . . . . . . . . . . . . . . . . . . . 31
Comparison of ADM to Selected Comparable Publicly Traded Companies . . 31
Limitations on Opinion . . . . . . . . . . . . . . . . . . . . . . . . 32
Fees Payable to Merrill Lynch. . . . . . . . . . . . . . . . . . . . . 33
4
<PAGE>
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Effective Time and Effect of the Merger. . . . . . . . . . . . . . . . 34
Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 35
Conditions to Consummation of the Merger . . . . . . . . . . . . . . . 35
Representations, Warranties and Covenants. . . . . . . . . . . . . . . 36
Amendment, Termination and Waiver. . . . . . . . . . . . . . . . . . . 37
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . 37
Certain Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . 37
Conduct of Business Prior to the Merger. . . . . . . . . . . . . . . . 38
No Solicitation of Acquisition Transactions. . . . . . . . . . . . . . 38
Indemnification and Insurance. . . . . . . . . . . . . . . . . . . . . 39
Conflicts of Interests of Certain Persons in the Merger. . . . . . . . 39
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . . 44
Business and Management After the Merger . . . . . . . . . . . . . . . 46
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 46
Resale of Shares by MMC Affiliates . . . . . . . . . . . . . . . . . . 46
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 46
CERTAIN FORWARD-LOOKING INFORMATION. . . . . . . . . . . . . . . . . . . . 47
BUSINESS OF MMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
MMC Common Stock Ownership . . . . . . . . . . . . . . . . . . . . . . 49
MMC Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . 50
BUSINESS OF ADM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Products and Markets . . . . . . . . . . . . . . . . . . . . . . . . . 52
Number of Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 57
Financial Information About Foreign and Domestic Operations and
Export Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ADM Management's Discussion of Operations and Financial Condition. . . 66
SHARE PRICE AND DIVIDEND INFORMATION FOR ADM COMMON STOCK AND MMC
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
COMPARATIVE RIGHTS OF SHAREHOLDERS OF MMC AND ADM. . . . . . . . . . . . . 72
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
5
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Dissenters' or Appraisal Rights. . . . . . . . . . . . . . . . . . . . 72
Vote on Certain Fundamental Issues . . . . . . . . . . . . . . . . . . 73
Cumulative Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Special Meetings of the Shareholders . . . . . . . . . . . . . . . . . 73
Shareholder Action by Written Consent. . . . . . . . . . . . . . . . . 73
Amendment of Certificate or Articles of Incorporation. . . . . . . . . 74
Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . 74
Limitations on Liability and Indemnification of Directors. . . . . . . 75
ITEM 2. CHANGE-OF-CONTROL ARRANGEMENTS. . . . . . . . . . . . . . . . . . 75
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
CHANGE IN ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 78
FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT A - Agreement and Plan of Merger . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C - Sections 11.65 and 11.70 of the Illinois Business
Corporation Act. . . . . . . . . . . . . . . . . . . . . . . . C-1
6
<PAGE>
GLOSSARY OF TERMS
THE FOLLOWING TERMS HAVE THE ASSOCIATED MEANINGS WHEN USED IN THIS PROXY
STATEMENT/PROSPECTUS (INCLUDING THE SUMMARY).
"ACQUISITION PROPOSAL" means an offer, from a party other than ADM or
ADMAC, to acquire MMC in a merger, acquisition, consolidation, or other similar
transaction involving any purchase of assets or capital stock of MMC or its
subsidiaries.
"ADM" means Archer-Daniels-Midland Company, a Delaware corporation.
"ADMAC" means ADM Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of ADM.
"ADM BOARD" means the Board of Directors of ADM.
"ADM BYLAWS" means the Bylaws of ADM.
"ADM CERTIFICATE" means the Certificate of Incorporation of ADM.
"ADM COMMON STOCK" means the common stock of ADM, without par value.
"ANTITRUST DIVISION" means Antitrust Division of the Department of Justice.
"ASI" means Agri Sales, Inc., one of the three business units of MMC.
"AVERAGE PRICE" means the average of the per share closing sale prices of
ADM Common Stock on the NYSE for the 20 trading days immediately preceding the
third trading day prior to the Closing Date.
"BASE VALUE" means $5,400, unless adjusted under the Merger Agreement to an
amount not less than $5,126.13.
"CHANGE-OF-CONTROL ARRANGEMENTS" means certain compensatory arrangements
including change-of-control agreements, termination agreements, agreements
entered into pursuant to the MMC Restricted Stock Unit Plan, the MMC Restricted
Stock Unit Plan for Outside Directors and certain retirement benefits, under
which members of MMC's senior management would receive certain benefits upon a
change of control of MMC, provided certain other conditions are fulfilled.
"CLOSING DATE" means the third business day after the date on which all
conditions precedent to the Merger have been satisfied or waived.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DELAWARE LAW" means the Delaware General Corporation Law.
"DOJ" means the United States Department of Justice.
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"EFFECTIVE TIME" means the later to occur of the filing of a properly
executed Certificate of Merger with the Delaware Secretary of State and the
issuance of a Certificate of Merger by the Illinois Secretary of State.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means Harris Trust and Savings Bank, ADM's stock transfer
agent.
"EXCHANGE RATIO" means the number of shares of ADM Common Stock into which
each share of MMC Common Stock will be converted in the Merger, calculated under
the formula set forth on the cover page of this Proxy Statement/Prospectus.
"FTC" means the Federal Trade Commission.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IRS" means the Internal Revenue Service.
"ILLINOIS LAW" means the Illinois Business Corporation Act.
"MERGER" means the merger of ADMAC with and into MMC, whereby MMC, as the
surviving corporation, will become a wholly owned subsidiary of ADM, as
contemplated by the Merger Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger among ADM, ADMAC,
and MMC, dated as of September 12, 1997, a copy of which is attached hereto as
EXHIBIT A.
"MERRILL LYNCH" means Merrill Lynch, Pierce, Fenner & Smith Incorporated,
MMC's financial adviser with respect to a business combination with a third
party, such as the Merger.
"MMC" means Moorman Manufacturing Company, an Illinois corporation.
"MMC ARTICLES" means the Articles of Incorporation of MMC.
"MMC BOARD" means the Board of Directors of MMC.
"MMC BYLAWS" means the Bylaws of MMC.
"MMC COMMON STOCK" means the common stock, $1.00 par value per share, of
MMC.
"MMI" means MoorMan's, Inc., one of the three business units of MMC.
"NYSE" means the New York Stock Exchange, Inc.
"QUINCY SOYBEAN" means Quincy Soybean Co., one of the three business units
of MMC.
8
<PAGE>
"REGISTRATION STATEMENT" means the registration statement on Form S-4,
together with all amendments and exhibits, of which this Proxy
Statement/Prospectus is a part.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL MEETING" means the special meeting of MMC shareholders to be held
on December 30, 1997.
"TAX COUNSEL" means Winston & Strawn, special tax counsel to MMC.
9
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED UNDER
THE CAPTION "GLOSSARY OF TERMS" AND ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS. REFERENCE IS MADE TO THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS AND THE EXHIBITS HERETO.
A COPY OF THE MERGER AGREEMENT IS ATTACHED AS EXHIBIT A TO THIS PROXY
STATEMENT/PROSPECTUS AND REFERENCE IS MADE THERETO FOR A COMPLETE DESCRIPTION OF
THE TERMS OF THE MERGER. ALL INFORMATION CONCERNING ADM INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN FURNISHED
BY ADM, AND ALL INFORMATION CONCERNING MMC INCLUDED OR INCORPORATED HEREIN BY
REFERENCE HAS BEEN FURNISHED BY MMC. EACH SHAREHOLDER SHOULD READ CAREFULLY
THIS PROXY STATEMENT/PROSPECTUS AND THE EXHIBITS HERETO IN ITS ENTIRETY.
GENERAL
This Proxy Statement/Prospectus relates to the proposed Merger of ADMAC
with and into MMC under the Merger Agreement. Following the Merger, MMC, as the
surviving corporation will continue its operations as a wholly-owned subsidiary
of ADM. See "The Merger." This Proxy Statement/Prospectus also relates to the
approval, for tax purposes, of certain payments pursuant to the
Change-of-Control Arrangements. See "Approval of Change-of-Control
Arrangements."
THE PARTIES TO THE MERGER
ADM. ADM is a major processor of agricultural products for the food and
feed industries. It is one of the largest oil seed and vegetable oil
processors, corn refiners, fuel alcohol producers, and wheat millers in the
United States. ADM was incorporated in Delaware in 1923 as the successor to a
business formed in 1902. ADM's executive offices are located at 4666 Faries
Parkway, Decatur, Illinois 62526, and its telephone number is (217) 424-5200.
References herein to ADM relate to Archer-Daniels-Midland Company, its
subsidiaries and their predecessors unless otherwise noted or indicated by the
context. See "Business of ADM."
MMC. MMC is an agricultural processing company with three business units:
MoorMan's, Inc., its livestock feed business; Quincy Soybean Co., its integrated
soybean processing and vegetable oil refining business; and Agri Sales, Inc.,
its dry edible bean business. MMC has its origins in 1885 when Thomas Robinson
Moorman began mixing, packaging and delivering a hog tonic from his Kentucky
farm. In 1900 two of T.R. Moorman's sons, E.V. and C.A. Moorman, expanded the
business and later moved to Quincy, Illinois. MMC was incorporated in 1912. As
used herein, the term MMC refers to MMC and its subsidiaries, unless the context
requires otherwise. The principal executive offices of MMC are located at 1000
North 30th Street, Quincy, Illinois, and its telephone number is (217) 222-7100.
See "Business of MMC."
THE SPECIAL MEETING
TIME, DATE AND PLACE. The Special Meeting will be held on
December 30, 1997, at the Blessing Conference Center, 28th and Chestnut
Streets, Quincy, Illinois, at 10:00 a.m., local time.
10
<PAGE>
RECORD DATE, QUORUM, AND SHARES ENTITLED TO VOTE. Only shareholders of
record of MMC Common Stock at the close of business on December 1, 1997
are entitled to notice of and to vote at the Special Meeting. At the close of
business on that date, there were 54,770 outstanding shares of MMC Common Stock
that are entitled to vote at the Special Meeting held of record by 295
shareholders. Each share of MMC Common Stock is entitled to one vote.
The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of MMC Common Stock entitled to
vote at the Special Meeting is necessary to constitute a quorum at the Special
Meeting. For these purposes, shares of MMC Common Stock that are present or
represented by proxy and entitled to vote at the Special Meeting will be counted
for quorum purposes regardless of whether the holder of the shares or proxy
fails to vote on a matter or votes "ABSTAIN" ("abstentions"). A broker with
discretionary authority failing to exercise its discretionary authority to vote
shares with respect to a matter, but exercising its discretionary authority to
vote on at least one other matter ("broker non-votes"), will be counted as
present for quorum purposes but will not be counted as present and entitled to
vote on a matter, for voting purposes. Only shares of MMC Common Stock voted
for the approval of a matter, excluding abstentions and broker non-votes, will
be counted as voting for approval in determining whether a matter is approved by
the shareholders of MMC. As a consequence, abstentions and broker non-votes
will have the same effect as votes against approval of the Merger.
If a quorum is not present at the Special Meeting, the shareholders
present, by vote of a majority of the votes cast by shareholders entitled to
vote thereon, may adjourn the Special Meeting, and at any such adjourned meeting
at which a quorum is present any business may be transacted that might have been
transacted at the Special Meeting as originally held and proxies will be voted
thereat as directed.
PROXIES AND REVOCATION OF PROXIES. The enclosed proxy card permits each
shareholder to specify that shares be voted "FOR" or "AGAINST" (or "ABSTAIN"
from) the approval and adoption of the Merger Agreement and the Merger and the
approval, for tax purposes, of certain payments made under the Change-of-Control
Arrangements. If properly signed and returned, and not revoked, a proxy will be
voted in accordance with its instructions. Where a signed proxy card is
returned, but no instructions are specified, the shares will be voted FOR
approval and adoption of the Merger Agreement and the Merger and FOR the
approval of payments under the Change-of-Control Arrangements.
Each shareholder may revoke a previously granted proxy at any time before
it is exercised by filing with MMC's Secretary a revoking instrument or a duly
executed proxy bearing a later date. The powers of the proxy holders will be
suspended if the person executing the proxy attends the Special Meeting in
person and so requests. Attendance at the Special Meeting will not, in itself,
constitute revocation of a previously granted proxy.
PURPOSES OF SPECIAL MEETING. At the Special Meeting, shareholders of MMC
will be asked to consider and vote on proposals (i) to approve and adopt the
Merger Agreement and the Merger, (ii) to approve, for tax purposes, certain
payments under the Change-of-Control Arrangements, and (iii) for such other
matters as may be properly brought before the meeting.
CERTAIN VOTING INFORMATION. As of December 1, 1997, MMC's directors
and executive officers, as a group, beneficially owned 179 shares (or
approximately 0.3%) of the outstanding MMC Common Stock entitled to vote at the
Special Meeting. Certain significant shareholders, who as of December 1,
1997, beneficially owned in the aggregate 28,711 outstanding shares (or
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<PAGE>
approximately 52.4%) of MMC Common Stock entitled to vote at the Special
Meeting, have executed voting agreements with ADM by which they have agreed to
vote their shares of MMC Common Stock "FOR" approval and adoption of the Merger
Agreement and the Merger. All directors and executive officers of MMC have
indicated orally that they will vote all outstanding shares of MMC Common Stock
beneficially owned by them "FOR" approval and adoption of the Merger Agreement
and the Merger.
OTHER MATTERS. Representatives of Deloitte & Touche LLP, MMC's independent
auditors, are expected to be present at the Special Meeting. See "Independent
Accountants."
REQUIRED VOTE
The affirmative vote of the holders of two-thirds of the outstanding shares
of MMC Common Stock is required to approve and adopt the Merger Agreement and
the Merger. The affirmative vote of the holders of more than three-fourths of
the outstanding shares of MMC Common Stock is required to approve, for tax
purposes, certain payments under the Change-of-Control Arrangements. Each share
of MMC Common Stock is entitled to one vote at the Special Meeting. See
"General Information--Vote Required at Special Meeting."
RECOMMENDATION OF THE MMC BOARD AND REASONS FOR THE MERGER
The Board of Directors of MMC has unanimously approved the Merger Agreement
and the transactions contemplated thereby and recommends that MMC shareholders
vote "FOR" approval and adoption of the Merger Agreement and the Merger. The
recommendation of the MMC Board is based upon its belief that the terms of the
Merger Agreement are fair to, and in the best interests of, MMC and its
shareholders and that the Merger will result in benefits to MMC's shareholders.
The MMC Board believes that the Merger offers the shareholders of MMC the
opportunity to receive the securities of a publicly held company that have
liquidity in contrast to MMC Common Stock; an increase in the value of their
investment over the book value of MMC Common Stock; to participate in the
combined company, which is expected to have a greater potential for profits and
growth and future increases in shareholder value than MMC could have alone; to
take advantage of opportunities for growth and diversification that are more
readily available to ADM than to MMC on a stand-alone basis; and to maximize the
compatible operating philosophies of the two companies and the synergies and
potential operating efficiencies that could result from the Merger. See
"Background of the Merger" and "Recommendation of the Board of Directors and
Reasons for the Merger." In considering the recommendation of the MMC Board
with respect to the Merger, shareholders should be aware that certain directors
and officers of MMC have interests in the Merger that are different from the
interests of other MMC shareholders. See "The Merger--Conflicts of Interest of
Certain Persons in the Merger."
FAIRNESS OPINION WITH RESPECT TO THE MERGER
In its role as financial adviser to MMC, Merrill Lynch was asked by MMC to
render an opinion to the MMC Board as to whether the Exchange Ratio was fair to
the holders of MMC Common Stock, from a financial point of view, under the
Merger Agreement. On September 3, 1997 representatives of Merrill Lynch
verbally advised the MMC Board that, as of such date, the Exchange Ratio was
fair to the shareholders of MMC from a financial point of view. A written
opinion, dated as of September 3, 1997, was delivered to the MMC Board. See
"Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated." A COPY OF THE
MERRILL LYNCH OPINION, DATED AS OF SEPTEMBER 3, 1997, IS ATTACHED AS EXHIBIT B
TO THIS PROXY STATEMENT/PROSPECTUS. THE SHAREHOLDERS OF MMC ARE URGED TO READ
THE OPINION IN ITS ENTIRETY
12
<PAGE>
FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE ASSUMPTIONS MADE, MATTERS
CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY
MERRILL LYNCH IN CONNECTION THEREWITH. See "The Merger--Opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated."
THE MERGER
CONVERSION OF SHARES. At the Effective Time, each outstanding share of MMC
Common Stock will be converted into the right to receive a number of shares of
ADM Common Stock, determined in accordance with the Exchange Ratio. See "The
Merger--General." The stockholders of ADM will continue to hold their shares of
capital stock of ADM without any change in the number, designation, terms, or
rights. For a summary of various differences between the rights of holders of
MMC Common Stock and the rights of holders of ADM Common Stock, see "Comparative
Rights of Shareholders of MMC and ADM."
The actual number of shares of ADM Common Stock that will be issued to the
shareholders of MMC in the Merger will be determined based upon the Base Value
and the Average Price of ADM Common Stock. The Base Value may be lower than
$5,400 if the shareholders' equity of MMC, determined under generally accepted
accounting principles, as of the date 15 days prior to the Closing Date, is less
than $265 million; provided, however, the Base Value will not be less than
$5,126.13. The shareholders' equity of MMC has exceeded $265 million since
fiscal year 1989. The management of MMC believes that the shareholders' equity
of MMC will exceed $265 million at the measurement date. The shareholders'
equity of MMC was approximately $268.9 million at November 1, 1997. See "The
Merger--General."
The following table sets forth, for each Average Price within a range of
specified values, the Exchange Ratio that would result from that Average Price.
Average Price Exchange Ratio
------------- --------------
$24.00 225.00
23.50 229.79
23.00 234.78
22.50 240.00
22.00 245.45
21.50 251.16
21.00 257.14
20.50 263.41
20.00 270.00
19.50 276.92
19.00 284.21
18.50 291.89
18.00 300.00
EFFECTIVE TIME OF THE MERGER. Subject to the terms and conditions of
the Merger Agreement, the Merger is expected to become effective on December
30, 1997. See "The Merger--Effective Time and Effect of the Merger." If the
Merger has not become effective on or before February 28, 1998, the Merger
Agreement provides that either party may terminate the Merger Agreement. See
"The Merger--Amendment, Termination, and Waiver."
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<PAGE>
CONDITIONS TO THE MERGER. The obligations of ADM and MMC to effect the
Merger are subject to certain conditions, including, among other things, that
certain regulatory approvals have been obtained and that the Merger Agreement
and the Merger has been approved and adopted by the MMC shareholders with no
more than ten percent of MMC's shareholders demanding statutory dissenters'
rights. See "The Merger--Conditions to Consummation of the Merger" for a
discussion of conditions to the Merger. Any of the conditions to the obligation
of ADM or MMC to consummate the Merger may be waived or modified by the party
that is entitled to the benefits thereof. Neither ADM nor MMC has any present
intention to waive or modify any condition that it deems material. Obtaining
the affirmative vote of more than three-fourths of the outstanding shares of MMC
Common Stock for approval, for tax purposes, of payments under the Change-of-
Control Arrangements is not a condition to the Merger.
MMC EMPLOYEE BENEFIT PLANS. Under the Merger Agreement, ADM has agreed to
assume, in accordance with their respective terms, certain of MMC's benefit
plans, programs, and arrangements. See "The Merger--Employee Benefit Plans."
AMENDMENT, TERMINATION, AND WAIVER. The Merger Agreement may be amended at
any time, provided that, after the Merger Agreement has been approved and
adopted by MMC's shareholders, it may not be amended to alter the number of
shares of ADM Common Stock to be exchanged for each share of MMC Common Stock or
in any other way that would have a material adverse effect on the rights of
MMC's shareholders, without their further approval. Under certain conditions,
the Merger Agreement may be terminated prior to the Effective Time, whether
before or after approval by the MMC shareholders. The conditions under which
the Merger Agreement may be terminated include termination by mutual consent of
the Boards of Directors of ADM and MMC; termination by either party if the
Merger has not been consummated on or before February 28, 1998; termination by
either party upon the failure of MMC to receive the requisite shareholder
approval at the Special Meeting, or adjournments thereof; termination by either
party upon the failure to meet any condition to the terminating party's
obligation to consummate the Merger that has not been waived or cured within the
prescribed cure period; and termination by either party if a final unappealable
order to prevent the Merger or an award of substantial damages is entered. The
Merger Agreement may also be terminated by either ADM or MMC if the
recommendation of the MMC Board in support of the Merger is withdrawn or
modified in a manner detrimental to ADM. See "The Merger--Conditions to
Consummation of the Merger" and "The Merger--Amendment, Termination, and
Waiver."
SOLICITATION OF THIRD-PARTY OFFERS. In the Merger Agreement, MMC has
agreed not to initiate, solicit, negotiate or encourage proposals or offers, or
provide any confidential information relating to any acquisition of all or any
substantial portion of the business or properties of MMC. MMC is permitted to
supply information to third parties and engage in discussions or negotiations
with third parties relating to such an acquisition transaction, or modify or
withdraw its recommendation of the Merger, after reasonable notice to ADM, if
the MMC Board, after consultation with Merrill Lynch, determines in good faith
that the third party's Acquisition Proposal is bona fide and superior to that
offered in the Merger; if the MMC Board determines in good faith, upon the
advice of counsel, that such action is necessary for the MMC Board to comply
with its fiduciary duties to its shareholders under Illinois Law; and if the MMC
Board receives an executed confidentiality agreement from the third party. If
these conditions are met with respect to a third-party offer, the Merger
Agreement provides that ADM has the right to match the offer and that if the MMC
Board determines that this matching proposal is at least equal to the third-
party offer, then the MMC Board must accept ADM's offer. See "The Merger--No
Solicitation of Acquisition Transactions."
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<PAGE>
REGULATORY APPROVALS. Consummation of the Merger is conditioned upon,
among other things, the expiration or early termination of the relevant waiting
period under the HSR Act. The waiting period expired on October 19, 1997. See
"The Merger -- Certain Legal Matters."
SURRENDER OF SHARE CERTIFICATES. After the Effective Time, each MMC
shareholder will be entitled to receive, upon surrender of certificates
previously representing shares of MMC Common Stock, certificates representing
the number of full shares of ADM Common Stock to which the shareholder is
entitled under the Merger Agreement. See "The Merger--General" and "The
Merger--Exchange of Shares." SHAREHOLDERS OF MMC SHOULD NOT SURRENDER THEIR
STOCK CERTIFICATES UNTIL THEY RECEIVE TRANSMITTAL MATERIALS, WHICH WILL BE
MAILED IMMEDIATELY AFTER THE EFFECTIVE TIME.
ACCOUNTING TREATMENT. The Merger will be accounted for under the purchase
method of accounting.
BUSINESS AND MANAGEMENT AFTER THE MERGER. After the Effective Time, the
directors of MMC as the surviving corporation will be Charles T. Bayless,
John D. McNamara, and Douglas J. Schmalz, and its officers will be John D.
McNamara, President; David J. Smith, Vice President and Secretary; Scott A.
Roberts, Assistant Secretary; and Charles P. Archer, Treasurer. All such new
officers and directors are currently officers of ADM. ADM intends to operate
MMC in a manner substantially consistent with its current operations. ADM will
carefully review the operations of MMC in an attempt to identify opportunities
for expense reduction through the use of shared resources with ADM. See
"Recommendation of the Board of Directors and Reasons for the Merger" and "The
Merger--Business and Management After the Merger."
After the Effective Time, the principal executive offices of MMC will
continue to be at 1000 North 30th Street, Quincy, Illinois 62301.
DISSENTERS' RIGHTS
If certain statutory conditions are met, an MMC shareholder will be
entitled to demand appraisal of his or her shares of MMC Common Stock in
accordance with Illinois Law. A shareholder who wishes to exercise such rights
must deliver to MMC before the Special Meeting a written demand for payment for
his or her shares of MMC Common Stock and must not vote in favor of the Merger
at the Special Meeting. Consummation of the Merger is conditioned, however, on
no more than ten percent of MMC's shareholders demanding such rights. See
"Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to be a tax-free reorganization under Section 368(a)
of the Code such that no gain or loss would be recognized by the holders of MMC
Common Stock to the extent they receive ADM Common Stock in exchange for their
MMC Common Stock in the Merger. It is a condition to MMC's obligation to
consummate the Merger that it receive a tax opinion from Winston & Strawn,
special tax counsel to MMC, dated as of the Closing Date, to the effect that the
Merger qualifies as a reorganization under Section 368(a) of the Code. This
opinion is specifically dependent upon current MMC shareholders in the aggregate
(i) having no present agreement, contract, plan or arrangement to sell, exchange
or otherwise dispose of more than 50 percent of the ADM Common Stock received in
the Merger and (ii) continuing to hold at least 50 percent of the ADM Common
Stock received in the Merger for a
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period of at least one year. If the Merger does not qualify as a
reorganization, the exchange of shares in the Merger would be taxable. See "The
Merger--Certain Federal Income Tax Consequences."
COMPARATIVE RIGHTS OF MMC SHAREHOLDERS BEFORE AND AFTER THE MERGER
The rights of the shareholders of MMC are currently governed by Illinois
Law and MMC's Articles and Bylaws. At the Effective Time, MMC shareholders will
become stockholders of ADM and their rights as ADM stockholders will then be
governed by Delaware Law and ADM's Certificate and Bylaws. There are various
differences between the rights of MMC shareholders and the rights of holders of
ADM Common Stock. See "Comparative Rights of Shareholders of MMC and ADM."
SHARE PRICE AND DIVIDEND DATA
Shares of ADM Common Stock are listed and principally traded on the NYSE.
There has been no public trading market for MMC Common Stock. However, certain
appraisals have been made periodically by an independent appraisal firm for the
purpose of valuing shares of MMC Common Stock held by the MMC Employees' Profit
Sharing Plan as discussed below. The following table sets forth for the
calendar periods indicated the high and low sale prices of ADM Common Stock and
the cash dividends paid per share :
ADM Common Stock
-----------------------------
High Low Dividend
------ ------ --------
1995 . . . . . . . . . . . . . . . $18.13 $13.00 $.112
1996 . . . . . . . . . . . . . . . 22.00 14.88 .184
1997
First Quarter . . . . . . . . 21.88 16.50 .048
Second Quarter. . . . . . . . 22.88 16.25 .048
Third Quarter . . . . . . . . 24.63 20.31 .048
Fourth Quarter (through
December 8, 1997). . . . . . 24.43 18.00 .050
With respect to MMC Common Stock, MMC paid dividends totaling $250 in each
of fiscal 1996 and fiscal 1997. No dividends were paid for the first or second
quarters of fiscal 1998. The value of the MMC Common Stock, appraised quarterly
by an independent appraisal firm for the purpose of valuing shares of MMC Common
Stock held by the MMC Employees' Profit Sharing Plan, ranged from $5,500 to
$5,000 in fiscal 1996 and $5,000 to $4,000 in fiscal 1997. For the first and
second quarters of fiscal 1998 the appraised values were $4,000 and $4,300,
respectively. These valuations were not prepared with the intent that they
serve as an estimate of the price that would be realized through a sale of MMC
to a third party and do not represent necessarily the price paid for or received
in the purchase or sale of shares of MMC Common Stock during the corresponding
periods. The appraisals were prepared solely to assist the Administrative
Committee of the MMC Employees' Profit Sharing Plan in fulfilling its
responsibilities to value the shares of MMC Common Stock held by the plan.
On September 11, 1997, the last trading day before the public announcement
of the Merger, the closing sale price per share of ADM Common Stock as reported
on the NYSE Composite Tape was $22.625. On December 8, 1997, the last trading
day for which closing sale prices were available at the time of the printing of
this Proxy Statement/Prospectus, the closing sale price per share of ADM Common
16
<PAGE>
Stock as reported on the NYSE Composite Tape was $21.25. If the Average Price
were equal to the closing sale price per share of ADM Common Stock on
December 8, 1997, shareholders of MMC who are to receive shares of ADM Common
Stock would be entitled to receive 254.118 shares of ADM Common Stock, having
a market value of $5,400, in exchange for each share of MMC Common Stock held
by them (assuming MMC shareholders' equity as of 15 days prior to the Closing
Date is at least $265 million). The aggregate number of shares of ADM Common
Stock to be received by each shareholder of MMC will be rounded to the nearest
whole number of shares. See "The Merger--General" for a discussion of the
determination of the actual Average Price and Exchange Ratio.
Listing on the NYSE of the shares of ADM Common Stock issuable in
connection with the Merger is a condition to its consummation.
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data of ADM
and MMC for the periods presented. The selected historical financial data of
ADM as of and for each of the five years in the period ended June 30, 1997, and
for the first fiscal quarters ended September 30, 1997 and September 30, 1996
shown below have been derived from the consolidated financial statements of ADM.
The selected historical financial data of MMC as of and for each of the five
years ended March 29, 1997, and for the first fiscal quarter ended June 28, 1997
and the second fiscal quarter ended September 27, 1997, compared with the same
periods in fiscal 1997, shown below have been derived from the consolidated
financial statements of MMC provided by management. These historical data are
not necessarily indicative of results to be expected after the Merger is
consummated and should be read in conjunction with the information set forth in
this Proxy Statement/Prospectus under the caption "ADM Management's Discussion
of Operations and Financial Condition" and the separate consolidated financial
statements of ADM and the notes thereto attached to this Proxy
Statement/Prospectus, and the information with respect to MMC set forth in this
Proxy Statement/Prospectus under the caption "MMC Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the separate
consolidated financial statements of MMC and the notes thereto attached to this
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
ADM
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------------- -----------------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
----------- ---------- ----------- ----------- ----------- ----------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales and other
operating income. . . $3,651,302 $3,330,475 $13,853,262 $13,239,839 $12,555,403 $11,158,479 $9,578,370
Net earnings . . . . . . 131,350 3,553 377,309 695,912 795,915 484,069 567,527
Net earnings per
common share . . . . . .24 .01 .66 1.20 1.34 .80 .91
Total assets . . . . . . 12,022,889 10,784,946 11,354,367 10,449,869 9,756,887 8,746,853 8,404,111
Long-term debt . . . . . 2,352,468 1,992,590 2,344,949 2,002,979 2,070,095 2,021,417 2,039,143
Cash dividends per
common share. . . . . .048 .046 .19 .16 .08 .05 .05
</TABLE>
Net earnings for the three months ended September 30, 1996 and the year ended
June 30, 1997 includes an after-tax charge of $177 million or $.31 per share
for fines and litigation settlements arising out of the
17
<PAGE>
United States Department of Justice investigation of the Company's lysine and
citric acid products as well as resolution of a securities suit brought by
shareholders.
Net earnings for 1993 includes a credit of $68 million or $.11 per share and an
after-tax charge of $35 million or $.06 per share for the cumulative effects of
changes in accounting for income taxes and postretirement benefits,
respectively.
<TABLE>
<CAPTION>
MMC
SIX MONTHS ENDED YEAR ENDED
----------------------- ---------------------------------------------------------------
Sept. 27, Sept. 28, March 29, March 30, March 25, March 26, March 27,
1997 1996 1997 1996 1995 1994 1993
-------- -------- ---------- --------- -------- -------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales . . . . . . . . .. . . . $500,548 $527,629 $1,157,859 $973,465 $904,321 $810,319 $820,047
Net Income from Continuing
Operations (1) . . . . . . . . . (8,278) (2,592) 6,780 20,930 13,088 14,824 32,772
Net Income (Loss) from
Discontinued Operations . .. . . 0 (2) 93 (1,550) (55) 0 0
Cumulative Effect of
Accounting Change In
Retiree Health and Life
Insurance, net of tax . . .. . . 0 0 0 0 0 (31,853) 0
Net Income (Loss)(1) . . . . . . . (8,278) (2,594) 6,873 19,380 13,033 (17,029) 32,772
Net Income from Continuing
Operations Per Share . . . . . . (151) (46) 122 360 211 238 526
Net Income (Loss) Per Share. . . . (151) (46) 124 334 210 (273) 526
Total Assets . . . . . . . . . . . 481,801 489,333 573,465 544,962 486,513 494,805 440,144
Long-Term Liabilities . . .. . . . 81,481 91,007 91,148 85,810 72,237 57,076 17,539
Cash Dividends Per Share . . . . . 0 50 250 250 250 250 250
</TABLE>
___________________________
(1) The following nonrecurring items are included in Net Income from
Continuing Operations: Gains from Benefit Plans Curtailment and Plan
Changes (pre-tax) -- 1997, $13,626; 1996, $17,080; Facility Closures and
Restructuring (pre-tax) -- 1996, ($1,873); 1995, ($4,942); 1994, ($6,607);
1993 Flood Loss and Subsequent Insurance Recovery -- 1995, $1,103; 1994,
($2,035).
18
<PAGE>
MOORMAN MANUFACTURING COMPANY
SUPPLEMENTARY FINANCIAL INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FY 1998 FY 1997 FY 1996
------------------ -------------------------------------------------- -----------------------------------------------
1ST QTR. 2ND QTR. 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR TOTAL
-------- -------- -------- -------- -------- -------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $252,215 $248,333 $245,968 $281,661 $324,441 $305,789 $1,157,859 $205,857 $216,806 $264,237 $286,565 $973,465
Gross Profit 22,735 14,555 25,787 24,456 37,965 35,006 123,214 34,279 27,935 39,196 33,853 135,263
Net Income
(Loss) From
Continuing
Operations (2,292) (5,986) (1,152) (1,440) 6,812 2,560 6,780 2,523 155 4,202 14,050 20,930
Net Income
(Loss) (2,292) (5,986) (1,154) (1,440) 6,812 2,655 6,873 2,242 (904) 3,940 14,102 19,380
Net Income
(Loss) From
Continuing
Operations
Per Share (41.85) (109.29) (20.40) (25.97) 122.25 46.50 122.37 41.56 3.72 72.26 242.78 360.32
Net Income
(Loss) Per
Share (41.85) (109.29) (20.44) (25.98) 122.25 48.21 124.05 36.93 (14.31) 67.55 243.46 333.64
Cash
Dividends
Per Share 0 0 25 25 80 120 250 25 25 80 120 250
Book Value
Per Share 4,976 4,867 5,018 5,134
</TABLE>
19
<PAGE>
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
The table below sets forth historical earnings per share, cash dividends
per share and book value per share data of ADM for the three months ended
September 30, 1997 and the year ended June 30, 1997 and of MMC for the three
months ended September 27, 1997 and the year ended March 29, 1997. The table
also sets forth unaudited pro forma combined per share data of ADM and pro forma
equivalent per share data of MMC for the three months ended September 30, 1997
and for the year ended June 30, 1997. The data should be read in conjunction
with the historical financial statements and notes thereto attached to this
Proxy Statement/Prospectus and the selected historical financial data included
elsewhere in this Proxy Statement/Prospectus. The pro forma data give effect to
the Merger under the purchase method of accounting. The pro forma combined data
are not necessarily indicative of the operating results or financial position
that would have been achieved if the Merger had been consummated at the
beginning of the periods presented, nor are they necessarily indicative of the
future consolidated operating results or financial position of ADM.
<TABLE>
<CAPTION>
ADM MMC
--------------------------------------- ----------------------------------------
Three Months Ended Year Ended Three Months Ended Year Ended
September 30, 1997 June 30, 1997 September 27, 1997 March 29, 1997
------------------ ------------- ------------------ --------------
<S> <C> <C> <C> <C>
Historical:
Earnings (Loss) Per Share $0.24 $0.66 $(109.29) $124.05
Cash Dividends Paid Per
Share 0.048 0.19 - 250.00
Book Value Per Share 11.00 10.85 4,867.00 5,018.00
<CAPTION>
Three Months Ended Year Ended
September 30, 1997 June 30, 1997
------------------ -------------
<S> <C> <C>
Pro Forma Combined (1)
Earnings Per Share $0.22 $0.66
Cash Dividends Paid Per
Share 0.048 0.19
Book Value Per Share 11.25 11.10
MMC Pro Forma Equivalents (2)
Earnings Per Share $55.58 $166.74
Cash Dividends Per Share 12.13 48.00
Book Value Per Share 2,842.11 2,804.21
_______________________
</TABLE>
(1) The pro forma combined data is presented as if the Merger had occurred at
the beginning of fiscal year 1997.
(2) MMC pro forma equivalent data reflect the pro forma combined amounts per
share multiplied by an assumed exchange ratio of 252.63 calculated on the
basis of $21.375, the closing price of ADM Common Stock on the NYSE
composite tape on November 28, 1997.
20
<PAGE>
GENERAL INFORMATION
THE SPECIAL MEETING
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the MMC Board for use at the Special Meeting to be
held on December 30, 1997, and at any adjournments or postponements of that
meeting. This Proxy Statement/Prospectus also constitutes the Prospectus of ADM
with respect to the shares of ADM Common Stock to be issued in connection with
the Merger.
The Special Meeting has been called for the purpose of considering and
voting upon a proposal to approve and adopt the Merger Agreement and the Merger,
whereby ADMAC will be merged with and into MMC, with MMC continuing its
operations as a wholly-owned subsidiary of ADM. The Merger will be accomplished
under the Merger Agreement by a statutory merger of ADMAC with and into MMC in
which all the outstanding shares of MMC Common Stock will be converted into the
right to receive shares of ADM Common Stock. The stockholders of ADM will
continue to hold their shares of ADM Common Stock without any change in number,
designation, terms, or rights. Under the Merger Agreement, holders of MMC
Common Stock will become stockholders of ADM and will receive a number of shares
of ADM Common Stock (rounded to the nearest whole share) for each outstanding
share of MMC Common Stock determined pursuant to the Average Price and the
Exchange Ratio. See "The Merger--General" and "The Merger--Exchange of Shares."
MMC's shareholders are also being asked to consider and vote upon a
proposal to approve, for tax purposes, payments to members of MMC's senior
management under the Change-of-Control Arrangements. The purposes of the
shareholder approval are (i) to permit MMC to report the full amount of the
payments under the Change-of-Control Arrangements as deductions for income tax
purposes and (ii) to make it so that members of MMC's senior management
receiving such payments should not be required to pay excise taxes on any
portion of the payments. Shareholder approval for the payments under the
Change-of-Control Arrangements is not a condition to either the consummation of
the Merger or the payment by MMC of all such amounts due under the Change-of-
Control Arrangements, since MMC is contractually obligated to make such
payments. If consummated, the Merger would constitute a change of control of
MMC. The Change-of-Control Arrangements include employment agreements, change-
of-control agreements, termination agreements, agreements entered into pursuant
to the MMC Restricted Stock Unit Plan, the MMC Restricted Stock Unit Plan for
Outside Directors and certain retirement benefits.
In addition to the foregoing proposals, MMC's shareholders may consider
such other matters as may be properly brought before the Special Meeting.
VOTE REQUIRED AT SPECIAL MEETING
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of two-thirds of the outstanding shares of MMC Common Stock
entitled to vote thereon. Holders of MMC Common Stock who dissent from the
approval and adoption of the Merger Agreement and the Merger may demand
appraisal rights under Illinois Law if certain procedural criteria are met. See
"Dissenters' Rights." Approval of the Change-of-Control Arrangements requires
the affirmative vote of the holders of three-fourths of the outstanding shares
of MMC Common Stock entitled to vote thereon.
21
<PAGE>
The MMC Board has fixed the close of business on December 1, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Special Meeting or any and all adjournments or postponements
thereof. At that date, there were 54,770 outstanding shares of MMC Common Stock
entitled to vote at the Special Meeting and the record holders on that date will
be entitled to one vote for each share held by them.
On December 1, 1997 MMC's directors and executive officers, as a
group, beneficially owned 179 shares (or approximately 0.3%) of the outstanding
shares of MMC Common Stock on that date. The MMC Employee's Profit Sharing Plan
and CMF Foundation beneficially own in the aggregate 28,711 shares (or
approximately 52.4%) of the outstanding MMC Common Stock entitled to vote at the
Special Meeting. The MMC Employee's Profit Sharing Plan and CMF Foundation have
executed voting agreements with ADM by which such MMC shareholders have agreed
to vote their shares of MMC Common Stock "FOR" approval and adoption of the
Merger Agreement and the Merger. All directors and executive officers of MMC
have indicated orally that they will vote all outstanding shares of MMC Common
Stock beneficially owned by them "FOR" approval and adoption of the Merger
Agreement and the Merger. The MMC Employee's Profit Sharing Plan and CMF
Foundation have indicated orally that they will vote all outstanding shares of
MMC Common Stock held by them "FOR" approval, for tax purposes, of the Change-
of-Control Arrangements.
The presence at the Special Meeting in person or by proxy of the holders of
a majority of the shares of MMC Common Stock outstanding on December 1,
1997 is required to constitute a quorum. At that date, there were 54,770
outstanding shares of MMC Common Stock. For these purposes, shares of MMC
Common Stock that are present or represented by proxy and entitled to vote at
the Special Meeting will be counted for quorum purposes regardless of whether
the holder of the shares or proxy fails to vote on a matter or votes "ABSTAIN"
("abstentions"). A broker with discretionary authority failing to exercise its
discretionary authority to vote shares with respect to a matter, but exercising
its discretionary authority to vote on at least one other matter ("broker non-
votes"), will be counted as present for quorum purposes but will not be counted
as present and entitled to vote on a matter, for voting purposes. Only shares
of MMC Common Stock voted for the approval of a matter, excluding abstentions
and broker non-votes, will be counted as voting for approval in determining
whether a matter is approved by the shareholders of MMC. As a consequence,
abstentions and broker non-votes will have the same effect as votes against
approval of the Merger.
If a quorum is not present at the Special Meeting, the shareholders
present, by vote of a majority of the votes cast by shareholders entitled to
vote thereon, may adjourn the Special Meeting, and at any such adjourned meeting
at which a quorum is present any business may be transacted that might have been
transacted at the Special Meeting as originally called and proxies will be voted
thereat as directed.
SOLICITATION OF PROXIES
Directors, officers and employees of MMC may solicit proxies from
shareholders by personal contact, special letter, telephone, or facsimile
transmission. MMC will bear the expenses of solicitation on its behalf.
Directors, officers, and other employees of MMC will not be specially
compensated for the solicitation of proxies. Brokerage houses and other
custodians, nominees, and fiduciaries will be requested to forward soliciting
materials to the beneficial owners of MMC Common Stock owned of record by such
organizations, and MMC may pay the reasonable expenses incurred in forwarding
these materials.
22
<PAGE>
A proxy relating to the Special Meeting may be revoked by the shareholder
at any time before it is exercised; however, mere attendance at the Special
Meeting will not itself have the effect of revoking the proxy. An MMC
shareholder may revoke a proxy before it is voted by executing and filing a
subsequently dated proxy with MMC, by sending written notice of revocation
received by MMC not later than the close of business on December 22,
1997, or by the holder of record voting in person at the Special Meeting.
A proxy in the form accompanying this Proxy Statement/Prospectus, when
properly executed and returned, will be voted in accordance with the
instructions contained therein. A properly executed proxy on which no
instruction has been indicated will be voted for approval and adoption of the
Merger Agreement and the Merger and for the approval of certain payments under
the Change-of-Control Arrangements.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the MMC Board does not know
of any business to be presented at the Special Meeting other than as set forth
in the notice accompanying this Proxy Statement/Prospectus. If any other
matters properly come before the Special Meeting, it is intended that the shares
represented by proxies will be voted with respect to those matters in accordance
with the judgment of the persons authorized to vote those proxies.
ITEM 1. THE MERGER
BACKGROUND OF THE MERGER
The terms and conditions of the Merger Agreement were determined through
arm's-length negotiations between the senior managements and Boards of Directors
of MMC and ADM. In determining the form of the transaction and calculation of
the consideration, numerous factors were reviewed by the senior managements and
Boards of Directors of MMC and ADM. See "Recommendations of the Boards of
Directors and Reasons for the Merger." The following is a brief discussion of
those negotiations and certain related events.
Historically, the MMC Board has not sought or invited proposals from third
parties to acquire MMC although business combinations have been discussed among
the MMC Board and with third parties from time to time. No third party,
however, has expressed an intent to make an offer to acquire MMC during the past
eighteen months. The MMC Board has followed a long-term strategic objective of
internal and external growth and diversification of MMC as a private,
independent company. Since fiscal 1996, the MMC Board has appointed annually a
Strategic Initiative Review Committee, which has reviewed from time to time and
reported to the entire MMC Board on issues related to long-term strategic
planning. The current members of the committee are Thomas L. Shade (Chairman),
William D. George, Jr., J. Douglas Gray and Robert J. Ireland. As part of its
strategy, MMC continuously evaluates and maintains a variety of contacts with
members of its industry for potential business combinations, joint ventures and
acquisitions and dispositions of businesses and business units.
In early July 1997, an agent of ADM contacted Thomas M. McKenna, President,
Chief Executive Officer and a director of MMC, to indicate that ADM may be
interested in a business combination with MMC. Mr. McKenna advised the ADM
agent of MMC's long-term strategy. As a result of this unsolicited contact and
at the request of ADM, representatives of ADM's top management met with Mr.
23
<PAGE>
McKenna and Alfred L. Williams, Jr., Vice President of Finance, Chief Financial
Officer, and Treasurer of MMC, in mid-July to discuss ADM's interest in a
business combination with MMC.
On July 18, 1997, Mr. McKenna consulted with the members of the Strategic
Initiative Review Committee regarding his discussions with ADM concerning a
possible business combination. Representatives of ADM and MMC met on July 21,
1997, to discuss the general business terms of such a business combination.
During the MMC Board's Strategic Planning Retreat and meeting on July 23
through July 25, 1997, MMC's senior management reported first to the Strategic
Initiative Review Committee and later to the entire MMC Board concerning its
discussions with ADM and the proposed terms of a possible business combination.
Three investment banking firms, including Merrill Lynch, made presentations to
the MMC Board concerning the business of MMC and the strategic alternatives
available to it. After the investment bankers' presentations and an extensive
review of the proposed terms, including the possibility of approaching other
potential acquirers or exploring other transactions, the MMC Board affirmed
management's authority to proceed with the negotiations exclusively with ADM.
MMC did not seek and is not now seeking an alternative acquirer. Following the
decision to proceed, the MMC Board selected Merrill Lynch to act as MMC's
financial adviser in connection with a business combination with a third party,
such as the Merger, subject to the negotiation and execution of a satisfactory
letter agreement concerning the engagement.
MMC's management, particularly, Mr. Williams, MMC's Chief Financial
Officer, along with its legal advisers then negotiated the detailed terms,
provisions and conditions of the Merger Agreement and related agreements over
the course of the next seven weeks. The negotiations concerning the Exchange
Ratio centered on ADM's desire to purchase MMC at a price approximating book
value (at that time approximately $4,940 per share) and MMC's desire to receive
a price in excess of book value. The parties compromised at an Exchange Ratio
with $5,400 per share as the Base Value. The parties also agreed that the
Exchange Ratio would be adjusted downward if the shareholders' equity of MMC,
determined under generally accepted accounting principles as of the date 15 days
before the Closing Date, was less than $265 million.
MMC's management reported again to the MMC Board during a special meeting
on August 22, 1997. Management and its legal and financial advisers reviewed
the proposed terms of the Merger Agreement, and the Board engaged in lengthy
discussions about the merits and terms of the Merger and authorized management
to continue to negotiate the Merger Agreement.
On August 28, 1997, MMC formally engaged Merrill Lynch to act as its
financial adviser in connection with a business combination with a third party,
such as the Merger, pursuant to a letter agreement of the same date.
From August 29, 1997 through September 2, 1997, the parties continued to
negotiate the other terms and provisions of the Merger Agreement.
On September 3, 1997, the MMC Board held a special meeting and received a
detailed report of the terms and provisions of the Merger Agreement and related
agreements as negotiated by MMC's management and legal advisers and Merrill
Lynch's oral presentation and written opinion, based upon and subject to the
matters referred to therein, that the Exchange Ratio was fair from a financial
point of view to MMC's shareholders. The MMC Board then determined that the
terms of the Merger Agreement and the transactions contemplated thereby were
fair to, and in the best interests of, MMC and its shareholders, and
24
<PAGE>
accordingly, each of the directors approved the Merger Agreement and the Merger
and resolved to recommend that MMC's shareholders vote for the approval and
adoption of the Merger Agreement and the Merger at a special meeting of MMC's
shareholders to be held for that purpose. See "Recommendation of the Board of
Directors and Reasons for the Merger."
On Friday, September 12, 1997, the Merger Agreement was executed, and later
that day the parties issued a joint press release announcing the proposed
Merger.
Certain directors and officers of MMC have interests in the Merger
different from the interests of other MMC shareholders. See "The Merger--
Conflicts of Interests of Certain Persons in the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
AND REASONS FOR THE MERGER
The MMC Board believes that the terms of the Merger are fair to, and in the
best interests of, MMC and its shareholders. ACCORDINGLY, THE MMC BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF MMC COMMON STOCK VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER. The MMC Board has retained the right,
under certain circumstances, to withdraw, modify, or amend the foregoing
recommendation of the MMC Board. See "The Merger--No Solicitation of
Acquisition Transactions."
The MMC Board believes that the Merger will permit the shareholders of MMC
to participate in a financially stronger, better diversified, cost efficient,
and more competitive combined company through a tax-free reorganization, with
taxes incurred only upon the ultimate sale of the shares of ADM Common Stock to
be received in the Merger. See "The Merger--Federal Income Tax Consequences."
In deciding to pursue a strategic business combination transaction with ADM
instead of remaining independent, the MMC Board evaluated with MMC senior
management their plans for the conduct of MMC's businesses on a stand-alone
basis. The analysis included a review of the historical financial condition and
results of operations of MMC and its subsidiaries, the profitability of various
lines of business, the current competitive environment in the agricultural
products industry, the changes required to be implemented to achieve
satisfactory profitability, and the achievability of strategic goals.
At its meeting on August 22, 1997, the MMC Board reviewed in detail the
proposed terms of the Merger Agreement with senior management and its financial
and legal advisers. Merrill Lynch answered questions from the MMC Board
concerning Merrill Lynch's analysis of the financial terms of the Merger.
On September 3, 1997, the MMC Board again discussed the proposed terms of
the Merger Agreement with senior management and its financial and legal
advisers. Merrill Lynch then delivered its opinion to the effect that the
Exchange Ratio in the Merger is fair to the shareholders of MMC from a financial
point of view (see "Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated"). After deliberating with respect to the Merger and the other
transactions contemplated by the Merger Agreement, considering, among other
things, the matters discussed herein and the opinion and presentation of Merrill
Lynch, the MMC Board unanimously determined the Merger to be advisable and in
the best interests of MMC and its shareholders and approved the Merger Agreement
and the transactions contemplated thereby.
25
<PAGE>
In reaching its decision to approve and adopt the Merger Agreement on
September 3, 1997, the MMC Board consulted with MMC senior management and its
financial and legal advisers and considered many factors, including, but not
limited to, those listed above and the following:
(i) historical information on both a line of business and company-wide
basis regarding the financial condition, capital levels, asset quality, cash
flow, operations, earnings, businesses and prospects of MMC;
(ii) the fact that the MMC shareholders will exchange their shares of MMC
Common Stock for a security that is publicly traded and thus more liquid;
(iii) the financial analyses and other information with respect to MMC
presented at the July 23, 1997 Board of Directors Retreat by MMC management,
the Strategic Initiative Review Committee, Merrill Lynch and the other
investment banking firms, including a description by business unit of current
business conditions, market and operating environment assumptions through the
year 2001 and resulting financial projections through 2001 and the business
prospects and outlook for MMC, as well as the MMC Board's own knowledge of
MMC and its businesses. (The financial projections considered by the MMC
Board are the same projections prepared by MMC for the years 1998 through
2001 and described in detail below under the descriptions of Merrill Lynch's
Discounted Cash Flow Analysis and Breakup Analysis. Using these projections
and the other factors enumerated herein, the Board concluded that the
business prospects and outlook for MMC following the Merger with a
subsidiary of ADM would be more attractive potentially than the prospects
and outlook of MMC on a stand-alone basis. Specifically, the MMC Board
concluded that while the prospects for Agri Sales Inc.'s edible bean
business were favorable, they presented too small of a portion of MMC's
overall business to counteract the unfavorable prospects for MoorMan's,
Inc.'s feed business and the fair prospects for Quincy Soybean Company's
crushing business);
(iv) the current economic and competitive operating environment and the
opportunities for growth and diversification that are more readily available to
ADM than to MMC on a stand-alone basis;
(v) the potential effect on shareholder value of MMC continuing as an
independent entity compared to the effect of its combining with ADM in light of
the factors summarized herein with respect to the financial condition and
prospects of MMC in the current economic environment (including risks arising in
connection with general industry conditions, general economic conditions and
general financial market conditions);
(vi) the opportunity for MMC shareholders to participate in the combined
company in the Merger, which was expected to have a greater potential for
profits and growth and future increase in shareholder value than MMC could have
alone;
(vii) the presentations made by Merrill Lynch and the opinion of
Merrill Lynch, dated September 3, 1997, that the Exchange Ratio in the Merger is
fair, from a financial point of view, to the holders of MMC Common Stock (see
"Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated");
(viii) the strategic fit of the MMC and ADM businesses, the compatible
operating philosophies of the two companies and the synergies and potential
operating efficiencies discussed above that could result from ADM acquiring MMC;
(ix) the MMC Board's review with its legal and financial advisers of the
provisions of the Merger Agreement, including the provisions in the Merger
Agreement that would permit the MMC Board, in the exercise of its fiduciary
duties, to supply information to, and to cooperate and negotiate a superior
Acquisition Proposal with, third parties following the execution of the Merger
Agreement, and to withdraw or modify its recommendation in favor of the Merger
(see "The Merger--No Solicitation of Acquisition Proposals");
(x) the expectation that the Merger would be tax free for federal income
tax purposes to MMC and its shareholders;
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(xi) the various differences between the rights and preferences of the
holders of shares of MMC Common Stock and the holders of ADM Common Stock, as
discussed below under "Comparative Rights of Shareholders of MMC and ADM";
(xii) the fact that the Merger is conditioned upon approval by the
holders of two-thirds of the outstanding shares of MMC Common Stock;
(xiii) the interests of certain officers and directors of MMC in the
Merger, including the matters described below under "The Merger--Conflicts of
Interests of Certain Persons in the Merger," and the fact that such officers and
directors have interests in the Merger that are different from the interests of
other MMC shareholders; and
(xiv) the fact that the Merger offers an attractive opportunity for the
MMC shareholders to receive a 9.3% premium over the book value of MMC Common
Stock as of August 2, 1997, the latest date for which financial information was
available.
The foregoing discussion of the information and factors considered by the
MMC Board is not intended to be exhaustive, but is believed to include all of
the material factors considered by the MMC Board in connection with its
evaluation of the Merger. In view of the wide variety of factors considered and
the complexity of such matters, the MMC Board did not attempt to quantify, rank
or otherwise assign relative weights to the specific factors it considered in
reaching its decision. In addition, the MMC Board did not undertake to make any
specific determination as to whether any particular factor (or any aspect of any
particular factor) was favorable or unfavorable to its ultimate determination
but, rather, conducted a wide ranging discussion of the factors described above,
including asking questions of MMC's management and its legal and financial
advisers, following which the MMC Board reached a general consensus that the
Merger was in the best interests of MMC and its shareholders. Individual
members of the MMC Board may have felt differently about, and may have given
different weight to, different factors.
On balance, however, the discussions among the members of the MMC Board
evidenced the general view that the factors enumerated above were regarded as
supporting the MMC Board's determination to approve the Merger and the Merger
Agreement.
THE BOARD OF DIRECTORS OF MMC HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AS BEING IN THE BEST INTERESTS OF SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
GENERAL
Merrill Lynch has rendered a written opinion dated September 3, 1997 to the
MMC Board that the Exchange Ratio in the Merger is fair, from a financial point
of view, to the holders of the MMC Common Stock. THE FULL TEXT OF MERRILL
LYNCH'S OPINION IS ATTACHED HERETO AS EXHIBIT B. THE SHAREHOLDERS OF MMC ARE
URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, BY MERRILL LYNCH IN CONNECTION THEREWITH.
THE OPINION OF MERRILL LYNCH IS ADDRESSED TO THE MMC
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BOARD AND DOES NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY MMC TO
ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MMC
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR AS
TO ANY OTHER ACTION SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION WITH THE PROPOSED
MERGER.
Merrill Lynch is a globally recognized investment banking firm and, as part
of its investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
underwritings, distributions of securities and similar activities. Merrill
Lynch was selected by the MMC Board on the basis of its qualifications,
reputation and experience.
Merrill Lynch was engaged by the MMC Board as an independent contractor to
provide general financial advisory services with respect to the Merger. Merrill
Lynch was not authorized by MMC or the MMC Board to solicit, nor did it solicit,
third-party indications of interest for the acquisition of all or any part of
MMC. Except for the foregoing, no limitations were placed on Merrill Lynch by
MMC with respect to the investigation made or the procedures followed by Merrill
Lynch in preparing and rendering its opinion.
Merrill Lynch did not express any opinion as to what value the ADM Common
Stock will have when it is issued in the Merger or as to the price the ADM
Common Stock will trade at after the announcement of the proposed Merger or
after consummation of the Merger.
The opinion of Merrill Lynch is necessarily based on information available,
and financial, stock market, economic and other conditions and circumstances as
they existed and could be evaluated, as of the date of the opinion. Although
subsequent developments may affect the opinion, Merrill Lynch does not have any
obligation to update, revise or reaffirm the opinion.
Merrill Lynch will receive a fee from MMC for its services. See "--Fees
Payable to Merrill Lynch" below. In addition, MMC has agreed to indemnify
Merrill Lynch for certain liabilities arising out of its engagement. Merrill
Lynch has advised MMC that, in the ordinary course of its securities business,
it may actively trade debt or equity securities of ADM for its own account and
the accounts of its customers. Accordingly, Merrill Lynch from time-to-time may
hold a long or short position in ADM securities.
MATERIALS AND INFORMATION CONSIDERED WITH RESPECT TO THE MERGER
In connection with its opinion, Merrill Lynch, among other things:
(i) reviewed MMC's audited financial information for the five fiscal years ended
March 29, 1997 and MMC's unaudited financial information for the four-month
periods ending August 2, 1997 and 1996; (ii) reviewed ADM's Annual Reports to
Shareholders, Forms 10-K and related financial information for the five fiscal
years ended June 30, 1996 and ADM's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending September 30, 1996;
December 31, 1996; and March 31, 1997; (iii) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash flow,
assets, and prospects of MMC, furnished to Merrill Lynch by MMC; (iv) conducted
discussions with members of senior management of MMC concerning its respective
businesses and prospects; (v) reviewed the market prices and valuation multiples
for ADM Common Stock and compared them with those of certain publicly traded
companies that Merrill Lynch deemed relevant; (vi) reviewed the results of
operations of MMC and ADM and compared them with those of certain companies
which Merrill Lynch deemed to be relevant; (vii) compared the proposed financial
terms of the transactions contemplated by the Merger Agreement with the
financial terms of certain other mergers and acquisitions which Merrill Lynch
deemed to be relevant; (viii) reviewed
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a draft dated August 27, 1997 of the Merger Agreement; and (ix) reviewed such
other financial studies and analyses and performed such other investigations and
took into account such other matters as Merrill Lynch deemed necessary.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available and did not
assume any responsibility for independently verifying such information or
undertake an independent evaluation or appraisal of any of the assets or
liabilities of ADM. In addition, Merrill Lynch did not assume any
responsibility to conduct any physical inspection of the properties or
facilities of ADM. With respect to the financial forecast information furnished
to or discussed with Merrill Lynch by MMC, Merrill Lynch assumed that it had
been reasonably prepared and reflected the best currently available estimates
and judgment of the managements of MMC as to the expected future financial
performance of MMC. While Merrill Lynch did not receive any financial forecasts
from, or relating to ADM, Merrill Lynch has conducted discussions with
management of ADM limited to the possible existence of undisclosed conditions
that may affect the market prices at which ADM Common Stock has traded recently
and such management's views as to the accuracy and reasonableness of estimates
and reports with respect to the future financial and operating performance of
ADM published by analysts. Merrill Lynch's opinion is predicated on the Merger
qualifying as a tax-free reorganization for U.S. federal income tax purposes and
assumes that the final form of the Merger Agreement is substantially similar to
the last draft reviewed by it.
Set forth below is a brief summary setting forth the material analyses
presented by Merrill Lynch to the MMC Board in connection with its written
opinion as to the fairness, from a financial point of view, of the Exchange
Ratio on the date the MMC Board approved the Merger Agreement. Unless otherwise
specified, all ratios and other financial information described below are based
on financial data as of or for the 12 months ended August 2, 1997.
ANALYSIS OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES
Merrill Lynch compared certain financial and operating information and
ratios for MMC with the corresponding financial and operating information for
the following eleven publicly traded companies (the "Public Comparables") that
Merrill Lynch deemed to be reasonably comparable to MMC for purposes of this
analysis. The Public Comparables were American Rice, Inc.;
Archer-Daniels-Midland Company; ConAgra, Inc.; CPC International Inc.; DEKALB
Genetics Corporation; ERLY Industries Inc.; High Plains Corporation; Imperial
Holly Corporation; Midwest Grain Products, Inc.; Pioneer Hi-Bred International,
Inc.; and Riviana Foods Inc.
Merrill Lynch analyzed, among other things, the market price per share of
common stock of each Public Comparable as of August 26, 1997 and market
capitalization (defined to be the market value of the common stock plus
preferred equity at liquidation value, total debt and minority interests less
cash and marketable securities) as a multiple of average earnings before
interest, taxes, depreciation and amortization ("EBITDA") for the last three
fiscal years. Applying a range of multiples (which were derived from the Public
Comparable information analyzed by Merrill Lynch) of 9.0x to 11.0x to MMC's
three-year average EBITDA, Merrill Lynch calculated the implied equity value of
a share of MMC Common Stock to range between $2,940 and $3,796.
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COMPARABLE TRANSACTION ANALYSIS
Merrill Lynch reviewed certain publicly available information relating to
the following six transactions involving the acquisition of companies involved
in the agriculture business: Eridania Beghin-Say S.A.'s acquisition of American
Maize Products Co.; ADM's acquisition of Acatos & Hutcheson PLC; American Maize
Products Co.'s acquisition of American Fructose Corp.; Zapata Corp.'s sale to an
investor group; Tate & Lyle PLC's acquisition of Staley Continental; and
Imperial Sugar Co.'s acquisition of Holly Sugar Corporation (collectively, the
"Comparable Transactions"). For each such transaction, Merrill Lynch reviewed
the transaction value as a multiple of latest twelve months ("LTM") EBITDA of
the target company. Applying a range of multiples (which were derived from the
Comparable Transactions information analyzed by Merrill Lynch) of 4.2x to 9.6x
to MMC's three-year average EBITDA, Merrill Lynch calculated the implied equity
value per share of MMC Common Stock to range between $886 and $3,197.
No company or transaction used in the above analyses as a comparison is
identical to MMC, ADM or the contemplated transaction. Accordingly, an analysis
of the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors which could affect the value of the companies to
which they are being compared. Mathematical analysis is not, in itself, a
meaningful method of using comparable company data.
DISCOUNTED CASH FLOW ANALYSIS
Merrill Lynch performed a discounted cash flow analysis of MMC based
upon estimates of projected financial performance prepared by MMC's
management for the years 1998 to 2001, and estimated by Merrill Lynch for
2002. The material assumptions underlying the projected stream of cash flows
for the years ending March 31, 1998 though March 31, 2002 include: net sales
growth of -0.1%, 6.6%, 1.9%, 1.8% and 2.0%; projected gross margins of 17.5%,
19.4%, 19.6%, 19.7% and 19.7%; projected ratio of operating expenses to net
sales of 17.2% for each such years; projected depreciation and amortization
of $16.6 million, $17.4 million, $17.8 million, $18.2 million and $18.2
million; projected capital expenditures of $10.1 million, $12.3 million, $8.6
million, $8.8 million and $13.0 million; projected change in non-cash working
capital of $12.1 million, $19.9 million, -$7.2 million, -$6.1 million and
- -$4.6 million and an income tax rate of approximately 40%. Utilizing these
projections, Merrill Lynch calculated a range of present values for MMC based
upon the discounted net present value of the sum of (i) the projected stream
of after-tax unlevered free cash flows of MMC (defined as operating cash flow
available after working capital, capital spending and tax requirements) to
the year 2002 and (ii) the projected terminal value of MMC at that year based
upon a range of multiples of MMC's projected EBITDA in such year. Applying a
discount rate of 13.0% and multiples of terminal EBITDA ranging from 4.5x to
6.5x, Merrill Lynch calculated the implied equity value per share of MMC
Common Stock to range between $3,036 and $4,053 per share.
BREAKUP ANALYSIS
Merrill Lynch also analyzed the implied equity value of MMC on a breakup
analysis basis, as if the three businesses, Agri Sales, Inc., Quincy Soybean
Co., and MoorMan's, Inc., were each sold separately. Each of the three
companies was separately valued using the three valuation techniques discussed
above: analysis of selected publicly traded comparable companies, comparable
transactions analysis, and discounted cash flow analysis. An important
consideration to be noted in this analysis is that MMC has approximately $12
million of corporate overhead expenses for the year ending March 1997. MMC's
management estimated that each of the three businesses could possibly be
operated with only $1 million of corporate overhead expenses if owned by certain
strategic buyers. Therefore, for the purpose of this analysis only $1 million
of corporate overhead expenses were allocated to each of the three businesses,
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for a total of $3 million. It is also important to note that the sale of any
of the three businesses could produce a taxable event for MMC, thus leaving
less consideration to be distributed to the MMC shareholders.
Using an analysis of financial and operating information of selected
publicly traded companies that it deemed to be reasonably comparable to the
three businesses for this purpose, Merrill Lynch determined that the implied
enterprise values of Agri Sales, Inc., Quincy Soybean Company and MoorMan's,
Inc. were within ranges of $94.8 to $115.9 million, $100.1 to $122.3 million,
and $116.4 to $142.3 million, respectively. After adjusting for net debt,
Merrill Lynch determined that the implied equity value per share of MMC Common
Stock under this analysis was within a range of $4,771 to $6,034. In performing
this analysis, Merrill Lynch analyzed the market price per share of common stock
of each of the comparable companies as of August 26, 1997 and market
capitalization as a multiple of EBITDA for the last three fiscal years. Merrill
Lynch applied a range of multiples, derived from its public comparable
information, of 9.0x to 11.0x to the three-year average EBITDA for each of
Quincy Soybean Company and MoorMan's, Inc. and to the projected EBITDA for Agri
Sales, Inc. for the fiscal year ending March 1998, as Agri Sales, Inc. has not
been owned by MMC for three years.
Using an analysis of comparable transactions, Merrill Lynch determined that
the implied enterprise values of Agri Sales, Inc., Quincy Soybean Company and
MoorMan's, Inc. were within ranges of $44.3 to $101.2 million, $46.7 to $106.8
million, and $54.3 to $124.2 million, respectively. After adjusting for net
debt, Merrill Lynch determined that the implied equity value per share of MMC
Common Stock was within a range of $1,740 to $5,152. For each comparable
transaction, Merrill Lynch reviewed the transaction value as a multiple of LTM
EBITDA of the target company. Merrill Lynch applied a range of multiples,
derived from publicly available information relating to the comparable
transactions, of 4.2x to 9.6x to the three-year average EBITDA for each of
Quincy Soybean Company and MoorMan's, Inc. and to the projected EBITDA for Agri
Sales, Inc. for the fiscal year ending March 1998.
Using a discounted cash flow analysis, Merrill Lynch determined that the
implied enterprise values of Agri Sales, Inc., Quincy Soybean Company and
MoorMan's, Inc. were within ranges of $107.6 to $132.8 million, $96.8 to
$128.6 million, and $41.0 to $59.8 million, respectively. After adjusting
for net debt, Merrill Lynch determined that the implied equity value per
share of MMC Common Stock was within a range of $3,568 to $4,952. The
material assumptions supplied by MMC's management underlying the projected
streams of cash flows for each of the three companies for the years ending
March 31, 1998 though 2001, and estimated by Merrill Lynch for 2002,
included annual changes in net sales growth, gross margins, ratio of
operating expenses to net sales, depreciation and amortization, capital
expenditures and non-cash working capital, and an income tax rate of
approximately 40%.
The material assumptions supplied by MMC's management underlying the
projected stream of cash flows of Quincy Soybean Company for the years ending
March 31, 1998 through 2001, and estimated by Merrill Lynch for 2002 include:
net sales growth of -6.8%, 2.0%, 0.1%, 0.0% and 0.0%; projected gross margins
of 7.2%, 9.7%, 9.7%, 9.7% and 9.7%; projected ratio of operating expenses to
net sales of 7.4%, 7.5%, 7.5%, 7.6% and 7.6%; projected depreciation and
amortization of $8.5% million, $8.6% million, $8.8 million, $9.0 million and
$9.2 million; projected capital expenditures of $2.0 million, $4.0 million,
$4.0 million, $4.0 million and $4.0 million; projected change in non-cash
working capital of $0.3 million, $0.0 million, -$0.1 million, $0.0 million
and $0.0 million; and an income tax rate of approximately 40 percent. The
value of this business was obtained by applying a range of discount rates of
13.0% and 12.0% and multiples of terminal EBITDA ranging from 4.0x to 6.0x.
The material assumptions supplied by MMC's management underlying the
projected stream of cash flows of MoorMan's, Inc. for the years ending March
31, 1998 through 2001, and estimated by Merrill Lynch for 2002 include: net
sales growth of 0.8%, 4.2%, 2.9%, 2.4% and 2.4%; projected gross margins of
48.0%, 49.2%, 49.3%, 49.4% and 49.4%; projected ratio of operating expenses to
net sales of 45.2%, 46.9%, 46.3%, 45.8% and 45.8%; projected depreciation and
amortization of $4.7 million, $5.3 million, $5.3 million, $5.3 million and
$5.5 million; projected capital expenditures of $6.1 million, $6.0 million,
$2.5 million, $2.5 million and $3.0 million; projected change in non-cash
working capital of -$5.6 million, $1.9 million, -$1.4 million, -$1.5 million
and -$1.6 million; and an income tax rate of approximately 40 percent. The
value of this business was obtained by applying a range of discount rates of
13.0% and 12.0% and multiples of terminal EBITDA ranging from 3.5x to 5.5x.
The material assumptions supplied by MMC's management underlying the
projected stream of cash flows of Agri Sales, Inc. for the years ending March
31, 1998 through 2001, and estimated by Merrill Lynch for 2002 include: net
sales growth of 24.1%, 24.2%, 5.6%, 5.6% and 5.6%; projected gross margins of
16.0%, 16.5%, 16.7%, 16.8% and 16.8%; projected ratio of operating expenses
to net sales of 12.2%, 11.0%, 10.9%, 10.9% and 10.9%; projected depreciation
and amortization of $3.4 million, $3.6 million, $3.7 million, $3.8 million
and $4.1 million; projected capital expenditures of $2.0 million, $2.3
million, $2.1 million, $2.3 million and $2.5 million; projected change in
non-cash working capital of $15.4 million, $18.0 million, -$1.9 million,
- -$1.4 million and -$4.4 million; and an income tax rate of approximately 40
percent. The value of this business was obtained by applying a range of
discount rates of 13.0% and 12.0% and multiples of terminal EBITDA ranging
from 5.0x to 7.0x.
ADM COMMON STOCK TRADING HISTORY
Merrill Lynch also reviewed the performance of the closing per share market
price and trading volume of ADM Common Stock for the period August 26, 1994 to
August 26, 1997. The analysis indicated that, for the latest year, the market
price per share of ADM Common Stock ranged from $16.42 to $22.67 and that for
the latest three years, the market price per share of ADM ranged from $13.61 to
$22.67.
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COMPARISON OF ADM TO SELECTED COMPARABLE PUBLICLY TRADED COMPANIES
Merrill Lynch compared certain financial and operating information and
ratios for ADM with the corresponding financial and operating information for
the following ten Public Comparables that Merrill Lynch deemed to be reasonably
comparable to ADM for purpose of this analysis. The Public Comparables were
American Rice, Inc.; ConAgra, Inc.; CPC International Inc.; DEKALB Genetics
Corporation; ERLY Industries Inc.; High Plains Corporation; Imperial Holly
Corporation; Midwest Grain Products, Inc.; Pioneer Hi-Bred International, Inc.;
and Riviana Foods Inc. Earnings estimates for the Public Comparables were based
on IBES and First Call data. IBES and First Call are on-line data services that
monitor and publish a compilation of earnings estimates produced by selected
research analysts on certain public companies.
Merrill Lynch analyzed, among other things, the market price per share of
common stock of each Public Comparable and ADM as of August 26, 1997 (the
"August 26, 1997 Closing Price") as a multiple of LTM earnings per share
("EPS"), and 1997 and 1998 projected EPS, and market capitalization (defined to
be the market value of the common stock plus preferred equity at liquidation
value, total debt and minority interests less cash and marketable securities) as
a multiple of EBITDA and earnings before interest and taxes ("EBIT"). Merrill
Lynch calculated the range of multiples for the Public Comparables as follows:
August 26, 1997 Closing Price to LTM EPS resulted in a range of 5.8x to 44.7x
(with ADM at 30.7x); August 26, 1997 Closing Price to 1997 and 1998 projected
EPS resulted in a range of 12.5x to 47.6x (with ADM at 17.2x), and 8.2x to
38.7x, respectively (with ADM at 14.1x); and August 26, 1997 Closing Price to
EBITDA and EBIT resulted in a range of 5.3x to 14.5x (with ADM at 11.3x), and
6.6x to 17.6x, respectively (with ADM at 16.9x). Merrill Lynch compared ADM's
multiples to the multiples of the Public Comparables and determined that ADM's
multiples were reasonable in comparison to the multiples of the Public
Comparables.
LIMITATIONS ON OPINION
The information above summarizes the material analyses prepared by Merrill
Lynch in connection with its opinion. This summary does not purport to be a
complete description of the analyses performed by Merrill Lynch in connection
with the rendering of its fairness opinion. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Merrill Lynch believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, or selecting part or all of the above summary,
without considering all factors and analyses, would create an incomplete view of
the process underlying the analyses set forth in the Merrill Lynch presentation
and opinion. In arriving at its opinion Merrill Lynch did not quantify the
relative significance of the various analyses it performed. The range in
calculations resulting from any particular analysis described above should not
be taken to be Merrill Lynch's view of the actual value of MMC, which may be
significantly more or less favorable than as set forth therein. The fact that
any specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given more weight than any of the other analyses
referred to in the summary above.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of MMC or ADM. These
analyses were prepared solely as part of Merrill Lynch's analysis of the
fairness of the Exchange Ratio in the Merger, from a financial point of view, to
the shareholders of MMC and were provided to the MMC Board in connection with
the delivery of Merrill Lynch's opinion. Because any estimates contained in the
analyses performed by Merrill Lynch are inherently subject to uncertainty, the
opinion of Merrill Lynch clearly sets forth the assumptions Merrill Lynch relied
upon in making the
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estimates. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold or the prices at which any
securities may be traded in the future.
As described above, Merrill Lynch's opinion and presentation to the MMC
Board is just one of the many factors taken into consideration by the MMC Board.
FEES PAYABLE TO MERRILL LYNCH
MMC's engagement of Merrill Lynch provides for a fee of $50,000 payable
upon execution of the Merrill Lynch engagement letter and an additional fee of
$250,000 payable upon delivery of its opinion to the MMC Board. An additional
fee of $50,000 is payable if Merrill Lynch is called upon to perform additional
analyses with respect to the Merger. Merrill Lynch has delivered an invoice to
MMC for $300,000 in connection with its delivery of the fairness opinion. If
Merrill Lynch is requested to perform and completes additional analysis relative
to an offer from ADM, but does not advise or participate in the negotiation of
the offer, Merrill Lynch will be entitled to an additional fee of $50,000. If
the Merger is not consummated with ADM pursuant to the Merger Agreement and
Merrill Lynch is asked to assist MMC in identifying purchasers or in analyzing,
structuring, negotiating and effecting proposed business combinations, and if
within the period of Merrill Lynch's engagement under the agreement or within
one year thereafter (a) a business combination is consummated with the purchaser
(i) that Merrill Lynch identified, (ii) as to which Merrill Lynch advised MMC or
(iii) with which MMC or Merrill Lynch had discussions regarding a business
combination, or (b) MMC enters into an agreement with any such purchaser that
subsequently results in a business combination, Merrill Lynch will be entitled
to an additional fee of an amount equal to one percent of the aggregate purchase
price in such business combination in cash upon consummation of such business
combination. However, if the purchaser is ADM, which already had discussions
with MMC prior to the date of the letter agreement, the additional fee would be
in an amount equal to 0.65 percent of the aggregate price paid in such business
combination. Any fees previously paid to Merrill Lynch for the preparation of
the fairness opinion and any subsequent work would be deducted from any fee to
which Merrill Lynch becomes entitled pursuant to its involvement. MMC has also
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses,
including reasonable attorneys' fees and disbursements, and to indemnify Merrill
Lynch against certain liabilities, including certain liabilities under the
federal securities laws.
Merrill Lynch has been engaged from time-to-time to underwrite debt and
equity securities of ADM and to provide other financial services to ADM. All
such relationships with ADM have been in the ordinary course of business of
Merrill Lynch, and fees paid in connection therewith were negotiated on an
arm's-length basis.
THE MERGER
SET FORTH BELOW IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT,
A COMPLETE COPY OF WHICH IS ATTACHED AS EXHIBIT A TO THIS PROXY
STATEMENT/PROSPECTUS. ALL SHAREHOLDERS ARE URGED TO READ THE MERGER AGREEMENT
IN ITS ENTIRETY.
GENERAL
Under the terms of the Merger Agreement, upon consummation of the Merger,
each share of MMC Common Stock outstanding at the Effective Time will be
converted, without any action on the part of the holder thereof, into the right
to receive a number (equal to the Exchange Ratio) of shares of ADM Common
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Stock, rounded to the nearest whole share. The Exchange Ratio is calculated by
dividing the Base Value ($5,400) by the Average Price. The Closing is expected
to occur three days after the vote of MMC's shareholders at the Special Meeting.
The Merger Agreement provides for adjustments to the Exchange Ratio if the
shareholders' equity of MMC, calculated under generally accepted accounting
principles, on the date 15 days before the Closing Date is less than $265
million. In that case, the Exchange Ratio will be recalculated by reducing the
Base Value by an amount equal to the quotient of (1) the difference between $265
million and the actual MMC shareholders' equity on that date divided by (2)
54,770 (the number of outstanding shares of MMC Common Stock); provided,
however, that the Base Value will not be lower than $5,126.13. The
shareholders' equity of MMC has exceeded $265 million since fiscal year 1989.
The management of MMC believes that the shareholders' equity of MMC will exceed
$265 million at the measurement date. The shareholders' equity of MMC was
approximately $268.9 million at November 1, 1997.
EFFECTIVE TIME AND EFFECT OF THE MERGER
If the Merger Agreement and the Merger are approved and adopted by the
requisite vote of the MMC shareholders and all other conditions to the
obligations of the parties to consummate the Merger are satisfied or waived, the
Merger will become effective upon the appropriate filing of a Certificate of
Merger with the Delaware Secretary of State and the issuance of a Certificate of
Merger by the Illinois Secretary of State. The Effective Time is expected to
occur on December 30, 1997.
At the Effective Time, ADMAC will be merged with and into MMC, with no
change in MMC's powers and obligations. The separate corporate existence of
ADMAC will terminate upon consummation of the Merger, and MMC, as the surviving
corporation, will continue as a wholly owned subsidiary of ADM. Under the
Merger Agreement each then-outstanding share of MMC Common Stock will be
converted automatically into a number of shares of ADM Common Stock equal to the
Exchange Ratio. Thereafter, holders of certificates formerly representing
outstanding shares of MMC Common Stock at the Effective Time will be entitled to
surrender these certificates to Harris Trust and Savings Bank, ADM's stock
transfer agent, which will act as the exchange agent for purposes of exchanging
these certificates for certificates representing shares of ADM Common Stock.
The Exchange Ratio is subject to appropriate adjustment to reflect the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into ADM Common Stock or MMC Common
Stock), exchange of shares, reclassification, reorganization, recapitalization,
or other similar change with respect to the ADM Common Stock or the MMC Common
Stock prior to the Effective Time.
EXCHANGE OF SHARES
Each record holder at the Effective Time of a certificate or certificates
previously representing shares of outstanding MMC Common Stock will be entitled,
upon the surrender of the certificate or certificates to the Exchange Agent,
promptly to receive in exchange therefor a certificate or certificates
representing the number of whole shares of ADM Common Stock into which the
shares of MMC Common Stock previously represented by the certificate or
certificates so surrendered have been converted pursuant to the Merger
Agreement. After the Effective Time, until surrendered, each certificate
previously representing shares of MMC Common Stock will be deemed for all
corporate purposes, other than payment of dividends, to evidence the ownership
of the number of whole shares of ADM Common Stock into which the shares of MMC
Common Stock have been converted. Until any such certificate has been
surrendered, the holder of that certificate will not be entitled to receive
payment of any dividends on those shares of
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ADM Common Stock payable to the holder thereof after the Effective Time. Upon
the surrender of a certificate previously representing shares of MMC Common
Stock, the holder thereof will receive a certificate representing the number of
whole shares of ADM Common Stock to which the holder is entitled and the amount
of any dividends or other distributions that were payable to holders of record
of ADM Common Stock on or after the Effective Time with respect to those shares
of ADM Common Stock, without interest. Any dividends payable to holders of
record of ADM Common Stock as of any record date prior to the Effective Time
will not be payable to holders of certificates previously representing MMC
Common Stock.
Detailed instructions and transmittal materials will be mailed to MMC
shareholders immediately after the Effective Time as to the method of exchanging
certificates formerly representing shares of MMC Common Stock for certificates
representing shares of ADM Common Stock. HOLDERS OF CERTIFICATES REPRESENTING
SHARES OF MMC COMMON STOCK SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE
UNTIL THEY RECEIVE THE APPROPRIATE TRANSMITTAL MATERIALS.
The shareholders of ADM will continue to hold their shares of capital stock
of ADM without any change in number, designation, terms or rights.
EMPLOYEE BENEFIT PLANS
Under the Merger Agreement, ADM has agreed to honor all benefits accrued
under any employee benefit plan, policy or agreement of MMC in accordance with
respective terms of such plans and to the extent required by law and,
specifically, to continue to provide benefits in accordance with the terms of
the MMC Retired Employees' Medical Plan or a plan with benefits substantially
similar to those provided to similarly situated persons under ADM's relevant
plan for retired employees. ADM has agreed to provide all employees of MMC who
remain employees after the Merger, credit for all service with MMC for
eligibility and for vesting purposes for all employee benefits of ADM and shall
offer such employees participation in all employee benefits of ADM offered to
similarly situated employees of ADM. To the extent any such ADM benefit plans
provide medical or dental welfare benefits, such benefit plans shall waive any
pre-existing condition exclusions and waiting periods for plan participation
unless the MMC employee was subject to one or more pre-existing condition
exclusions in the comparable MMC plan and shall provide that any expenses
incurred on or before the Merger shall be taken into account under the benefit
plans of ADM for purpose of satisfying applicable deductible, co-insurance and
maximum out-of-pocket provisions. Furthermore, for a period of nine months
after the Merger, ADM shall make a severance payment (in accordance with the
policy maintained by MMC prior to the Merger) to any MMC employee who is
terminated without cause by ADM within such nine-month period. In connection
with the Merger, ADM has made no commitments with respect to the continued
employment of any employee of ADM or MMC.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of ADM and MMC to consummate the Merger are subject
to (i) the requisite approval of the shareholders of MMC with respect to the
Merger Agreement and the Merger, (ii) the expiration or termination of the
waiting period applicable to the consummation of the Merger under the HSR Act
(the HSR Act waiting period terminated on October 19, 1997), (iii) the absence
of any judicial order preventing or making illegal the consummation of the
Merger, (iv) the effectiveness of the Registration Statement (of which this
Proxy Statement/Prospectus constitutes a part) and all requisite post-
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effective amendments thereto and the absence of any stop-orders suspending the
effectiveness thereof or proceedings initiated or, to the knowledge of the
parties, threatened by the SEC for such purpose, (v) the listing (subject to
official notice of issuance) on the NYSE of the shares of ADM Common Stock
issuable in the Merger, (vi) the receipt of all consents, authorizations, orders
and approvals of any governmental authority or other regulatory body (without
material conditions) that are required in connection with the consummation of
the Merger and related transactions, the failure of which to obtain would
prevent the consummation of the Merger or would reasonably be expected to result
in a material adverse change in the financial condition, results of operations
or businesses of MMC on a consolidated basis after the Effective Time, and (vii)
ADM shall have received all state securities or blue sky permits and other
authorizations necessary to issue the shares of ADM Common Stock in exchange for
the shares of MMC Common Stock and to consummate the Merger.
Additional conditions to ADM's obligation to consummate the Merger include
(i) the accuracy in all material respects, as of the date of the Merger
Agreement and the Closing Date, of the representations and warranties of MMC and
the compliance with and performance of, in all material respects, all of the
terms, covenants and conditions of the Merger Agreement to be complied with and
performed by MMC prior to the consummation of the Merger, (ii) the receipt of an
opinion of Schmiedeskamp, Robertson, Neu & Mitchell, counsel to MMC, (iii) the
receipt of all material authorizations, consents, waivers, and approvals from
parties to contracts or other arrangements to which MMC is a party that are
necessary in connection with the consummation of the Merger and related
transactions, (iv) the demand of statutory dissenters' rights by holders of no
more than ten percent of the outstanding MMC Common Stock, and (v) the receipt
from MMC's Chief Financial Officer of a certificate stating that MMC's
shareholders' equity as of the date 15 days prior to the Closing Date is in
excess of $250 million.
Additional conditions to MMC's obligations to consummate the Merger include
(i) the accuracy in all material respects, as of the date of the Merger
Agreement and the Closing Date, of the representations and warranties of ADM and
the compliance with and performance of, in all material respects, all of the
terms, covenants and conditions of the Merger Agreement to be complied with and
performed by ADM prior to the consummation of the Merger, (ii) on the Closing
Date, the fairness opinion from Merrill Lynch shall not have been withdrawn,
modified or amended, (iii) the receipt of an opinion of David J. Smith, General
Counsel of ADM, (iv) the receipt of a tax opinion of Winston & Strawn, special
counsel to MMC, in form and substance reasonably satisfactory to the MMC Board,
to the effect that the Merger will be treated for federal income tax purposes as
a tax-free reorganization under Section 368(a) of the Code, and (v) the receipt
of all material authorizations, consents, waivers, and approvals from parties to
contracts or other arrangements to which MMC is a party that are necessary in
connection with the consummation of the Merger and related transactions.
Under the Merger Agreement, ADM has no obligation to consummate the Merger
if any condition to its obligation to consummate the Merger is not satisfied on
or prior to the Closing Date and MMC has no obligation to consummate the Merger
if any condition to its obligation to consummate the Merger is not satisfied on
or prior to the Closing Date. Any of the conditions to the obligation of ADM or
MMC to consummate the Merger may be waived or modified by the party that is, or
whose shareholders are, entitled to the benefits thereof. See "The
Merger--Amendment, Terms and Waiver." Neither ADM nor MMC has any present
intention to waive or modify any condition that it deems material. Obtaining
the affirmative vote of more than three-fourths of the outstanding shares of MMC
Common Stock to approve, for tax purposes, certain payments under the
Change-of-Control Arrangements is not a condition to consummation of the Merger.
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Reference is made to Article VII of the Merger Agreement for a complete
statement of the conditions precedent to the obligations of the respective
parties to consummate the Merger.
REPRESENTATIONS, WARRANTIES AND COVENANTS
In the Merger Agreement, ADM and MMC have made various representations,
warranties, covenants and agreements, relating to, among other things, their
respective businesses and financial condition, the accuracy of various filings
with the SEC, the satisfaction of certain legal requirements for the Merger and
the absence of certain material litigation. The representations and warranties
of each of the parties to the Merger Agreement expire upon consummation of the
Merger.
AMENDMENT, TERMINATION AND WAIVER
The terms of the Merger Agreement may be amended or supplemented at any
time by written agreement of ADM, ADMAC and MMC, but after the Merger Agreement
has been approved and adopted by the shareholders of MMC, it may not be amended
to alter the number of shares of ADM Common Stock to be exchanged for each share
of MMC Common Stock or in any other way that would have a material adverse
affect on the rights of MMC's shareholders, without the further approval of such
shareholders. Any provision of the Merger Agreement may be waived at any time
by the party that is, or whose shareholders are, entitled to the benefits
thereof.
Notwithstanding prior approval of the Merger Agreement and the Merger by
the shareholders of MMC, the Merger Agreement may be terminated and the Merger
and other transactions contemplated by it may be abandoned at any time prior to
the Effective Time (i) by the mutual written consent of ADM and MMC, (ii) by
either ADM or MMC, if the Merger has not been consummated on or before February
28, 1998, (iii) by either ADM or MMC, if the Merger Agreement and the Merger has
been submitted to a vote of the shareholders of MMC at the Special Meeting, or
any adjournments thereof, and was not approved by the requisite vote, (iv) by
either ADM or MMC, if a condition to the terminating party's obligation to
consummate the Merger cannot be met on the Closing Date and is not waived or
cured within the prescribed time period, (v) by either ADM or MMC, if a final
unappealable order to restrain, enjoin or otherwise prevent, the consummation of
the Merger Agreement or the transactions contemplated in connection therewith,
has been entered by a court of competent jurisdiction; (vi) by either ADM or MMC
upon a material breach by the other party of any of its representations or
warranties or covenants or agreements set forth in the Merger Agreement, which
breach is not cured within the prescribed time period, (vii) by ADM, if ADM
determines prior to the Closing Date that it is reasonably possible that the
manufacture, sale and shipment by MMC of products, including soybean meal,
containing dioxin has had or will have a material adverse effect on MMC, or
(viii) by either ADM or MMC, if the MMC Board withdraws or modifies its
recommendation that shareholders approve the Merger. No party is obligated to
pay any break-up fee if the Merger Agreement is terminated.
EXPENSES
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring the
costs and expenses.
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STOCK EXCHANGE LISTING
ADM Common Stock is listed on the NYSE, and it is a condition to
consummation of the Merger that the additional shares of ADM Common Stock
issuable in the Merger have been approved for listing on the NYSE, subject to
official notice of issuance.
CERTAIN LEGAL MATTERS
Certain acquisition transactions such as the Merger are reviewed by the
Antitrust Division of the Department of Justice or the Federal Trade Commission
to determine whether they comply with applicable antitrust laws. Under the
provisions of the HSR Act, the Merger may not be consummated until certain
information has been furnished to the Antitrust Division and the FTC and certain
waiting period requirements of the HSR Act have been satisfied. ADM and MMC
filed information with the Antitrust Division and the FTC under the HSR Act on
September 19, 1997, and the waiting period under the HSR Act terminated on
October 19, 1997.
Consummation of the Merger is conditioned upon, among other things, the
absence of any judicial, governmental, regulatory or administrative order
preventing or making illegal the consummation of the Merger. In addition,
consummation of the Merger is conditioned upon receipt of all consents,
authorizations, orders and approvals of any governmental authority or other
regulatory body (without material conditions) that are required in connection
with the consummation of the Merger and related transactions, the failure of
which to obtain would prevent the consummation of the Merger or would reasonably
be expected to result in a material adverse change in the financial condition,
results of operations or businesses of either MMC on a consolidated basis or ADM
on a consolidated basis. The parties believe that the remaining required
regulatory approvals are likely to be secured without the imposition of any
conditions that would be materially burdensome. See "The Merger--Conditions to
Consummation of the Merger."
CONDUCT OF BUSINESS PRIOR TO THE MERGER
The Merger Agreement provides that, prior to the Effective Time, MMC will
conduct its business only in the ordinary course of business and consistent with
prior practice, and generally provides for certain restrictions with respect to
MMC on, among other things, the issuance or other disposition, encumbrance or
repurchase of capital stock of MMC or its subsidiaries, certain sales of assets
of MMC or its subsidiaries, the declaration or payment of dividends on MMC
Common Stock, the amendment of the corporate charters or bylaws of MMC or its
subsidiaries, the acquisition of substantial assets, the incurrence of certain
indebtedness and the issuance of debt securities, the making of certain capital
expenditures, the granting of certain employee benefits or the adoption or
amendment of employee benefit plans, or certain actions relating to the entering
into, amendment in any material respect of, or termination or waiver of any
material right under, certain contracts or arrangements material to MMC.
The Merger Agreement further provides that, during the period in which the
Average Price is calculated until the Effective Time, ADM will conduct its
business only in, and will not take any material action except in, the ordinary
course of business and consistent with past practices, and generally provides
for certain restrictions with respect to ADM on, among other things, the
issuance or other disposition, encumbrance or repurchase of capital stock,
certain sales of assets of ADM or its subsidiaries, certain acquisitions of
substantial assets, the incurrence of indebtedness and the issuance of debt
securities, the making of certain capital expenditures, the amendment of the ADM
Certificate or Bylaws or those of any
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of its subsidiaries, the declaration or payment of dividends (except for ADM's
regular quarterly cash dividend on its outstanding Common Stock), or certain
actions relating to the entering into, amendment in any material respect of, or
termination or waiver of any material right under, certain contracts and
arrangements material to ADM.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
Under the Merger Agreement, MMC has agreed that it will not, directly or
indirectly, through any director, officer, employee, agent or representative,
solicit, initiate or intentionally encourage submission of any inquiries,
proposals or offers from any person or entity (other than ADM) relating to any
merger, consolidation, share exchange, purchase or other acquisition of all or
(other than in the ordinary course of business) any substantial portion of the
assets of or any substantial equity interest in MMC or its subsidiaries or any
business combination with MMC or its subsidiaries or participate in any
discussions or negotiations regarding, or furnish to any other person any
information with respect to, MMC or its subsidiaries or afford access to the
properties, books or records of MMC for the purposes of, or cooperate with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
other person to seek or effect an Acquisition Proposal. MMC may furnish
information relating to MMC or its subsidiaries or afford access to the
properties, books or records of MMC to, or enter into discussions or
negotiations with, a third party interested in an Acquisition Proposal if (i)
the MMC Board, after consultation with its financial adviser, determines in good
faith such party's proposal is bona fide and superior to the Merger, (ii) upon
advice of counsel, the MMC Board determines in good faith that such action is
necessary for the MMC Board to comply with its fiduciary duties to MMC's
shareholders under Illinois Law, and (iii) the third party has signed and
delivered to MMC a confidentiality agreement. Following receipt of such a bona
fide offer, MMC has agreed to promptly notify ADM of any inquiry or proposal
made with respect to an Acquisition Proposal. Upon this notice, ADM will have
the right to submit a counter offer to the MMC Board. If the MMC Board
determines that ADM's counter offer is at least equal to the third-party offer,
then MMC will be required to accept ADM's counter offer.
If the MMC Board determines that the ADM counter-proposal does not equal or
exceed the third party offer, then the MMC Board shall provide ADM notice of any
deficiencies in the ADM counter-proposal and ADM shall have an opportunity to
submit a modified proposal. The MMC Board shall then be obligated to accept the
modified ADM proposal or provide written notice to ADM of any continuing
deficiencies. ADM shall then have the opportunity to modify further its
proposal. If ADM elects not to modify its proposal to match the third party
offer within such time periods, then MMC will be free to accept and proceed with
the third party offer. If ADM elects not to match the terms of the third party
offer and the third party offer is modified in any material respect, then ADM's
rights to submit counter-proposals under the Merger Agreement shall apply anew.
INDEMNIFICATION AND INSURANCE
ADM has agreed that from and after the Effective Time the indemnification
obligations of MMC set forth in the MMC Articles and Bylaws and the
organizational documents of any of its subsidiaries, as in effect on the date of
the Merger Agreement, as to any matter arising out of any action or omission of
any person described in those indemnification provisions before the Effective
Time (including any claim based upon or arising out of the Merger, this Proxy
Statement/Prospectus or any of the transactions contemplated by the Merger
Agreement) will continue, and those persons will be entitled to the full
benefits of such provisions as if the provisions continued in full force and
effect after the Effective Time. ADM further agrees to become directly liable
for such obligations and liabilities with respect to indemnification and
reimbursement of such persons to the extent of the difference between MMC's
shareholders' equity as of
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the date any such claim arises after the Closing Date and the shareholders'
equity of MMC on the Closing Date. In addition, ADM has agreed to provide
directors' and officers' liability insurance coverage for the benefit of MMC's
present or former directors and officers on substantially the same terms as that
provided MMC's directors and officers currently for a period of six years after
the Closing Date. See "The Merger--Conflicts of Interest of Certain Persons
in the Merger."
CONFLICTS OF INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the MMC Board's recommendation of the Merger, MMC
shareholders should be aware that certain directors and officers of MMC have
interests in the Merger different from the interests of other MMC shareholders.
The MMC Board was informed of the interests described herein prior to approving
the Merger Agreement and the Merger.
MMC has maintained in recent years various compensatory arrangements with
members of MMC's senior management, under which such persons would receive
payments and other benefits upon a change of control of MMC, provided certain
other conditions are fulfilled. These Change-of-Control Arrangements include
change-of-control agreements, termination agreements, agreements entered into
pursuant to the MMC Restricted Stock Unit Plan (the "Unit Plan"), the MMC
Restricted Stock Unit Plan for Outside Directors (the "Directors Plan") and
certain retirement benefits. If consummated, the Merger would constitute a
change of control of MMC under some of these arrangements. The following
discussion describes the Change-of-Control Arrangements between MMC and its
executive officers and directors and includes reasonable estimates of the
amounts that may become payable to such executive officers and directors. MMC
has also maintained similar arrangements with certain officers who are not
executive officers. The terms and conditions of those other arrangements are
substantially similar to those described below. ADM has made no commitment with
respect to the continued employment of any executive officer or other employee.
CHANGE-OF-CONTROL AGREEMENTS; TERMINATION AGREEMENTS. In the best
interests of MMC and its shareholders, to attract and retain highly qualified
individuals for MMC's management team and to assure that MMC would have the
continued dedication of its management team notwithstanding the possibility,
threat or occurrence of a change of control, MMC has maintained
change-of-control agreements (the "Change-of-Control Agreements") and/or
termination agreements (the "Termination Agreements") with certain officers.
These officers are entitled to receive the same type of benefit under one but
not both such agreements, as described below.
Presently, Change-of-Control Agreements are in effect for the following
executive officers: Thomas M. McKenna, Alfred L. Williams, Michael L. Foster,
Larry H. Horn, Terry W. Lunt, Alvin L. Melliere and Wendell R. Schwarz. Each
Change-of-Control Agreement is substantially in the same form and provides that
in the event of a change of control of MMC, if either the executive's
employment is terminated other than for "cause" or the executive terminates his
or her employment for "good reason," certain benefits will be paid.
Specifically, MMC will provide (i) payment of a sum equal to the
executive's base salary for a certain month period (set forth below),
(ii) payment of an amount of cash equal to a certain multiple (set forth below)
of the average incentive earned over the prior three-year period,
(iii) immediate vesting of all previously unvested cash awards and stock
incentives, subject to the Unit Plan and the MMC Long-Term Incentive Plan, (iv)
provision to the executive and his eligible dependents of medical, disability,
dental and life insurance coverage (to the extent such coverage is in effect
immediately prior to the change of control),
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for a certain month period (set forth below), (v) immediate granting to the
executive of a certain number of months (set forth below) of service and age
credit for determining benefit amounts and benefit entitlement and any early
retirement reductions with respect to all applicable MMC retirement plan
benefits, and in addition, no early retirement reductions will be imposed on the
retirement benefits if the executive's age at termination equals or exceeds 55,
and (vi) reimbursement to the executive of reasonable costs incurred by the
executive for out-placement services in the 24-month period following
termination of the executive's employment in connection with a change of
control.
The periods for which benefits would be payable pursuant to clauses (i),
(iv) and (v) above are as follows: Mr. McKenna, 36 months; Messrs. Foster, Horn
and Schwarz, 24 months; and Messrs. Lunt, Melliere and Williams, 12 months. The
multiples of the annual incentive of the executives pursuant to clause (ii)
above are as follows: Mr. McKenna, three; Messrs. Foster and Horn, two;
Messrs. Lunt, Melliere and Williams, one. Mr. Schwarz's Change-of-Control
Agreement provides that he would receive a fixed cash award in lieu of a
multiple of his annual incentive bonus. (The Termination Agreements for
Mr. McKenna and Mr. Williams provide the same types of benefits as those
described in clauses (i) and (ii) of the Change-of-Control Agreements. The
effect of this overlap is discussed below).
The cash payments set forth above shall be made in a lump sum unless the
executive elects to have all payments made in accordance with MMC's regular
salary and benefit payment practices. If an executive becomes entitled to
receive the foregoing benefits upon a change of control and termination, the
executive has agreed for a period of 12 months following termination of the
executive's employment not to compete with MMC.
Each Change-of-Control Agreement defines "good reason" and "cause" with
respect to termination of an executive's employment. Among other circumstances,
"good reason" is defined as the removal of the executive from the position he
held immediately prior to the change of control, the assignment to the executive
without his express consent of duties that the executive reasonably considers to
be inconsistent with those performed by the executive immediately prior to the
change of control or a substantial alteration in the nature or status of the
executive's responsibilities, a failure by MMC to pay the executive his annual
base salary, a reduction by MMC in the executive's annual base salary as in
effect on the date of the Change-of-Control Agreement or as the same may be
increased from time to time, MMC requiring the executive to be based at other
than MMC's principal place of business immediately prior to the change of
control, or any material reduction by MMC of the benefits enjoyed by the
executive under any of MMC's executive benefit plans.
"Cause" is defined in the Change-of-Control Agreements (and the Termination
Agreements) to include, among other circumstances, the willful and continued
failure of the executive to substantially perform his duties with MMC, the
willful and continued engaging by the executive in conduct that is demonstrably
and materially injurious to MMC, the willful breach of his fiduciary duty to
MMC, or commission by the executive of a felony, fraud, misappropriation or
embezzlement or a significant act of dishonesty or deceit in the performance of
his duties.
Each Change-of-Control Agreement was amended as of August 1, 1997, to
clarify the original intent that, to the extent a benefit provided under the
Change-of-Control Agreement is the same kind of benefit provided by any other
plan or agreement, such as a Termination Agreement, the executive will receive
the greater of the two benefits, but not both benefits.
MMC entered into Termination Agreements with Mr. McKenna and Mr. Williams
that provide that the executive should be entitled to receive certain benefits
if the executive is terminated under certain
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circumstances. The Termination Agreements are substantially similar and provide
that in the event that the employment of the executive is terminated without
just cause, the executive shall be entitled to receive benefits under the
following terms and conditions: (i) the executive shall continue to receive his
base salary for a period of 24 months plus his incentive bonus based on the
immediate past two years average; (ii) if the executive is terminated prior to
fulfilling two years of service with MMC, the incentive bonus will be based on
the past year, or annualized, if the executive has not completed a full year of
employment; and (iii) all such benefits shall be subject to statutory
deductions.
Under the Change-of-Control Agreements or the Termination Agreements, if a
change of control and a termination of employment occur, Mr. McKenna and Mr.
Williams would be entitled to receive the greater of each type of benefit
specified under both agreements. Specifically, Mr. McKenna would receive, among
other benefits, 36 months of his base salary and three times his average
incentive earned over the prior three-year period. Mr. Williams would receive,
among other benefits, 24 months of his base salary and two times his annualized
incentive earned to date.
Under the Change-of-Control Agreements or Termination Agreements (under
whichever the individual benefits would be greater), if a change of control and
a termination of employment had taken place on October 1, 1997, Messrs. McKenna,
Williams, Foster, Horn, Lunt, Melliere and Schwarz would have been entitled to
receive benefits estimated, before taxes, at approximately $1,756,000, $880,000,
$484,000, $514,000, $146,000, $204,000 and $1,049,000, respectively. The
foregoing amounts do not reflect the benefits payable under the Unit Plan and
certain retirement benefits, which, while addressed in the Change-of-Control
Agreements, are discussed below. Furthermore, the actual payments made under
the Change-of-Control Agreements and Termination Agreements will be determined
at the time of the change of control and termination using the actual dates
thereof.
Due to a provision in the Change-of-Control Agreements that, for
calculation purposes, takes into account the tax consequences to the executives
of Sections 280G and 4999 of the Code (as discussed below), the payment set
forth above for Mr. Foster has been reduced by approximately $35,000. If MMC's
shareholders approve the proposal described under Item 2 of this Proxy
Statement/Prospectus with respect to the tax consequences of Sections 280G and
4999 of the Code on payments under the Change-of-Control Arrangements, such
approval will have the effect, among others, of restoring the foregoing amount
to Mr. Foster's payment under his Change-of-Control Agreement.
UNIT PLAN. MMC maintains the Unit Plan by which MMC has granted to certain
officers of MMC and its subsidiaries units equal to an amount of the fair market
value of the MMC Common Stock based on the annual share valuation prepared for
the MMC Employees' Profit Sharing Plan or the sale price in the event of a
change of control. During the course of their employment, MMC has granted such
units to, and entered into Restricted Stock Unit Agreements with, certain
officers including the following executive officers: Messrs. McKenna, Williams,
Foster, Horn, Lunt and Melliere (the "Unit Agreements") .
The executive is entitled to receive an amount equal to the fair market
value of one unit multiplied by the number of units granted to such executive
reduced by the amount of any federal, state or local tax withholding after
either the earlier of a change of control with respect to MMC or February 16,
1999, if the executive is still employed by MMC on such date. For purposes
of the plan, fair market value of a unit means the value of MMC Common Stock
based on the share valuation prepared for the MMC Employees' Profit Sharing
Plan for such year. Amounts paid with respect to such units shall be
determined based on the sale price of the MMC Common Stock in connection with
the change of control.
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If an executive's employment is terminated by resignation, by MMC for cause
or by MMC without cause prior to February 16, 1999, no award shall be paid with
respect to outstanding units, except in the case of a change of control as set
forth above. The Merger constitutes a change of control under the Unit Plan and
the Base Value determined in accordance with the Merger Agreement would be the
value used to determine the executive officers' benefits under the Unit Plan.
In the case of death, disability, or retirement, the units become redeemable by
the executive or his beneficiary, as the case may be, on a pro rata basis for
the period prior to February 16, 1999, that the executive was employed.
Pursuant to the Unit Agreements, the executive officers have the following
number of units which become a right to receive certain cash amounts as
explained above: Mr. McKenna, 460 units; Mr. Williams, 200 units; Mr. Foster,
115 units; Mr. Horn, 115 units; Mr. Lunt, 47 units; and Mr. Melliere, 47 units.
If the Merger had occurred on October 1, 1997, and assuming the Base Value is
$5,400, Messrs. McKenna, Williams, Foster, Horn, Lunt and Melliere would have
been entitled to receive under these agreements, before taxes, approximately
$2,484,000, $1,080,000, $621,000, $621,000, $254,000 and $254,000, respectively.
DIRECTORS PLAN. MMC maintains the Directors Plan by which MMC grants
annually to each non-employee director units equal to an amount of the fair
market value of the MMC Common Stock based on the annual share valuation
prepared for the MMC Employees' Profit Sharing Plan or the sale price in the
event of a change of control. The Directors Plan incorporates the definition of
"change of control" that is contained in the Change-of-Control Agreements
(described above). At the time each non-employee director ceases to be a non-
employee director of MMC, he or she will be entitled to receive an amount equal
to such value of one unit multiplied by the aggregate number of units granted to
each such non-employee director. Presently, the non-employee directors are
William D. George, J. Douglas Gray, Robert J. Ireland and Thomas L. Shade.
Three units have been granted to each of the foregoing directors in each of 1996
and 1997. If as of October 1, 1997, the Merger had occurred and the non-
employee directors ceased serving as directors, and assuming the Base Value is
$5,400, Messrs. George, Gray, Ireland and Shade each would have been entitled to
receive under the Directors Plan, before taxes, approximately $32,400.
RETIREMENT BENEFITS. MMC maintains the MMC Supplementary Retirement
Benefit Plan and the MMC Select Employee Retirement Benefit Plan. The plans are
unfunded and maintained to provide retirement benefits to certain members of
MMC's management.
With respect to participants who are currently employed by MMC, the plan
provides that, in the event a participant's employment is involuntarily
terminated prior to age 65 following a change of control, such participant is
entitled to a lump-sum payment equal to the actuarial equivalent of such
participant's monthly benefit, calculated in accordance with the plan, after
granting the participant three years of additional age and service credits under
the Select Employee Retirement Plan. As of October 1, 1997, if the employment
of each executive officer participating under the plan had been involuntarily
terminated prior to such executive officer reaching age 65 and following a
change of control, such executive officers would be entitled under the plans to
receive, before taxes, approximately the following: Mr. McKenna, $1,463,000;
Mr. Foster, $84,000; Mr. Horn, $9,800; and Mr. Melliere, $186,000.
SECTIONS 280G AND 4999 OF THE CODE. Some portion of the amounts payable
under the Change-of-Control Arrangements (to the extent such payments are
payable as a result of the Merger) will be subject to Sections 280G and 4999 of
the Code, which impose a 20 percent excise tax on the recipient of "excess
parachute payments," as defined in the Code, and deny a tax deduction for such
excess parachute payments, to the company making them. In some cases, the
Change-of-Control Arrangements are subject
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to adjustment by MMC to reflect the impact of Sections 280G and 4999. See "Item
2. Change-of-Control Arrangements."
In addition to seeking approval for the Merger Agreement and the Merger,
MMC is also asking its shareholders to approve, for tax purposes, certain
payments under the Change-of-Control Arrangements to support the position that,
under the Code, such amounts will be fully tax deductible to MMC and such
executives will not pay excise taxes on such amounts. See "Item 2. Change-of-
Control Arrangements."
As of the Effective Time, MMC as the surviving corporation will continue to
be obligated under the Change-of-Control Arrangements.
INDEMNIFICATION; INSURANCE. ADM has agreed that from and after the
Effective Time the indemnification obligations of MMC set forth in MMC's
articles of incorporation and bylaws and the organizational documents of all of
its subsidiaries as in effect on the date of the Merger Agreement will continue
as to any matter arising out of any action or omission of any person described
in those indemnification provisions before the Effective Time. Furthermore, ADM
has agreed to provide directors' and officers' liability insurance coverage for
the benefit of MMC's present and former directors and officers. See "The
Merger--Indemnification and Insurance."
In addition to the foregoing benefits, each director or officer of MMC who
is a participant in MMC's employee benefit plans will be entitled to the
benefits described under the caption "The Merger--Employee Benefit Plans."
Except for the arrangements specifically set forth in this Proxy
Statement/Prospectus and the Merger Agreement, ADM has made no commitments with
respect to the retention of ADM or MMC employees or entities after the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following sets forth the material federal income tax consequences that
are expected to result to the shareholders of MMC from the Merger. This
discussion is based upon current provisions of the Code, Treasury Regulations
promulgated thereunder ("Regulations"), current administrative rulings, judicial
decisions and other applicable authorities in effect as of the date hereof, all
of which are subject to change, possibly with retroactive effect. No ruling
from the Internal Revenue Services ("IRS") has been sought with respect to the
Merger or the other transactions contemplated by this Proxy
Statement/Prospectus, and there can be no assurance that the IRS or a court will
not challenge the conclusions reached below. Furthermore, legislative, judicial
or administrative changes may occur, perhaps with retroactive effect, which
could affect the accuracy of the statements and conclusions set forth herein as
well as the tax consequences to the MMC shareholders.
The discussion contained herein does not address all aspects of federal
income taxation that may be relevant to particular MMC shareholders in light of
their personal investment or tax circumstances, or to certain types of holders
who may be subject to special treatment under the federal income tax laws
(including, without limitation, financial institutions, broker-dealers,
insurance companies, foreign persons, tax-exempt organizations, holders of stock
or options who received such property for compensatory purposes, and holders who
hold the MMC Common Stock as part of a straddle, hedge or conversion
transaction). In addition, this discussion is limited to persons who hold the
MMC Common Stock and who will hold the ADM Common Stock as "capital assets"
(generally, property held for investment) within the
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meaning of Code section 1221. Furthermore, this discussion does not address
state, local and foreign tax consequences nor does it consider any federal taxes
other than income taxes.
ALL HOLDERS OF MMC COMMON STOCK SHOULD CONSULT WITH THEIR OWN TAX ADVISERS
AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING THE EFFECT OF ANY CHANGE IN LAW THAT MAY OCCUR.
The Merger is intended to be a tax-free reorganization under Section 368(a)
of the Code so that no gain or loss would be recognized by the holders of MMC
Common Stock to the extent they receive ADM Common Stock in exchange for their
MMC Common Stock in the Merger. It is a condition to MMC's obligation to
consummate the Merger that it receive a tax opinion from Winston & Strawn,
special tax counsel to MMC ("Tax Counsel"), dated as of the Closing Date to the
effect that the Merger qualifies as a reorganization under Section 368(a) of the
Code. If the Merger does not qualify as a reorganization, the exchange of
shares in the Merger would be taxable.
The tax opinion will state, subject to the conditions and limitations
stated therein, that (i) the Merger will qualify as a reorganization within the
meaning of Code sections 368(a)(1)(A) and 368(a)(2)(E); (ii) the MMC
shareholders will not recognize gain or loss for federal income tax purposes to
the extent they receive only the ADM Common Stock in exchange for their MMC
Common Stock; and (iii) such exchanging MMC shareholders' basis in the ADM
Common Stock will equal their basis in the MMC Common Stock exchanged therefor
and the shareholders' holding period in the ADM Common Stock to be received in
the Merger will include the period for which the shareholders held their MMC
Common Stock exchanged therefor if the MMC Common Stock was held as a capital
asset. The tax opinion will be made subject to certain assumptions, conditions,
and limitations, including but not limited to certain representations to be made
by MMC, ADM, ADMAC, and their respective affiliated groups (within the meaning
of Code section 1504) and certain shareholders. This opinion is specifically
dependent upon current MMC shareholders in the aggregate (i) having no present
agreement, contract, plan or arrangement to sell, exchange or otherwise dispose
of more than 50 percent of the ADM Common Stock received in the Merger and
(ii) continuing to hold at least 50 percent of the ADM Common Stock received in
the Merger for a period of at least one year.
A holder of MMC Common Stock who exercises dissenters' rights in the Merger
and receives cash will generally recognize gain or loss equal to the difference
between the cash received and the holder's basis in the MMC Common Stock. This
gain or loss will generally be capital gain or loss. The tax rate on the
capital gain will depend on how long the holder held the MMC Common Stock and
the lowest rate will apply to assets held for more than 18 months. If a holder
of MMC Common Stock exercises dissenters' rights with respect to the holder's
shares but would have MMC Common Stock or ADM Common Stock owned by another
person (i.e., family members (spouse, children, grandchildren or parents) or
trusts, partnerships or corporations in which the holder directly or indirectly
owns an interest) attributed to the holder under the attribution rules of Code
section 318, the cash received may be treated as a dividend distribution, unless
the holder is only attributed ownership of stock from a family member, the
holder does not actually acquire another interest in ADM of a period of ten
years, and the holder complies with the notice requirements of Code section
302(c)(2). If the cash is treated as a dividend distribution, it will first
represent ordinary income to the holder to the extent of MMC's current and
accumulated earnings and profits allocable to such distribution, then as a
return of basis to the extent of the holder's basis in the dissenting shares and
finally any remaining amount of the cash will be treated as capital gain.
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Tax Counsel's opinion is based on the Code and Regulations in effect at the
time the opinion is rendered, current administrative interpretations and
positions of the IRS, and existing court decisions. No assurance can be given
that future legislation, Regulations, and administrative and judicial
interpretations will not affect the conclusions reached in Tax Counsel's
opinion. Furthermore, an opinion of counsel is not binding on the IRS or a
court; thus, no assurance may be made that a court or the IRS will agree with
Tax Counsel's opinion.
All holders of the MMC Common Stock who receive ADM Common Stock in the
Merger will be required to attach a statement to their federal income tax
returns for the year of the Merger which describes the facts of the Merger,
including the holder's basis in the MMC Common Stock exchanged, and the number
of shares of ADM Common Stock received in exchange for that Common Stock. The
holders should also keep as part of their permanent records information
necessary to establish their basis in and holding period for the ADM Common
Stock received in the Merger.
EACH MMC SHAREHOLDER SHOULD CONSULT A TAX ADVISER AS TO THE PARTICULAR
CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH SHAREHOLDER, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE CHANGES IN
FEDERAL INCOME TAX LAW.
BUSINESS AND MANAGEMENT AFTER THE MERGER
ADM intends to operate MMC in a manner substantially consistent with its
current operations. ADM will carefully review the operations of MMC in an
attempt to identify opportunities for expense reduction through the use of
shared resources with ADM.
The current directors and executive officers of ADM will continue in their
present capacities after consummation of the Merger. It is anticipated that
after the consummation of the Merger, Charles T. Bayless, John D. McNamara, and
Douglas J. Schmalz, will serve as MMC's directors, and John D. McNamara,
President; David J. Smith, Vice President and Secretary; Scott A. Roberts,
Assistant Secretary; and Charles P. Archer, Treasurer will serve as its
officers. All of the new officers and directors of MMC after consummation of
the Merger are currently officers of ADM.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting.
RESALE OF SHARES BY MMC AFFILIATES
The shares of ADM Common Stock to be received in the Merger will be freely
transferable, except for shares of ADM Common Stock received by persons who are
deemed to be "affiliates," as defined in the rules under the Securities Act, of
MMC immediately prior to the Effective Time (or of ADM after the Effective
Time). Shares of ADM Common Stock received in the Merger by persons who are
such affiliates may be sold by them only in accordance with the provisions of
Rules 144 and 145 under the Securities Act (which impose certain limitations on
the volume and manner of sales by such affiliates), or pursuant to an effective
registration statement under the Securities Act, or in transactions exempt from
registration thereunder.
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DISSENTERS' RIGHTS
The rights of MMC shareholders who choose to dissent from the Merger are
governed by the provisions of Illinois Law. An excerpt of Illinois Law
(Sections 11.65 and 11.70) governing dissenters' rights is attached hereto as
Exhibit C.
Under Section 11.70 of Illinois Law, a shareholder may assert dissenters'
rights only if the shareholder delivers to MMC prior to the vote taken with
respect to the Merger at the Special Meeting a written demand for payment for
his or her shares of MMC Common Stock if the Merger is consummated and the
shareholder does not vote in favor of the Merger.
Within ten days after the Effective Time, or 30 days after the shareholder
delivers to MMC the written demand for payment, whichever is later, MMC will
send each shareholder who has delivered a written demand for payment a statement
setting forth the opinion of MMC as to the estimated value of the shares of MMC
Common Stock, MMC's balance sheet as of the most recently completed fiscal year
ending not earlier than 16 months prior to delivery of the statement, together
with the statement of income for that year and the latest available interim
financial statements, and a commitment to pay the estimated value for the shares
of MMC Common Stock of the dissenting shareholder upon transmittal to MMC of the
certificate(s), or other evidence of ownership, with respect to such shares of
MMC Common Stock.
If the dissenting shareholder does not agree with the opinion of MMC as to
the estimated value of the shares, the shareholder, within 30 days after the
delivery of the statement of value, must notify MMC in writing of his or her
estimate of value and demand payment for the difference between the
shareholder's estimate of value and the amount of the payment by MMC. If,
within 60 days from delivery to MMC of the shareholder notification of estimate
of value of the shares, MMC and the dissenting shareholder have not agreed in
writing upon the value of the shares of MMC Common Stock, MMC must either pay
the difference in value demanded or file a petition in the circuit court of
Adams County, Illinois, requesting the court to determine the fair value of the
shares. MMC must make all dissenters, whether or not residents of Illinois,
whose demands remain unsettled parties to such proceeding and all parties will
be served with a copy of the petition. Failure of MMC to commence an action
will not limit or affect the right of dissenting shareholders to otherwise
commence an action as permitted by law. In an appraisal proceeding, the court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. According to Section 11.70 of Illinois
Law, "fair value" means the value of the shares immediately before the
consummation of the corporate action to which the dissenter objects excluding
any appreciation or depreciation in anticipation of the corporate action, unless
exclusion would be inequitable. The court's determination of fair value may be
more than, less than, or equal to the amount paid by MMC.
Each dissenter made a party to an appraisal proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
the shares exceeds the amount paid by MMC. The judgment will include an
allowance for interest at such rate as the court may find to be fair and
equitable from the Effective Time to the date of payment.
The court, in an appraisal proceeding, will determine all costs of the
proceeding, including the reasonable compensation and expenses of the
appraisers, if any, but will exclude the fees and expenses of counsel and
experts for any party. If the fair value of the shares as determined by the
court materially exceeds the amount offered by MMC, or if no offer was made,
then all or any part of such expenses may be assessed against MMC. If the
amount by which any dissenter estimated the value of the shares materially
exceeds the value as determined by the court, then all or any part of the costs
may be assessed against the dissenter.
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THE FOREGOING SUMMARY IS NOT A COMPLETE STATEMENT OF THE PROVISIONS OF
ILLINOIS LAW RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS OF MMC, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE EXCERPTS FROM THE ILLINOIS LAW
INCLUDED HEREIN AS EXHIBIT C.
CERTAIN FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus contains certain forward-looking
information. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking information to encourage companies to provide
prospective information about their companies without fear of litigation so long
as such information is identified as forward-looking and is accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the information.
ADM and MMC identify the following important factors which could cause ADM's and
MMC's actual results to differ materially from any results that might be
projected, forecast, estimated or budgeted by ADM or MMC in forward-looking
information. All of such factors are difficult to predict and many are beyond
the control of ADM and MMC. Accordingly, while ADM and MMC believe that the
assumptions underlying the forward-looking information are reasonable, there can
be no assurances that such assumptions will approximate actual experience.
These important factors include: (i) general economic conditions, changes in
interest rates and the performance of stock markets, each of which may impact
the profitability of the combined company; (ii) regulatory developments
affecting agricultural institutions generally; (iii) industry consolidation and
increased competition; (iv) the combined company's ability to control costs and
realize estimated cost savings; and (v) the integration of ADM and MMC's
products, sales and operations in a timely and cost effective manner. ADM and
MMC each disclaim any obligation to update forward-looking information.
BUSINESS OF MMC
GENERAL
MMC is an agribusiness company with three wholly owned operating business
units: MoorMan's, Inc. ("MMI"), a livestock feed manufacturer headquartered in
Quincy, Illinois; Quincy Soybean Co. ("Quincy Soybean"), an integrated soybean
processing and vegetable oil refining business with headquarters in Quincy; and
Agri Sales, Inc. ("ASI"), an originator and processor of dry edible beans and
bean seed with headquarters in Saginaw, Michigan. MMC employs approximately
2,700 people in 35 states.
MMC began in 1885 as a manufacturer and marketer of livestock feed products
and was incorporated in 1912. MMC acquired Quincy Soybean in 1961 and ASI in
1994. Several additional dry edible bean business acquisitions followed the
initial ASI purchase.
MMI manufactures and markets livestock feed products and provides on-site
services to livestock producers in the U.S., primarily swine, beef and dairy
producers. Nine manufacturing plants are located in Strategic Market Areas, and
MMI's direct sales force, the largest in the U.S., is located in 35 states. In
addition to its research-proven products, MMI's direct sales force provides
advisory services for improving livestock production and producer profitability.
Research and development laboratories and research farms develop new products
and processes for livestock producers.
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Quincy Soybean operates plants in Quincy, Illinois, and Helena, Arkansas.
These facilities extract vegetable oil from soybeans, refine soybean oil,
manufacture lecithin from soybean gum and produce soybean meal, over 70 percent
of which is exported through the Gulf of Mexico to destinations around the
world.
The vegetable oil refinery at the Quincy location is a joint venture
partnership with the C.F. Sauer Company of Richmond, Virginia. The Quincy
facility also refines other vegetable oils and packages finished vegetable oil
products. Quincy Soybean's processing facilities are supported by a wholly
owned country elevator system located in Arkansas, Illinois, Kentucky and
Missouri.
ASI is one of the largest originators, processors and marketers of pinto,
navy and black beans in the world. ASI operates over 50 dry edible bean and
grain elevators, which are located in all the major dry edible bean growing
areas in the U.S. In addition, ASI is the largest originator and marketer of
dry edible bean seed in the U.S. with locations in Wyoming, Idaho and
California. Its seed facilities are dispersed over these western states to help
manage disease and climatic conditions.
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MMC COMMON STOCK OWNERSHIP
As of December 1, 1997, there were 100,000 authorized shares of
MMC Common Stock, of which 54,770 shares were issued and outstanding. There
were 295 holders of MMC Common Stock as of such date. The following table sets
forth, as of such date, the number of shares and percentage held by each
director, executive officer, directors and executive officers as a group, and
each beneficial owner of more than 5 percent of the total outstanding shares of
MMC Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
SHAREHOLDER NUMBER OF OUTSTANDING
NAME POSITION SHARES SHARES
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael J. Foster Director, President-MMI 40 *
William D. George Director 10 *
J. Douglas Gray Director 10 *
Larry H. Horn Director, President-Quincy Soybean 10 *
Robert J. Ireland Director 0 *
Terry W. Lunt Vice President, Human Resources-MMC 15 *
Thomas M. McKenna Director, President and Chief 24 *
Executive Officer-MMC
Alvin L. Melliere Director, Vice President Research And 10 *
Development-MMI
Wendell R. Schwarz President-ASI 0 *
Thomas L. Shade Director 60 *
Alfred L. Williams, Jr. Director, Chief Financial Officer, 0 *
Vice President and Treasurer-MMC
All executive officers 179 *
and directors as a group
Merctavish & Co. 9,995 18.3%
The CFM Foundation 10,523 19.2%
MMC Employees' Profit 18,188 33.2%
Sharing Plan
</TABLE>
- -----------------------
*Indicates ownership of less than one percent of the outstanding shares of MMC
Common Stock.
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MMC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MMC is an agricultural processing company that produces and sells livestock
feed, soy protein and vegetable oil products, and dry edible beans.
SIX MONTHS ENDED SEPTEMBER 27, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 28,
1996
MMC's sales decreased 5.1% to $500 million from $527.6 million in the same
period of the previous year, driven by a decrease in soybean products sales
volume of approximately 13% and a decline in sales dollars of $42.5 million or
approximately 12%. Volumes and sales also declined slightly for livestock feed,
primarily swine feed. Partially offsetting these decreases is an increase in
the volumes of dry edible bean sales of approximately 51% generating an increase
in sales dollars of approximately 25% or $19.5 million. Gross profit declined
by approximately $6.8 million and gross profit margins declined from 8.4% to
7.5%. These results reflected primarily the lower margins in dry edible beans
caused by continuing declines in prices of navy and pinto beans as higher priced
inventory was shipped. Partially offsetting these declines were slight
improvements in soybean crush margins. Selling, general and administrative
expense ("SG & A") also declined by approximately $1.7 million or 3.5%, and
increased as a percent of sales slightly. The sale of fixed assets resulted in
a loss of $(.8) million in fiscal 1998 compared to a slight gain in the prior
year, primarily due to a loss on the sale of a corporate airplane during the
six months ended September 27, 1997. Net income declined to a loss of $(8.3)
million in the first six months of fiscal 1998, from a loss of $(2.6) million in
the same period of fiscal 1997, reflecting the above-noted factors. See
"Summary--Selected Historical Financial Data" and "MMC Financial Information."
Subsequent to March 29, 1997, management became aware of thefts by
employees and third parties at its Helena, Arkansas soybean processing facility.
The thefts involved the generation of fraudulent scale weight tickets for grain
that was not received by the facility and are believed to have occurred over a
period of approximately two and one-half years and to amount to approximately
$2.3 million. The impact of these thefts on the Company's financial statements
was to reduce gross margins from those that would have otherwise been reflected
during the periods of the thefts. The scale operators were bonded employees of
the Company and the fidelity insurance claim is expected to cover a portion of
the theft losses.
Upon learning of these thefts, management initiated a task force, including
company personnel, outside legal counsel, a private investigator, and fraud and
forensic accounting specialists to assist in investigating the events and to
make recommendations for changes in internal controls at each facility to
curtail future occurrences. Preliminary recommendations for such changes were
implemented by management subsequent to March 29, 1997 and include additional
system-generated exception reports related to grain scale receipts, required
supervisory approval of all manually input weights on scale tickets, and
involvement of non-operational personnel in monthly physical grain inventory
measurement procedures.
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YEAR ENDED MARCH 29, 1997 (52 WEEKS) COMPARED TO YEAR ENDED MARCH 30, 1996 (53
WEEKS)
MMC's sales increased 18.9% to $1.2 billion for the full year ended March
29, 1997, from $973.5 million in fiscal 1996, mainly due to higher prices for
soy protein products and increased soybean crush volume of approximately 10%.
These soy product sales increases of approximately $161 million account for
approximately 88% of the total sales increase. Dry edible bean sales increased
by 11% or $17 million due to acquisitions. During 1997, MMC acquired three dry
edible bean processors. Livestock feed sales were slightly higher in fiscal
1997, despite lower tonnage, due to higher prices.
Gross profit declined by approximately $12 million in 1997, and gross
profit margins decreased from 12.5% to 9.4%, due to continuing cyclical trends
in the livestock feed and soybean crushing businesses. The decline was
principally driven by industry-wide declines in soybean product margins, and by
the impact of lower volumes of livestock feed. Soy product margins decreased by
1% of sales for the Company or approximately $5.6 million. Gross profit for
livestock feed declined by approximately $10 million and approximately 5% of
sales due to the lower tonnage, specifically in higher margin swine products.
Dry edible bean profits increased due to acquisitions, and margins increased
from 3.6% of sales to 5.5%. SG & A declined by approximately $2 million in
1997, and declined as a percent of sales, as MMC focused on cost controls.
Operating income declined 55.3 percent to $9.5 million in 1997, compared to
$21.2 million in 1996, due to the above-mentioned pressures on gross profit
margins, but also due to a smaller gain from benefit plan curtailments and plan
changes in 1997, than in 1996. Other income, declined by approximately $3
million, primarily resulting from lower interest income, higher interest
expense, offset partially by increased earnings from joint ventures. The
combination of factors discussed above caused income from continuing operations
before income taxes to decrease 59 percent. A return to a more normal effective
tax rate in 1997, mainly due to a reduction in research tax credits from those
recognized in 1996, caused net income to decline 64.5%.
YEAR ENDED MARCH 30, 1996 (53 WEEKS) COMPARED TO YEAR ENDED MARCH 25, 1995 (52
WEEKS)
MMC's sales increased 7.6% for the year ended March 30, 1996 to $973.5
million, compared to $904.3 million in 1995, mainly due to business acquisitions
in dry edible beans, which accounted for an increase in sales of approximately
$124 million. Volumes declined for both the livestock feed and soybean
businesses, resulting in decreases of approximately $30 million in livestock
sales and $25 million in sales of soy products. Gross profit and gross profit
margins declined in 1996 by approximately $17 million from 15.4% to 12.5%. This
was due to erosion in livestock feed volumes, particularly in swine feed;
adverse product mix in livestock feed; and depressed soybean product margins
caused by selling prices that did not fully reflect higher soybean costs
resulting from an industry-wide shortage of soybeans. SG & A decreased
2.6 percent in dollars and slightly as a percent of sales due primarily to
decreased administrative expenses in the dry edible bean business as acquired
businesses were merged into Agri Sales, Inc. with duplicative costs eliminated.
Operating income increased 35.3 percent totally due to the $17 million gain from
benefit plan curtailments and plan changes implemented during the year.
Although interest expense was significantly higher in 1996, due to increased
borrowing, higher interest income and other income caused total "Other income"
to increase by $1.2 million. Income from continuing operations before income
taxes increased 37.1% in 1996 to $24.9 million, from $18.1 million in 1995. A
lower effective tax rate in 1996, reflecting a research and development tax
credits, contributed to an increase of 48.7% in net income.
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LIQUIDITY AND CAPITAL RESOURCES
MMC's principal sources of working capital ($142.9 million at September 27,
1997, including $15.9 million of cash and short-term investments) have
historically been funds generated by operations and retained within the Company
after payment of dividends, supplemented by borrowings under various bank
revolving credit agreements. Current assets consist principally of commodity
and feed inventories and accounts receivables. As a result, balances of these
current assets fluctuate significantly during the course of the year with large
cash outlays required during harvest seasons. Short-term debt is generally
utilized to support these seasonal increases in current assets. Short-term
borrowings are available under bank revolving credit totaling $265 million. At
September 27, 1997, $55 million was outstanding under these agreements, with
$27 million of this amount borrowed on a long-term basis under the terms of
certain of the credit facilities. Management believes that its current levels
of cash and available short-term credit will adequately provide liquidity for
its operating needs.
BUSINESS OF ADM
GENERAL
Archer-Daniels-Midland Company was incorporated in Delaware in 1923,
successor to the Daniels Linseed Co., which was founded in 1902.
During the last five years, ADM has experienced significant growth,
spending approximately $3.8 billion for construction of new plants, expansions
of existing plants and the acquisitions of plants and transportation equipment.
There have been no significant dispositions during this period. However, during
this period, ADM has disposed of its Supreme Sugar subsidiary and its British
Arkady bakery ingredient business. In addition, ADM has contributed its formula
feed operations, its rice milling operations, its Mexican wheat flour mills and
its masa corn flour business to various unconsolidated joint ventures.
PRODUCTS AND MARKETS
ADM is engaged in the business of procuring, transporting, storing,
processing and merchandising agricultural commodities and products. It is one
of the world's largest processors of oilseeds, corn and wheat ADM also
processes cocoa beans, milo, oats, barley and peanuts. Other operations include
transporting, merchandising and storing agricultural commodities as and
products. These operations and processes produce products which have primarily
two end uses: food or feed ingredients. Each commodity processed is in itself a
feed ingredient as are the by-products produced during the processing of each
commodity.
Production processes of all commodities are capital intensive and similar
in nature. These processes involve grinding, crushing or milling with further
value added through extraction, refining and fermenting. Generally, each
commodity can be processed by any of these methods to generate additional value-
added products. All commodities and related processed products share the same
network of commodity procurement facilities, transportation services (including
rail, barge, truck and ocean vessels) and storage facilities.
The geographic areas, customers and marketing methods are basically the
same for all commodities and their related further processed products. Feed
ingredient products and by-products are sold to farmers, feed dealers and
livestock producers, all of whom purchase products from across the entire
commodity chain. Food ingredient products are also sold to one basic group of
customers: food and beverage processors. Any single customer may purchase
products produced from all commodities, and any single food or feed product
could include ingredients produced from all commodities processed.
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Oilseed Products. Soybeans, cottonseed, sunflower seeds, canola, peanuts,
flaxseed and corn germ are processed to provide vegetable oils and meals
principally for the food and feed industries. Crude vegetable oil is sold "as
is" or is further processed by refining and hydrogenating into margarine,
shortening, salad oils and other food products. Partially refined oil is sold
for use in chemicals, paints and other industrial products. Lecithin, an
emulsifier produced in the vegetable oil refining process, is marketed as a food
and feed ingredient. Natural source Vitamin E, an antioxidant, and distilled
monoglycerides, an emulsifier, are produced from soybeans and other oilseeds.
Oilseed meals supply more than one-half of the high protein ingredients
used in the domestic manufacture of commercial livestock and poultry feeds.
Soybean meal is further processed into soy flour and grits, used in both food
and industrial products, and into value-added soy protein products. Textured
vegetable protein (TVP-Registered Trademark-), a soy protein product developed
by ADM, is sold primarily to the institutional food market and, through others,
to the food consumer market. ADM also produces a wide range of other edible soy
protein products including isolated soy protein, soy protein concentrate, soy-
based milk products, soy flours and vegetable patties (Harvest
Burgers-Registered Trademark-). ADM produces and markets a wide range of
consumer and institutional health foods based on ADM's various soy protein
products. ADM produces cottonseed flour, which is sold primarily to the
pharmaceutical industry. Cotton cellulose pulp is manufactured and sold to the
chemical, paper and filter markets.
Corn Products. ADM is engaged in dry milling and wet milling corn
operations. Products produced for use by the food and beverage industry include
syrup, starch, glucose, dextrose, crystalline dextrose, high fructose
sweeteners, crystalline fructose and grits. Corn gluten feed and distillers
grains are produced for use as feed ingredients. Ethyl alcohol is produced to
beverage grade or for industrial use as ethanol. In gasoline, ethanol increases
octane, and is used as an extender and oxygenate. Corn germ, a by-product of
the milling process, is further processed as an oilseed.
By fermentation of dextrose, ADM produces citric and lactic acids, feed-
grade amino acids and vitamins, lactates, sorbitol, and food emulsifiers
principally for the food and feed industries.
Wheat and Other Milled Products. Wheat flour is sold primarily to large
bakeries, durum flour is sold to pasta manufacturers and bulgur, a gelatinized
wheat food, is sold to both the export and the domestic food markets. ADM
produces wheat starch and vital wheat gluten for the baking industry. ADM mills
oats into oat bran and oat flour for institutional and consumer food customers.
ADM also mills milo to produce industrial flour that is used in the
manufacturing of wall board for the building industry.
Other Products and Services.
* ADM buys, stores and cleans agricultural commodities, such as
oilseeds, corn, wheat, milo, oats and barley, for resale to other processors
worldwide.
- ADM grinds cocoa beans and produces cocoa liquor, cocoa butter, cocoa
powder, chocolate and various compounds for the food processing industry.
- ADM produces and distributes formula feeds and animal health and
nutrition products to the livestock, dairy and poultry industries. Many of the
feed ingredients and health and nutrition products are produced in our other
commodity processing operations.
- ADM produces bakery products and mixes, which are sold to the baking
industry.
- ADM produces spaghetti, noodles, macaroni, and other consumer food
products. ADM also produces lettuce, other fresh vegetables and herbs in its
hydroponic greenhouse.
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- Malt products are produced for use by the food and beverage
industries.
- ADM raises fish for distribution to consumer food customers.
- Hickory Point Bank and Trust Co. furnishes public banking services,
except commercial loans, as well as cash management and securities safekeeping
services for ADM.
- ADM Investor Services, Inc. is a registered futures commission
merchant and a clearing member of all principal commodities exchanges. ADM
Securities Inc. is a securities broker-dealer registered with the SEC and a
member of the National Association of Securities Dealers, Inc.
- Agrinational Insurance Company acts as a direct insurer and reinsurer
of a portion of ADM's domestic and foreign property and casualty insurance
risks.
- Alfred C. Toepfer International (Germany) and affiliates, of which ADM
has a 50% interest, is one of the world's largest, most respected trading
companies specializing in processed agricultural products. Toepfer has 41 sales
offices worldwide.
- Compagnie Industrielle et Financiere des Produits Amylaces SA
(Luxembourg) and affiliates, of which ADM has a 41.5% interest, owns European
agricultural processing plants that are primarily engaged in wet corn milling
and wheat starch production.
- Gruma S.A. de C.V. (Mexico) and affiliates, of which ADM has a 22%
interest, is the world's largest producer and marketer of corn flour and
tortillas with operations in the U.S., Mexico and Central America.
Additionally, ADM has a 20% interest in a joint venture which consists of the
combined U.S. corn flour operations of ADM and Gruma. ADM also has a 40% share,
through a joint venture with Gruma, of four Mexican-based wheat flour mills.
- ADM owns a 30% non-voting equity interest in Minnesota Corn Processors
(MCP). MCP operates wet corn milling plants in Minnesota and Nebraska.
- ADM formed a strategic alliance with United Grain Growers of Canada
(UGG), which resulted in ADM having approximately 45% ownership of UGG. UGG,
with more than 165 locations throughout Western Canada, is involved in grain
merchandising, crop input marketing and distribution, livestock production
services and farm business communications.
- Consolidated Nutrition, L.C., a joint venture between ADM and Ag
Processing Inc., is a supplier of premium animal feeds and animal health
products. ADM has a 50% ownership interest in this joint venture.
- ADM/Countrymark, LLC, a joint venture between ADM and Countrymark
Cooperative Inc., operates a grain business in Indiana, Kentucky, Maryland,
Michigan and Ohio. ADM has a 50% ownership interest in this joint venture.
- ADM owns a 25% interest in Acatos & Hutchinson, a U.K. based company,
that processes and markets edible oil.
- Almidones Mexicanos S.A. (Mexico), of which ADM has a 50% interest,
operates a wet corn milling plant in Mexico.
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- Golden Peanut Company, a joint venture between ADM, Gold Kist, Inc.
and Alimenta Processing Corporation, is a major supplier of peanuts to both the
domestic and export markets. ADM has a 33-1/3% ownership interest in this joint
venture.
- ADM-Riceland Partnership, a joint venture between ADM and Riceland
Foods, Inc., is a processor of rice and rice products for institutional and
consumer food customers. ADM has a 50% ownership interest in this joint
venture.
- ADM owns a 48% interest in Heartland Rail Corporation. Heartland's
81% owned affiliate, Iowa Interstate Railroad, operates a regional railroad in
Iowa and Illinois.
- ADM participates in various joint ventures that operate oilseed
crushing facilities, oil refineries and related storage facilities in China and
Indonesia.
The percentage of net sales and other operating income by classes of
products and services for the last three fiscal years were as follows:
1997 1996 1995
---- ---- ----
Oilseed products 64% 61% 61%
Corn products 16 18 19
Wheat and other
milled products 12 13 11
Other products and services 8 8 9
--- --- ---
100% 100% 100%
--- --- ---
--- --- ---
Methods of Distribution. Since ADM's customers are principally other
manufacturers and processors, its products are distributed mainly in bulk from
processing plants or storage facilities directly to the customers' facilities.
ADM owns a large number of trucks and trailers and owns or leases large numbers
of railroad tank cars and hopper cars to augment those provided by the
railroads. ADM uses the inland waterway system and functions as a contract
carrier of commodities for its own operations as well as for other companies.
ADM owns and leases approximately 2,000 river barges and 27 line-haul towboats.
Status of New Products. ADM continues to expand its business through the
development and production of new, value-added products. ADM has entered the
vitamin market with the production of riboflavin and vitamin E and is currently
expanding production facilities to produce biotin and vitamin C. ADM continues
to develop its soy protein meat substitutes, Harvest Burgers-Registered
Trademark- and Harvest Burgers-Registered Trademark- for Recipes-TM-, its soy
protein powdered non-dairy beverage, Nutribev-Registered Trademark-, and its
non-dairy frozen dessert, Dairylike-TM-. Additionally, ADM is developing and
expanding production facilities to produce emulsifiers, distilled
monoglycerides, astaxanthan and isoflavones.
Source and Availability of Raw Materials. Substantially all of ADM's raw
materials are agricultural commodities. In any single year, the availability
and price of these commodities are subject to wide fluctuations due to
unpredictable factors such as weather, plantings, government (domestic and
foreign) farm programs and policies, changes in global demand created by
population growth and higher standards of living and worldwide production of
similar and competitive crops.
Patents, Trademarks and Licenses. ADM owns several valuable patents,
trademarks and licenses, but does not consider its business dependent upon any
single or group of patents, trademarks and licenses.
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Extent to Which Business is Seasonal. Since ADM is so widely diversified
in global agribusiness markets, there are no material seasonal fluctuations in
the manufacture, sale and distribution of its products and services. There is a
degree of seasonality in the growing season and procurement of ADM's principal
raw materials: oilseeds, wheat, corn and other grains. However, the actual
physical movement of the millions of bushels of these crops through ADM's
storage and processing facilities is reasonably constant throughout the year.
The worldwide need for food is not seasonal and is ever expanding as is the
world's population.
Working Capital Items. Price variations and availability of grain at
harvest often cause wide fluctuations in ADM's inventories and short-term
borrowings.
Dependence on Single Customer. No material part of ADM's business is
dependent upon a single customer or very few customers.
Amount of Backlog. Because of the nature of ADM's business, the backlog of
orders at year end is not a significant indication of ADM's activity for the
current or upcoming year.
Business Subject to Renegotiation. ADM has no business with the government
that is subject to renegotiation.
Competitive Conditions. Markets for ADM's products are highly price
competitive and sensitive to product substitution. No single company competes
with ADM in all of its markets; however, a number of large companies compete in
one or more markets. Major competitors in one or more markets include, but are
not limited to, Cargill, Inc., ConAgra, Inc., CPC International, Eridania
Beghin-Say and Tate & Lyle.
Research and Development Expenditures. Practically all of ADM's technical
efforts and expenditures are concerned with food and feed ingredient products.
Special efforts are being made to find improvements in food technology to
alleviate the protein malnutrition throughout the world, utilizing the three
largest United States crops: corn, soybeans and wheat.
The need to successfully market new or improved food and feed ingredients
developed in ADM's research laboratories led to the concept of technical
support. ADM is staffed with technical representatives who work closely with
customers and potential customers on the development of food and feed products
which incorporate Company-produced ingredients. These technical representatives
are an adjunct to both the research and sales functions.
ADM maintains a research laboratory in Decatur, Illinois where product and
process development activities are conducted. To develop new bioproducts and to
improve existing bioproducts, new cultures are developed using classical
mutation and genetic engineering. Protein research is conducted at facilities
in Decatur where meat and dairy pilot plants support application research.
Research to support sales and development for bakery products is done at a
laboratory in Olathe, Kansas. Research to support sales and development for
cocoa and chocolate products is done in Milwaukee, Wisconsin and the
Netherlands.
The amounts spent during the three years ended June 30, 1997, 1996 and 1995
for such technical efforts were approximately $12.2, $11.5 and $11.3 million,
respectively.
Material Effects of Capital Expenditures for Environmental Protection.
During 1997, $21 million was spent for equipment, facilities and programs for
pollution control and compliance with the requirements of various environmental
agencies.
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There have been no material effects upon the earnings and competitive
position of ADM resulting from compliance with federal, state and local laws or
regulations enacted or adopted relating to the protection of the environment.
ADM expects that expenditures for environmental facilities and programs
will continue at approximately the present rate with no unusual amounts
anticipated for the next two years.
NUMBER OF EMPLOYEES
The number of persons employed by ADM was 17,160 at June 30, 1997.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
ADM's foreign operations are principally in developed countries and do not
entail any undue or unusual business risks. Geographic financial information is
set forth in Note 10 of the Notes to Consolidated Financial Statements below.
PROPERTIES
Processing Facilities. ADM owns, leases, or has a 50% or greater interest
in the following processing plants:
United States Foreign Total
----------------------------------------
Owned 133 67 200
Leased 3 - 3
Joint Venture 54 21 75
--- -- ---
190 88 278
--- -- ---
--- -- ---
ADM's operations are such that most products are efficiently processed near
the source of raw materials. Consequently, ADM has many plants located
strategically in grain producing areas. The annual volume processed will vary
depending upon availability of raw materials and demand for finished products.
ADM operates 37 domestic and nine foreign oilseed crushing plants with a
daily processing capacity of approximately 84,000 metric tons. The domestic
plants are located in Alabama, Arkansas, Georgia, Illinois, Indiana, Iowa,
Kansas, Louisiana, Minnesota, Missouri, Mississippi, Nebraska, North Dakota,
Ohio, South Carolina, Tennessee and Texas. The foreign plants are located in
Canada, England, Germany, Mexico and the Netherlands.
ADM operates four wet corn milling and two dry corn milling plants with a
daily grind capacity of approximately 1,600,000 bushels. These plants and other
related properties, including corn germ extraction, corn gluten pellet, and
alcohol bottling plants, are located in Illinois, Iowa, New York, and North
Dakota. ADM also has interests, through joint ventures, in corn milling plants
in Mexico, Bulgaria, Hungary, Slovakia, and Turkey.
ADM operates 29 domestic wheat and durum flour mills, a domestic bulgur
plant, and 13 foreign flour mills with a total daily capacity of approximately
408,000 cwt. of flour. ADM also operates seven bakery mix and specialty
ingredient plants, three corn flour mills, two milo mills, two pasta plants, and
two starch and gluten plants. These plants and other related properties are
strategically located across North
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and Central America in California, Illinois, Indiana, Iowa, Kansas, Louisiana,
Minnesota, Missouri, Nebraska, New York, North Carolina, Oklahoma, Oregon,
Pennsylvania, Tennessee, Texas, Washington, Wisconsin, Canada, Barbados, Belize
and Jamaica.
ADM also has an interest, through a joint venture, in rice milling plants
in Arkansas and Louisiana.
ADM operates 11 domestic oilseed refineries in Georgia, Illinois, Indiana,
Iowa, Nebraska, Tennessee and Texas as well as eight foreign refineries in
Canada, England, Germany and the Netherlands. ADM also has an interest, through
a joint venture, in an oilseed refinery in Texas. ADM produces packaged oils in
California, Georgia, Illinois and Germany. ADM also has an interest, through a
joint venture, in a packaged oils plant in England. Soy protein specialty
products are produced in Illinois and the Netherlands, lecithin products are
produced in Illinois, Iowa, Nebraska, Canada, Germany and the Netherlands, and
Vitamin E is produced in Illinois. Cotton linter pulp is produced in Tennessee
and cottonseed flour is produced in Texas.
ADM produces feed and food additives at seven bioproducts plants located in
Illinois, North Carolina, and Ireland. ADM also operates formula feed and
animal health and nutrition plants in Georgia, Illinois, Iowa, Minnesota, Ohio,
Texas, Washington, Canada, Ireland, Barbados, Belize, China and Puerto Rico.
ADM also has an interest, through a joint venture, in formula feed and pet food
plants in Alabama, Arkansas, Georgia, Illinois, Iowa, Indiana, Kansas, Kentucky,
Michigan, Minnesota, Missouri, Nebraska, Ohio, Pennsylvania, Tennessee,
Wisconsin, Canada, Puerto Rico and Trinidad.
ADM operates three domestic and seven foreign chocolate and cocoa bean
processing plants located in Massachusetts, North Carolina, Wisconsin, Canada,
China, France, Germany, the Netherlands and Singapore.
ADM operates five North American barley malting plants located in Illinois,
Minnesota, Wisconsin and Canada.
ADM operates various other food ingredient plants in England, France and
Germany.
Procurement Facilities. ADM operates 190 domestic terminal, country and
river elevators covering the major grain producing states, including 128 country
elevators and 62 terminal and river loading facilities including three grain
export elevators in Louisiana. Elevators are located in Colorado, Georgia,
Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana,
Nebraska, North Carolina, North Dakota, Oklahoma, South Carolina, Tennessee, and
Texas. Domestic grain terminals, elevators and processing plants have an
aggregate storage capacity of approximately 401,000,000 bushels. ADM also has
an interest, through a joint venture, in 14 grain terminals and elevators
located in Indiana, Kentucky, Maryland, Michigan, and Ohio with an aggregate
storage capacity of approximately 58,000,000 bushels. ADM also operates 46
foreign grain elevators in Barbados, Brazil, Canada, Ireland and Germany.
Thirteen cotton gins are located in Texas and serve the cottonseed crushing
plants in that area.
LEGAL PROCEEDINGS
Environmental Matters. In 1993, the State of Illinois Environmental
Protection Agency ("IEPA") brought administrative enforcement proceedings
arising out of ADM's alleged failure to obtain permits for certain pollution
control equipment at certain of ADM's processing facilities in Illinois. ADM
and IEPA have executed a settlement agreement with respect to one of these
proceedings. That agreement is currently
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before the Illinois Pollution Control Board for approval. ADM believes it has
meritorious defenses to the remaining proceeding. In management's opinion this
settlement and the remaining proceeding will not, either individually or in the
aggregate, have a material adverse effect on ADM's financial condition or
results of operations.
ADM is involved in approximately 35 administrative and judicial proceedings
in which it has been identified as a potentially responsible party ("PRP") under
the federal Superfund law and its state analogs for the study and clean-up of
sites contaminated by material discharged into the environment. In all of these
matters, there are numerous PRPs. Due to various factors such as the required
level of remediation and participation in the clean-up effort by others, ADM's
future clean-up costs at these sites cannot be reasonably estimated. However,
in management's opinion these proceedings will not, either individually or in
the aggregate, have a material adverse effect on ADM's financial condition or
results of operations.
Litigation Regarding Alleged Anticompetitive Practices. ADM and certain
of its current and former officers and directors are currently defendants in
various lawsuits related to alleged anticompetitive practices by ADM as
described in more detail below. ADM and the individual defendants named in
these actions intend to vigorously defend the actions unless they can be settled
on terms deemed acceptable to the parties. ADM has paid and intends to continue
to pay the legal expenses of its current and former officers and directors and
to indemnify these persons with respect to these actions in accordance with
Article X of its Bylaws.
Governmental Investigations. Federal grand juries in the Northern
Districts of Illinois, California and Georgia, under the direction of the United
States Department of Justice ("DOJ"), have been investigating possible
violations by ADM and others with respect to the sale of lysine, citric acid and
high fructose corn syrup, respectively. In connection with an agreement with
the DOJ, ADM has paid the United States a fine of $100 million. This agreement
constitutes a global resolution of all matters between the DOJ and ADM and
brought to a close all DOJ investigations of ADM.
ADM received notice that certain foreign governmental entities were
commencing investigations to determine whether anticompetitive practices
occurred in their jurisdictions. In February 1997, ADM's three Mexican
subsidiaries were notified that the Mexican Federal Competition Commission
commenced an investigation as to whether ADM's marketing and sale of lysine in
Mexico resulted in violations of that country's federal antitrust laws. In June
1997, ADM and several of its European subsidiaries were notified that the
Commission of the European Communities initiated an investigation as to their
possible anticompetitive practices in the amino acid markets, in particular the
lysine market, in the European Union. In September 1997, ADM received a request
for information from the Commission of the European Communities with respect to
an investigation being conducted by that Commission into the possible existence
of certain agreements and/or concerted practices in the citric acid market
within the European Union. Each of these investigations is in the early stages
and, accordingly, their ultimate outcome and materiality cannot presently be
determined.
High Fructose Corn Syrup Actions. ADM, along with other companies, has
been named as a defendant in 30 antitrust suits involving the sale of high
fructose corn syrup. Twenty-nine of these actions have been brought as putative
class actions.
Federal Actions. Twenty-two of these putative class actions allege
violations of federal antitrust laws, including allegations that the defendants
agreed to fix, stabilize and maintain at artificially high levels the prices of
high fructose corn syrup, and seek injunctions against continued alleged illegal
conduct, treble damages of an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative
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classes in these cases comprise certain direct purchasers of high fructose corn
syrup during certain periods in the 1990s. These 22 actions have been
transferred to the United States District Court for the Central District of
Illinois and consolidated under the caption In Re High Fructose Corn Syrup
Antitrust Litigation, MDL No. 1087 and Master File No. 95-1477. The parties are
in the midst of discovery in this action.
On January 14, 1997, ADM, along with other companies, was named a defendant
in a non-class action antitrust suit involving the sale of high fructose corn
syrup and corn syrup. This action, which is encaptioned Gray & Co. v. Archer
Daniels Midland Co., et al, No. 97-69-AS, and was filed in federal court in
Oregon, alleges violations of federal antitrust laws and Oregon and Michigan
state antitrust laws, including allegations that defendants conspired to fix,
raise, maintain and stabilize the price of corn syrup and high fructose corn
syrup, and seeks treble damages, attorneys' fees and costs of an unspecified
amount. The parties are in the midst of discovery in this action.
State Actions. ADM, along with other companies, also has been named as a
defendant in six putative class action antitrust suits filed in California state
court involving the sale of high fructose corn syrup. These California actions
allege violations of the California antitrust and unfair competition laws,
including allegations that the defendants agreed to fix, stabilize and maintain
at artificially high levels the prices of high fructose corn syrup, and seek
treble damages of an unspecified amount, attorneys fees and costs, restitution
and other unspecified relief. One of the California putative classes comprises
certain direct purchasers of high fructose corn syrup in the State of California
during certain periods in the 1990s. This action was filed on October 17, 1995
in Superior Court for the County of Stanislaus, California and encaptioned
Kagome Foods, Inc. v. Archer-Daniels-Midland Co. et al., Civil Action No. 37236.
This action has been removed to federal court and consolidated with the federal
class action litigation pending in the Central District of Illinois referred to
above. The other five California putative classes comprise certain indirect
purchasers of high fructose corn syrup and dextrose in the State of California
during certain periods in the 1990s. One such action was filed on July 21, 1995
in the Superior Court of the County of Los Angeles, California and is
encaptioned Borgeson v. Archer-Daniels-Midland Co., et al., Civil Action No.
BC131940. This action and the other four indirect purchaser actions have been
coordinated before a single court in Stanislaus County, California under the
caption, Food Additives (HFCS) cases, Master File No. 39693. The other four
actions are encaptioned, Goings v. Archer Daniels Midland Co., et al., Civil
Action No. 750276 (Filed on July 21, 1995, Orange County Superior Court);
Rainbow Acres v. Archer Daniels Midland Co., et al., Civil Action No. 974271
(Filed on November 22, 1995, San Francisco County Superior Court); Patane v.
Archer Daniels Midland Co., et al., Civil Action No. 212610 (Filed on January
17, 1996, Sonoma County Superior Court); and St. Stan's Brewing Co. v. Archer
Daniels Midland Co., et al., Civil Action No. 37237 (Filed on October 17, 1995,
Stanislaus County Superior Court). The parties are in the midst of discovery in
this action.
ADM, along with other companies, also has been named a defendant in a
putative class action antitrust suit filed in Alabama state court. The Alabama
action alleges violations of the Alabama, Michigan and Minnesota antitrust laws,
including allegations that defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn syrup, and seeks an
injunction against continued illegal conduct, damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief. The putative class in
the Alabama action comprises certain indirect purchasers in Alabama, Michigan
and Minnesota during the period March 18, 1994 to March 18, 1996. This action
was filed on March 18, 1996 in the Circuit Court of Coosa County, Alabama, and
is encaptioned Caldwell v. Archer-Daniels-Midland Co., et al., Civil Action No.
96-17. On April 23, 1997, the court granted the defendants' motion to sever and
dismiss the non-Alabama claims. The remaining parties are in the midst of
discovery in this action.
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Lysine Actions. ADM, along with other companies, had been named as a
defendant in 21 putative class action antitrust suits involving the sale of
lysine. Except for several plaintiffs that opted out of the federal class
action settlement and the actions specifically described below, all such suits
have been settled, dismissed or withdrawn.
State Actions. ADM has been named as a defendant, along with other
companies, in two putative class action antitrust suits and one non-class action
suit filed in Alabama state court, one putative class action antitrust suit
filed in Tennessee state court and one putative class action antitrust suit
filed in Michigan state court involving the sale of lysine. The two putative
Alabama class actions allege violations of the Alabama antitrust laws, including
allegations that the defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of lysine, and seek an injunction against
continued alleged illegal conduct, damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The two putative classes in the
Alabama actions comprise certain indirect purchasers of lysine in the State of
Alabama during certain periods in the 1990s. One such action was filed on
August 17, 1995 in the Circuit Court of DeKalb County, Alabama, and is
encaptioned Ashley v. Archer-Daniels-Midland Co., et al., Civil Action No.
95-336. The parties are in the midst of discovery in this action. The other
Alabama action, encaptioned Bailey v. Archer Daniels Midland Co., et al., Civil
Action No. 95-165, and filed on December 11, 1995 in the Circuit Court of
Tallapoosa County, has been placed on the court's administrative docket pending
the outcome of the Ashley action. The non-class action, encaptioned Kent v.
Archer Daniels Midland Co., et al, No. CV 9701108, and filed on February 21,
1997 in the Circuit Court of Jefferson County, Alabama, includes allegations
that are similar to these contained in the putative class actions and seeks
monetary relief in the amount of $670,000, injunctive relief against alleged
illegal conduct, attorneys fees and costs, punitive damages and other
unspecified relief. This action has been removed to federal court in the
Northern District of Alabama. The Tennessee action, encaptioned McCormack Farms
v. Archer Daniels Midland Co., et al., Civil Action No. 96C-2190, and filed on
June 11, 1996 in Davidson County Circuit Court, alleges a restraint of trade in
violation of the Tennessee Trade Practices Act and Tennessee Consumer Protection
Act. This action includes allegations that defendants conspired to fix,
maintain or stabilize the prices of lysine and seeks an injunction against
continued illegal conduct, treble damages of an unspecified amount, attorneys'
fees and costs, and other unspecified relief. The putative class in this case
comprises certain indirect purchasers of lysine within the State of Tennessee
during the period June 10, 1992 through June 10, 1996. ADM has not yet filed a
responsive pleading. The Michigan action alleges a restraint of trade in
violation of the Michigan Antitrust Reform Act and include allegations that
defendants conspired to fix, raise, maintain and stabilize the price of lysine
and seeks an injunction against continued illegal conduct, treble damages of an
unspecified amount, attorneys' fees and costs, and other unspecified relief.
The putative class in this case comprises certain indirect purchasers of lysine
within the State of Michigan during certain periods in the 1990s. This action,
encaptioned Michigan Pork Producers Assn, et al. v. Archer Daniels Midland Co.,
et al., No. 906-10696-CZ, was filed on September 25, 1996 in Kent County Circuit
Court. ADM has not yet filed a responsive pleading in either action.
Citric Acid Actions. ADM, along with other companies, had been named as a
defendant in 11 putative class action antitrust suits and two non-class action
antitrust suits involving the sale of citric acid. Except for several
plaintiffs that opted out of the federal class action settlement and the actions
specifically described below, all such suits have been settled or dismissed.
Federal Actions. Seven of these actions alleged violations of federal
antitrust laws, including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the prices of citric acid,
and sought injunctions against continued alleged illegal conduct, treble damages
of an unspecified amount, attorneys fees and costs, and other unspecified
relief. The putative classes in these
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cases comprise certain direct purchasers of citric acid for certain periods in
the 1990s. These six actions were transferred to the United States District
Court for the Northern District of California and consolidated as In Re Citric
Acid Antitrust Litigation, MDL No. 1092, Master File No. C-95-2963(FMS). On
September 27, 1996 ADM entered into an agreement with counsel for the plaintiff
class in this consolidated action in which among other things, ADM agreed to pay
$35 million to members of the class, without admitting the alleged violations of
law. On March 3, 1997, the court preliminarily approved the settlement and
final approval was granted on July 23, 1997. On February 4, 1997, a class
action complaint, encaptioned Galavan Supplements Ltd. v. Archer Daniels Midland
Co., et al., No. 97-0704 JGD (VAPx), was filed in the United States District
Court for the Central District of California. ADM, along with other companies,
was named a defendant in this putative class action brought on behalf of a class
consisting of all persons and entities outside of the United States who
purchased citric acid directly from any defendants through their foreign
facilities during the time period July 1, 1991 through June 30, 1995. This
action alleges violations of the federal antitrust laws, including allegations
that the defendants conspired to fix, maintain and stabilize the price of citric
acid and to allocate amongst themselves their major citric acid customers,
accounts and market shares on a worldwide basis. ADM, along with other
defendants, has moved to dismiss this action. ADM, along with other companies,
also has been named as a defendant in two non-class action federal antitrust
suits involving the sale of citric acid. One action was filed on June 9, 1997
in the United States District Court for the Northern District of California and
is encaptioned The Proctor & Gamble Manufacturing Co., et al. v.
Archer-Daniels-Midland Company, et al., Civil Action No. 97-2155 (VRW). The
other action was filed on June 26, 1997 in the United States District Court for
the Northern District of California and is encaptioned Conopco, Inc., et al. v.
Archer-Daniels-Midland Company, et al., Civil Action No. 97-2407 (MMC). Both
actions allege violations of federal antitrust laws, including allegations that
defendants agreed to fix, raise and maintain the price of citric acid, and seek
an injunction against continued alleged illegal conduct, treble damages of an
unspecified amount, attorney's fees and costs, and other unspecified relief.
These actions, which have been brought by entities that opted out of the federal
class action, have been coordinated with In Re Citric Acid Antitrust Litigation
that also is pending in the United States District Court for the Northern
District of California. ADM and the plaintiffs in Conopco have settled this
action, the terms of which provide for consideration to be paid by ADM in the
form of cash and product in amounts not deemed material. The parties are in the
midst of discovery in the remaining action.
State Actions. ADM, along with other companies, also has been named as a
defendant in one putative class action antitrust suit filed in Alabama state
court involving the sale of citric acid. This action alleges violations of the
Alabama antitrust laws, including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the prices of citric acid,
and seeks an injunction against continued alleged illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other unspecified relief. The
putative class in the Alabama action comprises certain indirect purchasers of
citric acid in the State of Alabama from July 1993 until July 1995. This action
was filed on July 27, 1995 in the Circuit Court of Walker County, Alabama and is
encaptioned Seven Up Bottling Co. of Jasper, Inc. v. Archer-Daniels-Midland Co.,
et al., Civil Action No. 95-436. ADM currently is seeking appellate review of
the denial of its motion to dismiss this action. ADM, along with other
companies, also has been named as a defendant in two putative class action
antitrust suits filed in California state court involving the sale of citric
acid. These actions allege violations of the California antitrust and unfair
competition laws, including allegations that the defendants conspired to fix,
maintain or stabilize the price of citric acid, and seek injunctions against
continued illegal conduct, treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative classes in these
cases comprise certain indirect purchasers of citric acid within the State of
California during certain periods in the 1990s. One such action was filed on
June 12, 1996 in the Superior Court of the County of San Francisco, California
and is encaptioned Bianco v. Archer Daniels Midland Co., et al., Civil Action
No. 978912. The second action
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was filed on June 28, 1996 in San Francisco County Superior Court and is
encaptioned Wignall v. Archer Daniels Midland Co., et al., Civil Action No.
979360. These actions recently have been coordinated before a single court in
San Francisco, County, California under the caption, Food Additives
(Lysine/Citric Acid) cases, Coordination Proceeding No. 3265. ADM, along with
other companies, also has been named as a defendant in one putative class action
antitrust suit filed in Wisconsin state court involving the sale of citric acid.
This action alleges violations of the laws of Wisconsin, Minnesota, Alabama,
Arizona, California, District of Columbia, Florida, Tennessee, West Virginia,
Mississippi, New Mexico, North Carolina, South Dakota, North Dakota, Kansas,
Louisiana, Michigan and Maine, including allegations that defendants conspired
to maintain the price of citric acid at artificially high levels and seeks
injunctive relief, treble damages of an unspecified amount, attorneys fees and
costs and other unspecified relief. The putative class in this case comprises
certain indirect purchasers of citric acid in the above referenced states during
the period July 1, 1991 through June 27, 1995. This action was filed on
December 20, 1996 in the Circuit Court for Milwaukee County, Wisconsin and is
encaptioned Raz, et al. v. Archer-Daniels-Midland Co., et al., No. 96-CV-9729.
High Fructose Corn Syrup/Citric Acid State Class Actions. ADM, along with
other companies, has been named as a defendant in six putative class action
antitrust suits involving the sale of both high fructose corn syrup and citric
acid. Two of these actions allege violations of the California antitrust and
unfair competition laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels the prices of high
fructose corn syrup and citric acid, and seek treble damages of an unspecified
amount, attorneys fees and costs, restitution and other unspecified relief. The
putative class in one of these California cases comprises certain direct
purchasers of high fructose corn syrup and citric acid in the State of
California during the period January 1, 1992 until at least October 1995. This
action was filed on October 11, 1995 in the Superior Court of Stanislaus County,
California and is entitled Gangi Bros. Packing Co. v. Archer-Daniels-Midland
Co., et al., Civil Action No. 37217. The putative class in the other California
case comprises certain indirect purchasers of high fructose corn syrup and
citric acid in the state of California during the period October 12, 1991 until
November 20, 1995. This action was filed on November 20, 1995 in the Superior
Court of San Francisco County and is encaptioned MCFH, Inc. v. Archer-Daniels-
Midland Co., et al., Civil Action No. 974120. The California Judicial Council
has bifurcated the citric acid and high fructose corn syrup claims in these
actions and coordinated them with other actions in San Francisco County Superior
Court and Stanislaus County Superior Court. ADM, along with other companies,
also has been named as a defendant in at least one putative class action
antitrust suit filed in West Virginia state court involving the sale of high
fructose corn syrup and citric acid. This action also alleges violations of the
West Virginia antitrust laws, including allegations that the defendants agreed
to fix, stabilize and maintain at artificially high levels the prices of high
fructose corn syrup and citric acid, and seeks treble damages of an unspecified
amount, attorneys fees and costs, and other unspecified relief. The putative
class in the West Virginia action comprises certain entities within the State of
West Virginia that purchased products containing high fructose corn syrup and/or
citric acid for resale from at least 1992 until 1994. This action was filed on
October 26, 1995, in the Circuit Court for Boone County, West Virginia, and is
encaptioned Freda's v. Archer-Daniels-Midland Co., et al., Civil Action No.
95-C-125. ADM, along with other companies, also has been named as defendant in
a putative class action antitrust suit filed in Michigan state court involving
the sale of high fructose corn syrup and citric acid. This action alleges
violations of the Michigan antitrust laws, including allegations that the
defendants agreed to fix, stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and seeks treble damages of
an unspecified amount, attorneys fees and costs, and other unspecified relief.
The putative class in the Michigan action comprises certain persons within the
State of Michigan that purchased products containing high fructose corn syrup
and/or citric acid during the period January 1993 through June 27, 1995. This
action was filed on February 26, 1996 in the Circuit Court for Ingham County,
Michigan, and is encaptioned Wilcox v. Archer-Daniels-Midland Co., et al.,
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Civil Action No. 96-82473-CP. The parties are in the midst of discovery in this
action. On September 29, 1997, the court denied the plaintiff's motion for
class certification. ADM, along with other companies, also has been named as a
defendant in a putative class action antitrust suit filed in the Superior Court
for the District of Columbia involving the sale of high fructose corn syrup and
citric acid. This action alleges violations of the District of Columbia
antitrust laws, including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the prices of high fructose
corn syrup and citric acid, and seeks treble damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief. The putative class in
the District of Columbia action comprises certain persons within the District of
Columbia that purchased products containing high fructose corn syrup and/or
citric acid during the period January 1, 1992 through December 31, 1994. This
action was filed on April 12, 1996 in the Superior Court for the District of
Columbia, and is encaptioned Holder v. Archer-Daniels-Midland Co., et al., Civil
Action No. 96-2975. The parties are in the midst of discovery in this action.
ADM, along with other companies, has been named as a defendant in a putative
class action antitrust suit filed in Kansas state court involving the sale of
high fructose corn syrup and citric acid. This action alleges violations of the
Kansas antitrust laws, including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the prices of high fructose
corn syrup and citric acid, and seeks treble damages of an unspecified amount,
court costs and other unspecified relief. The putative class in the Kansas
action comprises certain persons within the State of Kansas that purchased
products containing high fructose corn syrup and/or citric acid during at least
the period January 1, 1992 through December 31, 1994. This action was filed on
May 7, 1996 in the District Court of Wyandotte County, Kansas and is encaptioned
Waugh v. Archer-Daniels-Midland Co., et al., Case No. 96-C-2029. The parties
are in the midst of discovery in this action.
High Fructose Corn Syrup/Citric Acid/Lysine State Class Actions. ADM,
along with other companies, has been named as a defendant in six putative class
action antitrust suits filed in California state court involving the sale of
high fructose corn syrup, citric acid and/or lysine. These actions allege
violations of the California antitrust and unfair competition laws, including
allegations that the defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn syrup, citric acid
and/or lysine, and seek treble damages of an unspecified amount, attorneys fees
and costs, restitution and other unspecified relief. One of the putative
classes comprises certain direct purchasers of high fructose corn syrup, citric
acid and/or lysine in the State of California during a certain period in the
1990s. This action was filed on December 18, 1995 in the Superior Court for
Stanislaus County, California and is encaptioned Nu Laid Foods, Inc. v.
Archer-Daniels-Midland Co., et al., Civil Action No. 39693. The other five
putative classes comprise certain indirect purchasers of high fructose corn
syrup, citric acid and/or lysine in the State of California during certain
periods in the 1990s. One such action was filed on December 14, 1995 in the
Superior Court for Stanislaus County, California and is encaptioned Batson v.
Archer-Daniels-Midland Co., et al., Civil Action No. 39680. The other actions
are encaptioned Nu Laid Foods, Inc. v. Archer Daniels Midland Co., et al., No
39693 (Filed on December 18, 1995 Stanislaus County Superior Court); Abbott v.
Archer Daniels Midland Co., et al., No. 41014 (Filed on December 21, 1995,
Stanislaus County Superior Court); Noldin v. Archer Daniels Midland Co., et al.,
No. 41015 (Filed on December 21, 1995, Stanislaus County Superior Court); Guzman
v. Archer Daniels Midland Co., et al., No. 41013 (Filed on December 21, 1995,
Stanislaus County Superior Court) and Ricci v. Archer Daniels Midland Co., et
al., No. 96-AS-00383 (Filed on February 6, 1996, Sacramento County Superior
Court). As noted in prior filings, the plaintiffs in these actions and the
lysine defendants have executed a settlement agreement that has been approved by
the court and the California Judicial Council has bifurcated the citric acid and
high fructose corn syrup claims and coordinated them with other actions in San
Francisco County Superior Court and Stanislaus County Superior Court.
Shareholder Derivative Actions. Following the public announcement of the
grand jury investigations in June 1995 discussed above, three shareholder
derivative suits were filed against certain of
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ADM's then current directors and executive officers and nominally against ADM in
the United States District Court for the Northern District of Illinois and
fourteen similar shareholder derivative suits were filed in the Delaware Court
of Chancery. The derivative suits filed in federal court in Illinois were
consolidated under the name Felzen, et al. v. Andreas, et al., Civil Action No.
95-C-4006, 95-C-4535, and a consolidated amended derivative complaint was filed
on September 29, 1995. This complaint names all then current directors of ADM
(except Mr. Coan) and one former director as defendants and names ADM as a
nominal defendant. It alleges breach of fiduciary duty, waste of corporate
assets, abuse of control and gross mismanagement, based on the antitrust
allegations described above, as well as other alleged wrongdoing. On October
31, 1995, the Court granted the defendants' motion to transfer the Illinois
consolidated derivative action to the Central District of Illinois, wherein it
now bears the case number 95-2279. On April 26, 1996, the court dismissed the
suit without prejudice and permitted the plaintiffs twenty-one days to refile
it. The plaintiffs refiled the complaint on May 17, 1996. The defendants again
moved to dismiss the complaint on June 1, 1996. Plaintiffs have supplemented
the complaint to include the antitrust settlements and guilty plea described
above. The fourteen shareholder derivative suits filed in the Delaware Court of
Chancery have been consolidated as In Re Archer Daniels Midland Derivative
Litigation, Consolidated No. 14403. An amended and consolidated complaint was
filed on November 19, 1996. ADM moved to dismiss the complaint on December 12,
1996. On May 29, 1997, ADM executed a Memorandum of Understanding with counsel
for both the Illinois and Delaware shareholder derivative plaintiffs. This
Memorandum of Understanding provides for, among other things, $8 million to be
paid by or on behalf of certain defendants in these actions to ADM and certain
changes in the structure and policies of ADM's Board of Directors. On May 30,
1997, the United States District Court for the Central District of Illinois
preliminarily approved this settlement and on July 7, 1997 final approval was
granted. Certain entities appealed the final settlement approval order to the
United States Court of Appeals for the Seventh Circuit and that appeal is
pending. Provided the order approving the Memorandum of Understanding is
affirmed, the parties have agreed to jointly seek dismissal of the Delaware
actions with prejudice.
Delaware State Law/Federal Securities Laws Actions. ADM and certain of its
current and former directors also have been named as defendants in a putative
class action suit encaptioned Loudon v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 14638, filed in the Delaware Court of Chancery on October 20,
1995. This action alleges violations of Delaware state law and seeks
invalidation of the 1995 election of ADM's directors on the basis of alleged
omissions from the proxy statement issued by ADM prior to its October 19, 1995
annual meeting of shareholders. The Delaware Court of Chancery dismissed this
action on February 20, 1996. On September 17, 1997, the Supreme Court of
Delaware affirmed the lower court's judgment and remanded the case to provide
the plaintiff's an opportunity to replead. The revised complaint must be filed
on or before November 21, 1997.
Other. As described in the notes to the unaudited consolidated financial
statements included herein and management's discussion of operations and
financial condition, ADM has made provisions to cover assessed fines,
litigation settlements and related costs and expenses described above.
However, because of the early stage of other putative class actions and
proceedings described above, including those related to high fructose corn
syrup, the ultimate outcome and materiality of these matters cannot presently
be determined. Accordingly, no provision for any liability that may result
therefrom has been made in the consolidated financial statements.
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ADM MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
ADM is in one business segment -- procuring, transporting, storing,
processing and merchandising agricultural commodities and products. A summary
of net sales and other operating income by classes of products and services is
as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Year Ended June 30,
-------------------------------- -------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(in millions) (in millions)
<S> <C> <C> <C> <C> <C>
Oilseed products $2,309 $2,106 $ 8,860 $ 8,027 $ 7,620
Corn products 535 549 2,171 2,431 2,368
Wheat and other
milled products 387 449 1,631 1,662 1,371
Other products 420 226 1,191 1,120 1,196
------ ------ ------- ------- -------
$3,651 $3,330 $13,853 $13,240 $12,555
------ ------ ------- ------- -------
------ ------ ------- ------- -------
</TABLE>
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996.
Net sales and other operating income increased 10% for the quarter to $3.7
billion due primarily to sales attributable to recently acquired operations.
Sales of oilseed products increased 10% for the quarter due principally to
higher sales volumes reflecting strong worldwide vegetable oil demand. This
increase was partially offset by lower average selling prices reflecting the
lower cost of raw materials. Sales of corn products decreased 2% due primarily
to lower average selling prices for both ADM's sweetener products and fuel
alcohol. This decrease was partially offset by increased sales volumes for both
fuel alcohol and sweetener products as well as by increased average selling
prices for lysine. Sales of wheat and other milled products decreased 14% for
the quarter due to decreased average selling prices reflecting the lower cost of
raw materials. The increase in other products and services was due principally
from sales related to ADM's recently acquired cocoa business.
Cost of products sold and other operating costs increased $366 million for
the quarter to $3.3 billion due principally to costs related to recently
acquired operations. To a lesser extent, costs increased due to higher sales
volumes partially offset by lower average raw material costs.
Gross profit declined $45 million to $325 million for the quarter due
primarily to the net effect of decreased sales prices versus lower raw material
costs and decreased merchandising and transportation margins. These decreases
were partially offset by increased sales volumes and margins from recently
acquired operations.
Selling, general and administrative expenses decreased $176 million to $135
million due primarily to decreased legal and litigation related costs of $200
million arising out of the DOJ's antitrust investigation of ADM's lysine and
citric acid products as well as a securities suit brought by shareholders
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(see note 4 to the unaudited consolidated financial statements below).
Additionally, selling, general and administrative costs increased $13 million
due to expenses attributable to recently acquired operations.
The decrease in other income for the quarter was due to decreased
investment income due to lower invested funds, increased interest expense due to
higher borrowing levels and decreased gains on marketable securities
transactions. These decreases were partially offset by increased equity in
earnings of unconsolidated affiliates.
The decrease in income taxes for the quarter was a result of a lower
effective income tax rate partially offset by higher pretax earnings. The
decrease in ADM's effective income tax rate to 34% for the quarter compared to
an effective rate of 95% last year is due primarily to the non-deductibility for
income tax purposes last year of a portion of ADM's litigation settlements and
fines.
1997 compared to 1996
Net sales and other operating income increased $613 million to a record
high $13.9 billion for 1997 due principally to a 4% increase in average selling
prices and to a lesser extent sales attributable to recently acquired
operations. Sales of oilseed products increased 10% to $8.9 billion due
primarily to higher average selling prices reflecting relatively strong demand
for protein meal in the domestic market and the higher cost of raw materials.
Sales volumes of oilseed products were up for the year due principally to
improved export vegetable oil demand. Sales of corn products decreased 11% to
$2.2 billion due primarily to decreased sales volumes of fuel alcohol as reduced
corn supplies and the resulting higher cost of corn resulted in ADM reducing its
production of fuel alcohol. Average selling prices of corn products were up 3%
for the year due to the good demand for ADM's fuel alcohol and bioproducts,
including lysine and threonine. These average selling price increases were
partially offset by lower average selling prices for ADM's sweetener products as
a result of the start-up of new corn wet milling facilities in the industry and
the resulting overcapacity in the marketplace. Sales of wheat and other milled
products decreased 2% to $1.6 billion due to both decreased volumes of products
sold and to lower average selling prices reflecting excess milling capacity in
the industry. This volume decrease was partially offset by sales related to
recently acquired operations in Canada and the Caribbean. The increase in
other products and services was due principally to the sales related to ADM's
recently acquired cocoa business partially offset by lower merchandising and
transportation revenues.
Cost of products sold and other operating costs increased $700 million to
$12.6 billion due principally to a 5% increase in average raw material commodity
prices and to costs attributable to recently acquired operations.
The $86 million decrease in gross profit to $1.3 billion resulted primarily
from decreased merchandising and transportation margins and the net effect of
increased raw material costs versus higher sales prices. These decreases were
partially offset by gross profit attributable to recently acquired operations.
Selling, general and administrative expenses increased $202 million to $675
million due primarily to increased legal and litigation related costs of $171
million including provisions related to fines and litigation settlements arising
out of the DOJ's antitrust investigation of ADM's lysine and citric acid
products, as well as a securities suit brought by shareholders (see note 11 to
the financial statements
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below). Additionally, selling, general and administrative expenses increased
$26 million due to expenses attributable to recently acquired operations.
The decrease in other income for 1997 was due principally to decreased
gains on marketable securities transactions, decreased investment income due to
both lower invested funds and lower interest rates, increased interest expense
due primarily to increased levels of borrowings, and a decrease in other income
as 1996 results included a $15 million gain on the sale of ADM's Supreme Sugar
subsidiary.
The decrease in income taxes for 1997 resulted primarily from lower pretax
earnings. The increase in ADM's effective income tax rate to 41% for the year
compared to an effective rate of 34% last year was due principally to the
non-deductibility for income tax purposes of a portion of ADM's litigation
settlements and fines.
1996 compared to 1995
Net sales and other operating income increased $685 million to $13.2
billion for 1996 due principally to a 6% increase in average selling prices.
This increase was partially offset by the decrease due to the sale of ADM's
Supreme Sugar subsidiary and British Arkady bakery ingredient business, and the
contribution of ADM's formula feed operation to an unconsolidated subsidiary.
Sales of oilseed products increased 5% to $8 billion due primarily to higher
average selling prices reflecting relatively strong demand for protein meal in
the domestic market and the higher cost of raw materials. Sales volumes of
oilseed products were up slightly for the year as the aforementioned meal demand
more than offset the weaker export vegetable oil demand. Sales of corn products
increased 3% to $2.4 billion due primarily to increased sales volumes resulting
from good demand for ADM's fuel, beverage, and industrial alcohol, as well as
for various bioproducts, including citric acid, lysine, and MSG. These volume
increases were partially offset by lower average selling prices and lower sales
volumes for ADM's sweetener products. Sales of wheat and other milled products
increased 21% to $1.7 billion due principally to increased average selling
prices reflecting the higher costs of raw materials. These increased average
selling prices were partially offset by decreased sales volumes reflecting
reduced export flour demand. The decrease in sales of other products and
services for the year was due principally to the sale of ADM's Supreme Sugar
subsidiary and British Arkady bakery ingredient business as well as the
contribution of ADM's formula feed operation to an unconsolidated joint venture.
These decreases were partially offset by increased merchandising and
transportation revenues.
Cost of products sold and other operating costs increased $961 million to
$11.9 billion due primarily to a 16% increase in average raw material commodity
prices, partially offset by costs attributable to recently divested operations.
The $276 million decrease in gross profit to $1.4 billion in 1996 resulted
primarily from a $242 million decrease due to the net effect of higher raw
material commodity prices versus increased average selling prices and, to a
lesser extent, gross profit attributable to recently divested operations.
Selling, general and administrative expenses increased $23 million to $473
million in 1996 due primarily to an increase in legal and litigation related
expenses which were partially offset by $29 million of expenses attributable to
recently divested operations and by an $8 million decrease in bad debt expense.
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The increase in other income for 1996 was due principally to increased
gains on marketable securities transactions and, to a lesser extent, increased
equity in earnings of unconsolidated affiliates. Other income for 1996
included a $15 million gain on the sale of ADM's Supreme Sugar subsidiary.
The decrease in income taxes for 1996 was the result of lower pretax
earnings partially offset by a higher effective income tax rate. ADM's
effective income tax rate for 1996 was 34% compared to an effective rate of 33%
for 1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, ADM continued to show substantial liquidity with
working capital of $1.6 billion, including cash and marketable securities of
$593 million. During the quarter, ADM's cash and marketable securities net of
short-term debt decreased $429 million and working capital decreased $478
million reflecting ADM's business acquisitions, investments in property, plant
and equipment expansions and investments in affiliates. Capital resources
remained strong as reflected in ADM's net worth of $6.1 billion. ADM's ratio of
long-term debt to total capital at September 30, 1997 was approximately 26%.
As discussed in Note 4 to the unaudited consolidated financial statements
included herein, various grand juries under the direction of the DOJ have
been conducting investigations into possible violations by ADM and others of
federal antitrust laws and related matters with respect to the sale of
lysine, citric acid and high fructose corn syrup. In connection with an
agreement with the DOJ, ADM has paid the United States a fine of $100
million. This agreement constitutes a global resolution of all matters
between the DOJ and ADM and brings to a close all DOJ investigations of ADM.
In addition, related civil class actions and other proceedings have been
filed against ADM, which could result in ADM being subject to monetary
damages, other sanctions and expenses. As also discussed in Note 4 to the
unaudited consolidated financial statements included herein, ADM has settled
certain civil federal class action suits involving lysine, citric acid, and
securities, and certain state actions filed by indirect purchasers of lysine.
ADM made provisions of $231 million in prior years to cover such fines and
settlements and related costs and expenses. Because of the early stage of
other putative class actions and proceedings, including those related to high
fructose corn syrup, the ultimate outcome and materiality of these matters
cannot presently be determined. Accordingly, no provision for any liability
that may result therefrom has been made in the unaudited consolidated
financial statements.
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
The market risk inherent in ADM's market risk sensitive instruments and
positions is the potential loss arising from adverse changes in commodity
prices, marketable equity security prices, foreign currency exchange rates, and
interest rates as discussed below.
Commodities.
The availability and price of agricultural commodities are subject to wide
fluctuations due to unpredictable factors such as weather, plantings, government
(domestic and foreign) farm programs and policies, changes in global demand
created by population growth and higher standards of living, and global
production of similar and competitive crops. To reduce price risk caused by
market fluctuations, ADM
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generally follows a policy of hedging its inventories and related purchase and
sale contracts. In addition, ADM from time to time will hedge portions of its
production requirements. The instruments used are principally readily
marketable exchange traded futures contracts which are designated as hedges.
The changes in market value of such contracts have a high correlation to the
price changes of the hedged commodity. To obtain a proper matching of revenue
and expense, gains or losses arising from open and closed hedging transactions
are included in inventories as a cost of the commodities and reflected in the
statement of earnings when the product is sold.
A sensitivity analysis has been prepared to estimate ADM's exposure to
market risk of its commodity position. ADM's daily net commodity position
consists of inventories, related purchase and sales contracts, and exchange
traded contracts, including those to hedge portions of production requirements.
The fair value of such position is a summation of the fair values calculated for
each commodity by valuing each net position at quoted futures prices. Market
risk is estimated as the potential loss in fair value resulting from a
hypothetical 10% adverse change in such prices. The results of this analysis,
which may differ from actual results, are as follows for fiscal 1997:
Fair Value Market Risk
---------- -----------
(in millions)
Highest long position $468 $47
Highest short position 314 31
Average position (long) 123 12
Marketable Equity Securities. Marketable equity securities at June 30,
1997, which are recorded at a fair value of $911 million and include net
unrealized gains of $183 million, have exposure to price risk. This risk is
estimated as the potential loss in fair value resulting from a hypothetical 10%
adverse change in prices quoted by stock exchanges and amounts to $91 million.
Actual results may differ.
Currencies. In order to reduce the risk of foreign currency exchange rate
fluctuations, ADM follows a policy of hedging substantially all transactions,
except for amounts permanently invested as described below, denominated in a
currency other than the functional currencies applicable to each of its various
entities. The instruments used for hedging are readily marketable exchange
traded futures contracts and forward contracts with banks. The changes in
market value of such contracts have a high correlation to the price changes in
the currency of the related hedged transactions. The potential loss in fair
value for such net currency position resulting from 10% adverse change in
foreign currency exchange rates is not material.
The amount permanently invested in foreign subsidiaries and affiliates and
translated into dollars using the year end exchange rate is $1.7 billion at June
30, 1997. The potential loss in fair value resulting from a hypothetical 10%
adverse change in quoted foreign currency exchange rates amounts to $167
million. Actual results may differ.
Interest. At June 30, 1997, the fair value of ADM's long-term debt is
estimated at $2.7 billion using quoted market prices or discounted future cash
flows based on ADM's current incremental borrowing rates for similar types of
borrowing arrangements. Such fair value exceeded the long-term debt carrying
value by $336 million. Market risk is estimated as the potential increase in
fair value resulting from a hypothetical one-half percent decrease in interest
rates and amounts to $107 million.
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SHARE PRICE AND DIVIDEND INFORMATION
FOR ADM COMMON STOCK AND MMC COMMON STOCK
ADM Common Stock is listed and principally traded on the NYSE under the
symbol "ADM." As of October 31, 1997, there were outstanding 557,527,630 shares
of ADM Common Stock.
There is no public trading market for MMC Common Stock. However, certain
appraisals have been made by an independent appraisal firm for the purpose of
valuing shares of MMC Common Stock held by the MMC Employees' Profit Sharing
Plan, as discussed below.
The following table shows, for the calendar periods indicated, the reported
high and low sale prices on the NYSE Composite Tape for, and the cash dividends
paid per share of, ADM Common Stock:
ADM
Common Stock
----------------------------------------
High Low Dividends
--------- --------- ---------
1995:
First Quarter.......... $18.13 $15.75 $.022
Second Quarter......... 17.13 15.63 .022
Third Quarter.......... 16.38 13.00 .022
Fourth Quarter......... 16.63 13.50 .046
1996:
First Quarter.......... 17.75 15.25 .046
Second Quarter......... 18.38 16.25 .046
Third Quarter.......... 18.38 14.88 .046
Fourth Quarter......... 22.00 18.13 .048
1997:
First Quarter.......... 21.88 16.50 .048
Second Quarter......... 22.88 16.25 .048
Third Quarter.......... 24.63 20.31 .048
Fourth Quarter (through
December 8, 1997)...... 24.43 18.00 .050
With respect to MMC Common Stock, MMC paid dividends totaling $250 in each
of fiscal 1996 and fiscal 1997. No dividends were paid for the first or
second quarters of fiscal 1998. The value of the MMC Common Stock, appraised
quarterly by an independent appraisal firm for the purpose of valuing shares of
MMC Common Stock held by the MMC Employees' Profit Sharing Plan, ranged from
$5,500 to $5,000 in fiscal 1996 and $5,000 to $4,000 in fiscal 1997. For the
first and second quarters of fiscal 1998 the appraised values were $4,000
and $4,300, respectively. These valuations were not prepared with the intent
that they serve as an estimate of the price that would be realized through a
sale of MMC to a third party and do not represent necessarily the price paid for
or received in the purchases or sales of shares of MMC Common Stock during the
corresponding periods. The appraisals were prepared solely to assist the
Administrative Committee of the MMC Employees' Profit Sharing Plan in fulfilling
its responsibilities to value the shares of MMC Common Stock held by the plan.
On September 12, 1997, public announcement of the Merger was made. The
closing sale price per share of ADM Common Stock on the NYSE Composite Tape on
September 11, 1997 (the last trading day
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<PAGE>
prior to the public announcement of the Merger) was $22.625. On December 8,
1997, the closing sale price per share on the NYSE Composite Tape of ADM
Common Stock was $21.25. If the Exchange Ratio is not adjusted, shareholders
of MMC who are to receive shares of ADM Common Stock would be entitled to
receive 254.118 shares of ADM Common Stock, having a market value of $5,400,
in exchange for each share of MMC Common Stock held by them (assuming MMC
shareholders' equity as of 15 days prior to the Closing Date is at least $265
million). The aggregate number of shares of ADM Common Stock to be received
by each shareholder of MMC will be rounded to the nearest whole number of
shares. See the discussion of the determination of the actual Exchange Ratio
on the cover page of this Proxy Statement/Prospectus.
COMPARATIVE RIGHTS OF SHAREHOLDERS OF MMC AND ADM
AS A RESULT OF THE MERGER, SHAREHOLDERS OF MMC WILL BECOME STOCKHOLDERS OF
ADM, AND THEIR RIGHTS WILL BE GOVERNED BY THE ADM CERTIFICATE AND ADM BYLAWS,
WHICH DIFFER IN CERTAIN MATERIAL RESPECTS FROM MMC'S ARTICLES OF INCORPORATION
AND BYLAWS. THE FOLLOWING IS A SUMMARY OF THE MATERIAL DIFFERENCES BETWEEN THE
RIGHTS OF HOLDERS OF MMC COMMON STOCK AND HOLDERS OF ADM COMMON STOCK.
GENERAL
MMC is incorporated under Illinois Law and ADM is incorporated under
Delaware Law. Holders of MMC Common Stock, whose rights as shareholders are
currently governed by the MMC Articles and the MMC Bylaws, will, at the
Effective Time of the Merger, become holders of ADM Common Stock and their
rights as such will be governed by the ADM Certificate and the ADM Bylaws.
Certain differences between the rights of holders of MMC Common Stock and ADM
Common Stock are summarized below.
Certain provisions contained in Delaware Law, the ADM Certificate and the
ADM Bylaws discourage transactions involving an actual or threatened change in
control of ADM. To the extent any of these provisions has such an effect,
stockholders might thereby be deprived of an opportunity to sell their shares at
a premium above the market price. These provisions could thus be considered to
be anti-takeover measures. See the discussion below for a description of
existing provisions in the ADM Certificate and the ADM Bylaws that may be viewed
as having anti-takeover effects.
DISSENTERS' OR APPRAISAL RIGHTS
Illinois Law grants shareholders the right to dissent and receive the fair
value of their shares in the event of certain amendments to or changes in the
articles of incorporation that adversely affect their shares, or certain
business transactions, including certain mergers. The MMC Articles do not
address dissenters' rights.
Under Delaware Law, stockholders of corporations being acquired pursuant to
a merger have the right to serve upon the corporation a written demand for
appraisal of their shares when the stockholders receive any form of
consideration for their shares other than (i) shares of the surviving
corporation, (ii) shares of any other corporation listed on a national
securities exchange or held of record by more than 2,000 stockholders,
(iii) cash in lieu of fractional shares, or (iv) any combination thereof.
Stockholders who perfect their appraisal rights are entitled to receive cash
from the corporation equal to the value of their shares as established by
judicial appraisal. Corporations may enlarge these statutory rights by
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<PAGE>
including in their certificate of incorporation a provision allowing the
appraisal rights in any merger in which the corporation is a constituent
corporation. The ADM Certificate does not contain any provision enlarging such
appraisal rights.
VOTE ON CERTAIN FUNDAMENTAL ISSUES
Illinois Law requires that a plan of merger, consolidation, exchange, sale
of all or substantially all of a corporation's assets other than in the ordinary
course, or dissolution be approved by at least two-thirds of the outstanding
shares entitled to vote thereon. Except with respect to certain unsolicited
business combinations and business combinations with interested shareholders,
the MMC Articles and Bylaws do not alter this general rule.
Delaware Law and the ADM Certificate require that any merger, consolidation,
sale of all or substantially all of the assets, or dissolution of a
corporation be approved by the affirmative vote of the holders of a majority
of the outstanding shares of the corporation entitled to vote thereon.
CUMULATIVE VOTING
Illinois Law and the MMC Bylaws provide that in all elections for directors,
every shareholder shall have the right to vote the number of shares owned by
him or her for as many persons as there are directors to be elected, or to
cumulate said shares, and give one candidate as many votes as the number of
directors multiplied by the number of his or her shares shall equal, or to
distribute such votes in any proportion among any number of candidates.
Delaware Law provides that the certificate of incorporation of any
corporation may grant stockholders the right to cumulate their votes. The ADM
Certificate does not provide stockholders the right to cumulate votes in the
election of directors. Therefore, stockholders holding a majority of ADM voting
stock will be able to elect all of ADM's directors.
SPECIAL MEETINGS OF THE SHAREHOLDERS
Illinois Law provides that special meetings of the shareholders may be
called by the president, the board of directors or the holders of not less than
one-fifth of all the outstanding shares entitled to vote on the matter for which
the meeting is called. Under the ADM Bylaws, special meetings of the
stockholders of ADM may be held upon the call of the Board of Directors, or the
Executive Committee, if one is selected, or of the President, and shall be
called by the President or the Secretary at the request in writing of
stockholders owning a majority of the capital stock of ADM entitled to vote at
the meeting.
SHAREHOLDER ACTION BY WRITTEN CONSENT
The MMC Articles do not permit actions to be taken by the shareholders
without a meeting. Written consents by the shareholders are not allowed.
Under Delaware Law, ADM may take any action that may be taken or is
required to be taken at any annual or special meeting of stockholders, without a
meeting, prior notice and a vote, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
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<PAGE>
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION
Illinois Law and the MMC Articles generally allow the corporation to amend
its articles of incorporation if the board of directors of the corporation
adopts a resolution approving such amendment, and the holders of at least
two-thirds of the outstanding shares entitled to vote in respect thereof vote in
favor of the amendment. In addition, the MMC Articles require the approval of
80 percent of the outstanding shares of the corporation to amend, alter or
repeal, or adopt any provision inconsistent with certain provisions of the MMC
Articles.
Under Delaware Law amendments to the ADM Certificate must be approved,
unless a greater affirmative vote is required under the ADM Certificate, by the
holders of a majority of all outstanding shares entitled to vote on an
amendment, including a majority of all outstanding shares of each class or
series if the rights of the holders of such securities would be adversely
affected by the amendment.
ANTI-TAKEOVER PROVISIONS
The MMC Articles contain certain provisions designed to prevent unsolicited
takeovers of the corporation. Specifically, such provisions require the
approval of outstanding shares representing at least 80 percent of the voting
power of the corporation to approve certain business combinations that have not
been recommended by the board of directors.
In addition, pursuant to Illinois Law and the MMC Articles, the corporation
is prohibited from engaging in certain business combinations with any interested
shareholder for a period of three years following the date on which such
shareholder became an interested shareholder, unless (i) the board of directors
of the corporation approved the business combination or the transaction in which
such shareholder became an interested shareholder, (ii) upon the consummation of
the transaction in which the shareholder became an interested shareholder, such
shareholder owned at least 85 percent of the outstanding voting shares of the
corporation (excluding shares held by certain persons), or (iii) the business
combination is approved by the board of directors and authorized at a meeting of
the shareholders by the affirmative vote of at least 66-2/3 percent of the
outstanding voting shares which are not owned by the interested shareholder.
Delaware has also enacted statutory provisions that limit certain business
combinations of Delaware corporations with interested stockholders. Under
Delaware Law, an interested stockholder (a stockholder whose beneficial
ownership in the corporation is at least 15 percent of the outstanding voting
securities) is precluded from entering into certain business combinations with
the corporation for a period of three years following the date on which the
stockholder became an interested stockholder unless, among other exceptions,
prior to that date the board of directors approves either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder. Delaware Law provides that the business combination
provisions have no effect if (i) the tender offer or other transaction by which
the stockholder became an interested stockholder results in the stockholder
beneficially owning at least 85 percent of the voting securities of the
corporation (exclusive of shares owned by directors who are also officers and
shares owned by certain employee stock option plans) or (ii) the business
combination is approved by the board of directors and two-thirds of the shares
held by stockholders other than the interested stockholder. ADM has not
opted-out of this Delaware anti-takeover law.
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<PAGE>
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS
The ADM Certificate provides that no director will be liable to ADM or its
stockholders for monetary damages for breach of fiduciary duty by the director
as a director, except that this provision does not eliminate or limit the
liability of the director to the extent provided by applicable law (i) for any
breach of the duty of loyalty of the director to ADM or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any unlawful action under
Section 174 of Delaware Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
In general, under Delaware Law the indemnification provided for therein is
not deemed to be exclusive of any nonstatutory indemnification rights provided
to directors, officers and employees under any by-law, agreement or vote of
stockholders or disinterested directors. The ADM Bylaws and the MMC Certificate
provide for the indemnification of directors, officers, agents and employees, to
the fullest extent permitted by Delaware Law against liability arising by reason
of the fact that such individual was a director, officer, agent or employee of
ADM or MMC, as the case may be.
Generally, Illinois Law provides that a corporation may indemnify any
person who is a party or is threatened to be made a party to any proceeding by
reason of the fact that such person is a director, officer, employee or agent of
the corporation, if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not oppose to the best interests of the
corporation, and, with respect to any criminal action, had no reasonable cause
to believe his or her actions were unlawful. The MMC Bylaws provide that the
corporation will indemnify those persons set forth in Illinois Law to the
fullest extent it is permitted to indemnify such persons.
ITEM 2. CHANGE-OF-CONTROL ARRANGEMENTS
Under certain circumstances, Sections 280G and 4999 of the Code impose
certain penalties with respect to compensation that is paid contingent upon a
change in control. The penalties are assessed if the payments are deemed
"Parachute Payments." A payment is considered a "Parachute Payment" if it is
equal to or greater than three times the employee's "base amount." The "base
amount" is an average of the employee's annual W-2 compensation for the prior
five years (or such shorter period if the employee has been employed with the
company less than five years). If a payment is deemed a "Parachute Payment,"
two penalties may be imposed:
(i) the recipient employee pays an excise tax of 20 percent of the
difference between the amount of the Parachute Payment in excess of the
base amount (the "Excess Parachute Payment"); and
(ii) the company cannot deduct for income tax purposes the amount of
the Excess Parachute Payment.
If consummated, the Merger would constitute a change of control of MMC as
defined under the Change-of-Control Arrangements, entitling the applicable
employee to certain benefits, provided certain conditions are fulfilled. See
"The Merger--Interest of Certain Persons in the Merger." Certain of the
benefits due or that may become due under the Change-of-Control Arrangements as
a result of the Merger would constitute Parachute Payments as defined in Code
Section 280G(b). Therefore, an estimated $2,759,000 of the amounts payable to
Mr. McKenna and an estimated $571,000 of the amounts payable to Mr. Schwarz
would constitute Excess Parachute Payments under Code Section 280G. Due to the
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<PAGE>
classification of such amounts as Excess Parachute Payments, no deduction would
be allowed to MMC for such amounts, and each applicable employee would be
subject to a 20 percent excise tax upon receipt of such amounts under Code
Section 4999(a). The 20 percent excise tax on such amounts under Code Section
4999(a) would result in a tax of $552,000 for Mr. McKenna and $114,000 for Mr.
Schwarz. In addition, MMC would be denied a deduction in the amount of
approximately $3,330,000 as a result of the classification of such payments as
Excess Parachute Payments. Final calculations of the foregoing amounts will be
determined by independent auditors using the actual dates of the change of
control and termination of employment.
The Change-of-Control Agreements take into account, for calculation
purposes, the tax consequences to the executives of Sections 280G and 4999 of
the Code. As a result, the payment for Mr. Foster under such agreement has been
reduced by approximately $35,000. The application of this provision to the
other executives has not resulted in any reductions.
Under Code Section 280(G)(b), the payments under the Change-of-Control
Arrangements should not be deemed Parachute Payments if they are approved by a
separate vote of more than 75 percent (or three-fourths) of the MMC Common Stock
entitled to vote thereon. If MMC's shareholders approve the proposal described
under this Item 2, MMC (as a wholly owned subsidiary of ADM) should be permitted
to report the full amount of payments under the Change-of-Control Arrangements
as deductions for income tax purposes and the executives receiving such payments
should not be required to pay excise taxes on any portion of the payments. In
addition, such approval would have the effect of restoring approximately
$35,000 to Mr. Foster under his Change-of-Control Agreement. However, since the
payment of the Parachute Payments is not contingent on such shareholder
approval, the IRS could assert the position that the Excess Parachute Payments
are non-deductible by MMC and impose the 20 percent excise tax on the recipients
of such amounts. MMC and the recipients believe the Code supports their
position and would vigorously contest such an assertion by the IRS.
Shareholder approval of the payments under the Change-of-Control is not a
condition to either the consummation of the Merger or the payment of the amounts
due under Change-of-Control Arrangements, including, the amounts which
constitute Parachute Payments, since MMC is contractually obligated to make such
payments.
THE BOARD OF DIRECTORS OF MMC RECOMMENDS THAT YOU VOTE FOR THE APPROVAL,
FOR TAX PURPOSES, OF CERTAIN PAYMENTS UNDER THE CHANGE-OF-CONTROL ARRANGEMENTS.
LEGAL MATTERS
The validity of the shares of ADM Common Stock to be issued in the Merger
will be passed upon for ADM by Faegre & Benson LLP, Minneapolis, Minnesota.
Certain tax consequences of the Merger will be passed upon for MMC by Winston &
Strawn, Chicago, Illinois.
EXPERTS
The consolidated financial statements of ADM as of June 30, 1997 and 1996
and for each of the three years in the period ended June 30, 1997, included in
this Proxy Statement/Prospectus, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing elsewhere
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<PAGE>
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of MMC and its subsidiaries as of
March 29, 1997, and March 30, 1996, and for the years then ended included in
this Proxy Statement/Prospectus have been audited by Deloitte & Touche LLP as
stated in its report appearing herein. The consolidated statements of income,
stockholders' equity and of cash flows of MMC and its subsidiaries as of
March 25, 1995, included in this Proxy Statement/Prospectus have been audited by
Price Waterhouse LLP as stated in its report appearing herein. The financial
statements of C&T Quincy, L.L.C. (a joint venture of MMC accounted for on the
equity method) as of March 31, 1997, and 1996 and for each of the three years in
the period ended March 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein. The balance sheet and statements of income, partners' capital and of
cash flows of ContiQuincy Export Company (a joint venture of MMC accounted for
on the equity method) for the year ended March 31, 1995, have been audited by
Arthur Andersen LLP, as stated in its report included herein. The statements of
income, members' equity, and cash flows of Associated Feed Blenders, L.L.C. (a
joint venture of MMC accounted for on the equity method) for the year ended
March 25, 1995, have been audited by McGladrey & Pullen LLP, as stated in its
report included herein. The statements of income, stockholders' equity and of
cash flows of Agri Sales, Inc. (consolidated with those of MMC) for the year
ended March 31, 1995, have also been audited by McGladrey & Pullen LLP as stated
in its report included herein. Such financial statements of MMC and its
consolidated subsidiaries (with joint ventures accounted for by the equity
method) are included herein in reliance upon the respective reports of such
firms given upon their authority as experts in accounting and auditing. All of
the foregoing firms are independent auditors.
CHANGE IN ACCOUNTANTS
On January 17, 1996, the Board of Directors of MMC, upon the
recommendation of its Audit Committee, determined to replace Price Waterhouse
LLP with Deloitte & Touche LLP as MMC's independent auditors for the year
ended March 30, 1996.
The reports of Price Waterhouse LLP on the consolidated financial
statements of MMC as of and for the two years ended March 25, 1995 did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. During the
two fiscal years ended March 25, 1995 and the subsequent interim period
preceding its dismissal, there were no disagreements with Price Waterhouse LLP
on any matter of accounting principles or practices, financial statement
disclosures of auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Price Waterhouse LLP would have caused that firm to make
reference in connection with its report to the event or subject matter of the
disagreement.
During the two fiscal years ended March 25, 1995, and through the date of
their appointment, Deloitte & Touche LLP did not provide any consultations to
MMC regarding the application of accounting principles to specific transactions
and the type of opinion that they may have rendered on the financial statements.
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INDEPENDENT ACCOUNTANTS
Representatives of Deloitte & Touche LLP are expected to be present at the
Special Meeting and will have the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
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INDEX TO FINANCIAL STATEMENTS
ADM FINANCIAL STATEMENTS
Summary of Significant Accounting Policies.................................F-3
Consolidated Statements of Earnings for the Years Ended
June 30, 1997, 1996 and 1995...........................................F-5
Consolidated Balance Sheets at June 30, 1997 and 1996......................F-6
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997, 1996 and 1995...........................................F-8
Consolidated Statements of Shareholders' Equity for the Years Ended
June 30, 1997, 1996 and 1995...........................................F-9
Note to Consolidated Financial Statements.................................F-10
Report of Independent Auditors............................................F-20
Consolidated Statements of Earnings for the Three Months Ended
September 30, 1997 and September 30, 1996 (unaudited).................F-21
Consolidated Balance Sheets at September 30, 1997 and September 30, 1996
(unaudited)........................................................F-22
Consolidated Statements of Cash Flows for the Three Months Ended
September 30, 1997 and September 30, 1996 (unaudited).................F-24
Notes to Consolidated Financial Statements (unaudited)....................F-25
MMC FINANCIAL STATEMENTS
Reports of Independent Auditors...........................................F-27
Consolidated Statements of Income for the Years Ended
March 29, 1997, March 30, 1996 and March 25, 1995.....................F-34
Consolidated Balance Sheets at March 29, 1997 and March 30, 1996..........F-35
Consolidated Statement of Stockholder's Equity for the Years Ended
March 29, 1997, March 30, 1996 and March 25, 1995.....................F-37
Consolidated Statement of Cash Flows for the Years Ended
March 29, 1997, March 30, 1996 and March 25, 1995.....................F-38
F-1
<PAGE>
Notes to Consolidated Financial Statements................................F-39
Condensed Consolidated Statements of Operations for the Six-Month
Periods Ended September 27, 1997 and
September 28, 1996 (unaudited)........................................F-51
Condensed Consolidated Balance Sheets at September 27, 1997 and
September 28, 1996 (unaudited)........................................F-52
Condensed Consolidated Statements of Cash Flows for the Six-Month
Periods Ended September 27, 1997 and
September 28, 1996 (unaudited)........................................F-54
Notes to Condensed Consolidated Financial Statements (unaudited)..........F-55
ADM -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business. ADM is in one business segment -- procuring,
transporting, storing, processing, and merchandising agricultural commodities
and products. The availability and price of agricultural commodities are
subject to wide fluctuations due to unpredictable factors such as weather,
plantings, government (domestic and foreign) farm programs and policies,
changes in global demand created by population growth and higher standards of
living, and global production of similar and competitive crops.
Principles of Consolidation. The consolidated financial statements include
the accounts of ADM and all majority-owned subsidiaries. Investments in
affiliates are carried at cost plus equity in undistributed earnings since
acquisition.
Use of Estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect amounts reported in its
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Reclassification. Certain items in prior year financial statements have been
reclassified to conform to the current year's presentation.
Cash Equivalents. ADM considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be cash
equivalents.
Marketable Securities. ADM classifies all of its marketable securities as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of income taxes, reported as a
component of shareholders' equity.
Inventories. Inventories, consisting primarily of merchandisable
agricultural commodities and related value-added products, are carried at
cost, which is not in excess of market prices. Inventory cost methods
F-2
<PAGE>
include the last-in, first-out (LIFO) method, the first-in, first-out (FIFO)
method and the hedging procedure method. The hedging procedure method
approximates FIFO cost.
To reduce price risk caused by market fluctuations, ADM generally follows
a policy of hedging its inventories and related purchase and sale contracts.
In addition, ADM from time to time will hedge portions of its production
requirements. The instruments used are readily marketable exchange traded
futures contracts which are designated as hedges. The changes in market value
of such contracts have a high correlation to the price changes of the hedged
commodity. Also, the underlying commodity can be delivered against such
contracts. To obtain a proper matching of revenue and expense, gains or
losses arising from open and closed hedging transactions are included in
inventories as a cost of the commodities and reflected in the statement of
earnings when the product is sold.
Property, Plant and Equipment. Property, plant, and equipment are recorded
at cost. ADM generally uses the straight line method in computing
depreciation for financial reporting purposes and generally uses accelerated
methods for income tax purposes. The annual provisions for depreciation have
been computed principally in accordance with the following ranges of asset
lives: buildings -- 10 to 50 years; machinery and equipment -- 3 to 30 years.
Net Sales. ADM follows a policy of recognizing sales at the time of product
shipment. Net margins from grain merchandised, rather than the total sales
value thereof, are included in net sales in the consolidated statements of
earnings. Sales of ADM, including the sales value of grain merchandised, were
$18.1 billion in 1997, $18.0 billion in 1996, and $15.6 billion in 1995, and
such sales include export sales of $5.4 billion in 1997, $5.7 billion in 1996
and $4.3 billion in 1995.
Per Share Data. Share and per share information have been adjusted to give
effect to all stock dividends, including the 5% stock dividend declared in
July 1997 and payable in September 1997. Net earnings per common share is
determined by dividing net earnings by the weighted average number of common
shares outstanding. The impact of common stock equivalents is not material.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 128 (SFAS 128) "Earnings
Per Share." This statement establishes standards for computing and presenting
basic and diluted earnings per share (EPS) for financial statements issued
for periods ending after December 15, 1997. The adoption of SFAS 128 will not
have a material effect on ADM's reported EPS.
ADM -- CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended June 30
------------------
1997 1996 1995
---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net sales and other operating income $13,853,262 $13,239,839 $12,555,403
F-3
<PAGE>
Cost of products sold and other operating costs 12,552,718 11,853,070 10,892,476
---------- ----------- ------------
Gross Profit 1,300,544 1,386,769 1,662,927
Selling, general and administrative expenses 675,103 473,294 450,365
---------- ----------- ------------
Earnings From Operations 625,441 913,475 1,212,562
Other income (expense) 18,964 140,938 (31,039)
---------- ----------- ------------
Earnings Before Income Taxes 644,405 1,054,413 1,181,523
Income taxes 267,096 358,501 385,608
---------- ----------- ------------
Net Earnings $377,309 $695,912 $795,915
---------- ----------- ------------
---------- ----------- ------------
Net earnings per common share $ .66 $ 1.20 $ 1.34
---------- ----------- ------------
---------- ----------- ------------
Average number of shares outstanding 567,954 577,547 596,139
---------- ----------- ------------
---------- ----------- ------------
</TABLE>
See notes to consolidated financial statements.
ADM -- CONSOLIDATED BALANCE SHEETS
June 30
------------------------
1997 1996
------------------------
Assets (In thousands)
Current Assets
Cash and cash equivalents $397,788 $534,702
Marketable securities 330,208 820,147
Receivables 1,329,350 1,131,591
Inventories 2,094,092 1,790,636
Prepaid expenses 132,897 107,607
----------- -----------
Total Current Assets 4,284,335 4,384,683
F-4
<PAGE>
Investments and Other Assets
Investments in and advances to affiliates 1,102,420 624,305
Long-term marketable securities 987,665 1,092,969
Other assets 271,352 233,611
----------- -----------
2,361,437 1,950,885
Property, Plant and Equipment
Land 118,898 114,542
Buildings 1,448,945 1,245,662
Machinery and equipment 6,841,225 6,034,979
Construction in progress 765,720 588,711
Less allowances for depreciation (4,466,193) (3,869,593)
----------- -----------
4,708,595 4,114,301
----------- -----------
$11,354,367 $10,449,869
ADM -- CONSOLIDATED BALANCE SHEETS
June 30
----------------------------
1997 1996
----------------------------
(In thousands)
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 604,831 $ -
Accounts payable 1,126,313 993,403
Accrued expenses 493,944 525,626
Current maturities of long-term debt 23,667 114,522
----------- -----------
Total Current Liabilities 2,248,755 1,633,551
Long-Term Debt 2,344,949 2,002,979
Deferred Liabilities
Income taxes 597,514 562,362
Other 113,020 106,165
----------- -----------
F-5
<PAGE>
710,534 668,527
----------- -----------
Shareholders' Equity
Common stock 4,192,321 3,869,875
Reinvested earnings 1,857,808 2,274,937
----------- -----------
6,050,129 6,144,812
----------- -----------
$11,354,367 $10,449,869
----------- -----------
----------- -----------
See notes to consolidated financial statements.
ADM -- CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30
-------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating Activities
Net earnings $ 377,309 $ 695,912 $ 795,915
Adjustments to reconcile to net cash provided by
operations
Depreciation and amortization 446,412 393,605 384,872
Deferred income taxes (12,235) 72,673 25,421
Amortization of long-term debt discount 29,094 25,584 21,908
(Gain) loss on marketable securities (59,549) (109,359) 27,633
transactions
Other (40,758) (33,243) 8,432
Changes in operating assets and liabilities
Receivables (23,225) (183,569) (82,203)
Inventories 23,046 (320,529) (41,561)
Prepaid expenses (18,760) (1,683) 5,219
Accounts payable and accrued expenses (110,653) 314,494 45,611
---------- ---------- ----------
Total Operating Activities 610,681 853,885 1,191,247
Investing Activities
Purchases of property, plant and equipment (779,508) (754,268) (558,604)
Net assets of businesses acquired (429,940) (28,612) (55,126)
Investments in and advances to affiliates (416,861) (110,615) (122,565)
Purchases of marketable securities (966,203) (816,401) (2,017,619)
Proceeds from sales of marketable securities 1,607,631 1,260,710 1,940,370
---------- ---------- ----------
Total Investing Activities (984,881) (449,186) (813,544)
F-6
<PAGE>
Financing Activities
Long-term debt borrowings 348,695 42,066 17,626
Long-term debt payments (115,853) (22,233) (32,304)
Net borrowings under line of credit agreements 421,046 - -
Purchases of treasury stock (312,525) (259,980) (179,613)
Cash dividends and other (104,077) (84,443) (45,213)
---------- ---------- ----------
Total Financing Activities 237,286 (324,590) (239,504)
---------- ---------- ----------
(136,914) 80,109 138,199
Increase (Decrease) In Cash And Cash
Equivalents
Cash And Cash Equivalents Beginning Of Period 534,702 454,593 316,394
---------- ---------- ----------
Cash And Cash Equivalents End Of Period $ 397,788 $ 534,702 $ 454,593
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
ADM -- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------
Shares Amount Reinvested
Earnings
--------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance July 1, 1994 343,639 $3,415,955 $ 1,629,466
Net earnings - - 795,915
Cash dividends paid - $.08 per share - - (46,825)
3-for-2 stock split 172,030 - -
5% stock dividend 25,358 406,019 (406,019)
Treasury stock purchases (9,756) (179,613) -
Foreign currency translation - - 66,005
Unrealized net gains on marketable securities - - 147,118
Other 1,253 26,616 (472)
---------- ---------- -----------
Balance June 30, 1995 532,524 3,668,977 2,185,188
Net earnings - - 695,912
Cash dividends paid - $.16 per share - - (90,860)
5% stock dividend 25,991 411,542 (411,542)
Treasury stock purchases (15,632) (259,980) -
Foreign currency translation - - (96,101)
Change in unrealized net gains on marketable
securities - - (7,421)
Other 2,938 49,336 (239)
---------- ---------- -----------
Balance June 30, 1996 545,821 3,869,875 2,274,937
F-7
<PAGE>
Net earnings - - 377,309
Cash dividends paid - $.19 per share - - (106,990)
5% stock dividend 26,565 594,590 (594,590)
Treasury stock purchases (16,707) (312,525) -
Foreign currency translation - - (73,393)
Change in unrealized net gains on marketable
securities - - (19,199)
Other 2,195 40,381 (266)
---------- ---------- -----------
Balance June 30, 1997 557,874 $4,192,321 $1,857,808
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
ADM -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-MARKETABLE SECURITIES AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----------- ----------- -----
(In thousands)
<S> <C> <C> <C> <C>
1997
United States government obligations
Maturity less than 1 year $ 455,657 $ 66 $ 19 $ 455,704
Maturity 1 year to 5 years 74,332 70 108 74,294
Other debt securities
Maturity less than 1 year 157,588 435 - 158,023
Equity securities 728,448 186,551 3,540 911,459
----------- ----------- ----------- -----------
$1,416,025 $187,122 $ 3,667 $1,599,480
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1996
United States government obligations
Maturity less than 1 year $1,184,216 $ 4,027 $ 235 $1,188,008
Maturity 1 year to 5 years 19,026 - 201 18,825
Other debt securities
Maturity less than 1 year 148,345 716 - 149,061
Maturity 1 year to 5 years 58,962 1,813 - 60,775
Equity securities 804,052 212,906 5,602 1,011,356
----------- ----------- ----------- -----------
$2,214,601 $219,462 $ 6,038 $2,428,025
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-8
<PAGE>
NOTE 2-INVENTORIES 1997 1996
---- ----
(In thousands)
LIFO inventories
FIFO value $ 521,277 $ 705,814
LIFO valuation reserve (44,811) (190,641)
----------- -----------
LIFO carrying value 476,466 515,173
FIFO inventories, including
hedging procedure method 1,617,626 1,275,463
----------- -----------
$2,094,092 $1,790,636
----------- -----------
----------- -----------
NOTE 3-ACCRUED EXPENSES
1997 1996
---- ----
(In thousands)
Payroll and employee benefits $ 128,205 $ 117,211
Income taxes 99,744 175,603
Other 265,995 232,812
----------- -----------
$ 493,944 $ 525,626
----------- -----------
----------- -----------
F-9
<PAGE>
NOTE 4-DEBT AND FINANCING ARRANGEMENTS
1997 1996
---- ----
(In thousands)
7.5% Debentures $350 million face
amount, due in 2027 $ 347,860 $ -
8.875% Debentures $300 million face
amount, due in 2011 298,331 298,271
8.125% Debentures $300 million face
amount, due in 2012 298,079 298,015
8.375% Debentures $300 million face
amount, due in 2017 294,285 294,178
7.125% Debentures $250 million face
amount, due in 2013 249,416 249,397
6.25% Notes $250 million
face amount, due in 2003 249,353 249,280
Zero Coupon Debt $400 million face
amount, due in 2002 209,967 183,736
7% Debentures $250 million face amount,
due in 2011 131,486 129,083
10.25% Debentures $100 million
face amount, due in 2006 98,847 98,767
6% Bonds 150 million Deutsche Mark
face amount, due in June 1997 - 98,370
Industrial Revenue Bonds at various
rates from 5.30% to 13.25% and due
in varying amounts to 2011 74,571 76,498
OTHER 116,421 141,906
---------- ----------
Total long-term debt 2,368,616 2,117,501
Less current maturities (23,667) (114,522)
---------- ----------
$2,344,949 $2,002,979
---------- ----------
---------- ----------
F-10
<PAGE>
At June 30, 1997, the fair value of ADM's long-term debt exceeded the carrying
value by $336 million, as estimated by using quoted market prices or discounted
future cash flows based on ADM's current incremental borrowing rates for similar
types of borrowing arrangements.
Unamortized original issue discounts on the 7% Debentures and Zero Coupon Debt
issues are being amortized at 15.35% and 13.80%, respectively. Accelerated
amortization of the discounts for tax purposes has the effect of lowering the
actual rate of interest to be paid over the remaining lives of the issues to
approximately 10.33% and 5.36%, respectively.
The aggregate maturities for long-term debt for the five years after June 30,
1997 are $24 million, $15 million, $11 million, $21 million and $428 million,
respectively.
At June 30, 1997 ADM had lines of credit totaling $864 million. The weighted
average interest rate on short-term borrowings outstanding at June 30, 1997 was
4.81%.
NOTE 5-SHAREHOLDERS' EQUITY
ADM has authorized 800 million shares of common stock and 500,000 shares of
preferred stock, both without par value. No preferred stock has been issued. At
June 30, 1997 and 1996, ADM had approximately 19.7 million and 33.4 million
common shares, respectively, in treasury. Treasury stock is recorded at cost,
$327 million at June 30, 1997, as a reduction of common stock.
Stock option plans provide for the granting of options to employees to purchase
common stock of ADM at market value on the date of grant. Options expire five to
ten years after the date of grant. At June 30, 1997, options for 4,320,588
shares at a weighted average price of $14.39 per share were outstanding of which
1,616,528 shares were exercisable at a weighted average price of $13.16 per
share. There were 3,958,635 shares available for future grant at June 30, 1997.
ADM accounts for its stock option plans in accordance with Accounting Principles
Board (APB) Opinion Number 25 "Accounting for Stock Issued to Employees." Under
APB 25 no compensation expense is recognized if the exercise price of the
employee stock option equals the market price on the grant date. Statement of
Financial Accounting Standards Number 123 "Accounting for Stock-Based
Compensation" requires the fair value of options granted and the pro forma
impact on earnings and earnings per share be disclosed when material. The pro
forma impact for 1997 and 1996 is not material.
Cumulative foreign currency translation losses of $107 million and unrealized
gains on securities of $120 million at June 30, 1997, net of applicable taxes,
are included as components of reinvested earnings.
F-11
<PAGE>
NOTE 6-OTHER INCOME (EXPENSE)
1997 1996 1995
-------------------------------------
(In thousands)
Investment income $ 121,991 $ 150,446 $ 147,133
Interest expense (197,214) (170,089) (170,886)
Gain (loss) on marketable
securities transactions 59,810 109,359 (27,633)
Equity in earnings (losses) of affiliates 35,243 31,780 (19,801)
Other (866) 19,442 40,148
-------------------------------------
$ 18,964 $ 140,938 $ (31,039)
-------------------------------------
-------------------------------------
Interest expense is net of interest capitalized of $41 million, $43 million and
$32 million in 1997, 1996 and 1995, respectively.
ADM made interest payments of $198 million, $188 million and $181 million in
1997, 1996 and 1995 respectively.
The realized gains on sales of available-for-sale marketable securities totaled
$63 million, $109 million and $18 million in 1997, 1996 and 1995, respectively.
The realized losses totaled $3 million and $46 million in 1997 and 1995,
respectively.
F-12
<PAGE>
NOTE 7-INCOME TAXES
For financial reporting purposes, earnings before income taxes includes the
following components:
1997 1996 1995
------------------------------------
(In thousands)
United States $ 563,086 $ 907,376 $1,022,245
Foreign 81,319 147,037 159,278
------------------------------------
$ 644,405 $1,054,413 $1,181,523
------------------------------------
------------------------------------
Significant components of income taxes are as follows:
1997 1996 1995
-------------------------------------
(In thousands)
Current
Federal $ 216,641 $ 207,166 $ 271,702
State 29,440 29,604 38,768
Foreign 27,352 46,646 42,085
Deferred
Federal (5,357) 69,253 30,191
State (2,910) 6,467 2,108
Foreign 1,930 (635) 754
------------------------------------
$ 267,096 $ 358,501 $ 385,608
------------------------------------
------------------------------------
Significant components of ADM's deferred tax liabilities and assets are as
follows:
1997 1996
---------------------
(In thousands)
Deferred tax liabilities
Depreciation $446,083 $413,792
Unrealized gain on marketable securities 62,957 73,727
Bond discount amortization 56,312 60,659
Other 76,992 66,812
---------------------
642,344 614,990
Deferred tax assets 29,318 27,822
Postretirement benefits
Other 64,186 76,337
---------------------
93,504 104,159
---------------------
Net deferred tax liabilities 548,840 510,831
F-13
<PAGE>
Current net deferred tax assets included in
prepaid expenses 48,674 51,531
---------------------
Non-current net deferred tax liabilities $597,514 $562,362
---------------------
---------------------
Reconciliation of the statutory federal income tax rate to ADM's effective tax
rate is as follows:
1997 1996 1995
-------------------------------------
Statutory rate 35.0% 35.0% 35.0%
Litigation settlements and fines 7.5 - -
State income taxes, net of
federal tax benefit 2.7 2.2 2.3
Foreign sales corporation (3.4) (2.4) (1.8)
Other (0.4) (0.8) (2.9)
-------------------------------------
Effective rate 41.4% 34.0% 32.6%
-------------------------------------
-------------------------------------
ADM made income tax payments of $312 million, $268 million and $354 million in
1997, 1996 and 1995, respectively.
Undistributed earnings of ADM's foreign subsidiaries amounting to approximately
$460 million at June 30, 1997, are considered to be permanently reinvested and,
accordingly, no provision for U.S. income taxes has been provided thereon. It is
not practicable to determine the deferred tax liability for temporary
differences related to these undistributed earnings.
NOTE 8-LEASES
ADM has noncancellable operating leases with total future rental commitments of
$161 million, which range from $7 million to $31 million during each of the next
five years, and expire on various dates through 2026. Rent expense for 1997,
1996 and 1995 was $69 million, $73 million and $73 million, respectively.
F-14
<PAGE>
NOTE 9-EMPLOYEE BENEFIT PLANS
ADM has noncontributory and trusteed pension plans covering substantially all
employees. It is ADM's policy to fund pension costs as required by the Employee
Retirement Income Security Act. At June 30, 1997, the plans had assets at fair
value of $432 million and projected benefit obligations of $458 million based on
a discount rate of 7.5%. Pension expense is not material.
ADM has postretirement health care and life insurance plans covering
substantially all employees. The fully accrued accumulated postretirement
benefit obligations (APBO) for the unfunded plans at June 30, 1997 were $59
million, based on a discount rate of 7.5% and an assumed health care cost trend
rate of 9.7% for 1998 gradually decreasing to 5.5% by 2004. Expense of these
plans is not material. A 1% increase in the health care cost trend rate
assumption would not have had a material impact on the APBO or expense for the
year.
In addition, ADM has savings and investment plans available to eligible
employees with one year of service. Employees may contribute up to 6% of their
salaries, not to exceed $9,500. ADM matches these contributions, at various
levels, to a maximum of $6,333.
F-15
<PAGE>
NOTE 10-GEOGRAPHIC INFORMATION
1997 1996 1995
-------------------------------------
(In millions)
Net sales and other operating income:
United States $ 9,773 $ 9,661 $ 9,052
Europe 3,039 2,753 2,754
Other foreign 1,041 826 749
-------------------------------------
$ 13,853 $ 13,240 $ 12,555
-------------------------------------
-------------------------------------
Sales or transfers between geographic areas:
United States $ 354 $ 282 $ 166
Europe 51 108 115
Other foreign 146 133 54
-------------------------------------
$ 551 $ 523 $ 335
-------------------------------------
-------------------------------------
Earnings from operations:
United States $ 550 $ 805 $ 1,089
Europe 46 69 77
Other foreign 29 39 47
-------------------------------------
$ 625 $ 913 $ 1,213
-------------------------------------
-------------------------------------
Identifiable assets:
United States $ 6,663 $ 6,025 $ 5,351
Europe 1,288 929 846
Other foreign 585 418 334
-------------------------------------
$ 8,536 $ 7,372 $ 6,531
-------------------------------------
-------------------------------------
Earnings from operations represent earnings before other income and income
taxes.
Sales or transfers between geographic areas are made at established transfer
prices.
Identifiable assets exclude cash and cash equivalents, marketable securities and
investments in and advances to affiliates. At June 30, 1997, approximately $1.3
billion of ADM's cash and cash equivalents, marketable securities and
investments in affiliates were foreign assets, of which $697 million were in
Europe.
F-16
<PAGE>
NOTE 11 - ANTITRUST INVESTIGATION AND RELATED LITIGATION
Federal grand juries in the Northern Districts of Illinois, California and
Georgia, under the direction of the DOJ, have been investigating possible
violations by ADM and others with respect to the sale of lysine, citric acid and
high fructose corn syrup, respectively. In connection with an agreement with the
DOJ, ADM has paid the United States a fine of $100 million. This agreement
constitutes a global resolution of all matters between the DOJ and ADM and
brings to a close all DOJ investigations of ADM.
Following public announcement in June 1995 of these investigations, ADM and
certain of its then current directors and executive officers were named as
defendants in a number of putative class action suits for alleged violations of
federal securities laws on behalf of all purchasers of securities of ADM during
the period between certain dates in 1992 and 1995. ADM, along with other
domestic and foreign companies, was named as a defendant in a number of putative
class action antitrust suits and other proceedings involving the sale of lysine,
citric acid, and high fructose corn syrup. The plaintiffs generally request
unspecified compensatory damages, costs, expenses and unspecified relief. ADM
and the individuals named as defendants intend to vigorously defend these
actions and proceedings unless they can be settled on terms deemed acceptable by
the parties. These matters have resulted and could result in ADM being subject
to monetary damages, other sanctions and expenses.
ADM has made provisions of $200 million in fiscal 1997 and $31 million in fiscal
1996 to cover the fine, litigation settlements related to the federal lysine
class action, federal securities class action, the federal citric class action
and certain state actions filed by indirect purchasers of lysine, and related
costs and expenses associated with the litigation described in the preceeding
paragraph. Because of the early stage of other putative class actions and
proceedings, including those related to high fructose corn syrup, the ultimate
outcome and materiality of these matters cannot presently be determined.
Accordingly, no provision for any liability that may result therefrom has been
made in the consolidated financial statements.
ADM and its directors have also been named as defendants in a putative class
action suit which alleges violations of Delaware state law and seeks
invalidation of the election of ADM's directors on the basis of alleged
omissions from the proxy statement issued by ADM prior to its 1995 Annual
Meeting of Shareholders. This case was dismissed and is now on appeal in the
Supreme Court of Delaware.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Archer Daniels Midland Company
Decatur, Illinois
We have audited the accompanying consolidated balance sheets of Archer
Daniels Midland Company and subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
F-17
<PAGE>
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Archer Daniels
Midland Company and its subsidiaries at June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota
/s/ Ernst & Young LLP
----------------------
July 31, 1997
F-18
<PAGE>
ARCHER-DANIELS-MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-------------------------
(In thousands, except
per share amounts)
Net sales and other operating income $3,651,302 $3,330,475
Cost of products sold and other operating costs 3,326,134 2,960,475
---------- ----------
Gross Profit 325,168 370,000
Selling, general and administrative expenses 134,986 311,332
---------- ----------
Earnings From Operations 190,182 58,668
Other income 8,833 19,441
---------- ----------
Earnings Before Income Taxes 199,015 78,109
Income taxes 67,665 74,556
---------- ----------
Net Earnings $ 131,350 $ 3,553
---------- ----------
---------- ----------
Average number of shares outstanding 557,695 572,360
Net earnings per common share $.24 $.01
Dividends per common share $.048 $.046
See notes to consolidated financial statements.
F-19
<PAGE>
ARCHER-DANIELS-MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
---- ----
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 144,829 $ 397,788
Marketable securities 448,045 330,208
Receivables 1,553,390 1,329,350
Inventories 2,071,409 2,094,092
Prepaid expenses 156,395 132,897
----------- -----------
Total Current Assets 4,374,068 4,284,335
Investments and Other Assets
Investments in and advances to affiliates 1,327,325 1,102,420
Long-term marketable securities 1,104,476 987,665
Other assets 268,223 271,352
----------- -----------
2,700,024 2,361,437
Property, Plant and Equipment
Land 122,257 118,898
Buildings 1,492,703 1,448,945
Machinery and equipment 7,029,320 6,841,225
Construction in progress 871,773 765,720
Less allowances for depreciation (4,567,256) (4,466,193)
----------- -----------
4,948,797 4,708,595
----------- -----------
$12,022,889 $11,354,367
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-20
<PAGE>
ARCHER-DANIELS-MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
---- ----
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 1,016,015 $ 604,831
Accounts payable 1,255,368 1,126,313
Accrued expenses 517,998 493,944
Current maturities of long-term debt 27,111 23,667
----------- -----------
Total Current Liabilities 2,816,492 2,248,755
Long-term Debt 2,352,468 2,344,949
Deferred Credits
Income taxes 607,491 597,514
Other 113,829 113,020
----------- -----------
721,320 710,534
Shareholders' Equity
Common stock 4,180,285 4,192,321
Reinvested earnings 1,952,324 1,857,808
----------- -----------
6,132,609 6,050,129
----------- -----------
$12,022,889 $11,354,367
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
ARCHER-DANIELS-MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER, 30
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Operating Activities
Net earnings $ 131,350 $ 3,553
Adjustments to reconcile to net cash provided
by operations
Depreciation and amortization 117,539 106,254
Deferred income taxes 4,128 22,751
Amortization of long-term debt discount 7,849 6,875
(Gain) loss on marketable securities transactions (23,698) (30,718)
Other 6,152 21,546
Changes in operating assets and liabilities
Receivables (182,327) (79,361)
Inventories 144,598 223,700
Prepaid expenses (23,201) 4,710
Accounts payable and accrued expenses 131,376 277,501
---------- ----------
Total Operating Activities 313,766 556,811
Investing Activities
Purchases of property, plant and equipment (190,591) (227,852)
Net assets of businesses acquired (209,355) (10,970)
Investments in and advances to affiliates (188,095) (307,809)
Purchases of marketable securities (389,177) (375,671)
Proceeds from sales of marketable securities 188,891 236,683
---------- ----------
Total Investing Activities (788,327) (685,619)
Financing Activities
Long-term debt payments (3,900) (3,123)
Net borrowings under line of credit agreements 281,509 116,965
Purchases of treasury stock (30,406) (40,989)
Cash dividends and other (25,601) (25,876)
---------- ----------
Total Financing Activities 221,602 46,977
---------- ----------
Decrease In Cash and Cash Equivalents (252,959) (81,831)
Cash and Cash Equivalents Beginning of Period 397,788 534,702
---------- ----------
Cash and Cash Equivalents End of Period $ 144,829 $ 452,871
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
ARCHER-DANIELS-MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the quarter ended September 30, 1997
are not necessarily indicative of the results that may be expected for
the year ending June 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto set forth
above.
Certain items in prior year financial statements have been
reclassified to conform to the current year's presentation.
Note 2. Other Income
THREE MONTHS ENDED
SEPTEMBER 30
1997 1996
---- ----
(In thousands)
Investment income $28,202 $38,867
Interest expense (55,419) (46,127)
Gain on marketable securities
transactions 23,701 30,301
Equity in earnings of affiliates 10,557 (1,991)
Other 1,792 (1,609)
------- -------
$ 8,833 $19,441
------- -------
------- -------
Note 3. Per Share Data
All references to share and per share information have been adjusted
for the 5 percent stock dividend paid September 15, 1997.
Note 4. Antitrust Investigation and Related Litigation
Federal grand juries in the Northern Districts of Illinois, California
and Georgia, under the direction of the United States Department of
Justice ("DOJ"), have been investigating possible violations by the
Company and others with respect to the sale of lysine, citric acid and
high fructose corn syrup, respectively. In connection with an
agreement with the DOJ, the Company has paid the United States a fine
of $100 million. This agreement constitutes a global resolution of all
matters between the DOJ and the Company and brings to a close all DOJ
investigations of the Company.
F-23
<PAGE>
Following public announcement in June 1995 of these investigations,
the Company and certain of its then current directors and executive
officers were named as defendants in a number of putative class action
suits for alleged violations of federal securities laws on behalf of
all purchasers of securities of the Company during the period between
certain dates in 1992 and 1995. The Company, along with other domestic
and foreign companies, was named as a defendant in a number of
putative class action antitrust suits and other proceedings involving
the sale of lysine, citric acid, and high fructose corn syrup. The
plaintiffs generally request unspecified compensatory damages, costs,
expenses and unspecified relief. The Company and the individuals named
as defendants intend to vigorously defend these actions and
proceedings unless they can be settled on terms deemed acceptable by
the parties. These matters have resulted and could result in the
Company being subject to monetary damages, other sanctions and
expenses.
The Company has made provisions of $200 million in fiscal 1997 and $31
million in fiscal 1996 to cover the fine, litigation settlements
related to the federal lysine class action, federal securities class
action, the federal citric class action and certain state actions
filed by indirect purchasers of lysine, and related costs and expenses
associated with the litigation described in the proceeding paragraph.
Because of the early stage of other putative class actions and
proceedings, including those related to high fructose corn syrup, the
ultimate outcome and materiality of these matters cannot presently be
determined. Accordingly, no provision for any liability that may
result therefrom has been made in the unaudited consolidated financial
statements.
The Company and its directors have also been named as defendants in a
putative class action suit which alleges violations of Delaware state
law and seeks invalidation of the election of the Company's directors
on the basis of alleged omissions from the proxy statement issued by
the Company prior to its 1995 Annual Meeting of Shareholders. This
case was dismissed, appealed and has now been remanded to provide the
plaintiffs an opportunity to replead.
F-24
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Moorman Manufacturing Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Moorman
Manufacturing Company and Subsidiaries (the "Company") as of March 29, 1997 and
March 30, 1996, and the related consolidated statements of income, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of C&T Quincy, L.L.C. the Company's
investment in this joint venture is accounted for by the equity method. The
Company's equity of $16.4 million and $17.1 million in the net assets at March
29, 1997 and March 30, 1996, respectively, and of $.7 million and $3 million in
the net losses for the years then ended of this joint venture is included in the
accompanying consolidated financial statements. The financial statements of
this joint venture were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for this joint venture, is based solely on the report of such other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of the Company at March 29, 1997 and March 30, 1996, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
St. Louis, Missouri
May 12, 1997
(September 12, 1997 as to Note 14)
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
May 16, 1995
To the Board of Directors
Moorman Manufacturing Company
and Subsidiaries
In our opinion, the accompanying consolidated statements of income, retained
earnings and of cash flows present fairly, in all material respects, the results
of operations and cash flows of Moorman Manufacturing Company and Subsidiaries
for the year ended March 25, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of C. & T./Quincy Foods Inc., Conti-Quincy Export Company and
Associated Feed Blenders, L.L.C., joint ventures in which the Company had
aggregate investment interests of $22,497,314 at March 25, 1995, including
related aggregate losses of $3,943,057 for the year then ended. In addition, we
did not audit the financial statements of Agri Sales, Inc., a wholly owned
subsidiary of the Company, with assets of $61,765,996 at March 25, 1995 and
related revenues of $31,059,436 for the year then ended. Those statements were
audited by other auditors whose reports thereon have been furnished to us, and
our opinion expressed herein, insofar as it relates to the amounts included for
C. & T./Quincy Foods, Inc., Conti-Quincy Export Company, Associated Feed
Blenders, L.L.C. and Agri Sales, Inc., is based solely on the reports of the
other auditors. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principals used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Moorman
Manufacturing Company and Subsidiaries as of or for any period subsequent to
March 25, 1995.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Chicago, Illinois
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members
C. & T. Quincy, L.L.C.
We have audited the balance sheets of C. & T. Quincy, L.L.C. as of
March 31, 1996 and 1995, and the related statements of operations, changes in
members' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of C. & T. Quincy, L.L.C. at
March 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
April 26, 1996
St. Louis, Missouri
F-27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Members
C. & T. Quincy, L.L.C.
We have audited the balance sheets of C. & T. Quincy, L.L.C. as of
March 31, 1997 and 1996, and the related statements of operations, changes in
members' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of C. & T. Quincy, L.L.C. at
March 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
April 29, 1997
St. Louis, Missouri
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
ContiQuincy Export Company:
We have audited the balance sheet of ContiQuincy Export Company (a New York
general partnership) as of March 31, 1995, and the related statements of income,
partners' capital and cash flows for the year then ended (not included herein).
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ContiQuincy Export Company as
of March 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
May 9, 1995
F-29
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Agri Sales, Inc.
Saginaw, Michigan
We have audited the statements of income, retained earnings (deficit), and
cash flows of Agri Sales, Inc., a wholly-owned subsidiary of Moorman
Manufacturing Company for the period from November 14, 1994, to March 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Agri
Sales, Inc. for the period from November 15, 1994, to March 31, 1995, in
conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen LLP
Cedar Rapids, Iowa
April 28, 1995
F-30
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Associated Feed Blenders, L.L.C.
Quincy, Illinois
We have audited the statements of income, members' equity, and cash flows
of Associated Feed Blenders, L.L.C., 70% owned by Moorman Manufacturing Company,
for the period from August 8, 1994, date of inception, to March 25, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Associated
Feed Blenders, L.L.C. for the period from August 8, 1994, date of inception, to
March 25, 1995, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen LLP
Cedar Rapids, Iowa
April 18, 1995
F-31
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 29, 1997, MARCH 30, 1996 AND MARCH 25, 1995
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
NET SALES $1,157,859 $973,465 $904,321
COST OF SALES 1,048,707 851,954 765,063
----------- ---------- ----------
GROSS PROFIT ON SALES 109,152 121,511 139,258
SELLING, GENERAL AND ADMINISTRATIVE 113,286 115,486 118,622
----------- ---------- ----------
OPERATING (LOSS) MARGIN (4,134) 6,025 20,636
GAIN FROM BENEFIT PLAN CURTAILMENTS AND PLAN CHANGES 13,626 17,080 -
RESTRUCTURING AND CLOSURE CHARGES - (1,873) (4,942)
----------- ---------- ----------
OPERATING INCOME 9,492 21,232 15,694
OTHER INCOME (EXPENSE):
Interest income 5,484 8,528 7,629
Interest expense (7,296) (5,327) (1,867)
Equity in earning (losses) of joint ventures - net 272 (2,139) (3,061)
Other - net 2,214 2,571 (253)
----------- ---------- ----------
Total 674 3,633 2,448
----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 10,166 24,865 18,142
PROVISION FOR INCOME TAXES 3,386 3,935 5,054
----------- ---------- ----------
NET INCOME FROM CONTINUING OPERATIONS 6,780 20,930 13,088
GAIN (LOSS) FROM DISCONTINUED OPERATIONS -
Net of income tax (expense) benefit of $(61), $931 and $35,
respectively 93 (1,550) (55)
----------- ---------- ----------
NET INCOME $ 6,873 $ 19,380 $ 13,033
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 29, 1997, MARCH 30, 1996
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 20,240 $ 4,151
Short-term investments 2,895 38,238
Margin deposits 15,043 11,655
Accounts and notes receivable - less allowance
for doubtful accounts of $2,624 and
$1,596, respectively 71,523 74,676
Inventories 236,626 214,093
Prepaid income taxes 7,197 10,540
Prepaid expenses 1,560 1,030
Deferred income tax benefits 11,620 9,852
---------- ----------
Total current assets 366,704 364,235
---------- ----------
NONCURRENT ASSETS:
Notes receivable 5,524 3,541
Property, plant and equipment - net 135,023 104,914
Investments in joint ventures 21,226 20,530
Long-term investments 10,128 35,055
Deferred income tax benefits 567
Goodwill and other intangible assets -
less accumulated amortization of
$1,544 and $567, respectively 31,579 13,812
Other assets 3,281 2,308
---------- ----------
Total noncurrent assets 206,761 180,727
---------- ----------
TOTAL $ 573,465 $ 544,962
---------- ----------
---------- ----------
(continued)
See notes to consolidated financial statements.
F-33
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 29, 1997, MARCH 30, 1996
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
CURRENT LIABILITIES:
Accounts payable $ 60,264 $ 42,850
Borrowings under short-term line of credit
agreements 106,971 87,461
Current portion of long-term debt 4,354 3,535
Dividends payable 6,572 6,820
Customer deposits 4,843 5,323
Accrued compensation 9,245 7,815
Other accrued expenses 13,021 11,176
Income taxes payable 884 1,200
Taxes other than income 1,336 1,237
-------- --------
Total current liabilities 207,490 167,417
-------- --------
NONCURRENT LIABILITIES
Long-term debt 53,695 41,141
Accrued pension and other postretirement benefits 29,038 44,312
Deferred income taxes 6,550
Other liabilities 1,865 357
-------- --------
Total noncurrent liabilities 91,148 85,810
-------- --------
Total liabilities 298,638 253,227
-------- --------
CONTINGENCIES (Notes 12 and 14)
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized, 100,000
shares; issued and outstanding, 70,000 shares 70 70
Retained earnings 315,934 322,802
Less: treasury stock (15,230 and 13,177 shares,
respectively) at cost (41,177) (31,137)
-------- --------
Total stockholders' equity 274,827 291,735
-------- --------
TOTAL $573,465 $544,962
-------- --------
-------- --------
See notes to consolidated financial statements.
F-34
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED MARCH 29, 1997, MARCH 30, 1996 AND MARCH 25, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK - Par value $1.00 per share
(100,000 shares authorized) 70,000 $ 70 70,000 $ 70 70,000 $ 70
---------- ---------- ----------
---------- ---------- ----------
RETAINED EARNINGS:
Balance, beginning of year 322,802 317,675 320,135
Net income 6,873 19,380 13,033
Dividends declared (13,741) (14,253) (15,493)
---------- ---------- ----------
Balance, end of year 315,934 322,802 317,675
TREASURY STOCK:
Balance, beginning of year 13,177 (31,137) 8,171 (4,024) 7,653 (1,435)
Purchase of shares 2,053 (10,040) 5,006 (27,113) 518 (2,589)
---------- ---------- ---------- ---------- ---------- ----------
Balance, end of year 15,230 (41,177) 13,177 (31,137) 8,171 (4,024)
---------- ---------- ----------
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 274,827 $ 291,735 $ 313,721
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-35
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 29, 1997, MARCH 30, 1996 AND MARCH 25, 1995
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,873 $ 19,380 $ 13,033
Adjustments needed to reconcile to cash flows from operating activities:
Depreciation and amortization 16,780 16,553 14,485
Provision for losses on accounts and notes receivable - net 1,028 1,102 2,223
Provision for deferred income taxes 4,849 7,776 (1,700)
Gains on sales of property, plant and equipment (859) (1,108) 3,623
Equity in (earnings) losses of joint ventures (272) 2,139 3,061
Gains from benefit plan curtailment and plan changes (13,626) (17,080)
Other noncash charges 158
Loss on sale of assets of discontinued operations, net of tax benefit 1,205
Changes in assets and liabilities (net of effects of acquired businesses):
Accounts and notes receivable 13,187 (8,923) 9,439
Inventories (1,533) (55,157) 55,454
Margin deposits (3,388) (9,361) 215
Other assets 4,745 (6,069) 2,924
Accounts payable 5,315 1,495 (8,924)
Customer deposits (6,666) 2,304 795
Other liabilities (3,563) (8,837) (1,207)
---------- ---------- ----------
Net cash provided by (used in) operating activities 22,870 (54,423) 93,421
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of assets of discontinued operations - 2,705 1,138
Purchases of investments (100,213) (173,967) (166,866)
Sales of investments 159,847 199,965 189,176
Proceeds from sales of property, plant and equipment 3,706 4,152
Capital expenditures (30,940) (21,980) (16,635)
Loans made (25,755) (9,549) (4,649)
Loan repayments received 21,512 6,912 4,714
Investments in joint ventures (1,100) (401) (4,864)
Distributions from joint ventures 676 1,536
Business acquisitions - net of cash acquired (16,755) (19,293) (24,437)
---------- ---------- ----------
Net cash provided by (used in) investing activities 10,978 (9,920) (22,423)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 20,000 30,522 11,957
Reductions of long-term debt (13,238) (6,907) (136)
Net (payments) borrowings under line-of-credit agreements (491) 53,699 (41,233)
Purchases of treasury stock (10,040) (27,113) (2,589)
Dividends paid (13,990) (14,852) (15,558)
---------- ---------- ----------
Net cash provided by (used in) financing activities (17,759) 35,349 (47,559)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,089 (28,994) 23,439
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,151 33,145 9,706
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 20,240 $ 4,151 $ 33,145
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-36
<PAGE>
MOORMAN MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 29, 1997, MARCH 30, 1996 AND MARCH 25, 1995
(DOLLAR AMOUNTS IN MILLIONS)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION- Moorman Manufacturing Company and its subsidiaries (the
"Company") process and blend agricultural commodities. The Company owns
and operates facilities that:
- Manufacture livestock feed
- Crush and market soybeans and related meal and oil; and
- Store, process and grade edible beans.
The Company sells a broad range of products to a diverse base of
international and domestic customers.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Moorman Manufacturing Company and its subsidiaries, all of
which are wholly-owned. All significant intercompany transactions and
balances have been eliminated. Investments in joint ventures are accounted
for under the equity method. During 1997, 1996, 1995, the Company entered
into various transactions to purchase stock or certain assets of other
businesses (see Note 9). These transactions were accounted for as
purchases. Accordingly, the costs of the acquisitions were allocated to
the assets acquired and liabilities assumed based on their estimated fair
values at the dates of the acquisitions. The results of operations of the
acquired businesses since their dates of acquisition are included in the
accompanying consolidated financial statements.
FISCAL YEAR-END - The Company's fiscal year ends on the last Saturday in
March. There were fifty-two weeks in fiscal years 1997 and 1995 and
fifty-three weeks in fiscal year 1996.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform with the current year presentation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENT - The carrying amounts of investment
securities, accounts and notes receivable and payable and long-term debt
approximate their fair values, as determined based upon quoted market
prices where available or current market rates for instruments with similar
terms and maturities.
CONCENTRATIONS OF CREDIT RISK - The Company sells on credit to a diverse
customer base. Credit limits, ongoing credit evaluation and account
monitoring procedures are utilized to minimize the
F-37
<PAGE>
risk of loss. The Company does not anticipate any losses from
concentration of credit in excess of provisions currently recorded.
REVENUE RECOGNITION - Revenue is recognized at the date of shipment or
delivery based upon the terms of individual sales agreements. Certain of
the Company's sales agreements for bulk commodities are based upon weights
and grades determined upon delivery at a specified destination. Advance
payments under these agreements received upon shipment are deferred with
customer deposits and recognized as revenue when commodities are delivered
to the specified destination and final weights and grades are determined.
Advance payments received from growers for edible bean seed not yet shipped
are included in customer deposits and recognized as revenue upon shipment
of seed.
RESEARCH AND DEVELOPMENT COSTS - Expenditures relating to the development
of new products and processes, including significant improvements and
refinements to existing products, are expensed as incurred. Research and
development costs amounted to $2.8 million, $3.4 million, and $6.5 million
in 1997, 1996 and 1995, respectively.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash, time
deposits, money market investments and all short-term investments with
original maturities of three months or less.
INVESTMENTS - The Company's investment securities have been classified
as available for sale. Accordingly, the portfolio is reported at estimated
market value with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity. Unrealized gains
and losses were not significant in 1997 or 1996.
MARGIN DEPOSITS - Margin deposits represent cash held at commodity brokers
as collateral on certain transactions.
INVENTORIES - Agricultural commodities are generally stated at market.
Open commodity forward and futures contracts are also stated at market,
reduced by applicable provisions for commitment and performance risk. The
Company generally hedges its commodities transactions to minimize risk due
to market fluctuations. Inventories related to livestock feed operations
are stated at the lower of average cost or market and inventories of edible
beans are stated at the lower of cost, determined by the first-in,
first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using
primarily the straight-line method over the estimated useful lives (3 years
to 39 years) of the related assets. The Company capitalizes internal use
computer software costs including external purchases of software,
consulting and other professional fees incurred for services provided by
third parties, and payroll-related costs for employee time spent directly
on software projects.
GOODWILL AND OTHER INTANGIBLE ASSETS - The excess of the purchase price
over the fair value of net assets of businesses acquired is amortized on a
straight-line basis principally over forty years. The Company periodically
reviews goodwill and other intangible assets to assess recoverability.
Impairments are recognized in operations if the expected future operating
cash flows (undiscounted and without interest charges) derived from such
intangible assets are less than carrying values.
F-38
<PAGE>
INCOME TAXES - Deferred income taxes are determined using an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns.
2. INVESTMENTS
Short-term and long term investments consist of the following:
1997 1996
Short-term investments:
State and local government securities $ 2.6 $ 25.8
Treasury bills 0.3 10.4
Commercial paper 2.0
------- -------
Total short-term investments $ 2.9 $ 38.2
------- -------
------- -------
Long-term investments (maturing
through 2001):
State and local government securities $ 6.3 $ 31.2
Other 3.8 3.9
------- -------
Total long-term investments $ 10.1 $ 35.1
------- -------
------- -------
The market value of the investment portfolio approximates its amortized
cost at March 29, 1997 and March 20, 1996.
3. INVENTORIES
Inventories consist of the following:
1997 1996
Finished products $ 144.0 $ 86.9
Raw materials 68.6 104.0
Livestock 19.3 14.3
Other 4.7 8.9
-------- --------
Total $ 236.6 $ 214.1
-------- --------
-------- --------
F-39
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Major classifications of property, plant and equipment are as follows:
1997 1996
Land $ 8.3 $ 8.1
Buildings and improvements 71.3 64.8
Machinery and equipment 192.8 170.0
Vehicles 16.9 17.3
Purchased software and system
development costs 9.9
Other 10.4 10.1
Held for disposal 0.8
-------- --------
Total 309.6 271.1
Accumulated depreciation (178.5) (170.2)
Construction in progress 3.9 4.0
Net property, plant and
equipment $ 135.0 $ 104.9
-------- --------
-------- --------
5. INCOME TAXES
The components of the provision (benefit) for taxes on income from
continuing operations are:
1997 1996 1995
Current:
Federal $ (1.6) $ (3.5) $ 5.3
State (0.3) (0.4) 1.4
------- ------ ------
(1.9) (3.9) 6.7
------- ------ ------
Deferred:
Federal 5.0 7.0 (1.8)
State 0.3 0.8 0.1
------- ------ ------
5.3 7.8 (1.7)
------- ------ ------
Total $ 3.4 $ 3.9 $ 5.0
------- ------ ------
------- ------ ------
F-40
<PAGE>
Significant components of the Company's deferred tax assets and liabilities are:
1997 1996
Deferred tax assets:
Postretirement benefits $ 12.7 $ 18.3
Non-deductible reserves 6.9 4.2
Other 5.8 5.4
------- -------
25.4 27.9
------- -------
Deferred tax liabilities:
Depreciation 19.6 16.1
Other 0.7 1.4
------- -------
20.3 17.5
------- -------
Net deferred tax assets $ 5.1 $ 10.4
------- -------
------- -------
The Company believes it is more likely than not to realize the deferred tax
assets and, accordingly, no valuation allowance has been provided.
The difference between the U.S. Federal statutory rate and the Company's
effective tax rate is reconciled below:
1997 1996 1995
U.S. Federal tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
income tax benefit 1.9 1.2 5.1
Foreign sales corporation benefit (2.8) (3.8) (6.8)
Tax exempt interest (4.8) (4.1) (8.1)
Research and experimentation
credits (11.0)
Other 4.0 (1.5) 2.6
---- ----- ----
Effective tax rate 33.3% 15.8% 27.8%
---- ----- ----
---- ----- ----
6. EMPLOYEE RETIREMENT BENEFITS
RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS - The Company has
various defined benefit and contribution plans covering virtually all of
its employees. The Company's policy is to annually fund at least the
minimum amount required under the Employee Retirement Income Security Act
of 1974 (ERISA). The estimated cost of retiree health care and life
insurance benefit payments is accrued during the employee's active service
life.
PENSION BENEFITS - Effective December 31, 1995, a defined benefit pension
plan sponsored by the Company covering substantially all employees was
amended to freeze existing benefits, cease further benefit accruals and
fully vest each participant. After December 31, 1995, no new
F-41
<PAGE>
participants will enter the plan. This curtailment resulted in a pre-tax
gain of $6.8 in 1996. The actuarial present value of accumulated plan
benefits and net assets available for benefits for all plans is:
1997 1996
Actuarial present value of benefit
obligations:
Vested $ 87.4 $ 90.4
Nonvested - -
------- -------
Accumulated benefit obligation 87.4 90.4
Effect of increases in future
compensation levels 2.3 2.1
------- -------
Projected benefit obligation 89.7 92.5
Plan assets at fair value,
principally invested in an
unallocated group annuity contract 85.6 88.6
------- -------
Deficit of plan assets under
the projected benefit obligation (4.1) (3.9)
Unrecognized net transition asset (1.7) (1.9)
Unrecognized loss from experience 5.3 5.1
Unrecognized prior service cost 0.9 1.0
Minimum pension liability adjustment (0.7) (1.5)
------- -------
Accrued pension liability $ (0.3) $ (1.2)
------- -------
------- -------
Net periodic pension expense is comprised of:
1997 1996 1995
Service cost for benefits earned $ 0.3 $ 2.2 $ 2.8
Interest costs on the projected benefit
obligation 6.7 6.7 6.4
Actual return on plan assets (5.3) (11.6) (6.9)
Net amortizations and deferral (1.6) 4.9 0.5
------ ------ ------
Net pension expense (excluding
curtailment gain in 1996) $ 0.1 $ 2.2 $ 2.8
------ ------ ------
------ ------ ------
Actuarial assumptions used to calculate the net pension expense are as
follows:
1997 1996 1995
Discount rate 7.5% 8.0% 8.0%
Expected return on assets 8.0% 8.0% 8.0%
Expected increase in compensation
levels Not applicable 5.5% 5.5%
For certain plans, the Company recorded a minimum pension liability in 1997
and 1996 of $.7 and $1.5, respectively, representing the excess of the
accumulated benefit obligations over plan assets
F-42
<PAGE>
and accrued pension costs for those plans. Corresponding amounts are
included in intangible assets.
PROFIT SHARING - Substantially all employees are eligible to participate in
the Company's profit sharing plan after approximately one year of service.
The Company makes contributions to the profit sharing plan in accordance
with the provisions of the plan. The profit sharing plan expense totaled
$1.4, $1.2 and $3.9 for the years ended 1997, 1996 and 1995, respectively.
The profit sharing plan was amended effective January 1, 1995 to permit
employees to elect income deferrals prescribed in Internal Revenue Code
401(k). The Company provides matching contributions at a rate of $.25 per
dollar on the participant's elective deferrals up to 6% of the
participant's earnings. Company matching contributions to this plan were
$.6 and $.1 in 1997 and 1996, respectively. No elective deferrals or
employer matches were made in 1995.
OTHER POST-RETIREMENT BENEFITS - The Company also provides certain health
care and life insurance benefits for retired employees. Effective January
1, 1996, the Company initiated a change to be phased-in over a three-year
period after which retirees will pay the full cost of the health care and
life insurance benefits. This plan change significantly reduced the
Company's obligations under the plan and resulted in a negative prior
service cost being established as of December 31, 1995. This negative
prior service cost is being amortized over the three-year period during
which the plan change is phased in. Additionally, the plan was amended to
allow only employees eligible for retirement prior to January 1, 1996 to
participate. This curtailment resulted in a pre-tax gain of $10.3 in 1996.
The Company retains the right to make further changes or terminate these
benefits.
Other postretirement benefit cost is comprised of:
1997 1996 1995
Interest cost $ 0.3 $ 3.1 $ 3.8
Service cost 0.6 0.9
Amortization of negative prior
service cost (13.4) (3.6)
Net amortization and deferrals (0.2) (0.3)
------- ------ ------
Net periodic postretirement
benefit cost (excluding
curtailment gain in 1996) $ (13.3) $ 0.1 $ 4.4
------- ------ ------
------- ------ ------
The accrued postretirement benefit liability includes the following
components:
1997 1996
Actuarial present value of postretirement benefit
obligations:
Retirees $ 3.0 $ 5.2
Fully eligible active plan participants 0.3 0.4
Other active plan participants 0.3 0.4
------- -------
Accumulated postretirement benefit obligation 3.6 6.0
Unrecognized prior service cost 23.6 37.1
Unrecognized net gain 0.7 -
------- -------
Accrued postretirement liability 27.9 43.1
Less current portion 1.8 3.8
------- -------
Noncurrent liability $ 26.1 $ 39.3
------- -------
------- -------
F-43
<PAGE>
The accumulated postretirement benefit obligation was based on discount
rates for 1997 and 1996 of 7.5%. The health care cost trend rate used was
9.5% and 11.6% for 1997 and 1996, respectively, decreasing each year
through 2003 to an ultimate rate of 6 percent. A one-percent increase in
the assumed health care cost trend rate would not have had a material
effect on the accumulated benefit obligation or postretirement benefit
expense for 1997 for 1996.
7. LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term consists of:
1997 1996
7.5% installment notes to former shareholders
of Agri Sales, Inc. Interest payable
quarterly. Principal repayment in five
annual installments through 2001. $9.6 $12.0
8.0% installment notes to former shareholders
of Wm. Mueller & Sons, Inc. Interest payable
quarterly. Principal repayment in five annual
installments through 2001. 3.6 4.8
7.0% installment notes to former shareholders of
Gormley & Company. Interest payable quarterly.
Principal repayment in six annual installments
through 2002. 15.6
7.125% installment notes to former shareholders
of Wruble Elevator, Inc. Interest payable
quarterly. Principal repayment in six annual
installments through 2002. 2.2
Long-term debt supported by revolving credit
agreements with banks. 27.0 27.0
Other long-term debt. 0.1 0.8
----- -----
Total 58.1 44.6
Less current portion (4.4) (3.5)
----- -----
Long-term debt $53.7 $41.1
----- -----
----- -----
At March 31, 1997 and 1996, Quincy Soybean Co. a wholly-owned consolidated
subsidiary, and its wholly-owned subsidiary Quincy Soybean Co. of Arkansas
had agreements with various banks for unsecured lines of credit totaling
approximately $175.0 and $140.0, respectively. Except for $85.0 which is
committed through February 18, 2002, these bank lines are generally
uncommitted. At March 31, 1997 and 1996, $63.4 and $59.8, respectively,
was outstanding under these agreements, including $20.0 of long-term debt.
In January 1996, Quincy Soybean Company entered into a five-year interest
rate exchange agreement, commonly called an interest rate swap, to fix the
LIBOR rate at 5.43% on the $20.0 of long-term debt borrowed under the
five-year bank revolving credit agreement. The Company may borrow under
the credit agreement at LIBOR plus .22% to .30%. The Company terminated
this agreement during April 1997 and received a cash payment of $.9. This
amount will be recognized as a reduction of interest expense over the
remaining term of the related debt instrument.
F-44
<PAGE>
At March 31, 1997 and 1996, Agri Sales, Inc., a wholly-owned consolidated
subsidiary, had agreements with a bank for lines of credit totaling $90.0
and $65.0, respectively, which are guaranteed by Moorman Manufacturing
Company. A total of $65.0 under these lines of credit is committed through
December 22, 2000. The additional $25.0 in 1997 is uncommitted and expires
in June 1997. At March 31, 1997 and 1996 long-term debt of $7.0 is
borrowed under these agreements at a rate of 5.95%. In addition, short-
term borrowings outstanding under the line of credit agreements total $63.5
and $47.7 at March 31, 1997 and 1996, respectively.
The Company and its subsidiaries generally may borrow short-term under its
lines of credit at a rate approximating LIBOR plus .25%. Certain of the
credit agreements require satisfaction of certain financial covenants by
the Company and its subsidiaries, the most restrictive of which are minimum
net worth requirements.
8. JOINT VENTURES
The Company is a participant in several joint venture arrangements.
ContiQuincyBunge, LLC operates as an exporter of soybean meal and related
products. C&T Quincy, L.L.C. refines and packages vegetable oils.
Associated Feed Blenders, L.L.C. grinds and blends livestock feeds and
related products. P.G. Lecithin markets lecithin and related products.
C&T Quincy Foods of Portland holds property and storage facilities. The
Company sells materials and products to certain of these joint ventures, at
prevailing market prices, and has also provided unconditional guarantees
for its pro-rata share of working capital financing arrangements of certain
of the joint ventures. The following table summarizes information related
to those joint venture arrangements with significant related party
transactions or balances.
CONTIQUINCYBUNGE, LLC C&T QUINCY, L.L.C.
Type and percent ownership 33% member share 50% member share
Investments in joint ventures:
1997 $ 1.4 $ 16.4
1996 $ 0.8 $ 17.1
Equity in earnings (losses) of
joint ventures:
1997 $ 0.6 $ (0.7)
1996 $ 0.3 $ (3.0)
1995 $ 0.8 $ (4.5)
Receivables from joint ventures:
1997 $ - $ 1.0
1996 $ 0.4 $ 6.8
Payables to joint ventures:
1997 $ 0.2 $ -
1996 $ 0.4 $ -
Sales to joint ventures:
1997 $ 336.0 $ 107.2
1996 $ 223.1 $ 106.0
1995 $ 253.8 $ 111.0
Pro-Rata share of outstanding
debt of Joint Ventures
guaranteed at March 31, 1997 $ 21.0 $ 23.3
Maximum authorized guarantee of
joint venture obligations at
March 31, 1997 $ 25.0 $ 25.0
F-45
<PAGE>
The following table presents summarized financial information of
ContiQuincyBunge, LLC and C&T Quincy, L.L.C. as of and for the year ended
March 31, 1997:
CONTIQUINCYBUNGE,
LLC C&T QUINCY, L.L.C.
Current assets $ 75.8 $ 43.9
Total assets $ 75.8 $ 83.7
Current liabilities $ 71.3 $ 51.0
Total liabilities $ 71.3 $ 51.0
Sales $ 815.9 $ 202.5
Net income (loss) $ 1.8 $ (1.5)
9. BUSINESS ACQUISITIONS
During 1997 and 1996, the Company acquired the outstanding common stock or
certain net assets of several processors of edible beans through its Agri
Sales, Inc. subsidiary which was acquired during 1995. The consolidated
operations of the Company include the operations of the acquirees from
their acquisition dates. Prior year financial statements have not been
restated because of the insignificance of the related amounts. Information
concerning these acquisitions is as follows:
TOTAL
DATE OF ACQUISITION
ACQUIRED ACQUISITION COSTS GOODWILL
Agri Sales, Inc. November 1994 $ 24.4 $ 9.1
Wm. Mueller & Son, Inc. April 1995 7.5 4.6
Sacramento Valley Milling February 1996 11.7 -
Auburn Bean & Grain September 1996 4.0 -
Gormley & Company, Inc.,
Snake River Bean and
Red River Bean September 1996 20.9 16.1
Wruble Elevator, Inc. January 1997 3.6 1.1
As described in Note 7, the Company issued installment notes to former
shareholders of certain of these acquired businesses in connection with
these acquisitions.
10. RESTRUCTURING AND CLOSURE CHARGES
Restructuring and closure charges in 1996 of $1.9 relate primarily to a
management decision to reduce headcount within the Corporate office,
outsource the Company's dairy research operations, and write down current
software being utilized by the business that will be replaced by new
technology. All charges were paid by the end of March 31, 1997.
Restructuring and closure charges in 1995 of $4.9 relate primarily to a
management decision to outsource its information processing systems. The
initial charge to outsource the Company's information systems was $2.3.
Additionally, the Company incurred $1.1 in costs to design new order
fulfillment processes. The remainder of the $4.9 charge related to
severance payments to a select group of manufacturing employees and costs
to dispose of facilities no longer used.
11. DISCONTINUED OPERATIONS
The Company completed a transaction on November 20, 1995 in which it sold
substantially all the assets of the wholly-owned subsidiary, Quincy Design
& Manufacturing, Inc. ("QDM"). The
F-46
<PAGE>
selling price of $2.7 was received in cash. The consolidated financial
statements for 1995 have been restated to reflect the operation of QDM as
discontinued operations.
QDM operated as a manufacturer of livestock equipment including feeders,
gates and penning facilities used for livestock in confinement. The
Company also performed other custom metal fabrication. Assets sold include
land, building, equipment and inventory.
The earnings (losses) recorded consist of the following:
1997 1996 1995
(Loss) from sale of assets $ - $ (1.9) $ -
Earnings (losses) from operations 0.2 (0.6) 0.1
------- ------- ------
Earnings (losses) before income
tax benefit 0.2 (2.5) 0.1
(0.1) 0.9
------- ------- ------
Income (loss) from discontinued
operations $ 0.1 $ (1.6) $ 0.1
------- ------- ------
12. LITIGATION AND OTHER MATTERS
The Company is involved in various legal and environmental matters,
incidental to the conduct of its business. While the ultimate results of
these matters presently cannot be determined, management, based on
consultation with counsel, does not expect that the resolution of such
matters will have a material adverse effect on the Company's results of
operations or financial position.
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
1997 1996 1995
CASH PAID FOR:
Interest $ 7.3 $ 3.2 $ 1.9
Income taxes $ 6.4 $ 9.3 $ 2.7
CASH RECEIVED FOR:
Interest $ 5.4 $ 8.5 $ 6.7
Income taxes $ 11.3 $ - $ -
14. SUBSEQUENT EVENTS
Subsequent to year-end, management became aware of thefts by employees and
third parties at its Helena, Arkansas soybean processing facility.
Although the investigation is still continuing, management believes these
thefts occurred over approximately a 2 1/2 year period and involve
approximately $2.3. The impact of these thefts on the Company's financial
statements reduced gross margins from those that would have otherwise been
reflected during the periods of the theft. Management has notified the
Company's fidelity insurance carrier of the occurrence and the related
claim is pending.
On September 12, 1997, the Company entered into an agreement and plan of
merger with Archer-Daniels-Midland Company ("ADM") whereby each share of
MMC common stock issued and
F-47
<PAGE>
outstanding as of the effective date of the merger shall be converted into
the right to receive the Company shares at a number based upon a specified
conversion ratio. In connection with this transaction, the Company will
recognize expenses of approximately $4 related to the immediate vesting of
grants under a restricted stock unit plan with officers and directors as
specified by the change of control provisions of that plan. In addition,
the Company has change-of-control agreements with certain officers which
provide that in the event of a change-of-control of MMC, if either MMC
terminates the executive's employment other than for cause or if the
executive terminates his or her employment for "good reason," certain
benefits will be paid.
* * * * * *
F-48
<PAGE>
MOORMAN MANUFACTURING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
-----------------------------------------
(in thousands, except share and per share
amounts)
Net Sales 500,548 527,629
Cost of Sales 463,258 483,564
--------------------
Gross Profit 37,290 44,065
Selling, General & Administrative Expenses 48,233 49,989
--------------------
Loss from Operations (10,943) (5,924)
Other Income (Expense) (2,240) (224)
--------------------
Earnings Before Taxes (13,183) (6,148)
Income Taxes (4,905) (3,556)
--------------------
Net Loss from Continuing Operations (8,278) (2,592)
Discontinued Operations 0 (2)
--------------------
Net Loss (8,278) (2,594)
--------------------
--------------------
See notes to condensed consolidated financial statements.
F-49
<PAGE>
MOORMAN MANUFACTURING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
----------------------------
(in thousands)
ASSETS
Current Assets
Cash & cash equivalents 14,926 16,782
Short-term investments 1,015 44,934
Margin deposits 245 3,187
Receivables 96,203 74,628
Inventories 140,427 125,218
Prepaid Income taxes 12,797 13,091
Prepaid expenses 1,879 1,108
Deferred income tax benefits 9,151 6,119
----------------------------
Total Current Assets 276,643 285,067
Noncurrent Assets
Notes receivable 8,151 5,478
Investment in joint ventures 19,176 19,848
Long-term investments 6,485 26,314
Deferred income tax benefits 0 389
Goodwill and other intangible assets 30,969 27,357
Other assets 3,129 4,119
----------------------------
67,910 83,505
Property, Plant & Equipment
Land 8,336 8,259
Buildings 69,113 70,145
Machinery & equipment 208,746 194,203
Construction in progress 25,156 17,001
Other 10,319 11,246
Less allowance for depreciation (184,422) (180,093)
----------------------------
Net Property, Plant & Equipment 137,248 120,761
TOTAL ASSETS 481,801 489,333
----------------------------
----------------------------
See notes to condensed consolidated financial statements.
F-50
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 68,124 46,289
Short-term debt 27,870 34,026
Current maturities of long-term debt 3,477 3,199
Dividends payable 0 1,380
Customer deposits 9,138 12,165
Accrued compensation 9,265 7,973
Other accrued expenses 14,866 14,041
Taxes other than income 1,030 1,120
----------------------------
Total Current Liabilities 133,770 120,193
Noncurrent Liabilities
Long-term debt 50,075 53,716
Accrued pension & postretirement benefits 19,465 36,598
Deferred income taxes 6,531 0
Other liabilities 5,410 693
----------------------------
Total noncurrent liabilities 81,481 91,007
Total Liabilities 215,251 211,200
Stockholders' Equity
Common stock 70 70
Retained earnings 307,657 317,422
Less: treasury stock (41,177) (39,359)
----------------------------
Total Stockholders' Equity 266,550 278,133
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 481,801 489,333
----------------------------
----------------------------
See notes to condensed consolidated financial statements.
F-51
<PAGE>
MOORMAN MANUFACTURING COMPANY
See notes to condensed consolidated financial statements.
F-52
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
(in thousands)
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) (8,278) (2,594)
Adjustments needed to reconcile to cash flows from operating activities:
Depreciation & amortization 8,647 7,917
Provision for losses on accounts and notes receivable - net 534 592
Provision for deferred income taxes 2,451 1,894
(Gain)/Loss on sales of property, plant and equipment 733 (123)
Equity in losses of joint ventures 841 6
Gains from benefit plan changes (6,678) (6,670)
Changes in assets and liabilities:
Accounts and notes receivable (23,648) 5,949
Inventories 96,200 96,745
Margin deposits 14,800 8,750
Other assets (5,767) (5,719)
Accounts payable 7,859 2,087
Customer Deposits 4,295 6,841
Other liabilities 1,323 2,412
----------------------------
Net cash provided by operating activities 93,312 118,087
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (42,000) (67,522)
Sales/maturities of investments 47,301 69,403
Proceeds from sale of property, plant and equipment 2,627 242
Capital expenditures (13,400) (14,973)
Loans made (17,454) (13,195)
Loan repayments received 13,261 10,859
Investments in joint ventures (75) 0
Distributions from joint ventures 1,284 676
Business acquisitions - net of cash acquired 0 (15,532)
----------------------------
Net cash used in investing activities (8,456) (30,042)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) under line-of-credit agreements (79,101) (53,436)
Reduction of long-term debt (4,497) (5,528)
Purchase of treasury stock 0 (8,222)
Dividends paid (6,572) (8,228)
----------------------------
Net cash used in financing activities (90,170) (75,414)
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS: (5,314) 12,631
CASH & CASH EQUIVALENTS, BEGINNING OF YEAR 20,240 4,151
----------------------------
See notes to condensed consolidated financial statements.
F-53
<PAGE>
CASH & CASH EQUIVALENTS, END OF YEAR 14,926 16,782
----------------------------
----------------------------
</TABLE>
See notes to condensed consolidated financial statements.
F-54
<PAGE>
MOORMAN MANUFACTURING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Amounts in thousands)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form S-4 and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for annual financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended September 27, 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 28, 1998. For further information, refer to the
consolidated financial statements of the Company and footnotes thereto for
the year ended March 29, 1997 included in this Registration Statement.
2. INVENTORIES
Inventories consist of the following:
Finished products $ 91,187 $ 75,356
Raw materials 29,595 33,112
Livestock 14,037 10,831
Other 5,608 5,919
Total $ 140,427 $ 125,218
3. OTHER INCOME (EXPENSE)
Other income (expense) consists of the following:
Interest Income $ 1,955 $ 2,786
Interest Expense (3,463) (3,045)
Gain (loss) on sale of assets (736) 123
Other 4 (88)
Total $ (2,240) $ (224)
F-55
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
MOORMAN MANUFACTURING COMPANY,
ADM ACQUISITION CORP.
AND
ARCHER-DANIELS-MIDLAND COMPANY
DATED AS OF SEPTEMBER 12, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . .A-1
1.3 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . .A-2
1.4 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . .A-2
1.5 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-2
ARTICLE II CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . .A-2
2.1 Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . .A-2
2.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . .A-3
2.3 Dividends; Transfer Taxes. . . . . . . . . . . . . . . . . . . . . .A-4
2.4 No Fractional Securities . . . . . . . . . . . . . . . . . . . . . .A-5
2.5 Closing of Transfer Books. . . . . . . . . . . . . . . . . . . . . .A-5
2.6 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
2.7 Supplementary Action . . . . . . . . . . . . . . . . . . . . . . . .A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ADM AND ADMAC . . . . . . . .A-6
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . .A-7
3.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . .A-7
3.4 Consents and Approvals; No Violations. . . . . . . . . . . . . . . .A-8
3.5 Reports and Financial Statements . . . . . . . . . . . . . . . . . .A-9
3.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . .A-9
3.7 Information in Registration Statement. . . . . . . . . . . . . . . .A-9
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-9
3.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . A-10
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
3.11 Compliance With Applicable Law. . . . . . . . . . . . . . . . . . A-11
3.12 Section 203 of the DGCL Not Applicable. . . . . . . . . . . . . . A-11
3.13 Ownership of MMC Shares . . . . . . . . . . . . . . . . . . . . . A-11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MMC. . . . . . . . . . . . . A-12
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
4.3 Authority Relative to this Agreement . . . . . . . . . . . . . . . A-13
4.4 Consents and Approvals; No Violations. . . . . . . . . . . . . . . A-13
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . A-14
4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . A-14
4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . A-14
i
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4.8 Information in Registration Statement. . . . . . . . . . . . . . . A-15
4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
4.10 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . A-15
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
4.12 Compliance With Applicable Law. . . . . . . . . . . . . . . . . . A-16
4.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
4.14 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . A-17
4.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . A-18
4.16 Contract, Leases and Agreements . . . . . . . . . . . . . . . . . A-19
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . A-21
4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
4.19 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . A-22
4.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
4.21 Section 5/11.75 of the IBCA Not Applicable. . . . . . . . . . . . A-23
4.22 Ownership of ADM Shares . . . . . . . . . . . . . . . . . . . . . A-23
4.23 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . A-23
4.24 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . A-23
4.25 No Existing Discussions . . . . . . . . . . . . . . . . . . . . . A-23
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER. . . . . . . . . . . . . A-24
5.1 Conduct of Business by MMC and ADM Pending the Merger. . . . . . . A-24
5.2 Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.3 Current Information. . . . . . . . . . . . . . . . . . . . . . . . A-26
5.4 Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . A-26
5.5 Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.6 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.7 Advice of Changes; Government Filings. . . . . . . . . . . . . . . A-27
ARTICLE VI ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . A-27
6.1 Access and Information . . . . . . . . . . . . . . . . . . . . . . A-27
6.2 Registration Statement . . . . . . . . . . . . . . . . . . . . . . A-28
6.3 Proxy Statement; Shareholder Approval. . . . . . . . . . . . . . . A-28
6.4 NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
6.5 Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
6.6 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . A-29
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
6.8 Certain Benefits . . . . . . . . . . . . . . . . . . . . . . . . . A-29
6.9 Standstill Agreement . . . . . . . . . . . . . . . . . . . . . . . A-30
6.10 Acquisition of MMC Common Stock . . . . . . . . . . . . . . . . . A-31
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . . . . . . . A-32
7.1 Conditions to Each Party's Obligation to Effect the Merger . . . . A-32
7.2 Conditions to Obligations of MMC to Effect the Merger. . . . . . . A-33
7.3 Conditions to Obligations of ADM and ADMAC to Effect the Merger. . A-34
ii
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . A-35
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . A-37
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-37
8.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . A-37
8.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . A-38
9.1 Non-Survival of Representations, Warranties and Agreements . . . . A-38
9.2 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
9.4 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . A-40
9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . A-40
9.6 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . A-40
9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
9.9 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . A-40
9.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
9.11 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
9.12 Jurisdiction and Venue. . . . . . . . . . . . . . . . . . . . . . A-40
9.13 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
9.14 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
9.15 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 12,
1997, by and among Moorman Manufacturing Company, an Illinois corporation
("MMC"), Archer-Daniels-Midland Company, a Delaware corporation ("ADM"), and ADM
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of ADM
("ADMAC");
RECITALS
WHEREAS, the Board of Directors of ADM, ADMAC and MMC each have determined
that it is in the best interests of their respective companies and shareholders
to combine their respective businesses in a merger transaction to be effected as
set forth in this Agreement; and
WHEREAS, ADM, ADMAC and MMC desire to effect the merger and the other
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the "Effective Time" (as defined in Section 1.2 hereof), MMC and ADMAC shall
consummate a merger (the "Merger") in which (i) ADMAC shall be merged with and
into MMC and the separate corporate existence of ADMAC shall thereupon cease,
(ii) MMC shall be the surviving corporation in the Merger and shall continue to
be governed by the laws of the State of Illinois, and (iii) the separate
corporate existence of MMC with all its rights, privileges, immunities, powers,
and franchises shall continue unaffected by the Merger. MMC is sometimes
referred to in this Agreement as the "Surviving Corporation". The Merger shall
have the effects set forth in this Agreement and the General Corporation Law of
the State of Delaware ("DGCL") and the Business Corporation Act of the State of
Illinois ("IBCA").
1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective upon
the later to occur of (a) the filing of a properly executed Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the DGCL, and (b) the filing of properly executed Articles of Merger filed with,
and the issuance of a Certificate of Merger by, the Secretary of State of the
State of Illinois in accordance with the IBCA, each of which filings
<PAGE>
shall be made substantially simultaneously with the other and as soon as
practicable after the closing of the transactions contemplated by this Agreement
in accordance with Section 2.6 hereof. When used in this Agreement, the term
"Effective Time" shall mean the later of the date and time at which the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware and the Certificate of Merger is issued by the Secretary of State of
the State of Illinois.
1.3 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws of the Surviving Corporation shall be amended and restated as of the
Effective Time to conform substantially to the Certificate of Incorporation and
Bylaws of ADMAC, except that the name of the Surviving Corporation shall remain
"Moorman Manufacturing Company."
1.4 DIRECTORS AND OFFICERS. The directors of the Surviving Corporation at
the Effective Time shall be the directors of ADMAC immediately prior to the
Effective Time, until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws. The
officers of the Surviving Corporation at the Effective Time shall be the
officers of ADMAC immediately prior to the Effective Time, until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
1.5 TAX TREATMENT. For federal income tax purposes, it is intended that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement and Plan of Merger shall constitute a "plan of reorganization" for
purposes of Section 368 of the Code.
ARTICLE II
CONVERSION OF SHARES
2.1 EXCHANGE RATIO. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof:
(a) Each share (each an "MMC Share") of common stock, par value $1.00
per share, of MMC ("MMC Common Stock"), issued and outstanding immediately
prior to the Effective Time (other than (i) shares of MMC Common Stock held
by shareholders who properly demand dissenters' rights in accordance with
Section 11.70 of the IBCA and (ii) shares of MMC Common Stock held of
record by ADM or ADMAC or any other direct or indirect subsidiary of ADM or
by MMC) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be
A-2
<PAGE>
canceled, extinguished and converted into the right to receive a number of
shares (each an "ADM Share") of common stock, without par value, of ADM
("ADM Common Stock") (rounded to the nearest share) in an amount equal to
the quotient (the "Exchange Ratio") obtained by dividing (x) $5,400 (the
"Base Value") by (y) an amount equal to the average (the "Average Price")
of the closing prices of ADM Common Stock as reported on the New York Stock
Exchange Composite Tape on each of the 20 trading days immediately
preceding the third trading day prior to the Closing Date (the "Pricing
Period"); provided, however, that the Exchange Ratio shall be adjusted in
the event that the shareholders' equity of MMC on the Closing Date is less
than $265 million by reducing the Base Value by an amount equal to the
(A) difference between $265 million and the actual "Shareholders' Equity"
(as hereinafter defined) of MMC as of the date 15 days prior to the Closing
Date (as set forth in the certificate provided for in Section 7.3(d))
divided (B) by 54,770. In no event will the Base Value be less than
$5,126.13. All such shares of MMC Common Stock shall no longer be deemed
outstanding, shall be canceled and retired and shall cease to exist. Each
holder of a certificate representing any such MMC Common Stock shall
thereafter cease to have any rights with respect to such MMC Common Stock,
other than the right to receive a number of ADM Shares according to the
Exchange Ratio based on the number of shares of MMC Shares previously
evidenced by such certificate upon the surrender of such certificate as
provided herein. Each share of MMC Common Stock then held in treasury of
MMC shall be canceled and retired, and no payment shall be made with
respect thereto. For purposes of this Agreement, "Shareholders' Equity"
shall mean the shareholders' equity of MMC or the Surviving Corporation, as
the case may be, determined in accordance with generally accepted
accounting principles, consistently applied.
(b) Each share of common stock, without par value, of ADMAC issued
and outstanding or held in the treasury immediately prior to the Effective
Time shall be canceled and extinguished and converted into one share of
common stock of the Surviving Corporation.
2.2 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, ADM, ADMAC and MMC shall select and
enter into an agreement (in form and substance reasonably satisfactory to
MMC, ADM and ADMAC) with a bank or trust company to act as exchange agent
hereunder (the "Exchange Agent"). Immediately after the Effective Time,
ADM and the Surviving Corporation shall make available, and each holder of
MMC Shares will be entitled to receive, upon surrender to the Exchange
Agent of one or more certificates representing such MMC Shares for
cancellation, certificates representing the number of ADM Shares into which
such MMC Shares are converted in the Merger. The ADM Shares into which the
MMC Shares shall be converted in the Merger shall be deemed to have been
issued at the Effective Time.
A-3
<PAGE>
(b) All of the certificates representing ADM Common Stock shall, upon
delivery at Closing, be duly authorized, validly issued and outstanding,
fully-paid, non-assessable, listed for trading on the New York Stock
Exchange ("NYSE") and registered under the Securities Act of 1933, as
amended (the "Securities Act").
(c) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding MMC Shares (the "MMC Certificates") whose MMC Shares were
converted into ADM Shares pursuant to Section 2.1, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the MMC Certificates shall pass, only upon delivery of
the MMC Certificates to the Exchange Agent, and which shall be in
negotiable form with signatures guaranteed by a national banking
institution and have such other provisions as ADM and the Surviving
Corporation may reasonably specify) and (ii) instructions for use in
effecting the surrender of the MMC Certificates in exchange for
certificates representing ADM Shares. Upon surrender of a duly executed
MMC Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, the holder of such MMC Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of
whole ADM Shares which such holder has the right to receive in respect of
the MMC Certificates surrendered pursuant to the provisions of this Article
II.
(d) In the event that any MMC Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to be lost, stolen or destroyed, ADM and
the Surviving Corporation will issue or cause to be issued in exchange for
such lost, stolen or destroyed certificate the number of ADM Shares into
which such MMC Shares are converted in the Merger in accordance with this
Article II. When authorizing such issuance in exchange therefor, ADM and
the Surviving Corporation may, in their discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or destroyed certificate to give ADM and the Surviving Corporation a bond
in such sum as they may direct as indemnity, or such other form of
indemnity as they shall direct, against any claim that may be made against
ADM and the Surviving Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
2.3 DIVIDENDS; TRANSFER TAXES. No dividends that are declared on ADM
Shares will be paid to persons entitled to receive certificates representing ADM
Shares until such persons surrender their MMC Certificates. Upon such
surrender, there shall be paid to the person in whose name the certificates
representing such ADM Shares shall be issued, any dividends which shall have
become payable with respect to such ADM Shares between the Effective Time and
the time of such surrender. In no event shall the person entitled to receive
such dividends be entitled to receive interest on such dividends. If any
certificates for any
A-4
<PAGE>
ADM Shares are to be issued in a name other than that in which the MMC
Certificates surrendered in exchange therefor are registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such ADM Shares in a name other than that of the
registered holder of the certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of MMC Shares for any ADM Shares or
dividends thereon delivered to a public official pursuant to applicable escheat
laws.
2.4 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional ADM Shares shall be issued upon the surrender for exchange of MMC
Certificates pursuant to this Article II and no dividend, stock split-up or
other change in the capital structure of ADM shall relate to any fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder. No cash or other consideration
shall be paid to any holder of MMC shares in lieu of any fractional securities.
2.5 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of MMC shall be closed and no transfer of MMC Shares shall thereafter be
made. If, after the Effective Time, MMC Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for certificates
representing ADM Shares in accordance with the terms hereof. At and after the
Effective Time, the holders of MMC Shares to be exchanged for ADM Shares
pursuant to this Agreement shall cease to have any rights as shareholders of
MMC, except for the right to surrender such stock certificates in exchange for
ADM Shares as provided hereunder.
2.6 CLOSING. Subject to Section 8.1 hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Schmiedeskamp, Robertson, Neu & Mitchell, 525 Jersey Street,
Quincy, Illinois, at 9:00 a.m., local time, on the third business day after the
later of (a) the date on which MMC's shareholders' meeting, referred to in
Section 6.3 hereof, shall have occurred, or (b) the day on which all of the
conditions set forth in Article VII hereof are satisfied or waived, or at such
other date, time and place as ADM and MMC shall agree (the "Closing Date").
2.7 SUPPLEMENTARY ACTION. If at any time after the Effective Time, any
further assignments or assurances in law or any other documents or actions are
necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of MMC or ADMAC or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered on
behalf of MMC and ADMAC, in the name of and on behalf of MMC and ADMAC, to
execute and deliver any and all documents and to take all actions necessary or
proper to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
A-5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ADM AND ADMAC
As used in this Agreement, (i) the word "subsidiary" when used with respect
to any party means any corporation or other organization, whether incorporated
or unincorporated, of which such party or any other subsidiary of such party is
a general partner or of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporations or other organizations is directly or indirectly owned or
controlled by such party and/or by any one or more of its subsidiaries, and (ii)
the term "Material Adverse Effect" means, with respect to MMC and ADM, as the
case may be, any change or effect that individually or when taken together with
all such changes or effects that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, has or is
reasonably likely to have a material adverse effect on the business, assets,
liabilities (contingent or otherwise), revenues, expenses, capital or financial
condition of such party and its subsidiaries, taken as a whole, or in the
ability of such party to perform its obligations hereunder.
Except as otherwise set forth on the ADM Schedule of Exceptions dated the
date hereof (the "ADM Schedules") which shall be organized by reference to
specific sections hereof as indicated below and which shall be deemed to include
any information specifically incorporated into any of the ADM Schedules, ADM
and, where indicated, ADMAC represent and warrant to MMC as follows:
3.1 ORGANIZATION. ADM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to carry on its business as it is now being conducted
or presently proposed to be conducted. ADM is duly qualified as a foreign
corporation to do business and is in good standing (to the extent the concept of
good standing exists) in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a Material Adverse Effect. Each subsidiary of ADM which is incorporated is
a corporation duly organized, validly existing and in good standing (to the
extent the concept of good standing exists) under the laws of its jurisdiction
of incorporation or organization, has the corporate power to carry on its
business as it is now being conducted and is duly qualified to do business and
is in good standing (to the extent the concept of good standing exists) in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so duly organized, validly existing and in good standing, to
have such corporate power or to be so qualified will not have a Material Adverse
Effect. ADM and ADMAC have delivered to MMC or its counsel complete and
A-6
<PAGE>
correct copies of their respective Certificates of Incorporation and Bylaws
which are in full force and effect on the date hereof.
3.2 CAPITALIZATION. The authorized capital stock of ADM consists of
800,000,000 shares of ADM Common Stock, without par value, and 500,000 shares of
preferred stock, without par value ("ADM Preferred Stock"). As of the date
hereof (and without giving effect to the five percent stock dividend having a
record date of August 18, 1997 and payable on September 15, 1997),
530,825,801 shares of ADM Common Stock were issued and outstanding, options to
acquire 3,878,755 shares of ADM Common Stock ("ADM Stock Options") were
outstanding under all stock option plans of ADM ("ADM Stock Option Plans"), and
no shares of ADM Preferred Stock or warrants to acquire ADM Common Stock were
issued and outstanding. All of the issued and outstanding shares of ADM Common
Stock are validly issued, fully paid and nonassessable and free of preemptive
rights or similar rights created by statute, the Certificate of Incorporation or
Bylaws of ADM or any agreement to which ADM or any of its subsidiaries is a
party or by which it is bound. Except as set forth above and pursuant to ADM's
employee benefit plans and as otherwise provided in this Agreement, there are
not as of the date of this Agreement any shares of capital stock of ADM issued
or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating ADM to
issue, transfer or sell any shares of its capital stock. As of the date hereof,
no bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into or exercisable for securities having the right to vote) on any
matters on which shareholders may vote ("Voting Debt") of ADM are issued and
outstanding. All outstanding shares of the capital stock of ADM's subsidiaries
have been duly authorized, validly issued and fully paid, and are non-assessable
and such shares owned by ADM or one of its subsidiaries are free and clear of
any liens, security interest, pledges, agreements, claims, charges, or
encumbrances of any nature whatsoever. There are no voting trusts or other
agreements or understandings to which ADM is a party with respect to the voting
of the capital stock of ADM or any of its subsidiaries. None of ADM or its
subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of ADM, or any of its subsidiaries, respectively, as a result of
the transactions contemplated by this Agreement. None of the shares of ADM
Common Stock has been issued in violation of any preemptive or other rights of
ADM's shareholders.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. ADM and ADMAC have all
requisite corporate power and authority to enter into this Agreement and to
carry out their respective obligations hereunder. The execution and delivery of
this Agreement by ADM and ADMAC and the consummation by ADM and ADMAC of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of ADM and ADMAC and by ADM as sole shareholder of ADMAC and no other
corporate proceedings on the part of ADM and ADMAC are necessary to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by ADM and ADMAC and constitutes the valid
and binding agreement of ADM and ADMAC, enforceable against ADM and ADMAC in
accordance with its terms, subject to applicable bankruptcy, insolvency,
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fraudulent transfer, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditor's rights and to general
equity principles.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except for (i) the filing of the pre-merger notification report
under applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of a
Form S-4 Registration Statement (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") in accordance with the
Securities Act, including the MMC proxy statement (the "MMC Proxy
Statement"), (iii) such consents, approvals, orders, authorization,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, and
(iv) the filing and recordation of a Certificate of Merger as required by
the DGCL and Articles of Merger as required by the IBCA, no filing with,
and no permit, authorization, consent or approval of, any public or
governmental body or authority is necessary for the consummation by ADM or
ADMAC of the transactions contemplated by this Agreement.
(b) Neither the execution and delivery of this Agreement by ADM or
ADMAC, nor the consummation by ADM or ADMAC of the transactions
contemplated hereby, nor compliance by ADM or ADMAC with any of the
provisions hereof, will (i) conflict with or result in any breach of the
Certificate of Incorporation or Bylaws of ADM or any of its subsidiaries,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or give rise to the
creation of any lien, charge, security interest or encumbrance upon the
respective properties or assets of ADM or any of its subsidiaries under,
any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which ADM or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or affected
or (iii) violate any permit, concession, franchise, license, judgment,
order, writ, injunction, decree, statute, law, ordinance, rule or
regulation applicable to ADM, any of its subsidiaries or any of their
properties or assets and which is material to the business or operations of
ADM.
(c) Except as set forth in the ADM Schedules, no consent or approval
is required by or with respect to ADM or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement under any
terms, conditions, or provisions of any material note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which ADM or any of its subsidiaries is a party or by which any of them
or any of their properties or assets may be bound or affected.
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3.5 REPORTS AND FINANCIAL STATEMENTS. ADM has filed all reports required
to be filed with the SEC pursuant to the Exchange Act since July 1, 1996,
including, without limitation, an Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 (collectively, the "ADM SEC Reports"), and has furnished to
MMC true and complete copies of all such ADM SEC Reports (including any
amendments thereto), and will promptly deliver to MMC any ADM SEC Reports
(including any amendments thereto) filed between the date hereof and the
Effective Time. None of such ADM SEC Reports, as of their respective filing
dates (as amended through the date hereof), contained or with respect to ADM SEC
Reports filed after the date hereof, will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements included in the ADM SEC Reports, presented fairly the
consolidated financial position of ADM and its subsidiaries as of the respective
dates thereof, and the results of operations and cash flow of ADM and its
subsidiaries for the respective periods or as of the respective dates set forth
therein, all in conformity with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise noted
therein.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1997, neither
ADM nor any of its subsidiaries has: (a) taken any of the actions set forth in
Sections 5.1(b), 5.1(c) or 5.1(e) hereof; (b) incurred any material liability,
except in the ordinary course of its business, consistent with past practices;
(c) suffered any material adverse change, or any event involving a prospective
material adverse change, in the business, assets, financial condition or results
of operations of ADM or any of its subsidiaries; or (d) except as permitted by
Section 5.1 hereof, conducted its business and operations other than in the
ordinary course of business and consistent with past practices.
3.7 INFORMATION IN REGISTRATION STATEMENT. None of the information to be
supplied by ADM and ADMAC to be included in the Registration Statement, or
amendments thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
3.8 LITIGATION. Except to the extent that individually and in the
aggregate they would not reasonably be expected to have a Material Adverse
Effect on ADM or as disclosed in the ADM SEC Reports or Schedule 3.8: (i) there
is no action, suit, judicial or administrative proceeding, arbitration or
investigation pending or, to the knowledge of ADM, threatened against or
involving ADM or any of its subsidiaries, or any of their respective properties
or rights, before any court, arbitrator, or administrative or governmental body;
(ii) there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against ADM or
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any of its subsidiaries; and (iii) ADM and its subsidiaries are not in violation
of any term of any judgments, decrees, injunctions or orders outstanding against
them.
3.9 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.9 contains a complete and accurate list of each
employee benefit plan (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), that is maintained by ADM or any of its
ERISA Affiliates or with respect to which ADM or any of its ERISA
Affiliates has any liability for payments, benefits or claims (all of the
foregoing, the "ADM Plans").
(b) Each of the ADM Plans that is subject to ERISA is in substantial
compliance with ERISA; each of the ADM Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified; and no
event has occurred, and to the knowledge of ADM, there exists no condition
or set of circumstances, in connection with which ADM or any ERISA
Affiliate of ADM is subject to liability (except liability for claims and
funding obligations payable in the ordinary course) under ERISA, the Code
or any other applicable law.
(c) All required contributions or other amounts payable by ADM or its
ERISA Affiliates as of the Effective Time with respect to each ADM Plan in
respect of current or prior plan years have been or will be (prior to the
Effective Time) either paid or accrued on the financial statements of ADM.
There are no pending, or, to the knowledge of ADM, threatened or
anticipated claims (other than routine claims for benefits) by or on behalf
of or against any of the ADM Plans or any trusts related thereto.
(d) For purposes of this Agreement, "ERISA Affiliate" means, with
respect to any person, any trade or business, whether or not incorporated,
which, together with such person, would constitute a "controlled group of
corporations", a group of trades or businesses under "common control", or
an "affiliated service group" within the meaning of Section 414(b), (c),
(m), or (o) of the Code.
3.10 TAXES. For the purposes of this section and Section 4.11, the term
"tax" shall include all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments imposed by any United States federal,
state or local authority or any other taxing authority on ADM or MMC or any of
their respective "Tax Affiliates" (as hereinafter defined) as to their
respective income, profit, franchise, gross receipts, payroll, sales,
employment, worker's compensation, use, property, withholding, excise,
occupancy, environmental and other taxes, duties or assessments of any nature,
whatsoever. ADM has filed or caused to be filed timely all material federal,
state, local and foreign tax returns required to be filed by each of it, any
partnership or joint venture in which it holds a majority interest or for which
it is
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responsible for filing tax returns, and any member of its consolidated,
combined, unitary or similar group (each such member a "Tax Affiliate"). Such
returns, reports and other information are accurate and complete in all material
respects. ADM has paid or caused to be paid or has made adequate provision or
set up an adequate accrual or reserve for the payment of, all taxes shown to be
due in respect of the periods for which returns are due, and has established (or
will establish at least quarterly) an adequate accrual or reserve for the
payment of all taxes payable in respect of the period subsequent to the last of
said periods required to be so accrued or reserved. Neither ADM nor any of its
Tax Affiliates has any material liability for taxes in excess of the amount so
paid or accruals or reserves so established. Neither ADM nor any of its Tax
Affiliates is delinquent in the payment of any material amount of tax in excess
of the amount reserved or provided therefor, and no deficiencies for any tax,
assessment or governmental charge in excess of the amount reserved or provided
therefor have been claimed or assessed. ADM's federal and state income tax
returns for all years ending on or prior to December 31, 1987 have been audited
(and such audits have been completed) or are no longer subject to audit by
reason of the applicable statute of limitations.
3.11 COMPLIANCE WITH APPLICABLE LAW. ADM and each of its subsidiaries
holds all licenses, franchises, permits, variances, exemptions, orders,
approvals and authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of each of ADM and its subsidiaries is
not being conducted in violation of, any provision of any federal, state, local
or foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to ADM or any of its subsidiaries except to
the extent that the failure to hold any such licenses, franchises, permits or
authorizations, or any such violation, would not, individually or in the
aggregate, be material to the business of ADM.
3.12 SECTION 203 OF THE DGCL NOT APPLICABLE. The provisions of Section
203 of the DGCL will not, prior to the termination of this Agreement, assuming
the accuracy of the representations contained in Section 4.22 (without giving
effect to the knowledge qualification thereof), apply to this Agreement, the
Merger or the transactions contemplated hereby.
3.13 OWNERSHIP OF MMC SHARES. As of the date hereof, neither ADM nor, to
its knowledge, any of its affiliates or associates (as such terms are defined
under the Exchange Act), (i) beneficially owns, directly or indirectly, or
(ii) is a party to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, in each case, MMC Shares, which
in the aggregate, represent ten percent or more of the outstanding MMC Shares.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MMC
Except as otherwise set forth on the MMC Schedule of Exceptions dated the
date hereof (the "MMC Schedules") which shall be organized by reference to
specific sections hereof as indicated below and which shall be deemed to include
any information specifically incorporated into any of the MMC Schedules, MMC
represents and warrants to ADM and ADMAC as follows:
4.1 ORGANIZATION. MMC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois and has the
requisite corporate power to carry on its business as it is now being conducted
or presently proposed to be conducted. MMC is duly qualified as a foreign
corporation to do business and is in good standing (to the extent the concept of
good standing exists) in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary except where the failure to be so qualified will not
have a Material Adverse Effect. Each subsidiary of MMC is a corporation duly
organized, validly existing and in good standing (to the extent the concept of
good standing exists) under the laws of its jurisdiction of incorporation or
organization, has the corporate power to carry on its business as it is now
being conducted and is duly qualified to do business and is in good standing (to
the extent the concept of good standing exists) in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
duly organized, validly existing and in good standing, to have such corporate
power or to be so qualified will not have a Material Adverse Effect. MMC has
delivered to ADM, ADMAC or their counsel complete and correct copies of its, and
each of its subsidiary's, Articles of Incorporation and Bylaws or other
organizational documents. Each of the Articles of Incorporation, Bylaws and
other organizational documents so delivered are in full force and effect on the
date hereof.
4.2 CAPITALIZATION. The authorized capital stock of MMC consists of
100,000 shares of MMC Common Stock, par value $1.00 per share. As of the date
hereof, 54,770 shares of MMC Common Stock were issued and outstanding. All of
the issued and outstanding shares of MMC Common Stock have been duly authorized
and are validly issued, fully-paid, non-assessable and free of preemptive rights
or similar rights created by statute, the Articles of Incorporation or Bylaws of
MMC or any agreement to which MMC or any of its subsidiaries is a party or by
which it is bound. Except as set forth above, there are not now, and at the
Effective Time there will not be, any shares of capital stock of MMC issued or
outstanding or any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating MMC to issue, transfer
or sell any shares of its capital stock. As of the date hereof, no Voting
Debt of MMC was issued or outstanding, nor will there be any issued or
outstanding at the Effective Time. Except as provided in this Agreement,
after the Effective Time, MMC will have no obligation to issue, transfer or
sell
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any shares of its capital stock pursuant to any employee benefit plan or
otherwise. All outstanding shares of the capital stock of MMC's subsidiaries
have been duly authorized, validly issued and fully paid, and are
non-assessable and are owned by MMC or one of its subsidiaries free and clear
of any liens, security interests, pledges, agreements, claims, charges, or
encumbrances of any nature whatsoever. There are no voting trusts or other
agreements or understandings to which MMC is a party with respect to the
voting of the capital stock of MMC or any of its subsidiaries. None of MMC
or its subsidiaries is required to redeem, repurchase or otherwise acquire
shares of capital stock of MMC, or any of its subsidiaries, respectively, as
a result of the transactions contemplated by this Agreement. None of the
shares of MMC Common Stock have been issued in violation of any preemptive or
other rights of MMC's shareholders.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. MMC has all requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by MMC and
the consummation by MMC of the transactions contemplated hereby have been duly
authorized by MMC's Board of Directors and, except for the approval of the
holders of at least two-thirds of the outstanding shares of MMC Common Stock, no
other corporate proceedings on the part of MMC are necessary to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by MMC and constitutes a valid and binding
agreement of MMC, enforceable against MMC in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditor's rights and to general equity principles.
4.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except for (i) the filing of the pre-merger notification report
under applicable requirements of the HSR Act, (ii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act,
including the MMC Proxy Statement, (iii) such consents, approvals, orders,
authorization, registrations, declarations and filings as may be required
under applicable federal and state securities laws and the laws of any
foreign country, and (iv) the filing and recordation of a Certificate of
Merger as required by the DGCL and Articles of Merger as required by the
IBCA, no filing with, and no permit, authorization, consent or approval of,
any public or governmental body or authority is necessary for the
consummation by MMC of the transactions contemplated by this Agreement.
(b) Neither the execution and delivery of this Agreement by MMC, nor
the consummation by MMC of the transactions contemplated hereby, nor
compliance by MMC with any of the provisions hereof, will (i) conflict with
or result in any breach of any provisions of the Articles of Incorporation
or Bylaws of MMC or any of its subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due
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notice or lapse of time or both) a default under (or give rise to a
material change in the terms of or any right of termination, cancellation
or acceleration) under, or give rise to creation of any lien, charge,
security interest or encumbrance upon, any of the respective properties or
assets of MMC or any of its subsidiaries under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
deed of trust, license, contract, agreement or other instrument or
obligation to which MMC or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or affected
or (iii) violate any permit, concession, franchise, license, judgment,
order, writ, injunction, decree, statute, law, ordinance, rule or
regulation of any court or government authority applicable to MMC, any of
its subsidiaries or any of their properties or assets and which is material
to the business or operations of MMC.
(c) No consent or approval is required by or with respect to MMC or
any of its subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated by this
Agreement under any terms, conditions, or provisions of any material note,
bond, mortgage, indenture, license, contract, agreement or other instrument
or obligation to which MMC or any of its subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or
affected.
4.5 FINANCIAL STATEMENTS. The consolidated audited financial statements
of MMC for the period ended March 29, 1997 and the unaudited financial
statements for MMC for the period ended June 28, 1997 (collectively, the
"Financial Statements") have been provided to ADM and in all material respects,
present fairly the consolidated financial position of MMC and its subsidiaries
as of the respective dates thereof, and the results of operations and the cash
flow of MMC and its subsidiaries for the respective periods or as of the
respective dates set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein and the absence of footnotes thereto.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Financial Statements, neither MMC nor any of its subsidiaries have any material
liabilities or obligations of any nature (whether accrued, absolute, fixed,
contingent, liquidated or unliquidated or otherwise and whether due or to become
due and whether or not required by generally accepted accounting principles to
set forth in financial statements) except for current liabilities which were
incurred since the date of the Financial Statements in the ordinary course of
business and consistent with past practice.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 28, 1997, neither
MMC nor any of its subsidiaries has: (a) taken any of the actions set forth in
Sections 5.1(b), 5.1(c) or 5.1(e) hereof; (b) incurred any material liability,
except in the ordinary course of its
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business, consistent with past practices; (c) suffered any material adverse
change, or any event involving a prospective material adverse change, in the
business, assets, financial condition or results of operations of MMC or any of
its subsidiaries; (d) changed its accounting principles, practices or methods;
(e) suffered any material damage, destruction or loss (whether or not covered by
insurance) with respect to any material property of MMC or any of its
subsidiaries; or (f) except as permitted by Section 5.1 hereof, conducted its
business and operations other than in the ordinary course of business and
consistent with past practices.
4.8 INFORMATION IN REGISTRATION STATEMENT. None of the information to be
supplied by MMC to be included in the Registration Statement, or amendments
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
4.9 LITIGATION. There is no material action, suit, judicial or
administrative proceeding, arbitration or investigation pending or, to the best
knowledge of MMC, threatened against or involving MMC and any of its
subsidiaries, or any of their respective properties or rights, before any court,
arbitrator, or administrative or governmental body; (ii) there is no material
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against MMC and any of its subsidiaries; and (iii) MMC and its subsidiaries are
not in violation of any term of any judgments, decrees, injunctions or orders
outstanding against them. Schedule 4.9 contains a description of all actions,
suits, proceedings, arbitrations, investigations, judgments, decrees,
injunctions or orders pending, or to the knowledge of MMC, threatened against
MMC or any of its subsidiaries, or any of their respective properties or rights
except where, based upon MMC's reasonable belief after consultation with
counsel, the potential exposure relating to any such matter does not exceed
$50,000.
4.10 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.10 contains a complete and accurate list of each
employee benefit plan (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA), policy or agreement that is
maintained, or is or was, within the past five years, contributed to by MMC
or any of its ERISA Affiliates or pursuant to which MMC or its ERISA
Affiliates have any liability for payments, benefits or claims (all of the
foregoing, the "MMC Plans"). A copy of each MMC Plan as currently in
effect and, if applicable, the most recent Annual Report, Actuarial Report,
Valuation, Summary Plan Description, Trust Agreement and any Determination
Letter issued by the IRS with respect thereto shall be delivered to ADM or
its counsel. Except as set forth in Schedule 4.10, neither MMC nor any
ERISA Affiliate of MMC has maintained or contributed to any plan subject
to Title IV of ERISA or Section 412 of the Code (including any
"multi-employer plan," as defined in Section 3(37) of ERISA) during the six
calendar years preceding the date of this Agreement.
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(b) Each of the MMC Plans that is subject to ERISA is in substantial
compliance with ERISA; each of the MMC Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter from the I.R.S.; and no event has occurred, and to the
knowledge of MMC , there exists no condition or set of circumstances, in
connection with which MMC or any ERISA Affiliate of MMC is subject to
material liability (except liability for claims and funding obligations
payable in the ordinary course) under ERISA, the Code or any other
applicable law.
(c) All required contributions or other amounts payable by MMC or its
ERISA Affiliates as of the Effective Time with respect to each MMC Plan in
respect of current or prior plan years have been or will be (prior to the
Effective Time) either paid or accrued on the financial statements of MMC.
There are no pending, or, to the best knowledge of MMC, threatened or
anticipated claims (other than routine claims for benefits) by or on behalf
of or against any of the MMC Plans or any trusts related thereto.
4.11 TAXES. MMC has filed or caused to be filed timely all material
federal, state, local and foreign tax returns required to be filed by each of it
and its Tax Affiliates. Such returns, reports and other information are
accurate and complete in all material respects. MMC has paid or caused to be
paid or has made adequate provision or set up an adequate accrual or reserve for
the payment of, all taxes shown to be due in respect of the periods for which
returns are due, and has established (or will establish at least quarterly) an
adequate accrual or reserve for the payment of all taxes payable in respect of
the period subsequent to the last of said periods required to be so accrued or
reserved. Neither MMC nor any of its Tax Affiliates has any material liability
for taxes in excess of the amount so paid or accruals or reserves so
established. Neither MMC nor any of its Tax Affiliates is delinquent in the
payment of any material amount of tax in excess of the amount reserved or
provided therefor, and no deficiencies for any tax, assessment or governmental
charge in excess of the amount reserved or provided therefor have been claimed
or assessed. No waiver or extension of time to assess any taxes has been given
or requested and remains in effect on the date hereof. There are no tax sharing
agreements or similar contracts or arrangements to which MMC or any of its
subsidiaries is a party. MMC's federal and state income tax returns for all
years ending on or prior to March 30, 1991, have been audited (and such audits
have been completed) or are no longer subject to audit by reason of the
applicable statute of limitations. All years ended subsequent to such date have
never been audited by the Internal Revenue Service or comparable state agencies.
4.12 COMPLIANCE WITH APPLICABLE LAW. MMC and each of its subsidiaries
holds all licenses, franchises, permits, variances, exemptions, orders,
approvals and authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of each of MMC and its subsidiaries is
not being conducted in violation of, any provision of any
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federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to MMC or any of its
subsidiaries, except to the extent that the failure to hold any such licenses,
franchises, permits or authorizations, or any such violation, would not,
individually or in the aggregate, be material to the business of MMC.
4.13 LABOR MATTERS. Except for that certain collective bargaining
agreement between Agri Sales, Inc., a wholly owned subsidiary of MMC, and the
United Steelworkers of America, Local 15298, neither MMC nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is MMC or any of its subsidiaries the subject of any material
proceeding asserting that MMC or any of its subsidiaries has committed an unfair
labor practice or is seeking to compel MMC or any of its subsidiaries to bargain
with any labor union or labor organization, nor is there any strike or other
general labor dispute involving MMC pending or, to the knowledge of MMC or any
of its subsidiaries, threatened.
4.14 TITLE TO ASSETS.
(a) MMC and its subsidiaries have good, valid and marketable title to
all of their respective material assets, and a valid leasehold interest in
all material leased real and personal property leased by them, including,
without limitation, the property and assets reflected in the Financial
Statements or acquired after the date thereof, in each case free and clear
of all liens, encumbrances or restrictions except (i) as set forth in the
Financial Statements, (ii) statutory liens, and (iii) for such defects in
title and liens, encumbrances or restrictions which individually or in the
aggregate are not material in amount and would not materially impair the
use or marketability of such assets.
(b) Schedule 4.14(b) contains a complete and accurate list of all
leases, copies of which have been previously provided to ADM pursuant to
which MMC or any of its subsidiaries lease real or personal property and
which require rental payments during any year of the existing lease term in
excess of $50,000 or with a remaining term of more than five years or which
are otherwise material to the business of MMC or any of its subsidiaries.
To the knowledge of MMC, each of the leases listed on Schedule 4.14(b) is
in full force and effect, is valid and enforceable in accordance with its
terms, and none of the parties thereto is in breach of or default under any
such lease in any material respect. To the knowledge of MMC, the lessee
under each such lease enjoys peaceful and undisturbed possession
thereunder.
(c) The assets owned by MMC or its subsidiaries and the property
referred to in Section 4.14(b) above constitute, including the Intellectual
Property (as defined in Section 4.15 of this Agreement) all the property
and assets (real, personal, mixed, tangible and intangible) used by MMC and
its subsidiaries in their respective businesses. Such property and assets
will enable ADM and the Surviving Corporation
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to carry on after the Effective Time the business operations of MMC and its
subsidiaries as presently conducted.
4.15 INTELLECTUAL PROPERTY.
(a) MMC owns or has valid binding, enforceable and adequate rights to
use all patents, trademarks, trade names, service marks, service names,
copyrights or other proprietary intellectual property rights, applications
therefor, registrations thereof and licenses or other rights in respect
thereof ("Intellectual Property") that are necessary to conduct the
business of MMC and its subsidiaries as presently conducted. Schedule 4.15
lists (i) all trademarks, registered copyrights, trade names, and service
marks, which MMC considers to be material to its business and included in
the Intellectual Property, including the jurisdictions in which each such
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed, (ii) all
material licenses, sublicenses, and other agreements to which MMC is a
party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all material licenses, sublicenses, and
other agreements to which MMC is a party and pursuant to which MMC is
authorized to use any third party patents, trademarks, or copyrights,
including software ("Third Party Intellectual Property") that is material
to its business.
(b) MMC is not, nor will it be as a result of the execution and
delivery of this Agreement, or the performance of its obligations under
this Agreement, in breach in any material respect of any license,
sublicense, or other agreements relating to the Intellectual Property or
Third Party Intellectual Property.
(c) To MMC's knowledge, all material patents, registered trademarks,
service marks, and copyrights held by MMC are valid and subsisting. Except
as set forth on Schedule 4.15, MMC (i) has not been sued in any suit,
action, or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, or copyrights, or violation of any
trade secret or other proprietary right of any third party, and (ii) has no
knowledge that the conduct of its business as presently conducted infringes
any patent, trademark, service mark, copyright, trade secret, or other
proprietary right of any third party. Neither MMC nor its subsidiaries has
received any written notice or, to the knowledge of MMC, any other notice,
from any other person or any other source pertaining to or challenging the
right of MMC or its subsidiaries to use any Intellectual Property or any
trade secrets, proprietary information, inventions, know-how, processes and
procedures owned or used by or licensed to MMC or its subsidiaries. To the
knowledge of MMC, none of MMC's or its subsidiaries' employees is in
violation of any term of any employment contract, patent disclosure
agreement, confidentiality agreement or any other contract or agreement
relating to the relationship of any such employee with it or any other
party.
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4.16 CONTRACT, LEASES AND AGREEMENTS.
(a) Schedule 4.16(a) contains a complete and accurate list of all
written contracts, and an accurate and complete written summary of all oral
contracts, to which MMC or any of its subsidiaries are a party or by which
any of their respective assets are bound as of the date of this Agreement
other than contracts with a term of less than one year or involving a
payment to or by MMC or its subsidiaries of less than $100,000. True and
complete copies of all written contracts listed on Schedule 4.16(a) have
been or will be delivered to ADM prior to the Closing for examination. To
the knowledge of MMC, each of the listed contracts is in full force and
effect, is valid and enforceable in accordance with its terms and none of
the parties thereto is in breach of or default in any material respect
under any such contracts.
(b) Except as set forth on Schedule 4.16(b), which Schedule sets
forth by subsection the disclosures called for by this Section 4.16(b),
neither MMC nor any of its subsidiaries are a party to or bound by any
contract:
(i) evidencing indebtedness for borrowed money in excess of
$100,000 or pursuant to which MMC or any of its subsidiaries have
guaranteed (including guarantees by way of acting as surety,
co-signer, endorser, co-maker, indemnitor or otherwise) for any
obligation in excess of $100,000 of any other person;
(ii) prohibiting or limiting the ability of MMC or any of its
subsidiaries (A) to engage in any line of business, (B) to compete
with any person or (C) to disclose any confidential information in the
possession of MMC or any of its subsidiaries (and not otherwise
generally available to the public) that could reasonably be expected
to have commercial value to MMC or any of its subsidiaries;
(iii) with any director, officer, employee, agent, consultant,
advisor or representative for employment or for consulting,
independent contracting or similar services or containing any
severance or termination pay obligations other than such contracts
which may be terminated upon no more than 30 days notice by, and in
any case without penalty or cost to, MMC or any of its subsidiaries,
or which involve a payment by MMC or any of its subsidiaries in excess
of $75,000 per annum or $250,000 over the remaining term thereof;
(iv) with any person directly or indirectly controlling,
controlled by or under common control with MMC other than transactions
between or among MMC and its subsidiaries in the ordinary course of
business;
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(v) pursuant to which it is obligated to indemnify any person,
including, without limitation, any contract to indemnify any other
entity or any director, officer or employee thereof;
(vi) granting a lien upon any property or asset;
(vii) pursuant to which it purchases materials, supplies or
equipment and which calls for future payments in excess of $100,000 in
any year and is not terminable by MMC or any of its subsidiaries upon
no less than 60 days' notice to the other party and in any case
without penalty or cost to MMC or any of its subsidiaries;
(viii) which is (A) a joint venture or marketing contract or
(B) pursuant to which MMC or any of its subsidiaries acts or is
obligated to act as the representative of any other person;
(ix) obligating MMC or any of its subsidiaries to pay to any
person any money as a result of the execution and delivery of this
Agreement or the consummation of the transaction contemplated hereby;
(x) granting to any person a right to purchase any material
assets or obligating MMC or any of its subsidiaries to obtain the
consent of any person to the Merger or to the transfer or assignment
by MMC or any of its subsidiaries of any material assets or contracts;
(xi) providing for the acquisition or disposition after the
date of this Agreement of any business or any assets or granting any
person a right of first refusal or first offer with respect to the
disposition of any assets;
(xii) providing for a power of attorney on behalf of MMC or any
of its subsidiaries;
(xiii) not entered into in the ordinary course of business; or
(xiv) which is otherwise material to the business of MMC or any
of its subsidiaries.
To the knowledge of MMC, each contract set forth on Schedule 4.16(b) is in
full force and effect in accordance with its terms as of the date hereof.
(c) Neither MMC nor any of its subsidiaries are, and to the knowledge
of MMC, no other party thereto is, in material breach or material violation
of or in material default under any contract listed on Schedule 4.16, and
to the knowledge of
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MMC, there is no basis for any claim of any such breach, violation or
default in the performance of any term of, and no event has occurred which,
with the passage of time or action by a third party, could reasonably be
likely to result in a default under any such contract.
4.17 ENVIRONMENTAL MATTERS.
(a) To the knowledge of MMC (i) no real property owned or operated by
MMC or any of its subsidiaries is contaminated with any Hazardous
Substances in such form or quantities so as to create any liability on the
part of MMC or ADM under any Environmental Law; (ii) no real property
formerly owned or operated by MMC or any of its subsidiaries was
contaminated with any Hazardous Substances in such form or quantities so as
to create any liability on the part of MMC or ADM under any Environmental
Law; (iii) neither MMC nor any of its subsidiaries are subject to liability
for any off-site disposal or contamination; (iv) neither MMC nor any of its
subsidiaries have received any claims or notices alleging liability under
any Environmental Law; and (v) MMC and its subsidiaries have provided ADM
with copies of all correspondence with regulatory agencies for any current
or pending environmental regulatory noncompliance and/or enforcement action
or dealing with the release of a Hazardous Substance or constituting notice
under any Environmental Law along with copies of all environmental reports
obtained by MMC and its subsidiaries since January 1, 1994.
(b) "ENVIRONMENTAL LAW" means the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), the Resource
Conservation and Recovery Act (RCRA), the Clean Water Act (CWA), the Clean
Air Act (CAA), the Toxic Substances Control Act (TSCA), the Oil Pollution
Prevention Act (OPPA), and any other federal, state or local statute,
regulation or order relating to Hazardous Substances or the protection of
the environment. "HAZARDOUS SUBSTANCE" means any pollutant, contaminant,
hazardous waste or mixture thereof, that is regulated under CERCLA, RCRA,
CWA, CAA, TSCA, and OPPA including petroleum products, as regulated under
RCRA and OPPA, friable asbestos containing material, as regulated under
OSHA, and polychlorinated biphenyls as regulated under TSCA. "RCRA
HAZARDOUS WASTE" means a hazardous waste, as that term is defined in and
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq.
(c) To the knowledge of MMC, no property that MMC or any of its
subsidiaries has ever owned or operated has ever been used in connection
with the business of manufacturing, storing or transporting Hazardous
Substances, with the exception of prepackaged agricultural chemicals
present solely for sale to the public. MMC does not and did not manage
RCRA Hazardous Waste subject to the requirements set forth in 40 CFR Parts
264 and 265.
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(d) To the knowledge of MMC, there are not any underground or
aboveground storage tanks on any property that MMC or its subsidiaries
currently own or operate that are not in accordance with the applicable
requirements set forth under any Environmental Law. To the knowledge of
MMC, there have been no underground storage tanks on property owned or
operated by MMC and its subsidiaries that were not removed, retired,
abandoned or replaced in accordance with the applicable requirements set
forth under Environmental Law.
(e) To the knowledge of MMC, no property that MMC or any of its
subsidiaries has ever owned or operated has ever been listed on the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any equivalent state or
local information system.
(f) To the knowledge of MMC, there are not any current or past
environmental requests, notices, demands or regulatory noncompliance and/or
enforcement actions at any property owned or operated by MMC or its
subsidiaries, nor is there litigation pending that alleges violations or
noncompliance with any Environmental Law. To the knowledge of MMC, no such
matter is anticipated, impending or threatened.
(g) MMC and each of its subsidiaries operates, and at all times has
operated, its business in all material respects in accordance with all
applicable Environmental Laws, and all material licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary for
the lawful operation of the business of MMC and its subsidiaries are in
MMC's or the appropriate subsidiary's possession and are in full force and
effect. To MMC's knowledge, there is no threat that any such permit,
license or other authorization will be withdrawn, terminated, limited or
materially changed.
(h) For purposes of this Section 4.17, "knowledge" of MMC shall mean
the knowledge of (i) the officers and directors of MMC and its subsidiaries
and (ii) the persons identified in Schedule 4.17 hereto.
4.18 INSURANCE. Schedule 4.18 contains a complete and accurate list of
all policies of fire, liability, workers' compensation, directors' and officers'
liability and other forms of insurance owned or held by, or the premiums for
which are paid by, MMC or any of its subsidiaries. All such policies are and
will at all times up to the Effective Time be, in full force and effect and no
notice of cancellation or termination has been received with respect to any such
policy. Neither MMC nor any of its subsidiaries have been refused any insurance
or had its coverage limited within the past four years. Neither MMC nor any of
its subsidiaries have any life insurance policies in respect of any shareholder,
director, officer, or employee of MMC or any of its subsidiaries, owned by, or
the premiums for which are paid by, MMC or any of its subsidiaries.
4.19 BOOKS AND RECORDS. The books and records of MMC and its subsidiaries
(a) are kept in all material aspects complete and correct and (b) reflect all
material financial
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transactions of MMC and its subsidiaries, in each case as complete entries in
such books and records.
4.20 EMPLOYEES. Schedule 4.20 contains a complete and accurate list of
all employees of MMC and its subsidiaries, together with their titles and rates
of total annual aggregate compensation as of the date of this Agreement.
4.21 SECTION 5/11.75 OF THE IBCA NOT APPLICABLE. The provisions of
Section 5/11.75 of the IBCA will not, prior to the termination of this
Agreement, assuming the accuracy of the representations contained in Section
3.13 (without giving effect to the knowledge qualification thereof), apply to
this Agreement, the Merger or the transactions contemplated hereby.
4.22 OWNERSHIP OF ADM SHARES. As of the date hereof, neither MMC nor, to
its knowledge, any of its affiliates or associates (as such terms are defined
under the Exchange Act), (a) beneficially owns, directly or indirectly, or
(b) is a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, ADM Shares, which in
the aggregate, represent ten percent or more of the outstanding ADM Shares.
4.23 CORPORATE RECORDS. The minute books of MMC, which have been made
available to ADM or its representatives, fully and accurately show in all
material respects all corporate action taken by MMC's Board of Directors, all
committees of MMC's Board of Directors and MMC's shareholders (including,
without limitation, actions taken by written consent without a meeting) and
contain true and complete copies or originals of the Articles of Incorporation
(and all amendments thereto) of MMC, the Bylaws (as amended) of MMC and the
minutes of all meetings or consent actions of MMC's Board of Directors,
committees of MMC's Board of Directors and MMC's shareholders. As of the date
of this Agreement, no resolutions material to MMC or bylaws of MMC have been
passed, enacted, consented to or adopted by MMC's Board of Directors, committees
of MMC's Board of Directors or MMC's shareholders except as set forth in such
minute books.
4.24 OPINION OF FINANCIAL ADVISOR. Prior to the date hereof, MMC has
received the opinion of Merrill Lynch to the effect that the Exchange Ratio, as
subject to adjustment in accordance with Section 2.1(a), is fair to the holders
of MMC Shares.
4.25 NO EXISTING DISCUSSIONS. On the date hereof, MMC is not engaged,
directly or indirectly, in any discussions or negotiations with any other party
with respect to an Acquisition Proposal (as defined below).
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS BY MMC AND ADM PENDING THE MERGER. Except as set
forth on Schedule 5.1 and except as consented to in writing by the other party
after the date hereof, during the period from the date of this Agreement and
continuing until the Effective Time relative to MMC and from the first day of
the Pricing Period until the Effective Time relative to ADM:
(a) The respective businesses of MMC and its subsidiaries and ADM and
its subsidiaries shall be conducted only in the ordinary course of business
and consistent with past practices, including, without limitation, methods
of accounting.
(b) Neither MMC or any of its subsidiaries nor ADM or any of its
subsidiaries shall (i) sell or pledge or agree to sell or pledge any stock
owned by it in any of its subsidiaries; (ii) amend its Certificate or
Articles of Incorporation or Bylaws; or (iii) split, combine or reclassify
any shares of its outstanding capital stock or declare, set aside or pay
any dividend or other distribution payable in cash, stock or property in
respect of its capital stock (except for ADM's regular quarterly cash
dividend on its outstanding Common Stock), or directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock or
other securities or shares of the capital stock or other securities of any
of its subsidiaries.
(c) Neither MMC or any of its subsidiaries nor ADM or any of its
subsidiaries shall (i) authorize for issuance, issue, sell, pledge, dispose
of, encumber, deliver or agree or commit to issue, sell, pledge, dispose
of, encumber or deliver any additional shares of, or rights of any kind to
acquire any shares of, its capital stock of any class or securities
exchangeable into shares of stock of any class or any Voting Debt (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for unissued shares
of ADM Common Stock reserved for issuance upon the exercise of the stock
options, stock purchase plans, employee benefit plans, or warrants
described in Sections 3.2 or 4.2; (ii) acquire, dispose of, transfer,
lease, license, mortgage, pledge or encumber any fixed or other substantial
assets other than in the ordinary course of business and consistent with
past practices; (iii) incur, assume or prepay any material indebtedness,
liability or obligation or any other material liabilities or issue any debt
securities other than in the ordinary course of business and consistent
with past practices; (iv) assume, guarantee, endorse or otherwise, become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person (other than a wholly owned subsidiary) in a
material amount other than in the ordinary course of business and
consistent with past practices; (v) make any material loans, advances or
capital contributions to, or investments in, any other person, other than
to wholly-owned
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subsidiaries, other than in the ordinary course of business and consistent
with past practices; or (vi) fail to maintain adequate insurance consistent
with past practices for their businesses and properties.
(d) Each of MMC and ADM shall use its best efforts to preserve intact
the business organization of MMC and its subsidiaries on the one hand and
ADM and its subsidiaries on the other hand, to keep available the services
of their present officers and key employees, and to preserve the goodwill
of those having business relationships with their respective subsidiaries;
provided, however, that no breach of this representation shall be deemed to
have occurred if a failure to comply with this Section 5.1(d) occurs as a
result of any matter arising out of the transactions contemplated by this
Agreement, or any Acquisition Proposals (as defined below) made to MMC by
any third party or the public announcement thereof.
(e) Neither MMC, ADM nor any of their respective subsidiaries shall
knowingly take or allow to be taken or fail to take any action which act or
omission would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
(f) MMC, ADM and each of their respective subsidiaries shall use all
reasonable efforts to take or omit to take any action or agree, in writing
or otherwise, to take or omit to take any action which would make any
representation or warranty of MMC, ADM or ADMAC, as applicable, herein
true and correct in all material respects.
5.2 COMPENSATION PLANS. Except as set forth in Schedule 5.2, during
the period from the date of this Agreement and continuing until the Effective
Time, MMC agrees as to itself and its subsidiaries that it will not, without the
prior written consent of ADM and ADMAC (except as otherwise required by
applicable law or pursuant to existing contractual arrangements) (a) enter into,
adopt or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment, severance or other employee
benefit plan, agreement, trust, plan, fund or other arrangement between MMC and
one or more of its officers, directors or employees, in each case so as to
materially increase benefits thereunder (collectively, "Compensation Plans"),
(b) grant or become obligated to grant any material increase in the compensation
or fringe benefits of directors, officers or employees (including any such
increase pursuant to any Compensation Plan) or any increase in the compensation
payable or to become payable to any director or officer, except, with respect to
employees other than officers, for increases in compensation in the ordinary
course of business consistent with past practice, or enter into any contract,
commitment or arrangement to do any of the foregoing, except for normal
increases and non-stock benefit changes in the ordinary course of business
consistent with past practice, or (c) enter into or renew any contract,
agreement, commitment or arrangement providing for the payment to any director,
officer or employee of compensation or benefits contingent, or the terms of
which are
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materially altered in favor of such individual, upon the occurrence of any of
the transactions contemplated by this Agreement, except for contracts renewed in
the ordinary course of business.
5.3 CURRENT INFORMATION. From the date of this Agreement to the Effective
Time, MMC will cause one or more of its designated representatives to confer on
a regular and frequent basis (not less frequently than semimonthly) with
representatives of ADM and to report the general status of MMC's and its
subsidiaries ongoing operations and to deliver to ADM (not less frequently than
monthly) unaudited consolidated balance sheets and related consolidated
statements of income, changes in shareholders equity and cash flow for the
period since the last such report. MMC will promptly notify ADM of any material
change in the normal course of business or in its subsidiaries' properties.
5.4 LEGAL CONDITIONS TO MERGER. Each of MMC (subject to Section 6.9), ADM
and ADMAC shall, and shall cause its subsidiaries to, use all reasonable efforts
(a) to take, or cause to be taken, all actions necessary to comply promptly with
all legal requirements which may be imposed on such party or its subsidiaries
with respect to the Merger and to consummate the transactions contemplated by
this Agreement, subject to the appropriate vote or consent of shareholders and
(b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any governmental
entity and or any other public or private third party which is required to be
obtained or made by such party or any of its subsidiaries in connection with the
Merger and the transactions contemplated by this Agreement; provided, however,
that a party shall not be obligated to take any action pursuant to the foregoing
if the taking of such action or such compliance or the obtaining of such
consent, authorization, order, approval or exemption would, in such party's
reasonable opinion, be materially burdensome to such party and its subsidiaries
taken as a whole. Each of MMC, ADM and ADMAC will promptly cooperate with and
furnish information to the other in connection with any such burden suffered by,
or requirement imposed upon, any of them or any of their subsidiaries in
connection with the foregoing.
5.5 VOTING AGREEMENTS. MMC shall use its best efforts to obtain from the
MMC Employees' Profit Sharing Trust and the CFM Foundation an agreement
substantially in the form of Exhibit 5.5 hereto (collectively, the "Voting
Agreements"), whereby each such person agrees to vote all shares of MMC Common
Stock for which they have voting power in favor of the Merger in any shareholder
vote to obtain approval to proceed with the Merger.
5.6 AFFILIATES. At least 30 days prior to the meeting of the shareholders
of MMC, MMC shall deliver to ADM and ADMAC a letter identifying all persons who
are, at the time this Agreement is submitted for approval to the shareholders of
MMC, "affiliates" of MMC for purposes of Rule 145 under the Securities Act. MMC
shall use all reasonable efforts to cause each person named as "affiliates" to
deliver to ADM and ADMAC no later than 15 days prior to the meeting of the
shareholders of MMC a written "affiliates" agreement, in customary form,
restricting the disposition by such person of the ADM Shares to be received
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by such person in the Merger to dispositions permitted by Rule 145. MMC
Certificates surrendered for exchange by any person constituting an "affiliate"
of MMC within the meaning of Rule 145 under the Securities Act shall not be
exchanged by the Exchange Agent for ADM Shares pursuant to Section 2.2 until ADM
and ADMAC have received such agreement described in the preceding sentence.
5.7 ADVICE OF CHANGES; GOVERNMENT FILINGS. Each party shall confer on a
regular and frequent basis with the other, report on operational matters and
promptly advise the other orally and in writing of any change or event having,
or which, insofar as can reasonably be foreseen, could have, a Material Adverse
Effect on such party or which would cause or constitute a material breach of any
of the representations, warranties or covenants of such party contained herein.
ADM shall use all reasonable efforts to file all reports required to be filed
with the SEC between the date of this Agreement and the Effective Time and shall
deliver to MMC copies of all such reports promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, each party shall
promptly provide the other (or its counsel) with copies of all other filings
made by such party with any state or federal government entity in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 ACCESS AND INFORMATION.
(a) MMC and its subsidiaries shall afford to ADM and its financial
advisors, legal counsel, accountants, consultants and other representatives
access during normal business hours throughout the period from the date
hereof to the Effective Time to all of its books, records, properties,
facilities, personnel commitments and records (including but not limited to
tax returns) and, during such period, each MMC and ADM and their respective
subsidiaries shall furnish promptly to the other all information concerning
its business, properties and personnel as such other party may reasonably
request for purposes of the transactions contemplated by this Agreement.
No investigation pursuant to this Section 6.1 shall affect any
representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger.
(b) All information furnished by MMC to ADM and ADMAC or furnished by
ADM or ADMAC to MMC pursuant hereto shall be treated as the sole property
of the party furnishing the information until consummation of the Merger
contemplated hereby. The parties will hold any such information which is
nonpublic in confidence to the extent required by, and in accordance with
the Confidentiality Agreement dated as of July 21, 1997, between MMC and
ADM (the "Confidentiality Agreement") and
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the confidentiality provisions contained in such Confidentiality Agreement
shall survive the termination of this Agreement.
6.2 REGISTRATION STATEMENT. As promptly as practicable, ADM shall prepare
and file with the SEC the Registration Statement and use its best efforts to
have the Registration Statement declared effective. ADM shall also use its best
efforts to take any action required to be taken under state securities or blue
sky laws in connection with the issuance of the ADM Shares pursuant hereto. MMC
shall furnish ADM with all information concerning MMC and its shareholders and
shall take such other action as ADM may reasonably request in connection with
such Registration Statement and issuance of ADM Shares.
6.3 PROXY STATEMENT; SHAREHOLDER APPROVAL. MMC, acting through its Board
of Directors, shall, in accordance with applicable law and its Articles of
Incorporation and Bylaws:
(a) promptly and duly call, give notice of, convene and hold as soon
as practicable following the date upon which the Registration Statement
becomes effective a meeting of its shareholders for the purpose of voting
to approve and adopt this Agreement and shall, subject to Section 6.9
hereof, use its best efforts to obtain such shareholders' approval; and
(b) subject to Section 6.9 hereof, recommend approval and adoption of
this Agreement by the shareholders of MMC and include such recommendations
in communications delivered by MMC to MMC's shareholders for the purpose of
soliciting proxies or as otherwise required by law, and take all lawful
action to solicit such approvals.
6.4 NYSE. ADM shall take such action to apply for listing of the ADM
Shares to be issued pursuant to the Merger on the NYSE, if necessary, and shall
use its best efforts to obtain prior to the Effective Time approval for the
listing of the ADM Shares subject to official notice of issuance.
6.5 ANTITRUST LAWS. As promptly as practicable, MMC, ADM and ADMAC shall
make all filings and submissions under the HSR Act as may be required to be made
in connection with this Agreement and the transactions contemplated hereby.
Subject to Section 6.1 hereof, MMC will furnish to ADM and ADMAC, and ADM and
ADMAC will furnish to MMC, such information and assistance as the other may
reasonably request in connection with the preparation of any such filings or
submissions. Subject to Section 6.1 hereof, MMC will provide to ADM's and
ADMAC's counsel, as reasonably requested, and ADM and ADMAC will provide to
MMC's designated outside counsel, as reasonably requested, copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives and any
governmental agency or
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authority or members of their respective staffs with respect to this Agreement
and the transactions contemplated hereby.
6.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, ADM,
ADMAC and MMC agree that they will each obtain the approval of the other parties
prior to issuing any press release and that they will use their best efforts to
consult with the other parties before otherwise making any public statement or
responding to any press inquiry with respect to this Agreement or the
transactions contemplated hereby, except as may be required by law, any
governmental agency or the rules of the NYSE.
6.7 EXPENSES. In the event the Merger is not consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
6.8 CERTAIN BENEFITS.
(a) From and after the Effective Time, ADM and the Surviving
Corporation shall (i) honor, in accordance with the respective terms of the
MMC Plans and to the extent required by ERISA, all benefits accrued at the
Effective Time under the MMC Plans and (ii) continue to provide benefits in
accordance with the terms of the MMC Retired Employees Medical Plan or a
plan with benefits substantially similar to those provided to similarly
situated persons under ADM's relevant plan for retired employees. ADM and
the Surviving Corporation shall grant to all employees of MMC or its
subsidiaries who remain employees of the Surviving Corporation or its
subsidiaries at the Effective Time ("MMC Employees"), from and after the
Effective Time, credit for all service with MMC and its subsidiaries,
affiliates and predecessors prior to the Effective Time for eligibility and
vesting purposes for all employee benefits of ADM and the Surviving
Corporation, and shall offer the MMC Employees participation in all
employee benefits of ADM and the Surviving Corporation offered to similarly
situated employees of ADM and the Surviving Corporation. To the extent any
such benefit plans provide medical or dental welfare benefits after the
Effective Time, such benefit plans shall waive any preexisting condition
exclusions and waiting periods for plan participation unless the
MMC Employee was subject to one or more preexisting condition exclusions in
the comparable MMC Plan (but credit shall be given to such employee for his
preexisting condition exclusion and waiting period time credited under the
comparable MMC plan), and shall provide that any expenses incurred on or
before the Effective Time shall be taken into account under the benefit
plans of ADM and the Surviving Corporation for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions.
Further, for a period of nine months from and after the Effective Time, ADM
and the Surviving Corporation shall make a severance payment in accordance
with the policy detailed in Schedule 6.8 to any MMC Employee who is
terminated without cause by ADM or the Surviving Corporation within such
nine-month period.
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(b) Except as provided in the next sentence, ADM, ADMAC and MMC
intend that the obligations and rights created hereunder (including,
without limitation, any rights or obligations created by Section 6.8(a))
are only for the benefit of ADM, ADMAC and MMC. This Agreement shall not
be construed to create any rights or benefits for any third party
beneficiaries except as referenced in Section 9.9, and except that the
parties to the agreements and arrangements listed on Schedule 6.8 shall be
entitled to enforce such agreements against ADM and the Surviving
Corporation.
6.9 STANDSTILL AGREEMENT.
(a) Neither MMC, its subsidiaries or any of their respective officers
and directors shall, and they shall each direct and use its best efforts to
cause their employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant) not to (i) initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of, or which reasonably could be expected to lead to, any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders or stockholders, as the case may be) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
any assets or capital stock of MMC or any of its subsidiaries (any such proposal
or offering being hereinafter referred to as an "Acquisition Proposal") or
(ii) engage in any negotiations or discussions concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. MMC will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing and will take the necessary steps to inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.9.
(b) Notwithstanding the provisions of Section 6.9(a), nothing
contained in this Section 6.9 shall prohibit the Board of Directors of MMC from
(i) furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited written, bona fide
proposal, to acquire MMC and/or its subsidiaries pursuant to a merger,
consolidation, share exchange, business combination, tender or exchange offer or
other similar transaction and in respect of which such person or entity has the
necessary funds or commitments therefor if, and only to the extent that (A) the
Board of Directors of MMC, after consultation with and based upon the advice of
independent legal counsel (who may be MMC's regularly engaged independent legal
counsel), determines in good faith that such action is necessary for the Board
of Directors of MMC to comply with its fiduciary duties to stockholders under
applicable law, (B) the Board of Directors of MMC, after consultation with MMC's
financial advisor, determines in good faith that such Acquisition Proposal is
bona fide and is superior to the shareholders of MMC than the Merger, and
(C) prior to taking such action, MMC (x) provides reasonable notice to ADM to
the effect that it is taking such action and (y) receives from such person or
entity an executed confidentiality agreement in
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reasonably customary form (an Acquisition Proposal meeting each of the foregoing
requirements is herein referred to as a "Superior Proposal"); or (ii) failing to
make or withdrawing or modifying its recommendation referred to in Section
6.3(b) hereof if there exists an Acquisition Proposal and the Board of Directors
of MMC determines that it is a Superior Proposal in accordance with Section
6.9(b)(i) hereof.
(c) If the Board of Directors of MMC determines to take any action
pursuant to Section 6.9(b)(ii) hereof, then prior to taking such action, MMC
shall give written notice to ADM specifying the pricing, terms, conditions and
all material provisions of the Superior Proposal, providing to ADM a copy of the
third-party's offer with such notice. ADM shall then have five business days
after receipt of such notice to submit to the Board of Directors of MMC its
counter proposal (the "ADM Proposal"). The Board of Directors of MMC shall then
have five business days to evaluate the ADM Proposal and to notify ADM as to
whether it equals or exceeds the Superior Proposal. If the Superior Proposal
includes securities or other non-cash consideration, the ADM Proposal shall be
deemed to be equivalent if ADM provides its own securities or other non-cash
consideration of reasonably equivalent economic value. If the Board of
Directors of MMC determines in its reasonable judgment that the ADM Proposal is
at least equal to the Superior Proposal, then the Board of Directors of MMC will
immediately accept the ADM Proposal, foregoing the Superior Proposal, and
proceed with the terms of this Agreement, as modified by the ADM Proposal. If
the Board of Directors of MMC determines in its reasonable judgment that the ADM
Proposal does not equal or exceed the Superior Proposal, then the Board of
Directors of MMC shall provide to ADM notice of any deficiencies in the ADM
Proposal and ADM shall have three business days to submit to the Board of
Directors of MMC a modified proposal. The Board of Directors of MMC shall then
be obligated to accept the ADM Proposal, as modified, or provide written notice
to ADM of any continuing deficiencies. ADM shall then have another three
business days to further modify its proposal. If ADM elects not to modify its
proposal to match the Superior Proposal within such time periods, then MMC will
be free to take any action contemplated by Section 6.9(b)(ii) hereof. If ADM
elects not to match the terms of the Superior Proposal and the Superior Proposal
is modified in any material respect from the proposal detailed in the initial
notice to ADM prior to the closing of the transactions contemplated thereby,
then ADM's rights under this Section 6.9 shall apply anew.
6.10 ACQUISITION OF MMC COMMON STOCK. From the date hereof until the
earlier to occur of (i) the Effective Time and (ii) termination of this
Agreement pursuant to Article VII hereof, ADM and ADMAC agree not to acquire, or
attempt to acquire, directly or indirectly any beneficial interest (including,
without limitation, any voting rights) in any shares of MMC Common Stock except
as contemplated by this Agreement.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any one of which may be waived by MMC, ADM and ADMAC:
(a) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(c) The NYSE shall have approved the listing of the ADM Shares to be
issued in the Merger.
(d) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the shareholders of
MMC in accordance with applicable law and any applicable provisions of its
Articles of Incorporation and Bylaws.
(e) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits
the consummation of the Merger shall have been issued and remain in effect;
provided, however, that prior to invoking this condition, each party shall
use all commercially reasonable efforts to have any such decree, ruling or
order lifted or vacated Other than the filing of the Certificate of Merger
with the Secretary of State of Delaware and the filing of the Articles of
Merger with and the issuance of a Certificate of Merger by the Secretary of
State of Illinois, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods
imposed by, any governmental entity (all of the foregoing, "Consents") that
may reasonably be deemed necessary so that the consummation of the Merger
and the transactions contemplated hereby will be in compliance with
applicable laws, other than Consents the failure to obtain which would not
have a Material Adverse Effect on the Surviving Corporation and its
subsidiaries, taken as a whole, shall have been filed, occurred or been
obtained (all such permits, approvals, filings and consents and the lapse
of all such waiting periods being referred to as the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full
force and effect.
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(f) ADM shall have received all state securities or blue sky permits
and other authorizations necessary to issue the ADM Shares in exchange for
shares of MMC Common Stock and to consummate the Merger.
7.2 CONDITIONS TO OBLIGATIONS OF MMC TO EFFECT THE MERGER. The obligation
of MMC to effect the Merger shall be further subject to the satisfaction at or
prior to the Closing Date of the following additional conditions, which may be
waived by MMC:
(a) ADM and ADMAC shall have performed and complied in all material
respects with the agreements and obligations under this Agreement required
to be performed and complied with by them at or prior to the Closing Date
and the representations and warranties of ADM and ADMAC contained in this
Agreement shall be true and correct as of the date hereof and shall be true
and correct in all material respects at and as of the Closing Date as if
made at and as of such time, and MMC shall have received a certificate of
the President and Chief Financial Officer of ADM as to the satisfaction of
this condition. The parties acknowledge and agree that certain of the
representations and warranties of ADM and ADMAC contained in this Agreement
are by their terms limited by a materiality standard contained therein and
that, in those cases, the condition contained in this Section 7.2(a) is not
intended to be further limited by the standard "in all material respects"
referred to herein.
(b) MMC shall have received an opinion of Winston & Strawn, special
counsel to MMC, dated as of the Closing Date, substantially to the effect
that, on the basis of facts, representations, and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and
that ADMAC and MMC will each be a party to the reorganization within the
meaning of Section 368(b) of the Code.
(c) MMC shall have received an opinion of counsel to ADM and ADMAC
dated as of the Closing Date substantially in the form of Exhibit 7.2(c)
hereto.
(d) On the Closing Date, the fairness opinion from Merrill Lynch
delivered at the execution of this Agreement pursuant to Section 4.24 shall
not have been withdrawn, modified or amended.
(e) ADM and ADMAC shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument,
except those for which failure to obtain such consents and approvals would
not, individually or in the aggregate, have a Material Adverse Effect on
MMC or ADM or a material adverse effect upon the consummation of the
transactions contemplated hereby.
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7.3 CONDITIONS TO OBLIGATIONS OF ADM AND ADMAC TO EFFECT THE MERGER. The
obligations of ADM and ADMAC to the Merger shall be further subject to the
satisfaction at or prior to the Closing Date of the following additional
conditions, which may be waived by ADM and ADMAC:
(a) MMC shall have performed and complied in all material respects
with the agreements and obligations under this Agreement required to be
performed and complied with by it at or prior to the Closing Date and the
representations and warranties of MMC contained in this Agreement shall be
true and correct as of the date hereof and shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of
such time, and ADM shall have received a certificate of the President and
Chief Financial Officer of MMC as to the satisfaction of this condition.
The parties acknowledge and agree that certain of the representations and
warranties of MMC contained in this Agreement are by their terms limited by
a materiality standard contained therein and that, in those cases, the
condition contained in this Section 7.3(a) is not intended to be further
limited by the standard "in all material respects" referred to herein.
(b) MMC shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of MMC or any subsidiary under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on the Surviving Corporation and its subsidiaries,
taken as a whole, or upon the consummation of the transactions contemplated
hereby.
(c) ADM and ADMAC shall have received an opinion of counsel to MMC
dated the Closing Date substantially in the form of Exhibit 7.3(c) hereto.
(d) ADM shall have received a certificate of the Chief Financial
Officer of MMC, dated the Closing Date, showing that the Shareholders'
Equity of MMC as of the date 15 days prior to the Closing Date is in excess
of $250 million, along with reasonable supporting documentation for such
calculation.
(e) The holders of not more than 10% of the total of the issued and
outstanding shares of MMC Common Stock, shall have taken such action prior
to or at the time of the MMC shareholders' vote as is necessary as of that
time to entitle them to the statutory dissenters' rights referred to in
Section 2.1(a) hereof.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby abandoned at any time prior to the Effective Time:
(a) By the mutual written consent of ADM and MMC;
(b) By either ADM or MMC if (i) any of the conditions to their
respective obligations specified in Article VII hereof has not been
satisfied or waived on or before February 28, 1998, or (ii) the Merger
shall not have been consummated on or before February 28, 1998; provided,
however, that the right to terminate this Agreement under this Section
8.1(b) shall not be available to a party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of any of the conditions specified in Article VII that are required
to have been satisfied prior to the Merger;
(c) By MMC, upon a material breach by ADM or ADMAC of any
representation or warranty or any covenant or agreement set forth in
this Agreement, which breach is not curable or, if curable, is not cured
within the earlier to occur of 20 days after written notice of such breach
is given by MMC to ADM or the Closing;
(d) By ADM, upon a material breach by MMC of any representation or
warranty or any covenant or agreement set forth in this Agreement, which
breach is not curable or, if curable, is not cured within the earlier to
occur of 20 days after written notice of such breach is given by ADM and
ADMAC to MMC or the Closing;
(e) By either ADM or MMC, if any court of competent jurisdiction in
the United States or other federal or state governmental body shall have
issued an order, decree or ruling or take any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or any other action shall have become final and non-appealable;
provided, however, that the right to terminate this Agreement under this
Section 8.1(e) shall not be available to a party who has not complied with
its obligations under Section 5.4 hereof;
(f) By ADM or MMC, upon written notice to the other party, if (i) MMC
fails to make or withdraws or modifies its recommendation referred to in
Section 6.3(b) hereof in accordance with the provisions of Section 6.9(b)
and 6.9(c) hereof or (ii) any approval of the shareholders of MMC required
for the consummation of the Merger shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment thereof;
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(g) By ADM, upon written notice to MMC, if within 45 days after the
date of this Agreement, ADM shall not have received the executed Voting
Agreements;
(h) By ADM, upon written notice to MMC, if prior to the Closing Date,
ADM shall have determined, in its sole discretion acting in a commercial
reasonable manner, that it is "reasonably possible" that the possible
manufacture, sale and shipment by MMC or any of its subsidiaries of
products, including soybean meal, containing dioxin has had or will have a
Material Adverse Effect on MMC and its subsidiaries, taken as a whole. For
purposes of this Section 8(h), "reasonably possible" shall mean that the
chance of the specified future event or events occurring is more than
remote;
(i) By ADM, upon written notice to MMC, if, prior to the 14th day
after receipt by ADM of such additional due diligence documents, materials
and information relative to MMC, if any, as shall be reasonably requested
in writing by ADM after performance of its initial due diligence review (to
be completed no later than 30 days after the date of this Agreement), ADM
shall have discovered during the course of its due diligence investigation
of MMC and its subsidiaries any conditions, facts or circumstances relative
to MMC or any of its subsidiaries which had not been disclosed in this
Agreement or in the MMC Schedules and which, in the aggregate, has had or
is reasonably likely to have a Material Adverse Effect on MMC and its
subsidiaries, taken as a whole; provided; however, that failure to
(i) provide such notice or request such additional due diligence documents,
materials or information during the initial 30-day review period or
(ii) provide such notice within such additional 14-day period shall be
deemed a waiver of ADM's right to terminate this Agreement pursuant to this
Section 8.1(i). Notwithstanding the foregoing, if MMC does not provide to
ADM in a commercially reasonable manner all due diligence documents,
materials and information relating to MMC as ADM shall reasonably request
in writing during the initial 30-day review period, then such period shall
be extended until such time as ADM has received all such documents,
materials and information; or
(j) By MMC, upon written notice to ADM, if, prior to the 14th day
after receipt by MMC of such additional due diligence documents, materials
and information relating to ADM, if any, as shall be reasonably requested
in writing by MMC after performance of its initial due diligence review (to
be completed no later than 30 days after the date of this Agreement), MMC
shall have discovered during the course of its due diligence investigation
of ADM and its subsidiaries any conditions, facts or circumstances relative
to ADM or any of its subsidiaries which had not been disclosed in this
Agreement, in the ADM SEC Reports or in the ADM Schedules and which, in the
aggregate, has had or is reasonably likely to have a Material Adverse
Effect on ADM and its subsidiaries, taken as a whole; provided, however,
that failure to (i) provide such notice or request such additional due
diligence documents,
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materials or information during the initial 30-day review period or
(ii) provide such notice within such additional 14-day period shall be
deemed a waiver of MMC's right to terminate this Agreement pursuant to this
Section 8.1(j). Notwithstanding the foregoing, if ADM does not provide to
MMC in a commercially reasonable manner all due diligence documents,
materials and information relating to ADM as MMC shall reasonably request
in writing during the initial 30-day review period, then such period shall
be extended until such time as MMC has received all such documents,
materials and information.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided above, this Agreement shall forthwith become of no further effect
and there shall be no liability or obligation on the part of ADM, ADMAC or MMC
or their respective officers or directors (except as set forth in Sections 6.1
and 6.9 hereof which shall survive the termination). Nothing contained in this
Section 8.2 shall relieve any party from liability for breach of this Agreement
that results in termination of this Agreement. Upon request therefor, each
party will redeliver all documents, work papers and other material of any other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the party furnishing same.
8.3 AMENDMENT. This Agreement may be amended by action taken by ADM,
ADMAC and MMC at any time before or after approval hereof by the shareholders of
MMC, but, after any such approval, no amendment shall be made which alters the
number of ADM Shares to be exchanged for each MMC Share or which in any way has
a material adverse effect on the rights of such shareholders, without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
8.4 INDEMNIFICATION. All rights to indemnification and/or reimbursement
existing in favor of any present or former director, officer or employee of MMC
or any of its subsidiaries (an "Indemnified Party") as provided in (a) MMC's
Articles of Incorporation Bylaws, or (b) the articles of incorporation, bylaws
or similar organizational documents of any of its subsidiaries or (c) such
related contracts as are listed on Schedule 8.4, each as in effect on the date
hereof, shall survive the Merger with respect to matters occurring at or prior
to the Effective Time. ADM agrees that pursuant to the terms of the Merger such
obligations and liabilities with respect to indemnification and reimbursement of
the Indemnified Parties shall become obligations and liabilities of the
Surviving Corporation and its successors. ADM further agrees to maintain
coverage under MMC's director and officer insurance policies currently in force
or under substantially similar policies for a period of six years after the
Closing Date. ADM further agrees to become directly liable for such obligations
and liabilities with respect to indemnification and reimbursement of the
Indemnified Parties to the extent of the difference between the Surviving
Corporation's Shareholders' Equity as of the date of any such related claim and
the Shareholders' Equity of MMC on the Closing Date.
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8.5 WAIVER. Except as set forth in Sections 8.1(i) and 8.1(j) hereof, at
any time prior to the Effective Time, the parties hereto may (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. Such waiver shall not operate as a waiver of, or estoppel with respect
to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 9.1 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time or the termination of the Agreement.
9.2 BROKERS. Except as set forth on Schedule 9.2, each party hereto
represents and warrants to the other parties that no broker, finder or financial
advisor is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of such party.
9.3 NOTICES. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telecopy or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to ADM, to:
Archer-Daniels-Midland Company
4666 Faries Parkway
Decatur, Illinois 62526
Attention: Chief Executive Officer
Facsimile: (217) 424-4266
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with a copy to:
Archer-Daniels-Midland Company
4666 Faries Parkway
Decatur, Illinois 62526
Attention: General Counsel
Facsimile: (217) 424-6196
(b) If to ADMAC, to:
ADM Acquisition Corp.
4666 Faries Parkway
Decatur, Illinois 62526
Attention: Chief Executive Officer
Facsimile: (217) 424-4266
with a copy to:
ADM Acquisition Corp.
4666 Faries Parkway
Decatur, Illinois 62526
Attention: General Counsel
Facsimile: (217) 424-6196
(c) If to MMC, to:
Moorman Manufacturing Company
1000 North 30th Street
P.O. Box C1
Quincy, Illinois 62305
Attention: Chief Executive Officer
Facsimile: (217) 223-8653
with a copy to:
Schmiedeskamp, Robertson, Neu & Mitchell
525 Jersey, P.O. Box 1069
Quincy, Illinois 62306
Attention: Delmer R. Mitchell, Esq.
Facsimile: (217) 223-1005
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9.4 DESCRIPTIVE HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.5 ENTIRE AGREEMENT. This Agreement (including the Schedules and other
documents and instruments referred to herein) and the Confidentiality Agreement
constitute the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. Section 6.9 hereof shall supersede
Section 18 of the Confidentiality Agreement.
9.6 SPECIFIC PERFORMANCE. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
9.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without giving effect to the
provisions thereof relating to conflicts of law.
9.9 PARTIES IN INTEREST. Except for Sections 6.6 and 6.9 hereof, nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefit or remedies of any nature whatsoever.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
9.11 VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not effect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9.12 JURISDICTION AND VENUE. Each party hereto hereby agrees that any
proceeding relating to this Agreement and the Merger shall be brought in a state
court of Illinois. Each party hereto hereby consents to personal jurisdiction
in any such action brought in any such Illinois court, consents to service of
process by registered mail made upon such party and such party's agent and
waives any objection to venue in any such Illinois court or any claim that such
Illinois court is an inconvenient form.
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9.13 INVESTIGATION. The respective representations and warranties of ADM,
ADMAC and MMC contained herein or in the certificates or other documents
delivered prior to the Closing shall not be deemed waived or otherwise affected
by any investigation made by any party hereto.
9.14 CONSENTS. For purposes of any provision of this Agreement requiring,
permitting or providing for the consent of ADM, ADMAC or MMC, the written
consent of the Chief Executive Officer of ADM, ADMAC or MMC, as the case may be,
shall be sufficient to constitute such consent.
9.15 KNOWLEDGE. Wherever the representations and warranties of the parties
contained herein are qualified by the "knowledge" of such party or the "best
knowledge" of such party, such knowledge shall be limited to that of the
officers and directors of such party and its subsidiaries.
IN WITNESS WHEREOF, each of ADM, ADMAC and MMC has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
ARCHER-DANIELS-MIDLAND COMPANY
By /s/ David J. Smith
------------------------------------------
Its Vice President
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ADM ACQUISITION CORP.
By /s/ David J. Smith
------------------------------------------
Its Vice President
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MOORMAN MANUFACTURING COMPANY
By /s/ THOMAS M. MCKENNA
------------------------------------------
Its President & Chief Executive Officer
---------------------------------------
<PAGE>
EXHIBIT B
September 3, 1997
Board of Directors
Moorman Manufacturing Company
1000 North 30th Street
Quincy, Illinois 62305-7100
Gentlemen:
Moorman Manufacturing Company (the "Company"), Archer-Daniels-Midland
Company (the "Acquiror") and ADM Acquisition Corp., a wholly owned subsidiary of
the Acquiror (the "Acquisition Sub"), propose to enter into an agreement (the
"Agreement") pursuant to which the Company will be merged with the Acquisition
Sub in a transaction (the "Merger") in which each outstanding share of the
Company's common stock, par value $1.00 per share (the "Shares"), will be
converted into the right to receive a number of shares of the common stock, no
par value, of the Acquiror (the "Acquiror Shares") in an amount equal to the
quotient (the "Exchange Ratio") obtained by dividing (x) $5,400.00 (the "Base
Value") by (y) an amount equal to the average of the closing prices of the
Acquiror Shares as reported on the New York Stock Exchange Composite Tape on
each of the 20 trading days immediately preceding the third trading day prior to
the Closing Date (as defined in the Agreement). In the event that the
Shareholders' Equity (as defined in the Agreement) of the Company on the Closing
Date is less than $265 million, the Base Value shall be reduced by an amount
equal to (A) the difference between $265 million and the actual Shareholders'
Equity of the Company on the Closing Date divided by (B) 54,770; provided,
however, that in no event will the Base Value be less than $5,126.13. The
Merger is expected to be considered by the shareholders of the Company at a
special shareholders' meeting and consummated on or shortly after the receipt of
shareholder and all regulatory approvals.
You have asked us whether, in our opinion, the Exchange Ratio is fair to
the holders of Shares from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's audited financial information for the five fiscal
years ended March 29, 1997 and the Company's unaudited financial
information for the four month periods ending August 2, 1997 and 1996;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended June 30, 1996 and the
Acquiror's Forms 10-Q and the related unaudited financial information for
the quarterly periods ending September 30, 1996, December 31, 1996 and
March 31, 1997;
(3) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of the Company,
furnished to us by the Company;
(4) Conducted discussions with members of senior management of the Company
concerning its respective businesses and prospects;
<PAGE>
(5) Reviewed the market prices and valuation multiples for the Acquiror Shares
and compared them with those of certain publicly traded companies that we
deemed relevant;
(6) Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain companies which we deemed to be
relevant;
(7) Compared the proposed financial terms of the transactions contemplated by
the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(8) Reviewed a draft dated August 27, 1997 of the Agreement; and
(9) Reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as we deemed
necessary.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, and we have not assumed any
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of the assets or liabilities of the
Company or the Acquiror. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information furnished
to or discussed with us by the Company, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company. While we have not received any financial forecasts
from or relating to the Acquiror, we have conducted discussions with management
of the Acquiror limited to the possible existence of undisclosed conditions that
may affect the market prices at which the Acquiror Shares have recently traded
and such management's views as to the accuracy and reasonableness of estimates
and reports with respect to the future financial and operating performance of
the Acquiror published by analysts. Our opinion is predicated on the Merger
qualifying as a tax-free reorganization for U.S. federal income tax purposes.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. We have assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or otherwise) for the
Merger, no restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
We have been retained by the Board of Directors of the Company as an
independent contractor to act as financial advisor to the Company with respect
to the Merger and will receive a fee for our services. In addition, the Company
has agreed to indemnify us for certain liabilities arising out of our
engagement. We have in the past provided investment banking and other services
to the Acquiror and may continue to do so and have received, and may receive,
fees for the rendering of such services. In addition, in the ordinary course of
our securities business, we may actively trade debt and/or equity securities of
the Acquiror for our own account and the accounts of our customers, and we
therefore may, from time to time, hold a long or short position in such
securities.
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<PAGE>
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote or as to any other action
such shareholder should take in connection with the proposed Merger.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the Exchange Ratio is fair to the holders of Shares from a financial point of
view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-3
<PAGE>
EXHIBIT C
ILLINOIS COMPILED STATUTES ANNOTATED
CHAPTER 805. BUSINESS ORGANIZATIONS
CORPORATIONS
ACT 5. BUSINESS CORPORATION ACT OF 1983
ARTICLE 11. MERGER AND CONSOLIDATION--DISSENTERS' RIGHTS
5/11.65. RIGHT TO DISSENT
Section 11.65. Right to dissent.
(a) A shareholder of a corporation is entitled to dissent from, and obtain
payment for his or her shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if (i) shareholder
authorization is required for the merger or consolidation or the share exchange
by Section 11.20 or the articles of incorporation or (ii) the corporation is a
subsidiary that is merged with its parent or another subsidiary under Section
11.30;
(2) consummation of a sale, lease or exchange of all, or
substantially all, of the property and assets of the corporation other than in
the usual and regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of such shares;
(iii) in the case of a corporation incorporated prior to
January 1, 1982, limits or eliminates cumulative voting rights with respect to
such shares; or
(4) any other corporate action taken pursuant to a shareholder vote
if the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain payment
for their shares in accordance with the procedures set forth in Section 11.70 or
as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his or
her entitlement unless the action is fraudulent with respect to the shareholder
or the corporation or constitutes a breach of a fiduciary duty owned to the
shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer
than all the shares recorded in such person's name only if such person dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other shares
were recorded in the names of different shareholders. A beneficial owner of
shares who is not the record owner may assert dissenters' rights as to
<PAGE>
shares held on such person's behalf only if the beneficial owner submits to the
corporation the record owner's written consent to the dissent before or at the
same time the beneficial owner asserts dissenters' rights.
C-2
<PAGE>
5/11.70. PROCEDURE TO DISSENT
Section 11.70. Procedure to Dissent.
(a) If the corporate action giving rise to the right to dissent is to be
approved at a meeting of shareholders, the notice of meeting shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to the meeting, the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively enable a
shareholder to vote on the transaction and to determine whether or not to
exercise dissenters' rights, a shareholder may assert dissenters' rights only if
the shareholder delivers to the corporation before the vote is taken a written
demand for payment for his or her shares if the proposed action is consummated,
and the shareholder does not vote in favor of the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to
be approved at a meeting of shareholders, the notice to shareholders describing
the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is later,
the corporation shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are canceled or
modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the corporation
as to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's
C-3
<PAGE>
estimate of fair value and interest due and the amount of the payment by the
corporation or the proceeds of sale by the shareholder, whichever is applicable
because of the procedure for which the corporation opted pursuant to subsection
(c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may
award to that counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
C-4
<PAGE>
(j) As used in this Section:
(1) "Fair value", with respect to dissenter's shares, means the value
of the shares immediately before the consummation of the corporate action to
which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
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<PAGE>
P A R T II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware Law, a corporation may indemnify any person who was or is
a party or is threatened to be made a party to an action (other than an action
by or in the right of the corporation) by reason of his service as a director,
officer, employee or agent of the corporation, or his service, at the
corporation's request, as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees)
that are actually and reasonably incurred by him ("Expenses"), and judgments,
fines and amounts paid in settlement of the action, provided that he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Although Delaware Law permits a corporation to indemnify any person referred to
above against Expenses in connection with the defense or settlement of an action
by or in the right of the corporation, provided that he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the corporation's
best interests, if the person has been judged liable to the corporation,
indemnification is only permitted to the extent that the Court of Chancery (or
the court in which the action was brought) determines that, despite the
adjudication of liability, the person is entitled to indemnity for such Expenses
as the court deems proper. Delaware Law also provides for mandatory
indemnification of any director, officer, employee or agent against Expenses to
the extent such person has been successful in any proceeding covered by the
statute. In addition, Delaware Law permits (i) corporations to include a
provision in their certificates of incorporation limiting or eliminating the
personal liability of a director to a corporation or its stockholders, under
certain circumstances, for monetary damages or breach of fiduciary duty as a
director and (ii) the general authorization of advancement of a director's or
officer's litigation expenses, including by means of a mandatory charter or
by-law provision to that effect, in lieu of requiring the authorization of such
advancement by the board of directors in specific cases. In addition, Delaware
Law provides that indemnification and advancement of expenses provided by the
statute shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement or otherwise.
Article Fourteenth of the Registrant's Certificate of Incorporation and
Article X of its Bylaws provide for the broad indemnification of the
Registrant's officers and directors and limit the personal monetary liability of
the Registrant's directors to the fullest extent permitted by Delaware Law. The
Registrant has also entered into indemnification contracts with certain of its
directors and officers and maintains insurance coverage relating to certain
liabilities of its directors and officers.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
Number
Exhibit Exhibit
--------- ---------
2 - Agreement and Plan of Merger, dated as of September 12,
1997, among Moorman Manufacturing Company, ADM Acquisition
Corp., and Archer-Daniels-Midland Company (included in the
Proxy Statement/Prospectus as EXHIBIT A).*
5 - Opinion of Faegre & Benson LLP.*
8 - Form of opinion of Winston & Strawn regarding certain tax
matters.**
16 - Letter relating to change in accountants.**
23(a) - Consent of Ernst & Young LLP (relating to financial
statements of the Registrant).*
23(b) - Consent of Deloitte & Touche LLP (relating to financial
statements of MMC).*
23(c) - Consent of Price Waterhouse LLP (relating to financial
statements of MMC).*
23(d) - Consent of Ernst & Young LLP (relating to financial
statements of C&T Quincy L.L.C., a joint venture of
MMC).*
23(e) - Consent of Arthur Andersen LLP (relating to financial
statements of Conti-Quincy Export Company, a joint venture
of MMC).*
23(f) - Consent of McGladrey & Pullen LLP (relating to financial
statements of ASI).*
23(g) - Consent of McGladrey & Pullen LLP (relating to financial
statements of Associated Feed Blenders, L.L.C., a joint
venture of MMC).*
23(h) - Consent of Faegre & Benson LLP (included in Exhibit 5).*
23(i) - Consent of Winston & Strawn .*
24 - Powers of Attorney of directors and officers of the
Registrant.*
99(a) - Form of Proxy of MMC.*
99(b) - Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included in the Proxy Statement/Prospectus
as EXHIBIT B).*
- ------------------------------
* previously filed
** filed herewith
II-2
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
None required.
(c) REPORTS, OPINIONS OR APPRAISALS
Information requested hereunder is furnished as Exhibit 99(b) hereto
and as EXHIBIT B to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement PROVIDED, HOWEVER, that clauses (1)(i) and (1)(ii)
do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
ADM pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by
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<PAGE>
the applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the other
Items of the applicable form.
The undersigned Registrant undertakes that every prospectus: (i) that
is filed pursuant to the immediately preceding paragraph, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to this Registration Statement and will not
be used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Decatur, State of
Illinois, on the 9th day of December, 1997.
ARCHER-DANIELS-MIDLAND COMPANY
By /s/ D. J. Smith
--------------------------------------
D. J. Smith, Vice President, Secretary,
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 9th day of December, 1997, by the
following persons in the capacities indicated:
/s/ G. A. Andreas* G. A. Andreas
- ----------------------------------- President and Chief Executive Officer
(Principal Executive Officer)
/s/ D. J. Schmalz* D. J. Schmalz
- ----------------------------------- Vice President and Chief Financial
Officer (Principal Financial Officer)
/s/ S. R. Mills* S. R. Mills
- ----------------------------------- Controller
(Principal Accounting Officer)
D. O. Andreas, Chairman of the Board* )
Shreve M. Archer, Jr., Director* )
J. R. Block, Director* )
Richard Burt, Director* )
M. H. Carter, Director* )
Gaylord O. Coan, Director* )
F. Ross Johnson, Director* ) A MAJORITY OF THE BOARD OF
M. B. Mulroney, Director* ) DIRECTORS
Robert S. Strauss, Director* )
John K. Vanier, Director* )
O. Glenn Webb, Director* )
Andrew Young, Director* )
*D. J. Smith, by signing his name hereto, hereby signs this document on
behalf of each of the other above-named officers or directors of the Registrant
pursuant to powers of attorney duly executed by those persons.
By /s/ D. J. Smith
--------------------------------------
D. J. Smith, Attorney-in-Fact
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number
Exhibit Exhibit
--------- ---------
<S> <C>
2 - Agreement and Plan of Merger, dated as of
September 12, 1997, among Moorman Manufacturing
Company, ADM Acquisition Corp., and Archer-Daniels-Midland
Company (included in the Proxy Statement/Prospectus
as EXHIBIT A).
5 - Opinion of Faegre & Benson LLP.. . . . . . . . . . . . . . Filed Electronically
8 - Form of opinion of Winston & Strawn regarding certain tax
matters. . . . . . . . . . . . . . . . . . . . . . . . . . Filed Electronically
16 - Letter relating to change in accountants . . . . . . . . . Filed Electronically
23(a) - Consent of Ernst & Young LLP (relating to financial
statements of the Registrant). . . . . . . . . . . . . . . Filed Electronically
23(b) - Consent of Deloitte & Touche LLP (relating to
financial statements of MMC).. . . . . . . . . . . . . . . Filed Electronically
23(c) - Consent of Price Waterhouse LLP (relating to financial
statements of MMC).. . . . . . . . . . . . . . . . . . . . Filed Electronically
23(d) - Consent of Ernst & Young LLP (relating to financial
statements of C&T Quincy L.L.C., a joint venture of MMC).. Filed Electronically
23(e) - Consent of Arthur Andersen LLP (relating to financial
statements of Conti-Quincy Export Company, a joint venture
of MMC). . . . . . . . . . . . . . . . . . . . . . . . . . Filed Electronically
23(f) - Consent of McGladrey & Pullen LLP (relating to financial
statements of ASI) . . . . . . . . . . . . . . . . . . . . Filed Electronically
23(g) - Consent of McGladrey & Pullen LLP (relating to financial
statements of Associated Feed Blenders, L.L.C., a joint
venture of MMC). . . . . . . . . . . . . . . . . . . . . . Filed Electronically
23(h) - Consent of Faegre & Benson LLP (included in Exhibit 5).
23(i) - Consent of Winston & Strawn .. . . . . . . . . . . . . . . Filed Electronically
24 - Powers of Attorney of directors and officers of
the Registrant.. . . . . . . . . . . . . . . . . . . . . . Filed Electronically
99(a) - Form of Proxy of MMC.. . . . . . . . . . . . . . . . . . . Filed Electronically
99(b) - Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included in the Proxy
Statement/Prospectus as EXHIBIT B).
</TABLE>
<PAGE>
Exhibit 8
[Letterhead of Winston & Strawn]
December ___, 1997
Moorman Manufacturing Company
1000 North 30th Street
P.O. Box C1
Quincy, Illinois 62305
Re: Merger Agreement with Archer-Daniels-Midland Company
Dear Ladies and Gentlemen:
We have acted as special tax counsel for you in connection with the
transactions contemplated by that certain Agreement and Plan of Merger dated as
of September 12, 1997 among Moorman Manufacturing Company ("MMC"),
Archer-Daniels-Midland Company ("ADM") and ADM Acquisition Corp. ("Merger Sub")
(a wholly-owned subsidiary of ADM) (the "Agreement"). This letter addresses
the federal income tax issues on which you have requested our opinion. This
opinion is being delivered pursuant to Section 7.2(b) of the Agreement and upon
the express instructions and request of MMC. Capitalized terms not defined
herein shall have the same meaning as set forth in the Agreement.
In connection with our opinions herein, we have examined the following
documents:
(a) the Agreement;
(b) the Representation Letter dated ________________, 1997 from MMC to
Winston & Strawn;
(c) the Representation Letter dated ________________, 1997 from ADM to
Winston & Strawn;
(d) the Representation Letter dated _______________, 1997 from the CFM
Foundation to Winston & Strawn;
(e) the Representation Letter dated _______________, 1997 from the
Mercantile Trust & Savings Bank (the "Bank") to Winston & Strawn
regarding the Bank's letter dated _________________, 1997 to MMC;
(f) the Representation Letter dated _________________, 1997 from the
Moorman Manufacturing Company Employee Profit Sharing Plan to Winston
& Strawn; and
(g) Representation Letters from various shareholders of MMC who own 1% or
more of the MMC stock.
<PAGE>
Moorman Manufacturing Company
December __, 1997
Page 2
We have assumed the authenticity of all documents submitted to us as
originals, the conformity to the originals of all documents submitted to us as
copies, and that the signatures on all documents examined by us are genuine.
This opinion is dependent upon current MMC shareholders (the "Shareholders") in
the aggregate (i) having no present agreement, contract, plan or arrangement to
sell, exchange or otherwise dispose of more than 50 percent of the ADM stock
received in the merger and (ii) continuing to hold at least 50 percent of the
ADM stock received in the merger for a period of at least one year.
As to any facts material to our opinion, we have, with your consent, relied
on the representations, warranties, covenants, and opinions made in the above
listed documents by the respective parties thereto. Whenever our opinion with
respect to the existence or absence of facts is based on our knowledge or
awareness, we are referring to the actual knowledge of Winston & Strawn
attorneys or have actively represented MMC or the Shareholders during the course
of our representation of such parties with respect to this opinion. Except as
expressly set forth herein, we have not undertaken any independent investigation
to determine the existence or absence of any facts and no inference as to our
knowledge concerning any facts should be drawn as a result of the limited
representation undertaken by us.
All opinions contained herein are rendered only as to the date hereof, and
we undertake no obligation to update this opinion. Moreover, the Code and
regulations promulgated thereunder are subject to change, new interpretations,
both prospectively and retroactively, and changes in the facts as they have been
represented to us or assumed by us or concluded by others, could affect our
analysis and conclusions.
Subject to the foregoing, we express the following opinions:
1. Under current law, upon consummation of the transactions contemplated
by the Agreement, the merger of Merger Sub into MMC will be treated as
a reorganization within the meaning of Code sections 368(a)(1)(A) and
368(a)(2)(E).
2. Under current law, upon consummation of the transactions contemplated
by the Agreement, the Shareholders will not recognize gain or loss for
federal income tax purposes to the extent that they receive only the
ADM Common Stock in exchange for their MMC Stock.
3. Under current law, upon consummation of the transactions contemplated
by the Agreement, the Shareholders' basis in the ADM Common Stock to
be received will equal their basis in the MMC Stock exchanged therefor
and the Shareholders' holding period in the ADM Common stock to be
received in the Merger will include the period for which the
Shareholders held their MMC Stock exchanged therefore as long as the
MMC Stock was held as a capital asset.
4. Under current law, upon consummation of the transactions contemplated
by the Agreement, neither MMC, ADM, nor Merger Sub will recognize gain
or loss as a result of the merger.
These opinions are rendered only to you and may not be quoted in whole or
in part or otherwise referred to, used by, or relied upon, nor be filed with,
or furnished to, any other person or entity, other than the Shareholders in
connection with the Merger without our prior written consent. Notwithstanding
the foregoing, we hereby consent to the use of this opinion as
<PAGE>
Moorman Manufacturing Company
December __, 1997
Page 3
an Exhibit to the Registration Statement and the use of our name in the Proxy
under the section entitled "Certain Federal Income Tax Consequences." In giving
this consent, we do not admit that we are included in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
<PAGE>
Exhibit 16
Letter relating to Change in Accountants
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Moorman Manufacturing Company
We have read the section entitled "Change in Accountants" of this Proxy
Statement of Moorman Manufacturing Company and are in agreement with the
statements contained thereunder.
Yours very truly,
/s/ Price Waterhouse LLP
December 9, 1997
<PAGE>
Exhibit 16
