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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
PIONEER HI-BRED INTERNATIONAL, INC.
(Name of Issuer)
PIONEER HI-BRED INTERNATIONAL, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $1.00 PAR VALUE PER SHARE
(Title of Class of Securities)
________723680-10-1________
(CUSIP Number of Class of Securities)
WILLIAM DEMEULENAERE
Corporate Counsel
Pioneer Hi-Bred International, Inc.
400 Locust Street
700 Capital Square
Des Moines, IA 50309
(515) 248-4800
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
F. WILLIAM REINDEL
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
(212) 859-8189
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September 25, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION*: AMOUNT OF FILING FEE:
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$1,710,236,944 $342,047
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* Calculated solely for purposes of determining the filing fee, based upon the
purchase of 16,444,586 shares at the maximum tender offer price per share of
$104.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Amount Previously Paid: N/A Filing Party: N/A
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Form or Registration No.: N/A Date Filed N/A
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ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is
Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), and
the address of its principal executive office is 400 Locust Street, 700 Capital
Square, Des Moines, Iowa 50309.
(b) This Schedule 13E-4 relates to the offer by the Company to purchase up
to 16,444,586 shares (or such lesser number of shares as are validly tendered
and not withdrawn) of its Common Stock, $1.00 par value per share (including the
associated Preferred Stock Purchase Rights, the "Shares"), at prices not greater
than $104 nor less than $88 per Share net to the Seller in cash, specified by
the tendering stockholders, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer"), copies of which are attached as Exhibits (a)(1) and (a)(2),
respectively, and incorporated herein by reference. As of September 25, 1997,
82,225,435 Shares were issued and outstanding.
As more fully discussed in Section 8, "Background and Purpose of the Offer,"
of the Offer to Purchase, the Company is making the Offer pursuant to the terms
of the Investment Agreement (as defined in the Offer to Purchase) between the
Company and E. I. du Pont de Nemours and Company ("DuPont"), which requires that
the Company commence the Offer within five business days of closing of the
DuPont equity investment transaction.
(c) The information set forth in "Introduction" and Section 7, "Price Range
of Shares; Dividends," of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable. This statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10, "Source and Amount of
Funds," of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) The information set forth in "Introduction," Section 8, "Background
and Purpose of the Offer," Section 9, "Interests of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares," Section 10,
"Source and Amount of Funds," Section 12, "Effects of the Offer on the Market
for Shares; Registration under the Exchange Act," and Section 14, "Certain U.S.
Federal Income Tax Consequences," of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Introduction," Section 8, "Background and
Purpose of the Offer," and Section 9, "Interests of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares," of the Offer to
Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The information set forth in "Introduction," Section 8, "Background and
Purpose of the Offer," Section 9, "Interests of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares," Section 10,
"Source and Amount of Funds," Section 14, "Certain U.S. Federal Income Tax
Consequences," and Section 16, "Fees and Expenses," of the Offer to Purchase is
incorporated herein by reference.
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ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in "Introduction" and Section 16, "Fees and
Expenses," of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 11, "Certain Information About
the Company," of the Offer to Purchase and the financial statements and notes
related thereto contained in the Company's Annual Report to Shareholders for the
fiscal year ended August 31, 1996, and its Quarterly Report on Form 10-Q for the
quarter ended May 31, 1997, copies of which are attached hereto as Exhibits
(g)(1) and (g)(2), respectively, are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) The information set forth in "Introduction" of the Offer to Purchase is
incorporated herein by reference.
(b)-(e) Not Applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) -- Form of Offer to Purchase dated September 25, 1997.
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(2) -- Form of Letter of Transmittal (including Certification of Taxpayer
Identification Number on Substitute Form W-9).
(3) -- Form of Notice of Guaranteed Delivery.
(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(7) -- Form of Letter to Stockholders of the Company, dated September 25, 1997 from
Charles S. Johnson, President and Chief Executive Officer of the Company.
(8) -- Form of Notice of Offer to Purchase for Cash.
(9) -- Press Release
(b) -- Not Applicable.
(c)(1) -- Formation Agreement, dated as of August 6, 1997, between the Company and DuPont.
(2) -- Research Alliance Agreement, dated as of August 6, 1997, between the Company and
DuPont.
(3) -- Investment Agreement, dated as of August 6, 1997, between the Company and
DuPont.
(4) -- Preferred Seed Support Agreement, dated as of August 6, 1997, between the
Company and DuPont.
(d) -- Not Applicable.
(e) -- Not Applicable.
(f) -- Not Applicable.
(g)(1) -- The Company's Annual Report to Shareholders for the fiscal year ended August 31,
1996.
(2) -- The Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
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PIONEER HI-BRED INTERNATIONAL, INC.
By: /s/ JERRY CHICOINE
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Jerry Chicoine
EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER
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Dated: September 25, 1997
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EXHIBIT INDEX
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EXHIBIT DESCRIPTION
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(a)(1) -- Form of Offer to Purchase dated September 25, 1997.
(2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on
Substitute Form W-9).
(3) -- Form of Notice of Guaranteed Delivery.
(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(7) -- Form of Letter to Stockholders of the Company, dated September 25, 1997 from Charles S. Johnson,
President and Chief Executive Officer of the Company.
(8) -- Form of Notice of Offer to Purchase for Cash.
(9) -- Press Release
(b) -- Not Applicable.
(c)(1) -- Formation Agreement, dated as of August 6, 1997, between the Company and DuPont.
(2) -- Research Alliance Agreement, dated as of August 6, 1997, between the Company and DuPont.
(3) -- Investment Agreement, dated as of August 6, 1997, between the Company and DuPont.
(4) -- Preferred Seed Support Agreement, dated as of August 6, 1997, between the Company and DuPont.
(d) -- Not Applicable.
(e) -- Not Applicable.
(f) -- Not Applicable.
(g)(1) -- The Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996.
(2) -- The Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997.
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PIONEER HI-BRED INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company" or
"Pioneer"), invites its stockholders to tender shares of its common stock, par
value $1.00 per share (including the associated Preferred Stock Purchase Rights
(the "Rights"), the "Shares"), to the Company at prices not greater than $104
nor less than $88 per Share in cash, specified by tendering stockholders, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
the related Letter of Transmittal (which together constitute the "Offer").
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $104 nor less than $88 per
Share), net to the seller in cash (the "Purchase Price"), that it will pay for
Shares validly tendered and not withdrawn pursuant to the Offer, taking into
account the number of Shares so tendered and the prices specified by tendering
stockholders. The Company will select the lowest Purchase Price that will allow
it to buy 16,444,586 Shares (the "Requisite Number") (or such lesser number of
Shares as are validly tendered at prices not greater than $104 nor less than $88
per Share) validly tendered and not withdrawn pursuant to the Offer. The Company
will pay the Purchase Price for all Shares validly tendered at prices at or
below the Purchase Price and not withdrawn, upon the terms and subject to the
conditions of the Offer, including the proration terms hereof.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
The Offer is being made pursuant to an Investment Agreement, dated as of
August 6, 1997 (the "Investment Agreement"), between the Company and E. I. du
Pont de Nemours and Company ("DuPont"). Concurrently with the execution of the
Investment Agreement, the Company entered into a Research Alliance Agreement and
a Joint Venture Formation Agreement with DuPont (collectively, all such
agreements and the agreements ancillary thereto, the "Agreements"). Pursuant to
the Agreements, Pioneer and DuPont agreed to three integrated transactions
involving a research alliance and collaboration between the two companies (the
"Research Alliance"), the formation of a joint venture (the "Joint Venture") to
exploit business opportunities in quality grain traits and an equity investment
by DuPont in Pioneer which will ultimately give DuPont, after giving effect to
the consummation of the Offer assuming the Requisite Number of Shares are
purchased by the Company, a 20% equity interest in Pioneer (the transactions
contemplated by the Agreements, the "Transactions").
The Shares are listed and principally traded on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "PHB." On September 24, 1997, the last full
trading day on the NYSE prior to the announcement by the Company of the price
range of the Offer, the closing per Share sales price as reported on the NYSE
Composite Tape was $93 1/16. On August 6, 1997, the last full trading day on the
NYSE prior to the announcement of the Transactions by the Company, the closing
per Share sales price as reported on the NYSE Composite Tape was $76 9/16.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE
SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS,
INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES.
------------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
The date of this Offer to Purchase is September 25, 1997.
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IMPORTANT
Any stockholders desiring to tender all or any portion of their Shares
should either (i) complete and sign the Letter of Transmittal (or, for Eligible
Institutions (as defined in Section 3) only, a facsimile thereof) in accordance
with the instructions in the Letter of Transmittal, mail or deliver the Letter
of Transmittal with any required signature guarantee, or transmit an Agent's
Message (as defined in Section 3) in connection with a book-entry transfer,
together in each case with any other required documents, to BankBoston, N.A.
(the "Depositary"), and either mail or deliver the stock certificates for such
Shares to the Depositary (with all such other documents) or follow the procedure
for book-entry delivery set forth in Section 3, or (ii) request a broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact that broker, dealer, commercial bank, trust company or other nominee if
such stockholder desires to tender such Shares. Stockholders who desire to
tender Shares and whose certificates for such Shares are not immediately
available or who cannot comply with the procedure for book-entry transfer on a
timely basis or whose other required documentation cannot be delivered to the
Depositary, in any case, by the expiration of the Offer should tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
TO EFFECT A VALID TENDER OF SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE
LETTER OF TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT WHICH THEY
ARE TENDERING SHARES.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent at its address and telephone number set
forth on the back cover of this Offer to Purchase.
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SUMMARY
THIS GENERAL SUMMARY IS PROVIDED FOR THE CONVENIENCE OF THE COMPANY'S
STOCKHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT AND
MORE SPECIFIC DETAILS OF THIS OFFER TO PURCHASE. UNLESS OTHERWISE DEFINED,
CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE MEANINGS ASCRIBED TO
THEM ELSEWHERE IN THIS OFFER TO PURCHASE. STOCKHOLDERS OF THE COMPANY ARE URGED
TO READ CAREFULLY THIS OFFER TO PURCHASE AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, IN THEIR ENTIRETY.
THE OFFER
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Number of Shares to
be Purchased.................. 16,444,586 Shares (or such lesser number of Shares as are
validly tendered).
Purchase Price.................. The Company will determine a single per Share net cash
price, not greater than $104 nor less than $88 per Share,
that it will pay for Shares validly tendered. The Company
will select the lowest Purchase Price that will allow it
to buy 16,444,586 Shares (or such lesser number of Shares
as are validly tendered at prices not greater than $104
nor less than $88 per Share) validly tendered. All Shares
acquired in the Offer will be acquired at the Purchase
Price even if tendered below the Purchase Price. Each
stockholder desiring to tender Shares must specify in the
Letter of Transmittal the minimum price (not greater than
$104 nor less than $88 per Share) at which such
stockholder is willing to have Shares purchased by the
Company. Stockholders wishing to maximize the possibility
that their Shares will be purchased at the Purchase Price
may check the box in the Letter of Transmittal marked
"Shares Tendered at Price Determined by Dutch Auction."
Checking this box may result in a Purchase Price of the
Shares so tendered at the minimum price of $88 per Share.
Market Price of Shares.......... On September 24, 1997, the last reported sale price of the
Shares on the NYSE Composite Tape was $93 1/16 per Share.
On August 6, 1997, the last full trading day on the NYSE
prior to the announcement of the Transactions by the
Company, the closing per Share sales price as reported on
the NYSE Composite Tape was $76 9/16. See Section 7 for
recent trading prices of and cash dividends paid on the
Shares.
How to Tender Shares............ See Section 3. Call the Information Agent at its address
and telephone number set forth on the back cover page of
this Offer to Purchase, or consult your broker for
assistance.
Brokerage Commissions........... None.
Stock Transfer Tax.............. None, if payment is made to the registered holder.
Expiration and Proration
Dates......................... October 23, 1997, at 12:00 Midnight, New York City time,
unless extended by the Company.
Payment Date.................... As soon as practicable after the Expiration Date.
Position of the Company and its
Directors..................... Neither the Company nor its Board of Directors makes any
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recommendation to any stockholder as to whether to tender
or refrain from tendering Shares.
Withdrawal Rights............... Tendered Shares may be withdrawn at any time until 12:00
Midnight, New York City time, on October 23, 1997, unless
the Offer is extended by the Company. See Section 4.
Odd Lots........................ There will be no proration of Shares tendered by any
stockholder owning beneficially or of record fewer than
100 Shares in the aggregate (including Shares held in the
Dividend Reinvestment Plan) as of the Expiration Date, who
tenders all such Shares at or below the Purchase Price
prior to the Expiration Date and who checks the "Odd Lots"
box in the Letter of Transmittal.
Further Developments Regarding
the Offer..................... Call the Information Agent at its address and telephone
number set forth on the back cover page of this Offer to
Purchase, or consult your broker.
THE TRANSACTIONS
Transactions.................... On August 6, 1997, the Company entered into a Research
Alliance Agreement, Joint Venture Formation Agreement and
Investment Agreement (collectively, together with the
ancillary agreements thereto, the "Agreements") with
DuPont. Pursuant to the terms of the Agreements, Pioneer
and DuPont agreed to three integrated transactions
involving a research alliance and collaboration between
the two companies, the formation of a Joint Venture to
exploit business opportunities in quality grain traits and
an equity investment by DuPont in Pioneer which will
ultimately give DuPont, after giving effect to the Offer
assuming the Requisite Number of Shares are purchased, a
20% equity interest in Pioneer. The Offer is being made
pursuant to the terms of the Investment Agreement.
Research Alliance Agreement..... Pursuant to the Research Alliance Agreement, Pioneer and
DuPont have agreed to a research alliance and
collaboration to take advantage of their respective
expertise in technology and know-how concerning quality
grain traits, agronomic traits, industrial use traits,
genomics and enabling technologies for developing seed,
grain, grain products, plant materials and other crop
improvement products. Quality traits are genetic
characteristics which result in a modification of seed,
plant or grain composition or attributes that have value
to end users of grain, grain products or plant materials
and which command value in the market that is capable of
being captured. Agronomic traits are genetic improvements
which improve the plant's defensive characteristics and
its ability to produce a high grain yield.
Joint Venture Formation
Agreement..................... Pursuant to the Joint Venture Formation Agreement, Pioneer
and DuPont have agreed to form a commercial joint venture
(the "Joint Venture"), in which each party will own a 50%
interest, which will seek to create, maximize and capture
value for quality traits in
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seeds, grain, grain products and plant material delivered
through corn, soybean and other selected oilseeds. The
interest of each of Pioneer and DuPont in the Joint
Venture may be purchased by the other party in certain
circumstances.
Investment Agreement............ The equity investment component of the transaction
involves DuPont's purchase directly from Pioneer of
164,445.86 shares of a new series of Preferred Stock of
the Company denominated as Series A Convertible Preferred
Stock, par value $.01 per share (the "Preferred Stock"),
which shares represented a common equivalent economic
ownership interest in Pioneer equal to 19.99% of Pioneer's
outstanding Shares before giving effect to the equity
investment transaction, which was completed on September
18, 1997 (the "Equity Investment Closing Date"), and
approximately 16.67% after giving effect thereto. The
price paid by DuPont, on a common share equivalent basis,
was $104 per Share in cash and $1.71 billion in aggregate
for all shares of Preferred Stock purchased by DuPont.
The Investment Agreement, which has a term of 16 years and
is thereafter extended unless terminated upon one year's
prior notice given by either party, includes a standstill
which prohibits DuPont from acquiring any additional
Shares, except for certain top-up rights to enable it to
obtain and maintain a 20% equity interest, or from taking
certain other actions to seek control of or influence the
management, the Board or the policies of the Company
(including by proposing or seeking to effect any merger or
other business combination transaction involving the
Company, engaging in any consent or proxy solicitation as
to the election of directors or otherwise, or forming a
"group" within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with third parties with respect to any of the
Company's voting securities). DuPont is entitled under the
Investment Agreement to nominate two (and in certain
circumstances three) directors to Pioneer's board of
directors (the "Board") of 13 members (exclusive of the
DuPont nominees), provided that DuPont maintains an equity
ownership of at least 10%. At the Equity Investment
Closing Date, Charles O. Holliday, Jr., Executive Vice
President and a director of DuPont, and William F. Kirk,
Vice President and General Manager of DuPont Agricultural
Products, joined Pioneer's Board as DuPont's initial
designees.
The Investment Agreement requires Pioneer to use the
proceeds of the DuPont equity investment to repurchase its
Shares by commencing the Offer shortly after the Equity
Investment Closing Date, and thereafter, if necessary, by
making open market repurchases, in each case, with Pioneer
seeking to repurchase sufficient shares to increase
DuPont's equity ownership to 20%. Pioneer is not required
to repurchase any shares in excess of the $104 per Share
common equivalent issue price unless DuPont agrees to pay
the weighted average cost in excess of $104 per Share.
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After completion of the Company buy-back program, if
DuPont's ownership has not been increased to 20%, DuPont
is permitted for one year to increase its economic
ownership through open market purchases to up to 20%.
DuPont is required to exchange all Shares acquired by it
in any such transaction for additional shares of Preferred
Stock (on the basis of 100 Shares for each share of
Preferred Stock).
The Preferred Stock is a common stock economic equivalent
and participates equally, on the basis of the number of
Shares into which the Preferred Stock is convertible,
whether or not such conversion has occurred, in all
dividends and distributions when declared by the Company
on or with respect to the Shares. Shares of Preferred
Stock are convertible (on the basis of 100 Shares for each
share of Preferred Stock) automatically upon the transfer
of beneficial ownership of such shares of Preferred Stock
to a person not a member of a DuPont Group (defined
generally under the Investment Agreement as including
DuPont and its affiliates) and under certain other limited
circumstances described in this Offer to Purchase. The
Preferred Stock will vote together as a class with the
holders of Shares on all matters, including the election
of directors, on which the holders of Shares are entitled
to vote with voting power at all times (and regardless of
the number of votes that may be cast at any meeting based
on the Company's existing time-phased five vote per Share
voting rights structure) equal to its percentage common
equivalent economic ownership interest in the Company.
The Investment Agreement obligates DuPont to vote its
shares of Preferred Stock in favor of the slate of
directors (including any DuPont nominees) proposed by the
Board and certain other limited matters, and otherwise
permits DuPont to exercise its voting power in its
discretion. The Investment Agreement contains provisions
that impose certain restrictions upon DuPont's ability to
transfer its shares of Preferred Stock (or the Shares into
which such shares are convertible), including provisions
that prohibit any transfer (other than by means of a
dividend by DuPont to its shareholders) for three years
after the Equity Investment Closing Date and restrict
thereafter the manner in which any such transfer may be
made, the size of the block of shares that any transferee
may acquire and, in certain cases, the terms upon which
any transferee may acquire Shares as a result of any such
transfer. The Investment Agreement further obligates
DuPont, in the event that its common equivalent economic
ownership should exceed by more than one percentage point,
as a result of stock repurchases by the Company or
otherwise, 20% (or such lower percentage as is equal to
DuPont's Ownership Cap (as defined in the Investment
Agreement) in effect at such time), to sell its Preferred
Stock at the request of the Company so that its economic
ownership is equal to 20% (or the lower Ownership Cap, if
applicable), subject to certain indemnification
obligations of the Company if any such sale requires
DuPont to incur a loss as a result of the mandatory sale
of
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such shares based on the price at which DuPont purchased
such shares. In addition, under the Investment Agreement,
as long as DuPont's Ownership Cap is 18% or more, (i)
DuPont is entitled to 30 days' prior notice of, and the
right to participate in any auction leading up to, the
sale of the Company or other business combination
constituting a Change in Control (as defined in the
Investment Agreement) of Pioneer, and (ii) the Company is
prohibited from consummating or entering into a binding
agreement for a Competing Investment (defined in the
Investment Agreement as certain equity investments in the
Company exceeding a specified size by one of the eight
competitors designated by DuPont on an annual basis) for a
period of four years after the date of the Investment
Agreement. DuPont is also accorded certain rights in the
event that a Competing Investment is proposed or
consummated by the Company after the end of such four-year
period, including the right to be provided 30 days' prior
notice thereof, subject to the loss by DuPont of certain
of its other rights as a stockholder under the Investment
Agreement. In addition, certain of DuPont's rights as a
stockholder under the Investment Agreement are eliminated
or modified in the event that either the Joint Venture or
the Research Alliance is terminated.
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THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION
OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE, AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
TABLE OF CONTENTS
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SECTION PAGE
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SUMMARY................................................................................................... 3
INTRODUCTION.............................................................................................. 9
THE OFFER................................................................................................. 11
1. Number of Shares; Proration........................................................................... 11
2. Tenders by Owners of Fewer than 100 Shares............................................................ 13
3. Procedure for Tendering Shares........................................................................ 14
4. Withdrawal Rights..................................................................................... 17
5. Purchase of Shares and Payment of Purchase Price...................................................... 18
6. Certain Conditions of the Offer....................................................................... 19
7. Price Range of Shares; Dividends...................................................................... 20
8. Background and Purpose of the Offer; Certain Effects of the Offer..................................... 21
9. Interests of Directors and Executive Officers; Transactions and Arrangements Concerning
the Shares............................................................................................. 27
10. Source and Amount of Funds............................................................................ 27
11. Certain Information About the Company................................................................. 27
12. Effects of the Offer on the Market for Shares; Registration Under the Exchange Act.................... 33
13. Certain Legal Matters; Regulatory Approvals........................................................... 33
14. Certain U.S. Federal Income Tax Consequences.......................................................... 33
15. Extension of the Offer; Termination; Amendments....................................................... 36
16. Fees and Expenses..................................................................................... 36
17. Miscellaneous......................................................................................... 37
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TO THE HOLDERS OF SHARES OF COMMON STOCK OF
PIONEER HI-BRED INTERNATIONAL, INC.:
INTRODUCTION
Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"),
invites its stockholders to tender shares of its common stock, par value $1.00
per share (including the associated Preferred Stock Purchase Rights (the
"Rights"), the "Shares"), to the Company at prices not greater than $104 nor
less than $88 per Share in cash, specified by tendering stockholders, upon the
terms and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together constitute the "Offer").
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $104 nor less than $88 per
Share), net to the seller in cash (the "Purchase Price"), that it will pay for
Shares validly tendered and not withdrawn pursuant to the Offer, taking into
account the number of Shares so tendered and the prices specified by tendering
stockholders. The Company will select the lowest Purchase Price that will allow
it to buy 16,444,586 Shares (the "Requisite Number") (or such lesser number of
Shares as are validly tendered at prices not greater than $104 nor less than $88
per Share) validly tendered and not withdrawn pursuant to the Offer. The Company
will pay the Purchase Price for all Shares validly tendered prior to the
Expiration Date (as defined in Section 1) at prices at or below the Purchase
Price and not withdrawn, upon the terms and subject to the conditions of the
Offer, including the proration terms described below.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If, before the Expiration Date, more than 16,444,586 Shares are validly
tendered at or below the Purchase Price and not withdrawn, the Company will,
upon the terms and subject to the conditions of the Offer, purchase Shares first
from all Odd Lot Owners (as defined in Section 2) who validly tender all their
Shares at or below the Purchase Price and then on a pro rata basis from all
other stockholders who validly tender Shares at prices at or below the Purchase
Price (and do not withdraw them prior to the Expiration Date). The Company will
return at its own expense all Shares not purchased pursuant to the Offer,
including Shares tendered at prices greater than the Purchase Price and not
withdrawn and Shares not purchased because of proration. The Purchase Price will
be paid net to the tendering stockholder in cash for all Shares purchased.
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the Company's purchase of Shares pursuant to the Offer.
HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN
AND RETURN TO THE DEPOSITARY (AS DEFINED BELOW) THE SUBSTITUTE FORM W-9 THAT IS
INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP
FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH
STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. In addition,
the Company will pay all fees and expenses of Lazard Freres & Co. LLC ("Lazard"
or the "Dealer Manager"), D.F. King & Co., Inc. (the "Information Agent") and
BankBoston, N.A. (the "Depositary") in connection with the Offer. See Section
16.
The Offer is being made pursuant to an Investment Agreement, dated as of
August 6, 1997 (the "Investment Agreement"), between the Company and E. I. du
Pont de Nemours and Company ("DuPont"). Concurrently with the execution of the
Investment Agreement, the Company entered into a Research Alliance Agreement and
a Joint Venture Formation Agreement with DuPont (collectively, together with the
agreements ancillary thereto, the "Agreements"). Pursuant to the terms of the
Agreements, Pioneer and DuPont agreed to three integrated transactions involving
a research alliance and collaboration between the two companies (the "Research
Alliance"), the formation of the Joint Venture to exploit business opportunities
in quality grain traits and an equity investment by DuPont in Pioneer which will
ultimately give DuPont, after giving effect to the consummation of the Offer
assuming the Requisite
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Number of Shares are purchased by the Company, a 20% equity interest in Pioneer
(the transactions contemplated by the Agreements, the "Transactions").
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $104 nor less than $88 per Share) at which they are willing to sell
their Shares and, if any such Shares are purchased pursuant to the Offer, to
sell those Shares for cash without the usual transaction costs associated with
open-market sales. In addition, the Offer may give stockholders the opportunity
to sell Shares at prices greater than market prices prevailing prior to the
announcement of the Offer or prior to the announcement of the Transactions on
August 7, 1997.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS,
INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. SEE SECTION 9 FOR INFORMATION REGARDING THE
INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO
TENDERING SHARES PURSUANT TO THE OFFER.
If the Company, pursuant to the Offer, purchases fewer than the Requisite
Number of Shares, the Company is further required under the Investment
Agreement, and the Board of Directors of Pioneer ("the Board") has authorized
the Company, to use commercially reasonable efforts during the remainder of the
one-year period (the "Company Buy-Back Period") commencing with the Equity
Investment Closing Date to repurchase Shares from the stockholders of the
Company other than DuPont or any member of the DuPont Group in open market
purchases or pursuant to additional self-tender offers by the Company to the
extent necessary so that DuPont's common stock equivalent ownership percentage
shall equal 20%. Any such open market or other purchases may be made on the same
terms or on terms more favorable or less favorable to the stockholders than the
terms of the Offer. Under the terms of the Investment Agreement, the Company is
not obligated to pay greater than $104 per Share in any such repurchase (unless
DuPont pays the average weighted cost per Share in excess of $104), the
aggregate amount paid by the Company in all such purchases (including pursuant
to the Offer) need not exceed the aggregate purchase price paid by DuPont for
the shares of Preferred Stock purchased by it, and the Company is not required
to repurchase in excess of the Requisite Number of Shares. Accordingly, no
assurance can be given that the Company will purchase additional Shares after
the consummation or expiration of the Offer. In any event, the Company will not
make (and is restricted from doing so under Rule 13e-4(f) adopted by the
Securities and Exchange Commission (the "Commission") under the Exchange Act)
any such purchase until the expiration of at least ten business days after
termination of the Offer.
Stockholders who are participants in the Company's Dividend Reinvestment
Plan (the "Dividend Reinvestment Plan") may instruct BankBoston, N.A., as
administrator of the Dividend Reinvestment Plan (in such capacity, the "Plan
Administrator"), to tender all or part of the Shares credited to a participant's
account in the Dividend Reinvestment Plan by following the instructions set
forth in "Procedure for Tendering Shares--Dividend Reinvestment Plan" in Section
3.
As of September 25, 1997, there were 82,222,935 Shares outstanding,
16,444,586 Shares issuable upon conversion of all outstanding Preferred Stock
owned by DuPont and no Shares issuable upon exercise of vested stock options
under the Company's stock option plans or agreements relating thereto. The
16,444,586 Shares that the Company is offering to purchase represent
approximately 16.67% of the outstanding Shares including, for this purpose, the
Shares into which the Preferred Stock owned by DuPont is convertible. In
addition to the foregoing, 997,000 Shares are issuable upon exercise of
outstanding unvested options under the Company's stock option plans or
agreements relating thereto, which options are eligible for vesting at various
times through 2002.
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The Shares are listed and principally traded on the New York Stock Exchange,
Inc. ("NYSE") under the symbol "PHB." On September 24, 1997, the last full
trading day on the NYSE prior to the announcement by the Company of the price
range of the Offer, the closing per Share sales price as reported on the NYSE
Composite Tape was $93 1/16. On August 6, 1997, the last full trading day on the
NYSE prior to the announcement of the Transactions by the Company, the closing
per Share sale price as reported on the NYSE Composite Tape was $76 9/16. THE
COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF
THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 16,444,586 Shares or such lesser
number of Shares as are validly tendered before the Expiration Date (and not
withdrawn in accordance with Section 4) at a net cash price (determined in the
manner set forth below) not greater than $104 nor less than $88 per Share. The
term "Expiration Date" means 12:00 Midnight, New York City time, on October 23,
1997, unless and until the Company in its sole discretion shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the Offer, as
so extended by the Company, shall expire. See Section 15 for a description of
the Company's right to extend the time during which the Offer is open and to
delay, terminate or amend the Offer. Subject to Section 2, if the Offer is
oversubscribed, Shares tendered at or below the Purchase Price before the
Expiration Date will be eligible for proration. The proration period also
expires on the Expiration Date.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share Purchase Price that it will pay for Shares validly
tendered and not withdrawn pursuant to the Offer, taking into account the number
of Shares so tendered and the prices specified by tendering stockholders. The
Company will select the lowest Purchase Price that will allow it to buy
16,444,586 Shares (or such lesser number as are validly tendered at prices not
greater than $104 nor less than $88 per Share) validly tendered and not
withdrawn pursuant to the Offer. As required under the Rules adopted by the
Commission, if (i) the Company increases or decreases the price to be paid for
Shares, the Company increases or decreases the Dealer Manager's soliciting fee,
the Company increases the number of Shares being sought and such increase in the
number of Shares being sought exceeds 2% of the outstanding Shares, or the
Company decreases the number of Shares being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner specified
in Section 15, the Offer will be extended until the expiration of such period of
ten business days. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
In accordance with Instruction 5 of the Letter of Transmittal, each
stockholder desiring to tender Shares must specify the price (not greater than
$104 nor less than $88 per Share) at which such stockholder is willing to have
the Company purchase Shares. As promptly as practicable following the Expiration
Date, the Company will, in its sole discretion, determine the Purchase Price
(not greater than $104 nor less than $88 per Share) that it will pay for Shares
validly tendered and not withdrawn pursuant to the Offer, taking into account
the number of Shares so tendered and the prices specified by tendering
stockholders. The Company will select the lowest Purchase Price that will allow
it to buy 16,444,586 Shares (or such lesser number of Shares as are validly
tendered at prices not greater than $104 nor less than $88 per Share) validly
tendered and not withdrawn pursuant to the Offer. The Company will pay the
Purchase Price, even if such Shares were tendered below the Purchase Price, for
all Shares validly tendered prior to the Expiration Date at prices at or below
the Purchase Price and not withdrawn, upon the terms and subject to
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the conditions of the Offer. All Shares not purchased pursuant to the Offer,
including Shares tendered at prices greater than the Purchase Price and Shares
not purchased because of proration, will be returned to the tendering
stockholders at the Company's expense as promptly as practicable following the
Expiration Date.
If the number of Shares validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date is less than or equal to 16,444,586
Shares, the Company will, upon the terms and subject to the conditions of the
Offer, purchase at the Purchase Price all Shares so tendered.
PRIORITY. Upon the terms and subject to the conditions of the Offer, in the
event that prior to the Expiration Date more than 16,444,586 Shares are validly
tendered at or below the Purchase Price and not withdrawn, the Company will
purchase such validly tendered Shares in the following order of priority:
(i) all Shares validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Date by any Odd Lot Owner (as defined in
Section 2) who:
(a) tenders all Shares beneficially owned by such Odd Lot owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(b) completes the box captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, on the Notice of Guaranteed Delivery; and
(ii) after purchase of all of the foregoing Shares, all other Shares validly
tendered at or below the Purchase Price and not withdrawn prior to the
Expiration Date on a pro rata basis.
PRORATION. In the event that proration of tendered Shares is required, the
Company will determine the final proration factor as promptly as practicable
after the Expiration Date. Proration for each stockholder tendering Shares
(other than Odd Lot Owners) shall be based on the ratio of the number of Shares
tendered by such stockholder at or below the Purchase Price to the total number
of Shares tendered by all stockholders (other than Odd Lot Owners) at or below
the Purchase Price. This ratio will be applied to stockholders tendering Shares
(other than Odd Lot Owners) to determine the number of Shares that will be
purchased from each such stockholder pursuant to the Offer. Although the Company
does not expect to be able to announce the final results of such proration until
approximately seven business days after the Expiration Date, it will announce
preliminary results of proration by press release as promptly as practicable
after the Expiration Date. Stockholders can obtain such preliminary information
from the Information Agent and may be able to obtain such information from their
brokers.
On April 6, 1989, the Board of Directors declared a dividend distribution of
one Right for each Share outstanding on April 6, 1989 (the "Record Date"). Each
Share issued subsequent to the Record Date had a Right attached to it. The
Rights expire on December 13, 2006 unless earlier redeemed by the Company. The
terms of the Rights have been amended on December 13, 1994, December 13, 1996
and August 6, 1997, to, among other things, (i) modify the Rights so that each
Right represents the right to purchase one one-thousandth of a share of Series A
Participating Preferred Stock of the Company at an exercise price of $250,
subject to adjustment and (ii) grant holders of shares of Preferred Stock, in
respect of each Share into which the Preferred Stock is convertible, whether or
not such conversion has occurred, the same Rights as holders of Shares. The
Rights generally become exercisable upon the earlier to occur of (i) the
ownership by a person of 15% or more of the outstanding Shares or (ii) the
ownership by a person of 10% or more of the outstanding Shares, but only if and
when such ownership, at any time, represents more than one-fourth of the
combined voting power of the Shares then outstanding (the "Trigger Amount") and
treating all Shares into which the Preferred Stock is convertible as outstanding
for purposes of these provisions. The Rights are not currently exercisable and
trade together with the Shares associated therewith. Absent circumstances
causing the Rights to become exercisable or separately tradable prior to the
Expiration Date, the tender of any Shares pursuant to the Offer will also
constitute a tender of the associated Rights. No separate consideration will be
paid for such Rights. Upon the purchase of Shares by the Company pursuant to the
Offer, the sellers of the Shares so purchased will no longer have an interest in
the Rights associated with such Shares. The Rights Agreement further permits,
without triggering the Rights, the ownership of Shares by certain members of the
Wallace family and other Grandfathered
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Persons as set forth in the Rights Agreement and the ownership by DuPont or
certain of its wholly-owned subsidiaries of the shares of Preferred Stock to the
extent such ownership is permitted under the Investment Agreement. It is not
expected that the completion of the Offer, by itself, will result in the Rights
becoming exercisable or separately tradable or any single stockholder or group
of stockholders owning an excess of the Trigger Amount.
As described in Section 14, the number of Shares that the Company will
purchase from a stockholder may affect the United States federal income tax
consequences to the stockholder of such purchase and therefore may be relevant
to a stockholder's decision whether, and in what amounts, to tender Shares. In
addition, the order in which Shares are purchased may affect the United States
federal income tax consequences to a stockholder, including because, as
indicated in Section 14, the United States federal income tax consequences to a
stockholder may vary depending on the extent to which the stockholder's voting
interest in the Company is reduced and on the particular block of Shares
purchased from the stockholder. The Letter of Transmittal affords each tendering
stockholder tendering shares in certificate form the opportunity to designate
the order of priority in which Shares tendered are to be purchased in the event
of proration for tax purposes and so as to otherwise enable stockholders who own
both Shares entitled to five votes per Share and Shares entitled to one vote per
Share to designate which Shares are to be tendered.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares on or about September 25, 1997 and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the Company's stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES
The Company, upon the terms and subject to the conditions of the Offer, will
accept for purchase, without proration, all Shares validly tendered at or below
the Purchase Price and not withdrawn on or prior to the Expiration Date by or on
behalf of stockholders who own, beneficially or of record, as of the Expiration
Date an aggregate of fewer than 100 Shares, including Shares held in the
Dividend Reinvestment Plan ("Odd Lot Owners"). To avoid proration, however, an
Odd Lot Owner must validly tender at or below the Purchase Price all such Shares
that such Odd Lot Owner owns, beneficially or of record; partial tenders will
not qualify for this preference. This preference is not available to partial
tenders or to owners of 100 or more Shares in the aggregate (including Shares
held in the Dividend Reinvestment Plan), even if such owners have separate stock
certificates for fewer than 100 such Shares. Any Odd Lot Owner wishing to tender
all such Shares owned beneficially or of record by such stockholder pursuant to
this Offer must complete the box captioned "Odd Lots" in the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery and must
properly indicate in the section entitled "Price (In Dollars) Per Share At Which
Shares Are Being Tendered" in the Letter of Transmittal the price at which such
Shares are being tendered, except that an Odd Lot Owner may check the box in the
section entitled "Odd Lots" indicating that the stockholder is tendering all of
such stockholder's Shares (including Shares held in the Dividend Reinvestment
Plan) at the Purchase Price. See Section 3. Stockholders owning an aggregate of
less than 100 Shares whose Shares are purchased pursuant to the Offer will avoid
both the payment of brokerage commissions and any applicable odd lot discounts
payable on a sale of their Shares in transactions on a stock exchange.
The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any stockholder who tendered any Shares owned,
beneficially or of record, at or below the Purchase Price and who, as a result
of proration, would then own, beneficially or of record, an aggregate of fewer
than 100 Shares. If the Company exercises this right, it will increase the
number of Shares that it is offering to purchase in the Offer by the number of
Shares purchased through the exercise of such right.
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3. PROCEDURE FOR TENDERING SHARES
PROPER TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer:
(i) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or, for Eligible Institutions only, a manually signed facsimile thereof)
with any required signature guarantees, or an Agent's Message in connection
with a book-entry transfer, together in each case with any other documents
required by the Letter of Transmittal, must be received prior to 12:00
Midnight, New York City time, on the Expiration Date by the Depositary at
its address set forth on the back cover of this Offer to Purchase; or
(ii) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
AS SPECIFIED IN INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH STOCKHOLDER
DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE
SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING
TENDERED" IN THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $.25) AT WHICH
SUCH STOCKHOLDER'S SHARES ARE BEING TENDERED, EXCEPT THAT AN ODD LOT OWNER MAY
CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL ENTITLED "ODD LOTS"
INDICATING THAT THE STOCKHOLDER IS TENDERING ALL OF SUCH STOCKHOLDER'S SHARES AT
THE PURCHASE PRICE. Stockholders desiring to tender Shares at more than one
price must complete separate Letters of Transmittal for each price at which
Shares are being tendered, except that the same Shares cannot be tendered
(unless properly withdrawn previously in accordance with the terms of the Offer)
at more than one price. IN ORDER TO VALIDLY TENDER SHARES, ONE AND ONLY ONE
PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF
TRANSMITTAL. Stockholders wishing to maximize the possibility that their Shares
will be purchased at the Purchase Price may check the box on the Letter of
Transmittal marked "Shares Tendered at Price Determined by Dutch Auction."
Checking this box may result in a purchase of the Shares so tendered at the
minimum price of $88 per Share.
In addition, Odd Lot Owners who tender all Shares must complete the section
entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery, in order to qualify for the preferential
treatment available to Odd Lot Owners as set forth in Section 2.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is signed
by the registered holder of the Shares (which term, for purposes of this
Section, includes any participant in The Depository Trust Company or
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities")
whose name appears on a security position listing as the holder of the Shares)
tendered therewith and payment and delivery are to be made directly to such
registered holder, or (ii) if Shares are tendered for the account of a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
(not a savings bank or savings and loan association) having an office, branch or
agency in the United States (each such entity being hereinafter referred to as
an "Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If a certificate representing Shares is registered in
the name of a person other than the signer of a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name of the registered holder appears on the certificate, with the signature on
the certificate or stock power guaranteed by an Eligible Institution. In this
regard see Section 5 for information with respect to applicable stock transfer
taxes. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities as described above), a properly completed and duly executed
Letter of Transmittal (or, for Eligible Institutions only, a manually signed
facsimile thereof), or an Agent's Message in connection with a book-entry
transfer, together in each case with any other documents required by the Letter
of Transmittal.
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THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the Shares by causing such facility to
transfer such Shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or, for Eligible Institutions only, a manually signed facsimile
thereof), with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, together in each case with any other
required documents must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date, or the guaranteed delivery procedure set
forth below must be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message from a Book-Entry Transfer
Facility transmitted to, and received by, the Depositary forming a part of a
timely confirmation of a book-entry transfer of Shares (a "Book-Entry
Confirmation") which states that (a) such a Book-Entry Transfer Facility has
received from the participant in such Book-Entry Transfer Facility an express
acknowledgment of such participant's tender of the Shares that are the subject
of the Book-Entry Confirmation, (b) the participant in such Book-Entry Transfer
Facility has received and agrees to be bound by the terms of the Letter of
Transmittal, and (c) the Company may enforce such agreement against the
participant in such Book-Entry Transfer Facility.
Delivery of documents to a Book-Entry Transfer Facility in accordance with
such Facility's procedures does not constitute delivery to the Depositary.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or time will not permit all
required documents to reach the Depositary before the Expiration Date, such
Shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) the Depositary receives (by hand, mail, overnight courier, telegram
or facsimile transmission), on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form the Company has provided with this Offer to Purchase (indicating
the price at which the Shares are being tendered), including (where
required) a signature guarantee by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery; and
(iii) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities), together
with a properly completed and duly executed Letter of Transmittal (or, for
Eligible Institutions only, a manually signed facsimile thereof), or an
Agent's Message in connection with a book-entry transfer, together in each
case with any required signature guarantees or other documents required by
the Letter of Transmittal, are received by the Depositary within three NYSE
trading days after the date the Depositary receives such Notice of
Guaranteed Delivery.
If any tendered Shares are not purchased, or if less than all Shares
evidenced by a stockholder's certificates are tendered, certificates for
unpurchased Shares will be returned as promptly as practicable after the
expiration or termination of the Offer or, in the case of Shares tendered by
book-entry transfer at a Book-Entry Transfer Facility, such Shares will be
credited to the appropriate account maintained by the tendering stockholder at
the appropriate Book-Entry Transfer Facility, in each case without expense to
such stockholder.
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<PAGE>
FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax
withholding equal to 31% of the gross payments payable pursuant to the Offer,
each stockholder who does not otherwise establish an exemption from backup
withholding must notify the Depositary of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing,
under penalties of perjury, the Substitute Form W-9 included in the Letter of
Transmittal. Noncorporate foreign stockholders should generally complete and
sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. As more fully
described below, in the case of a foreign stockholder, even if such stockholder
has provided the required certification to avoid backup withholding, the
Depositary will withhold 30% of the gross payments made pursuant to the Offer
unless a reduced rate of withholding or an exemption from withholding is
applicable.
The Depositary will withhold United States federal income taxes equal to 30%
of the gross payments payable to a foreign stockholder unless the Company and
the Depositary determine that (i) a reduced rate of withholding is available
pursuant to a tax treaty or (ii) an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (a) a citizen or resident of the
United States, (b) a corporation, partnership, or other entity created or
organized in or under the laws of the United States, any State or any political
subdivision thereof (other than any partnership treated as foreign under United
State Treasury regulations), or (c) an estate or trust, the income of which is
subject to United States federal income taxation regardless of the source of
such income. In order to obtain a reduced rate of withholding pursuant to a tax
treaty, a foreign stockholder must deliver to the Depositary before any payment
a properly completed and executed IRS Form 1001. In order to obtain an exemption
from withholding on the grounds that the gross proceeds paid pursuant to the
Offer are effectively connected with the conduct of a trade or business within
the United States, a foreign stockholder must deliver to the Depositary before
any payment a properly completed and executed IRS Form 4224. The Company and the
Depositary will determine a stockholder's status as a foreign stockholder and
eligibility for a reduced rate of, or exemption from, withholding by reference
to any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form
4224) unless facts and circumstances indicate that such reliance thereon is not
warranted. A foreign stockholder may be eligible to obtain a refund of all or a
portion of any tax withheld if such stockholder meets the "complete redemption",
"substantially disproportionate" or "not essentially equivalent to a dividend"
tests described in Section 14 or is otherwise able to establish that no tax or a
reduced amount of tax is due. Backup withholding generally will not apply to
amounts subject to the 30% or a treaty-reduced rate of withholding.
For a discussion of certain United States federal income tax consequences
generally applicable to tendering stockholders, see Section 14.
DIVIDEND REINVESTMENT PLAN. Shares credited to participants' accounts under
the Dividend Reinvestment Plan will be tendered by BankBoston, N.A., as Plan
Administrator, according to instructions provided to the Plan Administrator from
participants in the Dividend Reinvestment Plan. Shares for which the Plan
Administrator has not received timely instructions from participants will not be
tendered. The Plan Administrator will make available to the participants whose
accounts are credited with Shares under the Dividend Reinvestment Plan all
documents furnished to stockholders generally in connection with the Offer.
BECAUSE THE DEPOSITARY FOR THE OFFER ALSO ACTS AS PLAN ADMINISTRATOR OF THE
DIVIDEND REINVESTMENT PLAN, PARTICIPANTS IN THE DIVIDEND REINVESTMENT PLAN MAY
USE THE LETTER OF TRANSMITTAL TO INSTRUCT THE PLAN ADMINISTRATOR REGARDING THE
OFFER BY COMPLETING THE BOX ENTITLED "DIVIDEND REINVESTMENT PLAN SHARES." Each
participant may direct that all, some or none of the Shares credited to the
participant's account under the Dividend Reinvestment Plan be tendered and the
price at
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<PAGE>
which such participant's Shares are to be tendered. Participants in the Dividend
Reinvestment Plan are urged to read the Letter of Transmittal and related
materials carefully.
TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 promulgated under the
Exchange Act for a person acting alone or in concert with others, directly or
indirectly, to tender Shares for such person's own account unless at the time of
tender and at the Expiration Date such person has a "net long position" equal to
or greater than the amount tendered in (i) the Shares and will deliver or cause
to be delivered such Shares for the purpose of tender to the Company within the
period specified in the Offer, or (ii) other securities immediately convertible
into, exercisable for or exchangeable into Shares ("Equivalent Securities") and,
upon the acceptance of such tender, will acquire such Shares by conversion,
exchange or exercise of such Equivalent Securities to the extent required by the
terms of the Offer and will deliver or cause to be delivered such Shares so
acquired for the purpose of tender to the Company within the period specified in
the Offer. Rule 14e-4 also provides a similar restriction applicable to the
tender or guarantee of a tender on behalf of another person. A tender of Shares
made pursuant to any method of delivery set forth herein will constitute the
tendering stockholder's representation and warranty to the Company that (i) such
stockholder has a "net long position" in Shares or Equivalent Securities being
tendered within the meaning of Rule 14e-4, and (ii) such tender of Shares
complies with Rule 14e-4. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Company upon the terms and subject to the
conditions of the Offer.
DETERMINATIONS OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Company, in its sole discretion, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance of or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Share or any particular stockholder. No tender of
Shares will be deemed to be properly made until all defects or irregularities
have been cured or waived. None of the Company, the Dealer Manager, the
Depositary, the Information Agent or any other person is or will be obligated to
give notice of any defects or irregularities in tenders, and none of them will
incur any liability for failure to give any such notice.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE VALIDLY TENDERED.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of Shares, pursuant
to the Offer, are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time before the Expiration Date and, unless accepted for
payment by the Company as provided in this Offer to Purchase, may also be
withdrawn after 12:00 Midnight, New York City time, on November 21, 1997.
For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in written, telegraphic or facsimile transmission form on a timely
basis. Such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares tendered, the number
of Shares to be withdrawn and the name of the registered holder, if different
from that of the person who tendered such Shares. If the certificates have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such
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<PAGE>
certificates, the tendering stockholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution (except
in the case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
3, the notice of withdrawal must specify the name and the number of the account
at the applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility. All questions
as to the form and validity, including time of receipt, of notices of withdrawal
will be determined by the Company, in its sole discretion, which determination
shall be final and binding on all parties. None of the Company, the Dealer
Manager, the Depositary, the Information Agent or any other person is or will be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice. Withdrawals may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not tendered for purposes of the Offer. However,
withdrawn Shares may be retendered before the Expiration Date by again following
any of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Company all tendered Shares, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share Purchase Price that it will pay for Shares validly
tendered and not withdrawn pursuant to the Offer, taking into account the number
of Shares so tendered and the prices specified by tendering stockholders, and
will accept for payment and pay for (and thereby purchase) Shares validly
tendered at or below the Purchase Price and not withdrawn as soon as practicable
after the Expiration Date. The Company will select the lowest Purchase Price
that will allow it to buy 16,444,586 Shares (or such lesser number of Shares as
are validly tendered at prices not greater than $104 nor less than $88 per
Share) validly tendered and not withdrawn pursuant to the Offer. For purposes of
the Offer, the Company will be deemed to have accepted for payment (and
therefore purchased), subject to proration, Shares that are validly tendered at
or below the Purchase Price and not withdrawn when, as and if it gives oral or
written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for all of the Shares
accepted for payment pursuant to the Offer as soon as practicable after the
Expiration Date. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made promptly (subject to possible delay
in the event of proration) but only after timely receipt by the Depositary of
certificates for Shares (or of a timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal (or,
for Eligible Institutions only, a manually signed facsimile thereof), or an
Agent's Message in connection with a book-entry transfer, in each case with any
other required documents.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from the Company and transmitting payment to the tendering stockholders. In the
event of proration, the Company will determine the proration factor and pay for
those tendered Shares accepted for payment as soon as practicable after the
Expiration Date. However, the Company does not expect to be able to announce the
final results of any such proration until approximately seven business days
after the Expiration Date. Under no circumstances will the Company pay interest
on the Purchase Price including, without limitation, by reason of any delay in
making payment. Certificates for all
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<PAGE>
Shares not purchased, including all Shares tendered at prices greater than the
Purchase Price and Shares not purchased due to proration, will be returned (or,
in the case of Shares tendered by book-entry transfer, such Shares will be
credited to the account maintained with one of the Book-Entry Transfer
Facilities by the participant who so delivered such Shares) as promptly as
practicable following the Expiration Date or termination of the Offer without
expense to the tendering stockholder. In addition, if certain events occur, the
Company may not be obligated to purchase Shares pursuant to the Offer. See
Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that if payment of the Purchase Price is to be made to, or (in the circumstances
permitted by the Offer) if unpurchased Shares are to be registered in the name
of, any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of all stock transfer taxes, if any (whether imposed on
the registered holder or such other person), payable on account of the transfer
to such person will be deducted from the Purchase Price unless evidence
satisfactory to the Company of the payment of such taxes or exemption therefrom
is submitted. See Instruction 7 of the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF
31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO
THE OFFER. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING FEDERAL INCOME TAX
CONSEQUENCES FOR FOREIGN STOCKHOLDERS.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for, Shares tendered, subject to Rule 13e-4(f)
promulgated under the Exchange Act, if at any time on or after September 25,
1997, and prior to the time of payment for any such Shares (whether any Shares
have theretofore been accepted for payment, purchased or paid for pursuant to
the Offer) any of the following events shall have occurred (or shall have been
determined by the Company to have occurred) that, in the Company's judgment in
any such case and regardless of the circumstances giving rise thereto (including
any action or omission to act by the Company), makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payment:
(a) there shall have been threatened, instituted or pending before any
court, agency, authority or other tribunal any action, suit or proceeding by
any government or governmental, regulatory or administrative agency or
authority or by any other person, domestic or foreign, or any judgment,
order or injunction entered, enforced or deemed applicable by any such
court, authority, agency or tribunal, which (i) challenges or seeks to make
illegal, or to delay or otherwise directly or indirectly to restrain,
prohibit or otherwise affect the making of the Offer, the acquisition of
Shares pursuant to the Offer or is otherwise related in any manner to, or
otherwise affects, the Offer; or (ii) could, in the sole judgment of the
Company, materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company and its subsidiaries, taken as
a whole; or
(b) there shall have been any action threatened or taken, or any
approval withheld, or any statute, rule or regulation invoked, proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Company or any of its subsidiaries, by any
government or governmental, regulatory or administrative authority or agency
or tribunal, domestic or
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<PAGE>
foreign, which, in the sole judgment of the Company, would or might directly
or indirectly result in any of the consequences referred to in clause (i) or
(ii) of paragraph (a) above; or
(c) there shall have occurred (i) the declaration of any banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory); (ii) any general suspension of trading
in, or limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market; (iii) the
commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event which, in
the sole judgment of the Company, might materially affect, the extension of
credit by banks or other lending institutions in the United States; (v) any
significant decrease in the market price of the Shares or in the market
prices of equity securities generally in the United States or any change in
the general political, market, economic or financial conditions or in the
commercial paper markets in the United States or abroad that could have in
the sole judgment of the Company a material adverse effect on the business,
condition (financial or otherwise), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, or on the trading in the
Shares; (vi) in the case of any of the foregoing existing at the time of the
announcement of the Offer, a material acceleration or worsening thereof; or
(vii) any decline in either the Dow Jones Industrial Average or the S&P 500
Composite Index by an amount in excess of 10% measured from the close of
business on September 24, 1997; or
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, which in the sole judgment of the Company is
or may be material to the Company and its subsidiaries taken as a whole; or
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger or acquisition proposal for the Company,
shall have been proposed, announced or made by another person or shall have
been publicly disclosed, or the Company shall have learned that any person
or "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
shall have acquired or proposed to acquire beneficial ownership of more than
5% of the outstanding Shares, or any new group shall have been formed that
beneficially owns more than 5% of the outstanding Shares; or
(f) any person or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an
intent to acquire the Company or any of its Shares.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time. Any determination by the Company concerning the
events described above and any related judgment or decision by the Company
regarding the inadvisability of proceeding with the purchase of or payment for
any Shares tendered will be final and binding on all parties.
7. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and principally traded on the NYSE. The Company's
stock began trading on the NYSE on November 7, 1995. Prior to that date, the
Company's stock was traded in the National Association of Securities Dealers
National Market System ("NSM"). The high and low closing sales prices per Share
on the NYSE Composite Tape (or, if applicable, as reported on the NSM) as
compiled from
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published financial sources and the quarterly cash dividends paid per Share for
the periods indicated are listed below:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
--------- --------- -------------
<S> <C> <C> <C>
FISCAL 1996
1st Quarter................................................... $57 3/8 $43 $ .20
2nd Quarter................................................... 58 1/4 49 3/4 .20
3rd Quarter................................................... 56 5/8 51 3/4 .20
4th Quarter................................................... 57 1/4 51 .23
FISCAL 1997
1st Quarter................................................... 73 1/8 55 1/8 .23
2nd Quarter................................................... 72 1/8 65 3/8 .23
3rd Quarter................................................... 73 58 3/4 .23
4th Quarter................................................... 90 69 5/8 .26
FISCAL 1998
1st Quarter (through September 24, 1997)...................... 93 1/16 86 7/16 .26*
</TABLE>
- ------------------------
* Declared but not paid.
The closing per Share sales price as reported on the NYSE Composite Tape on
September 24, 1997, the last full trading day before the announcement by the
Company of the price range of and the number of Shares sought in the Offer, was
$93 1/16. On August 6, 1997, the last full trading day on the NYSE prior to the
announcement of the Transactions by the Company, the closing per Share sales
price as reported on the NYSE Composite Tape was $76 9/16. On September 16,
1997, the Board declared the regular quarterly cash dividend of $.26 per Share
on all outstanding Shares. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT
QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
BACKGROUND AND PURPOSE OF THE OFFER. The Company is making the Offer
pursuant to the terms of the Investment Agreement which requires that the
Company commence the Offer within five business days of the Equity Investment
Closing Date and further requires, if the Offer does not result in the purchase
by the Company of the Requisite Number of Shares, that the Company use
commercially reasonable efforts to repurchase additional Shares through
additional tender offers or open market purchases.
The Investment Agreement, together with the Research Alliance Agreement and
the Joint Venture Formation Agreement (collectively, together with the
agreements ancillary thereto, the "Agreements") were entered into on August 6,
1997 between Pioneer and DuPont. The Transactions effected pursuant to the
Agreements consist of (i) the creation of a Research Alliance between Pioneer
and DuPont to develop and improve upon the companies' respective expertise,
technology and know-how concerning quality grain traits, agronomic traits,
industrial use traits and enabling technologies for seed, grain, grain products,
plant materials and other crop improvement products, (ii) the formation of a
jointly owned (with each party owning 50%) commercial Joint Venture to create
and capture value from quality traits, and (iii) the acquisition by DuPont of an
equity investment in Pioneer which, assuming the purchase by the Company of the
Requisite Number of Shares pursuant to the Offer, would give DuPont a 20%
interest in Pioneer's common equity. Quality grain traits involve the creation
of genetic characteristics which modify seed, plant or grain composition or
attributes in a manner that has value to end-users of grain, grain products or
plant materials and which command value in the market that is capable of being
captured. Agronomic traits are genetic improvements which improve the plant's
defensive characteristics and its ability to produce a high grain yield. The
Company believes that the Research Alliance with DuPont, together with the
commercial Joint Venture in quality grain traits, will be beneficial over the
long term to the Company and its stockholders by strengthening the Company's
access to technology that is believed to be vital to the future
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<PAGE>
of the Company's business and will expand the opportunities of the Company to
exploit the commercial possibilities of quality grain traits. The Company
believes DuPont is a well-suited partner for it in these efforts because of the
scope and extent of DuPont's capabilities in life science and agricultural
products research and development and the common vision shared by both companies
in emerging technologies in the agricultural marketplace.
The Company entered into the Investment Agreement as part of the
Transactions in order to cement the relationships established under the Research
Alliance and Joint Venture between the two companies by providing DuPont a stake
in the future value of the Company. The Investment Agreement satisfies Pioneer's
objectives in proceeding with a DuPont equity investment, including that the
structure and terms of the equity investment be made on terms believed to be
fair to Pioneer and its stockholders, that the equity investment not enable
DuPont, as a result of the Company's time phased five vote per Share voting
rights structure to exercise voting power in excess of its percentage economic
ownership in the Company and that DuPont agree to a standstill agreement with
respect to its equity investment in the Company to ensure that Pioneer maintain
its status as an independent public company and that DuPont would not seek to
acquire control of Pioneer. The structure of the DuPont equity investment
involved the direct purchase from the Company of a new series of Preferred Stock
that was effectively a common stock economic equivalent and the subsequent
repurchase of an equal number of Shares by the Company from stockholders, other
than DuPont, through one or more self-tender offers or open-market purchases.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $104 nor less than $88 per Share) at which they are willing to sell
their Shares and, if any such Shares are purchased pursuant to the Offer, to
sell those Shares for cash without the usual transaction costs associated with
open market sales. In addition, the Offer may give stockholders the opportunity
to sell Shares at prices greater than market prices prevailing prior to
announcement of the Offer, or prior to the announcement of the Transactions on
August 7, 1997.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS,
INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF
DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES AND NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS
HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION.
Shares acquired by the Company pursuant to the Offer will be retained as
treasury stock by the Company (unless and until the Company determines to retire
such Shares) and will be available for the Company to issue without further
stockholder action (except as required by applicable law or, if retired, the
rules of any securities exchange on which Shares are listed) for any corporate
purpose, including, the issuance of Shares upon the conversion of the Preferred
Stock acquired by DuPont, the acquisition of other businesses, the raising of
additional capital for use in the Company's business and the satisfaction of
obligations under existing or future employee benefit plans and employment
agreements. The Company has no current plans for issuance of the Shares
repurchased pursuant to the Offer.
DESCRIPTION OF AGREEMENTS. THE FOLLOWING SUMMARIES OF THE RESEARCH ALLIANCE
AGREEMENT, THE JOINT VENTURE FORMATION AGREEMENT AND THE INVESTMENT AGREEMENT
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE AGREEMENTS, WHICH ARE
ATTACHED AS EXHIBITS TO THE SCHEDULE 13E-4 TO WHICH THIS OFFER TO PURCHASE
RELATES. CERTAIN DEFINED TERMS USED IN THE DESCRIPTION OF THE AGREEMENTS BELOW
WHICH ARE NOT OTHERWISE DEFINED IN THIS OFFER TO PURCHASE AND WHICH ARE DEFINED
IN THE AGREEMENTS SHALL HAVE THE RESPECTIVE MEANINGS SET FORTH THEREIN.
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<PAGE>
RESEARCH ALLIANCE AGREEMENT. Pursuant to the Research Alliance Agreement,
Pioneer and DuPont have agreed to a Research Alliance to take advantage of the
respective expertise of each in technology and know-how concerning quality grain
traits, agronomic traits, industrial use traits, genomics and enabling
technologies for developing seed, grain, grain products, plant materials and
other crop improvement products within the field of corn, soybean and other
selected oilseed crops. The Research Alliance has two components, namely
collaborative efforts by both parties to develop new technologies, and the grant
by each party to the other of licenses to certain technology. The focus of the
research collaboration efforts is to benefit primarily the Joint Venture and
secondarily the respective businesses of Pioneer and DuPont. The research
collaboration is managed by a seven-member research committee with three
representatives from each of Pioneer and DuPont and one representative from the
Joint Venture. Each party will fund its own efforts under the research
collaboration; however, the research committee will seek to balance the
resources and funding provided by each party so that each party will make
approximately equal contributions on an annual basis. The parties have agreed
that their current level of research spending and efforts for Joint Venture
product quality traits will be maintained or increased. The parties will jointly
own (including through the Joint Venture) technology developed through the
collaborative efforts of the parties. In addition to the collaborative efforts,
the Research Alliance provides for grants of licenses. Each party has a
nonexclusive, nontransferable royalty-free license to the technology of the
other party for research purposes. Technology related to quality traits is
licensed to the Joint Venture. The Joint Venture, in turn, is required to
license such technology to Pioneer on a royalty basis in order for Pioneer to
fulfill its role as the preferred seed supplier to the Joint Venture under the
Preferred Seed Support Agreement described below. DuPont is not entitled to
convey Pioneer sourced germplasm (that is, the proprietary seed of the Company
from which hybrid seed products are developed) or commingled germplasm to any
third party without Pioneer's consent. In the event of termination of the
Research Alliance, DuPont must meet a 95% minimum distance requirements for
commingled germplasm. In addition, each party will have the right to use, on an
exclusive royalty bearing basis, all technology developed by the other party to
make, use or sell products within the first party's principal business field,
which in the case of Pioneer means the production of seeds that embody traits
that impact crop yield potential and in the case of DuPont means technology
related to the interaction of chemicals with genes to protect or regulate crop
growth or development or technology that has application in non-agricultural
markets. Each party has a right of first refusal to technology for products in
the field of corn, soybeans and other selected oilseeds that fall outside
products otherwise covered by the Research Alliance. The Research Alliance
Agreement may be terminated by either party upon three years' prior written
notice delivered no earlier than 13 years after the date of the Research
Alliance Agreement.
JOINT VENTURE FORMATION AGREEMENT. Pursuant to the Joint Venture Formation
Agreement, Pioneer and DuPont have established a commercial joint venture (the
"Joint Venture") in the form of a limited liability company in which each party
has a 50% interest, to create, maximize and capture value from quality grain
traits. Each party has agreed to contribute its respective existing quality
trait assets and businesses to the Joint Venture. Pioneer has not contributed
any of its germplasm to the Joint Venture. The Joint Venture will be managed by
a members committee composed of three representatives designated by each party.
The term of the Joint Venture is perpetual, subject to earlier termination in
certain events including (i) the bankruptcy of either DuPont or Pioneer, (ii) a
"substantial disagreement" between the parties at any time after the tenth
anniversary of the date of the Agreements that is not resolved in accordance
with the dispute resolution procedures established under the Joint Venture, and
(iii) a change of control (as defined in the Investment Agreement) of either
DuPont or Pioneer or certain sales by DuPont of its Agricultural Products
Division or the consummation of a Competing Investment by Pioneer. Under the
Joint Venture Formation Agreement, the party not initiating or the subject of
the event which triggers the termination under clause (i) or (iii) above will
have the right either, depending upon the type of event and when it occurs, (a)
to purchase the joint venture interest owned by the other party at a price
determined through a fair market valuation conducted by investment banking firms
selected by the parties under the Joint Venture Formation Agreement or (b) to
trigger an auction process by which the joint venture interest of either party
will be sold to the highest bidder as between the two parties. In the case of
23
<PAGE>
a substantial disagreement after the tenth anniversary of the date of the
Agreements, an auction process is triggered. A voluntary default by either party
under the Joint Venture Formation Agreement permits the non-defaulting party to
buy the Joint Venture interest of the defaulting party at a nominal cost if the
default occurs during the first 10 years after the date of the Agreements and at
fair market value if the default occurs thereafter. Certain long-term post
termination rights and obligations apply after any termination which permit an
orderly wind-up of the Joint Venture and ensure that Pioneer will have access to
the Joint Venture's technology to sell quality trait seed.
A key component of the Joint Venture is the Preferred Seed Support Agreement
between the Joint Venture and Pioneer. The Joint Venture is not in the seed
business and will look to Pioneer to be the Joint Venture's preferred worldwide
provider and preferred marketer of quality trait seed pursuant to the Preferred
Seed Support Agreement, subject to certain existing supply contracts with
third-party seed companies that will continue. In addition, there may be needs
for other third-party suppliers in the future if Pioneer's capacity cannot meet
demand or when the Joint Venture is not able to provide Pioneer the freedom to
operate technology. In general, the Joint Venture will be entitled to premiums
or royalties captured from the quality trait aspects of seed sold by Pioneer, as
determined by the parties in accordance with the Joint Venture Formation
Agreement and Pioneer will be entitled to revenues from the entire genetic
package of traits and services in the buying of seed except for the quality
trait aspect.
INVESTMENT AGREEMENT. The equity investment component of the transaction
involved DuPont's purchase directly from Pioneer of 164,445.86 shares of a new
series of Series A Convertible Preferred Stock, par value $.01 per share (the
"Preferred Stock"), which represent a common equivalent economic ownership
interest in Pioneer equal to 16,444,586 Shares, or 19.99% of Pioneer's
outstanding Shares before giving effect to the equity investment transaction,
and approximately 16.67% after giving effect thereto. The purchase was completed
on September 18, 1997 (the "Equity Investment Closing Date"). The price paid by
DuPont, on a common share equivalent basis, is $104 per Share in cash, for an
aggregate purchase price of approximately $1.71 billion (the "Preferred Stock
Purchase Price").
STANDSTILL; BOARD SEATS. The Investment Agreement, which has a term of 16
years after the date of the Agreements, and continues thereafter unless and
until either party gives one year's prior written notice, includes a standstill
which prohibits DuPont from acquiring any additional Shares except for certain
top-up rights to enable it to obtain and maintain a 20% equity interest, or from
taking certain other actions to seek control of or influence the management, the
Board or the policies of the Company (including proposing or seeking to effect
any merger or other business combination transaction involving the Company,
engaging in any consent or proxy solicitation as to the election of directors or
any other matter or forming a 13D Group with respect to any of the Company's
voting securities with third parties). DuPont is entitled under the Investment
Agreement to nominate two (and in certain circumstances three) directors to
Pioneer's Board of 13 members (exclusive of the DuPont nominees), provided that
DuPont maintains an equity ownership of at least 10%. Effective at the Equity
Investment Closing Date, Charles O. Holliday, Jr., Executive Vice President and
a director of DuPont, and William F. Kirk, Vice President and General Manager of
DuPont Agriculture Products, joined the Board as DuPont's initial designees.
USE OF PROCEEDS. The Investment Agreement requires that Pioneer use the
proceeds of the DuPont equity investment to repurchase its Shares by commencing
the Offer, shortly after the Equity Investment Closing Date, and thereafter, if
necessary, through open market repurchases, in each case, with Pioneer seeking
to repurchase sufficient Shares to increase DuPont's equity ownership up to 20%.
Pioneer is not required to repurchase any Shares in excess of the $104 issue
price unless DuPont agrees to pay the weighted average cost in excess of the
$104 per Share issue price. In addition, the aggregate amount paid by Pioneer in
all such repurchases (including pursuant to the Offer) need not exceed the
aggregate Preferred Stock Purchase Price and the aggregate number of Shares
acquired by Pioneer in all such repurchases need not exceed the Requisite
Number. After completion of the Company buy-back program (the period such
program is required to be in effect, the "Company Buy-Back Period"), if DuPont's
ownership has not been increased to 20%, DuPont is permitted for one year
thereafter (such period being subject to extension in certain cases) to increase
its economic ownership through open market purchases to
24
<PAGE>
up to 20%. DuPont is required to exchange all Shares acquired by it in any such
transaction for additional shares of Preferred Stock on the basis of 100 Shares
for each additional share of Preferred Stock.
TERMS FOR PREFERRED STOCK; EXCHANGE FOR CLASS B COMMON STOCK. The Preferred
Stock is a common stock economic equivalent and participates equally, on the
basis of the number of Shares into which the Preferred Stock is convertible,
whether or not such conversion has occurred, in all dividends and distributions
when declared by the Company on or with respect to the Shares. Shares of
Preferred Stock are convertible (on the basis of 100 Shares for each share of
Preferred Stock) automatically upon the transfer of beneficial ownership of such
shares of Preferred Stock to a person not a member of a DuPont Group and under
certain other limited circumstances described below. The Preferred Stock will
vote together as a class with the holders of Shares on all matters, including
the election of directors, on which the holders of Shares are entitled to vote
with voting power at all times (regardless of the number of votes that may be
cast at any meeting based on the Company's existing time-phased voting structure
pursuant to which every Share is generally entitled to five votes if it has been
continuously beneficially owned by the same holder for three consecutive years
and to one vote per share otherwise) equal to its percentage common equivalent
economic ownership interest in the Company. In no event will DuPont's aggregate
voting power exceed 20%. The Preferred Stock is also convertible into Shares (a)
in the event that all outstanding Shares are changed through a charter amendment
or other reclassification to have the same vote per share, without any time
phased voting and (b) at the option of DuPont in the event that after the fifth
annual meeting following the end of the Company Buy-Back Period, the Company's
stockholders have not approved an amendment to the Company's charter to
reclassify the Preferred Stock held by DuPont into Class B Common Stock having
identical terms and thereafter both DuPont's independent public accountants and
the staff of the Commission shall not have permitted DuPont to account for its
investment in the Company using the full equity accounting method. If DuPont
exercises its conversion rights specified under clause (b) above, DuPont has
agreed to vote any voting power it would otherwise have in excess of its
economic ownership pro rata in proportion to how the Shares owned by all
stockholders of the Company other than DuPont are voted. The Company presently
intends to propose the reclassification amendment described above to the
Company's stockholders in connection with the next annual meeting of the
Company's stockholders in January 1998.
VOTING AGREEMENT; TRANSFER RESTRICTIONS. The Investment Agreement obligates
DuPont to vote its shares of Preferred Stock in favor of the slate of directors
(including any DuPont nominees) proposed by the Board and certain other limited
matters, and otherwise permits DuPont to exercise its voting power in its
discretion. The Investment Agreement contains provisions imposing certain
restrictions upon DuPont's ability to transfer its shares of Preferred Stock (or
the Shares into which such shares are convertible), including provisions that
prohibit any transfer (other than by means of a dividend by DuPont to its
shareholders) for three years after the Equity Investment Closing Date and
restrict thereafter the manner in which such transfer may be made, the size of
the block of Shares that any transferee may acquire, and, in certain cases, the
terms upon which any transferee may acquire Shares as a result of any such
transfer. Generally, pursuant to such provisions, no transfer may be made unless
one or more of the following conditions have been satisfied: (i) the transferee
would not own, after giving effect to the transfer, in excess of 5% of the total
voting power or ownership of the equity securities of Pioneer, (ii) the
transferee has signed a standstill agreement incorporating certain provisions of
the Investment Agreement and/or (iii) prior to such transfer, Pioneer has been
accorded a right of first refusal or a right of first offer to purchase the
shares proposed to be transferred. DuPont is also entitled, after the third
anniversary of the Equity Investment Closing Date, to exercise certain demand
and "piggyback" registration rights with respect to the Shares into which the
Preferred Stock is convertible on customary terms.
MANDATORY SELL-DOWN. The Investment Agreement obligates DuPont, in the
event its common equivalent economic ownership should exceed by one percentage
point, as a result of stock repurchases by the Company or otherwise, 20% (or
such lower percentage as is equal to DuPont's Ownership Cap in effect at such
time), to sell its Preferred Stock at the request of the Company so that its
economic ownership is equal to 20% (or the lower Ownership Cap, if applicable),
provided that the Company
25
<PAGE>
indemnifies DuPont for any loss incurred by it (based on its $104 per Share
effective purchase price) as a result of such forced sale. The DuPont Ownership
Cap is initially 20% and is subject to reduction (x) automatically, in the event
that DuPont transfers any of its shares to a third party not a member of the
DuPont Group (other than in certain limited circumstances) and (y) after the
expiration of specified time periods, if DuPont fails to purchase Shares in
open-market transactions sufficient to bring its ownership level to that
permitted under the Investment Agreement.
RIGHTS OF DUPONT UPON CHANGE OF CONTROL; COMPETING INVESTMENT. Under the
Investment Agreement, as long as DuPont's Ownership Cap is 18% or more, (i)
DuPont is entitled to 30 days' prior notice of, and a full and fair opportunity
to participate in any auction leading up to, the sale of the Company or other
business combination constituting a Change in Control of Pioneer (which is
defined to include the acquisition by any person or group of Shares representing
a common stock economic equivalent percentage ownership in Pioneer of 30% (or,
in certain cases, up to 40%) or more and a merger or other business combination
transaction in which the Company's stockholders own less than 50% of the total
voting power or common equity of the surviving entity) and (ii) the Company is
prohibited from consummating or entering into a binding agreement for a
Competing Investment (defined as an equity investment in the Company exceeding a
specified size by one of the eight competitors designated by DuPont on an annual
basis) for a period of four years after the date of the Agreements and
thereafter DuPont is accorded certain rights in the event a Competing Investment
is proposed or consummated. The size of equity investment in Pioneer treated as
a Competing Investment ranges from 10% or more if certain conditions (such as if
competitor has the right to designate a Board member) to 15% or more under other
circumstances. In any event, a transaction constituting a Change in Control will
be governed exclusively by the provisions described above applicable to a Change
in Control of Pioneer and not the provisions for Competing Investment. See
"Joint Venture Formation Agreement" under Section 8, "Background and Purpose of
the Offer; Certain Effects of the Offer," above. If the Company consummates a
Competing Investment after the fourth anniversary of the date of the Agreements,
DuPont is entitled to 30 days' prior written notice of the proposed Competing
Investment and to declare a Release Event (as defined in the Investment
Agreement) to have occurred, in which event DuPont will have the right, if such
Release Event occurs, within the first three years after the end of the initial
four year period, to purchase Pioneer's joint venture interest for fair market
value as described above and thereafter, to trigger an auction process in which
the highest bidder as between DuPont and Pioneer will have the right to purchase
the joint venture interest of the other.
In addition, upon the occurrence of any Release Event, the termination of
the Formation Agreement or the Research Alliance Agreement other than as a
result of willful and substantial breach of material terms by Pioneer, and the
sale, except under certain defined conditions, by DuPont of its Agricultural
Products division, DuPont will lose its right to nominate its designees to the
Pioneer Board and shall cause its nominees to resign. In addition, DuPont will
thereafter be required to vote all shares in favor of the Board slate and in
proportion to all other votes of the other stockholders of the Company on all
other matters. DuPont will also lose certain other rights as a stockholder under
the Investment Agreement, including its rights with respect to change in control
of Pioneer and with respect to Competing Investments. DuPont will also
thereafter be subject to certain standstill restrictions in perpetuity. In
addition, certain provisions of the Investment Agreement will survive a
transaction constituting a change in control of Pioneer if DuPont has a
significant equity stake in (and no other person or group owns more than 50% of)
the surviving company.
CERTAIN EFFECTS OF THE OFFER. Consummation of the Offer will have the
effect of increasing the proportionate economic interest and, depending upon
whether, and the extent to which, Shares tendered into the Offer and Shares that
remain outstanding after the Offer have five votes or one vote per share under
the Company's time phased five for one voting rights structure, the relative
voting interest of stockholders who do not tender Shares into the Offer. The
Company has not been advised and has not inquired whether or not the members of
the Wallace family (other than H. Scott Wallace who is a director
26
<PAGE>
of the Company and who has advised the Company that he is undecided as to
whether or not to tender the Shares owned by him) intend to tender any Shares
pursuant to the Offer.
9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES
As of September 25, 1997, there were 82,222,935 Shares outstanding,
16,444,586 Shares issuable upon conversion of all outstanding Preferred Stock
owned by DuPont, and no Shares issuable upon exercise of vested stock options
under the Company's stock option plans or agreements related thereto. As of
September 24, 1997, the Company's directors and executive officers as a group
(35 persons) beneficially owned 2,278,103 Shares which constituted 2.31% of the
outstanding Shares at such time (including for this purpose, the Shares into
which the Preferred Stock owned by DuPont is convertible). The Company has been
advised that, other than with respect to two of its directors (one of whom, Dr.
Owen J. Newlin, has advised the Company of his intention to tender 180,000
Shares owned by such director pursuant to the Offer and the other of whom, H.
Scott Wallace, has advised the Company that he is undecided as to whether to
tender up to 50,000 Shares owned by him), none of its directors or executive
officers intends to tender any Shares pursuant to the Offer. If the Company
purchases 16,444,586 Shares pursuant to the Offer (approximately 16.67% of the
outstanding Shares as of September 25, 1997 including, for this purpose, the
Shares into which the Preferred Stock owned by DuPont is convertible), and if no
director or executive officer (other than the one director referred to above who
intends to tender Shares) tenders Shares pursuant to the Offer, then, after the
purchase of Shares pursuant to the Offer, the Company's directors and executive
officers as a group would beneficially own approximately 2.55% of the
outstanding Shares (including, for this purpose, the Shares into which the
Preferred Stock owned by DuPont is convertible). In addition to the foregoing,
997,000 Shares are issuable to the Company's directors and officers as a group
upon exercise of outstanding unvested options under the Company's stock option
plans or agreements relating thereto, which options are eligible for vesting at
various times through 2002.
Except as set forth in Schedule I hereto, based upon the Company's records
and upon information provided to the Company by its directors, executive
officers, associates and subsidiaries, neither the Company nor any of its
associates or subsidiaries or persons controlling the Company nor, to the best
of the Company's knowledge, any of the directors or executive officers of the
Company or any of its subsidiaries, nor any associates or subsidiaries of any of
the foregoing, has effected any transactions in the Shares during the 40
business days prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Company or any
person controlling the Company nor, to the Company's knowledge, any of its
directors or executive officers, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to the Offer with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations).
10. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 16,444,586 Shares pursuant to the Offer
at a purchase price of $104 per Share, the Company expects the maximum aggregate
cost of the Offer itself to be approximately $1.71 billion. The funds necessary
to purchase Shares pursuant to the Offer will come from the proceeds previously
received by the Company from the sale of Preferred Stock to DuPont, the funds
necessary to pay all related fees and expenses of the Offer and the Transactions
will come from the Company's working capital.
11. CERTAIN INFORMATION ABOUT THE COMPANY
Pioneer's business is the broad application of the science of genetics to
develop, produce and market hybrids of corn, sorghum and sunflowers and
varieties of soybeans, alfalfa, wheat and canola. Pioneer also produces
microbial products including inoculants for high-moisture corn silage, hay and
other forages.
Pioneer's principal executive offices are located at 700 Capital Square, 400
Locust Street, Des Moines, Iowa 50309, and Pioneer's telephone number is (515)
248-4800.
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<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table presents summary historical consolidated financial data
for the periods indicated. The historical financial data (other than the book
value per share and the ratio of earnings to fixed charges) for the years ended
August 31, 1996 and 1995 were derived from the audited consolidated financial
statements contained in the Company's Annual Report to Shareholders for the year
ended August 31, 1996 and for the nine months ended May 31, 1997 were derived
from the unaudited consolidated condensed financial statements contained in the
Company's Quarterly Report to Shareholders for the nine months ended May 31,
1997. The following summary financial information should be read in conjunction
with, and is qualified in its entirety by reference to, the audited and
unaudited financial statements and related notes, and other information
pertaining to the Company, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," contained in the Annual Report
to Shareholders for the year ended August 31, 1996 and the Quarterly Report to
Shareholders for the nine months ended May 31, 1997 referred to above. Copies of
these reports may be obtained from the Commission in the manner specified in
"Additional Information" below.
28
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
MAY 31, AUGUST 31, AUGUST 31,
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................. $ 183 $ 99 $ 84
Accounts and notes receivable, net........................................ 489 243 209
Inventories:
Finished seed........................................................... 288 209 280
Unfinished seed......................................................... 94 163 140
Other................................................................... 7 10 6
Deferred income taxes..................................................... 59 58 49
Prepaid expenses and other current assets................................. 11 2 2
------ ----------- -----------
Total current assets.................................................... $ 1,131 $ 784 $ 770
LONG-TERM ASSETS............................................................ $ 87 $ 81 $ 41
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and allowances
May 31, 1997 - $499
August 31, 1996 - $475
August 31, 1995 - $438.................................................... $ 542 $ 510 $ 472
INTANGIBLES................................................................. $ 66 $ 47 $ 10
------ ----------- -----------
$ 1,826 $ 1,422 $ 1,293
------ ----------- -----------
------ ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings....................................................... $ 28 $ 13 $ 58
Current maturities of long-term debt........................................ 5 12 53
Accounts payable, trade..................................................... 167 89 58
Accrued compensation........................................................ 52 65 45
Income taxes payable........................................................ 181 63 23
Other accruals.............................................................. 49 46 43
------ ----------- -----------
Total current liabilities............................................... $ 482 $ 288 $ 280
------ ----------- -----------
LONG-TERM DEBT.............................................................. $ 32 $ 25 $ 18
------ ----------- -----------
DEFERRED ITEMS
Postretirement benefits..................................................... $ 42 $ 40 $ 37
Other....................................................................... 46 44 38
------ ----------- -----------
$ 88 $ 84 $ 75
------ ----------- -----------
MINORITY INTEREST IN SUBSIDIARIES........................................... $ 7 $ 7 $ 7
------ ----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value............................................... $ -- $ -- $ --
Common stock, $1 par value.................................................. 93 93 93
Additional paid-in capital.................................................. 41 23 18
Retained earnings........................................................... 1,499 1,272 1,118
Unrealized gain on available-for-sale securities, net....................... 17 11 --
Cumulative translation adjustment........................................... (13) (3) 1
------ ----------- -----------
$ 1,637 $ 1,396 $ 1,230
Less: Cost of common shares acquired for the treasury....................... (393) (364) (303)
Unearned compensation....................................................... (27) (14) (14)
------ ----------- -----------
$ 1,217 $ 1,018 $ 913
------ ----------- -----------
$ 1,826 $ 1,422 $ 1,293
------ ----------- -----------
------ ----------- -----------
Book Value per share of common stock outstanding at balance sheet date...... $ 14.81 $ 12.35 $ 10.93
</TABLE>
29
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AND RATIO INFORMATION)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------
AUGUST 31, AUGUST 31,
1996 1995
NINE MONTHS ----------- -----------
ENDED
MAY 31, 1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Net sales.................................................................. $ 1,642 $ 1,721 $ 1,532
------ ----------- -----------
Operating costs and expenses:
Cost of goods sold....................................................... $ 700 $ 727 $ 642
Research and product development......................................... 103 136 130
Selling.................................................................. 305 382 354
General and administrative............................................... 96 129 126
------ ----------- -----------
$ 1,204 $ 1,374 $ 1,252
------ ----------- -----------
Operating income......................................................... $ 438 $ 347 $ 280
Investment income.......................................................... 16 22 23
Interest expense........................................................... (6) (11) (13)
Net exchange and other gains (losses)...................................... -- (4) 1
------ ----------- -----------
Income before items shown below.......................................... $ 448 $ 354 $ 291
Provision for income taxes................................................. (161) (127) (106)
Minority interest and other................................................ (2) (4) (2)
------ ----------- -----------
Net income............................................................... $ 285 $ 223 $ 183
------ ----------- -----------
------ ----------- -----------
Income per common share.................................................... $ 3.46 $ 2.68 $ 2.16
Dividends per common share................................................. $ .69 $ .83 $ .71
Weighted average number of common shares outstanding....................... 82.3 83.2 84.5
Ratio of earnings to fixed charges(1)...................................... 65.5 30.1 21.3
</TABLE>
- --------------------------
(1) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income before provision for income taxes plus fixed charges.
Fixed charges consist of interest expense (including amortization of
deferred financing costs) and that portion of rent expense estimated to be
representative of the interest factor.
30
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following table presents summary unaudited pro forma consolidated
financial data for the periods indicated. The unaudited pro forma financial data
(other than the book value per share and the ratio of earnings to fixed charges)
for the year ended August 31, 1996 was derived from the audited consolidated
financial statements contained in the Company's Annual Report to Shareholders
for the year ended August 31, 1996. The unaudited pro forma financial data for
the nine months ended May 31, 1997 was derived from the unaudited consolidated
financial statements for the nine months ended May 31, 1997. The following
summary financial information should be read in conjunction with, and is
qualified in its entirety by reference to, the audited and unaudited financial
statements and related notes, and other information pertaining to the Company,
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations," contained in the Annual Report to Shareholders for the
year ended August 31, 1996 and the Quarterly Report to Shareholders for the nine
months ended May 31, 1997 referred to above. Copies of these reports may be
obtained from the Commission in the manner specified in "Additional Information"
below. The unaudited pro forma information does not purport to represent what
the results of operation or financial position of the Company would actually
have been if these transactions had in fact occurred on such date or to project
the Company's financial position or results of operation for any future period.
On a pro forma basis, assuming (a) the acquisition by DuPont of 164,445.86
shares of Preferred Stock (which represents a common stock equivalent of
16,444,586 Shares) on the Share equivalent basis of $104 per Share and (b)
assuming the maximum number of Shares of 16,444,586 shares at the maximum price
of $104 per Share are repurchased pursuant to the Offer and that both these
transactions took place on either August 31, 1996 or May 31, 1997, the effect on
the consolidated balance sheets and the book value per Share of the Company as
of August 31, 1996 and May 31, 1997 would not be material. Assuming that
transaction (a) took place at the beginning of the respective periods, and
transaction (b) took place 30 days later, the effect on the consolidated
statements of income for the nine months ended May 31, 1997 and the year ended
August 31, 1996, including the effect on the ratio of earnings to fixed changes
for the respective periods would not be material.
On a pro forma basis, assuming (a) the acquisition by DuPont of 164,445.86
shares of Preferred Stock (which represents a common stock equivalent of
16,444,586 Shares) on the Share equivalent basis of $104 per Share and (b)
assuming the maximum number of Shares of 16,444,586 shares at the minimum price
of $88 per share are repurchased pursuant to the Offer and that both of these
transactions took place on either May 31, 1997 or August 31, 1996, the effect on
the consolidated balance sheets at May 31, 1997 and August 31, 1997 would be to
increase the items set forth below by approximately $252 million, the difference
between the funds received from DuPont and the cost of the Shares repurchased.
Additionally, book value per Share would increase as set forth below. Assuming
that transaction (a) took place at the beginning of the respective period and
transaction (b) took place 30 days later, the effect on the consolidated
statements of income for the nine-month period ended May 31, 1997 and the year
ended August 31, 1996 would be to increase the items set forth below for the
earnings from the investment of the excess funds resulting from these two
transactions. The ratio of earnings to fixed charges would increase as set forth
below.
31
<PAGE>
PRO FORMA FINANCIAL INFORMATION (CONTINUED)
(UNAUDITED)
CONSOLIDATED BALANCE SHEET ITEMS
<TABLE>
<CAPTION>
MAY 31, 1997 AUGUST 31, 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C>
Cash and cash equivalents.......................................... $ 183 $ 435 $ 99 $ 351
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Current assets..................................................... $ 1,131 $ 1,383 $ 784 $ 1,036
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total assets....................................................... $ 1,826 $ 2,078 $ 1,422 $ 1,674
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shareholders' equity............................................... $ 1,217 $ 1,469 $ 1,018 $ 1,270
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Book Value per share of common stock and common stock equivalents
outstanding at balance sheet date................................ $ 14.81 $ 17.87 $ 12.35 $ 15.41
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME ITEMS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
MAY 31, 1997 AUGUST 31, 1996
------------------------ ------------------------
<S> <C> <C> <C> <C>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AND RATIO
INFORMATION)
<S> <C> <C> <C> <C>
Investment income.................................................. $ 16 $ 33 $ 22 $ 43
----- ----- ----- -----
----- ----- ----- -----
Provision for income taxes......................................... $ (161) $ (167) $ (127) $ (135)
----- ----- ----- -----
----- ----- ----- -----
Net income......................................................... $ 285 $ 296 $ 223 $ 236
----- ----- ----- -----
----- ----- ----- -----
Net income per share of common stock and common stock
equivalents...................................................... $ 3.46 $ 3.51 $ 2.68 $ 2.79
Weighted average number of shares of common stock and common stock
equivalents outstanding.......................................... 82.3 84.1 83.2 84.5
Ratio of earnings to fixed charges................................. 65.5 68.0 30.1 31.8
</TABLE>
ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 2120, Washington
D.C. 20549; at its regional offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, New York, New York
10048. Copies of such material may also be obtained by mail, upon payment of the
Commission's customary charges, from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549.
The Commission also maintains a Web site on the World Wide Web at http: /
/www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
Such reports, proxy statements and other information concerning the Company also
can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005, on which the Shares are listed.
32
<PAGE>
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of stockholders. Nonetheless, there will still be a sufficient number of
Shares outstanding and publicly traded following the Offer to ensure a continued
trading market in the Shares. Based on the published guidelines of the NYSE, the
Company does not believe that its purchase of Shares pursuant to the Offer will
cause its remaining Shares to be delisted from such exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the purchase of Shares pursuant to the Offer, the Shares will continue
to be "margin securities" for purposes of the Federal Reserve Board's margin
regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares as contemplated by the Offer. Should any such approval or
other action be required, the Company currently contemplates that it will seek
such approval or other action. The Company cannot predict whether it may
determine that it is required to delay the acceptance for payment of, or payment
for, Shares tendered pursuant to the Offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions or
that the failure to obtain any such approval or other action might not result in
adverse consequences to the Company's business. The Company's obligations under
the Offer to accept for payment and pay for Shares are subject to certain
conditions. See Section 6.
14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences relevant to the Offer. The discussion contained in this summary is
based upon the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed United States Treasury regulations promulgated
thereunder, rulings, administrative pronouncements and judicial decisions,
changes to any of which could materially affect the tax consequences described
herein and could be made on a retroactive basis. As discussed below, depending
upon a stockholder's particular circumstances, the Company's purchase of such
stockholder's Shares pursuant to the Offer may be treated either as a sale or a
dividend for United States federal income tax purposes. Accordingly, such a
purchase generally will be referred to in this section of the Offer to Purchase
as an exchange of Shares for cash.
This summary does not apply to Shares acquired as compensation (including
Shares acquired upon the exercise of options or which were or are subject to
forfeiture restrictions). The summary also does not address the state, local or
foreign tax consequences of participating in the Offer. The summary discusses
only Shares held as capital assets, within the meaning of Section 1221 of the
Code, and does not address all of the tax consequences that may be relevant to
particular stockholders in light of their personal circumstances, or to certain
types of stockholders (such as certain financial institutions, foreign holders,
33
<PAGE>
dealers in securities or commodities, insurance companies, tax-exempt
organizations or persons who hold Shares as a position in a "straddle" or as a
part of a "hedging" or "conversion" transaction for United States federal income
tax purposes). In particular, the discussion of the consequences of an exchange
of Shares for cash pursuant to the Offer applies only to a United States Holder.
For purposes of this summary, a "United States Holder" is a beneficial owner of
Shares that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States, any State or any political subdivision thereof (other
than any partnership treated as foreign under United States Treasury
regulations), or (iii) an estate or trust, the income of which is subject to
United States federal income taxation regardless of its source. EACH STOCKHOLDER
SHOULD CONSULT SUCH STOCKHOLDER'S TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES
OF PARTICIPATION IN THE OFFER.
UNITED STATES HOLDERS WHO RECEIVE CASH PURSUANT TO THE OFFER. An exchange
of Shares for cash pursuant to the Offer by a United States Holder will be a
taxable transaction for United States federal income tax purposes. As a
consequence of the exchange, a United States Holder, depending on such holder's
particular circumstances will be treated either as having sold such holder's
Shares or as having received a dividend distribution from the Company, with the
tax consequences described below.
Under Section 302 of the Code, a United States Holder whose Shares are
exchanged pursuant to the Offer will be treated as having sold such Shares, and
thus will recognize gain or loss, if the exchange (i) is "not essentially
equivalent to a dividend" with respect to the holder, (ii) is "substantially
disproportionate" with respect to such holder or (iii) results in "complete
termination" of such holder's equity interest in the Company, each as discussed
below. In applying these tests, a United States Holder will be treated as owning
Shares actually or constructively owned by certain related individuals and
entities. Further, for purposes of applying the tests described in clauses (i)
and (ii), the Company believes it would be proper to treat the Preferred Stock
as having been issued simultaneously with the Offer, and thus believes it would
be proper for a United States Holder to disregard the Preferred Stock in
determining its interest in the Company immediately prior to the Offer, but to
take into account the Preferred Stock in determining its interest in the Company
immediately after the Offer.
If a United States Holder sells Shares to persons other than the Company at
or about the time such holder also sells Shares to the Company pursuant to the
Offer, and the various sales effected by the holder are part of an overall plan
to reduce or terminate such holder's proportionate interest in the Company, then
the sales to persons other than the Company may, for United States federal
income tax purposes, be integrated with the holder's exchange of Shares pursuant
to the Offer and, if integrated, should be taken into account in determining
whether the holder satisfies any of the three tests described below.
A United States Holder will satisfy the "not essentially equivalent to a
dividend" test if the reduction in such holder's proportionate interest in the
Company constitutes a "meaningful reduction" given such holder's particular
facts and circumstances. The IRS has indicated in published rulings that any
reduction in the proportionate interest of a stockholder whose relative stock
interest in a publicly-held corporation is minimal and who exercises no control
over corporate affairs should constitute such a "meaningful reduction." The IRS
has further indicated that in determining whether the proportionate interest of
a United States Holder is reduced for this purpose, consideration will be given
to changes in both the holder's equity and voting interests in the Company.
An exchange of Shares will generally be "substantially disproportionate"
with respect to a United States Holder if (a) the ratio which the Shares owned
actually and constructively by the holder immediately after the redemption bears
to all of the voting stock of the Company at such time is less than 80% of the
ratio which the Shares owned actually and constructively by the holder
immediately before the redemption bears to all of the voting stock of the
Company at such time and (b) the United States Holder's actual and constructive
ownership of the aggregate common stock of the Company (including, for this
purpose, the Preferred Stock) on a fair market value basis also satisfies the
80% requirement described in clause (a).
34
<PAGE>
A United States Holder that exchanges all Shares actually or constructively
owned by such holder for cash pursuant to the Offer will be treated as having
completely terminated such holder's equity interest in the Company. If a United
States Holder could meet the complete termination of interest test but for
attribution from family members, such attribution can be waived if a number of
requirements are met, including the timely filing of an agreement with the
Internal Revenue Service.
If a United States Holder is treated as having sold such holder's Shares
under any of the tests described above, such holder will recognize gain or loss
equal to the difference between the amount of cash received and such holder's
tax basis in the Shares exchanged therefor. Any such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the holding
period of the Shares exceeds one year as of the date of the exchange.
Calculation of gain or loss must be made separately for each block of Shares
exchanged by a United States Holder. A United States Holder may be able to
designate which blocks and the order of such blocks of Shares to be tendered
pursuant to the Offer. In the case of a non-corporate holder of Shares,
long-term capital gains will be subject to tax at a reduced rate, and will be
treated as long-term capital gain eligible for a further reduced rate if the
Shares are held for more than eighteen months.
If a United States Holder who exchanges Shares pursuant to the Offer is not
treated under Section 302 as having sold such holder's Shares, the entire amount
of cash received by such holder will be treated as a dividend to the extent of
the Company's current and accumulated earnings and profits, which the Company
anticipates will be sufficient to cover the amount of any such dividend and will
be includible in the holder's gross income as ordinary income in its entirety,
without reduction for the tax basis of the Shares exchanged. No loss will be
recognized. The United States Holder's tax basis in the Shares exchanged
generally will be added to such holder's tax basis in such holder's remaining
Shares. To the extent that cash received in exchange for Shares is treated as a
dividend to a corporate United States Holder, such holder will be, (i) eligible
for a dividends received deduction (subject to applicable limitations) and (ii)
subject to the "extraordinary dividend" provisions of the Code (in which case
the nontaxed portion of the dividend would reduce a corporate holder's adjusted
tax basis in the Shares exchanged, but not below zero, and would thereafter be
taxable as capital gain from the sale or exchange of the exchanged Shares). To
the extent, if any, that the cash received by a United States Holder is not a
dividend because the Company does not have sufficient current and accumulated
earnings and profits, it will be treated first as a tax-free return of such
holder's tax basis in the Shares and thereafter as capital gain.
The Company cannot predict whether or to what extent the Offer will be
oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant to
the Offer will cause the Company to accept fewer Shares than are tendered.
Therefore, a Holder can be given no assurance that a sufficient number of such
Holder's Shares will be exchanged pursuant to the Offer to ensure that such
exchange will be treated as a sale, rather than as a dividend, for United States
federal income tax purposes pursuant to the rules discussed above.
STOCKHOLDERS WHO DO NOT RECEIVE CASH PURSUANT TO THE OFFER. Stockholders,
none of whose Shares are exchanged pursuant to the Offer, will not incur any tax
liability as a result of the consummation of the Offer.
See Section 3 with respect to the application of United States federal
income tax withholding to payments made to foreign stockholders and backup
withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
EACH STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
35
<PAGE>
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. The Company also expressly reserves the right, in its sole
discretion, to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of the
conditions specified in Section 6 hereof by giving oral or written notice of
such termination or postponement to the Depositary and making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rules 13e-4(f)(2) and
13e-4(f)(5) promulgated under the Exchange Act, which require that the Company
must pay the consideration offered or return the Shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, the Company further reserves the right, in its sole discretion,
and regardless of whether any of the events set forth in Section 6 shall have
occurred or shall be deemed by the Company to have occurred, to amend the Offer
in any respect (including, without limitation, by decreasing or increasing the
consideration offered in the Offer to holders of Shares or by decreasing or
increasing the number of Shares being sought in the Offer). Amendments to the
Offer may be made at any time and from time to time by public announcement
thereof, such announcement, in the case of an extension, to be issued no later
than 9:00 a.m., New York City time, on the next business day after the last
previously scheduled or announced Expiration Date. Any public announcement made
pursuant to the Offer will be disseminated promptly to stockholders in a manner
reasonably designated to inform stockholders of such change. Without limiting
the manner in which the Company may choose to make any public announcement,
except as provided by applicable law (including Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act), the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including by exercising its sole discretion under Section 6 to conclude
that a condition set forth in Section 6 has not occurred under circumstances in
which a reasonable person could conclude that such condition had in fact
occurred), the Company will extend the Offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require
the minimum period during which an offer must remain open following material
changes in the terms of the Offer or information concerning the Offer (other
than a change in price or a change in percentage of securities sought) will
depend upon the facts and circumstances, including the relative materiality of
such terms or information. If (i) the Company increases or decreases the price
to be paid for Shares, the Company increases or decreases the Dealer Manager's
soliciting fee, the Company increases the number of Shares being sought and such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or the Company decreases the number of Shares being sought, and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
16. FEES AND EXPENSES
The Company has retained Lazard Freres & Co. LLC ("Lazard") to act as the
dealer manager in connection with the Offer. Lazard will receive a fee for its
services as dealer manager pursuant to the Offer of $800,000 if any Shares are
purchased by the Company pursuant to the Offer. The Company has agreed to
reimburse Lazard for certain expenses incurred in connection with the Offer,
including out-of-pocket expenses and the reasonable fees and disbursements of
their counsel and to indemnify Lazard against
36
<PAGE>
certain liabilities in connection with the Offer, including certain liabilities
under the federal securities laws. Lazard has rendered various investment
banking and other advisory services to the Company in the past, including, by
acting as financial advisor to the Company in connection with the Transactions,
for which Lazard received an aggregate fee of $7,000,000, and may render similar
services to the Company in the future.
The Company has retained D.F. King & Co., Inc. as Information Agent and
BankBoston, N.A. as Depositary in connection with the Offer. The Information
Agent and the Depositary will receive reasonable and customary compensation for
their services. The Company will also reimburse the Information Agent and the
Depositary for out-of-pocket expenses, including reasonable attorneys' fees, and
has agreed to indemnify the Information Agent and the Depositary against certain
liabilities in connection with the Offer, including certain liabilities under
the federal securities laws. The Dealer Manager and Information Agent may
contact stockholders by mail, telephone, telex, telegraph and personal
interviews, and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners. Neither the
Information Agent nor the Depositary has been retained to make solicitations or
recommendations in connection with the Offer.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than the Dealer Manager)
for soliciting any Shares pursuant to the Offer. The Company will, however, on
request, reimburse such persons for customary handling and mailing expenses
incurred in forwarding materials in respect of the Offer to the beneficial
owners for which they act as nominees. No such broker, dealer, commercial bank
or trust company has been authorized to act as the Company's agent for purposes
of the Offer. The Company will pay (or cause to be paid) any stock transfer
taxes on its purchase of Shares, except as otherwise provided in Instruction 7
of the Letter of Transmittal.
17. MISCELLANEOUS
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. In any jurisdiction the
securities or blue sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer is being made on the Company's behalf by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has
filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4
(the "Schedule 13E-4") which contains additional information with respect to the
Offer. The Schedule 13E-4, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 11 with respect to information concerning the
Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY OR THE DEALER MANAGER IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER
MANAGER.
PIONEER HI-BRED INTERNATIONAL, INC.
September 25, 1997
37
<PAGE>
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers, associates and subsidiaries,
except as described below, neither the Company nor any of its associates,
subsidiaries or persons controlling the Company nor, to the best of the
Company's knowledge, any of the directors or executive officers of the Company
or any of its subsidiaries, nor any associates or subsidiary of any of the
foregoing, has effected any transactions in the Shares during the 40 business
days prior to September 25, 1997.
There was a sale of 900 Shares in open market transactions on August 26,
1997 at an average sales price of $87.222 per share by Paul E. Schickler, a vice
president of the Company. Pursuant to the Company's Stock Purchase Plan, as of
September 4, 1997, each of Herman H.F. Wijffels, a director of the Company,
Jerry L. Chicoine, Executive Vice President and Chief Operating Officer of the
Company, and Dr. James E. Miller, a vice president of the Company, purchased
11.5030, 5.7313 and 1.1503 Shares, respectively, at a purchase price of $86.9375
per Share. Leon R. Shearer, a vice president of the Company, was granted an
option on August 17, 1997 covering an aggregate of 12,000 Shares, exercisable at
$85.1875 per Share in equal installments in each of the third, fourth and fifth
years following the grant.
38
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted from Eligible
Institutions only. The Letter of Transmittal (or an Agent's Message in lieu
thereof) and certificates for the Shares and any other required documents should
be sent or delivered by each stockholder or such stockholder's broker, dealer,
commercial bank, trust company or other nominee to the Depositary at its address
set forth below:
THE DEPOSITARY FOR THE OFFER IS:
BANKBOSTON, N.A.
BY MAIL VIA RETURN ENVELOPE:
BankBoston, N.A.
Corporate Reorganization
P.O. Box 8029
Boston, MA 02266-8029
BY HAND:
Securities Transfer and Reporting Services, Inc.
c/o Boston EquiServe L.P.
Corporate Reorganization
1 Exchange Plaza/55 Broadway
3rd Floor
New York, NY 10006
BY OVERNIGHT OR EXPRESS MAIL:
BankBoston, N.A.
Corporate Reorganization
Mail Stop 45-01-40
150 Royall Street
Canton, MA 02021
BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
(617) 575-2232/2233
CONFIRM FACSIMILE TRANSMISSIONS BY TELEPHONE:
(800) 730-4001
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent, at the telephone number and
address below. Stockholders may also contact their broker, dealer, commercial
bank or trust company for assistance concerning the Offer. To confirm delivery
of Shares, stockholders are directed to contact the Depositary.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers, call collect: (212) 269-5550
All others, call toll-free: (800) 290-6429
THE DEALER MANAGER FOR THE OFFER IS:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PIONEER HI-BRED INTERNATIONAL, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 25, 1997
- --------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
BY MAIL VIA RETURN ENVELOPE: BY HAND: BY OVERNIGHT OR
BankBoston, N.A. Securities Transfer and EXPRESS MAIL:
Corporate Reorganization Reporting Services, Inc. BankBoston, N.A.
P.O. Box 8029 c/o Boston EquiServe L.P. Corporate Reorganization
Boston, MA 02266-8029 1 Exchange Plaza/ Mail Stop 45-01-40
55 Broadway, 3rd Floor 150 Royall Street
New York, NY 10006 Canton, MA 02021
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(617) 575-2232/2233
CONFIRM FACSIMILE TRANSMISSION
BY TELEPHONE:
(800) 730-4001
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
/ / IF ANY OF THE CERTIFICATES FOR THE SHARES THAT YOU OWN HAVE BEEN LOST OR
DESTROYED, CHECK THIS BOX AND SEE INSTRUCTION 16.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are to be purchased in the
event of proration.*** (Attach an additional signed list if necessary.) See Instruction 15.
1st 2nd 3rd 4th 5th
- ----------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by each Share
certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
*** If you do not designate an order, then in the event less than all Shares tendered are purchased
due to proration, Shares will be selected for purchase by the Depositary.
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERY TO THE COMPANY WILL NOT BE
FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY.
This Letter of Transmittal is to be used only if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
("DTC") or the Philadelphia Depository Trust Company ("PDTC") (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 3 of the Offer to Purchase (as defined
below). THIS LETTER OF TRANSMITTAL MAY BE USED FOR SHARES CREDITED TO ACCOUNTS
IN THE COMPANY'S DIVIDEND REINVESTMENT PLAN (THE "DIVIDEND REINVESTMENT PLAN")
(SEE BOX ENTITLED "DIVIDEND REINVESTMENT PLAN SHARES").
Stockholders who cannot deliver their Share certificates and any other
documents required to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) (or who are unable to comply with the procedures for book-
entry transfer on a timely basis) must tender their Shares using the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
Ladies and Gentlemen:
The undersigned hereby tenders to Pioneer Hi-Bred International, Inc., an
Iowa corporation (the "Company"), the above-described shares of its common
stock, par value $1.00 per share (including the associated Preferred Stock
Purchase Rights (the "Rights"), the "Shares"), at the price per Share indicated
in this Letter of Transmittal, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated September
25, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (which together constitute the "Offer"). Absent
circumstances causing the Rights to become exercisable or separately tradeable
prior to the Expiration Date, a tender of Shares will also constitute a tender
of the associated Rights. Unless the context requires otherwise, all references
herein to Shares include the associated Rights.
Subject to, and effective upon, acceptance for payment of, and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to all the Shares that are being tendered hereby or
orders the registration of such Shares tendered by book-entry transfer that are
purchased pursuant to the Offer to or upon the order of the Company and hereby
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to:
(i) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by any of the Book-Entry Transfer
Facilities, together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Company upon receipt by
the Depositary, as the undersigned's agent, of the Purchase Price (as defined
below) with respect to such Shares;
(ii) present certificates for such Shares for cancellation and transfer on
the books of the Company; and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby and that, when and to the extent the same are
accepted for payment by the Company, the Company will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and the same will not be subject to
any adverse claims. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Shares tendered
hereby.
The undersigned represents and warrants to the Company that the undersigned
has read and agrees to all of the terms of the Offer. All authority herein
conferred or agreed to be conferred shall not be affected by and shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
Instructions will constitute the undersigned's representation and warranty to
the Company that (i) the undersigned has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) the tender of such Shares complies
with Rule 14e-4. The Company's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Offer.
<PAGE>
The names and addresses of the registered holders should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes on
this Letter of Transmittal.
The undersigned understands that the Company will determine a single per
Share price (not greater than $104 nor less than $88 per Share), net to the
Seller in cash (the "Purchase Price"), that it will pay for Shares validly
tendered and not withdrawn pursuant to the Offer, taking into account the number
of Shares so tendered and the prices specified by tendering stockholders. The
undersigned understands that the Company will select the lowest Purchase Price
that will allow it to purchase 16,444,586 Shares (or such lesser number of
Shares as are validly tendered at prices not greater than $104 nor less than $88
per Share) validly tendered and not withdrawn pursuant to the Offer. The
undersigned understands that all Shares validly tendered at prices at or below
the Purchase Price and not withdrawn will be purchased at the Purchase Price,
net to the seller in cash, upon the terms and subject to the conditions of the
Offer, including its proration provisions, and that the Company will return all
other Shares, including Shares tendered at prices greater than the Purchase
Price and not withdrawn and Shares not purchased because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for Shares tendered or
may not be required to purchase any of the Shares tendered hereby or may accept
for payment fewer than all of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased (less the amount
of any federal income or backup withholding tax required to be withheld), and/or
return any Shares not tendered or not purchased, in the name(s) of the
undersigned (or, in the case of Shares tendered by book-entry transfer, by
credit to the account at the applicable Book-Entry Transfer Facility).
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the Purchase Price of any Shares purchased (less the
amount of any federal income or backup withholding tax required to be withheld),
and/or any certificates for Shares not tendered or not purchased (and
accompanying documents, as appropriate), to the undersigned at the address shown
below the undersigned's signature. In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the check for the Purchase Price of any Shares purchased (less the amount of any
federal income or backup withholding tax required to be withheld), and/or return
any Shares not tendered or not purchased, in the name(s) of, and mail such check
and/or any certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder(s)
thereof or to order the registration or transfer of such Shares tendered by
book-entry transfer if the Company does not accept for payment any of the Shares
so tendered. If the Special Payment Instructions are completed, all signatures
on this Letter of Transmittal must be guaranteed by a firm that is an Eligible
Institution (as defined in the Offer to Purchase).
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
<PAGE>
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED
MUST BE USED. (SEE INSTRUCTION 5)
------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS
BELOW), THERE IS NO VALID TENDER OF SHARES.
------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the Company purchase
all the Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Purchase Price resulting from the Dutch auction tender
process. This action could result in receiving a price per Share as low as
$88 or as high as $104.
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
------------------------
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101
/ / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 1/4
/ / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2
/ / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4
/ / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102
/ / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4
/ / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2
/ / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4
/ / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103
/ / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4
/ / 90 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2
/ / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4
/ / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
</TABLE>
<PAGE>
ODD LOTS
(SEE INSTRUCTION 9)
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person who is the beneficial or record owner of an aggregate of
fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan).
The undersigned either (check one box):
/ / owns beneficially or of record at the Expiration Date, an aggregate of
fewer than 100 Shares (including Shares held in the Dividend Reinvestment
Plan), all of which are being tendered; or
/ / is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owner thereof, Shares with
respect to which it is the record owner, and (ii) believes, based upon
representations made to it by such beneficial owner, that such beneficial
owner owns beneficially at the Expiration Date, an aggregate of fewer
than 100 Shares (including Shares held in the Dividend Reinvestment Plan)
and is tendering all of his or her Shares.
If you do not wish to specify a Purchase Price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of
Transmittal). / /
DIVIDEND REINVESTMENT PLAN SHARES
(SEE INSTRUCTION 14)
This section is to be completed ONLY if Shares held in the Dividend
Reinvestment Plan are to be tendered.
/ / By checking this box, the undersigned represents that the undersigned
is a participant in the Dividend Reinvestment Plan and hereby instructs
the Plan Administrator to tender on behalf of the undersigned the
following number of Shares credited to the Dividend Reinvestment Plan
account of the undersigned at the Purchase Price per Share indicated in
the box entitled "Price (In Dollars) Per Share At Which Shares Are Being
Transferred" in this Letter of Transmittal:
______ Shares*
* The undersigned understands and agrees that all Shares held in the Dividend
Reinvestment Plan account(s) of the undersigned will be tendered if the
above box is checked and the space above is left blank.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the check for the aggregate Purchase Price of Shares
purchased (less the amount of any federal income and backup withholding tax
required to be withheld) and/or certificates for Shares not tendered or not
purchased, are to be issued in the name of someone other than the undersigned.
If these Special Payment Instructions are completed, all signatures on this
Letter of Transmittal must be guaranteed by a firm that is an Eligible
Institution (as defined in the Offer to Purchase).
Issue check and/or certificates to:
Name
(Please Print)
Address
<TABLE>
<C> <S>
(INCLUDE ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
</TABLE>
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 6 AND 8)
To be completed ONLY if the check for the Purchase Price of Shares purchased
(less the amount of any federal income and backup withholding tax required to be
withheld) and/or certificates for Shares not tendered or not purchased, are to
be mailed to someone other than the undersigned or to the undersigned at an
address other than that shown below the undersigned's signatures). If these
Special Delivery Instruments are completed, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is an Eligible Institution (as
defined in the Offer of Purchase).
Mail check and/or certificates to:
<TABLE>
<C> <S>
(PLEASE PRINT)
Address
(INCLUDE ZIP CODE)
</TABLE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(To be completed by all stockholders)
________________________________________________________________________________
________________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
Dated __________________________________________________________________ , 1997
Name(s) ________________________________________________________________________
________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone No. __________________________________________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 6.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm ___________________________________________________________________
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
___________________________________________________________________________
(PLEASE PRINT)
Title __________________________________________________________________________
Address ________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone No. __________________________________________________________________
Dated __________________________________________________________________ , 1997
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is an
Eligible Institution (as defined in the Offer to Purchase), unless (i) this
Letter of Transmittal is signed by the registered holder(s) of the Shares (which
term, for purposes of this document, shall include any participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) have not completed
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal, or (ii) such Shares are
tendered for the account of an Eligible Institution. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used either if Share
certificates are to be forwarded herewith or if delivery of Shares is to be made
by book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or, for
Eligible Institutions only, a facsimile thereof) or an Agent's Message in
connection with a book-entry transfer, together in each case with any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter of
Transmittal prior to the Expiration Date. If certificates are forwarded to the
Depositary in multiple deliveries, a properly completed and duly executed Letter
of Transmittal must accompany each such delivery.
Stockholders whose Share certificates are not immediately available, who
cannot deliver their Share certificates and all other required documents to the
Depositary or who cannot complete the procedure for delivery by book-entry
transfer prior to the Expiration Date may tender their Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (with any
required signature guarantees) must be received by the Depositary prior to the
Expiration Date, and (iii) the certificates for all physically delivered Shares
in proper form for transfer by delivery, or a confirmation of a book-entry
transfer into the Depositary's account at one of the Book-Entry Transfer
Facilities of all Shares delivered electronically, in each case together with a
properly completed and duly executed Letter of Transmittal (or, for Eligible
Institutions only, facsimile thereof) (or, in the case of a book-entry transfer,
an Agent's Message (as defined below) in lieu of the Letter of Transmittal) and
any other documents required by this Letter of Transmittal, must be received by
the Depositary no later than Midnight, New York City time, on the third business
day after the date of the execution of the Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase.
The term "Agent's Message" means a message from a Book-Entry Transfer
Facility transmitted to, and received by, the Depositary forming a part of a
timely confirmation of a book-entry transfer of Shares (a "Book-Entry
Confirmation") which states that (a) such Book-Entry Transfer Facility has
received from the participant in such Book-Entry Transfer Facility an express
acknowledgement of such participant's tender of the Shares that are the subject
of the Book-Entry Confirmation and specifying the price at which such Shares are
to be tendered, (b) the participant in such Book-Entry Transfer Facility has
received and agrees to be bound by the terms of the Letter of Transmittal, and
(c) the Company may enforce such agreement against the participant in such
Book-Entry Transfer Facility.
Delivery of documents to a Book-Entry Transfer Facility in accordance with
such Facility's procedures does not constitute delivery to the Depositary.
The Notice of Guaranteed Delivery may be delivered by hand or by facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution on the form set forth in such notice.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative or contingent tenders will be accepted. By executing this
Letter of Transmittal (or, for Eligible Institutions only, a facsimile thereof),
the tendering stockholder waives any right to receive any notice of the
acceptance for payment of the Shares.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
<PAGE>
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box entitled "Number of Shares Tendered." In such
case, a new certificate for the Shares not purchased by the Company in the Offer
will be sent to the person(s) signing this Letter of Transmittal, unless
otherwise provided in the "Special Payment Instructions" or "Special Delivery
Instructions" boxes on this Letter of Transmittal, as promptly as practicable
following the expiration or termination of the Offer. All Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to
be validly tendered, the stockholder must check the box indicating the price per
Share at which such stockholder is tendering Shares under "Price (In Dollars)
Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal,
except that Odd Lot Owners (as defined in Section 2 of the Offer to Purchase)
may check the box above in the section entitled "Odd Lots" indicating that such
stockholder is tendering all Shares at the Purchase Price determined by the
Company. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR (OTHER
THAN AS DESCRIBED ABOVE FOR ODD LOT OWNERS) IF NO BOX IS CHECKED, THERE IS NO
VALID TENDER OF SHARES. A stockholder wishing to tender portions of such
stockholder's Share holdings at different prices must complete a separate Letter
of Transmittal for each price at which such stockholder wishes to tender each
such portion of such stockholder's Shares. The same Shares cannot be tendered
(unless previously validly withdrawn as provided in Section 4 of the Offer to
Purchase) at more than one price. Stockholders wishing to maximize the
possibility that their Shares will be purchased at the relevant Purchase Price
may check the box on the Letter of Transmittal marked "Shares Tendered at
Purchase Price Determined by Dutch Auction." Checking this box may result in a
Purchase Price of the Shares so tendered at the minimum price of $88.
6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signatures(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or, for Eligible Institutions only,
facsimiles thereof) as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the Purchase Price is to be made to, or Shares
not tendered or not purchased are to be registered in the name of, any person
other than the registered holder(s), in which case the certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on such certificates. Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates evidencing the
Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear(s) on such certificate(s). Signature(s) on any such
certificates or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction, the
Company will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the aggregate Purchase Price is to be made to, or Shares
not tendered or not purchased are to be registered in the name of, any person
other than the registered holder(s), or if tendered Shares are registered in the
name of any person other than the person(s) signing this Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. See
Section 5 of the Offer to Purchase. Except as provided in this Instruction 7, it
will not be necessary to affix transfer tax stamps to the certificates
representing Shares tendered hereby.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the Purchase
Price of any Shares tendered hereby is to be issued in the name of, and/or any
Shares not tendered or not purchased are to be returned to, a person other than
the person(s) signing this Letter of Transmittal, or if the check and/or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained by
such stockholder at the Book-Entry Transfer Facility from which such transfer
was made.
<PAGE>
9. ODD LOTS. As described in Section 1 of the Offer to Purchase, if fewer
than all Shares validly tendered and not withdrawn prior to the Expiration Date
are to be purchased, the Shares purchased first will consist of all Shares
validly tendered and not withdrawn by any stockholder who owns beneficially or
of record at the Expiration Date, an aggregate of fewer than 100 Shares
(including Shares held in the Dividend Reinvestment Plan), and who validly
tenders all such Shares (partial tenders of Shares will not qualify for this
preference) and completed the box captioned "Odd Lots" in this Letter of
Transmittal, and, if applicable, the Notice of Guaranteed Delivery.
10. SUBSTITUTE FORM W-9 AND FORM W-8. To prevent backup federal income tax
withholding equal to 31% of the gross payments payable pursuant to the Offer,
each stockholder who does not otherwise establish an exemption from backup
withholding must notify the Depositary of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing,
under penalties of perjury, the Substitute Form W-9 included in the Letter of
Transmittal. Noncorporate foreign stockholders should generally complete and
sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. As more fully
described below, in the case of a foreign stockholder, even if such stockholder
has provided the required certification to avoid backup withholding, the
Depositary will withhold 30% of the gross payments made pursuant to the Offer
unless a reduced rate of withholding or an exemption from withholding is
applicable.
11. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold
United States federal income taxes equal to 30% of the gross payments payable to
a foreign stockholder unless the Company and the Depositary determine that (i) a
reduced rate of withholding is available pursuant to a tax treaty or (ii) an
exemption from withholding is applicable because such gross proceeds are
effectively connected with the conduct of a trade or business within the United
States. For this purpose, a foreign stockholder is any stockholder that is not
(i) a citizen or resident of the United States, (ii) a corporation, partnership,
or other entity created or organized in or under the laws of the United States,
any State or any political subdivision thereof (other than any partnership
treated as foreign under United States Treasury regulations) or (iii) an estate
or trust, the income of which is subject to United States federal income
taxation regardless of the source of such income. In order to obtain a reduced
rate of withholding pursuant to a tax treaty, a foreign stockholder must deliver
to the Depositary before the payment a properly completed and executed IRS Form
1001. In order to obtain an exemption from withholding on the grounds that the
gross proceeds paid pursuant to the Offer are effectively connected with the
conduct of a trade or business within the United States, a foreign stockholder
must deliver to the Depositary a properly completed and executed IRS Form 4224.
The Company and the Depositary will determine a stockholder's status as a
foreign stockholder and eligibility for a reduced rate of, or exemption from,
withholding by reference to any outstanding certificates or statements
concerning eligibility for a reduced rate of, or exemption from, withholding
(E.G., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate
that such reliance thereon is not warranted. A foreign stockholder may be
eligible to obtain a refund of all or a portion of any tax withheld if such
stockholder meets the "complete redemption," "substantially disproportionate" or
"not essentially equivalent to a dividend" tests described in Section 14 of the
Offer to Purchase or is otherwise able to establish that no tax or a reduced
amount of tax is due. Backup withholding generally will not apply to amounts
subject to the 30% or a treaty-reduced rate of withholding.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or
requests for assistance may be directed to the Information Agent at its
telephone number and address listed below. Requests for additional copies of the
Offer to Purchase, this Letter of Transmittal or other tender offer materials
may likewise be directed to the Information Agent, and such copies will be
furnished promptly at the Company's expense. Stockholders may also contact their
local broker, dealer, commercial bank or trust company for documents relating
to, or assistance concerning, the Offer.
<PAGE>
13. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company, in its sole discretion, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders it determines not be in proper form or the
acceptance of or payment for which may, in the opinion of the Company's counsel,
be unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer and any defect or irregularity in the tender of any
particular Shares or any particular stockholder. No tender of Shares will be
deemed to be validly made until all defects or irregularities have been cured or
waived. None of the Company, the Dealer Manager, the Depositary, the Information
Agent or any other person is or will be obligated to give notice of any defects
or irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
14. DIVIDEND REINVESTMENT PLAN. If a tendering stockholder desires to have
tendered pursuant to the Offer Shares credited to the stockholder's account
under the Dividend Reinvestment Plan, the box captioned "Dividend Reinvestment
Plan Shares" should be completed. A participant in the Dividend Reinvestment
Plan wishing to tender portions of such participant's Share holdings in the
Dividend Reinvestment Plan at different prices must complete a separate Letter
of Transmittal for each price at which such participant wishes to tender each
such portion of such participant's Shares.
If a stockholder authorizes a tender of Shares held in the Dividend
Reinvestment Plan, all such Shares credited to such stockholder's account(s),
including fractional Shares, will be tendered, unless otherwise specified in the
appropriate space in the box captioned "Dividend Reinvestment Plan Shares." In
the event that the box captioned "Dividend Reinvestment Plan Shares" is not
completed, no Shares held in the tendering stockholder's account will be
tendered.
15. ORDER OF PURCHASE IN EVENT OF PRORATION. The order in which Shares are
purchased may affect the United States federal income tax consequences to a
stockholder, including because, as indicated in Section 14 of the Offer to
Purchase, the United States federal income tax consequences to a stockholder may
vary depending on the extent to which the stockholder's voting interest in the
Company is reduced and on the particular block of Shares purchased from the
stockholder. The Letter of Transmittal affords each stockholder tendering shares
in certificate form the opportunity to designate the order of priority in which
Shares tendered are to be purchased in the event of proration for tax purposes
and so as to otherwise enable stockholders who own both Shares entitled to five
votes per Share and Shares entitled to one vote per Share to designate which
Shares are to be tendered. See Sections 1 and 14 of the Offer to Purchase.
16. MULTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Shares have been mutilated, lost, stolen or destroyed should
contact the Depositary at the address indicated above for further instructions
as soon as possible. In the event of a mutilated, lost, stolen or destroyed
certificate, certain procedures will be required to be completed before this
Letter of Transmittal can be processed. Because these procedures may take a
substantial amount of time to complete, notice of any mutilated, lost, stolen or
destroyed certificate should be provided to the Depositary as soon as possible.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH SHARE CERTIFICATES AND ALL
OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION
DATE. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 WITH
THEIR LETTER OF TRANSMITTAL.
<TABLE>
<C> <S> <C> <C>
- -------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE Social security number
FORM W-9 YOUR TIN IN THE BOX AT ------------------------
Department of the Treasury RIGHT AND CERTIFY BY OR ------------------------
Internal Revenue Service SIGNING AND DATING BELOW Employer identification number
---------------------------------------------
Part 2 -- CERTIFICATION -- Under penalties of perjury, I
certify that:
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am awaiting for a number to be
issued to me) and
(2) I am not subject to backup withholding either because: (a)
I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (the "IRS") that
I am not subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup
withholding.
---------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross Part 3
out item (2) above if you have been notified
by the IRS that you are currently subject to
backup withholding because of underreporting
interest or dividends on your tax return.
However, if after being notified by the IRS
that you are subject to backup withholding,
you received another notification from the
IRS that you are no longer subject to backup
withholding, do not cross out such item (2).
SIGNATURE ------------------------- DATE Awaiting TIN / /
-------------
- -------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties that a taxpayer identification number has not been
issued to me, and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
<TABLE>
<S> <C>
--------------------------------- ---------------------------------
Signature Date
</TABLE>
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
or
All Others Can Call Toll-Free: (800) 290-6429
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the shares of common
stock of Pioneer Hi-Bred International, Inc. are not immediately available, if
the procedure for book-entry transfer cannot be completed on a timely basis, or
if time will not permit all other documents required by the Letter of
Transmittal to be delivered to the Depositary (as defined below) prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase defined
below). Such form may be delivered by hand or transmitted by mail or overnight
courier, or by facsimile transmission, to the Depositary. See Section 3 of the
Offer to Purchase. THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST
COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF
TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN
HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE
INSTITUTION.
THE DEPOSITARY FOR THE OFFER IS:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
BY MAIL VIA RETURN ENVELOPE: BY HAND: BY OVERNIGHT OR EXPRESS MAIL:
BankBoston, N.A. Securities Transfer and BankBoston, N.A.
Corporate Reorganization Reporting Services, Inc. Corporate Reorganization
P.O. Box 8029 c/o Boston EquiServe L.P. Mail Stop 45-01-40
Boston, MA 02266-8029 1 Exchange Plaza/ 150 Royall Street
55 Broadway, 3rd Floor Canton, MA 02021
New York, NY 10006
BY FACSIMILE TRANSMISSION:
(617) 575-2232/2233
CONFIRM FACSIMILE
TRANSMISSION
BY TELEPHONE:
(800) 730-4001
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Pioneer Hi-Bred International, Inc., an
Iowa corporation (the "Company"), upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of shares of
common stock, par value $1.00 per share (including the associated Preferred
Stock Purchase Rights (the "Rights"), the "Shares"), of the Company listed
below, pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Unless the Rights become exercisable or separately
tradeable prior to the Expiration Date, a tender of Shares will also constitute
a tender of the associated Rights. Unless the context requires otherwise, all
references herein to Shares include the associated Rights.
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING
TENDERED
------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A
SEPARATE NOTICE OF GUARANTEED DELIVERY FOR EACH
PRICE SPECIFIED MUST BE USED.
------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS
CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND
INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF
SHARES.
- --------------------------------------------------------------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / The undersigned wants to maximize the chance of having the
Company purchase all the Shares the undersigned is tendering
(subject to the possibility of proration). Accordingly, by
checking this one box INSTEAD OF ONE OF THE PRICE BOXES
BELOW, the undersigned hereby tenders Shares at, and is
willing to accept, the Purchase Price resulting from the
Dutch auction tender process. This action could result in
receiving a price per Share as low as $88 or as high as $104.
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
- --------------------------------------------------------------------------------
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101
/ / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 1/4
/ / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2
/ / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4
/ / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102
/ / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4
/ / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2
/ / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4
/ / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103
/ / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4
/ / 93 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2
/ / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4
/ / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
</TABLE>
2
<PAGE>
ODD LOTS
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person who owns beneficially or of record, as of the Expiration
Date, an aggregate of fewer than 100 Shares (including Shares held in the
Dividend Reinvestment Plan (as defined in the Offer to Purchase)).
The undersigned either (check one box):
/ / owned beneficially or of record, as of the Expiration Date,
an aggregate of fewer than 100 Shares (including Shares held
in the Dividend Reinvestment Plan), all of which are being
tendered, or
/ / is a broker, dealer, commercial bank, trust company or other
nominee who (i) is tendering, for the beneficial owners
thereof, Shares with respect to which it is the record owner,
and (ii) believes, based upon representations made to it by
each such beneficial owner, that such beneficial owner owns
beneficially, as of the Expiration Date, an aggregate of
fewer that 100 Shares (including Shares held in the Dividend
Reinvestment Plan) and is tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" above). / /
<TABLE>
<S> <C>
Number of Shares --------------------------------------------
Certificate No.(s) (If Available) Name(s) (Please Print)
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
If Shares will be tendered by --------------------------------------------
book-entry transfer:
(Address)
Name of Transferring Institution:
- -------------------------------------------- --------------------------------------------
Account No. at (check one) Area Code and Telephone Number
/ / The Depository Trust Company --------------------------------------------
/ / Philadelphia Depository Trust Company Signature(s)
</TABLE>
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc. or a commercial
bank or trust company (not a savings bank or savings and loan association)
having an office, branch or agency in the United States hereby guarantees (i)
that the above-named person(s) has a net long position in the Shares being
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, (ii) that such tender of Shares complies with
Rule 14e-4, and (iii) to deliver to the Depositary at one of its addresses set
forth above certificates for the Shares tendered hereby, in proper form for
transfer, or a confirmation of the book-entry transfer of the Shares tendered
hereby into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company in each case together with a properly
completed and duly executed Letter(s) of Transmittal (or, for Eligible
Institutions only, facsimiles thereof), or an Agent's Message in connection with
a book-entry transfer, together in each case with any required signature
guarantees and any other required documents, all within three New York Stock
Exchange, Inc. trading days after the date hereof.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- -------------------------------------------- Name
ADDRESS PLEASE TYPE OR PRINT
- -------------------------------------------- Title
CITY, STATE, ZIP CODE
Area Code and Tel. No. Date, 199
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM.
YOUR SHARE CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL.
4
<PAGE>
PIONEER HI-BRED INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH
UP TO 16,444,586 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE
RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN
$104 NOR LESS THAN $88 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
September 25, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
In our capacity as Dealer Manager, we are enclosing the material listed
below relating to the offer of Pioneer Hi-Bred International, Inc., an Iowa
corporation (the "Company"), to purchase up to 16,444,586 shares of its common
stock, par value $1.00 per share (including the associated Preferred Stock
Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $104
nor less than $88 per Share, net to the seller in cash, specified by tendering
stockholders, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer").
Unless the Rights become exercisable or separately tradeable prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender of
Shares will also constitute a tender of the associated Rights. Unless the
context otherwise requires, all references herein to Shares include the
associated Rights. Also enclosed is certain other material related to the Offer.
The Company will determine a single price (not greater than $104 nor less
than $88 per Share), net to the seller in cash, that it will pay for Shares
validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"),
taking into account the number of Shares so tendered and the prices specified by
tendering stockholders. The Company will select the lowest Purchase Price that
will allow it to purchase 16,444,586 Shares (or such lesser number of Shares as
is validly tendered at prices not greater than $104 nor less than $88 per Share)
and not withdrawn pursuant to the Offer. The Company will purchase all Shares
validly tendered at prices at or below the Purchase Price and not withdrawn,
upon the terms and subject to the conditions of the Offer, including the
provisions relating to proration described in the Offer to Purchase. See Section
1 of the Offer to Purchase.
The Purchase Price will be paid in cash, net to the seller, with respect to
all Shares purchased. Shares tendered at prices in excess of the Purchase Price
and Shares not purchased because of proration will be returned.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE
OFFER TO PURCHASE.
<PAGE>
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Company will, upon request, reimburse you for
reasonable and necessary handling and mailing expenses incurred by you in
forwarding any of the enclosed materials to your clients.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal for your use and for the information of
your clients.
3. A letter to stockholders of the Company from Charles S. Johnson,
President and Chief Executive Officer of the Company.
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
the Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date (each as defined in the Offer to
Purchase).
5. A letter that may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space for obtaining such clients, instructions with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup federal income
tax withholding.
7. A return envelope addressed to BankBoston, N.A., the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
The Company will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer (other than
the Dealer Manager). The Company will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and necessary
handling and mailing expenses incurred by them in forwarding materials relating
to the Offer to their customers. The Company will pay all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 7 of the Letter of Transmittal.
As described in the Offer to Purchase, if more than 16,444,586 Shares have
been validly tendered at or below the Purchase Price and not withdrawn prior to
the Expiration Date, as defined in Section 1 of the Offer to Purchase, the
Company will accept Shares for purchase in the following order of priority: (i)
all Shares validly tendered at or below the Purchase Price and not withdrawn
prior to the Expiration Date by any stockholder who owned beneficially or of
record, as of the Expiration Date, an aggregate of fewer than 100 Shares
(including Shares held in the Company's Dividend Reinvestment Plan) and who
validly tenders all of such Shares (partial tenders will not qualify for this
preference) and complete the box captioned "Odd Lots" in the Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (ii)
after purchase of all of the foregoing Shares, all other Shares validly tendered
at or below the Purchase Price and not withdrawn prior to the Expiration Date on
a pro rata basis.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS (AS
DEFINED IN THE OFFER TO PURCHASE), INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS
SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER AND THE PRICE AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE
COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER
AS TO WHETHER TO TENDER OR REFRAIN
2
<PAGE>
FROM TENDERING SHARES. SEE SECTION 9 OF THE OFFER TO PURCHASE FOR INFORMATION
REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH
RESPECT TO TENDERING PURSUANT TO THE OFFER.
Any questions or requests for assistance or additional copies of the
enclosed materials may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth on the
back cover of the enclosed Offer to Purchase.
Very truly yours,
Lazard Freres & Co. LLC
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON, THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION
AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
3
<PAGE>
LETTER TO CLIENTS
PIONEER HI-BRED INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF ITS
COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK
PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $104 NOR
LESS THAN $88 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated September
25, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") setting forth an offer by Pioneer Hi-Bred
International, Inc., an Iowa corporation (the "Company"), to purchase up to
16,444,586 shares of its common stock, par value $1.00 per share (including the
associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at
prices not greater than $104 nor less than $88 per Share, net to the seller in
cash, specified by tendering stockholders, upon the terms and subject to the
conditions of the Offer. Unless the Rights become exercisable or separately
tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), a tender of Shares will also constitute a tender of the associated
Rights. Unless the context otherwise requires, all references herein to Shares
include the associated Rights. Also enclosed herewith is certain other material
related to the Offer, including a letter to stockholders from Charles S.
Johnson, President and Chief Executive Officer of the Company.
The Company will determine a single per Share price (not greater than $104
nor less than $88 per Share) (the "Purchase Price") that it will pay for the
Shares validly tendered pursuant to the Offer and not withdrawn, taking into
account the number of Shares so tendered and the prices specified by tendering
stockholders. The Company will select the lowest Purchase Price that will allow
it to purchase 16,444,586 Shares (or such lesser number of Shares as are validly
tendered at prices not greater than $104 nor less than $88 per Share) and not
withdrawn pursuant to the Offer. The Company will purchase all Shares validly
tendered at prices at or below the Purchase Price and not withdrawn, upon the
terms and subject to the conditions of the Offer, including the provisions
thereof relating to proration. See Section 1 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal.
Your attention is directed to the following:
1. You may tender Shares at prices (in multiples of $.25), which cannot
be greater than $104 nor less than $88 per Share, as indicated in the
attached Instruction Form, net to you in cash.
2. The Offer is extended for up to 16,444,586 Shares. The Offer is not
conditioned on any minimum number of Shares being tendered. The Offer is,
however, subject to certain other conditions set forth in the Offer to
Purchase.
<PAGE>
3. The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, New York City time, on October 23, 1997, unless the Offer is
extended. Your instructions to us should be forwarded to us in ample time to
permit us to submit a tender on your behalf.
4. As described in the Offer to Purchase, if more than 16,444,586
Shares have been validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Date, as defined in Section 1 of the Offer
to Purchase, the Company will purchase Shares in the following order of
priority:
(i) first, all Shares validly tendered at or below the Purchase
Price and not withdrawn prior to the Expiration Date by any stockholder
who as of the Expiration Date owns beneficially or of record an aggregate
of fewer than 100 Shares (including Shares held in the Company's Dividend
Reinvestment Plan) all of which are being tendered (partial tenders will
not qualify for this preference) and completes the box captioned "Odd
Lots" in the Letter of Transmittal, the Notice of Guaranteed Delivery and
the Instruction Form, as applicable; and
(ii) then, after purchase of all the foregoing Shares, all Shares
validly tendered at or below the Purchase Price and not withdrawn prior
to the Expiration Date on a pro rata basis. See Section 1 of the Offer to
Purchase for a discussion of proration.
Thus, if you owned beneficially or of record, as of the Expiration Date,
an aggregate of fewer than 100 Shares (including Shares held in the
Company's Dividend Reinvestment Plan), and you instruct us to tender on your
behalf all such Shares prior to the Expiration Date and check the box
captioned "Odd Lots" in the Instruction Form (and on the Instruction Form),
all such Shares will be accepted for purchase before proration, if any, of
the other tendered Shares.
5. Tendering stockholders will not be obligated to pay any brokerage
commissions or solicitation fees on the Company's purchase of Shares in the
Offer. Any stock transfer taxes applicable to the purchase of Shares by the
Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 7 of the Letter of Transmittal.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY, NOR ANY OF ITS DIRECTORS OR OFFICERS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. EACH STOCKHOLDER SHOULD MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR
PRICES AT WHICH SHARES SHOULD BE TENDERED. SEE SECTIONS 8, 10 AND 14 OF THE
OFFER TO PURCHASE.
If you wish to have us tender any or all of your Shares held by us for your
account upon the terms and subject to the conditions set forth in the Offer to
Purchase, please so instruct us by completing, executing and returning to us the
attached Instruction Form. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified on the Instruction Form. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF BY THE EXPIRATION OF THE OFFER.
The Offer is being made solely by the Offer to Purchase, dated September 25,
1997 and the related Letter of Transmittal. The Offer is not being made to, nor
will tenders be accepted from or on behalf of holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
violate the laws of such jurisdiction. In any jurisdiction the securities laws
of which require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on the Company's behalf by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 16,444,586 SHARES OF COMMON STOCK
OF
PIONEER HI-BRED INTERNATIONAL, INC.
AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE
The undersigned acknowledges receipt of your letter and the enclosed Offer
to Purchase, dated September 25, 1997, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the Offer by Pioneer
Hi-Bred International, Inc. (the "Company") to purchase up to 16,444,586 shares
of its common stock, par value $1.00 per share (including the associated
Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at prices not
greater than $104 nor less than $88 per Share, net to the seller in cash,
specified by tendering stockholders, upon the terms and subject to the
conditions of the Offer. Unless the Rights become exercisable or separately
tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), a tender of Shares will also constitute a tender of the associated
Rights. Unless the context otherwise requires, all references herein to Shares
include the associated Rights.
This will instruct you to tender to the Company the number of Shares
indicated below (or, if no number is indicated below, all Shares) that are held
by you for the account of the undersigned, at the price per Share indicated
below, upon the terms and subject to the conditions of the Offer.
SHARES TENDERED
/ / By checking this box, all Shares held by us for your account, excluding
fractional Shares, will be tendered. If fewer than all Shares held by us for
your account are to be tendered, please check the box and indicate below the
aggregate number of Shares to be tendered by us.
______ Shares
Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE,
A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED
MUST BE USED. (SEE INSTRUCTION 5)
------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS
BELOW), THERE IS NO VALID TENDER OF SHARES.
------------------------
SHARES TENDERED AT PRICE DETERMINED
BY DUTCH AUCTION
/ / THE UNDERSIGNED WANTS TO MAXIMIZE THE CHANCE OF HAVING THE COMPANY PURCHASE
ALL THE SHARES THE UNDERSIGNED IS TENDERING (SUBJECT TO THE POSSIBILITY OF
PRORATION). ACCORDINGLY, BY CHECKING THIS ONE BOX INSTEAD OF ONE OF THE
PRICE BOXES BELOW, THE UNDERSIGNED HEREBY TENDERS SHARES AT, AND IS WILLING
TO ACCEPT, THE PURCHASE PRICE RESULTING FROM THE DUTCH AUCTION TENDER
PROCESS. THIS ACTION COULD RESULT IN RECEIVING A PRICE PER SHARE AS LOW AS
$88 OR AS HIGH AS $104.
3
<PAGE>
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
------------------------
SHARES TENDERED AT PRICE
DETERMINED BY STOCKHOLDER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/ / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101
/ / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 3/4
/ / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2
/ / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4
/ / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102
/ / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4
/ / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2
/ / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4
/ / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103
/ / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4
/ / 90 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2
/ / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4
/ / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
</TABLE>
ODD LOTS
/ / By checking this box, the undersigned represents that the undersigned owns
beneficially or of record as of the Expiration Date, an aggregate of fewer
than 100 Shares (including Shares held in the Company's Dividend
Reinvestment Plan) and is tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (In
Dollars) Per Share At Which Shares Are Being Tendered" above. [ ]
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE
TENDERING STOCKHOLDERS. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
SIGN HERE
--------------------------------------
Signature(s)
Dated: , 1997 Name
--------------------------------------
Address
--------------------------------------
--------------------------------------
--------------------------------------
Social Security or Taxpayer ID No.
4
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- --------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<C> <S> <C>
- -------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a) The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee);
b) So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
</TABLE>
- --------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<C> <S> <C>
-------------------------------------------------------
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, The legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments.
</TABLE>
____________________________________________ _________________________________
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter business or
"doing business as" name. You may use either your SSN or EIN (if you have
one).
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
For purposes of the Offer, payees exempted from backup withholding include
the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends not generally subject to withholding include the
following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner payments made
to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments that are not subject to information reporting are also not
subject to backup withholding. For details, see the regulations under sections
6041, 6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payers who must
report the payments to IRS. IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE OBTAINING A NUMBER.
2
<PAGE>
September 25, 1997
Dear Stockholder:
Pioneer Hi-Bred International, Inc. is offering to purchase up to 16,444,586
shares of its common stock (including associated Preferred Stock Purchase
Rights) at a price not greater than $104 nor less than $88 per share. The
Company is conducting the Offer through a procedure commonly referred to as a
"Dutch auction." This procedure allows you to select the price within the
specified price range at which you are willing to sell all or a portion of your
shares to the Company without incurring brokerage commissions.
The Offer is being made pursuant to an Investment Agreement entered into
between the Company and E. I. du Pont de Nemours and Company ("DuPont").
Concurrently with the consummation of the Investment Agreement, the Company
entered into a Research Alliance Agreement and a Joint Venture Formation
Agreement with DuPont. Pursuant to the terms of the Agreements, Pioneer and
DuPont agreed to three integrated transactions involving a research alliance and
collaboration between the two companies, the formation of a joint venture to
exploit business opportunities in quality grain traits and an equity investment
by DuPont.
The Offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. If you wish to tender your shares, instructions on how to
tender shares are provided in the enclosed materials.
I encourage you to read these materials carefully before making any decision
with respect to the Offer. Neither the Company nor its Board of Directors makes
any recommendation to any stockholder whether to tender any or all shares.
Please note that the Offer is scheduled to expire at 12:00 Midnight, New
York City time, on October 23, 1997, unless extended by the Company. Questions
regarding the Offer should not be directed to the Company but should instead be
directed to D.F. King & Co., Inc., the Information Agent, at (800) 290-6429.
Sincerely,
[LOGO]
Charles S. Johnson,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase and the
related Letter of Transmittal dated September 25, 1997. While the Offer is being
made to all stockholders of the Company, tenders will not be accepted from or on
behalf of stockholders in any jurisdiction in which the acceptance thereof would
not be in compliance with the laws of such jurisdiction. The Company is not
aware of any jurisdiction in which the making of the Offer or the tender of
Shares would not be in compliance with the laws of such jurisdiction. In those
jurisdictions whose laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Company by Lazard
Freres & Co. LLC or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
PIONEER HI-BRED INTERNATIONAL, INC.
UP TO 16,444,586 SHARES
OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE
NOT GREATER THAN $104.00 NOR LESS THAN $88.00 PER SHARE
Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"),
invites its stockholders to tender up to 16,444,586 shares of its Common Stock,
par value $1.00 per share (including the associated Preferred Stock Purchase
Rights (the "Rights"), the "Shares"), at prices not greater than $104.00 nor
less than $88.00 per Share net to seller in cash, specified by tendering
stockholders, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). Unless the Rights become exercisable or separately
tradeable prior to the Expiration Date, a tender of Shares will also constitute
a tender of the associated Rights. Unless the context otherwise requires, all
references herein to Shares include the associated Rights.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE
OFFER, HOWEVER, IS SUBJECT TO CERTAIN OTHER CONDITIONS AS SET FORTH IN THE OFFER
TO PURCHASE. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER.
HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES
AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES
SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES.
As promptly as practicable following the Expiration Date, the Company will
purchase up to 16,444,586 Shares or such lesser number of Shares as are properly
tendered (and not withdrawn in accordance with Section 4 of the Offer to
Purchase) prior to the Expiration Date at prices not greater than $104.00 nor
less than $88.00 per Share in cash. The term "Expiration Date" means 12:00
Midnight, New York City time, on October 23, 1997, unless and until the Company,
in its sole discretion, shall have extended the period of time during which the
Offer will remain open, and thereby delay acceptance for payment of, and payment
for, any Shares by giving oral or written notice of such extension to
BankBoston, N.A. (the "Depositary") and making a public announcement thereof.
The Company will, upon terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $104.00 nor less than
$88.00 per Share) net to the seller in cash (the "Purchase Price") that it will
pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking
into account the number of Shares so tendered and the prices specified by the
tendering stockholders. The Company will select the lowest Purchase Price that
will allow it to buy 16,444,586 Shares (or such lesser number as are validly
tendered at prices not greater than $104.00 nor less than $88.00 per Share). All
<PAGE>
Shares validly tendered at prices at or below the Purchase Price and not
withdrawn will be purchased at the Purchase Price, subject to the terms and the
conditions of the Offer, including the proration terms thereof.
The Company is making the Offer pursuant to an Investment Agreement, dated
as of August 6, 1997 (the "Investment Agreement"), between the Company and E. I.
du Pont de Nemours and Company ("DuPont"), pursuant to which DuPont has
completed, as of September 18, 1997, an equity investment in preferred stock of
the Company representing, on a common equivalent basis, 16,444,586 Shares, and
the Company is required, subject to the terms of the Investment Agreement, to
seek to repurchase an equal number of Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, if more than
16,444,586 Shares have been validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date, the Company will purchase validly
tendered Shares in the following order of priority: (i) all Shares validly
tendered at or below the Purchase Price and not withdrawn prior to the
Expiration Date by any stockholder who owns beneficially or of record as of the
Expiration Date an aggregate of fewer than 100 Shares (including Shares held in
the Company's Dividend Reinvestment Plan) and who validly tenders all of such
Shares (partial tenders will not qualify for this preference); and completes the
box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing
Shares, all other Shares validly tendered at or below the Purchase Price and not
withdrawn prior to the Expiration Date, on a pro rata basis. The Company also
reserves the right, but will not be obligated, to purchase all Shares duly
tendered by any stockholder who tendered any Shares owned beneficially or of
record, at or below the Purchase Price and who, as a result of proration, would
then own beneficially or of record, an aggregate of fewer than 100 Shares. If
the Company exercises this right, it will increase the number of Shares that it
is offering to purchase by the number of Shares purchased through the exercise
of this right.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and payment for, any Shares
by giving oral or written notice of such extension to the Depositary and making
a public announcement thereof. The Company's reservation of the rights to delay
payment for Shares it has accepted is limited by Rules 13e-4(f)(2) and
13c-4(f)(5) promulgated under the Securities Exchange Act of 1934, as amended,
which requires that the Company must pay the consideration offered or return the
Shares tendered promptly after termination or withdrawal of the tender offer.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the Company
pursuant to the Offer, may also be withdrawn at any time after 12:00 Midnight,
New York City time, on November 21, 1997. For a withdrawal to be effective, a
notice of withdrawal must be in written, telegraphic or facsimile transmission
form and must be received in a timely manner by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Such notice of
withdrawal must specify the name of the tendering stockholder, the name of the
registered holder, if different from that of the person who tendered such
Shares, the number of Shares tendered and the number of Shares to be withdrawn.
If the certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the release of such certificates,
the tendering stockholder must also submit the serial numbers shown on the
particular certificates for Shares to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (except in
the case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedure for book-entry tender set forth in Section 3
of the Offer to Purchase, the notice of withdrawal also must specify the name
and the number of the account at the applicable Book-Entry Transfer Facility to
be credited with the withdrawn Shares and otherwise comply with the procedures
of such facility.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY TENDERS ARE MADE. The
information required to be disclosed by Rule 13e-4(d)(1) of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended, is
contained in the Offer to Purchase and is incorporated herein by reference. The
Offer to Purchase and the related Letter of Transmittal are
<PAGE>
being mailed to record holders of Shares and are being furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear on
the Company's stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
Additional copies of the Offer to Purchase and the Letter of Transmittal may
be obtained from the Depositary, the Information Agent or the Dealer Manager and
will be furnished promptly at the Company's expense.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 290-6429
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717
September 25, 1997
<PAGE>
Exhibit a(9)
Dirck Steimel (515) 248-4893
PIONEER ANNOUNCES DUTCH AUCTION SELF TENDER
DES MOINES, IOWA -- September 25, 1997 -- Pioneer Hi-Bred International, Inc.
announced today that it has launched a Dutch auction self tender for
approximately 20 percent of its outstanding shares of common stock, or
approximately 16.4 million shares, as part of its previously announced alliance
with DuPont.
All Pioneer shareholders are invited to tender shares within a price range
of $88 per share to $104 per share. Tendering shareholders will be required to
specify the price within that range they would be willing to accept.
Shareholders will have until midnight New York City time, October 23, 1997 to
respond to the Company's Dutch auction self tender offer. The Company will
select the lowest purchase price per share that will enable it to buy the shares
pursuant to the offer.
All inquiries on procedures for the Dutch auction self tender offer
should be directed to D.F. King & Co., Inc., the information agent for the
offer. The address for D.F. King is 77 Water Street, New York, NY 10005.
Bankers and brokers should call the information agent collect at (212)
269-5550. All others should call toll-free at (800) 290-6429.
The dealer manager for the offer is Lazard Freres & Co. LLC.
Pioneer and DuPont recently completed a broad research alliance and the
formation of a separate joint venture company designed to speed the discovery,
development, and delivery of new crops that benefit farmers, livestock
producers, and consumers worldwide. In addition, DuPont has invested $1.7
billion in Pioneer by purchasing preferred voting shares at $104 per share.
Pioneer will use the proceeds from the DuPont investment to finance the Dutch
auction.
Pioneer Hi-Bred International, Inc. (NYSE: PHB) is a leading supplier of
agricultural genetics and is a leading integrator of agricultural technology.
Headquartered in Des Moines, Iowa, Pioneer develops, produces, and markets a
full line of seeds, microbial products, and services to farmers, grain
processors, and other customers worldwide.
Based in Wilmington, Delaware, DuPont (NYSE:DD), is a global chemical,
energy and life sciences company. In addition to its biotechnology-based
business, the DuPont Agricultural Products unit is a leading world supplier
of crop protection products, which are not included in this alliance.
<PAGE>
Exhibit (C)1
FORMATION AGREEMENT
This Formation Agreement is made and entered into as of this 6th day of
August, 1997, between Pioneer Hi-Bred International, Inc., a corporation
organized and existing under the laws of the State of Iowa ("Pioneer") and E.
I. du Pont de Nemours and Company, a corporation organized and existing under
the laws of the State of Delaware ("DuPont").
WHEREAS, Pioneer has engaged in substantial research and development to
discover new genetic hybrids which enhance the agronomics and the quality of
corn, soybeans and selected oilseed grains, primarily through its own
proprietary genetic breeding research and techniques;
WHEREAS, DuPont has no corn, soybean or other selected oilseed germplasm of
its own, but has discovered and is developing several enhanced quality traits
for these grains through its own proprietary genetic engineering research and
techniques;
WHEREAS, by combining Pioneer's and DuPont's research, development, and
marketing of enhanced agronomics and enhanced quality corn, soybean and
selected oilseed grains, including promising new developments achieved by
each company through entirely different biological mechanisms, the parties
will be able to take advantage of substantial synergies such as "stacking"
complementary enhanced grain traits to produce additive affects, and to speed
the discovery and development of entirely new, qualitative combinations, that
neither party could achieve on its own;
WHEREAS, the effect of this synergistic combination will be to speed the
discovery, development and marketing of new quality enhanced corn, soybean and
selected oilseed grains;
WHEREAS, Pioneer and DuPont desire to form a profitable, jointly owned Venture
(as defined below) to create and capture value for Quality Trait (as defined
below) seed, grain, grain products and plant material delivered through corn,
soybean and selected oilseeds to enable the Parties to maximize their
opportunity to participate in the transformation of the agribusiness system;
WHEREAS, the Venture contemplates that DuPont and Pioneer will contribute
certain technology, patents, trademarks and trade secrets which when combined
with Pioneer germplasm will produce Quality Trait Seed for the Venture;
WHEREAS, it is contemplated that Pioneer will be the preferred producer and
marketer of the Quality Trait Seed for the Venture as more fully reflected in
the Preferred Seed Support Agreement (as defined below) between the parties;
WHEREAS, Pioneer and DuPont, have organized Optimum Quality Grains L.L.C., a
limited liability company organized under the laws of the State of Delaware and
in accordance with the Delaware Limited Liability Company Act ("L.L.C."), as the
vehicle for establishing the Venture;
WHEREAS, Pioneer and DuPont desire to transfer certain tangible and intangible
assets currently used by Pioneer and DuPont and their respective Affiliates (as
defined below) to the Venture for the creation and capturing of value for
Quality Trait (as defined below) seed, grain, grain products and plant materials
subject to the assumption by the Venture of certain liabilities arising out of
the operation of the business, as more fully described below; and,
WHEREAS, Pioneer and DuPont desire to commit to provide certain administrative
services and support for the business of the Venture.
NOW, THEREFORE, in consideration of the premises and mutual agreements and
covenants contained in this Agreement, Pioneer and DuPont agree as follows:
ARTICLE I - DEFINITIONS AND RULES OF CONSTRUCTION
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1.1. Definitions.
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The following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1.1. "Affiliate", when used with respect to any
Entity, shall mean any other Entity directly
or indirectly controlling, controlled, or under common
control with, that Entity. For purposes of this Agreement,
"control" means (a) the direct or indirect ownership of more
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than fifty percent (50%) of the total voting rights or other
evidences of ownership interest of the Entity, or (b) the
possession, directly or indirectly, of the power to direct
or cause the direction of the management and
policies of the Entity;
1.1.2. "Agreement" shall mean this Formation Agreement between
Pioneer and DuPont and any Schedules or Exhibits thereto, as
amended from time to time;
1.1.3. "Ancillary Agreements" shall mean any and all agreements,
leases and licenses referenced in this Agreement or necessary
or reasonably requested by a party to complete the
transactions contemplated in this Agreement, as the same may
be amended from time to time, but excluding the Research
Alliance Agreement and the Preferred Seed Support Agreement;
1.1.4. "Bona Fide Third Party" shall mean an Entity less than five
percent (5%) of the stock or other ownership interest of which
is owned, directly or indirectly, by either Pioneer or DuPont
or their respective Affiliates, which has equal or better
financial stability as the Venture, and which has experience
in conducting a business of a nature comparable to that
operated by the Venture;
1.1.5. "Business Purpose" shall have the meaning ascribed to that
term in Section 2.1 of this Agreement;
1.1.6. "Change of Control" shall mean, with respect to DuPont, any of
the following: (i) the sale, lease, conveyance or other
disposition of eighty percent (80%) or more of the assets of
DuPont as an entirety or substantially as an entirety to any
other Entity or "group" within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as the same has or may
be amended or modified from time to time, or any successor
legislation (the "Exchange Act") in one or a series of
transactions, provided that a transaction where the holders of
all classes of stock, voting securities or other indicia of
ownership of the transferor immediately prior to such
transaction own, directly or indirectly, more than fifty
percent (50%) of the aggregate voting power of all classes of
such stock, voting securities or other indicia of ownership of
the transferee immediately after such transaction shall not be
a Change of Control; (ii) any transaction or series of
transactions (as a result of a tender offer, merger,
consolidation or otherwise) that results in, or that is in
connection with, any Entity, including a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) that includes
such Entity, acquiring "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly, of
fifty percent (50%) or more of the aggregate voting power of
all classes of stock, voting securities or other indicia of
ownership of DuPont, or (iii) the consummation by DuPont or
any of its subsidiaries of a merger, consolidation or other
business combination that requires the approval of DuPont's
shareholders, whether for such transaction or the issuance of
securities in such transaction, if immediately after giving
effect to such transaction, the persons who beneficially owned
common securities of DuPont immediately prior to such
transaction beneficially own in the aggregate common
securities representing common equity ownership on a fully
diluted basis of less than 50% immediately after giving effect
to such transaction.
1.1.7. "Claim" shall mean any action, claim, demanded, interference,
obligation, suit, arbitration or other proceeding brought or
asserted by or against a party to this Agreement (including
the Venture) or their respective Affiliates;
1.1.8. "Closing" shall mean the consummation of the transactions
contemplated in this Agreement, which shall occur on the
Closing Date;
1.1.9. "Closing Date" shall mean August 31, 1997, or thirty
(30) days after receipt of the approval of a
Hart-Scott-Rodino application or such earlier or later date
as the parties mutually may agree;
1.1.10. "Code" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent
superseding Federal revenue laws;
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1.1.11. "Combined Assets" shall mean the Pioneer Assets and the DuPont
Assets, collectively, and any other tangible and intangible
assets that the Venture may develop, design, manufacture,
construct, have constructed, or acquire, as the same may exist
from time to time;
1.1.12. "Combined Business" shall mean the Combined Assets and other
assets as operated by the Venture to create and capture value
for Quality Trait (as defined below) seed, grain, grain
products and plant materials on a worldwide basis, subject to
the exclusions specifically identified and agreed to by the
parties;
1.1.13. "Damages" shall mean all costs, liabilities, obligations,
damages, fines, penalties, deficiencies, losses and judgments,
including incidental and consequential damages and reasonable
attorneys' fees, in each case after the application of any
amounts recoverable under insurance contracts or similar
arrangements and from third parties by the Entity claiming
indemnity;
1.1.14. "Deadlock" shall mean the inability of Pioneer and
DuPont to resolve a Substantial Disagreement in accordance
with the provisions of Section 10.4 of this Agreement;
1.1.15. "Delaware Limited Liability Company Act" shall mean
the Delaware Limited Liability Company Act, Delaware Code,
Title 6, Sections 18101, et seq;
1.1.16. "DuPont Assets" shall have the meaning ascribed to that
term in Section 2.3.2 of this Agreement;
1.1.17. "DuPont End-Use Business" shall mean the DuPont Assets
and any other assets, personnel, technology, development,
marketing capabilities, intellectual properties, supply and
sales contracts, and any other items and properties
necessary or required in carrying on the existing operations
of DuPont and its Affiliates responsible for the creation
and capturing of value for Quality Trait (as defined below)
seed, grain, grain products and plant materials on a global
basis;
1.1.18. "DuPont Defined Benefit Plan" shall mean a DuPont Plan
that is a defined benefit plan within the meaning of Section
3(35) of ERISA or Section 4l4(j) of the Code;
1.1.19. "DuPont Plans" shall mean all pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance or any
other type of employee benefit plan, program, or arrangement
within the meaning of Section 3(3) or ERISA or any
equivalent plans governed by applicable foreign law on
behalf of any of the current or former Quality Grains
Employee of DuPont or their beneficiaries, whether on an
active or frozen basis;
1.1.20. "DuPont End-Use Products" shall mean those products
transferred to the Venture as part of the DuPont Assets as
listed on Schedule 2.3.2;
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1.1.21. "DuPont Technology" shall mean the total of the
technologies and intellectual properties licensed or
assigned to the Venture pursuant to the terms of the DuPont
Technology License Agreement for the Business Purpose;
1.1.22. "DuPont Technology License Agreement" shall mean the
agreement between DuPont and the Venture dated as of the
Closing Date for the license by DuPont to the Venture of
DuPont Technology in the form attached as Exhibit 1.1.22;
1.1.23. "Entity" shall mean any individual or person; or
general partnership, limited partnership, limited liability
company, corporation, joint venture, trust, business trust,
cooperative, association, foreign trust or foreign business
organization, or government or government organization; and
the heirs, executors, administrators, legal representatives,
successors, and assigns of the Entity when the context so
permits;
1.1.24. "Environmental Liabilities" shall mean conditions arising out
of the pollution or contamination of the environment,
whether or not they give rise to Claims and Damages. Such
conditions may include, without limitation:
(a) Containment, removal, remediation, response to,
clean-up, or abatement of any release, or threat of
release, emission, spill, discharge, leaching,
disposition, transportation, recycling, storage,
disposal, treatment, use or application, of any
chemical substance or other contamination of soil
surface water, ground water, or river, lake or ocean
sediment (whether onsite or off-site and whether
accidental or deliberate, or in the ordinary course of
business) of any material (whether raw material, waste
material, manufactured intermediate or manufactured
products) in any way associated with any business
(including the Pioneer End-Use Business and the DuPont
End-Use Business) including, without limitation, the
design, development, manufacture, generation,
formulation, processing, reprocessing, disposal,
distribution, storage, transportation or handling of
products (including Pioneer End-Use Products and DuPont
End-Use Products); and
(b) Personal injury, Damages (including property damage and
damage to natural resources) asserted or prosecuted by
or on behalf of any party (whether based on negligent
acts or omissions, statutory or strict liability or
otherwise, and whether occurring onsite or off-site),
including, but not limited to, any governmental entity,
employee, former employee or their respective legal
representatives, or any private party, association or
other Entity; arising or alleged to arise under any
Federal, state or local statute, law or regulation for
the protection of the environment, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and
the Resource Conservation and Recovery Act of 1976, as
amended, or any common law theory or theory based on
tort, negligence, statutory or strict liability or
otherwise. Environmental Liabilities shall not include
Occupational Liabilities;
1.1.25. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, to the date in question;
1.1.26. "Fair Market Value" shall mean the price that a willing buyer
will pay and a willing seller will accept for Transferred
Property;
1.1.27. "Indemnified Party" shall have the meaning ascribed to that
term in Section 5.5, of this Agreement;
1.1.28. "Indemnifying Party" shall have the meaning ascribed to that
term in Section 5.5 of this Agreement;
1.1.29. "Investment Agreement" shall mean the Investment Agreement
dated as of August 6, 1997 between DuPont and Pioneer.
1.1.30. "Judgment" shall have the meaning ascribed to that term in
Section 5.2 of this Agreement;
1.1.31. "Limited Liability Company Agreement" shall mean the agreement
executed between Pioneer and DuPont for the organization,
operation and management of the Venture;
1.1.32. "Members Committee" shall mean the governing body of the
L.L.C. comprised of equal numbers of employees from Pioneer
and DuPont, as more fully described in the Limited Liability
Company Agreement;
1.1.33. "Member Representative" shall mean each employee of Pioneer
and each employee of DuPont selected to serve on the Members
Committee;
1.1.34. "Offer of Settlement" shall have the meaning ascribed to that
term in Section 5.2.1 of this Agreement;
1.1.35. "Pioneer Assets" shall have the meaning ascribed to that term
in Section 2.3.1 of this Agreement. This shall not include any
of the germplasm of Pioneer;
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1.1.36. "Pioneer End-Use Business" shall mean the Pioneer Assets and
any other assets, personnel, technology, development,
marketing capabilities, intellectual properties, supply and
sales contracts, and any other items and properties necessary
or required in carrying on the existing operations of Pioneer
and its Affiliates responsible for the creation and capturing
of value for Quality Trait (as defined below) seed, grain,
grain products and plant materials on a global basis;
1.1.37. "Pioneer Defined Benefit Plan" shall mean a Pioneer Plan that
is a defined benefit plan within the meaning of Section 3(35)
of ERISA or Section 414(j) of the Code;
1.1.38. "Pioneer Plans" shall mean all pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance or any
other type of employee benefit plan, program, or arrangement
within the meaning of Section 3(3) of ERISA or any equivalent
plans governed by applicable foreign law on behalf of any of
the current or former Quality Grains Employee of Pioneer or
their beneficiaries, whether on an active or frozen basis;
1.1.39. "Pioneer End-Use Products" shall mean those products
transferred to the Venture as part of the Pioneer Assets and
the Pioneer End-Use Business as listed on Schedule 2.3.1 and
shall not be read to include any further products as it is the
clear intent not to vest the joint enterprise with any
interest in the germplasm of Pioneer;
1.1.40. "Pioneer Technology" shall mean the total of all technologies
and intellectual properties licensed or assigned to the
Venture pursuant to the terms of the Pioneer Technology
License Agreement for the Business Purpose;
1.1.41. "Pioneer Technology License Agreement" shall mean the
agreement between Pioneer and the Venture dated as of the
Closing Date for the license by Pioneer to the Venture of
Pioneer Technology in the form attached as Exhibit 1.1.33;
1.1.42. "Quality Trait Seed" shall mean a seed product developed by or
on behalf of the Venture which contains a Quality Trait;
1.1.43. "Quality Grains Employees" shall have the meaning ascribed to
that term in Section 11.2.1 of this Agreement;
1.1.44. "Quality Trait(s)" shall mean a characteristic which results
in a modification of the plant, grain composition or its
attributes that has a value to end-users of grain, grain
products or plant materials and which commands value in the
market and such value is capable of being captured;
1.1.45. "Related Company " shall mean, with respect to Pioneer and
DuPont, any Entity one hundred percent (100%) of the voting
interest or other indicia of ownership of which is owned,
directly or indirectly, by Pioneer or DuPont, as applicable;
provided, however, that for purposes of Section 10.3 and
Section 15.11 hereof, any Spin-Off Entity (as defined in the
Investment Agreement) (which term for purposes of such
Sections, shall include any person who would otherwise be
deemed a Spin-Off Entity but for such person's status as a
subsidiary of DuPont) which is a subsidiary of the Investor or
satisfies each of the conditions set forth in clauses (i)
through (v) of the definition of the term "Sale of Ag
Products" in the Investment Agreement, shall constitute a
Related Company of DuPont.
1.1.46. "Research Alliance" shall mean the cooperative effort between
the parties as set forth in the Research Alliance Agreement
executed on even date herewith;
1.1.47. "Retained Liabilities" shall have the meaning ascribed to that
term in Section 2.6.1 of this Agreement;
1.1.48. "Substantial Disagreement" shall mean the inability of the
Members Committee to reach agreement on any issue regarding
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the strategic direction of the Venture and having a material
impact on the business or operations of the Venture, Pioneer
or DuPont;
1.1.49. "Transferred Employees" shall mean Quality Grains Employees
who accept employment with the Venture;
1.1.50. "Venture" shall mean the L.L.C. a Delaware Limited Liability
Company organized as described in Section 2.2.1 of this
Agreement and any Entities, the majority of the stock or other
ownership interest of which is owned, directly or indirectly,
by the Venture;
1.1.51. "Venture Interest" shall mean a party's interest in the
Venture.
1.2. Other Terms.
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Other words, terms or phrases used, but not specifically defined, in this
Agreement shall have the meanings commonly ascribed to such words, terms
or phrases.
1.3. Rules of Construction.
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Unless the context otherwise requires:
1.3.1. A term has the meaning assigned to it;
1.3.2. References in the singular or to "him," "her," "it," "itself,"
or other like references, and references in the plural or the
feminine or masculine reference, as the case may be, shall
also, when the context so requires, be deemed to include the
plural or singular, or the masculine or feminine reference, as
the case may be;
1.3.3. References to Articles and Sections shall refer to articles
and sections of this Agreement, unless otherwise specified;
1.3.4. The headings in this Agreement are for convenience and
identification only and are not intended to describe,
interpret, define or limit the scope, extent, or intent of
this Agreement or any provision hereof; and
1.3.5. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the
party or parties that drafted or caused this Agreement to be
drafted.
ARTICLE II - FORMATION
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2.1. Business Purpose.
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The business purpose of the Venture (the "Business Purpose") shall be to
create and capture value for Quality Trait seed, grain, grain products
and plant materials delivered through corn, soybean and selected
oilseeds, on a global basis.
To this end, Pioneer and DuPont shall have the Venture represent all of
their respective interests within the Business Purpose, shall not engage
in competition with the Venture's Business Purpose, and shall cause the
Venture to focus on building core competencies and strong market access
within the scope of the Business Purpose. The Business Purpose may be
expanded from time to time upon approval of the Members Committee.
2.2. Venture Formation.
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2.2.1. Pioneer and DuPont have organized the L.L.C. pursuant to the
provisions of the Delaware Limited Liability Company Act. The
formation of the L.L.C. was in accordance with the Limited
Liability Company Agreement. Pioneer and DuPont each have a
fifty percent (50%) ownership interest in the Venture. The
L.L.C. shall operate the Combined Business in the United
States;
2.2.2. The Members Committee shall supervise the business and affairs
of the L.L.C. in accordance with the powers granted to it in
the Limited Liability Company Agreement. The Members Committee
shall be constituted in accordance with the provisions of the
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Limited Liability Company Agreement, and shall consist of an
equal number of Member Representatives from each of Pioneer
and DuPont;
2.2.3. The ownership interests issued by the L.L.C. shall have
restrictions which shall appear prominently on any document
that represents that ownership interest to the effect that the
interest may not be transferred without the prior written
consent of Pioneer or DuPont, as applicable;
2.2.4. In order to operate the Combined Business on a global basis,
Pioneer and DuPont shall cause the Venture to organize and
conduct its international business through such Entities and
in such countries as the Members Committee shall deem
appropriate.
2.3. Transfer of Assets and Liabilities.
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Except as otherwise specified, at the Closing, Pioneer shall, and shall
cause its Affiliates to, and DuPont shall, and shall cause its Affiliates
to, transfer to the Venture the following;
2.3.1. Pioneer Assets.
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Except as otherwise agreed at Closing, Pioneer shall, and
shall cause its Affiliates to, transfer to the Venture at
Closing the following assets (the "Pioneer Assets"):
(a) The Pioneer End-Use Products and Pioneer trademarks as
listed in Schedule 2.3.1;
(b) The pollinators listed on Schedule 2.3.1;
(c) Rights under the patents, patent applications, know-how
and other technology with regard to the Pioneer End-Use
Business pursuant to the Pioneer Technology License
Agreement including the freedom to operate under such
rights consistent with the provisions of this
Agreement;
(d) Customer lists for Pioneer End-Use Products from the
Pioneer End-Use Business as defined herein;
(e) All sales contracts and distributor agreements
principally dedicated to the sale of the Pioneer
End-Use Products to customers;
(f) All inventories and work-in-process for Pioneer End-Use
Products, and raw materials identified for the
manufacture of Pioneer End-Use Products exclusive of
any germplasm or intellectual property related thereto;
(g) At least one full copy of, or reasonable access to, the
books, records, files, papers and other such documents,
and portions thereof, specific to the Pioneer End-Use
Business;
(h) To the extent transferable, all right, title and
interest in any Claims with regard to the Pioneer
End-Use Business brought or asserted against third
parties by Pioneer or its Affiliates;
(i) Any other assets to the extent identified on Schedule
2.3.1(j);
(j) The laboratories and facilities comprising Pioneer
Livestock Nutrition Center and the capabilities of the
Johnston grain functionality lab; and
(k) Office equipment, furniture and other items of personal
property principally dedicated to the administration or
management of the Pioneer End-Use Business.
2.3.2. DuPont Assets.
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Except as otherwise agreed at Closing, DuPont shall, and shall
cause its Affiliates to, transfer to the Venture at Closing at
least the following assets (the "DuPont Assets"):
(a) The DuPont End-Use Products and DuPont trademarks as
listed in Schedule 2.3.2;
(b) The TC Blend pollinators listed on Schedule 2.3.2;
(c) Rights under the patents, patent applications, know-how
and other technology with regard to the DuPont End-Use
Business pursuant to the DuPont Technology License
Agreement including the freedom to operate under such
rights consistent with the provisions of this
Agreement;
(d) Customer lists for DuPont End-Use Products;
(e) All sales contracts and distributor agreements
principally dedicated to the sale of DuPont End-Use
Products to customers;
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(f) All inventories and work-in-process for DuPont End-Use
Products, and raw material identified for the
manufacture of DuPont End-Use Products;
(g) At least one full copy of, or reasonable access to,
books, records, files, papers and other such documents,
and portions thereof, specific to the conduct of the
DuPont End-Use Business;
(h) To the extent transferable, all right, title and
interest in any Claims with regard to the DuPont
End-Use Business brought or asserted against third
parties by DuPont or its Affiliates;
(i) Any other assets to the extent identified on Schedule
2.3.2;
(j) The Quality Trait grain functionality development
capability at DuPont's Stine Laboratory and
Experimental Station and seed product development
capability at El Paso, Illinois;
(k) DuPont's Quality Grain facility in Des Moines, Iowa;
and
(l) Office equipment, furniture and other items of personal
property principally dedicated to the administration or
management of the DuPont End-Use Business.
2.4. Excluded Assets.
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The aforementioned assets represent all of the assets to be transferred
to the Venture, and unless such assets are described with specificity
herein or in other documents which are part of the Closing, such assets
shall not be transferred into the Venture. Both DuPont and Pioneer fully
intend to leave intact their core businesses and none of the documents
contemplate any transfer of any rights to the Venture other than as
specifically set forth herein.
2.5. Liabilities Assumed by the Venture.
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After the Closing Date, the Venture shall assume liabilities and
obligations incurred by it for its own account, and ongoing debts,
liabilities, and obligations associated with either the Pioneer End-Use
Business or the DuPont End-Use Business with regard to:
2.5.1. Debts, liabilities and obligations arising out of the ongoing
operations of the Venture or to be performed or discharged
under any contract or other obligation assigned or otherwise
transferred to the Venture by Pioneer or DuPont or their
respective Affiliates, but only to the extent that any such
debt, liability or obligation is for, or relates to, actions
or performance or obligations due after the Closing Date;
provided, however, that Pioneer and DuPont or their respective
Affiliates shall retain liability for Claims or Damages
relating to the breach or nonperformance of contracts or other
obligations on or before the Closing Date;
2.5.2. Accounts payable that arise after the Closing Date, regardless
of whether such accounts payable result from the operation of
the Pioneer End-Use Business or the DuPont End-Use Business on
or before the Closing Date;
2.5.3. Debts, liabilities and obligations specifically transferred to
the Venture by Pioneer or DuPont or their respective
Affiliates pursuant to the provisions of this Agreement or any
other agreements executed in the furtherance of the
transactions contemplated in this Agreement; and
2.5.4. Debts, liabilities and obligations incurred by the Venture for
its own account.
2.6. Liabilities.
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Pioneer and DuPont agree that the following liabilities shall be
apportioned among Pioneer and its Affiliates, DuPont and its Affiliates,
and the Venture, as follows:
2.6.1. Liabilities Incurred During the Ordinary Course of Business.
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Other than the liabilities specifically assumed by the Venture
pursuant to Section 2.5, and except as otherwise provided in
this Agreement, Pioneer and its Affiliates shall retain from
the Pioneer End-Use Business, and DuPont and its Affiliates
shall retain from the DuPont End-Use Business, any and all
liabilities that result from the ordinary course of the
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Pioneer End-Use Business and the DuPont End-Use Business
respectively on or before the Closing Date (the "Retained
Liabilities") whether or not the Claim relating to such
Retained Liabilities arises before, on, or after the Closing
Date. The Retained Liabilities shall include, but shall not be
limited to:
2.6.2. Environmental Liabilities.
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(a) Pioneer and its Affiliates, with regard to the Pioneer
End-Use Business, and DuPont and its Affiliates, with
regard to the DuPont End-Use Business, shall retain any
and all Environmental Liabilities that exist at
Closing, provided however, if a condition was lawful at
Closing and after Closing such condition requires
correction, any costs or Damages associated with such
correction shall be the responsibility of the Venture;
(b) The Venture shall be responsible for any Environmental
Liabilities attributable to any process, mode of
operation or business carried on by the Venture after
Closing.
2.7. Indemnity from Liabilities.
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2.7.1. Pioneer, with regard to the Pioneer End-Use Business, and
DuPont, with regard to the DuPont End-Use Business, shall
indemnify, defend and hold the Venture harmless against any
Claims that may be filed against the Venture with respect to
liabilities for which Pioneer, DuPont, or their respective
Affiliates, as applicable, are responsible under Section 2.6.
Pioneer or DuPont, as the case may be, reserves the right to
manage any such Claims, including the defense, settlement or
appeal thereof. Pioneer or DuPont shall keep the Venture
informed of the status of the Claims and, as appropriate,
shall solicit the advice of the Venture with regard to the
defense, settlement or appeal of the Claims. The Venture shall
provide any support reasonably requested by Pioneer or DuPont
with regard to such Claims, and shall notify Pioneer or
DuPont, as appropriate, of any Claims filed against the
Venture with regard to such liabilities.
2.7.2. The Venture, with regard to the Combined Business, shall
indemnify, defend and hold harmless Pioneer and its
Affiliates, and DuPont and its Affiliates, against any Claims
that may be filed against Pioneer or its Affiliates, or DuPont
or its Affiliates, with respect to any debts, liabilities or
other obligations of the Venture set forth in this Agreement.
The Venture reserves the right to manage any such Claims,
including the defense, settlement or appeal thereof. The
Venture shall keep Pioneer and its Affiliates, and DuPont and
its Affiliates, as applicable, informed of the status of the
Claims and, as appropriate, shall solicit advice of Pioneer
and its Affiliates, or DuPont or its Affiliates, as
applicable, with regard to the defense, settlement or appeal
of the Claims. Pioneer or its Affiliates, or DuPont or its
Affiliates, shall provide any support reasonably requested by
the Venture with regard to such Claims, and shall notify the
Venture of any Claims filed against Pioneer or its Affiliates,
or DuPont or its Affiliates, with regard to the debts,
liabilities or other obligations of the Venture set forth in
this Agreement.
2.8. Apportionment of Certain Formation Costs.
----------------------------------------
Unless Pioneer and DuPont mutually agree otherwise prior to the Closing
Date:
2.8.1. Costs incurred by Pioneer and DuPont and their respective
Affiliates in analyzing the feasibility of; and negotiating
the agreements regarding the formation of; the Venture and the
orderly transfer of the Combined Business to the Venture
including, without limitation, costs for evaluation, due
diligence investigations, and transition planning, including
any travel and other related costs with regard to such
activities, shall be borne by the party incurring such costs.
2.8.2. Costs incurred to establish the Venture as an independent
entity, as well as costs incurred that primarily are for the
benefit of the Venture, such as new telephone systems, new
information systems, and the formation of the Venture and its
<PAGE>
10
direct or indirect subsidiaries, shall be borne by the
Venture. Pioneer and its Affiliates, and DuPont and its
Affiliates, shall keep records adequate to substantiate the
costs with regard to such expenditures. Each of Pioneer and
DuPont periodically will notify the other of the category and
extent of such costs. Pioneer and DuPont shall agree on the
total amount of the costs to be reimbursed by the Venture and
shall provide an accounting of such costs to the Venture
promptly after Closing. The Venture shall reimburse the
appropriate party for such costs within thirty (30) days of
the receipt by the Venture of such accounting. Pioneer and
DuPont may agree on, and request payment from, the Venture for
additional costs incurred pursuant to this Section 2.8.2 from
time to time for a period of six (6) months after the Closing
Date.
2.8.3. If this Agreement is terminated pursuant to
Section 9.1, prior to Closing then the costs incurred pursuant
to Section 2.8.2 shall be borne equally by Pioneer and DuPont.
2.9. Discounts or Rebates.
--------------------
2.9.1. Pioneer and its Affiliates, with regard to sales contracts for
Pioneer End-Use Products that extend past the Closing Date,
and DuPont and its Affiliates, with regard to sales contracts
for DuPont End-Use Products that extend past the Closing Date,
shall be responsible to make good any discounts rebates, or
other price adjustments that relate to sales of such Pioneer
End-Use Products or DuPont End-Use Products up to and
including the Closing Date. The Venture shall be responsible
to make good on any discounts, rebates or other price
adjustments that relate to sales of Pioneer End-Use Products
or DuPont End- Use Products pursuant to such sales contracts
after the Closing Date.
2.9.2. Pioneer and its Affiliates, with regard to the purchase of
materials for the Pioneer End-Use Business, or DuPont and its
Affiliates, with regard to the purchase of materials for the
DuPont End-Use Business, shall be entitled to any discounts,
or other price adjustments that relate to purchases of such
materials to the extent paid for by them, as appropriate. The
Venture shall be entitled to any such discounts, rebates or
other price adjustments that relate to its purchase of such
materials to the extent paid for by it.
2.9.3. Pioneer and its Affiliates, with regard to discounts, rebates
or other price adjustments for the purchase or sale of
products (including Pioneer End-Use Products) relating to the
Pioneer End-Use Business, and DuPont and its Affiliates, with
regard to discounts, rebates or other price adjustments for
the purchase or sale of products (including DuPont End-Use
Products) relating to the DuPont End-Use Business, and the
Venture shall apportion any such discounts, rebates, or other
price adjustments in a fair and equitable manner to the extent
that they are determined on the purchase or sale of products
during a period that extends both before and after the Closing
Date.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PIONEER
- -------------------------------------------------------
Pioneer hereby represents and warrants to DuPont as follows:
3.1. Organization.
------------
Pioneer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa. Pioneer has the corporate
power and authority to own, lease, use, and operate the tangible and
intangible assets held or used by it in connection with, and to conduct,
the Pioneer End-Use Business as currently conducted. Pioneer is duly
licensed or qualified to do business as a foreign corporation, and in
good standing, in all jurisdictions in which the Pioneer End-Use Business
is required to be so licensed or qualified.
3.2. Authority: Enforceability.
-------------------------
Pioneer has the corporate power and authority to execute and deliver this
Agreement and other instruments and documents required or contemplated
herein and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and each of such
other instruments and documents and the consummation of the transactions
provided for hereby and thereby have been duly authorized by the Board of
<PAGE>
11
Directors of Pioneer and no other corporate proceeding on the part of
Pioneer necessary to authorize the execution, delivery and performance of
this Agreement or any of such other instruments or documents or the
consummation of any of the transactions contemplated hereby or thereby.
With respect to Pioneer, each of this Agreement and such other documents
and instruments is, or upon its execution and delivery will be, legal,
valid, binding and enforceable in accordance with its terms.
3.3. Consents and Approvals.
----------------------
Except as set forth on Schedule 3.3, no consent, waiver, approval,
authorization, exemption, registration, license or declaration of or by,
or filing with, any other Entity (including, without limitation, any
domestic or foreign government or political subdivision or any agency,
department or instrumentality thereof) is required with respect to
Pioneer, in connection with the execution, delivery or enforceability of
this Agreement or the other instruments and documents required or
contemplated herein or the consummation of the transactions provided for
hereby or thereby, except for such consents, waivers, approvals,
authorizations, exemptions, registrations, licenses and declarations of
or by, or filings with, other Entities which, if not made or obtained,
would not individually or in the aggregate, materially impair Pioneer's
ability to perform its obligations hereunder or thereunder or consummate
such transactions contemplated hereby or thereby.
3.4. No Conflict.
-----------
Except as set forth on Schedule 3.4, the execution, delivery and
performance by Pioneer of this Agreement and the other instruments and
documents required or contemplated herein does not, and the consummation
of the transactions contemplated hereby and thereby will not:
(a) Contravene the certificate of incorporation or bylaws of
Pioneer;
(b) Violate, conflict with or result in the breach or termination
of or default under any material agreement, instrument or
indenture to which Pioneer or any of its respective Affiliates
is a party or by which any of them are bound;
(c) Violate any order, judgment, decree, rule or regulation
applicable to Pioneer or by which Pioneer may be bound; or
(d) Constitute a violation by Pioneer of any Federal, state, local
or municipal law or ordinance or any material rule or
regulation of an applicable regulatory authority.
3.5. No Brokers.
----------
Pioneer has not taken any action that would entitle any agent, broker,
investment banker or other firm or person to any broker's or finder's fee
or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement.
3.6. Adequacy of Pioneer Assets.
--------------------------
Except as set forth on Schedule 3.6, the Pioneer Assets, together with
the Ancillary Agreements and the leases and other assets transferred to
the Venture directly or through contract, include access to all material
tangible and intangible assets and properties used principally for the
operation of the Pioneer End-Use Business and are free and clear of any
claim, mortgage, lien, pledge, option, security interest, charge or other
encumbrance, except for (a) liens for current taxes not yet due and
payable and (b) statutory liens of warehousemen, mechanics and
materialmen and other similar statutory liens.
3.7. Intellectual Property.
---------------------
3.7.1. Except as specified in Schedule 3.7.1, the Pioneer Technology
contains all patents, patent applications, technology,
enabling technology and know-how used principally for the
operation of the Pioneer End-Use Business and no Claim is
pending or has been threatened in writing with regard to the
Pioneer Technology.
3.7.2. Except as specified on Schedule 3.7.2, Pioneer holds all
right, title, and interest to the trademarks, trade names, and
copyrights (excluding software copyrights) principally
dedicated to the Pioneer End-Use Business and can transfer
them to the Venture, and no Claim has been threatened in
writing or is pending with regard to such trademarks, trade
names or copyrights.
3.8. Contracts.
<PAGE>
12
---------
Except as disclosed on Schedule 3.8, all sales contracts with a duration
of at least one year or for an amount in excess of Twenty-five Thousand
Dollars ($25,000), and all other contracts, leases, licenses, and other
agreements with a duration of at least one year or for an amount in
excess of Fifty Thousand Dollars ($50,000), included in the Pioneer
Assets are legal and binding agreements enforceable in accordance with
their terms, are in full force and effect and are assignable or otherwise
transferable by Pioneer or its Affiliates to the Venture.
3.9. Accuracy of Information.
-----------------------
3.9.1. The business valuation with respect to the Pioneer End- Use
Business provided by Pioneer to DuPont as part of a process to
establish the relative values of the Pioneer End-Use Business
and the DuPont End-Use Business, were based on good faith
projections, calculated on a reasonable basis from information
and data available at the time do not contain information that
is deliberately false or misleading.
3.9.2. The written historical factual data with respect to the
Pioneer End-Use Business provided by Pioneer in accordance
with the due diligence performed by DuPont was prepared from
the books and records of Pioneer maintained in accordance with
the internal practices and procedures of Pioneer and, subject
to any accompanying written explanations, is accurate in all
material respects as of the date given. The written responses
to DuPont questions and requests for information represent the
good faith opinion and/or judgment of Pioneer as of the date
given based, to the extent applicable, upon the books and
records of Pioneer maintained in accordance with the internal
practices and procedures of Pioneer.
3.10. Claims.
------
Except as set forth on Schedule 3.10, no Claims are pending or threatened
in writing against Pioneer or its Affiliates and related to the Pioneer
End-Use Business that individually have or could result in Damages in
excess of Five Hundred Thousand Dollars ($500,000).
3.11. Inventories.
-----------
Except as set forth on Schedule 3.12, the inventories of Pioneer End-Use
Products, raw materials for the manufacture of Pioneer End-Use Products,
and work-in-process are sufficient for the operation of the Pioneer
End-Use Business in the ordinary course. Except as set forth on Schedule
3.12, the inventories of Pioneer End-Use Products, raw materials for the
manufacture of Pioneer End-Use Products and work-in-process are free and
clear of any lien, security interest or other encumbrance, except for:
(a) Liens for current taxes not yet due and payable; and
(b) Statutory liens of warehousemen, mechanics, materialmen and
other similar statutory liens.
3.12. Certain Labor Matters.
---------------------
Except as disclosed in Schedule 3.13, during the last three (3) years
Pioneer, with regard to the Pioneer End-Use Business:
(a) Has not engaged in any unfair labor practice, and does not
have pending any unfair labor practice complaint;
(b) Except for routine grievance procedures, has not had a labor
strike, dispute, slow-down or stoppage pending or threatened
in writing against or affecting the Pioneer End-Use Business;
and
(c) Except for routine grievance procedures, has not been a party
to any Claims relating to severance, compensation, benefits,
employment discrimination, wrongful or constructive discharge,
breach of contract, invasion of privacy or other tort claims,
or claims involving workplace injury or occupational illness.
3.13. No Material Adverse Change.
--------------------------
Except as disclosed on Schedule 3.14, since March 1, 1997, there has not
been any change, event or condition which, individually or in the
aggregate, has a material adverse effect on the Pioneer End-Use Business.
3.14. Operation in the Ordinary Course.
--------------------------------
Except as disclosed on Schedule 3.15, and except for activities related
to the transactions contemplated in this Agreement, Pioneer and its
Affiliates have operated the Pioneer End-Use Business in the ordinary
<PAGE>
13
course since March 1, 1997.
The Schedules referenced in any representation or warranty provided by Pioneer
in Article III of this Agreement shall be considered an integral part of such
representation or warranty and shall be construed in accordance with such
representation or warranty.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF DUPONT
- -----------------------------------------------------
DuPont hereby represents and warrants to Pioneer as follows:
4.1. Organization.
------------
DuPont is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. DuPont has the
corporate power and authority to own, lease, use, and operate the
tangible and intangible assets held or used by it in connection with, and
to conduct, the DuPont End-Use Business as currently conducted. DuPont is
duly licensed or qualified to do business as a foreign corporation, and
in good standing, in all jurisdictions in which the character of the
DuPont Assets or the nature of the DuPont End-Use Business requires it to
be so licensed or qualified.
4.2. Authority: Enforceability.
-------------------------
DuPont has the corporate power and authority to execute and deliver this
Agreement and other instruments and documents required or contemplated
herein and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and each of such
other instruments and documents and the consummation of the transactions
provided for hereby and thereby have been duly authorized by the Board of
Directors of DuPont and no other corporate proceeding on the part of
DuPont is necessary to authorize the execution, delivery and performance
of this Agreement or any of such other instruments or documents or the
consummation of any of the transactions contemplated hereby or thereby.
With respect to DuPont, each of this Agreement and such other documents
and instruments is, or upon its execution and delivery will be, legal,
valid, binding and enforceable in accordance with its terms.
4.3. Consents and Approvals.
----------------------
Except as set forth on Schedule 4.3, no consent, waiver, approval,
authorization, exemption, registration, license or declaration of or by,
or filing with, any other Entity (including, without limitation, any
domestic or foreign government or political subdivision or any agency,
department or instrumentality thereof) is required with respect to
DuPont, in connection with the execution, delivery or enforceability of
this Agreement or the other instruments and documents required or
contemplated herein or the consummation of the transactions provided for
hereby or thereby, except for such consents, waivers, approvals,
authorizations, exemptions, registrations, licenses and declarations of
or by, or filings with, other Entities which, if not made or obtained,
would not individually or in the aggregate, materially impair DuPont's
ability to perform its obligations hereunder or thereunder or consummate
such transactions contemplated hereby or thereby.
4.4. No Conflict.
-----------
Except as set forth on Schedule 4.4, the execution, delivery and
performance by DuPont of this Agreement and the other instruments and
documents required or contemplated herein does not, and the consummation
of the transactions contemplated hereby and thereby will not:
(a) Contravene the certificate of incorporation or bylaws of
DuPont;
(b) Violate, conflict with or result in the breach or termination
of or default under any material agreement, instrument or
indenture to which DuPont or any of its respective Affiliates
is a party or by which any of them are bound;
(c) Violate any order, judgment, decree, rule or regulation
applicable to DuPont or by which DuPont may be bound; or
(d) Constitute a violation by DuPont of any Federal, state, local
or municipal law or ordinance or any material rule or
regulation of an applicable regulatory authority.
4.5. No Brokers.
----------
DuPont has not taken any action that would entitle any agent, broker,
investment banker or other firm or person to any broker's or finder's fee
or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement.
<PAGE>
14
4.6. Adequacy of DuPont Assets.
-------------------------
Except as set forth on Schedule 4.6, the DuPont Assets, together with the
Ancillary Agreements and the leases and other assets transferred to the
Venture directly or through contract, include access to all material
tangible and intangible assets and properties used principally for the
operation of the DuPont End-Use Business and those assets can be further
licensed by the Venture to Pioneer if contemplated in the Preferred Seed
Support Agreement and are free and clear of any claim, mortgage, lien,
pledge, option, security interest, charge or other encumbrance, except
for (a) liens for current taxes not yet due and payable and (b) statutory
liens of warehousemen, mechanics and materialmen and other similar
statutory items.
4.7. Intellectual Property.
---------------------
4.7.1. Except as specified in Schedule 4.7.1, the DuPont Technology
contains all patents, patent applications, technology,
enabling technology and know-how used principally for the
operation of the DuPont End-Use Business and those licenses
can be further sub-licensed by the Venture to Pioneer as
contemplated in the Preferred Seed Support Agreement and no
Claim is pending or has been threatened in writing with regard
to the DuPont Technology.
4.7.2. Except as specified in Schedule 4.7.2, DuPont holds all right,
title and interest to the trademarks, trade names and
copyrights (excluding software copyrights) principally
dedicated to the DuPont End-Use Business and can transfer them
to the Venture, and no Claim has been threatened in writing or
is pending with regard to such trademarks, trade names or
copyrights.
4.8. Contracts.
---------
Except as disclosed in Schedule 4.8, all sales contracts with a duration
of at least one year or for an amount in excess of Twenty-five Thousand
Dollars ($25,000), and all other contracts, leases, licenses and other
agreements with a duration of at least one year or for an amount in
excess of Fifty Thousand Dollars ($50,000), included in the DuPont Assets
are legal and binding agreements enforceable in accordance with their
terms, are in full force and effect, and are assignable or otherwise
transferable by DuPont or its Affiliates to the Venture.
4.9. Accuracy of Information.
-----------------------
4.9.1. The business valuation with respect to the DuPont End-Use
Business provided by DuPont to Pioneer were based on good
faith projections, calculated on a reasonable basis from
information and data available at the time do not contain
information that is deliberately false or misleading.
4.9.2. The written historical factual data with respect to the DuPont
End-Use Business provided by DuPont in accordance with the due
diligence performed by Pioneer was prepared from the books and
records of DuPont maintained in accordance with the internal
practices and procedures of DuPont and, subject to any
accompanying written explanations, is accurate in all material
respects as of the date given. The written responses to
Pioneer questions and requests for information represent the
good faith opinion and/or judgment of DuPont as of the date
given based, to the extent applicable, upon the books and
records of DuPont maintained in accordance with the internal
practices and procedures of DuPont.
4.10. Claims.
------
Except as set forth on Schedule 4.10, no Claims are pending or threatened
in writing against DuPont or its Affiliates and related to the DuPont
End-Use Business that individually have or could result in Damages in
excess of Five Hundred Thousand Dollars ($500,000).
4.11. Inventories.
-----------
Except as set forth on Schedule 4.11, the inventories of DuPont End-Use
Products, raw materials for the manufacture of DuPont End-Use Products,
and work-in-process are sufficient for the operation of the DuPont
End-Use Business in the ordinary course. Except as set forth on Schedule
<PAGE>
15
4.11, the inventories of DuPont End-Use Products, raw materials for the
manufacture of DuPont End-Use Products and work-in-process are free and
clear of any lien, security interest or other encumbrance, except for:
(a) Liens for current taxes not yet due and payable; and
(b) Statutory liens of warehousemen, mechanics, materialmen and
other similar statutory liens.
4.12. Certain Labor Matters.
---------------------
Except as disclosed on Schedule 4.12, during the last three (3) years,
DuPont, with regard to the DuPont End-Use Business:
(a) Has not engaged in any unfair labor practice, and does not
have pending any unfair labor practice complaint;
(b) Except for routine grievance procedures, has not had a labor
strike, dispute, slow-down or stoppage pending or threatened
in writing against or affecting the DuPont End-Use Business;
and
(c) Except for routine grievance procedures, has not been a party
to any Claims relating to severance, compensation, benefits,
employment discrimination, wrongful or constructive discharge,
breach of contract, invasion of privacy or other tort claims,
or claims involving workplace injury or occupational illness.
4.13. No Material Adverse Change.
--------------------------
Except as disclosed on Schedule 4.13, since March 1, 1997, there has not
been any change, event or condition which, individually or in the
aggregate, has a material adverse effect on the DuPont End-Use Business.
4.14. Operation in the Ordinary Course.
--------------------------------
Except as disclosed on Schedule 4.14, and except for activities related
to the transactions contemplated in this Agreement, DuPont and its
Affiliates have operated the DuPont End-Use Business in the ordinary
course since March 1, 1997.
The Schedules referenced in any representation or warranty provided by DuPont in
Article VI of this Agreement shall be considered an integral part of such
representation or warranty and shall be construed in accordance with such
representation or warranty.
ARTICLE V - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES
- -------------------------------------------------------------------
5.1. Survival of Representations and Warranties Claims.
-------------------------------------------------
5.1.1. The representations and warranties contained in Articles III
and IV of this Agreement shall be true and correct on the
Closing Date and shall survive the Closing Date as though made
on the Closing Date, regardless of any investigation made by
or on behalf of the parties to this Agreement. DuPont shall be
liable to Pioneer and the Venture for any Claims or Damages
for breach or misrepresentation of any of the representations
and warranties in Article IV of this Agreement, but only after
the amount of such Claims and Damages in the aggregate exceeds
One- million Dollars ($1,000,000) and then only to the extent
that any such Claim or Damages shall exceed Twenty-five
Thousand Dollars ($25,000). Pioneer shall be liable to DuPont
and the Venture for any Claims or Damages for breach or
misrepresentation of any of the representations and warranties
in Article III of this Agreement but only after the amount of
such Claims and Damages in the aggregate exceeds One Million
Dollars ($1,000,000) and then only to the extent that any such
Claim or Damages shall exceed Twenty-five Thousand Dollars
($25,000).
5.1.2. No party to this Agreement (including the Venture) may bring
or assert any Claim against any other party to this Agreement
on account of breach of warranty or misrepresentation relating
to the representations and warranties set forth in Articles
III and IV hereof more than [thirty (30)] months after the
Closing Date, and no party to this Agreement (including the
Venture) may bring any action or institute any arbitration
against any other party to this Agreement on account of breach
of warranty or misrepresentation relating to the
representations and warranties set forth in Articles III and
IV hereof more than thirty-six (36) months after the Closing
Date.
5.1.3. Any Claims brought or asserted by Pioneer or DuPont on account
<PAGE>
16
of misrepresentation or breach of warranty relating to the
representations and warranties set forth in Articles III and
IV of this Agreement, shall be on behalf of the Venture, and
any Damages recovered shall be contributed to the Venture,
excluding any attorneys' fees or costs to which a party is
entitled pursuant to Section 5.2 of this Article V which may
be retained by the party.
5.2. Offer of Settlement.
-------------------
Any Claim that is instituted pursuant to Section 5.1 shall be subject to
the following procedure:
5.2.1. Any party to the Claim, at any time prior to the date of the
arbitrators' order or the Final judgment of a court of
competent jurisdiction (the "Judgment"), may make and amend a
monetary offer of settlement to the other party to finally and
completely resolve the dispute between the parties ("Offer of
Settlement").
5.2.2. If the dispute is not settled prior to the Judgment, despite
an Offer of Settlement by Pioneer and the Judgment is more
favorable to Pioneer than Pioneer's Offer of Settlement, as
amended, and, if applicable, such Judgment is less favorable
to DuPont than DuPont's Offer of Settlement, as amended, then
Pioneer shall be entitled to recover from DuPont all
reasonable costs and expenses of the arbitration or litigation
(including, but not limited to, attorneys' fees, arbitration
costs, court costs and cost of experts) incurred by Pioneer in
connection with the arbitration or litigation proceedings.
5.2.3. If the dispute is not settled prior to the Judgment, despite
an Offer of Settlement by DuPont and the Judgment is more
favorable to DuPont than DuPont's Offer of Settlement, as
amended, and, if applicable, such Judgment is less favorable
to Pioneer than Pioneer's Offer of Settlement, as amended,
then DuPont shall be entitled to recover from Pioneer all
reasonable costs and expenses of the arbitration or litigation
(including, but not limited to, attorneys' fees, arbitration
costs, court costs and costs of experts) incurred by DuPont in
connection with the arbitration or litigation proceedings.
5.2.4. In the event neither Sections 5.2.2 nor 5.2.3 apply, then the
parties shall bear their own costs and expenses in connection
with the arbitration or litigation proceedings.
5.3. Method of Indemnification.
-------------------------
If any party to this Agreement (including the Venture) is entitled to
indemnification pursuant to Section 5.1 (the "Indemnified Party") from
another party to this Agreement (the "Indemnifying Party"), then:
5.3.1. The Indemnified Party promptly shall give written notice
within fifteen (15) business days to the indemnifying Party of
any such Claim, specifying the nature of and the basis for
such Claim and the amount or the estimated amount thereof to
the extent that it is feasible to determine such amount;
provided however, that failure by the Indemnified Party to
provide notice to the Indemnifying Party shall not affect the
Indemnified Party's right to indemnification unless the
Indemnifying Party is unduly prejudiced by such failure;
5.3.2. Upon receipt of such written notice, the Indemnifying Party
shall have the right to manage the Claim and, at its option
and expense, to retain counsel reasonably satisfactory to the
Indemnified Party in order to defend such claim; provided
however, that the Indemnified Party may, at its expense,
retain its own counsel to defend the Claim so long as such
participation does not significantly interfere with the
management of the Claim by the Indemnifying Party; and
5.3.3. The Indemnifying Party, upon notice to and approval by the
Indemnified Party, which approval shall not be unreasonably
withheld, may settle any such Claim.
The parties to this Agreement, whether they be an Indemnifying Party or
an Indemnified Party, shall cooperate fully with each other in the
defense, negotiation settlement or appeal of any Claim.
<PAGE>
17
ARTICLE VI - COVENANTS
- ----------------------
6.1. Access to Books and Records.
---------------------------
Before the Closing Date, Pioneer and DuPont each shall allow reasonable
access, and shall cause their respective Affiliates to allow reasonable
access, by employees or authorized representatives of the other, to:
(a) Corporate records, books of accounts; contracts, deeds and
other documents, or portions thereof specific to the Pioneer
End-Use Business or the DuPont End-Use Business, as
applicable, as the same may be reasonably requested by the
other;
(b) Facilities, properties, plants and equipment principally
relating to the Pioneer End-Use Business or the DuPont End-Use
Business, as applicable;
(c) Patent, technology, know-how, research and development
specific to the Pioneer End-Use Business or the DuPont End-Use
Business, as applicable; and
(d) Employees, representatives or agents principally relating to
the Pioneer End-Use Business or the DuPont End-Use Business,
as applicable, in order to permit a reasonable examination and
inspection to evaluate the feasibility of the transactions
contemplated in this Agreement. Such examination and
inspection shall be scheduled during normal business hours and
upon other reasonable terms and conditions so as to minimize
any interference with the normal conduct of business and shall
be subject to the applicable safety and security policies of
Pioneer or DuPont, or their respective Affiliates, and the
Confidentiality Agreement dated March 13, 1997, between
Pioneer and DuPont.
6.2. Conduct of Business in the Ordinary Course.
------------------------------------------
Except as otherwise provided for in this Agreement, prior to the Closing
Date, Pioneer and its Affiliates, with regard to the Pioneer End-Use
Business, and DuPont and its Affiliates, with regard to the DuPont
End-Use Business, shall:
(a) Except for activities relating to the transactions
contemplated in this Agreement, conduct the Pioneer End-Use
Business and the DuPont End-Use Business, as applicable, in
the ordinary course and consistent with prior practices;
(b) Maintain their respective books and records in accordance with
their standard practices and procedures; and
(c) Reasonably maintain, preserve and protect the Pioneer Assets
and the DuPont Assets, as applicable, including, without
limitation, goodwill and relationships with customers,
distributors, formulators, lessors and licensors, except as
may be otherwise agreed.
6.3. Disposition of Assets.
---------------------
Except as otherwise expressly stated in this Agreement, Pioneer shall
not, and shall cause its Affiliates not to, dispose of any Pioneer Assets
that are material to the operation of the Pioneer End-Use Business, and
DuPont shall not and shall cause its Affiliates not to, dispose of any
DuPont Assets that are material to the operation of the DuPont End-Use
Business, whether by sale, assignment, lease, license, contribution or
otherwise, without the express written consent of Pioneer or DuPont, as
appropriate; provided however, that Pioneer and its Affiliates may
dispose of Pioneer Assets, and DuPont and its Affiliates may dispose of
DuPont Assets, in the ordinary course of business and consistent with
prior practices.
6.4. Further Assurances.
------------------
6.4.1. Pioneer, DuPont and the Venture shall cooperate fully in order
to complete the transactions contemplated in this Agreement.
In connection therewith, from time to time after the Closing
Date, upon request and without further consideration, Pioneer,
DuPont and the Venture, and their respective Affiliates, as
appropriate, will execute and deliver such documents and
instruments; assist in obtaining the necessary operating,
environmental, zoning and other permits; and take such other
action as may be necessary in order to transfer (by
assignment, contribution, sale, lease, license or otherwise)
the Pioneer Assets and the DuPont Assets to the Venture.
6.4.2. Each of Pioneer, DuPont and the Venture shall, and shall cause
each of their Affiliates to, take any and all actions
necessary to complete the transactions contemplated under this
<PAGE>
18
Agreement, including the transfer of; or access to, any
additional assets that in the opinion of the parties should be
owned or utilized by the Venture in order to best achieve the
Business Purpose in the most efficient manner.
6.5. Notice of Events.
----------------
Each of Pioneer and DuPont shall give prompt notice to the other of the
occurrence or non-occurrence of any event or condition prior to the
Closing Date which, alone or in the aggregate with other events or
conditions, would have a material adverse effect on the transactions
contemplated in this Agreement, such that it could form the basis for
postponing or canceling the Closing.
6.6. No Solicitations.
----------------
Until this Agreement is terminated pursuant to its terms, Pioneer or its
Affiliates, with regard to the Pioneer Assets or the Pioneer End-Use
Business, and DuPont or its Affiliates, with regard to the DuPont Assets
or the DuPont End-Use Business, shall not solicit any inquiries or
proposals to enter into or continue any discussions or agreements
relating to the acquisition, disposition, consolidation or merger of all
or any material portion of the Pioneer End-Use Business or the Pioneer
Assets, or the DuPont End-Use Business or the DuPont Assets, or provide
information or assistance with regard to any such transaction. If Pioneer
or DuPont or any of their respective Affiliates, receives an unsolicited
offer for any such transaction or obtains information that such an offer
likely will be made, then such party promptly will provide notice to
Pioneer or DuPont, as applicable, of the existence of such offer,
including the identity of the prospective offeror or soliciting party.
The provisions of this Section 6.6 shall not preclude Pioneer or DuPont
or their respective Affiliates from working with customers (including
entering into joint development agreements) in order to expand the
markets and opportunities for Quality Trait seed, grain, grain products
and plant materials.
6.7. Public Statements.
-----------------
Until the earlier of the termination of this Agreement or the Closing
Date, Pioneer and DuPont shall cooperate in making any public statement,
issuing any press release, or making any statement to a third party
(other than to a government agency pursuant to a formal request) with
respect to any information concerning the transactions contemplated by
this Agreement.
6.8. Conditions and Consents.
-----------------------
Pioneer and DuPont, as the case may be, shall use best reasonable
efforts, and shall cause their respective Affiliates to use best
reasonable efforts, to:
(a) Obtain all necessary approvals, assignments, consents and
releases; and
(b) Obtain all necessary third-party waivers, approvals and
consents, including consents for the assignment, delegation,
sublease or sublicense of contracts, leases, licenses or other
agreements, that form a part of the Pioneer Assets, or the
DuPont Assets; in order to effect all of the transfers and
satisfy each of the conditions and obligations contemplated by
this Agreement.
6.9. Transfer of Appropriate Levels of Working Capital.
-------------------------------------------------
At Closing, Pioneer and its Affiliates, with regard to the Pioneer
End-Use Business, and DuPont and its Affiliates, with regard to the
DuPont End-Use Business, shall transfer working capital to the Venture.
The amount of working capital and whether the transfer of such working
capital shall be made as a capital contribution or in the form of a loan,
shall be determined by the parties.
6.10. Seed Support.
------------
At Execution, Pioneer shall contract with the Venture to provide,
pursuant to a Preferred Seed Support Agreement, for the development and
production of Quality Trait Seed.
6.11. Provision of Services to the Venture.
------------------------------------
At Closing, Pioneer and DuPont and their respective Affiliates shall
enter into service agreements with the Venture in order to provide
services required by the Venture to operate.
<PAGE>
19
6.12. Research Alliance Agreement.
---------------------------
At Closing, Pioneer and DuPont shall form the Research Alliance which
shall be evidenced by the Research Alliance Agreement.
6.13. Insurance.
---------
6.13.1. Pioneer, with regard to the Pioneer Assets, and DuPont, with
regard to the DuPont Assets, shall maintain insurance in
amounts at least equal to their respective historic levels up
to and including the Closing Date.
6.13.2. After the Closing Date, the Venture shall establish a policy
on risk management and contract for such insurance as it deems
appropriate. To the extent appropriate, the Venture shall
coordinate its insurance coverage with the insurance carriers
of Pioneer and DuPont.
6.14. Contributions.
-------------
6.14.1. On or before the Closing Date, Pioneer, shall, or shall cause
its Affiliates to:
(a) Contribute to the capital of the Venture;
(b) Transfer the Pioneer Assets to the Venture; and
(c) Make available to the Venture pursuant to the Ancillary
Agreements certain non-contributed assets of Pioneer.
6.14.2. On or before the Closing Date, DuPont shall, or shall cause
its Affiliates to:
(a) Contribute to the capital of the Venture;
(b) Transfer the DuPont Assets to the Venture; and
(c) Make available to the Venture pursuant to the Ancillary
Agreements certain non-contributed assets of DuPont.
6.15. Tax Incentives.
--------------
Pioneer and its Affiliates with regard to the Pioneer End-Use Business,
and DuPont and its Affiliates, with regard to the DuPont End-Use
Business, shall endeavor to transfer to the Venture any tax incentives
enjoyed by the Pioneer End-Use Business or the DuPont End-Use Business,
as applicable, to the extent pertaining to the Pioneer Assets or the
DuPont Assets.
ARTICLE VII - CONDITIONS PRECEDENT
- ----------------------------------
7.1. The obligations of Pioneer, DuPont and the Venture to consummate the
transactions contemplated in this Agreement shall be subject to the
fulfillment at or prior to Closing of each of the following conditions to
the satisfaction of the affected party or parties:
7.1.1. Regulatory and Government Approvals.
-----------------------------------
Pioneer and DuPont shall have obtained all domestic and
foreign government consents and approvals that are necessary
to consummate the transactions contemplated in this Agreement;
no injunction or restraining order shall have been filed by,
or written notification thereof received from, issued by a
court or other agency or body of competent jurisdiction or any
other law or regulation prohibits the consummation of the
transactions contemplated in this Agreement; and no Claim
shall be pending or threatened in writing challenging the
transactions contemplated under this Agreement; and no written
notice shall have been received from any governmental agency
threatening to prohibit any transaction contemplated under
this Agreement.
7.1.2. Compensation and Benefit Plan.
-----------------------------
Pursuant to Section 11.2.2 the parties shall have met and
agreed upon an appropriate compensation and benefit package.
7.1.3. Board Approval.
--------------
The Board of Directors of each of Pioneer and DuPont shall
have approved the execution, delivery and performance of this
Agreement and the transactions contemplated hereby which
approvals have previously been obtained on the part of each of
Pioneer and DuPont.
<PAGE>
20
7.1.4. Investment Agreement.
--------------------
The Closing (as defined in the Investment Agreement) of the
transactions contemplated by the Investment Agreement shall
have occurred concurrently herewith; provided however that if
the Investment Agreement terminates pursuant to its terms
prior to the Closing (as defined in the Investment Agreement)
thereunder, this Agreement shall terminate in accordance with
Section 9.1(a)(1).
ARTICLE VIII - EXECUTION AND CLOSING
- ------------------------------------
8.1. Time and Place of Execution.
---------------------------
The Execution Date of this Agreement shall be August 6, 1997.
8.2. Proceedings at Execution.
------------------------
At Execution all proceedings to be taken and all documents to be executed
and/or delivered by a party or its Affiliates or their officers or
counsel in connection with this Agreement shall be reasonably
satisfactory in form and context to the parties hereto and their
respective counsel.
8.3. Action of Pioneer at Execution.
------------------------------
At Execution Pioneer shall and, as appropriate, shall cause its
Affiliates to execute, deliver and/or provide for inspection the
following documents:
(a) Certified resolutions of the Board of Directors of Pioneer
authorizing Pioneer to consummate the transactions
contemplated in this Agreement;
(b) Limited Liability Company Agreement , Formation Agreement,
Research Alliance Agreement, and Preferred Seed Support
Agreement executed by an authorized representative of Pioneer.
8.4. Actions of DuPont at Execution.
------------------------------
At Execution, DuPont shall and, as appropriate, shall cause its
Affiliates to execute, deliver, and/or provide for inspection the
following documents:
(a) Certified resolutions of the Board of Directors of DuPont
authorizing DuPont to consummate the transactions contemplated
in this Agreement;
(b) Limited Liability Company Agreement, Formation Agreement, and
Research Alliance Agreement executed by an authorized
representative of DuPont.
8.5. Actions of the L.L.C. at Execution.
----------------------------------
At the Execution, Pioneer and DuPont shall cause the L.L.C. to execute
and/or deliver the Preferred Seed Support Agreement and any other
documents necessary to complete the transactions contemplated in this
Agreement.
8.6. Time and Place of Closing.
-------------------------
The Closing shall occur on the Closing Date at a time and place agreed
between Pioneer and DuPont .
8.7. Proceedings at Closing.
----------------------
At Closing all proceedings to be taken, all transfers, contributions, or
assignments to be made, and all documents to be executed and/or delivered
by a party or its Affiliates or their officers or counsel in connection
with the transactions contemplated in this Agreement shall be reasonably
satisfactory in form and content to the parties hereto and their
respective counsel. All proceedings to be taken, all transfers,
contributions or assignments to be made, and all documents to be executed
and/or delivered by all or any one or more of the parties or their
Affiliates at the Closing shall be deemed to have been taken,
transferred, contributed, assigned, executed and delivered
simultaneously. No proceedings shall be deemed taken, no assets or things
shall be deemed transferred, contributed or assigned and no documents
shall be deemed executed or delivered until all have been taken,
transferred, contributed, assigned, executed and delivered.
8.8. Actions of Pioneer at Closing.
-----------------------------
<PAGE>
21
At Closing, Pioneer shall and, as appropriate, shall cause its Affiliates
to execute, deliver and/or provide for inspection all Ancillary
Agreements, the Pioneer Technology License Agreement and all other
appropriate deeds, asset transfer documents, assignments, leases,
licenses, and other instruments of conveyance and transfer to evidence
the contribution and transfer of the Pioneer Assets to the Venture.
8.9. Actions of DuPont at Closing.
----------------------------
At the Closing, DuPont shall and, as appropriate, shall cause its
Affiliates to execute, deliver, and/or provide for inspection all
Ancillary Agreements, the DuPont Technology License Agreement and all
other appropriate deeds, asset transfer documents, assignments, leases,
licenses, and other instruments of conveyance and transfer to evidence
the transfer of the DuPont Assets from DuPont to the Venture.
8.10. Actions of the L.L.C.
--------------------
At the Closing Pioneer and DuPont shall cause the L.L.C. to:
(a) Deliver and/or provide for inspection the following documents:
(i) A signed statement of the L.L.C. to the effect that the
L.L.C. accepts all rights and obligations under this
Agreement;
(ii) A limited liability company certificate from the
Secretary of State of Delaware certifying that the
L.L.C. is a limited liability company duly organized,
validly existing and in good standing under the laws of
the State of Delaware;
(iii) The Limited Liability Company Agreement; and
(iv) Documentation to the effect that Pioneer and DuPont
each have a fifty percent (50%) ownership interest in
the Venture.
(b) Execute and/or deliver the Ancillary Agreements and any other
documents necessary to complete the transactions contemplated
in this Agreement.
ARTICLE IX - TERMINATION AND DISSOLUTION
- ----------------------------------------
9.1. Termination Prior to Closing.
----------------------------
(a) This Agreement, and the transactions contemplated hereunder,
may be terminated by written notice if any of the following
events occur prior to the Closing:
(i) By the mutual consent of Pioneer and DuPont; or
(ii) By Pioneer or DuPont if any of the Conditions Precedent
set forth in Section 7.1 shall not have been fulfilled
or waived prior to the Closing Date;
(b) In the event of the termination of this Agreement pursuant to
9.1(a) above, the party invoking the termination shall provide
prompt written notice to the other party. Upon providing such
notice, this Agreement shall terminate in accordance with the
following procedures:
(i) If termination results pursuant to Section 9.1(a)
above, the L.L.C. Agreement, the Research Alliance
Agreement, all Ancillary Agreements, the Preferred Seed
Support Agreement and all licenses (including, but not
limited to, trade name licenses), loans, leases, and
other contracts or arrangements between Pioneer or its
Affiliates and the Venture, and DuPont or its
Affiliates and the Venture, shall terminate except for
any confidentiality agreements or the research
agreement for high oil corn.
9.2. Termination Subsequent to Closing-Involuntary Default.
-----------------------------------------------------
This Agreement, and the transactions contemplated hereunder, may be
terminated after the Closing Date upon the occurrence of one of the
following events of default which as described below in this 9.2 (a),
(b), (c) or (d) shall be deemed to be an event of "Involuntary Default":
(a) At any time after the Closing Date upon the bankruptcy of
Pioneer or DuPont or a Change of Control, or upon the
occurrence, prior to the fifth anniversary of the date of the
Investment Agreement, of a Sale of Ag Products (as defined in
the Investment Agreement) (provided that in the event of such
a Sale of Ag Products, Pioneer shall be deemed the
non-defaulting party for purposes of this Section 9.2(a));
provided however, that in the event of such bankruptcy, Change
in Control, or the Sale of Ag Products the Venture Interest of
the Party other than the non-defaulting Party may be
purchased by the non-defaulting Party for fair market value in
<PAGE>
22
accordance with the provisions in Section 9.7 Fair Market
Value;
(b) At any time pursuant to a final judgment by a court of
competent jurisdiction or by regulatory authority ordering the
dissolution of the Venture where such dissolution does not
arise by reason of action taken by either party; provided
however that, in the event of any such judgment or order, the
disposition of each party's Venture Interest shall be in
accordance with the provisions of Section 9.6 Auction
Termination;
(c) At any time after the tenth anniversary of the Closing Date
upon a Substantial Disagreement that is not resolved pursuant
to the provisions of Section 9.5 (a) or (b) of Section 9.5
Resolution of Substantial Disagreement; or upon the
occurrence, on or following the fifth anniversary of the date
of the Investment Agreement, of a Sale of Ag Products (as
defined in the Investment Agreement); provided however, that
there shall be a disposition of one Party's Venture Interest
to the other Party in accordance with the provisions of
Section 9.6 Auction Termination; and
(d) At any time upon the occurrence of Release Events and Change
in Control Release Events (each as defined in the Investment
Agreement) as contemplated by, and to the extent provided in,
Section 6.9 and Section 8.2(c) of the Investment Agreement;
provided that (X) in the event of a Release Event arising out
of the provisions set forth in clause (i) of the fourth
sentence of Section 6.9 of the Investment Agreement or a
Change in Control Release Event arising out of the provisions
set forth in clause (i) of the first sentence of Section
8.2(c) of the Investment Agreement, the Venture Interest of
the Party other than the non-defaulting Party may within the
time periods specified in the Investment Agreement be
purchased by the non-defaulting Party for fair market value in
accordance with the provisions in Section 9.7 Fair Market
Value, and (Y) in the event of a Release Event arising out of
the provisions set forth in clause (ii) of the fourth sentence
of Section 6.9 of the Investment Agreement or a Change in
Control Release Event arising out of the provisions set forth
clause (ii) of the first sentence of Section 8.2(c) of the
Investment Agreement, there shall be a disposition of one
party's Venture Interest to the other party in accordance with
the provisions of Section 9.6 Auction Termination.
Notwithstanding anything to the contrary contained in this Agreement, no
Party shall be entitled to purchase the Venture Interest of the other
Party following such time as its Venture Interest has been purchased by
the other Party in accordance with the provisions of this Section 9.2 or
otherwise.
9.3. Termination Subsequent to Closing-Voluntary Default.
---------------------------------------------------
This Agreement, and the transactions contemplated hereunder, may be
terminated after the Closing Date upon the occurrence of one of the
following events of default, which as described below in 9.3 (a), (b),
(c) and (d), shall be deemed to be an event of "Voluntary Default":
(a) At any time after the sixteenth (16th) anniversary of Closing,
should either Party provide written notice expressing its
desire to transfer their interest in the Venture; provided
however, that such transfer shall be in accordance with the
provisions of Article X Transfer of Venture Interest.
(b) At any time by the non-defaulting party in the case of a
willful and substantial breach of any material term of this
Agreement, the Research Alliance Agreement, or the Preferred
Seed Support Agreement where such breach has not been cured
within the cure period set forth in such agreement or if none
specified, then within 180 days of receipt by the defaulting
party of a written notice of the breach from the
non-defaulting party. If such breach occurs within ten (10)
years of the anniversary of Closing, then the non-defaulting
party shall be entitled to purchase the defaulting party's
Venture Interest for the sum of one-dollar ($1.00). If the
breach occurs after the tenth (10th) anniversary of Closing
then non-defaulting party shall be entitled to purchase the
defaulting party's Venture Interest for fair market value in
accordance with the provisions at Section 9.7 Fair Market
Value.
(c) Action by either party that results in regulatory or court
ordered dissolution of the Venture, but only at such time as
the later of (i) the time limit for the filing of any stay,
countersuit, appeal or appeals in respect of such dissolution
having expired, or (ii) any final appeal against such
dissolution having failed.
<PAGE>
23
9.4. Post-Termination Rights and Obligations-Involuntary Default and Voluntary
Default.
-------
(a) For termination in the case of an event of Involuntary Default
or a Voluntary Default, and if DuPont becomes the sole owner
of the Venture the following conditions shall apply:
(i) Within one (1) year from the notice of termination,
DuPont shall have notified Pioneer of DuPont's desire
to either begin the transition of all traits that
result in Venture Products, DuPont Crop Production
Products, DuPont Industrial Products, or Other Products
(all as defined in the Research Alliance Agreement)
(together hereinafter referred to as "the Transfer
Traits") to another seed company pursuant to one of the
two options set out below in 9.4(a)(ii) or (iii), or
DuPont shall have notified Pioneer of DuPont's desire
to continue in a Preferred Seed Support Agreement with
Pioneer. During such one-year period the Preferred
Seed Support Agreement and the Research Alliance
Agreement shall continue per the terms of those
agreements as they exist prior to the notice of
termination. The Research Alliance Agreement and the
research thereunder shall continue at the level of
funding and with research programs similar to and
consistent with those in place during the 12 month
period prior to the termination notice.
(ii) If during the one-year period following termination
DuPont elects to have Pioneer cooperate to transition
the Transfer Traits to another seed company as a new
seed supplier that will have preference over Pioneer
with regard to Quality Trait planted acres, then upon
such notice from DuPont to Pioneer (the "Transition
Notice") the following provisions shall govern:
1) The Preferred Seed Support Agreement shall
continue for 3 additional years on the same terms
and conditions as prior to the Transition Notice;
2) The Research Alliance Agreement shall continue for
an additional three years for the purpose of
completing any ongoing Collaborative Efforts. If
any Collaborative Efforts are not completed at
such three year expiration date, the parties shall
mutually determine the best approach for
completion of such Collaborative Efforts. All
irrevocable licenses for Transfer Traits where
such Transfer Traits have been transformed into or
otherwise combined with Pioneer germplasm and
previously granted from the Venture to Pioneer,
whether resulting from Collaborative Efforts
concluded prior to or after the Transition Notice
shall become non-exclusive and shall remain in
full force and effect including the obligation of
Pioneer to pay premiums and royalties to DuPont
(or the L.L.C., as the case may be) and subject to
restrictions as may exist in such licenses as to
the sale of grain to end-users;
3) Pioneer shall cooperate with DuPont to transition
the Transfer Traits that have been previously
licensed to Pioneer and transformed into Pioneer
germplasm prior to the Transition Notice. The
transfer shall be accomplished by Pioneer making
the most efficient F1 crosses available for
back-crossing that assist the transfer of the
Transfer Traits into another company's or
companies' germplasm subject to the restriction
that such other seed company must backcross the
germplasm four times or ensure that via molecular
marker analysis at least ninety-five percent (95%)
of the Pioneer germplasm is removed from such
transferred germplasm and that other than the five
percent (5%) with the Transfer Trait the other
seed company obtains no rights to breed with such
germplasm;
4) At the conclusion of the three year Preferred Seed
Support Agreement and the transition to another
party seed company, Pioneer shall continue to be a
non-exclusive licensee of the Venture with an
obligation to pay premiums and royalties and
supply Quality Trait Seed to the Venture on a
non-exclusive basis and in competition with other
seed companies for an additional four years.
<PAGE>
24
Subsequent to such four (4) year period the
irrevocable licenses granted to Pioneer for
Quality Traits transformed prior to the Transition
Notice shall become royalty free and shall be
without restriction regarding grain sales to the
Venture; however, the licenses to Pioneer for
Quality Traits developed through Collaborative
Efforts after the Transition Notice shall remain
royalty bearing on a most favored nation status
for Pioneer and subject to all restrictions that
are applicable to other seed companies; provided
that, in the event of a voluntary breach by
Pioneer (as described in Section 9.3 (b) above)
during the five year period following Closing, all
of the Pioneer Technology previously exclusively
licensed by Pioneer to the Venture pursuant the
Pioneer Technology License shall be thereafter
licensed non-exclusively by Pioneer to the Venture
and all of the licenses granted to Pioneer from
the Venture for Quality Traits shall become
non-exclusive and otherwise remain in force and
Pioneer shall continue to support the Venture with
Quality Trait Seed sales on a non-exclusive basis
pursuant to the terms of the those licenses.
(iii) If during the one year period following termination
DuPont elects to have Pioneer cooperate to transition
the Transfer Traits to a seed supplier or a group of
seed suppliers on terms and market access no more
favorable than granted to Pioneer, then upon such
notice from DuPont to Pioneer, the following provisions
shall govern:
1) The Preferred Seed Support Agreement shall
continue for three (3) additional years on the
same terms and conditions as prior to the
Transition Notice;
2) The Research Alliance Agreement shall continue for
an additional three years for the purpose of
completing any ongoing Collaborative Efforts;
however, at the time of such Transition Notice,
Pioneer shall be free to begin its Independent
Effort research without obligation to provide
licenses to DuPont for the Intellectual Property
or Proprietary Property arising from such
Independent Efforts. If any Collaborative Efforts
are not completed at such three year expiration
date, the parties shall mutually determine the
best approach for completion of such Collaborative
Efforts. All irrevocable licenses for Transfer
Traits where such Transfer Traits have been
transformed into or otherwise combined with
Pioneer germplasm and previously granted from the
Venture to Pioneer, whether resulting from
Collaborative Efforts concluded prior to or after
the Transition Notice shall become non-exclusive
and shall remain in full force and effect
including the obligation of Pioneer to pay
premiums and royalties to DuPont (or the L.L.C.,
as the case may be) and subject to restrictions as
may exist in such licenses as to the sale of grain
to end-users;
3) Pioneer shall cooperate with DuPont to transition
the Transfer Traits that have been previously
licensed to Pioneer and transformed into Pioneer
germplasm prior to the Transition Notice. The
transfer shall be accomplished by Pioneer making
the most efficient F1 crosses available for
back-crossing that assist the transfer of the
Transfer Traits into another company's or other
companies' germplasm subject to the restriction
that such other seed company must backcross the
germplasm four times or ensure that via molecular
marker analysis at least ninety-five percent (95%)
of the Pioneer germplasm is removed from such
transferred germplasm and that other than the five
percent (5%) with the Transfer Trait the other
seed company obtains no rights to breed with such
germplasm;
4) At the conclusion of the three year Preferred Seed
Support Agreement and the transition to a group of
other seed companies, Pioneer shall continue to be
a non-exclusive licensee of the Venture and supply
<PAGE>
25
Quality Trait Seed to the Venture on a
non-exclusive basis; however, Pioneer shall be
entitled to a "most favored nation" status on all
seed market access and license terms including
premiums and royalties owing to DuPont, as sole
owner of the Venture.
(iv) If during the one-year period following notice of
termination DuPont elects to continue the Preferred
Seed Support Agreement then upon notice of such
election to Pioneer (the "Continuation Notice") the
following provisions shall govern:
1) The Preferred Seed Support Agreement shall
continue for three additional years on the same
terms and conditions that existed prior to the
Continuation Notice. At the expiration of such
three-year period, the parties may re-negotiate
the Preferred Seed Support Agreement for an
additional period or either party may give notice
to the other that the Preferred Seed Support
Agreement shall continue for three (3) more years
but during such period the transition of Transfer
Traits to another seed company shall occur. In
such case, DuPont shall elect whether it desires
the transition to be to a new "preferred" supplier
in accordance with 9.4(a)(ii) or transition to one
or a group of seed suppliers pursuant to
9.4(a)(iii).
(b) For termination in the case of an event of Involuntary Default
or a Voluntary Default, and if Pioneer becomes the sole owner
of the Venture the following conditions shall apply:
(i) DuPont shall continue performing its obligations under
the Research Alliance Agreement for an additional four
(4) years. If any Collaborative Efforts are not
completed at such four year expiration date, the
parties shall mutually determine the best approach for
completion of and transition to Pioneer of such
Collaborative Efforts.
(ii) Following the notice of termination, to the extent that
the Venture has created a mechanism or a preference for
DuPont chemical sales that occur during the twelve (12)
month period prior to the notice of termination, then
Pioneer, as sole owner of the Venture, will continue to
facilitate for four years DuPont chemical sales at the
same level of support and with programs similar to and
consistent with those in place for the twelve (12)
month period prior to the termination notice.
9.5. Resolution of Substantial Disagreement.
--------------------------------------
Any Substantial Disagreement shall be resolved in accordance with the
following procedure:
(a) Determination of Substantial Disagreement
-----------------------------------------
If the parties are in Substantial Disagreement, then one party
shall notify the other party of the disagreement. The parties
shall then have a period of forty-five (45) days to attempt to
resolve the Substantial Disagreement. If the parties cannot
resolve the Substantial Disagreement within such period, then
they will agree on the issues giving rise to the Substantial
Disagreement and submit the matter to their respective chief
executive officers.
(b) Resolution by Executive Officers
--------------------------------
Upon receipt of notice of the Substantial Disagreement, the
respective chief executive officers (or a pre-specified senior
executive) of Pioneer and DuPont, each shall appoint a single
delegate from among their respective senior executives, with
full power and authority to resolve the Substantial
Disagreement. The delegates shall then have a period of
fifteen (15) days to meet and resolve the Substantial
Disagreement. If the senior executives cannot resolve the
Substantial Disagreement within such time period, then the
chief executive officers (or the pre-specified senior
executives) shall meet to discuss and resolve the Substantial
Disagreement by mutual consent. If the Substantial
Disagreement has not been resolved within ninety (90) days of
the notice starting the process described in this Section
9.4(b), then either Pioneer or DuPont may certify that the
parties have reached Deadlock.
(c) If either Pioneer or DuPont certifies to the other that
Deadlock has been reached and such Deadlock occurred more that
<PAGE>
26
ten (10) years since the Closing Date, then the parties agree
to continue the Preferred Seed Support Agreement for two
successive North American Quality Trait Seed sales seasons.
After July 1 of the second of such sales seasons either party
may then offer to purchase the Venture Interest of the other
in accordance with the provisions of Section 9.6. Auction
Termination Provisions as set out below.
9.6. Auction Termination Provisions.
------------------------------
If Pioneer and DuPont reach Deadlock and more than ten (10) years has
elapsed from the Closing Date or in the event of a Change in Control
Release Event or a Release Event (each as defined in the Investment
Agreement) with the consequences set forth in Section 9.2(d)(Y) hereof as
specified in the Investment Agreement or a Sale of Ag Products (as
defined in the Investment Agreement) as provided in Section 9.2(c)
hereof, then either party may purchase the Venture Interest from the
other in accordance with the following procedures.
(I) If, in the case of a Denolock, both parties wish to purchase
the Venture Interest of the other, then either may invoke the
following Deadlock termination provisions:
(a) Each of Pioneer and DuPont independently shall appraise
the value of the Venture within forty-five (45) days of
the declaration of Deadlock;
(b) Upon completion of the valuation, the parties each
shall submit a sealed bid to the independent auditor of
the Venture or another mutually acceptable independent
third party, to purchase the Venture Interest of the
other party;
(c) The independent third party to which such bids are
delivered shall open and examine the bids and certify
which party submitted the higher bid; and
(d) The party submitting the higher bid shall purchase the
Venture Interest from the other party at such price
certified by the independent third party.
(II) In all other circumstances in which this Section 9.6 is
applicable, the following termination provisions shall apply:
(a) Within ten business days following a Sale of Ag
Products, a delivery of a Competitor Release Notice or
a delivery of a Change in Control Release Notice, as
applicable, (each as defined in the Investment
Agreement), the parties shall mutually agree on an
investment bank of national reputation. If the parties
cannot agree on an investment bank in accordance with
the provisions of the foregoing sentence, then:
(i) Each party shall select an investment bank of
national reputation within five business days of
the expiration of such ten business day period;
and
(ii) The two investment banks selected pursuant to
clause (a) above shall select a third investment
bank of national reputation (the investment bank
selected pursuant to this Section 9.6(II)(a), the
"Auctioneer").
(b) The Auctioneer shall conduct an auction (the
"Auction"), commencing on the third business day
following its selection, of the applicable Venture
Interest pursuant to which the party who submits the
highest price payable in cash upon consummation of the
Auction will buy the other party's Venture Interest at
the price so submitted by such party. The fees and
expenses of the Auctioneer shall be divided equally
between Pioneer and DuPont.
(c) DuPont shall make the first bid in the Auction by
submitting in writing to the Auctioneer its bid, after
which the parties shall alternate in submitting bids in
writing to the Auctioneer. The Auctioneer shall
promptly notify each party of its receipt of a bid and
the amount of such bid, after which the party who had
not made the previous bid shall have one business day
to submit its bid to the Auctioneer. In the event a
party does not submit a bid (or an invalid bid is
submitted as specified in clause (d) below and no
subsequent valid bid is submitted) in such one business
day period or at such time as a party indicates that it
is unwilling to submit any further bids, the Auctioneer
shall declare the Auction completed. Upon completion of
the Auction, the party who had submitted the highest
valid final bid shall promptly complete the purchase of
the other parties' Venture Interest at the price
specified in such bid.
<PAGE>
27
(d) Any bid submitted to the Auctioneer (other than with
respect to the first bid) that does not exceed the
immediately preceding bid by 5 percent shall be
considered an invalid bid and shall not be accepted by
the Auctioneer.
(e) The Auction shall be conducted by the Auctioneer in an
even-handed, equitable and impartial manner in
accordance with the provisions of this Section 9.6(II)
and in accordance with any further provisions specified
by the Auctioneer which are consistent with and do not
contravene the provisions of this Section 9.6(II);
provided however that the parties may mutually agree to
any procedures with respect to the Auction irrespective
of the provisions of this Section 9.6(II).
9.7. Fair Market Value.
-----------------
If Pioneer, DuPont, or the Venture, as applicable, independently cannot
agree on the Fair Market Value of the Transferred Property, then, upon
agreement of the parties to follow the procedures contained in this
Section 9.7:
(a) They mutually shall agree on an independent appraiser of
national reputation which shall determine such Fair Market
Value. The parties shall have thirty (30) days within which to
agree on such independent appraiser;
(b) If the parties cannot agree on an independent appraiser in
accordance with the provisions of Section 9.7(a), then:
(i) Each party, within thirty (30) days, shall select an
appraiser of national reputation, qualified to
determine the Fair Market Value of the Transferred
Property;
(ii) The appraisers selected pursuant to Section 9.7(b)(i)
mutually shall select a third independent appraiser of
national reputation who is qualified to determine the
Fair Market Value of the Transferred Property and who
shall have no material relationship with either party;
and
(iii) The three appraisers so selected mutually shall agree
on the Fair Market Value or, absent agreement, the Fair
Market Value shall be the average of the values
calculated by each appraiser.
(c) Any determination of Fair Market Value pursuant to this
Section 9.7 shall take into consideration all relevant factors
and shall be calculated by multiplying (x) the price that a
willing buyer will pay and a willing seller will accept for
the purchase of all of the assets and business of the Venture
as a going concern immediately prior to the transaction giving
rise to the determination of Fair Market Value and without any
discount for lack of liquidity or control and assuming that
all agreements between the Venture and the parties to this
Agreement that were in effect prior to such transaction would
have continued in effect by (y) the percentage interest in the
Venture being acquired.
(d) Each party shall bear the costs of any independent appraisers
that it selects. The costs of any independent appraiser
selected jointly by the parties, or the costs of a third
independent appraiser selected pursuant to Section 9.7(b)(ii),
shall be borne equally by the parties. Each party shall bear
its respective internal costs.
(e) Within thirty (30) days of the determination of Fair Market
Value, the party having the right to purchase the Venture
shall either submit an irrevocable offer to purchase the
Venture for the determined Fair Market Value for cash or shall
notify the other party that no offer will made. If an offer is
made, then closing of the transaction shall occur within 90
days from the offer, subject to the appropriate regulatory
approvals.
ARTICLE X - TRANSFER OF VENTURE INTEREST
- ----------------------------------------
10.1. Should any party desire to transfer their interest in the Venture after
the sixteenth year following Closing, they shall first give the other
party notice of that desire more than twelve months prior to the
sixteenth year and the parties shall meet and attempt to negotiate a
transfer of the Venture Interest and negotiate in good faith for
continuation of the Research Alliance or the Preferred Seed Support
Agreement. If the parties are unable to successfully conclude such
negotiations within ninety (90) days after such notice, the party
desiring to sell their interest may do so by seeking a bona fide offer to
purchase from a bona fide third party.
<PAGE>
28
10.2. Should any party receive a bona fide offer to purchase their interest,
they shall disclose all of the terms thereof to the other party and the
other party shall have thirty (30) days within which to match that offer
and sixty (60) days thereafter to close the proposed transaction, subject
to the appropriate regulatory approvals, and thereby purchase the
interest of the selling party. Otherwise the selling party may complete
the sale to that bona fide purchaser so long as the sale is closed within
180 days of the disclosure of the original offer to purchase.
10.3. This provision shall not preclude the transfer by Pioneer or DuPont to a
Related Company of Pioneer or DuPont respectively.
10.4. If the above provisions are invoked then the parties shall no longer be
obligated to continue the Research Alliance Agreement, to the extent it
has not yet expired nor shall they be obligated to continue the Preferred
Seed Support Agreement. Continuation of either of these agreements shall
be a matter for negotiation between the parties after the notice is given
as provided in Section 10.1.
ARTICLE XI - HUMAN RESOURCES MATTERS
- ------------------------------------
11.1. Human Resources Philosophy.
--------------------------
11.1.1. Pioneer and DuPont recognize that the success of the Venture
will depend largely on the quality of the employees that they
will transfer to the Venture and the careful selection of
persons to fill key positions. Pioneer and DuPont will
endeavor to balance the selection of persons for key positions
equally between Pioneer and DuPont employees, recognizing that
these persons must have the capability to establish a new
entrepreneurial culture for the Venture. The Venture
management team shall be responsible for filling other
management positions in the Venture.
11.1.2. Pioneer and DuPont anticipate that many of the personnel
presently involved in the Pioneer End-Use Business or the
DuPont End-Use Business will become employees of the Venture.
The parties, however, recognize that there may be overlaps or
that it may be more efficient to have employees in certain
functions remain with their current employers and provide
services to the Venture on a contract basis.
11.1.3. Pioneer and DuPont will work together to build a personnel
plan prior to Closing with a bias toward (a) having the
optimum number of employees become employed by the Venture and
(b) ensuring that Venture management has control over those
services or functions that are unique to the Combined
Business. Pioneer and DuPont shall be responsible for any of
their respective employees who provide services to the Venture
on a contract basis.
11.2. Transfer of Employees to the Venture.
------------------------------------
11.2.1. The Venture shall offer employment effective as of the Closing
Date to the following persons ("Quality Grains Employees"):
(a) Certain employees of Pioneer and its Affiliates, to be
identified prior to Closing, principally dedicated to
the design, development, manufacture, marketing,
distribution and sale of Pioneer End-Use Products in
the Pioneer End-Use Business; and
(b) Certain employees of DuPont and its Affiliates, to be
identified prior to Closing, principally dedicated to
the design, development, manufacture, marketing,
distribution, and sale of DuPont End-Use Products in
the DuPont End-Use Business.
Pioneer and DuPont will use their best efforts to cause such
Quality Grains Employees to accept such employment, and shall
provide the Venture with information as to the title and
current compensation levels of such employees and assist the
Venture in effecting the change of employment in an orderly
fashion.
11.2.2. The offers of employment to the Quality Grains Employees shall
include compensation and benefits as the Members Committee
shall deem appropriate to attract and retain such employees
including credits for prior years of service which shall be
developed and agreed upon prior to Closing. Pioneer and DuPont
<PAGE>
29
shall be responsible for the salary and benefits of their
respective Transferred Employees for the period up to and
including the date of their change of employment, including
any accrued vacation or other benefits unless they are assumed
by the Venture.
ARTICLE XII - NON-COMPETITION FUTURE DEVELOPMENTS
- -------------------------------------------------
12.1. Competition with Venture.
------------------------
12.1.1. Except as otherwise specifically provided in this Agreement,
or in the Pioneer Technology License Agreement or the DuPont
Technology License Agreement, and for as long as Pioneer and
DuPont each own, directly or indirectly, fifty percent (50%)
of the Venture, Pioneer and DuPont shall not, and shall cause
their respective Affiliates not to, compete with the Venture
within the scope of its Business Purpose.
12.2. Acquisitions Within the Scope of the Business Purpose.
-----------------------------------------------------
12.2.1. Pioneer and DuPont shall not, and shall cause their
respective Affiliates not to, purchase all or any portion of
an Entity, a majority of the business of which is within the
scope of the Business Purpose, without the written consent of
the Members Committee.
12.2.2. If Pioneer or DuPont, or any of their respective Affiliates,
purchase an Entity less than a majority of the business of
which is within the scope of the Business Purpose, then the
purchaser shall offer the portion of the Entity that falls
within the scope of the Business Purpose to the Venture at
Fair Market Value. The Venture then shall have ninety (90)
days within which to accept or reject the offer. If the
Venture rejects the offer, then Pioneer or DuPont, or their
respective Affiliates, as appropriate, may continue to own and
operate the Entity, including the portion that falls within
the scope of the Business Purpose, and continue its operation
or sell the portion that falls within the Business Purpose;
provided however, that, for a period of one (1) year, Pioneer,
DuPont or their respective Affiliates shall not offer that
portion of the Entity that falls within the Business Purpose
to a third party upon terms more favorable than those offered
to the Venture.
12.2.3. The provisions of Sections 12.2.1 and 12.2.2 shall apply only
for so long as Pioneer and DuPont each own, directly or
indirectly, fifty percent (50%) of the Venture.
12.2.4. The provisions of Sections 12.2.1 and 12.2.2 shall not apply
to the acquisition by either Pioneer or DuPont, of all or any
portion of any Equity in the business of food, food
ingredient, feed or agriculturally derived industrial products
so long as they create an opportunity for Venture Products or
other businesses of either DuPont, Pioneer or their respective
Affiliates.
ARTICLE XIII - CERTAIN INTELLECTUAL PROPERTY MATTERS
- ----------------------------------------------------
13.1. Trademark Licenses.
------------------
Pioneer, with regard to the Pioneer trade name and certain of the
trademarks for Pioneer End-Use Products, and DuPont, with regard to the
DuPont trade name and certain of the trademarks for DuPont End-Use
Products, shall enter into appropriate licenses or other written
instruments with the Venture for the use of such trade names and
trademarks. The Venture shall have no right to use any other Pioneer or
DuPont marks except as expressly provided for by Pioneer or DuPont.
13.2. Use of Trade Names.
------------------
The Venture shall not use or permit to be used the trade names or
trademarks of Pioneer or DuPont or any of their respective Affiliates,
except as otherwise may be provided by separate agreement or written
instrument executed by Pioneer or DuPont or their respective Affiliates,
pursuant to Section 13.1, and then only in accordance with the specific
terms of such agreement or instrument. For a period not to exceed one (1)
year from the Closing Date the Venture may use inventories of product
<PAGE>
30
literature, labels, invoices, and other documents specifically related to
the Pioneer End-Use Business or the DuPont End-Use Business that contain
trade names or trademarks not specifically transferred, by license or
otherwise, to the Venture; provided, however, that, in its use of such
product literature, labels, invoices and other documents, the Venture
shall take all reasonable steps necessary to clarify that the Venture,
and not Pioneer or DuPont or their respective Affiliates, is providing,
and is responsible for, such product literature, labels, invoices and
other documents.
ARTICLE XIV - VENTURE FINANCES
- ------------------------------
14.1. Distribution Policy.
-------------------
The Venture shall distribute to Pioneer and DuPont, in proportion to
their respective ownership interests, any excess cash in the Venture,
taking into account Venture capital expenditure plans and working capital
requirements. Distributions shall be declared by the Members Committee
and shall occur at least annually.
14.2. Debt.
----
Any third party borrowings by the Venture shall be limited to the amount
and type as may be authorized from time to time by the Members Committee.
14.3. Inter-Company Borrowings.
------------------------
The Venture may borrow or lend money among its Affiliates, or among
Pioneer or DuPont and their respective Affiliates, upon such terms and
conditions as may be authorized from time to time by the Members
Committee.
14.4. Limitation on Secured Borrowings.
--------------------------------
The Venture shall not encumber, mortgage, hypothecate, pledge or create a
security interest in any Combined Assets that would cause Pioneer or
DuPont or their respective Affiliates to be in default with respect to
any covenant or other obligation contained in any indenture, loan
agreement, mortgage, security agreement or other similar agreement.
ARTICLE XV - MISCELLANEOUS
- --------------------------
15.1. Term.
----
This Agreement shall become binding upon its execution by Pioneer and
DuPont and shall continue in full force and effect until the dissolution
of the Venture or the sale or transfer by Pioneer or DuPont of all or any
portion of their respective interests in the Venture.
15.2. Rights and Remedies. Specific Performance.
-----------------------------------------
The rights and remedies granted under this Agreement shall not be
exclusive but shall be in addition to all other rights and remedies
available at law or in equity. It is expressly agreed that the remedy at
law for breach by any party hereto of its obligations hereunder is
inadequate in view of the complexities and uncertainties in measuring the
actual damages that would be sustained by reason of such party's failure
to comply fully with each of such obligations. Accordingly, the
obligations of each party hereunder are expressly made enforceable by
specific performance to the extent appropriate.
15.3. Transfer Tax.
------------
Prior to Closing, the parties shall agree on the responsibility for the
payment of any tax or other fee imposed on the transfer of Pioneer Assets
or DuPont Assets as a result of the consummation of the transactions
described herein. At Closing, the Venture shall provide Pioneer, DuPont
and their respective Affiliates with appropriate sales and use tax
exemption certificates for assets transferred by Pioneer or DuPont or
their respective Affiliates to the Venture.
15.4. Governing Law and Waiver of Jury Trial.
--------------------------------------
15.4.1. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of Delaware;
however, the parties agree that any legal proceeding shall
take place in the federal court located in the State of
Illinois.
<PAGE>
31
15.4.2. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
15.5. Dispute Resolution.
------------------
15.5.1. Any dispute or claim arising out of or relating to this
Agreement, or any breach thereof, including, without
limitation, the validity of the provisions of this Section
15.5, but specifically excluding any disputes with regard to
Substantial Disagreements, or the determination of Fair Market
Value pursuant to Section 9.8 when there is no manifest error,
shall be settled in accordance with the provisions of this
Section 15.5.
15.5.2. Initiation of Negotiations.
--------------------------
In the event of a dispute or claim either party may give to
the other a Notice of Negotiation requiring each party to
appoint a single delegate from among their respective senior
executives, with full power and authority to resolve the
dispute or claim. The delegates shall then have a period of
fifteen (15) days to meet and resolve the dispute or claim. If
the senior executives cannot resolve the dispute or claim
within such time period, then the chief executive officers (or
the pre-specified senior executives) shall meet to discuss and
resolve the dispute or claim by mutual consent.
15.5.3. Initiation of Mediation.
-----------------------
If the dispute or claim has not been resolved pursuant to
Section 15.6.2 hereof within 90 days from referral, any party
to the dispute may give a Notice of Mediation to all other
parties and to the CPR Institute for Dispute Resolution. The
party receiving such notice shall be obligated to participate
in the mediation in good faith.
15.5.4. Selection of the Mediator.
-------------------------
(a) Promptly following receipt of a Notice of Mediation,
CPR shall convene the parties participating in the
mediation, in person or by telephone, to attempt to
select a mediator by agreement of the parties. If the
parties do not promptly reach agreement, CPR shall
submit to the parties the names of not less than three
mediator candidates from the CPR Panels of
Distinguished Neutrals, with their resumes and hourly
rates. If the parties are unable to agree on a
candidate from the list within seven days following
receipt of the list, each party will, within ten days
following receipt of the list, send to CPR the list of
candidates ranked in descending order of preference.
The candidate with the lowest combined score will be
appointed as the mediator by CPR. CPR shall break a
tie.
(b) Before proposing any mediator candidate CPR shall
request the candidate to disclose any circumstances
known to him or her which would cause reasonable doubt
regarding the candidate's impartiality. If such
circumstances are disclosed, the individual shall not
serve, unless all parties agree. A party may challenge
a mediator candidate if it knows of circumstances
giving rise to reasonable doubt regarding the
candidate's impartiality.
(c) The procedure set forth in this Section 15.5.4
notwithstanding, the parties shall be free to select a
mediator by themselves or by other means.
15.5.5. Mediator Expense.
----------------
The mediator's compensation rate will be determined before
appointment. Each party will pay an equal share of the
compensation and any other costs of the process, including the
administrative fee CPR will charge for its services in the
selection of the mediator.
15.5.6. Rules of the Mediation.
----------------------
<PAGE>
32
The rules of the mediation shall be as follows:
(a) The process is non-binding.
(b) The mediator shall be neutral and impartial.
(c) The parties shall cooperate fully with the mediator.
(d) The mediator shall control the procedural aspects of
the mediation.
(i) The mediator may meet and communicate separately
with each party.
(ii) The mediator normally will hold an initial joint
meeting with the parties and then decide when to
hold joint and/or separate meetings. The mediator
will fix the time, place and agenda for each
session. There will be no record of any meeting.
Formal rules of evidence will not apply.
(e) At least one senior business executive of each party,
authorized to negotiate a resolution of the dispute,
shall attend each session.
(f) The process will be conducted expeditiously. Each
representative shall make every effort to be available
for meetings.
(g) The mediator shall not transmit information received
from any party to another party or any third party
unless authorized to do so by the party transmitting
the information.
(h) Subject to the provisions of Section 15.5, the parties
will refrain from pursuing judicial and/or
administrative remedies during the mediation.
(i) The mediator shall be disqualified as a witness,
consultant or expert in any pending or future
investigation, action or proceeding relating to the
subject matter of the mediation.
(j) The mediator may obtain assistance and independent
expert advice, subject to the agreement and at the
expense of the parties.
(k) Unless the parties agree otherwise, the procedure shall
be deemed terminated without any agreed resolution if:
(i) After 60 days from the date of selection of the
mediator a written resolution has not been agreed
upon by the parties and a party has given written
notice to the mediator and the other party of its
intention to withdraw.
(ii) The mediator concludes that further efforts would
not be useful.
(l) Neither CPR nor the mediator shall be liable for any
act or omission in connection with the mediation.
15.5.7. Presentation to the Mediator.
----------------------------
Upon entering into mediation, and at least seven days before
the first mediation conference, each party will deliver to the
mediator a statement summarizing the dispute's background and
such other information it deems necessary to familiarize the
mediator with the dispute. Any materials the parties agree
upon may be submitted jointly. The mediator may request each
party to provide clarification and additional information, and
to present its case informally to the mediator at the initial
joint meeting or at later separate meetings.
The parties are encouraged to exchange all information
submitted to the mediator to further each party's
understanding of the other's viewpoint. Except as the parties
otherwise agree, the mediator shall keep confidential any
information submitted. At the conclusion of the mediation, the
mediator will return to each party all written materials which
that party provided to the mediator without retaining copies.
15.5.8. Exchange of Information.
-----------------------
If any party has a substantial need for documents or other
material in the possession of another party, the parties shall
attempt to agree on an exchange of documents or other
material. Should they fail to agree, either party may request
a joint consultation with the mediator who shall assist the
parties in reaching agreement. The parties and mediator may
establish a plan for limited, informal, expeditious discovery
that may facilitate a settlement.
At the conclusion of the mediation process, upon the request
of a party which provided documents or other material to one
or more other parties, upon the request of a party which
provided documents or other material to one or more other
<PAGE>
33
parties, the recipients shall return the same to the
originating party without retaining copies thereof.
15.5.9. Negotiation of Terms.
--------------------
The mediator may promote a resolution in any manner the
mediator believes is appropriate. The parties are expected to
initiate proposals for resolution.
If the mediator concludes that mediation techniques have been
exhausted and the parties have not reached agreement, the
mediator, with the consent of all parties, will promptly give
them an evaluation (which if the parties so choose will be in
writing) of the likely outcome of the case if it were tried to
final judgment and/or a final settlement proposal which the
mediator considers fair and equitable. Thereupon, the
mediator will call another mediation conference, in the hope
that the mediator's evaluation or proposal will lead to a
resolution.
15.5.10. Resolution.
----------
If a resolution is reached, the mediator, or a representative
of a party, will draft a written settlement agreement
incorporating all terms. This draft will be circulated among
the parties, amended as necessary and formally executed.
15.5.11. Failure to Agree.
----------------
If a resolution is not reached, the mediator will discuss with
the parties the possibility of their agreeing on binding
regular arbitration or "last offer" arbitration of their
dispute. If the parties agree to arbitration in principle, the
mediator will offer to assist them in structuring a procedure
designed to result in a prompt, economical adjudication. The
mediator will not serve as the arbitrator, unless all parties
agree.
15.5.12. Confidentiality.
---------------
The entire mediation process shall be confidential. Unless
agreed among all the parties or required to do so by law, the
parties and the mediator shall not disclose to any person who
is not associated with participants in the process, including
any judicial officer, any information regarding the process
(including pre-process exchanges and agreements), consent
(including written and oral information), settlement terms or
outcome of the proceeding.
Under this procedure, the entire process is a compromise
negotiation subject to Federal Rule of Evidence 408 and all
state counterparts, together with any applicable statue
protecting the confidentiality of mediation. All offers,
promises, conduct and statements, whether oral or written,
made in the course of the proceeding by any of the parties,
their agents, employees, experts and attorneys, and by the
mediator shall be confidential. Such offers, promises, conduct
and statements are privileged under any applicable mediation
privilege and are inadmissible and not discoverable for any
purpose, including impeachment, in litigation between the
parties. However, evidence that is otherwise admissible or
discoverable shall not be rendered in admissible or
non-discoverable solely as a result of its presentation or use
during the mediation.
The mediator and any documents and information in the
mediator's possession shall be subject to subpoena in any
investigation, action or proceeding, and all parties will
oppose any effort to subpoena the mediator or documents. The
mediator will promptly advise the parties of any attempt to
compel him/her to divulge information received in mediation.
15.5.13. Preservation of Rights.
----------------------
Subject to the provisions of Section 15.5.1, the procedures
set forth in this Section 15.5 shall be the sole and exclusive
procedures for the resolution of dispute or claims between the
parties until such procedures are terminated in accordance
with their terms, provided however that a party may initiate
legal action if in its sole judgment such action is necessary
to avoid irreparable damage or otherwise to preserve the
<PAGE>
34
status quo. Despite such action the parties shall continue to
participate in the procedures set forth herein in good faith.
15.6. No Partnership.
--------------
Except for tax purposes, nothing contained in or relating to this
Agreement shall constitute or be deemed to constitute a partnership
between the parties hereto.
15.7. Entire Agreement.
----------------
This Agreement, together with the LLC Agreement, the Research Alliance
Agreement, the Investment Agreement, the Preferred Seed Support Agreement
and related implementing agreements executed herewith or after the
execution of this Agreement, sets forth the entire understanding and
agreement between the parties as to the matters covered herein and
supersedes and replaces any prior understanding, agreement or statement
of intent, in each case, written or oral.
15.8. Notice.
------
Any notice, request, demand, report, offer, acceptance, certificate or
other instrument that may be required or permitted to be delivered or
served hereunder shall be delivered by a recognized courier service, by
facsimile transmission (followed by a copy by mail) or by certified mail,
return receipt requested, and shall be effective upon receipt, provided
however, that notices shall be presumed to have been received:
(a) If given by courier service, upon receipt by the addressee or
upon the third business day following delivery of the notice
to a recognized courier service, delivery costs prepaid,
whichever is sooner;
(b) If given by facsimile transmission, on the next business day,
provided that the facsimile transmission is confirmed by
answer back, written evidence of electronic confirmation of
delivery, or oral or written acknowledgment of receipt thereof
by the addressee; or
(c) If given by certified mail, return receipt requested, upon the
date indicated on the return receipt.
Notices shall be sent to the addresses as follows (until notice of a
change thereof is given as provided in this Section 15.8).
If to Pioneer:
Pioneer Hi-Bred International, Inc.
700 Capital Square
400 Locust Street
Des Moines, Iowa 50309
Attn: General Counsel
Facsimile: (515) 248-4844
Phone: (515) 248-4800
If to DuPont:
E. I. du Pont de Nemours and Company
DuPont Legal
1007 Market Street
Wilmington, DE 19898
Attn: General Counsel
Facsimile:(302) 773-4679
Phone: (302) 773-0177
If to the Venture:
Optimum Quality Grains L.L.C.
15.9. Amendments.
----------
This Agreement may be amended, modified or superseded, and any of the
terms, covenants or conditions hereof may be waived, at any time only by
a written instrument executed by the parties hereto, or, in the case of a
waiver, by the party waiving compliance. Any such amendment, modification
or waiver shall be valid only for the specific purposes contained in the
executed written instrument related thereto.
15.10. Waiver of Breach.
----------------
The failure at any time of any party hereto to require performance by
another party of any responsibility or obligation provided for or
contemplated in this Agreement shall in no way affect the full right to
require such performance at any time thereafter, nor shall the waiver by
any party of a breach of any provision of this Agreement by another party
<PAGE>
35
constitute a waiver of any succeeding breach of the same or any other
provision nor constitute a waiver of the responsibility or obligation
itself.
15.11. Assignability.
-------------
Except as otherwise provided herein, neither this Agreement nor any right
or obligation hereunder may be assigned or delegated in whole or in part
by any party hereto without the prior written consent of the parties
hereto and any such attempted assignment or delegation without such
consent shall be null, void ab initio and without effect; however,
notwithstanding the above, this Agreement may be assigned by either party
to a Related Company of such party. Any permitted assignment of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
15.12. Severability.
------------
If any one or more of the provisions contained in this Agreement or any
document executed in connection herewith shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired; provided however, that in
such case the parties hereto agree to use their best efforts to achieve
the purpose of the invalid provision by a new legally valid stipulation.
15.13. Headings.
--------
The headings contained in this Agreement are for convenience of reference
only and do not modify or affect in any way the meaning or interpretation
of this Agreement.
15.14. No Third Party Rights.
---------------------
This Agreement is intended to be solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create any
rights in favor of; any Entity other than their parties hereto, except as
expressly provided to the contrary elsewhere in this Agreement.
15.15. The L.L.C.
---------
It is the intent of Pioneer and DuPont that, upon acceptance of this
Agreement by the L.L.C., the L.L.C. shall become a party to this
Agreement and shall enjoy the benefits and be subject to the obligations
set forth in this Agreement.
15.16. No Duplicate Recovery.
---------------------
A party shall only be entitled to recover, and only one party shall be
entitled to recover, the full actual loss suffered on account of any act
or omission by another party that constitutes a breach of any of the
representations, warranties, covenants or obligations set forth in this
Agreement or in any Ancillary Agreement notwithstanding the fact that the
act or omission constitutes a breach of more than one of such
representations, warranties, covenants or obligations made or owed to one
or more parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective duly authorized representatives as of the date
first above written.
PIONEER HI-BRED INTERNATIONAL, INC.
/s/ Jerry L. Chicoine
- ----------------------------------------
By:
-----------------------------------
Title:
---------------------------------
E. I. DU PONT DE NEMOURS AND COMPANY
/s/ W.F. Kirk
- ----------------------------------------
By:
-----------------------------------
<PAGE>
36
Title:
---------------------------------
The undersigned, Optimum Quality Grains L.L.C., as of this _____ day of
______________, 1997, hereby agrees to become a party to this Agreement, accepts
the rights and obligations under this Agreement, and agrees to perform and abide
by all of the provisions of this Agreement to be performed by or which are
applicable to it.
OPTIMUM QUALITY GRAINS L.L.C.
/s/ Dick Reasons
- ----------------------------------------
By:
-----------------------------------
Title:
---------------------------------
<PAGE>
Exhibit (C)2
RESEARCH ALLIANCE AGREEMENT
THIS AGREEMENT, effective this 6th day of August, 1997
("Effective Date"), by and between E. I. du Pont de Nemours and
Company, a corporation of the State of Delaware having a
principal business address at 1007 Market Street, Wilmington,
Delaware 19898 ("DUPONT") and Pioneer Hi-Bred International,
Inc., a corporation of the State of Iowa having a principal
business address at 700 Capital Square, 400 Locust Street, Des
Moines, Iowa 50309 ("PIONEER").
WITNESSETH:
WHEREAS, the parties have developed complementary expertise,
technology and know-how concerning quality grain traits,
agronomic traits, industrial use traits, genomics and enabling
technologies for developing seed, grain, grain products, plant
materials and other crop improvement products and desire to
collaborate in order to realize significant synergies for the
benefit of both parties in a research alliance ("Research
Alliance") and to speed the discovery of new developments in
corn, soybean and other selected oilseeds, genetics and crop
improvement, both in agronomic traits and quality traits, and in
industrial uses and in grain, grain products and plant materials
that have unique end-use functionality;
WHEREAS, the parties have formed a jointly owned, commercial
joint venture ("Venture") in accordance with a Formation
Agreement executed herewith that will take advantage of the
complementary skills and resources, and through such synergies
create value for quality trait seed, grain, grain products and
plant material with beneficial end-use functionality delivered
through corn, soybean and other selected oilseeds to enable the
parties to speed new discoveries and their development for the
market, and to maximize their business opportunity in such
developments; and
WHEREAS, it is the desire of the parties to form the
Research Alliance between themselves with the primary goal to
take advantage of opportunities for synergy which will speed new
discoveries and support the business objectives of the Venture in
the area of quality trait seed, grain, grain products and plant
material in corn, soybean and other selected oilseeds.
Secondarily, the Research Alliance will support each party's core
business in these crops.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
A. "Field of Interest" means corn, soybean and other
selected oilseed crops.
B. "Field of Agricultural Research" means improvement of
economically important quality seed, grain, grain products or
plant material traits and agronomic and industrial traits in the
Field of Interest. The improvements may result from, but are not
limited to, plant breeding, genetics, genomics research, gene
discovery, gene expression and regulation technology, grain
traits, transformation, gene targeting, enabling technology,
industrial traits, agronomic traits, molecular markers,
bioinformatics, analytical chemistry, and crop production
chemical technology including technology related to the
interaction of chemicals with genes and gene products.
C. "Venture Products" means seed, grain, grain products
and plant material in the Field of Interest that embodies a trait
or traits that results in modifications of plant or grain
composition or its attributes (excluding silage that does not
include such a trait) that have value to end-users of grain,
grain products, or plant materials and that commands a value in
the market which is capable of being captured.
D. "PIONEER Product" means planting seed or plants in the
Field of Interest that embody a trait or traits that impact crop
yield potential or the realization of yield potential.
E. "DUPONT Crop Production Product" means any chemical or
biological substance or microorganism or technology related to
the interaction of chemicals with genes and gene products that
<PAGE>
2
beneficially protects, modifies, regulates or controls crop
growth or development when applied to the soil, seed, or plant in
the Field of Interest.
F. "DUPONT Industrial Product" means raw materials,
intermediates, proteins, molecules or chemicals for use in non-
agricultural markets including biochemical catalysts (enzymes and
microorganisms), chemicals for industrial, pharmaceutical and
consumer applications, and polymer intermediates, polymer and
fibers for applications typical of DUPONT's coatings and
industrial businesses.
G. "Other Product" means any product other than those
defined above in C, D, E, or F.
H. "Collaborative Effort" means research and development
undertaken by the parties based upon mutually agreed upon product
targets, timelines, strategies, division of responsibilities,
allocation of resources, and funding.
I. "Affiliate" means:
(1) Any corporation owning or directly or indirectly
controlling at least fifty percent (50%) of the stock normally
entitled to vote for election of directors of a party; and
(2) Any corporation owned or directly or indirectly
controlled by a party, or by a corporation defined by
subparagraph (1) above through ownership of at least fifty
percent(50%) of stock normally entitled to vote for election of
directors.
J. "Independent Effort" means research and development
conducted by either of the parties independently of the
Collaborative Effort, either prior to or after the Effective
Date.
K. "PIONEER Proprietary Property" means all existing or
future PIONEER know-how, trade secrets, proprietary processes,
formulae, PIONEER sourced germplasm, patents, patent
applications, plant variety protection certificates, inventions,
and rights in licenses or sublicenses owned by PIONEER or its
Affiliates applicable within the Field of Interest developed
through Independent Effort which it has the right to convey.
L. "DUPONT Proprietary Property" means all existing or
future DUPONT know-how, trade secrets, proprietary processes,
formulae, DUPONT sourced germplasm, patents, patent applications,
plant variety protection certificates, inventions, and rights in
licenses or sublicenses owned by DUPONT or its Affiliates
applicable within the Field of Interest developed through
Independent Effort which it has the right to convey.
M. "Confidential Information" means any and all
proprietary information (including without limitation,
information related to technical, business and Intellectual
Property matters), know-how, data, Intellectual Property, trade
secrets, and germplasm and biological and other physical
materials owned or held by either party to this Agreement, now
and in the future, which such party maintains as confidential.
N. "Intellectual Property" means all germplasm and
industrial and intellectual property rights including, but not
limited to, patents, patent applications, patent rights, plant
variety protection certificates, inventions, trade secrets, know-
how, trademarks, service marks, brand names, trade names,
copyrights, licenses, sublicenses and proprietary processes and
formulae and all regulatory registrations/approvals or
applications for registration of any of the foregoing.
O. "Joint Intellectual Property" means Intellectual
Property developed as the result of a Collaborative Effort.
P. "Commingled Germplasm" means germplasm in the Field of
Interest containing a Venture Product trait or traits descending
from crossing PIONEER-sourced germplasm and DUPONT-sourced
germplasm, or the introduction of a gene or genes for a Venture
Product trait from one party into the germplasm of the other.
ARTICLE II
General Purpose
<PAGE>
3
---------------
A. The parties agree to form a Research Alliance to speed
the discovery and development of new beneficial agronomic,
quality, industrial, and crop production traits, and optimize
research efforts and share expertise, technology and know-how in
the Field of Agricultural Research to benefit primarily the
Venture and secondarily PIONEER and DUPONT. The role and
management of the Research Alliance will evolve; however, at a
minimum the Research Alliance will be organized and managed to:
(1) ensure that the research needs of the Venture are
met through the discovery and development of
Venture Products in a timely way;
(2) operate in a way that allows the research
organizations of both parties to capitalize on
their respective scientific competencies,
strengths, and resources;
(3) assign portions of the Collaborative Effort so as
to reduce inefficiencies;
(4) support the core businesses of the parties in
PIONEER Products for PIONEER and DUPONT Crop
Production Products and DUPONT Industrial Products
for DUPONT;
(5) develop and implement state of the art
technologies in genomics, transformation, gene
targeting, gene regulation, and gene expression
for Venture Products, PIONEER Products, DUPONT
Crop Production Products and DUPONT Industrial
Products;
(6) develop technologies to enable plant scientists to
be more efficient in managing and exploiting corn,
soybean, and selected oilseed germplasm bases to
improve selections therefrom;
(7) develop strategies to protect Joint Intellectual
Property thereby protecting the investments of
both parties;
(8) identify and use new technologies in the
Collaborative Efforts.
ARTICLE III
Management of Research Alliance
-------------------------------
A. Management of the Research Alliance shall be the
responsibility of a Research Board that will oversee the
coordination and execution of all Collaborative Efforts conducted
in accordance herewith. The Research Board shall be composed of
two representatives from each party, with each party having one
vote on issues as appropriate, plus a representative of the
Venture, who shall be non-voting until such time that the Venture
contributes at least 50% of the total funding of all
Collaborative Efforts after which the Venture shall have one
vote.
B. A seven person Research Committee shall be formed and
will be composed of three representatives from each party, one of
whom will also be a Research Board member of said party, and the
person representing the Venture on the Research Board. The
Research Committee will report to the Research Board and be
responsible for detailed management of all Collaborative Efforts.
C. Each party and the Venture may replace any of its
designated Research Board or Research Committee members as it may
desire at its sole discretion.
D. The Research Board shall have the following powers and
duties:
(1) Ensure that each Collaborative Effort is
prioritized, sufficiently resourced and focused to
maximize the value realized by the parties through
the Venture;
(2) Approve initiation of new Collaborative Efforts
and the assignment of responsibilities of each
<PAGE>
4
party under such programs based upon input and
recommendations of the Research Committee;
(3) Make decisions to continue or terminate
Collaborative Efforts based upon input and
recommendations of the Research Committee
including, without limitation, rescinding any
Collaborative Effort or any part of any
Collaborative Effort;
(4) Make all decisions regarding significant changes
in resources and funding to ensure a balanced,
efficient effort between the parties;
(5) Identify opportunities for collaboration between
parties.
E. All decisions by the Research Board will require
unanimity.
F. Since decisions of the Research Board have the
potential for significant impact on the success of the Venture,
every effort to evaluate the options for major decisions shall be
made and shared among the parties and the Venture. The Research
Board shall meet frequently, but in no event less than once in
each calendar quarter. Minutes of each meeting shall be kept and
promptly circulated to each of the parties.
G. The Research Committee shall have the following powers
and duties:
(1) Appoint research teams ("Research Teams") to
efficiently and effectively implement each
Collaborative Effort which include representatives
of the parties and the Venture as appropriate;
(2) Define and evaluate (i) the objective of each
Collaborative Effort, (ii) the technical
challenges and chance of success of each
Collaborative Effort, (iii) timelines of
Collaborative Efforts, (iv) the responsibility of
each party under each Collaborative Effort, and
(v) the resources needed to pursue and complete
each Collaborative Effort;
(3) Recommend to the Research Board the initiation of
a new Collaborative Effort and the
responsibilities of each party;
(4) Provide regular reports to the Research Board
addressing progress against budget, technical
goals, and significant developments and issues
under the Collaborative Effort;
(5) Recommend to the Research Board the continuation
or termination of any Collaborative Effort;
(6) Organize and empower a sub-committee on
intellectual property and licensing relating to
Collaborative Efforts to review, evaluate and
recommend to the Research Committee the need for
any third party technology and patent rights to
complete any Collaborative Effort, and to the
extent possible, the Independent Efforts of and
party in the Field of Interest;
(7) Oversee and assess technical developments and
progress against objectives of each Collaborative
Effort.
ARTICLE IV
Collaborative Efforts
---------------------
A. To ensure the business success of the Venture, the
parties will conduct Collaborative Efforts presently contemplated in the
following areas:
(1) Oils
(2) Carbohydrates
<PAGE>
5
(3) Protein and amino acids
(4) Other quality grain traits
(5) Crop yield
(6) Crop production traits
(7) Industrial traits
(8) Genomics
(9) Transformation and gene targeting
(10) Gene expression and evaluation
(11) Trait functionality
(12) Energy availability and nutritional quality
(13) Phosphate availability
Detailed planning of any Collaborative Effort in said areas and
the assignment of responsibilities to each party for certain
points of each Collaborative Effort will be concluded as soon as
possible following execution of this Research Alliance Agreement.
B. Either party or the Venture at any time can request an
evaluation to initiate a new Collaborative Effort, provided that
such potential new Collaborative Effort can be reasonably
completed on or before the expiration of this Agreement, as
determined by the Research Board. The request will be made to
the Research Board which will instruct the Research Committee to
define and evaluate all aspects of the proposed Collaborative
Effort and recommend to the Board: (i) where the program should
be conducted; (ii) the budget and resources needed; (iii) the
probability of technical success; (iv) the anticipated
development schedule; (v) critical decision points and milestones
along the development schedule; and (vi) an estimated time frame
for completing the effort.
Based on the recommendations of the Research Committee, the
Research Board will approve or reject such Collaborative Effort
or resubmit the effort to the Research Committee with suggested
revisions for reevaluation.
C. The Research Team assigned for a particular
Collaborative Effort by the Research Committee will recommend
which party should be responsible for specific parts of any
Collaborative Effort based on the technical capabilities of the
parties. The Research Team's recommendation will be presented to
the Research Committee for review. Once a Collaborative Effort
has been approved by the Research Board, each party will then be
committed to perform its part of such Collaborative Effort within
the levels of effort approved by the Research Board. If it is
later determined that such Collaborative Effort requires
substantial additional resources in excess of initial
expectations, then approval of the Research Board will be needed
before additional resources are committed.
D. Unless the Research Board decides to drop or defer a
Collaborative Effort or part of an effort each party will use
best efforts to perform any material part of any Collaborative
Effort. Failure to use best efforts (after notice from the other
party and a ninety (90) day cure period, or such period
established by the Research Board) will result in a material
breach of this Agreement.
E. In the event that substantial additional resources
(substantially in excess of the resources initially anticipated
by the Research Committee) need to be devoted by a party to
complete a specific part of a Collaborative Effort, then the
Research Board will be responsible for resolving any inequities
that may result from the extra effort.
ARTICLE V
Grant of Rights to Conduct Research
-----------------------------------
A. PIONEER hereby grants to DUPONT, to the extent it has
the authority and ability to do so, a worldwide, nonexclusive,
nontransferable royalty free license to PIONEER Proprietary
<PAGE>
6
Property solely for the purpose of, and solely to the extent
necessary for DUPONT to conduct its research activities under
Collaborative Efforts and Independent Efforts in the Field of
Interest.
B. DUPONT hereby grants to PIONEER, to the extent it has
the authority and ability to do so, a worldwide, nonexclusive,
nontransferable royalty free license to DUPONT Proprietary
Property solely for the purpose of, and solely to the extent
necessary for PIONEER to conduct its research activities under
Collaborative Efforts and Independent Efforts in the Field of
Interest.
ARTICLE VI
Funding and Efforts
-------------------
A. Each party shall fund its own efforts under each
Collaborative Effort approved and assigned by the Research Board;
provided however, that the Research Board shall attempt, if
possible, to balance the resources and funding provided by each
party so that there will be approximately an equal contribution
by each party to the funding of the sum total of all
Collaborative Efforts. An annual review of the total funding of
each party to each Collaborative Effort shall be made by the
Research Board to determine the equality of funding based on the
level of effort by each of the parties. It is anticipated that
in the future, the Venture will assist in funding all or a
significant portion of any Collaborative Effort relating to
Venture Products as determined in the sole discretion of the
Venture Board (as defined in the Formation Agreement).
B. The Research Board will review and consider the level
of funding that each party undertakes toward all Collaborative
Efforts. Although the parties recognize that there may be a
reallocation and change in focus of their research efforts as a
result of the Research Alliance, the parties agree that their
current levels of research spending and effort for Venture
Product traits will be maintained or increased.
ARTICLE VII
Ownership and Licensing of
Intellectual Property and Proprietary Property
----------------------------------------------
A. The parties will promptly inform the Research Committee
of any ideas or improvements, including any potentially
patentable inventions, arising from any ongoing research under
any Collaborative Effort, and make a reasonable effort to
disclose to the Research Committee proprietary property from
Independent Efforts wherein said proprietary property is
potentially applicable to DUPONT Crop Production Products, DUPONT
Industrial Products, PIONEER Products or Venture Products.
B. All Joint Intellectual Property shall be jointly owned
by the parties. In those instances where the Venture has
contributed 50% or more of the funding to such Collaborative
Effort, the Venture shall be a joint owner of such Intellectual
Property. Any Intellectual Property resulting from an
Independent Effort by either party shall be owned by the party
that developed it. Any Intellectual Property independently
developed by the Venture, or the development of which was fully
funded by the Venture shall be owned solely by the Venture.
C. The classification of the rights in Joint Intellectual
Property or PIONEER Proprietary Property or DUPONT Proprietary
Property to establish which party possesses the right to make,
have made, use or sell product for various commercial
applications shall be carried out using the following sequential
queries:
(1). Is the Joint Intellectual Property or
PIONEER Proprietary Property or DUPONT Proprietary
Property to be exploited or value captured through a
DUPONT Crop Production Product? If yes, DUPONT
possesses the commercial application. If no, proceed
to (2.);
(2). Is the Joint Intellectual Property or
PIONEER Proprietary Property or DUPONT Proprietary
Property to be exploited or value captured through a
DUPONT Industrial Product? If yes, DUPONT possesses
the commercial application. If no, proceed to (3.);
<PAGE>
7
(3). Is the Joint Intellectual Property or
PIONEER Proprietary Property or DUPONT Proprietary
Property to be exploited or value captured through a
Venture Product? If yes, the Venture possesses the
commercial application. If no, proceed to (4.);
(4). Is the Joint Intellectual Property or
PIONEER Proprietary Property or DUPONT Proprietary
Property to be exploited or value captured through a
PIONEER Product? If yes, PIONEER possesses the
commercial application. If no, proceed to (5.);
(5). The Joint Intellectual Property or PIONEER
Proprietary Property or DUPONT Proprietary Property to
be exploited or value captured is Other Product.
D. Each party shall grant to the Venture an irrevocable,
exclusive, worldwide and royalty free license to make, use or
sell Venture Products, with the right to grant sublicenses, to
the extent permitted, under said party's rights in Joint
Intellectual Property, Commingled Germplasm, and its respective
Proprietary Property. The Venture shall license PIONEER to
produce and sell seed for production of Venture Products under
terms of the Seed Supply Agreement executed herewith. Further,
the Venture shall grant DUPONT a right of first refusal for an
exclusive license to produce and sell DUPONT Industrial Products
which may be derived from Venture Products.
E. DUPONT shall grant to PIONEER an irrevocable,
exclusive, worldwide and royalty bearing license to make, use, or
sell PIONEER Products, including the right to grant sublicenses,
under DUPONT's rights in Joint Intellectual Property. Subject to
the exclusive rights granted herein to the Venture, DUPONT shall
grant to PIONEER an irrevocable, nonexclusive, worldwide and
royalty bearing license to make, use, or sell PIONEER Products,
including the right to grant sublicenses, to the extent permitted
and subject to the restrictions of ARTICLE IX, under DUPONT
Proprietary Property. PIONEER shall be free to use PIONEER
Proprietary Property in any manner without any obligation to pay
royalties to DUPONT. PIONEER shall be free to use in any manner,
including the right to license, its ownership rights in Joint
Intellectual Property outside the Field of Interest in any
product areas outside DUPONT Industrial Products, DUPONT Crop
Production Products and Venture Products without the approval of
DUPONT and without any obligation to pay royalties to DUPONT,
subject to the rights of Paragraph G, below.
F. PIONEER shall grant to DUPONT an irrevocable,
exclusive, worldwide and royalty bearing license to make, use, or
sell DUPONT Industrial Products and DUPONT Crop Production
Products, including the right to grant sublicenses, under
PIONEER's rights in Joint Intellectual Property with the proviso
that in the case of DUPONT Crop Production Products in the Field
of Interest, PIONEER shall retain a nonexclusive right under the
Joint Intellectual Property, and DUPONT shall grant to PIONEER,
to the extent permitted, a nonexclusive license under DUPONT
Proprietary Property as required for PIONEER for the purpose of
producing and selling seed responsive to a DUPONT Crop Production
Product in return for a reasonable royalty to be negotiated in
good faith. Further, in the event that a DUPONT Industrial
Product or a DUPONT Crop Production Product is produced in a
plant or grain within the Field of Interest, to the extent the
Venture can competitively source such a DUPONT Industrial Product
or DUPONT Crop Production Product, DUPONT shall obtain its
requirements from the Venture. Subject to the exclusive rights
granted herein to the Venture, PIONEER shall grant to DUPONT an
irrevocable, nonexclusive, worldwide and royalty bearing license
to make, use, or sell DUPONT Industrial Products or DUPONT Crop
Production Products, including the right to grant sublicenses to
the extent permitted and subject to the restrictions of ARTICLE
IX, under PIONEER Proprietary Property. DUPONT shall be free to
use DUPONT Proprietary Property in any manner without any
obligation to pay royalties to PIONEER. DUPONT shall be free to
use in any manner, including the right to license, its ownership
rights in Joint Intellectual Property outside the Field of
Interest in any product areas outside PIONEER Products and
Venture Products without the approval of PIONEER and without any
obligation to pay royalties to PIONEER, subject to the rights of
Paragraph G, below.
<PAGE>
8
G. DUPONT, PIONEER, and the Venture shall grant DUPONT and
PIONEER a right of first refusal for an irrevocable, exclusive
and royalty bearing license to make, use or sell Other Product in
the Field of Interest, including the right to grant sublicenses,
under their rights in Joint Intellectual Property.
H. Each royalty bearing license for Joint Intellectual
Property and DUPONT or PIONEER Proprietary Property granted to
PIONEER or DUPONT shall have a royalty rate and terms negotiated
in good faith by the parties involved. Such royalty rate shall
be reasonable and based upon a good faith estimate of the royalty
rate that would be granted or is granted to a third party for an
identical license having terms and conditions reasonable and
customary in the subject area and resulting from arms length
negotiations. In the event that the parties involved cannot
agree on a royalty rate and terms for any particular license, the
issue shall be arbitrated in accordance with the rules of the
American Arbitration Association. The parties agree to maintain
adequate records in sufficient detail to enable the royalties due
from each under the grants of rights above to be determined and
permit said records to be inspected on no more than an annual
basis at any time during regular business by an independent
auditor acceptable to DUPONT and PIONEER for this purpose, who
shall report to the appropriate licensor only the amount of the
fees due hereunder.
ARTICLE VIII
Confidentiality
---------------
A. During the term of this Agreement and for a period of
five (5) years from the termination of this Agreement, each party
will keep confidential any and all Confidential Information (not
otherwise excluded from the confidentiality and nonuse
obligations of this Article as set forth below) received from the
other party in connection with the performance of this Agreement
and will not disclose it to third parties or use it for any
purpose other than pursuant to this Agreement, without the prior
written consent of the disclosing party.
The confidentiality and nonuse obligations of this Article
VIII will not apply to information and other items listed under
the definition of Confidential Information:
(a) which is public knowledge at the time of disclosure, or
which after disclosure becomes public knowledge in any
way except through the wrongful act of the party so
disclosing it;
(b) which the receiving party is able to prove was in its
possession at the time of disclosure by the disclosing
party or subsequently and independently developed and
which had not been obtained from the latter, either
directly or indirectly;
(c) whose disclosure is compelled by administrative or
judicial requirement; or
(d) which either party received from a third party having
the legal right to disclose such information, provided
that such information was not obtained by the third
party directly or indirectly from the other party to
this Agreement on a confidential basis.
B. Confidential Information may be disclosed to an
Affiliate for purposes of carrying out research under this
Agreement where the receiving party agrees in writing to be bound
by the terms of confidentiality and other applicable obligations
expressed in this Agreement.
C. The provisions of this Article VIII will survive any
termination of this Agreement.
ARTICLE IX
Protection and Use of Germplasm
-------------------------------
A. DUPONT shall not give, transfer, convey or license
PIONEER-sourced germplasm or Commingled Germplasm to any third
party without the prior written approval of PIONEER.
B. PIONEER shall not give, transfer, convey or license
DUPONT-sourced germplasm or Commingled Germplasm to any third
<PAGE>
9
party without the prior written approval of DUPONT.
C. Notwithstanding Paragraphs A and B, above, in the event
of termination the parties shall be free to use Commingled
Germplasm for any purpose without payment of a royalty if the
following conditions are met:
1. In the case of PIONEER, PIONEER shall remove any
Venture Product trait from the Commingled
Germplasm; and
2. In the case of DUPONT, DUPONT shall carry out four
(4) backcrosses of Commingled Germplasm with other
germplasm, or achieve greater than 95%
dissimilarity of the resulting germplasm from the
Commingled Germplasm as assessed by molecular
marker analysis.
ARTICLE X
Patent Prosecution, Defense and Enforcement
-------------------------------------------
A. (1) Each party shall promptly disclose to the other
party and the Research Committee the conception or reduction to
practice under a Collaborative Effort of inventions by employees
or others acting on behalf of such party. When such an invention
has been made that may reasonably be considered to be patentable,
a priority patent application shall be filed as soon as
reasonably possible. The party conducting the project shall have
the first right, using in-house or outside legal counsel selected
at its sole discretion and expense, to prepare, file, prosecute,
maintain and extend patent applications and patents concerning
all such inventions. The party having such first right shall
solicit the Research Committee's and the other party's advice and
review of the nature and text of such patent applications and
important prosecution matters related thereto in reasonably
sufficient time prior to filing thereof, and shall take into
account the reasonable comments related thereto. If the party
having the first right, prior or subsequent to filing certain
patent applications on any inventions or discoveries, elects not
to file, prosecute or maintain such patent applications
inventions or discoveries, elects not to file, prosecute or
maintain such patent applications or ensuing patents or certain
claims encompassed by such patent applications or ensuing patents
in any country, that party shall give the other party notice
thereof within a reasonable period prior to allowing such patent
applications or patents or such certain claims encompassed by
such patent applications or patents to lapse or become abandoned
or unenforceable, and the other party shall thereafter have the
right, at its sole expense, to prepare, file, prosecute and
maintain patent applications and patents or divisional
applications related to such certain claims encompassed by such
patent applications or patents concerning all such inventions and
discoveries in countries of its choice throughout the world.
(2) No later than nine (9) months following the filing date
of a priority patent application with respect to an invention
made under a Collaborative Effort and filed according to the
above paragraph, the parties shall consult together, through the
Research Committee or otherwise, to determine whether such
priority application with respect to such invention should be
abandoned without replacement; abandoned and refiled; proceeded
within the country of filing only; or used as the basis for a
claim of priority under the Paris Convention for corresponding
applications in or designating other countries. The parties
shall consult together to ensure that so far as practicable the
texts filed in the United States and in other countries contain
the same information and claim the same scope of protection. The
parties agree that they will cooperate in good faith in supplying
whatever assistance is reasonably needed by the other for the
preparing, filing and prosecuting of any such patent
applications.
B. Each party agrees to indemnify and defend the other
party and the Venture from any claim of infringement by a third
party based upon the use by the indemnifying party of Joint
Intellectual Property or DUPONT Proprietary Property or PIONEER
Proprietary Property. Each party shall have full responsibility
with respect to its own potentially infringing activities which
occurred prior to this Agreement.
C. In the event that a third party is misappropriating or
<PAGE>
10
infringing any Joint Intellectual Property right, then the
parties will consult with one another regarding enforcement of
such Joint Intellectual Property right. In this respect, the
parties will consider the nature and extent of the
misappropriation or infringement, the strength of such Joint
Intellectual Property right with respect thereto and the
existence of facts or circumstances that would weigh against
enforcement of such rights.
If the parties agree that such Joint Intellectual Property
right should be sufficient to stop the infringing activity or
collect damages or compel the misappropriating or infringing
party to seek a license from either party, then the parties will
consider whether they want to act in concert in an enforcement
action. If a party does not want to engage in a joint
enforcement action, then the other party will be free to enforce
such Joint Intellectual Property right on its own and at its own
expense and will retain all monetary damages that it may be
awarded as a result of such enforcement. If the parties decide
to act in concert in an enforcement action then they will agree
upon: (i) retention of legal counsel; (ii) who controls the
action; (iii) sharing of legal and other expenses; (iv)
settlement authority and (v) sharing of damages or other award.
ARTICLE XI
Termination
-----------
A. This Agreement, unless terminated earlier as set forth
below, may be terminated by three (3) years prior notice in
writing by either party which notice may be delivered at any time
after the 13th anniversary of the date of this Agreement, except
that if the Venture is terminated, the termination provisions of
the Venture Agreement shall apply. This Agreement shall be
extendable by mutual agreement of the parties.
B. Termination may be effected under the terms and
conditions of Article IX-TERMINATION AND DISSOLUTION provisions
of the Venture Formation Agreement executed concomitantly by the
parties. The rights and obligations of the parties in the event
of termination shall also be found in such Article IX.
ARTICLE XII
Representations and Warranties
------------------------------
Each party to this Agreement, only with respect to itself,
hereby represents and warrants to the other party as follows:
a. Each party has all the requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated herein and to
perform its obligations hereunder. The execution,
delivery and performance of this Agreement, including,
without limitation, the grant of licenses authorized
herein has been duly and validly authorized by proper
corporate action and constitutes a valid and legally
binding agreement of such party, without requiring the
consent of any third party or governmental authority.
b. Each party warrants that it has good title (either as
the owner or as a licensee) to that Proprietary
Property in which it has granted a nonexclusive license
for research and commercial purposes to the other party
in accordance herewith. Each party further warrants
that the practice or use of any of their technology and
patent rights of proprietary property is free of
infringement or interference with any valid or
enforceable property rights belonging to a third party.
c. Neither party has entered into any understanding or
agreement with any third party that will in any way
conflict with any right granted, or obligation arising,
under this Agreement, other than those agreements
previously disclosed by each party to the other.
ARTICLE XIII
Notices and Reports
-------------------
Any notice required or permitted to be given to any party
for all of the purposes hereof shall be mailed by registered
mail, return receipt requested, or hand delivered, addressed as
follows:
<PAGE>
11
To: E.I. du Pont de Nemours and Company
Agricultural Products
P.O. Box 80038
Wilmington, DE 19880-0038
Attention: E. M. Beyer-Director,
Global Technology
To: Pioneer Hi-Bred International, Inc.
700 Capital Square
400 Locust Street
Des Moines, Iowa 50309
Attention: General Counsel
or to such other address or addresses as any of the parties shall
designate by notice given as herein required. Notices shall be
effective upon receipt by the party to whom they are addressed.
ARTICLE XIV
Force Majeure
-------------
A. One should consider as a case of force majeure,
involving an exoneration of liability, any unpredictable or
inevitable event which, as for its nature or consequences for the
party invoking it, cannot be avoided or overcome by said party,
and which does not result from a fault, committed by the latter,
and is such as to render impossible, fully or partially,
temporarily or finally, the performance of contractual
obligations.
B. A case of force majeure can only be invoked if the
party invoking it has informed the other party of the beginning
and end of the case of force majeure by registered mail, return
receipt requested, within thirty (30) calendar days of the date
of its appearance and disappearance.
C. In the case of force majeure duly communicated
according to the preceding paragraph, the obligations of the
parties will be automatically prolonged for the time of the delay
caused by such force majeure, and the parties shall consult each
other.
ARTICLE XV
Assignability
-------------
Neither this Agreement nor the rights or licenses herein
granted to any party shall, except as expressly permitted or
required under the Investment Agreement, be assignable or
otherwise transferable by any party other than to an Affiliate
without the prior written consent of the other party. Each of
PIONEER and DUPONT agree that they shall each cause their
respective Subsidiaries (as defined in the Investment Agreement)
to take such action as shall be necessary to enable PIONEER and
DUPONT, as the case may be, to fulfill their respective
obligations under this Agreement, including without limitation,
by providing or making available to their respective parent
companies such research capabilities as may be transferred to
such Subsidiaries by each such parent company.
ARTICLE XVI
Applicable Law
--------------
This Agreement shall be interpreted in accordance with the
laws of the State of Delaware.
ARTICLE XVII
Severability
------------
If any term of this Agreement is held unenforceable or in
conflict with the law of any applicable jurisdiction, it is the
intention of the parties that the validity of the remaining terms
hereof shall not be affected by such holding and that such
conflicting term be construed and enforced to the fullest extent
permissible under law.
ARTICLE XVIII
Complete Agreement
------------------
This Agreement together with the LLC Agreement, the
Formation Agreement, the Investment Agreement, the Preferred Seed
Support Agreement and related implementing agreements executed
<PAGE>
12
herewith or after the Effective Date constitutes the entire
Agreement between the parties and supersedes and merges all prior
agreements with respect to the subject matter discussed herein
and any warranty, representation, promise or condition in
connection therewith not expressly incorporated herein shall not
be binding upon any party. No modification, extension or waiver
of this Agreement or any of its provisions shall be binding
unless in writing signed by a duly authorized representative of
each of the parties.
ARTICLE XIX
Descriptive Headings
--------------------
The descriptive headings in this Agreement are for
convenience only and shall not be interpreted so as to limit or
affect in any way the meaning of the language in the pertaining
article, paragraph or subparagraph.
IN WITNESS WHEREOF, the parties hereby execute and deliver
this Agreement as of the date first written above.
E.I. du Pont de Nemours and Company
By: /s/W.F. Kirk
------------------------------
Pioneer Hi-Bred International, Inc.
By: /s/Richard L. McConnell
------------------------------
bwm/August 6, 1997
<PAGE>
INVESTMENT AGREEMENT
dated as of August 6, 1997
between
E.I. DU PONT DE NEMOURS AND COMPANY
and
PIONEER HI-BRED INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS..............................................1
Section 1.1. Definitions..........................................1
Section 1.2. General Interpretive Principles.....................16
SECTION 2 ISSUANCE AND SALE OF SHARES.............................16
Section 2.1. Issuance and Sale of Shares.........................16
Section 2.2. Closing.............................................17
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........17
Section 3.1. Corporate Organization and Qualification............17
----------------------------------------
Section 3.2. Authorization of Agreements.........................18
---------------------------
Section 3.3. Consents; No Conflicts..............................19
----------------------
Section 3.4. Capitalization......................................20
--------------
Section 3.5. Company Reports; Financial Statements...............21
-------------------------------------
Section 3.6. Absence of Certain Changes..........................22
--------------------------
Section 3.7. Litigation..........................................22
----------
Section 3.8. Compliance with Laws; Regulatory Approvals..........22
------------------------------------------
Section 3.9. Exemption from Registration.........................22
---------------------------
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..........22
Section 4.1. Organization........................................23
------------
Section 4.2. Authorization of Agreements.........................23
---------------------------
Section 4.3. Consents; No Conflicts..............................23
----------------------
Section 4.4. Investor Reports; Financial Statements..............24
--------------------------------------
Section 4.5. Absence of Certain Changes..........................25
--------------------------
Section 4.6. Purchase for Purpose of Investment..................25
----------------------------------
SECTION 5 GOVERNANCE..............................................25
Section 5.1. Directors Designated by the Shareholder.............25
Section 5.2. Resignation of Investor Nominees....................29
Section 5.3. Committees..........................................29
SECTION 6 ADDITIONAL AGREEMENTS...................................30
Section 6.1. Standstill Agreement................................30
Section 6.2. Voting..............................................33
Section 6.3. Dispositions........................................35
Section 6.4. Company's Right to Purchase Voting Securities.......39
Section 6.5. Company's Right to Purchase Voting Securities in
Case of Unsolicited Offer...........................43
Section 6.6. Required Dispositions...............................47
Section 6.7. Top-Up Rights; Permitted Reacquisitions;
Exchange of Share Certificates......................48
Section 6.8. Spin-off Distributions..............................50
Section 6.9. Competing Investments...............................51
Section 6.10. Rights of the Company upon a Trigger Event.........54
SECTION 7 PRE-CLOSING COVENANTS...................................55
Section 7.1. Taking of Necessary Action..........................55
--------------------------
Section 7.2. Notifications.......................................55
-------------
Section 7.3. No-Shop.............................................56
-------
Section 7.4. Share Listing.......................................56
-------------
Section 7.5. Registration Rights Agreement.......................56
-----------------------------
Section 7.6. Pre-Closing Information.............................56
-----------------------
SECTION 8 ADDITIONAL COVENANTS....................................56
Section 8.1. Certain Information.................................56
-------------------
<PAGE>
Section 8.2. Right to Participate in Sale of the Company.........57
-------------------------------------------
Section 8.3. Use of Proceeds.....................................61
---------------
Section 8.4. Rights Agreement....................................62
----------------
Section 8.5. Publicity...........................................63
---------
Section 8.6. Legend..............................................63
------
Section 8.7. No Restrictions.....................................64
---------------
Section 8.8. Amendment to Articles of Incorporation..............64
--------------------------------------
Section 8.9. HSR Act Filings.....................................66
---------------
SECTION 9 CONDITIONS..............................................66
Section 9.1. Conditions of Investor's Obligation.................66
Section 9.2. Conditions of the Company's Obligation..............67
SECTION 10 TERMINATION............................................68
Section 10.1. Termination........................................68
Section 10.2. Effect of Termination..............................69
SECTION 11 MISCELLANEOUS..........................................69
Section 11.1. Fees and Expenses..................................69
Section 11.2. Survival...........................................69
Section 11.3. Notices............................................70
Section 11.4. Entire Agreement; Amendment........................71
Section 11.5. Counterparts.......................................71
Section 11.6. Governing Law; Submission to Jurisdiction..........71
Section 11.7. Successors and Assigns.............................71
Section 11.8. Assignment.........................................71
Section 11.9. Remedies; Waiver...................................72
Section 11.10. Specific Performance..............................72
Section 11.11. Severability......................................72
EXHIBIT A Form of Registration Rights Agreement
EXHIBIT B Form of Rights Agreement Amendment
EXHIBIT C Form of Certificate of Designation
EXHIBIT D Initial Investor Nominee Notice
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT, dated as of August 6, 1997 (the
"Agreement"), by and between E.I. du Pont de Nemours and Company, a
Delaware corporation (the "Investor"), and Pioneer Hi-Bred
International, Inc., an Iowa corporation (the "Company").
W I T N E S S E T H:
WHEREAS, contemporaneously herewith, the parties are
entering into a Joint Venture Agreement and a Research Alliance
Agreement (each as defined herein);
WHEREAS, the Company and the Investor have each determined
to enter into this Agreement pursuant to which the Investor has agreed
to purchase from the Company, and the Company has agreed to issue and
sell to the Investor, in each case subject to the conditions herein,
the Shares at the Closing (each as defined herein);
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
-----------
Section 1.1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
<PAGE>
"Acceptance Notice" has the meaning set forth in Section
6.4(a) hereof.
"Affiliate" of a Person has the meaning set forth in Rule
12b-2 under the Exchange Act.
"Agreement" has the meaning set forth in the preamble
hereto.
"Amended Rights Agreement" means the Rights Agreement, as
amended by the Rights Agreement Amendment and as further amended from
time to time in accordance with the terms of this Agreement.
"Articles of Incorporation" means the Third Restated
and Amended Articles of Incorporation of the Company, as amended from
time to time.
"Associate" of a Person has the meaning set forth in Rule
12b-2 under the Exchange Act.
"Beneficially Own" with respect to any securities means
having "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act, as in effect on the
date hereof, without limitation by the 60-day provision in paragraph
(d)(1)(i) thereof). The terms "Beneficial Ownership" and "Beneficial
Owner" have correlative meanings.
"Board" or "Board of Directors" means the Board of Directors
of the Company.
"Business Day" means any day, other than a Saturday, Sunday
or a day on which banking institutions in the State of Iowa or the
State of Delaware are authorized or obligated by law or executive
order to close.
"Bylaws" means the Restated and Amended Bylaws of the
Company as amended from time to time.
"Change in Control" means the occurrence of any of the
following events:
(a) the direct or indirect purchase or acquisition by
any Person or 13D Group (other than an Excluded Person) of Beneficial
Ownership of Voting Securities or Common Securities of the Company if,
after giving effect to such acquisition, such Person or 13D Group
would Beneficially Own Voting Securities or Common Securities
representing an Equity Percentage of 30% or more on a fully diluted
basis; or
(b) the consummation by the Company or any of its
Subsidiaries of a merger, consolidation or other business combination
(including a sale of all or substantially all of the assets of the
Company (other than to wholly-owned Subsidiaries of the Company)) that
requires the approval of the Company's shareholders, whether for such
transaction or the issuance of securities in such transaction, if
immediately after giving effect to such transaction, the Persons who
Beneficially Owned Voting Securities or Common Securities immediately
prior to such transaction Beneficially Own in the aggregate Voting
Securities or Common Securities (or voting securities or common
securities in the case of a surviving entity other than the Company)
representing a Voting Ownership Percentage or a Total Ownership
Percentage (or voting power or common equity ownership of common
securities in the case of a surviving entity other than the Company)
on a fully diluted basis of less than 50% immediately after giving
effect to such transaction; or
(c) the consummation by the Company of a plan of
complete liquidation or
dissolution of the Company.
"Change in Control Transaction" means a transaction which,
if consummated, would result in a Change in Control.
"Closing" means the closing of the sale and purchase of
the Shares pursuant to Section 2.1 hereof.
"Closing Date" has the meaning set forth in Section 2.2
hereof.
"Commission" means the Securities and Exchange Commission.
<PAGE>
"Common Securities" means the Common Stock, the Series A
Convertible Preferred Stock and any other securities of the Company
(excluding non-voting securities (other than capital stock) issued to
directors, officers or employees of the Company as compensation) to
the extent to which such securities by the terms thereof (i) are not
effectively limited in amount as to dividends or amounts payable upon
liquidation of the Company or (ii) are otherwise a substantial
equivalent of Common Stock as to dividends or upon liquidation of the
Company or upon consummation of a merger or other extraordinary
transaction in which the outstanding shares of Common Stock
participate.
"Common Stock" means the Common Stock, par value $1.00 per
share, of the Company.
"Company" has the meaning set forth in the preamble hereto.
"Company Buy Back Period" means the period beginning on the
Closing Date and ending twelve months thereafter.
"Company Repurchase" has the meaning set forth in Section
6.6(a).
"Competing Investment" means the acquisition by a Competitor
(other than in connection with a Change in Control Transaction) of
Beneficial Ownership of (i) Common Securities (A) directly from the
Company or any Subsidiary of the Company, (B) pursuant to an agreement
with the Company or any of its Subsidiaries (a "Competitor Agreement")
providing either for the issuance or transfer by the Company or any of
its Subsidiaries of such Common Securities or providing for the waiver
or inapplicability of the Amended Rights Agreement (or a Substantially
Similar Plan) with respect to the ownership of such Common Securities,
or (C) where, in connection with such acquisition, the Company waives
or renders the Amended Rights Agreement (or a Substantially Similar
Plan) inapplicable thereto, in each case, if, after giving effect to
such acquisition, the Competitor would, in the case of clauses (A),
(B) and (C) above, to the knowledge of the Company, after reasonable
inquiry, Beneficially Own Common Securities either (x) in excess of
the Trigger Amount (as defined in the Amended Rights Agreement, as
then in effect, as such term (or comparable term) may be amended from
time to time by the Company in its sole discretion) or (y)
representing an Equity Percentage of 15% or more or with a number of
Votes of 15% or more of the Total Voting Power, (ii) Common Securities
representing an Equity Percentage of 15% or more (whether acquired
from the Company or otherwise) (provided that this clause (ii) will
apply only if the Company shall amend, waive or modify the Amended
Rights Agreement as in effect on the date of this Agreement (or a
Substantially Similar Plan) so as to increase the percentage "15%"
referred to in clause (i) of the definition of Trigger Amount in the
Amended Rights Agreement or increase the percentage "10%" or the
fraction "one-fourth (1/4)" referred to in clause (ii) of the
definition thereof or otherwise render the Amended Rights Agreement
inapplicable (including by taking action to cause a Section 11(a)(ii)
Event or Section 13 Event (each as defined in the Amended Rights
Agreement as in effect on the date hereof), not to occur that, absent
such action, would otherwise have occurred, or to redeem the Preferred
Stock Purchase Rights) to an acquisition referred to in this clause
(ii) (whether or not done in connection therewith or in anticipation
thereof) or so as to provide that the acquisition of any additional
shares of Common Stock under the circumstances contemplated by clause
(2) of the proviso to paragraph (a)(ii) of the definition of Acquiring
Person contained in the Amended Rights Agreement (or similar provision
of any Substantially Similar Plan) will not have the effect specified
in said clause (2) (other than any such amendment, waiver,
modification or redemption legally required to be made by the Board as
a result of a shareholder-sponsored resolution or a final and
non-appealable court order, in each case, that is opposed by the
Board; provided, that for purposes of this clause (ii) references to
the "Amended Rights Agreement" shall also refer to a Substantially
Similar Plan in which the term "Trigger Amount" or comparable term
thereto, and the consequences resulting from its occurrence, are
substantially identical to those set forth in the Amended Rights
Agreement on the date of this Agreement including containing the same
percentages and fraction as those set forth above), or (iii) (a)
Common Securities representing an Equity Percentage of 10% or more,
and (b) the right (whether such right is contingent, conditional or
otherwise) to designate or nominate one or more Directors (or if the
Board within five years after the date of the acquisition of shares
specified in clause (a), nominates or appoints any designee of such
Competitor or its Affiliates to the Board). An acquisition of
<PAGE>
Beneficial Ownership of Common Securities in excess of a percentage of
Votes shall be deemed to have occurred when, as a result of such
Common Securities becoming entitled to additional Votes by reason of
the passage of time, such securities represent or have a number of
Votes which represent more than the specified percentage and, in the
case of clause (iii)(a) above, an acquisition of Beneficial Ownership
of Common Securities in excess of an Equity Percentage shall be deemed
to have occurred when, as a result of repurchases by the Company of
Common Securities, such securities represent more than the specified
percentage (provided that such 10% level in clause (iii)(a) above
shall not be deemed exceeded by reason of the repurchase of Common
Securities by the Company unless (i) an Equity Percentage of 10.5% or
more is achieved and (ii) the Competitor fails to reduce its
Beneficial Ownership of Common Securities to an Equity Percentage
below 10% within one year after equaling or exceeding the 10.5%
level). Notwithstanding the foregoing, (A) no transaction with a
Person who is not, at the time such transaction is consummated or
entered into, then designated as a Competitor shall be deemed a
Competing Investment as a result of the subsequent designation of such
Person by the Investor as a Competitor, but (B) by way of
illustration, the acquisition of Common Securities from the Company by
a Person (I) after which such acquisition such Person Beneficially
Owned Common Securities in an amount satisfying the 15% requirement of
clause (i) above, and (II) before which acquisition such Person had
been designated a Competitor but whose Beneficial Ownership did not
satisfy such 15% requirement, shall be deemed to be a Competing
Investment.
"Competitor" means any Person that is one of eight
participants in the agricultural chemicals or biotechnology market as
designated to the Company by the Investor as a Competitor (which term
shall include any Controlled Affiliate of each such Competitor and any
13D Group with respect to securities of the Company of which such
Person is a member). The Investor shall provide to the Company prior
to the date of this Agreement, and within 10 Business Days prior to
each anniversary of the Closing Date, a written list of such
Competitors (which Investor may change from year to year as of each
anniversary of the Closing Date) which Competitors shall conform to
the provisions of the definition of Competitor contained herein. The
Competitors so designated shall constitute the Competitors hereunder
for the initial period commencing on the Closing date hereof and
ending one year following the Closing Date and the successive one year
period following each applicable anniversary of the Closing Date and
if no such notice is provided for any year, the Competitors specified
in the notice for the most recent year that such notice was given
shall continue to be deemed the Competitors.
"Competitor Agreement " shall have the meaning set
forth in the definitions of the term "Competing Investment".
"Confidentiality Agreement" has the meaning set forth in
Section 8.1(a) hereof.
"control" with respect to any Person means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Controlled Affiliate" shall mean, with respect to any
Person, any Affiliate of such Person that is controlled by or that
controls or is under common control with such Person such that, in any
such case, the controlling party has the legal or contractual power
(including, without limitation, through negative control or through
the controlling parties designees or representatives on the board of
directors or other governing body of the parties controlled by the
controlling or under the articles of incorporation or other
constituent documents of such controlled parties or as a result of
voting rights of any securities or other instruments issued by such
controlled parties) to direct or to manage the direction of the
business and policies of such Affiliate.
"Derivative Securities" means any subscriptions, options,
conversion rights, warrants, phantom stock rights or other agreements,
securities or commitments of any kind obligating the Company or any of
its Subsidiaries to issue, grant, deliver or sell, or cause to be
issued, granted, delivered or sold (i) any Common Securities or Voting
Securities of the Company, (ii) any securities convertible into or
exchangeable for any Common Securities or Voting Securities of the
Company, or (iii) any obligations measured by the price or value of
any shares of capital stock of the Company.
<PAGE>
"Dilutive Issuance" has the meaning set forth in Section
6.7(e) hereof.
"Director" shall mean a director of the Company.
"Disposition" has the meaning set forth in Section 6.3(a)
hereof.
"Equity Percentage" means, with respect to any Common
Securities calculated at any particular point in time, the ratio,
expressed as a percentage of (a) the total number of shares of Common
Stock included in, or issuable upon conversion of (whether or not then
convertible), or otherwise constituting the economic equivalent of,
such Common Securities over (b) the total number of shares of Common
Stock then outstanding and the number of shares of Common Stock
issuable upon conversion of (whether or not then convertible), or
otherwise constituting the economic equivalent of, all outstanding
Common Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Excluded Person" shall mean (i) any member of the Investor
Group, (ii) any Grandfathered Person, (iii) any wholly owned
Subsidiary of the Company, or (iv) any underwriter temporarily holding
Common Securities in connection with a public offering of such
securities.
"First Offer Price" has the meaning set forth in Section
6.4(a) hereof.
"Fully Independent Director" means a person who qualifies as
an "outside director" of the Company and the Investor within the
meaning of Section 162(m) of the Internal Revenue Code of 1986 as in
effect on the date hereof and who is not (apart from such
directorship) (i) a current or former officer or employee of the
Company or any Affiliate of the Company, (ii) a current or former
director, officer or employee of the Investor or any member of the
Investor Group, (iii) did not in either of the last two completed
calendar years receive, and is not an officer, director, employee,
stockholder holding more than 10% of the voting interest of, partner
or Affiliate of any person ("Entity") that in either of such Entity's
two most recent fiscal years, received, more than 10% of such person's
total revenues from either the Company or the Investor.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, political subdivision,
tribunal, or other instrumentality of any government (including any
regulatory or administrative agency), whether federal, state or local,
domestic or foreign.
"Grandfathered Person" means any of the Persons specified in
clauses (i) through (vi) of the term "Grandfathered Person" in the
Amended Rights Agreement as in effect on the date of this Agreement
and any 13D Group referred to in clause (B) below; provided, however,
that a Grandfathered Person shall cease to be a Grandfathered Person
if any of the following occur at any time: (A) such Grandfathered
Person, individually or together with one or more other Grandfathered
Persons, acting together or as part of a 13D Group, Beneficially Owns
Common Securities representing an Equity Percentage of 40% or more on
a fully diluted basis, or (B) such Grandfathered Person, individually
or together with one or more Grandfathered Persons, are acting as part
of a 13D Group which includes Persons who are not Grandfathered
Persons and who individually or in the aggregate Beneficially Own,
directly or indirectly, in excess of 1% of the then outstanding Common
Securities provided that the reference to "1%" referred to in this
clause (B) shall be increased to up to 5% so long as the Beneficial
Ownership of the entire 13D Group referred to in this clause (B) does
not have an Equity Percentage greater than 35%.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder.
"Independent Director" means a person who is not (apart from
such directorship) (i) a current or former officer or employee of the
Company or any Affiliate of the Company or (ii) a current or former
director, officer or employee of the Investor or any member of the
Investor Group or Other Investor Affiliate.
<PAGE>
"Initial Investor Nominee Notice" has the meaning set forth
in Section 5.1(a) hereof.
"Initial Top-Up Period" has the meaning set forth in Section
6.7(b)(i) hereof.
"Investor" has the meaning set forth in the preamble hereto.
"Investor Group" shall mean (a) the Investor, (b) any
Subsidiary of the Investor, (c) any Affiliate of the Investor
controlled by the Investor such that the Investor has the legal or
contractual power (including, without limitation, through negative
control or through the Investor's designees or representatives on the
board of directors or other governing body of such Affiliate or under
the articles of incorporation or other constituent documents of such
Affiliate or as a result of the voting rights of any securities or
other instruments issued by such Affiliate) to cause such Affiliate to
comply with the terms of this Agreement applicable to the Investor,
and (d) any Person with whom the Investor or any Person included in
the foregoing clauses (b) or (c) is part of a 13D Group.
"Investor Nominee Notice" has the meaning set forth in
Section 5.1(a) hereof.
"Investor Nominee" has the meaning set forth in Section
5.1(a) hereof.
"Investor SEC Reports" has the meaning set forth in Section
4.4 hereof.
"Joint Venture Agreement" shall mean (i) the Formation
Agreement, dated as of August 6, 1997, between the Company and the
Investor (the "Formation Agreement") and (ii) the LLC Agreement
referred to therein.
"Junior Preferred Stock" has the meaning set forth in
Section 3.4(a) hereof.
"Law" means any law, treaty, statute, ordinance, code, rule
or regulation of a Governmental Entity.
"Lien" means any security interest, claim, voting agreement,
restriction, option, mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever and any contingent or other agreement to provide any of the
foregoing.
"Loss" has the meaning set forth in Section 6.6(b) hereof.
"Market Price," shall mean on any trading day, with respect
to shares of Common Stock or any other security which is listed on a
national securities exchange, the last sale price regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices regular way, in either case on the NYSE, or, if
the Common Stock or other security is not listed or admitted to
trading on such exchange, on the principal national securities
exchange on which the Common Stock or other security is listed or
admitted to trading, or, if the Common Stock or other security is not
listed or admitted to trading on any national securities exchange but
is designated as national market system security by the NASD, the last
sale price, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, in either case as report
on the NASD Automated Quotation/National Market System, or if the
Common Stock or other security is not so designated as a national
market systems security, the average of the highest reported bid and
lowest reported asked prices as furnished by the NASD or similar
organization if the NASD is no longer reporting such information.
"Material Adverse Effect" means any material adverse effect
on the financial condition, business or operations of the Company and
its Subsidiaries taken as a whole.
"Maximum Offer Price" has the meaning set forth in Section
8.3(a) hereof.
"NASD" has the meaning set forth in Section 6.4(b) hereof.
"NYSE" means the New York Stock Exchange.
<PAGE>
"Offer" has the meaning set forth in Section 8.3(a).
"Offer Purchase Price" has the meaning set forth in Section
8.3(a).
"Options" has the meaning set forth in Section 3.3(b)
hereof.
"Order" means any judgment, decree, order, writ, award,
ruling, stipulation, injunction or determination of an arbitrator or
court or other Governmental Entity.
"Other Investor Affiliate" has the meaning set forth in
Section 6.1(A) hereof.
"Ownership Cap" means a Total Ownership Percentage of 20%,
subject to reduction as provided in Section 6.7(b).
"Per Share Price Range" has the meaning set forth in Section
8.3(a).
"Permitted Underwriter" has the meaning set forth in Section
6.3(b)(I) hereof.
"Person" means any individual, corporation, company,
association, partnership, joint venture, limited liability company,
trust or unincorporated organization, group (within the meaning of
Rule 13d-5 under the Exchange Act) or a government or any agency or
political subdivision thereof.
"Pioneer Competitor" means any Person that is one of eight
participants in the seed market within the Field of Interest (as
defined in the Research Alliance Agreement) as designated to the
Investor by the Company as a Pioneer Competitor (which term shall
exclude the Investor and its Subsidiaries but shall include any
Controlled Affiliate of each such Pioneer Competitor, and the persons
specified in writing by the Company to the Investor on the date of
this Agreement, and any 13D Group with respect to voting securities of
the Spin-Off Entity of which such Person is a member). The Company
shall provide to the Investor prior to the date of this Agreement, and
within 10 Business Days prior to each anniversary of the Closing Date,
a written list of such Pioneer Competitors (which the Company may
change from year to year as of each anniversary of the Closing Date)
which Pioneer Competitors shall conform to the provisions of the
definition of Pioneer Competitor contained herein. The Pioneer
Competitors so designated shall constitute the Pioneer Competitors
hereunder for the initial period commencing with the date hereof and
ending one year following the Closing Date and the successive one year
periods following each applicable anniversary of the Closing Date and
if no such notice is provided for any year, the Competitors specified
in the notice for the most recent year that such notice was given
shall continue to be deemed the Pioneer Competitors.
"Post Termination Standstill Period" has the meaning set
forth in Section 6.1(A) hereof.
"Preferred Stock Purchase Rights" means rights to purchase
the Junior Preferred Stock pursuant to the Amended Rights Agreement,
as amended from time to time.
"Process" has the meaning set forth in Section 8.2 hereof.
"Proposal" means any inquiry, indication of interest,
proposal or offer made to the Company or publicly disclosed by any
Person relating to any Change in Control Transaction or Competing
Investment.
"Purchase Price" has the meaning set forth in Section 2.1
hereof.
"Purchaser Standstill Agreement" has the meaning set forth
in Section 6.3(B)(II) hereof.
"Purchasing Person" has the meaning set forth in Section
6.3(b) hereof.
"Reclassification Amendment" shall have the meaning set
forth on Section 8.8.
"Registration Rights Agreement" means the agreement to be
entered into on the Closing Date between the Company and the Investor
<PAGE>
in the form set forth in Exhibit A hereto.
"Regulatory Approvals" means any and all certificates,
permits, licenses, franchises, concessions, grants, consents,
approvals, orders, registrations, authorizations, waivers, variances
or clearance from a Governmental Entity.
"Release Event" has the meaning set forth in Section 6.9
hereof.
"Representatives" means, with respect to any Person, any of
such Person's officers, directors, partners, employees, agents,
attorneys, accountants, consultants or financial or other advisors or
other Person associated with or acting on behalf of such Person.
"Required Disposition" has the meaning set forth in Section
6.6(a) hereof.
"Required Disposition Amount" has the meaning set forth in
Section 6.6(a) hereof.
"Requisite Number" has the meaning set forth in Section
8.3(a).
"Research Alliance Agreement" shall mean the Research
Alliance Agreement, dated as of August 6, 1997, between the Company
and the Investor.
"Rights Agreement" means the Amended and Restated Rights
Agreement, dated as of December 13, 1996, by and between the Company
and The First National Bank of Boston, as Rights Agent.
"Rights Agreement Amendment" means the amendment to the
Rights Agreement executed by the Company and the Rights Agent
concurrently herewith in the form set forth in Exhibit B hereto.
"Sale of Ag Products" means (x) a sale or other transfer to
one or more Persons other than a Subsidiary of the Investor of all or
substantially all of the assets or business of the Agricultural
Products business of the Investor or (y) a transfer (whether by sale,
merger or other transaction) of any of the common equity of any Person
through which any such assets are held (such entity or any transferee
pursuant to clause (x) hereof a "Spin-Off Entity") if, after giving
effect to such transfer, such Person is not a Subsidiary of the
Investor, provided that a transfer referred to in this clause (y)
effected by means of a dividend, distribution, bona fide public
offering or otherwise, and a sale or transfer referred to in clause
(x), in either case, shall not be a "Sale of Ag Products" if and for
so long as all of the following conditions are and continue to be
satisfied: (i) the Spin-Off Entity agrees to be and is bound by the
provisions of Section 6.1(A) of the Agreement (to the same extent as
if the Spin-Off Entity were a Subsidiary of the Investor), (ii) the
Spin-Off Entity shall agree to be and is bound by the Research
Alliance Agreement to the same extent as the Investor (it being
understood that in no event shall the Investor be released from any of
its obligations under this Agreement or the Research Alliance
Agreement as a result of the Spin-Off Entity's agreement to the
matters referred to in clauses (i) and (ii) above except that, in the
case of the Research Alliance Agreement, if substantially all of the
research capabilities of the Investor in agricultural products is
transferred to the Spin-Off Entity, then the Investor will continue
pursuant to the Research Alliance Agreement to provide the Company
with, but only with, genomic and biotechnology support sufficient so
that the research available to the Company from the Spin-Off Entity
under the Research Alliance Agreement, when taken together with such
support from the Investor, is substantially the same in scope and
capability as the research available from the Investor prior to the
transfer of such assets to the Spin-Off Entity), (iii) if at any time,
any Person or 13D Group owns 15% or more of any class of voting
securities of the Spin-Off Entity, the Investor and its wholly owned
Subsidiaries must have an interest in the Voting Securities of the
Spin-Off Entity greater than or equal to any other Person or 13D Group
(however, such interest must be greater than that of any Person or 13D
Group which is a Pioneer Competitor), (iv) no Pioneer Competitor may
own voting or common securities of the Spin-Off Entity (A)
representing more than 15% of the common securities or voting power of
the Spin-Off Entity, which securities have been acquired directly from
the Investor or the Spin-Off Entity or a Subsidiary of either, (B)
representing 10% or more of the common securities of the Spin-Off
Entity if the Pioneer Competitor has the right (whether such right is
contingent, conditional or otherwise) to designate or nominate one or
<PAGE>
more directors of the Spin-Off Entity (or if the board of directors of
the Spin-Off Entity within five years after the date of acquisition of
shares referred to in this clause (B) nominates any designee of such
Pioneer Competitor or any Affiliate of such Pioneer Competitor to the
board of the Spin-Off Entity), provided that such 10% level in this
clause (B) shall not be deemed exceeded by reason of the repurchase of
common securities by the Spin-Off Entity unless (i) an ownership of
10.5% or more of the common securities is achieved and (ii) the
Pioneer Competitor fails to reduce its Beneficial Ownership of common
securities to an ownership level below 10% within one year after
equaling or exceeding the 10.5% level or (C) representing in excess of
the level of ownership that would cause a triggering event to occur
under any rights plan or "poison pill" adopted by the Spin-Off Entity
and then in effect, and (v) so long as the Investor owns less than 30%
of the common equity of the Spin-Off Entity, the Company has the right
to nominate one representative of the Company to the board of the
Spin-Off Entity analogous to the rights of the Investor under Sections
5.1(b) and (c) and the first sentence of clause (d) thereof (provided
that such representative must be one of the four most senior
executives of the Company, and provided that, if any such
representative of the Company on the board of the Spin-Off Entity is
unable to attend any meeting of such board, the Company shall have the
right to designate an alternate designee of the Company, who is also
one of the four most senior executives of the Company, to attend such
meeting of the board of the Spin-off Entity as an observer) and the
Investor shall use commercially reasonable efforts (including by
voting its voting securities in favor of such nominee) to cause such
nominee to be elected to the board of the Spin-Off Entity (it being
understood that a Sale of Ag Products will be deemed to occur at any
time any of the foregoing conditions cease to be satisfied; provided,
however, that in the case of a failure of either clauses (iii) or (iv)
above, the conditions as to ownership of common securities or voting
securities by a Pioneer Competitor must have ceased to have been
satisfied with respect to any Person or 13D Group only after the
designation (to the extent in effect at such time) by the Company of
such Person or 13D Group as a Pioneer Competitor).
"Section 6.4 Closing" has the meaning set forth in Section
6.4(a) hereof.
"Section 6.4 Price" has the meaning set forth in Section
6.4(b) hereof.
"Section 6.4 Securities" has the meaning set forth in
Section 6.4(a) hereof.
"Section 6.5 Acceptance Notice" has the meaning set forth in
Section 6.5(a) hereof.
"Section 6.5 Closing" has the meaning set forth in Section
6.5(a) hereof.
"Section 6.5 Price" has the meaning set forth in Section
6.5(b) hereof.
"Section 6.5 Securities" has the meaning set forth in
Section 6.5(a) hereof.
"SEC Reports" has the meaning set forth in Section 3.5(a)
hereof.
"Securities Act" means the Securities Act of 1933, as
amended, and the regulations promulgated thereunder.
"Sell Down Period" has the meaning set forth in Section
6.6(a) hereof.
"Series A Convertible Preferred Stock" has the meaning set
forth in Section 2.1 hereof.
"Shares" has the meaning set forth in Section 2.1 hereof.
"Spin-Off Agreement" has the meaning set forth in Section
6.8 hereof.
"Spin-Off Company" means the corporation or other entity the
capital stock or other equity interests of which are distributed in a
Spin-off Distribution.
"Spin-Off Distribution" means any distribution by the
Company to all holders of Common Securities of capital stock of or
<PAGE>
other equity interests in any corporation or entity other than the
Company.
"Spin-Off Entity" has the meaning set forth in the
definition of the term "Sale of Ag Products".
"Standstill Period" means the period commencing on the date
hereof and ending on the termination of this Agreement pursuant to
Section 10.1; subject to extension upon the occurrence of a Trigger
Event or a Release Event as provided in Section 10.2(iv).
"Subsidiary" means, as to any Person, any other Person more
than fifty percent (50%) of the shares of the voting stock or other
voting interests of which are owned or controlled, or the ability to
select or elect more than fifty percent (50%) of the directors or
similar managers is held, directly or indirectly, by such first Person
or one or more of its Subsidiaries or by such first Person and one or
more of its Subsidiaries. A Subsidiary that is directly or indirectly
wholly-owned by another Person except for directors' qualifying shares
shall be deemed wholly-owned for purposes of this Agreement.
"Substantially Similar Plan" has the meaning set forth in
Section 8.4 hereof.
"Surviving Change in Control Transaction" has the meaning
set forth in Section 8.2(b).
"13D Group" shall mean any group of Persons who, with
respect to those acquiring, holding, voting or disposing of Voting
Securities would, assuming ownership of the requisite percentage
thereof, be required under Section 13(d) of the Exchange Act and the
rules and regulations thereunder to file a statement on Schedule 13D
with the SEC as a "person" within the meaning of Section 13(d)(3) of
the Exchange Act, or who would be considered a "person" for purposes
of Section 13(g)(3) of the Exchange Act. "13D Group" when used with
reference to standards or tests that are based on securities other
than Voting Securities shall have the foregoing meaning except that
the words "Voting Securities" in the second line of the definition of
"13D Group", (i) in the case of standards or tests based on
"securities of the Company", shall be replaced with the words
"securities of the Company", and (ii) in the case of standards or
tests based on "voting securities of the Spin-Off Entity", shall be
replaced with the words "voting securities of the Spin-Off Entity."
"Third Party Offer" has meaning set forth in Section 6.4(a)
hereof.
"Total Ownership Percentage" means, with respect to any
Person calculated at a particular point in time, the ratio, expressed
as a percentage, of (a) the total number of shares of Common Stock
Beneficially Owned by such Person and issuable upon conversion of
(whether or not then convertible), or otherwise constituting the
economic equivalent of, all Common Securities Beneficially Owned by
such Person, over (b) the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon
conversion (whether or not then convertible) of, or otherwise
constituting the economic equivalent of, all outstanding Common
Securities.
"Total Voting Power" shall mean, calculated at a particular
point in time, the aggregate Votes represented by all then outstanding
Voting Securities then entitled to vote (a) as estimated conclusively
for purposes of the definition of the terms "Change in Control" and
"Competing Investment" at any time in good faith by the Company on the
assumption that all holders of Common Stock who would, upon taking the
necessary documentation steps under the Articles of Incorporation, be
entitled to five votes per share at such time, have effectively taken
such steps, it being understood that it will be necessary for the
Company to make various assumptions in connection therewith (such as
identity of holders and period of ownership of shares of Common Stock)
and (b) for all other purposes of this Agreement, based on the number
of Votes as were actually entitled to vote at the then current or the
most recent meeting of shareholders as determined by the Company which
excludes any estimation of any kind (including, as to who would have
been entitled to 5 votes per share if such shareholder had taken the
requisite steps to obtain such vote) plus, without duplication of any
Votes otherwise taken into account, the number of Votes attributable
to any Voting Securities issued by the Company since the most recent
meeting of shareholders of the Company.
"Transaction Agreements" means this Agreement, the
<PAGE>
Registration Rights Agreement and the Rights Agreement Amendment.
"Transfer" has the meaning set forth in Section 6.7(b)(iii).
"Transfer Notice" has the meaning set forth in Section
6.4(a) hereof.
"Trigger Event" has the meaning set forth in Section 6.10
hereof.
"Unsolicited Offer" has the meaning set forth in Section
6.3(e) hereof.
"Votes" shall mean, at any time, with respect to any Voting
Securities, the total number of votes that would be entitled to be
cast by the holders of such Voting Securities generally (by the terms
of such Voting Securities, the Articles of Incorporation or any
certificate of designations for such Voting Securities) in a meeting
for the election of Directors held at such time, including the votes
that would be able to be cast by holders of shares of Series A
Convertible Preferred Stock.
"Voting Amendment" has the meaning set forth in Section
6.2(a) hereof.
"Voting Ownership Percentage" shall mean, calculated at a
particular point in time, the Voting Power represented by the Voting
Securities Beneficially Owned by the Person whose Voting Ownership
Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point
in time, the ratio, expressed as a percentage, of (a) the Votes
represented by the Voting Securities with respect to which the Voting
Power is being determined to (b) Total Voting Power.
"Voting Securities" means the shares of Common Stock, the
Series A Convertible Preferred Stock and any other securities of the
Company entitled to vote generally for the election of directors, and
any securities (other than employee stock options) which are
convertible into, or exercisable or exchangeable for, Voting
Securities.
Section 1.2. General Interpretive Principles. Whenever used
in this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, any noun or pronoun shall be deemed to
include the plural as well as the singular and to cover all genders.
The name assigned this Agreement and the section captions used herein
are for convenience of reference only and shall not be construed to
affect the meaning, construction or effect hereof. Unless otherwise
specified, the terms "hereof," "herein" and similar terms refer to
this Agreement as a whole (including the exhibits, schedules and
disclosure statements hereto), and references herein to Sections refer
to Sections of this Agreement.
SECTION 2
ISSUANCE AND SALE OF SHARES
Section 2.1. Issuance and Sale of Shares. Upon the terms and
subject to the conditions set forth in this Agreement, and in reliance
upon the representations and warranties hereinafter set forth, on the
Closing Date, the Company will issue, sell and deliver to the
Investor, and the Investor will purchase from the Company, 164,445.86
shares of Series A Convertible Preferred Stock of the Company, par
value $.01 per share, having the terms set forth in the Certificate of
Designation attached hereto as Exhibit C (the "Series A Convertible
Preferred Stock"), together with the associated Preferred Stock
Purchase Rights (such shares of Series A Convertible Preferred Stock,
together with such Preferred Stock Purchase Rights, the "Shares"),
free and clear of all Liens (other than Liens pursuant to this
Agreement), for an aggregate purchase price of $1,710,236,944 (the
"Purchase Price").
Section 2.2. Closing. (a) The Closing shall take place at
the offices of Fried, Frank, Harris, Shriver & Jacobson at 10:00 a.m.,
One New York Plaza, New York, NY 10004, New York City time, on the
Business Day of the satisfaction or concurrent satisfaction or, if
permissible, waiver of the conditions set forth in Sections 9.1 and
9.2 hereof (the "Closing Date") or at such other time and place as the
parties may agree.
<PAGE>
(b) At the Closing (i) the Company will deliver to the
Investor certificates representing the Shares against payment of the
Purchase Price, registered in the name of the Investor, or any
wholly-owned United States Subsidiary of the Investor designated by it
(provided that such Subsidiary agrees in writing to be bound by this
Agreement to the same extent as the Investor and such Subsidiary at
all times remains a wholly-owned United States Subsidiary of the
Investor), together with the other documents and certificates to be
delivered pursuant to Section 9.1 hereof, and (ii) the Investor, in
full payment for the Shares, will deliver to the Company an amount
equal to the Purchase Price in immediately available funds by wire
transfer to the account designated by the Company, at least two
Business Days prior to the Closing Date, or by such other means as may
be agreed by the parties, together with the other documents and
certificates to be delivered pursuant to Section 9.2 hereof.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees
with, the Investor as follows:
Section 3.1. Corporate Organization and Qualification. Each
of the Company and its material Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate
power and authority to own or lease its assets and to conduct its
business. Each of the Company and its Subsidiaries is duly licensed or
qualified as a foreign corporation for the transaction of its business
and is in good standing under the laws of each other jurisdiction in
which its ownership, lease or operation of property or conduct of its
business requires such qualification, except where the failure to be
so licensed, authorized and qualified and in good standing would not
reasonably be expected to have a Material Adverse Effect. The Company
has made available to the Investor a complete and correct copy of the
Articles of Incorporation and the Bylaws of the Company, in each case
as amended to date, and each of which as so made available, as the
case may be, is in full force and effect.
Section 3.2. Authorization of Agreements. (a) The Company
has all requisite corporate power and authority to execute, deliver
and perform its obligations under the Transaction Agreements, to issue
and sell the shares of Series A Convertible Preferred Stock to be sold
to the Investor (or its permitted designee) hereunder and the shares
of Common Stock issuable upon the conversion thereof and to otherwise
consummate the transactions contemplated hereby and thereby and such
issuance, sale and delivery of such shares of Series A Convertible
Preferred Stock to the Investor (or its permitted designee) will
convey to the Investor (or its permitted designee) (and any issuance
of Common Stock upon any such conversion will convey to the Person to
whom such Common Stock is issued) good and marketable title to such
shares, free and clear of all Liens, other than Liens arising pursuant
to any Transaction Agreement. The execution, delivery and performance
of the Transaction Agreements, and the consummation by the Company of
the transactions contemplated hereby and thereby, have been approved
by the Board of Directors (by the vote of the directors as advised by
the Company to the Investor in writing prior to the execution of this
Agreement) and have been duly authorized by all other necessary
corporate action on the part of the Company. The Company has taken the
corporate action necessary to approve the transactions contemplated by
this Agreement for purposes of Section 490.1109 of the Business
Corporation Act of the State of Iowa and to provide that the
Transaction Agreements and the transactions contemplated thereby shall
be exempt from the requirements of any "moratorium," "control share,"
"fair price" or other anti-takeover laws or regulations of any state
which, to the knowledge of the Company, is reasonably likely to
otherwise be applicable thereto.
(b) Each of this Agreement and the Rights Agreement
Amendment have been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity. The
Registration Rights Agreement, when executed, will have been duly
executed and delivered by the Company and will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
<PAGE>
insolvency and similar laws affecting creditors' rights generally and
to general principles of equity.
(c) The execution, delivery and performance of the
Transaction Agreements and the acquisition of the Shares contemplated
thereby and the issuance of Common Stock to the Investor Group upon
the conversion thereof in accordance with the Certificate of
Designation for the Series A Convertible Preferred Stock will not
cause a Distribution Date or constitute a Triggering Event, a Section
11(a)(ii) Event or a Section 13 Event (in each case, as defined in the
Amended Rights Agreement) under the Amended Rights Agreement.
Section 3.3. Consents; No Conflicts. (a) Except for (i) the
expiration of the waiting period under the HSR Act, (ii) if necessary,
the approval of the NYSE required for listing of the Common Stock into
which the Series A Convertible Preferred Stock is convertible, (iii)
all consents, authorizations, orders and approvals of, and all filings
and registrations, including the effectiveness of a registration
statement and applicable "Blue Sky" clearance and, in each case
required for, or in connection with, the consummation of the
transactions contemplated by the Registration Rights Agreement, and
(iv) the Regulatory Approvals set forth on Schedule 3.3, no Regulatory
Approval from, or registration, declaration, notice or filing with,
any Governmental Entity is required to be made or obtained by the
Company or any of its Subsidiaries in connection with the execution,
delivery and performance of the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby,
except for such Regulatory Approvals, registrations, declarations,
notices and filings, (A) the failures of which to be made or obtained,
would not in the aggregate reasonably be expected to have a Material
Adverse Effect, or (B) which are applicable by reason of any facts
specifically relating to, or the particular regulatory status of, the
Investor.
(b) The execution and delivery of this Agreement and the
Rights Agreement Amendment does not, and the execution and delivery of
the Registration Rights Agreement will not, and the performance of the
obligations set forth herein and therein and the consummation of the
transactions contemplated hereby and thereby will not, (i) violate any
provision of the Articles of Incorporation or the Bylaws or the other
organizational documents of the Company or the comparable governing
instruments of any of its material Subsidiaries; (ii) conflict with,
contravene or result in a breach or violation of any of the terms or
provisions of, or constitute a default (with or without notice or the
passage of time) under, or result in or give rise to a right of
termination, cancellation, acceleration, amendment or modification of
any right or obligation under, or to a loss of any benefit to which
any of the Company or its Subsidiaries is entitled, or give rise to a
right to put or to compel a tender offer for outstanding securities of
the Company or any of its Subsidiaries under, or require any consent,
waiver, provision of notice or approval under, any note, bond, debt
instrument, indenture, mortgage, deed of trust, lease, loan agreement,
joint venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property of the Company or any of its Subsidiaries
is bound; (iii) result in the creation or imposition of any Lien upon
any assets or properties of the Company or any of its Subsidiaries
except pursuant to any Transaction Agreement; or (iv) violate or
conflict with any Law or Order applicable to the Company or any of its
Subsidiaries or any of their respective assets or properties of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries or any of their respective assets or properties, except
in the case of clause (ii), clause (iii) and clause (iv) for such
violations, conflicts, defaults, creation of Liens and other matters
which would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
Section 3.4. Capitalization. (a) The authorized capital
stock of the Company consists of (i) 150,000,000 shares of Common
Stock, of which 82,222,935 shares are issued and outstanding and (ii)
10,000,000 shares of preferred stock, no par value, of which (x)
150,000 shares have been designated Junior Participating Preferred
Stock (the "Junior Preferred Stock"), of which no shares are
outstanding and (y) 200,000 shares have been designated Series A
Convertible Preferred Stock, of which no shares are outstanding. All
of such outstanding shares of Common Stock were duly authorized and
validly issued and are fully paid and non-assessable.
(b) Other than (i) shares of Common Stock reserved for
issuance pursuant to the Company's stock option plan (the "Options"),
<PAGE>
(ii) shares of Common Stock reserved for issuance upon conversion of
the Series A Convertible Preferred Stock and (iii) shares of Junior
Preferred Stock reserved for issuance upon exercise of the currently
existing Preferred Stock Purchase Rights, and except as set forth on
Schedule 3.4(b)(1), there are not authorized or outstanding (or any
obligations to authorize or issue) any Derivative Securities or any
contract, agreement or understanding to pay any dividend on or make
any distribution with respect to any capital stock or other securities
of the Company. Schedule 3.4(b)(2) sets forth the terms (including,
without limitation, the exercise price and the expiration date) and
number of each type of Derivative Securities outstanding. The
transactions contemplated hereby will not affect the terms and
provisions of, and will not alter the rights of holders of, any
Derivative Securities, including but not limited to any anti-dilution
adjustments to the number of outstanding Options, the exercise price
thereof or the number of shares of Common Stock to be acquired upon
exercise thereof. Other than pursuant to the Transaction Agreements
and the Rights Agreement, there are no restrictions on the transfer of
shares of capital stock of the Company, and no contract, agreement or
understanding to which the Company is a party exists among holders of
capital stock of the Company with respect to the ownership, holding,
voting or any other rights or obligations with respect to such capital
stock, except as set forth in Schedule 3.4(b)(3).
(c) The shares of Series A Convertible Preferred Stock to be
issued pursuant to this Agreement and the shares of Common Stock
issuable upon conversion of such shares have been duly and validly
authorized and, when such shares are issued as contemplated by this
Agreement, will have been validly issued, fully paid and
non-assessable. There are no, and the issuance and sale of the Series
A Convertible Preferred Stock pursuant to this Agreement and the
issuance of shares of Common Stock upon conversion of the Series A
Convertible Preferred Stock will not give rise to any, preemptive
rights, rights of first refusal or other similar rights on behalf of
any Person under any provision of applicable Law or any provision of
the Articles of Incorporation or Bylaws of the Company or of any
agreement or instrument to which the Company or any of its material
Subsidiaries is a party or by which the Company or any of its material
Subsidiaries is bound in respect of any capital stock or other
securities of the Company or its material Subsidiaries other than
pursuant to the Transaction Agreements. No consent or approval of the
Company's shareholders is required by Law, the Articles of
Incorporation or Bylaws or otherwise for the execution, delivery and
performance by the Company of the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby.
Section 3.5. Company Reports; Financial Statements. (a) The
Company has delivered to the Investor a true and complete copy of (i)
the Company's Annual Report on Form 10-K for the fiscal years ended
August 31, 1996, 1995 and 1994; (ii) the Company's Quarterly Report on
Form 10-Q for the periods ended November 30, 1996, February 29, 1997
and May 30, 1997; and (iii) each registration statement, report on
Form 8-K and Form 8-A, proxy statement, information statement or other
document, report or statement filed by the Company or any of its
Subsidiaries with the Commission since December 31, 1994, in each case
in the form (including financial statements, schedules, exhibits and
any amendments thereto) filed with the Commission (collectively, the
"SEC Reports"). As of their respective dates, the SEC Reports (i) were
timely filed with the Commission; (ii) complied, in all material
respects, with the applicable requirements of the Exchange Act and the
Securities Act; and (iii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Other
than the SEC Reports, the Company and its Subsidiaries have not filed
or been required to file any other reports or statements with the
Commission since December 31, 1994.
(b) Each of (i) the consolidated balance sheets (including
the related notes and schedules) included in or incorporated by
reference into the SEC Reports fairly presents the consolidated
financial position of the Company and its Subsidiaries as of the date
thereof, subject, in the case of unaudited statements, to normal
year-end adjustments, and (ii) the consolidated statements of income
(or statements of results of operations), shareholders' equity and
cash flows (including the related notes and schedules) included in or
incorporated by reference into the SEC Reports fairly presents the
results of operations, retained earnings and cash flows, as the case
may be, of the Company and its Subsidiaries (on a consolidated basis)
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end adjustments and except as permitted by
<PAGE>
Form 10-Q of the Commission) in each case in accordance with GAAP
applied on a consistent basis throughout the periods covered (except
as stated therein or in the notes thereto) and in compliance with the
rules and regulations of the Commission.
Section 3.6. Absence of Certain Changes. Except for
transactions contemplated by the Transaction Agreements or as
disclosed in the SEC Reports or as set forth in Schedule 3.6, since
August 31, 1996, there have not been any changes, conditions,
occurrences, circumstances or other events that have had or would
reasonably be expected to have a Material Adverse Effect.
Section 3.7. Litigation. Except as disclosed in SEC Reports
and Schedule 3.7 hereto, there are no claims, suits, actions,
proceedings, arbitrations or investigations pending or, to the
knowledge of the Company, threatened in writing against the Company or
any of its material Subsidiaries that in the aggregate would
reasonably be expected to have a Material Adverse Effect; nor are
there any Orders outstanding against or applicable to the Company or
any of its material Subsidiaries or against or applicable to any of
their respective assets, properties or businesses which would
reasonably be expected to have a Material Adverse Effect.
Section 3.8. Compliance with Laws; Regulatory Approvals.
Except as disclosed in the SEC Reports and except for matters which in
the aggregate would not have a Material Adverse Effect, the Company
and its Subsidiaries are in compliance with all applicable Laws.
Except, for matters which in the aggregate, as would not have a
Material Adverse Effect, (a) all material Regulatory Approvals
required by the Company and its Subsidiaries to conduct their
respective business as now conducted by them have been obtained and
are in full force and effect and (b) the Company and its Subsidiaries
are in compliance in all material respects with the terms and
requirements of such Regulatory Approvals.
Section 3.9. Exemption from Registration. Assuming the
representations and warranties of the Investor set forth in Section 4
hereof are true and correct, the offer and sale of the shares of
Series A Convertible Preferred Stock made pursuant to this Agreement
will be in compliance with the Securities Act and any applicable state
securities laws and will be exempt from the registration requirements
of the Securities Act and such state securities laws.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to, and agrees
with, the Company as follows:
Section 4.1. Organization. The Investor is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to
own or lease its assets and to conduct its business.
Section 4.2. Authorization of Agreements. (a) The Investor
has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement, the Registration Rights
Agreement and each other document, instrument or certificate to be
executed by the Investor in connection with the consummation of the
transactions contemplated by this Agreement. The execution, delivery
and performance of this Agreement and the Registration Rights
Agreement, and the consummation by the Investor of the transactions
contemplated hereby and thereby, have been approved by the board of
directors of the Investor (by the vote of the directors as advised by
the Investor to the Company in writing prior to execution of this
Agreement) and have been duly authorized by all other necessary
corporate action on the part of the Investor.
(b) This Agreement has been duly executed and delivered by
the Investor and constitutes a valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity. The Registration Rights Agreement, when executed, will have
been duly executed and delivered by the Investor and will constitute a
valid and binding obligation of the Investor, enforceable against the
Investor in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
<PAGE>
Section 4.3. Consents; No Conflicts. (a) Except for (i) the
expiration of the waiting period under the HSR Act, (ii) all consents,
authorizations, orders and approvals of, and filing and registrations
including the effectiveness of a registration statement and applicable
"Blue Sky" clearance required for, or in connection with, the
consummation of the transactions contemplated by the Registration
Rights Agreement, and (iii) the Regulatory Approvals set forth on
Schedule 4.3, no Regulatory Approval from, or registration,
declaration, notice or filing with, any Governmental Entity is
required to be made or obtained by the Investor in connection with the
execution, delivery and performance of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby except for such Regulatory Approvals,
registrations, declarations, notices and filings, (A) the failures of
which to make or obtain would not reasonably be expected to have a
material adverse effect on the ability of the Investor to consummate
or to perform its obligations under the Transaction Documents, or (B)
which are applicable by reason of any facts specifically relating to,
or the particular regulatory status of, the Company or its
Subsidiaries.
(b) The execution and delivery of this Agreement does not,
and the execution and delivery of the Registration Rights Agreement
will not, and the performance of the obligations set forth herein and
therein and the consummation of the transactions contemplated hereby
and thereby will not, (i) violate any provision of the certificate of
incorporation, by-laws or the other organizational documents of the
Investor or any of its material Subsidiaries; (ii) give rise to a
right to put or to compel a tender offer for outstanding securities of
the Investor or any of its Subsidiaries under, or require any consent,
waiver, provision of notice or approval under, any note, bond, debt
instrument, indenture, mortgage, deed of trust, lease, loan agreement,
joint venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Investor or any of
its Subsidiaries is a party or by which the Investor or any property
of the Investor or any of its material Subsidiaries is bound; (iii)
result in the creation or imposition of any Lien upon the Series A
Convertible Preferred Stock to be issued to the Investor pursuant to
this Agreement, other than pursuant to a Transaction Agreement or (iv)
violate or conflict with any Law or Order applicable to the Investor
or any of its Subsidiaries or any of their respective assets or
properties of any Governmental Entity having jurisdiction over the
Investor or any of its Subsidiaries or any of their respective assets
or properties, except in the case of clause (ii), clause (iii) and
clause (iv) for such violations, conflicts, defaults, creation of
Liens and other matters which would not reasonably be expected to have
a material adverse effect on the ability of the Investor to consummate
or to perform its obligations under the Transaction Documents.
Section 4.4. Investor Reports; Financial Statements. (a) The
Investor has delivered to the Company a true and complete copy of (i)
the Investor's Annual Report on Form 10-K for the fiscal years ended
December 31, 1996, 1995 and 1994; (ii) the Investor's Quarterly Report
on Form 10-Q for the period ended March 31, 1997; and (iii) each
registration statement, report on Form 8-K and Form 8-A, proxy
statement, information statement or other document, report or
statement filed by the Investor or any of its Subsidiaries with the
Commission since December 31, 1994, in each case in the form
(including financial statements, schedules, exhibits and any
amendments thereto) filed with the Commission (collectively, the
"Investor SEC Reports"). As of their respective dates, the Investor
SEC Reports (i) were timely filed with the Commission; (ii) complied,
in all material respects, with the applicable requirements of the
Exchange Act and the Securities Act; and (iii) did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Other than the SEC Reports, the Investor
and its Subsidiaries have not filed or been required to file any other
reports or statements with the Commission since December 31, 1994.
(b) Each of (i) the consolidated balance sheets (including
the related notes and schedules) included in or incorporated by
reference into the Investor SEC Reports fairly presents the
consolidated financial position of the Investor and its Subsidiaries
as of the date thereof, subject, in the case of unaudited statements,
to normal year-end adjustments, and (ii) the consolidated statements
of income (or statements of results of operations), shareholders'
equity and cash flows (including the related notes and schedules)
included in or incorporated by reference into the Investor SEC Reports
<PAGE>
fairly presents the results of operations, retained earnings and cash
flows, as the case may be, of the Investor and its Subsidiaries (on a
consolidated basis) for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end adjustments and
except, as permitted by Form 10-Q of the Commission) in each case in
accordance with GAAP applied on a consistent basis throughout the
periods covered (except as stated therein or in the notes thereto) and
in compliance with the rules and regulations of the Commission.
Section 4.5. Absence of Certain Changes. Except for
transactions contemplated by the Transaction Agreements or as
disclosed in the Investor SEC Reports or as set forth in Schedule 4.5,
since December 31, 1996 there have not been any changes, conditions,
occurrences, circumstances or other events that have had or would
reasonably be expected to have a material adverse effect on the
financial condition of the Investor and its Subsidiaries, taken as a
whole.
Section 4.6. Purchase for Purpose of Investment. The
Investor (or its permitted designee) is acquiring the Shares under
this Agreement for its own account solely for the purpose of
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act. The Investor
acknowledges that the shares of Series A Convertible Preferred Stock
to be acquired by it or any other member of the Investor Group have
not been registered under the Securities Act and may be sold or
disposed of in the absence of such registration only pursuant to any
exemption from such registration and in accordance with the terms of
the Transaction Agreements. Neither the Investor nor any other member
of the Investor Group Beneficially Owns any Voting Securities.
SECTION 5
GOVERNANCE
Section 5.1. Directors Designated by the Shareholder. (a)
Immediately following the Closing, the Board shall appoint as
additional Directors the two (2) Investor Nominees (as defined in
Section 5.1(b) below) who have been designated by the Investor in the
Investor Nominee Notice (as defined in Section 5.1(b) below) attached
as Exhibit D hereto (the "Initial Investor Nominee Notice"). One
Investor Nominee shall be placed in the class of Directors next
standing for election, and the remaining Investor Nominee shall be
placed in the class of Directors next but one standing for election.
In addition, if at any time following the annual meeting of
shareholders to be held in January 1999, the number of members
constituting the entire Board of Directors shall equal or exceed 15,
including the Investor Nominees appointed pursuant to the previous
sentence, the Investor shall be entitled to designate pursuant to an
Investor Nominee Notice, and the Board shall appoint to the Board, an
additional Investor Nominee in accordance with the provisions of this
Section 5, provided that, for purposes of this sentence (but not for
purposes of requiring the resignation of any Investor Nominee pursuant
to Section 5.2(w)), the number of directors constituting the entire
Board of Directors at any time after the annual meeting of
shareholders to be held in January 2000 shall exclude any Director who
has advised (and not withdrawn) the Company of his or her intention,
or would be scheduled pursuant to the policies of the Company, to
retire or resign from the Board within 12 months of the date as of
which the determination pursuant to this sentence is being made;
provided, further, that no such Director shall be excluded for
purposes of determining the number of directors constituting the
entire Board for a period of greater than 12 consecutive months until
he or she no longer serves as a member of the Board. Any such
additional Investor Nominee shall be placed in the class of Directors
which does not include an Investor Nominee. In the event of a vacancy
caused by the disqualification, removal, resignation or other
cessation of service of any Investor Nominee from the Board, the Board
shall elect as a Director (to serve until the Company's immediately
succeeding annual meeting of shareholders) a new Investor Nominee who
has been designated by the Investor in an additional Investor Nominee
Notice that has been provided to the Company at least seven (7) days
prior the date of a regular meeting of the Board. The Investor shall
nominate each Investor Nominee pursuant to an additional Investor
Nominee Notice in advance of each meeting of shareholders at which
such Investor Nominee is to be elected.
(b) The Investor shall provide notice to the Company (the
"Investor Nominee Notice") as required by Section 5.1(a) above for
each Investor Nominee, which notice shall contain the following
<PAGE>
information: (i) the name of the person(s) it has designated to become
Director(s) (the "Investor Nominees"), and (ii) all information
required by Regulation 14A and Schedule 14A under the Exchange Act
with respect to each such Investor Nominee. Subject to Section 5.1(c)
below, (x) if there shall be two or fewer Investor Nominees, such
Investor Nominees may be any person designated by the Investor,
including persons who are officers, directors or employees of the
Investor; and (y) if there shall be three Investor Nominees, two of
such Investor Nominees may be persons described in clause (x) above
and one Investor Nominee shall be an Independent Director.
(c) Any proposed Investor Nominee shall be a person
acceptable to the Board in its reasonable discretion prior to the
initial appointment, or election, as the case may be of each Investor
Nominee to the Board; provided, that at any time (i) any of the five
most senior executives of the Investor (as determined by the Investor
in its reasonable discretion) and (ii) the head of the Investor's
Agricultural Products business, so long as (subject to the following
proviso) such business is owned by the Investor or a Subsidiary of the
Investor, each shall be conclusively deemed to be acceptable to the
Board for purposes of this Section 5.1(c); and provided, further, that
once an Investor Nominee is accepted by, or deemed acceptable to, the
Board, such person shall thereafter be conclusively deemed to be
acceptable pursuant to this Agreement (together with such persons
specified in the foregoing clauses (i) and (ii), the "Pre-Approved
Persons"). Any objection by the Company to a proposed Investor Nominee
must be made no later than five Business Days after the Investor
delivers the applicable Investor Nominee Notice for the proposed
Investor Nominee; provided, however, that the Company shall in all
cases notify the Investor of any such objection sufficiently in
advance of the date on which proxy materials are mailed by the Company
in connection with such election of directors to enable the Investor
to propose an alternate Investor Nominee pursuant to and in accordance
with the terms of this Agreement.
(d) The Company agrees, subject to Section 5.1(c) above and
Section 5.2 below, to include such Investor Nominee to be added to or
retained on the Board pursuant to this Agreement in the slate of
nominees recommended by the Board to the Company's shareholders for
election as Directors and shall use its reasonable efforts to cause
the election or reelection of each such Investor Nominee to the Board
at each meeting of shareholders at which such Investor Nominee is up
for election, including soliciting proxies in favor of the election of
such persons, it being understood that efforts consistent with those
used for other members of the slate recommended by the Board shall be
deemed reasonable. In the event that, notwithstanding the provisions
of this Section 5.1(d), any one or more Investor Nominees is not
elected to the Board then, at the written request of the Investor made
within 30 days after the date of the shareholder meeting at which such
Investor Nominee was not elected, either, as directed by the Investor,
(a) the Company shall promptly call a special meeting of the Company's
shareholders proposing the election of such Investor Nominees not
elected to the Board or an alternative Investor Nominee as may be
designated by the Investor in accordance with Section 5.1 and in
connection with such special meeting shall use its reasonable efforts
to cause the election of such Investor Nominees by the shareholders of
the Company, including recommending the election of such Investor
Nominees and soliciting proxies in favor of the election of such
Investor Nominees by the shareholders of the Company; or (b) the
Company shall appoint another individual selected by the Investor, who
shall be a Fully Independent Director and shall otherwise qualify
under Section 5.1(c), as an additional Director of the Company who
shall serve for a term co-extensive with the term such Investor
Nominee would have served if such Investor Nominee had been elected
(provided that the Investor shall cause such additional Director to
resign at such time as an Investor Nominee is elected to the Board
seat that would have been held by the Investor Nominee whose failure
to be elected triggered the Investor's right to designate such
additional Director). In connection with the expiration of the term of
office of any Fully Independent Director appointed in accordance with
the foregoing clause (b), the Investor shall be free to designate an
Investor Nominee in accordance with this Section 5.1 to replace such
Fully Independent Director. In the event the Investor elects to call a
special meeting of stockholders pursuant to clause (a), the Company
shall, until such time as the Investor Nominee being proposed by the
Investor is elected to the Board, invite such Investor Nominee who was
not elected to the Board to attend meetings of the Board as an
observer and the Company shall afford to such Investor Nominee, on as
nearly equivalent basis as is possible (other than the right to vote)
as would have been the case if such Investor Nominee had been elected
to the Board, the opportunity to meaningfully participate in, express
<PAGE>
views with respect to and have influence on the deliberations of the
Board, including through receipt, at the same time as the Board
receives the same, of all information and material as is distributed
to the Board. Notwithstanding the foregoing, if at any time as a
result of the failure of all Investor Nominees designated by the
Investor who are not Independent Directors or Fully Independent
Directors to be elected to the Board as provided in this Section 5.1,
the Investor Nominees shall consist entirely of Independent Directors
and Fully Independent Directors, the Investor shall be entitled to
designate one individual who is an officer, employee or director of
the Investor and who qualifies as an Investor Nominee under Section
5.1(c) to serve as an observer at the meetings of the Board in
accordance with the foregoing sentence until such time as an Investor
Nominee designated by the Investor who is not an Independent Director
or a Fully Independent Director shall be elected by the shareholders
of the Company to the Board provided that the foregoing right to
designate an observer shall not apply if the Investor shall have
(without being required by this Agreement to do so) designated for
election to the Board pursuant to Section 5.1(a) only Investor
Nominees who were Independent Directors or a Fully Independent
Director. If the Board of Directors shall cease to be a classified
board, the Investor shall be entitled to present to the Board of
Directors or the Nominating Committee thereof the full number of
Investor Nominees for election to the Board of Directors at each
annual meeting of shareholders of the Company contemplated by
paragraph (a) above (without regard to the provisions regarding
classes of directors contained therein). At the direction of the
Investor, the Company shall use reasonable efforts to cause the
removal from the Board of Directors of any Investor Nominee (other
than an Independent Director or Fully Independent Director).
(e) The Investor agrees, to the extent required by Iowa law,
to cause the Investor Nominees to comply with the standards for
recusal from Board meetings applicable to all members of the Board.
Except for any Investor Nominee who is an Independent Director or a
Fully Independent Director, the Investor acknowledges that the
Investor Nominees to the Board will not be entitled to receive any
compensation as directors.
Section 5.2. Resignation of Investor Nominees. Unless
otherwise agreed by the Company, (w) at any time that there are three
Investor Nominees serving on the Board, the Investor shall cause one
of the Investor Nominees then serving on the Board to offer his or her
resignation from the Board immediately upon the number of directors
constituting the entire Board constituting 15 or fewer, (x) the
Investor shall cause all of the Investor Nominees then serving on the
Board to offer their resignations from the Board immediately upon
either (i) at any time after the Initial Top-Up Period the Investor
Group's Total Ownership Percentage falls below 10% for twelve
consecutive months (subject to extension by the number of days equal
to the period of time purchases by the Investor Group would be
prohibited by Section 6.7(b)(iv) or Section 6.7(d)) or (ii) the
Ownership Cap is at any time less than 10%; (y) the Investor shall
cause Investor Nominees then serving on the Board to offer his or her
resignations from the Board immediately upon the Ownership Cap at any
time being less than 18%, so that the total number of Investor
Nominees does not exceed 2 at any time thereafter; and (z) the
Investor shall cause all of the Investor Nominees then serving on the
Board to offer their resignations from the Board immediately upon the
occurrence of a Trigger Event or a Release Event; provided, however,
that in the event that the Investor Group's Total Ownership Percentage
is less than the 10% amount referred to in clause (x)(i) of this
Section 5.2 and would not be so but for the issuance of capital stock
by the Company during, or within one month prior to, the twelve month
period referred to in clause (x)(i) of this Section 5.2, such twelve
month period shall be extended by an additional six months to eighteen
consecutive months. To effectuate the resignations provided for in
this Section 5.2, the Investor shall cause each Investor Nominee to
provide the Investor with a letter of resignation upon such Investor
Nominee's election to the Board which may be used by the Investor at
any time.
Section 5.3. Committees. The Board will not establish an
executive committee authorized to exercise the power of the Board
generally unless the Investor is granted representation on such
committee proportional to its representation on the Board, nor will
the Board establish or employ committees (unless the Investor is
granted proportional representation thereon) as a means designed to
circumvent or having the effect of circumventing the rights of the
Investor under this Agreement to representation on the Board.
<PAGE>
SECTION 6
ADDITIONAL AGREEMENTS
Section 6.1. Standstill Agreement.
(A) During the Standstill Period, and, if this Agreement is
terminated prior to Closing pursuant to Section 10.1(a), for the one
year period after the end of the Standstill Period (such one year
period, the "Post Termination Standstill Period"), unless the Company
shall have materially breached its obligation to nominate Investor
Nominees or to appoint any Fully Independent Director pursuant to
Section 5 (provided that, with respect to any such material breach
that does not concern a Pre-Approved Person, a court of competent
jurisdiction shall have determined pursuant to a final non-appealable
order that the Company has so materially breached its obligations),
the Investor shall not, shall cause each other member of the Investor
Group not to, and shall use reasonable commercial efforts to cause
other Affiliates and Associates of the Investor not members of the
Investor Group ("Other Investor Affiliates") not to, directly or
indirectly, alone or in concert with others:
(a) acquire, offer or propose to acquire or agree to
acquire, whether by purchase, tender or exchange offer, through the
acquisition of control of another person, by joining a partnership,
limited partnership, syndicate or other 13D Group or otherwise,
Beneficial Ownership of any Voting Securities, Derivative Securities
or any other securities of the Company or any rights to acquire
(whether currently, upon lapse of time, following the satisfaction of
any conditions, upon the occurrence of any event or any combination of
the foregoing) any Voting Securities, other than (i) the purchase of
Shares or other Voting Securities expressly permitted by this
Agreement, (ii) the acquisition of Voting Securities as a result of
any stock split, stock dividends or other distributions,
recapitalizations or offerings made available by the Company to
holders of Voting Securities generally or (iii) in a transaction in
which the Investor or a Subsidiary of the Investor acquires a
previously unaffiliated business entity that, to the knowledge of the
Investor after reasonable inquiry, owns shares of Common Stock that
represents less than 4% of the Company's outstanding Common Stock and
less than 10% of the unaffiliated entity's assets; provided, that all
such Voting Securities shall be subject to the terms of this
Agreement; provided, further, however, that in the event of a
transaction as contemplated by clause (iii) hereof, the Investor will
transfer, or cause such Subsidiary to transfer, in a manner consistent
with Section 6.3, such shares of Common Stock previously owned by the
unaffiliated entity within twelve months following the consummation of
such transaction and all such shares of Common Stock, pending their
transfer, shall be voted by the Investor or such Subsidiary in
accordance with the requirements of clauses (w) through (z) of Section
6.2 and on any other matter in the same proportion as the votes cast
by or on behalf of all holders of the Company's Voting Securities
other than the Investor Group and Other Investor Affiliates;
(b) propose or seek to effect any merger, business
combination, restructuring, recapitalization or similar transaction
involving the Company or any of its Subsidiaries or the sale or other
disposition outside the ordinary course of business of any material
portion of the assets of the Company or any of its Subsidiaries except
pursuant to Section 8.2 hereof;
(c) deposit any Voting Securities in a voting trust or
subject any Voting Securities to any arrangement or agreement with
respect to the voting of such Voting Securities except pursuant to
Section 8.8 hereof;
(d) seek election to, seek to place a representative on, or
seek the removal of any member of, the Board, except pursuant to
Section 5 hereof;
(e) engage in any "solicitation" (within the meaning of rule
14a-1 under the Exchange Act) of proxies or consents (whether or not
relating to the election or removal of directors) with respect to the
Company, or become a "participant" in any "election contest" (within
the meaning of Rule 14a-11 under the Exchange Act) or, unless the
execution by the Investor, member of the Investor Group or Other
Investor Affiliate is first approved by the Board, execute any written
consent in lieu of a meeting of the holders of any class of Voting
Securities that is solicited by or on behalf of any shareholder of the
Company;
<PAGE>
(f) call or seek to have called any meeting of the
shareholders of the Company (except for the exercise by the Investor
of its rights pursuant to Section 5.1(d));
(g) initiate, propose or otherwise solicit shareholders for
the approval of any shareholder proposal (as described in Rule 14a-8
under the Exchange Act or otherwise) with respect to the Company;
(h) form, join or in any way participate in or assist in the
formation of a 13D Group with respect to any Voting Securities, other
than any such "group" consisting exclusively of the Investor and other
wholly-owned United States Subsidiaries of the Investor who have
acquired Voting Securities in accordance with Section 2.2(b) or
Section 6.3(a);
(i) otherwise act, alone or in concert with others, to seek
control or influence the management, the Board or the policies of the
Company in a manner designed or having the deliberate effect of
circumventing the restrictions otherwise imposed under this Section
6.1(A);
(j) disclose or publicly announce any intention, plan or
arrangement inconsistent with the foregoing;
(k) advise, assist or encourage or finance any other persons
in connection with any of the foregoing types of activities; or
(l) request the Company (or its directors, officers,
employees or agents) to amend or waive any provision of this
Agreement;
provided that nothing in this Section 6.1(A) shall limit any rights of
the members of the Investor Group under the Joint Venture Agreement or
the Research Alliance Agreement, or (I) prohibit any individual who is
serving as a Director of the Company, solely in his or her capacity as
such Director and provided no public disclosure thereof by the Company
would be required, from (x) taking any action or making any statement
at any meeting of the Board of Directors or of any committee thereof,
(y) making any statement to any Representative of the Company, or (z)
making any statement or disclosure required under federal securities
laws or other applicable Law, (II) restrict any private communications
not requiring public disclosure between the Investor and any Investor
Nominee, (III) restrict any disclosure or statements required to be
made by any member of the Investor Group under applicable Law to the
extent any such requirement does not arise from actions by the
Investor Group inconsistent with this Agreement, or (IV) limit the
rights of the Investor Group pursuant to Section 6.2, Section 6.9 or
Section 8.2.
(B) Notwithstanding the foregoing, if this Agreement is
terminated prior to Closing pursuant to Section 10.1(a), the
provisions of paragraph (A) of this Section 6.1 (other than the
provisions of clauses (a) (except as to proposals to the Company as to
the matters in clause (b)) and (h) thereof and the provisions of (i),
(j), (k) and (l) thereof to the extent such provisions relate to the
acquisition of Voting Securities or other securities of the Company)
shall cease to apply during the Post-Termination Standstill Period if
(i) the Company enters into an agreement contemplating a Change in
Control Transaction or a Competing Investment or the Company makes any
filing with respect to, or seeks expiration of the waiting period
under, the HSR Act with respect to a Change in Control Transaction or
Competing Investment; (ii) the Board of Directors publicly announces
its intention to solicit or publicly solicits any Proposal or publicly
approves, accepts, authorizes or recommends to shareholders of the
Company their approval of or the conveyance of shares pursuant to a
Change in Control Transaction or Competing Investment; (iii) during or
prior to the pendency of a bona fide tender or exchange offer made by
any Person or 13D Group (other than a member of the Investor Group),
the Board of Directors determines or resolves to, or announces its
intention to, or is ordered or directed by any Governmental Entity to,
redeem, amend or modify (to render inapplicable (including by taking
action to cause a Section 11(a)(ii) Event or Section 13 Event (each as
defined in the Amended Rights Agreement as in effect on the date
hereof), not to occur that, absent such action, would otherwise have
occurred, or to redeem the Preferred Stock Purchase Rights) thereto or
otherwise exempt therefrom) the Preferred Stock Purchase Rights or the
Amended Rights Agreement (or a Substantially Similar Agreement) or;
(iv) any Person other than the Investor or an Excluded Person acquires
or agrees to acquire 20% or more of the then outstanding Voting
Securities or Common Securities.
<PAGE>
Section 6.2. Voting. (a) At all times during the Standstill
Period, the Investor shall, shall cause each other member of the
Investor Group to, and shall use its commercially reasonable efforts
to cause each Other Investor Affiliate to, vote all Voting Securities
which they Beneficially Own, at any shareholder meeting or in
connection with any action by written consent at or in which such
Voting Securities are entitled to vote, (w) in favor of the slate of
nominees (including any Investor Nominee to be included in such slate
in accordance with Section 5) proposed by the Board; provided, that
any Investor Nominee nominated by the Investor for inclusion in such
slate pursuant to Section 5.1 is so included, (x) in favor of any
amendment to the Company's Articles of Incorporation proposed by the
Board to change the voting rights of the Common Stock to one vote per
share of Common Stock (a "Voting Amendment"), (y) in favor of the
Reclassification Amendment at each meeting of the Company's
shareholders at which the Reclassification Amendment is submitted for
approval of the Company's shareholders, and (z) on any matter relating
to the adoption of any stock option, stock purchase or other benefit
or compensation plan for employees, executives or directors of the
Company, and on any non-Company sponsored shareholder proposal which
is opposed by the Company, in accordance with the direction of the
Board as to how such Voting Securities shall be voted, except that
during any period or at any time when there shall be in full force and
effect a valid order or judgment of a court of competent jurisdiction
or a ruling, pronouncement or requirement of the NYSE to the effect
that the foregoing provisions of this Section 6.2 are invalid, void,
unenforceable or not in accordance with NYSE policy, then the Investor
will, if so requested by the Board, vote or cause (or, in the case of
the Other Investor Affiliates, use its commercially reasonable efforts
to cause) to be voted all of the Voting Securities beneficially owned
by it, the Investor Group and the Other Investor in the same
proportion as the votes cast by or on behalf of the other holders of
the Company's Voting Securities other than the Investor Group and
Other Investor Affiliates, but only with respect to the foregoing
matters. On all other matters the Investor, the members of the
Investor Group and the Other Investor Affiliates shall be entitled to
vote the Voting Securities held by them in their discretion; provided,
that at any meeting at which a quorum would not be present but for the
inclusion of the Voting Securities Beneficially Owned by the Investor
Group, the Investor shall cause such Voting Securities to be voted
with respect to each of the matters presented to shareholders at such
meeting and such vote shall be in accordance with the foregoing
provisions of this Section 6.2(a). At all times during the Standstill
Period, the Investor shall be, shall cause each other member of the
Investor Group to be, and shall use its commercially reasonable
efforts to cause each Other Investor Affiliate to be, as the
Beneficial Owners of Voting Securities, present, in person or by
proxy, at all meetings of shareholders of the Company, so that all
Voting Securities which Investors or any other member of the Investor
Group or any Other Investor Affiliate Beneficially Owns may be counted
for the purpose of determining the presence of a quorum at all
meetings of shareholders of the Company.
(b) If the holders of the outstanding shares of Common Stock
are entitled to vote as a separate class or voting group under the
Articles of Incorporation or the corporation laws of the Company's
jurisdiction of incorporation on any matter on which a shareholder
vote is otherwise required, then the Company hereby covenants and
agrees that if the Investor advises the Company in writing prior to
the meeting held (or the record date for action taken by written
consent in lieu of a meeting) to approve such matter that the Investor
opposes such matter so to be voted upon by such class or voting group,
then it shall be a condition to the effectiveness of the matter to be
voted on that the matter be approved by an aggregate number of Votes
that would have been sufficient to approve such matter under the
Articles of Incorporation and the corporation laws of the Company's
jurisdiction of incorporation if all the Votes that could have been
voted by the Investor Group had such class or voting group included
the Voting Power represented by the Series A Convertible Preferred
Stock held by the Investor Group been included in such class or voting
group and cast against the approval of such matter.
(c) To the full extent permitted by Iowa law, the Investor
hereby waives, shall cause each member of the Investor Group to waive,
and shall use its commercially reasonable efforts to cause each Other
Investor Affiliate to waive, any rights that the Investor, any member
of the Investor Group or any Other Investor Affiliate, as the case may
be, may have or hereafter acquire under Division XIII of the Iowa
Business Corporation Act with respect to any disposition of Voting
Securities pursuant to this Agreement.
<PAGE>
(d) At any time after the conversion of the Series A
Convertible Preferred Stock into Common Stock pursuant to Section
6(a)(ii) of the Certificate of Designation for the Series A
Convertible Preferred Stock, the Investor will cause all Votes
attributable to any shares of Common Stock thereafter owned by the
Investor Group and acquired prior to the termination of this Agreement
to be voted (a) with respect to a number of Votes representing no more
than voting power equal to the Investor Group's Total Ownership
Percentage at such time, during the Standstill Period, in accordance
with the provisions of Section 6.2(a) and after the Standstill Period,
in the sole discretion of the Investor, and (b) with respect to all
other Votes, on any matter pro rata in accordance with the Votes voted
on such matter by all holders of Voting Securities other than the
Investor Group and Other Investor Affiliates.
(e) Notwithstanding the foregoing provisions of this Section
6.2, at any time following the occurrence of a Trigger Event or a
Release Event, the Investor shall, shall cause each other member of
the Investor Group to, and shall use its commercially reasonable
efforts to cause each Other Investor Affiliate to vote all Voting
Securities which they Beneficially Own, (i) in favor of the slate of
nominees proposed by the Board (except that during any period or at
any time when there shall be in full force and effect a valid order or
judgment of a court of competent jurisdiction or a ruling,
pronouncement or requirement of the NYSE to the effect that the
foregoing provisions of this Section 6.2(e) are invalid, void,
unenforceable or not in accordance with NYSE policy, in which case,
the Investor will, if so requested by the Board, vote or cause to be
voted all of its Voting Securities Beneficially Owned by it and the
other members of the Investor Group, and use commercially reasonable
efforts to cause all Voting Securities Beneficially Owned by Other
Investor Affiliates to be voted, for the election of directors in the
same proportion as the votes cast by or on behalf of the other holders
of the Company's Voting Securities other than the Investor Group and
Other Investor Affiliates) and (ii) on all other matters at any
shareholder meeting or in connection with any action by written
consent, in the same proportion as the votes cast by or on behalf of
all holders of the Company's Voting Securities other than the Investor
Group and Other Investor Affiliates.
Section 6.3. Dispositions. During the Standstill Period and
thereafter in perpetuity in the case of clauses (f) and (g) hereof to
the extent specified therein, the Investor shall not, shall cause each
other member of the Investor Group not to, and shall use its
commercially reasonable efforts to cause each Other Investor Affiliate
not to, directly or indirectly (including, without limitation, through
the disposition or transfer of any equity interest in another Person),
sell, assign, transfer, pledge, hypothecate, grant any option with
respect to or otherwise dispose of any interest in (or enter into an
agreement or understanding with respect to the foregoing) any Voting
Securities (a "Disposition"), except as set forth below in this
Section 6.3.
(a) Dispositions may be made to wholly-owned United States
Subsidiaries of the Investor; provided, that such Subsidiaries agree
in writing to be bound by this Agreement to the same extent as the
Investor and such Subsidiaries at all times remain wholly-owned United
States Subsidiaries of the Investor.
(b) Dispositions of Voting Securities may be made to Persons
other than members of the Investor Group and Other Investor Affiliate
pursuant to (i) a bona fide public offering effected in accordance
with the Registration Rights Agreement, (ii) in bona fide open market
"brokers' transactions" as permitted by the provisions of Rule 144 as
currently promulgated under the Securities Act (other than pursuant to
the provisions of clause (k) thereof) and subject to the requirement
that the amount of Voting Securities sold may not exceed the lesser of
the amounts specified under clauses (i) and (ii) of paragraph (e)(1)
of Rule 144 as currently in effect, (iii) in privately-negotiated
transactions to (A) any Person specified in Rule 13d-1(b)(1)(ii)
promulgated under the Exchange Act who would be eligible based on such
person's status and passive intent with respect to the ownership,
holding and voting of such Voting Securities to report such person's
ownership of such Voting Securities (assuming such person owned a
sufficient number of such Voting Securities to require such filing) on
Schedule 13G or (B) any other Person, and (iv) pursuant to a pro rata
dividend to the stockholders of the Investor, provided, however, that:
(I) Dispositions shall not be made pursuant to clauses (i),
(ii), (iii)(A) or (iv) of this Section 6.3(b) if, (A) in the case of
Dispositions pursuant to clauses (i), (ii) and (iii)(A) of this
<PAGE>
Section 6.3(b), any Person (other than any underwriter who is in the
business of underwriting securities and who, in the ordinary course of
its business as an underwriter, acquired Common Securities in
connection with a public offering with the bona fide intention of
reselling all of the Common Securities so acquired pursuant to such
public offering (a "Permitted Underwriter")) to whom the Disposition
in question is made would, to the actual knowledge of the Investor
(without any duty of inquiry) in the case of Dispositions pursuant to
clause (ii) of Section 6.3(b), and to the knowledge of the Investor,
after reasonable inquiry, in all other cases after giving effect to
such Disposition, together with such Person's Affiliates and
Associates and the members of any 13D Group existing with respect to
Voting Securities of which such Person is a part (any such Person and
its Affiliates, Associates and 13D Group members being collectively
referred to herein as a "Purchasing Person"), Beneficially Own Voting
Securities representing more than 3% (or 5% in the case of clause
(iii)(A)), as the case may be (or, in any such case, 1% if any Person
included in a Purchasing Person is a Pioneer Competitor) of the Total
Voting Power or Total Ownership Percentage then outstanding, (B) in
the case of Dispositions pursuant to clauses (ii) and (iii)(A) of this
Section 6.3(b), the Investor Group shall have complied with the
provisions of Section 6.4 and the Company shall have had the right to
purchase pursuant to Section 6.4 the Voting Securities subject to such
Disposition; or (C) in the case of a Disposition pursuant to clause
(iv) of this Section 6.3(b), any shareholder receives in such dividend
more than 2% of the Total Voting Power or Total Ownership Percentage,
unless such shareholder shall have executed and delivered a Purchaser
Standstill Agreement (as defined below) pursuant to which such
shareholder agrees to be bound by Section 6 of this Agreement (other
than Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the same
extent as the Investor as if references to the Investor in such
Section were to such shareholder with an Ownership Cap equal to its
then current ownership provided that for purposes of Section 6.6(a)
only the Ownership Cap of such shareholder shall be 5%; provided,
however, that in no event shall any disposition be made pursuant to
such clause (iv) if any shareholder would be entitled to receive in
connection therewith 7.5% (or 2% if such shareholder is a Pioneer
Competitor) or more of the Total Voting Power or Total Ownership
Percentage;
(II) Dispositions shall not be made pursuant to clauses
(iii)(B) of this Section 6.3(b) if the Purchasing Person would, to the
knowledge of the Investor, after reasonable inquiry, after giving
effect to the Disposition, Beneficially Own Voting Securities
representing more than 5% (or 1% if any Person included in the
Purchasing Person is a Pioneer Competitor) of the Total Voting Power
or Total Ownership Percentage then outstanding, provided that if any
such Purchasing Person would, to the knowledge of the Investor, after
reasonable inquiry, after giving effect to such Disposition,
Beneficially Own Voting Securities representing more than 3% of the
Total Voting Power or Total Ownership Percentage then outstanding, (x)
the Investor Group shall, in the case of Dispositions pursuant to
clause (iii)(B) of this Section 6.3(b), have complied with the
provisions of Section 6.4 and the Company shall have had the right to
purchase pursuant to Section 6.4 the Voting Securities subject to the
Disposition, and (y) the Purchasing Person shall have executed and
delivered to the Company a written agreement (which agreement shall be
addressed to the Company and reasonably satisfactory in form and
substance to the Company) (a "Purchaser Standstill Agreement") of each
such Purchasing Person to be bound by Section 6 of this Agreement
(other than Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the
same extent as the Investor as if references to the Investor in such
Section were to such Purchasing Person with an Ownership Cap equal to
its then current ownership provided that for purposes of Section
6.6(a) only the Ownership Cap of such Purchasing Person shall be 5%;
and
(III) No Disposition pursuant to this Section 6.3(b) (other
than pursuant to Section 6.3(b)(iv)) shall be effected prior to the
third anniversary of the Closing Date, unless the Investor Group is
required to make a Disposition pursuant to the last proviso to Section
6.1(A)(a)(iii) or Section 6.6 hereof, nor shall any Disposition be
made (other than pursuant to Section 6.3(b)(i)) if such Disposition
would constitute a distribution in violation of Regulation M under the
Securities Act by reason of any repurchase program of the Company then
announced.
(c) Dispositions may be made to the Company in accordance
with Sections 6.4 through 6.6 hereof.
(d) Dispositions may be made pursuant to a tender offer or
<PAGE>
exchange offer (or, during the pendency thereof pursuant to Section
6.3(b)(iii)(A) or in open market transactions permitted under Section
6.3(b)(ii) and, in each case, subject to the restrictions of clause
(I)(A) thereof but not subject to clause (I)(B) thereof) or any other
transaction (x) which is recommended to shareholders of the Company by
the Board of Directors (or, in the case of a tender or exchange offer,
which is not within 10 Business Days of the commencement thereof
opposed by the Board of Directors or, in the case of an Unsolicited
Offer which is opposed, in the event such opposition is thereafter
withdrawn by the vote of the Board of Directors) or (y) in the case of
a merger or other business combination transaction, which has been
approved by the shareholders of the Company (including approval
without a meeting pursuant to the short-form merger provisions of the
Iowa Business Corporation Act) in a manner so as to be legally binding
on all shareholders of the Company and so as to require the
disposition by such shareholders of their shares pursuant to such
merger or other business combination transaction (without regard to
this Agreement); and
(e) Dispositions may be made pursuant to a tender offer or
exchange offer which is not recommended by a majority of the entire
Board (an "Unsolicited Offer"); provided that such Unsolicited Offer
is for at least a majority of the Common Stock outstanding on a fully
diluted basis; and provided further, (i) if the Amended Rights
Agreement (or a Substantially Similar Plan) was in effect prior to the
commencement of such Unsolicited Offer, the Company has redeemed the
Rights (as defined in the Amended Rights Agreement) or otherwise
amended or modified the Amended Rights Agreement (or a Substantially
Similar Plan) to be inapplicable (including by taking action to cause
a Section 11(a)(ii) Event or Section 13 Event (each as defined in the
Amended Rights Agreement as in effect on the date hereof), not to
occur that, absent such action, would otherwise have occurred, or to
redeem the Preferred Stock Purchase Rights) to such Unsolicited Offer
or otherwise taken any Board action pursuant to the Amended Rights
Agreement (or a Substantially Similar Plan) in order to permit the
Unsolicited Offer to be consummated without causing a Triggering Event
(as defined in the Amended Rights Agreement) to occur and (ii) in any
event, the Investor and each member of the Investor Group shall have
complied with the provisions of Section 6.5 and the Company shall have
had the right pursuant to Section 6.5 to purchase the Voting
Securities subject to such Disposition.
(f) At any time subsequent to the Standstill Period, the
Investor shall not, shall cause each other member of the Investor
Group not to, and shall use its commercially reasonable efforts to
cause each Other Investor Affiliate not to, directly or indirectly,
effect any Disposition of Voting Securities if, to the knowledge of
the Investor, such member of the Investor Group or such Other Investor
Affiliate, after reasonable inquiry, the Purchasing Person (other than
a Permitted Underwriter and broker-dealers acting in connection with a
block trade in which no Person or 13D Group acquires Voting Securities
representing an Equity Percentage of more than 5%) would, after giving
effect to such Disposition, Beneficially Own Voting Securities
representing more than 5% of the Total Voting Power or Total Ownership
Percentage then outstanding; provided, however, that the foregoing
restrictions shall not be applicable to any Disposition in connection
with a tender or exchange offer or a merger, business combination or
other extraordinary transaction.
(g) Notwithstanding the foregoing, at any time subsequent to
(i) the consummation of a Surviving Change in Control Transaction (as
defined in Section 8.2(b)), (ii) a Release Event, or (iii) a Trigger
Event, the provisions of Sections 6.3(a) through (c) and Section
6.3(f) shall not apply and in lieu thereof, the Investor shall not,
and shall cause each other member of the Investor Group not to, and
shall use commercially reasonable efforts to cause each Other Investor
Affiliate not to, directly or indirectly effect any Disposition of
Voting Securities (a) representing an Equity Percentage of more than
3% to any one Person or 13D Group (other than a Permitted Underwriter
and broker-dealers acting in connection with a block trade in which no
Person or 13D Group acquires Voting Securities representing an Equity
Percentage of more than 3%) or (b) to any Person or 13D Group who has
filed a Schedule 13D with the Commission with respect to any Voting
Securities issued by the Company; provided, however, that the
foregoing restrictions shall not be applicable to any Disposition of
Voting Securities in compliance with Section 6.3(d) or (e) and Section
6.5.
(h) If the Investor intends to effect a Disposition in
accordance with this Section 6.3, it shall give the Company as much
prior notice of such intention as is reasonably practicable.
<PAGE>
Section 6.4. Company's Right to Purchase Voting Securities.
Prior to any Disposition of Voting Securities pursuant to clauses (ii)
and (iii) of Section 6.3(b), the Company shall have the right, to the
extent provided in Section 6.3(b), exercisable in accordance with this
Section 6.4, to purchase all, but not less than all, of the Voting
Securities intended to be subject to such Disposition by the Investor
or any other member of the Investor Group.
(a) To the extent required by Section 6.3(b), if any member
of the Investor Group wishes to effect any Disposition of Voting
Securities pursuant to clauses (ii) and (iii) of Section 6.3(b), the
Investor shall give notice (a "Transfer Notice") to the Company of
such intended Disposition, specifying the Voting Securities to be
subject to Disposition and the intended method of Disposition. The
Transfer Notice shall specify, in the case of Dispositions pursuant to
clauses (ii) or (iii)(A) of Section 6.3(b), the cash price (the "First
Offer Price") at or above which the Investor intends to effect such
Dispositions and, in the case of Dispositions pursuant to clause
(iii)(B) of Section 6.3(b), the terms of a bona fide third party offer
(a "Third Party Offer") to purchase such Voting Securities theretofore
received by the Investor and then remaining open (including the
identity of the offeror and the price offered). If the Company wishes
to purchase the Voting Securities specified in the Transfer Notice,
then within fifteen Business Days (or, in the case of any Required
Disposition being made as a result of a Company request pursuant to
Section 6.6, five Business Days) following receipt of the Transfer
Notice, the Company shall deliver a written notice (an "Acceptance
Notice") to the Investor indicating that the Company wishes to
purchase such Voting Securities (such Voting Securities, the "Section
6.4 Securities"), a date for the closing of such purchase, which shall
not be more than 45 days after delivery of such Acceptance Notice
(subject to extension as provided in Section 6.4(f) hereof), and a
place for the closing of such purchase (a "Section 6.4 Closing"). Upon
delivery of an Acceptance Notice, a binding agreement shall be deemed
to exist providing for the purchase by the Company of the Section 6.4
Securities to which such Acceptance Notice relates, upon the terms and
subject to the conditions set forth in this Section 6.4 and the
Company shall use its reasonable best efforts to secure all approvals
required in connection therewith; provided, that (i) the Company may
rescind its Acceptance Notice (in which event it will have no
obligation to purchase such Section 6.4 Securities) at any time within
two Business Days following any determination of (x) the value of any
untraded securities pursuant Section 6.4(b)(ii) hereof or (y) fair
market value pursuant to Section 6.4(b)(ii) hereof; and (ii) the
Investor may rescind its Transfer Notice (in which event it will have
no obligation to sell such Section 6.4 Securities) at any time within
two Business Days following any determination of (a) the value of any
untraded securities pursuant to Section 6.4(b)(ii) hereof or (y) fair
market value pursuant to Section 6.4(b)(ii) hereof.
(b) The purchase price for any Section 6.4 Securities (the
"Section 6.4 Price") shall be determined as set forth below.
(i) With respect to any Section 6.4 Securities for which a
Third Party Offer consisting of other than solely cash and/or
readily marketable securities is disclosed in the applicable
Transfer Notice, the Section 6.4 Price per share or other unit of
such Section 6.4 Securities (which shall refer, in the case of
shares of Series A Convertible Preferred Stock that are Section
6.4 Securities, to the applicable number of shares of Common
Stock issuable upon conversion of such Series A Convertible
Preferred Stock), shall equal the average Market Price per share
or per unit of the Section 6.4 Securities during the 30
consecutive trading days immediately preceding the Company's
receipt of the Transfer Notice.
(ii) With respect to any Section 6.4 Securities for which a
First Offer Price or a Third Party Offer is disclosed in the
applicable Transfer Notice which provides for consideration
consisting solely of cash and/or readily marketable securities,
the Section 6.4 Price per share or other unit of such Section 6.4
Securities shall equal the per share or per unit price specified
in such First Offer Price or Third Party Offer; provided,
however, that, except for Acceptance Notices delivered in respect
of a Required Disposition, in the event the Market Price per
share or per unit on the last Business Day prior to the date the
Acceptance Notice is delivered is more than 10% greater than the
per share or per unit price specified by such First Offer Price
or Third Party Offer, than the price per share or per unit shall
equal the Market Price per share or per unit on the last Business
<PAGE>
Day prior to the date the Acceptance Notice is delivered. The
value of any readily marketable securities identified in such
Third Party Offer shall equal the average Market Price per share
or per unit of such securities during the 30 consecutive trading
days immediately preceding the Company's receipt of the Transfer
Notice. In the case of any securities not theretofore traded,
such securities must be issued or proposed to be issued by an
entity which has been subject to the reporting requirements of
the Exchange Act for at least one year, and the value of such
securities shall be determined by two nationally recognized
investment banking firms, one firm to be selected by each of the
Investor and the Company, or in the event such firms are unable
to agree, by a third nationally recognized investment banking
firm selected by such firms. The Investor and the Company shall
use their reasonable best efforts to cause any such determination
of value to be made within five Business Days following the
Company's receipt of the applicable Transfer Notice. In
connection with any determination of fair market value pursuant
to this Section 6.4(b)(ii), each party will bear the fees and
expenses of the investment banking firm selected by it and the
parties will bear equally the fees and expenses of any third
investment banking firm.
(c) At any Section 6.4 Closing, the Company shall pay to the
Investor (or its designees) the aggregate Section 6.4 Price for the
Section 6.4 Securities by wire transfer of immediately available
funds, and the Investor shall deliver or cause to be delivered to the
Company such Section 6.4 Securities, with documentation satisfactory
to the Company evidencing the transfer of such Section 6.4 Securities,
in form acceptable for transfer on the Company's books.
(d) If the Company does not exercise its right to purchase
Voting Securities specified in a Transfer Notice, or if the Company
exercises its right to rescind as described in the proviso to the last
sentence of Section 6.4(a) hereof, or if any agreement deemed to exist
with respect to Voting Securities upon delivery of an Acceptance
Notice is terminated pursuant to Section 6.4(f), then the party giving
such Transfer Notice shall be free to effect the Disposition of such
Voting Securities, subject to any other requirements applicable to
such Disposition pursuant to Section 6.3; provided, that any such
Disposition is completed within 60 days following the expiration of
the period in which the Company had the right to elect to purchase
such Voting Securities or such rescission or termination, as the case
may be (which 60 day period may be extended day by day by the Investor
if as of such 60th day or any day thereafter on which such period is
extended (x) all waiting periods, if any, applicable to such
Disposition under the HSR Act, shall not have expired or been
terminated or (y) any statute, rule, regulation, executive order,
decree, ruling, injunction or other order shall have been enacted,
entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction which prohibits such Disposition
or makes such Disposition illegal, provided that no such extension
shall be for more than 60 days in the aggregate); provided, further,
that such Disposition is effected in accordance with the intended
method of Disposition described in the applicable Transfer Notice;
provided, further, that with respect to any such Disposition of Voting
Securities for which a First Offer Price or a Third Party Offer is
disclosed in the applicable Transfer Notice, the Disposition of such
Voting Securities is at the price specified therein or at any price in
excess thereof (or, in the case of Dispositions pursuant to Section
6.3(b)(ii) or in the case of Dispositions pursuant to Section
6.3(b)(iii)(A) which are being made as a result of the Company's
request for a Required Disposition pursuant to Section 6.6 (a), where,
in each case, the applicable First Offer Price per share of Common
Stock does not exceed the average Market Price for the Common Stock
for the three trading days immediately preceding the receipt by the
Company of the related Transfer Notice, the Disposition is completed
at prices in excess of 95% of the applicable First Offer Price) and,
in the case of a Third Party Offer, to the transferee specified in the
Transfer Notice. In the case of any Disposition pursuant to clause
(iii) of Section 6.3(b), the price per share of Common Stock at which
such Disposition is deemed to be effected shall (i) not have deducted
therefrom any ordinary brokerage or placement fees, and (ii) be
increased by the amount of any discount in purchase price granted to
any broker-dealer in connection with such Disposition in lieu of any
such ordinary brokerage or placement fees. If any such Disposition is
not completed within the 60-day period specified in the first proviso
of the preceding sentence, any Voting Securities specified in the
applicable Transfer Notice and not disposed of in such Disposition
shall again be subject to the restrictions on transfer set forth in
Section 6.3, including the Company's purchase rights under this
<PAGE>
Section 6.4, to the extent provided in Section 6.3.
(e) Without limiting Section 6.3(b), if any Disposition is
made to any Purchasing Person who is required to have entered into a
Purchaser Standstill Agreement, then such person shall be deemed to
have consented to be bound by Section 6 of this Agreement (other than
Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the same extent
as the Investor and to the extent of such Purchasing Person's
ownership interest as if references to the Investor in such Section
were to such Purchasing Person provided that for purposes of Section
6.6(a) only, the Ownership Cap of the Purchasing Person shall be 5%.
(f) The obligations of the parties to effect any Section 6.4
Closing shall be subject to the satisfaction of the following
conditions: (i) all waiting periods, if any, applicable to the
transactions occurring at such Section 6.4 Closing under the HSR Act,
shall have expired or been terminated and (ii) no statute, rule,
regulation, executive order, decree, ruling, injunction or other order
shall have been enacted, entered, promulgated or enforced by any court
or governmental authority of competent jurisdiction which prohibits
such transactions or makes such transactions illegal. If, as of any
date on which a Section 6.4 Closing is scheduled to occur, the
foregoing conditions relating thereto have not been satisfied, then
such Section 6.4 Closing shall occur as promptly as practicable
following such satisfaction, and the parties shall use their
reasonable best efforts to cause the satisfaction of such conditions;
provided that if the foregoing conditions relating to any Section 6.4
Closing are not satisfied within 120 days in the case of clause (i),
and 180 days in the case of clause (ii), following delivery of the
applicable Acceptance Notice (or in the case of an order or injunction
arising out of any proceeding initiated by the Investor or any member
of the Investor Group, such later date on which such order or
injunction becomes final and nonappealable), then the Investor or the
Company may terminate the agreement deemed to exist upon delivery of
the applicable Acceptance Notice; provided that no such termination
shall excuse any party for a breach of its obligations thereunder.
Section 6.5. Company's Right to Purchase Voting Securities
in Case of Unsolicited Offer. Prior to any Disposition of Voting
Securities pursuant to Section 6.3(e), the Company (and/or its
designees) shall have the right, exercisable in accordance with this
Section 6.5, to purchase all of the Voting Securities permitted to be
subject to such Disposition by the Investor Group.
(a) If any member of the Investor Group wishes to effect any
Disposition of Voting Securities pursuant to Section 6.3(e), the
Investor shall give notice (a "Section 6.5 Transfer Notice") to the
Company of such intended Disposition at least 9 Business Days prior to
the latest date, as provided below, on which the Company (and/or its
designees) is entitled to exercise its right to purchase the Voting
Securities specified in such Section 6.5 Transfer Notice, unless a
shorter period after commencement of the Unsolicited Offer or a change
in the price term thereof is provided for acceptance or qualification
for proration, in which case the Section 6.5 Transfer Notice shall be
given promptly after commencement of the Unsolicited Offer or such
change; provided that the Investor may rescind such Section 6.5
Transfer Notice at any time prior to delivery of a Section 6.5
Acceptance Notice (as defined below). The Section 6.5 Transfer Notice
shall specify the Voting Securities to be tendered. If the Company
(and/or its designees) wishes to purchase the Voting Securities
specified in the Transfer Notice, then not later than 24 hours prior
to the latest time by which such securities must be tendered in order
to be accepted in the Unsolicited Offer, the Company shall deliver a
written notice (a "Section 6.5 Acceptance Notice") to the Investor
specifying that the Company (and/or its designees) wishes to purchase
such Voting Securities (such Voting Securities, the "Section 6.5
Securities"), a date for the closing of such purchase, which shall not
be more than 45 days after delivery of such Section 6.5 Acceptance
Notice (subject to extension as provided in Section 6.5(e) hereof),
and a place for the closing of such purchase (a "Section 6.5
Closing"). Upon delivery of a Section 6.5 Acceptance Notice, a binding
agreement shall be deemed to exist providing for the purchase by the
Company (and/or its designees) of the Section 6.5 Securities to which
such Section 6.5 Acceptance Notice relates, upon the terms and subject
to the conditions set forth in this Section 6.5 and the Company shall
use its reasonable best efforts to secure all approvals required in
connection therewith; provided, that if the Unsolicited Offer is for
less than all of the outstanding shares of Common Stock, the Section
6.5 Securities to be purchased by the Company as a result of the
Section 6.5 Acceptance Notice shall equal (i) if the Section 6.5
Closing occurs after the date of consummation of the applicable
<PAGE>
Unsolicited Offer, the Voting Securities specified in the Section 6.5
Transfer Notice that would have been purchased (taking into account
prorationing) if all of such Voting Securities so specified had been
tendered into such Unsolicited Offer and (ii) otherwise, the Voting
Securities specified in the Section 6.5 Transfer Notice that would
have been so purchased (taking into account prorationing) if the party
giving the Section 6.5 Transfer Notice had tendered such Voting
Securities into the Unsolicited Offer, and all other shareholders of
the Company had tendered all their Voting Securities into the
Unsolicited Offer; and, provided, further, that if following delivery
of a Section 6.5 Acceptance Notice, the price per share of Common
Stock in the Unsolicited Offer is increased, the Company may, not
later than 24 hours prior to the latest time by which Common Stock
must be tendered in order to be accepted in the Unsolicited Offer,
rescind its Section 6.5 Acceptance Notice (in which event it will have
no obligation to purchase such Section 6.5 Securities and such Section
6.5 Securities may be sold into the Unsolicited Offer).
Notwithstanding anything to the contrary contained in this Section
6.5, for so long as the agreement deemed to exist upon delivery of a
Section 6.5 Acceptance Notice remains in effect, the Investor shall
not and shall cause the Investor Group not to, tender any Voting
Securities pursuant to the Unsolicited Offer.
(b) The purchase price for any Section 6.5 Securities (the
"Section 6.5 Price"), assuming simultaneous conversion of any Series A
Convertible Preferred Stock, shall be the per share price of Common
Stock paid in the Unsolicited Offer. The value of any securities
offered in the Unsolicited Offer shall equal the average Market Price
per share or per unit of such securities during the 30 consecutive
trading days immediately preceding the Company's receipt of the
Section 6.5 Transfer Notice. In the case of any securities not
theretofore traded, the value of such securities shall be determined
by two nationally recognized investment banking firms, one firm to be
selected by each of the Investor and the Company, or in the event such
firms are unable to agree, by a third nationally recognized investment
banking firm selected by such firms. The Investor and the Company
shall use their reasonable best efforts to cause any such
determination of value to be made within five business days following
the Company receipt of a Section 6.5 Transfer Notice. In connection
with any determination of value pursuant to this Section 6.5(b), each
party will bear the fees and expenses of the investment banking firm
selected by it and the parties will bear equally the fees and expenses
of any third investment banking firm.
(c) At any Section 6.5 Closing, the Company (and/or its
designees) shall pay to the Investor (or its designees) the aggregate
Section 6.5 Price for the Section 6.5 Securities by wire transfer of
immediately available funds, and the Investor shall deliver or cause
to be delivered to the Company (and/or its designees) such Section 6.5
Securities, with documentation satisfactory to the Company evidencing
the transfer of such Section 6.5 Securities, in form acceptable for
transfer on the Company's books. In the event a Section 6.5 Closing
occurs after the 30th day following delivery of the applicable Section
6.5 Acceptance Notice, then, in addition to the aggregate Section 6.5
Price, the Company (and/or its designees) shall pay to the Investor
(or its designees) interest on the aggregate Section 6.5 Price for the
period from and after such 30th day to and including the date of such
Section 6.5 Closing. Such interest shall accrue at the Federal Funds
Rate as in effect from time to time, plus 1/4 of 1%. Such interest
shall not be compounded and shall be calculated on the basis of a
360-day year and the actual number of days elapsed.
(d) If the Company (and/or its designee) does not, to the
extent specified in Section 6.5(a), exercise its right to purchase the
securities specified in a Section 6.5 Transfer Notice, then the party
giving such Section 6.5 Transfer Notice shall be free to effect the
Disposition pursuant to the Unsolicited Offer of such Voting
Securities, but only such Voting Securities, so specified in such
Section 6.5 Transfer Notice (without being subject to the restrictions
contained in Section 6.3(e) hereof relating to the Company's purchase
rights under this Section 6.5) and the Company shall take such steps
as are necessary to effectuate the conversion into Common Stock of any
Series A Convertible Preferred Stock to be tendered by the party
giving the Section 6.5 Transfer Notice prior to the acceptance of such
shares for payment pursuant to the Unsolicited Offer so that such
party shall have a reasonable opportunity to timely tender such shares
in accordance with such Unsolicited Offer (including tenders of such
shares by the Company on behalf of such party); provided that the
Company and the Investor shall request that such shares be returned to
the Company for exchange in accordance with Section 6.7(c) if such
shares are not accepted for purchase pursuant to the Unsolicited Offer
<PAGE>
and that, in the event of the return of such shares to the Investor,
the Investor shall promptly return such shares to the Company for
exchange in accordance with Section 6.7(c); provided, further, that
the Company shall take such steps to ensure that any shares not
tendered shall be duly issued and outstanding; provided, further, that
(i) such Disposition is effected at a price equal to or in excess of
the price offered in the Unsolicited Offer at the time that the
Company's right to purchase such securities expires, taking into
account any extension of the time by which the Company must exercise
such right including by reason of clause (iii) below, (ii) except as
provided in Section 6.5(e) below, the foregoing shall not apply with
respect to any shares as to which the Company shall have delivered a
Section 6.5 Acceptance Notice in the event that the agreement deemed
to exist with respect to such securities upon delivery of the
applicable Section 6.5 Acceptance Notice is terminated pursuant to
Section 6.5(e) hereof, and (iii) in the event that the price per share
of Common Stock in the Unsolicited Offer is decreased at any time
during such offer, any member of the Investor Group who wishes to
effect a Disposition of Voting Securities pursuant to Section 6.3(e)
shall give a Section 6.5 Transfer Notice to the Company of such
intended Disposition (irrespective of whether a Section 6.5 Transfer
Notice was previously delivered with respect thereto) at least 48
hours prior to the latest time by which such securities must be
tendered in order to be accepted in the Unsolicited Offer, and,
notwithstanding any other provision of this Section 6.5, the Company
shall have 24 hours following delivery of such Section 6.5 Transfer
Notice to deliver a Section 6.5 Acceptance Notice. If any such
Disposition is not, subject to Section 6.3(e) hereof, completed prior
to the later of (i) 60 days following the expiration of the Company's
right to purchase the securities specified in a Section 6.5 Transfer
Notice, and (ii) 30 days following the redemption, amendment or
modification of the Preferred Stock Purchase Rights or the Amended
Rights Agreement (or a Substantially Similar Plan), any Voting
Securities specified in such Section 6.5 Transfer Notice and not
disposed of in such Disposition shall again be subject to the
Company's purchase rights under this Section 6.5, to the extent
provided in Section 6.3(e) hereof.
(e) The obligations of the parties to effect any Section 6.5
Closing shall be subject to the satisfaction of the following
conditions: (i) all waiting periods, if any, applicable to the
transactions occurring at such Section 6.5 Closing under the HSR Act,
shall have expired or been terminated and (ii) no statute, rule,
regulation, executive order, decree, ruling, injunction or other order
shall have been enacted, entered, promulgated or enforced by any court
or governmental authority of competent jurisdiction which prohibits
such transactions or makes such transactions illegal. The obligation
of the Company (and/or its designees) to effect any Section 6.5
Closing shall be further subject to the condition that shares of
Common Stock validly tendered in accordance with the terms of the
Unsolicited Offer subject to prorationing in accordance therewith
shall have been paid for or shall simultaneously with such Section 6.5
Closing be paid for pursuant to the Unsolicited Offer. If, as of any
date on which a Section 6.5 Closing is scheduled to occur, the
foregoing conditions relating thereto have not been satisfied, then
such Section 6.5 Closing shall occur as promptly as practicable
following such satisfaction, and, with respect to the conditions set
forth in the first sentence of this Section 6.5(e), the parties shall
use their reasonable best efforts to cause the satisfaction of such
conditions. If (x) the conditions relating to any Section 6.5 Closing
are not satisfied within 120 days in the case of clause (i), and 180
days in the case of clause (ii), following delivery of the applicable
Section 6.5 Acceptance Notice (or in the case of an order or
injunction arising out of any proceeding initiated by the Investor or
any member of the Investor Group, such later date on which such order
or injunction becomes final and nonappealable), or (y) the Unsolicited
Offer is terminated without the condition set forth in the second
sentence of this Section 6.5 (e) being satisfied, then the Investor or
the Company in the case of the preceding clause (x), or the Company in
the case of the preceding clause (y), may, prior to the acceptance for
payment of shares pursuant to the Unsolicited Offer, terminate the
agreement deemed to exist upon delivery of the applicable Section 6.5
Acceptance Notice by delivering written notice to the other; provided
that no such termination shall excuse a party for a breach of its
obligations thereunder and, in the case of a termination by the
Company pursuant to clause (x), the party having given the applicable
Section 6.5 Transfer Notice shall be free to sell the Section 6.5
Securities into the Unsolicited Offer.
Section 6.6. Required Dispositions. (a) If, at any time
during the Standstill Period, the Total Ownership Percentage of the
<PAGE>
Investor Group shall exceed the Ownership Cap plus 1%, whether as a
result of any repurchase of Common Stock by the Company pursuant to a
tender offer, open market purchases or otherwise (a "Company
Repurchase") or for any other reason, then, if and to the extent
requested by the Company by written notice to the Investor which may
be made at any time, the Investor shall, within twelve months after
such request (the "Sell Down Period"), dispose of, or cause the other
members of the Investor Group to dispose of (a "Required
Disposition"), such number of Common Securities owned by the Investor
Group as shall be necessary to reduce the Total Ownership Percentage
of the Investor Group to no more than the then applicable Ownership
Cap immediately prior to such Company Repurchase or other event giving
rise to such Required Disposition (the "Required Disposition Amount"),
as applicable; provided that any such Required Disposition shall be
subject to the provisions of Section 6.3 and provided, further, that
the Investor agrees that such Common Securities in excess of the
Ownership Cap shall be voted by the Investor Group at any meeting of
shareholders (or action by written consent in lieu of any such
meeting) pro rata in accordance with the vote of all shares held by
Persons other than the members of the Investor Group and Other
Investor Affiliates. Notwithstanding the foregoing, if any Required
Disposition during the applicable Sell Down Period (A) would result in
liability to the Investor or other members of the Investor Group under
Section 16(b) of the Exchange Act or any similar successor statute, or
(B) would be prohibited as a result of the restrictions set forth in
Section 9 of the Registration Rights Agreement on transfer of Common
Securities, then such Sell Down Period (x) shall, in the case of
clause (A) above, begin on the first date on which such Required
Disposition may be effected without liability under Section 16(b) of
the Exchange Act and (y) with respect to clause (B) above, be extended
by the number of days that the Investor Group is restricted from
selling Common Securities under the Registration Rights Agreement.
(b) The Company agrees to indemnify the Investor Group
against any Loss (as defined below) incurred by the Investor Group as
a result of any Required Disposition; provided, that (i) such Required
Disposition is effected on an arm's-length basis to a Person that is
not affiliated with any member of the Investor Group or Other Investor
Affiliate either in a bona fide open market "brokers' transaction" or
in a privately negotiated transaction, (ii) the purchase price in
connection with such Required Disposition is paid in cash and (iii)
the Required Disposition is made during the Sell Down Period following
the receipt by the Investor of the notice from the Company specified
in the first sentence of Section 6.6(a). For purposes of this Section
6.6, Voting Securities disposed of in a Required Disposition shall be
deemed to have been disposed of in the order in which such Voting
Securities were purchased. "Loss" means the amount, if any, by which
(A) the weighted average purchase price of the Voting Securities
disposed of by the Investor Group in a Required Disposition during a
Sell Down Period calculated on a per share of Common Stock basis
(based on the number of shares of Common Stock such Voting Securities
are convertible into at such time, if applicable) (which shall not
include (x) sales pursuant to the last proviso of Section 6.1(A)(a) or
(y) sales of Voting Securities in excess of the Required Disposition
Amount) (excluding any out-of-pocket expenses incurred in connection
with such purchase) exceeds (B)(1) the higher of (x) the Market Price
of the Common Stock for the trading day immediately preceding the
closing of such Required Disposition and (y) the price received by the
Investor Group pursuant to such Required Disposition (net in each case
of ordinary brokerage or placement commissions incurred by the
Investor to effect such Required Disposition) multiplied by (2) the
number of Voting Securities sold in connection with such Required
Disposition (excluding any Voting Securities in excess of the Required
Disposition Amount). In no event will Losses be deemed to include any
taxes payable in connection with such Required Disposition. Such
indemnification payment, if any, shall be made, without interest,
within five business days after the sale occurs.
Section 6.7. Top-Up Rights; Permitted Reacquisitions;
Exchange of Share Certificates.
(a) After the end of the Company Buy Back Period the
Investor at its option may, at any time, purchase Voting Securities in
open market purchases or privately negotiated transactions provided
that, after giving effect to such purchase, the Investor Group's Total
Ownership Percentage does not exceed the Ownership Cap then applicable
to the Investor Group; provided that a block purchase of Voting
Securities in accordance with the foregoing effected as a single
transaction which results in the Investor Group's Total Ownership
Percentage exceeding the Ownership Cap then applicable to the Investor
Group shall not be deemed to violate this Section 6.7(a), Section 6.1
<PAGE>
or any other provision hereof solely as a result of the acquisition of
such excess securities so long as the aggregate Voting Securities so
held by the Investor Group at any time in excess of the Ownership Cap
represent an Equity Percentage of less than .04% and have an aggregate
Market Price at the time of purchase of less than $2,000,000; provided
that the Investor will transfer, or cause to be transferred, such
excess Voting Securities to an unaffiliated entity within twelve
months of the acquisition thereof by the Investor Group and all such
excess Voting Securities, pending their transfer, shall be voted by
the Investor Group in accordance with the requirements of clause (w)
through (z) of Section 6.2 and on any other matter in the same
proportion as the votes cast by or on behalf of all holders of the
Company's Voting Securities other than the Investor Group and Other
Investor Affiliates.
(b) The Ownership Cap shall initially be 20%, subject to
reduction as follows:
(i) If, on the last day of the twelve-month period
commencing on the day immediately succeeding the last day of
the Company Buy Back Period (or in the event that the
Company shall issue during such twelve-month period Common
Securities having an aggregate Equity Percentage after such
issuance of 3% or more, the twenty-four-month period
commencing on the day immediately succeeding the last day of
the Company Buy Back Period (the "Initial Top-Up Period"))
the Investor Group's Total Ownership Percentage is less than
20%, the Ownership Cap shall be reduced to the amount of
such Total Ownership Percentage.
(ii) At any time after the expiration of the Initial
Top-Up Period, the Ownership Cap shall be reduced by the
amount by which, during each successive twelve-month period
following any Dilutive Issuance, the Common Stock purchased
by the Investor represents an Equity Percentage of less than
3% (disregarding in computing such Equity Percentage any
subsequent Dilutive Issuance); notwithstanding the
foregoing, the Ownership Cap shall not be reduced at any
time the Total Ownership Percentage is equal to the
Ownership Cap.
(iii) The Ownership Cap shall be reduced by the Equity
Percentage represented by all Transfers (as hereinafter
defined) by the Investor Group of Common Securities to
Persons other than members of the Investor Group other than
(a) inadvertent dispositions or (b) dispositions in excess
of the Required Disposition Amount in connection with block
trades executed to facilitate a Required Disposition,
provided that the aggregate amount excluded under (a) and
(b) above does not exceed .5% of the Equity Percentage and
is actually purchased by the Investor or a wholly-owned
United States Subsidiary of the Investor within twelve
months of the date of the disposition referred to in (a) or
(b) above, as the case may be. For purposes of this Section
6.7(b)(iii), the term "Transfer" with respect to Voting
Securities shall include any sale, exchange, offer to sell
or exchange, contract to sell or exchange, option or warrant
to purchase or exchange, any dividend of, or any swap or
other agreement or transaction that transfers, directly or
indirectly, the economic consequence of ownership of Voting
Securities and such Transfer shall be deemed to occur on the
date upon which the all conditions to the consummation of
such Transfer are subject to the discretion of the
transferee.
(iv) Any period of twelve or twenty-four months under
this Section 6.7 shall be extended by the number of days
that the Investor Group cannot purchase Common Stock without
liability under Section 16(b) of the Exchange Act due to a
Required Disposition.
(c) The Investor shall present for exchange, and the Company
shall exchange at no cost to the Investor, any Common Securities
acquired by the Investor Group, whether purchased pursuant to this
Section 6.7 or received by way of dividend or otherwise (other than
shares of Common Stock acquired pursuant to Section 6.1(A)(a)(iii))
for shares of Series A Convertible Preferred Stock (at a ratio of one
share of Series A Convertible Preferred Stock in exchange for each 100
shares of Common Stock (as appropriately adjusted to reflect any stock
split, stock dividend, reverse stock split, reclassification or any
other transaction with a comparable effect)).
<PAGE>
(d) No purchase pursuant to this Section 6.7 may be made by
the Investor Group during any period during which the Company notifies
the Investor that this Company is effecting a "distribution" as
defined in Regulation M under the Securities Act; provided, that any
period of twelve months or twenty-four months under this Section 6.7
shall be extended by the number of days that the Investor Group is so
prohibited from purchasing shares of Common Securities as a result of
this Section 6.7(d).
(e) A "Dilutive Issuance" shall mean any issuance of Common
Securities by the Company after the Closing Date; provided, that no
Dilutive Issuance shall be deemed to have occurred unless such
issuance, together with all other issuances since the Closing Date or
the most recent Dilutive Issuance to occur (other than those which
have been theretofore taken into account for purposes of this Section
6.7(e)), shall represent an Equity Percentage of 1% or more; provided,
however, that any adjustments which by reason of this Section 6.7(e)
are not required to be made shall be carried forward and taken into
account in, and as of the date of, any subsequent adjustment. All
calculations shall be made to the nearest one thousandth of a percent.
Section 6.8. Spin-off Distributions. In the event that the
Company makes any Spin-off Distribution, then effective as of the date
of such Spin-off Distribution, without any action on the part of the
Company, the Spin-off Company or the Investor, there shall be deemed
to exist, in addition to this Agreement, between the Investor and the
Spin-off Company a binding agreement (the "Spin-off Agreement")
containing provisions substantially identical to Section 6 hereof,
including the definitions of any capitalized terms used in such
Sections but defined in other Sections of this Agreement; provided
that, for purposes of the Spin-off Agreement (i) references to the
Company shall mean the Spin-off Company; (ii) references to Voting
Securities shall mean the Voting Securities of the Spin-off Company,
(iii) references to "the date hereof" and "the date of this Agreement"
shall mean the date of the Spin-off Distribution; and (iv) the
Spin-off Agreement shall terminate on the date this Agreement would
have terminated or does terminate pursuant to Section 10. Prior to any
Spin-off Distribution, the Investor shall, and the Company shall cause
the Spin-off Company to, enter into an agreement memorializing the
Spin-off Agreement.
Section 6.9. Competing Investments. From and after the date
hereof, and following the Closing for so long as the Ownership Cap is
18% or more and no Trigger Event or Release Event shall have occurred,
the Company shall not consummate or agree pursuant to a binding
agreement to consummate a Competing Investment at any time prior to
the fourth anniversary of the date of this Agreement. So long as the
Ownership Cap is 18% or more and no Trigger Event or Release Event
shall have occurred, the Company shall not consummate or agree
pursuant to a binding agreement to consummate a Competing Investment
at any time after the fourth anniversary of the date of this
Agreement, unless (a) the Company shall have provided the Investor
prior written notice of such proposed Competing Investment at least 30
days prior to the earlier of the consummation of or the entering into
a binding agreement providing for such Competing Investment specifying
the principal terms thereof (including the form and amount of such
Competing Investment and the identity of the Competitor proposing to
make such Competing Investment) (such notice, the "Competing
Investment Notice") and (b) the Competitor shall have agreed in the
Competitor Agreement or otherwise that (x) neither it nor any of its
Affiliates or Associates (including any of its designees on the Board)
will have access to any DuPont Proprietary Information or Joint
Intellectual Property (as such terms are defined in the Research
Alliance Agreement) except pursuant to a sublicense from the Company
with respect to Pioneer Products (as defined in the Research Alliance
Agreement) that is permitted pursuant to the Research Alliance
Agreement, (y) upon any breach of the agreement referred to in clause
(x) above, and so long as the Investor shall have the right to
designate any Investor Nominees for election or appointment to the
Board pursuant to Section 5 (and without limiting any other remedies
the Investor may otherwise have), the Competitor will cause all
designees of the Competitor on the Board to immediately resign and the
Competitor will not have any rights to nominate any other persons to
the Board, and (z) the provisions of the agreement referred to in this
clause (b) shall be for the express benefit of the Investor and the
Investor shall be a third party beneficiary thereof. The Investor
shall have the right, which may be exercised by written notice to the
Company delivered during the period commencing on the date of delivery
of the Competing Investment Notice to the Investor and ending on the
date which is the later of (i) the 30th day thereafter, (ii) the
<PAGE>
execution by the Company of a binding agreement providing for the
Competing Investment (or, if no such agreement is executed, the
consummation of such Competing Investment) and (iii) the second
Business Day after the Company notifies the Investor in writing it
will execute an agreement effectuating (or consummate, as the case may
be) the transactions contemplated in the preceding clause (ii),
provided that such notification shall not be deemed given unless such
agreement is in fact executed (or transaction consummated, as the case
may be) within such two Business Day period, notwithstanding the
provisions of Section 6.1(A), to discuss the merits of the Competing
Investment with the Company and the Board or to make alternative
public or private proposals with respect thereto. The Investor shall
also have the right, exercisable by delivering a notice (the
"Competitor Release Notice") to the Company within the time period
specified below, of its election to immediately terminate the
Formation Agreement (the election of the Investor to so terminate the
Formation Agreement, a "Release Event"), which termination shall be
carried out, (i) if the Competing Investment resulting in such Release
Event occurs or is consummated, or if the agreement providing therefor
is executed by the parties thereto, prior to the seventh anniversary
of the date of this Agreement, in accordance with the provisions of
Section 9.2(d)(X) of the Formation Agreement as if an Involuntary
Default described therein had occurred (and as if the Investor was the
non-defaulting "Party" for purposes of Section 9.2(d)(X) of the
Formation Agreement) upon consummation of the Competing Investment,
and (ii) in all other cases, in accordance with the provisions Section
9.2(d)(Y) of the Formation Agreement as if an Involuntary Default
described therein had occurred (and as if the Investor was the
non-defaulting "Party" for purposes of Section 9.2(d)(Y) of the
Formation Agreement). A Release Event shall be irrevocable and binding
upon the Investor and the Company, except that (A) the Investor may,
in the case of a termination carried out in accordance with clause (i)
of the preceding sentence, rescind such Release Event (in which event
all rights and obligations of the parties shall be as if no Release
Event shall have ever occurred) for a period of five Business Days
after the determination of Fair Market Value (as defined in, and
calculated pursuant to, the Formation Agreement) by delivering a
written notice of such rescission to the Company within such period,
and (B) the Investor may rescind such Release Event (in which event
all rights and obligations of the parties shall be as if no Release
Event shall have ever occurred) for a period of five Business Days
following the entry of a final and non-appealable Order as
contemplated by the following sentence and (C) the Release Event shall
automatically be rescinded (in which event all rights and obligations
of the parties shall be as if no Release Event shall have occurred) if
the Competing Investment which triggered such Release Event was not
consummated, as advised in writing by the Company to the Investor. The
closing of the transfer of the Investor's or the Company's Venture
Interest, as applicable (as defined in the Formation Agreement)
following a Release Event shall be as soon as practicable following
the expiration or termination of all waiting periods, if any, under
the HSR Act and in any event no later than the later to occur of (I)
15 days after the delivery of the Competitor Release Notice and (II) 5
business days after the expiration or termination of all waiting
periods, if any, under the HSR Act, subject to no Order having been
entered, promulgated or enforced by a court or governmental authority
of competent jurisdiction which prohibits such transaction (and the
Investor and the Company shall use commercially reasonable efforts to
have any such Order lifted or terminated in order to allow
consummation of such transaction unless and until such time as such
Order becomes final and non-appealable). The Competitor Release
Notice, in order to result in the rights described above, must be
delivered by the Investor to the Company within twenty Business Days
after the earlier of (i) the public announcement by the Company of the
consummation of the Competing Investment, and (ii) the Company
notifying the Investor in writing that the Competing Investment has
been consummated (and the Company agrees to promptly so notify the
Investor); provided, however, that the Investor may deliver a
Competitor Release Notice at any time after it becomes aware of the
consummation of a Competing Investment until twenty Business Days
after either of the events described in clauses (i) or (ii) above
shall have occurred. Notwithstanding anything to the contrary in this
Agreement, following consummation of the Competing Investment, the
Investor, with the consent of the Company, may engage in discussions
with the Company as to matters relating to the Joint Venture Agreement
(including the entity established pursuant to the Formation Agreement)
and the Research Alliance Agreement, including the terms of a purchase
or sale of any interest therein. Notwithstanding anything herein to
the contrary, solely for purposes of Section 5.2(z), 6.2(e) and clause
(iii) and the reference to Sections 8.1(b) and (c) contained in the
second to last sentence of Section 6.9, the Release Event will not be
<PAGE>
deemed to have occurred (and the rights and obligations of the parties
referenced therein will not come into effect) until the earlier of (I)
the time, following a Release Event, of the consummation of the
transfer of the Company's or the Investor's Venture Interest, as
applicable (each as defined in the Formation Agreement) in connection
with such Release Event and (II) six months following such Release
Event. Upon the occurrence of a Release Event, (i) the Standstill
Period shall be extended, in respect of the sections indicated, and to
the extent provided, in Section 10.2(iv), (ii) the Company shall file
and use commercially reasonable efforts to obtain and maintain the
effectiveness of a shelf registration statement on the terms set forth
in the Registration Rights Agreement, (iii) the Investor shall
immediately cause all of the Investor Nominees then serving on the
Board to offer their resignations from the Board, and the Company's
obligations to designate Investor Nominees to the Board pursuant to
Section 5 shall terminate, (iv) the parties' obligations and rights
pursuant to Section 6.7(a), Section 8.1(b) and (c), Section 8.2,
Section 8.3 and Section 8.8 shall terminate, (v) the provisions of
Section 6.3(g) shall thereafter apply and (vi) the provisions of
Section 6.1(A), Section 6.2(e), Section 6.6, Section 6.7(b) through
(e) and Section 6.8 shall remain in full force and effect in
perpetuity. The rights of the Investor to terminate the Formation
Agreement pursuant to Section 6.9 and Section 8.2(c) hereof shall
automatically be transferred and assigned at the election of the
Investor, upon notice to and acknowledgment by the Company of such
notice, but without any consent required on the part of the Company,
to any Spin-Off Entity (which term, for purposes of this sentence,
shall include any Person who would otherwise be deemed a Spin-Off
Entity but for such Person's status as a Subsidiary of the Investor)
which is a Subsidiary of the Investor or satisfies each of the
conditions set forth in clauses (i) through (v) of the definition of
the term "Sale of Ag Products."
Section 6.10. Rights of the Company upon a Trigger Event.
In the event that:
(A) the Research Alliance Agreement or the Formation
Agreement shall be terminated (notwithstanding the survival
of certain obligations of the parties for the periods
following such termination as provided in Section 9.4 of the
Formation Agreement) other than (i) a termination of the
Research Alliance Agreement or the Formation Agreement as a
result of a willful and substantial breach by the Company of
any material term of the Formation Agreement or the Research
Alliance Agreement, (ii) a termination of the Research
Alliance Agreement at or after the sixteenth anniversary of
the date of such agreement, and (iii) a termination of the
Formation Agreement or the Research Alliance Agreement in
connection with the acquisition by one party of the Venture
Interest of the other pursuant to a Change in Control
Release Event or a Release Event and where the consequences
set forth in Section 8.2(b) or in the second to last
sentence of Section 6.9, as and to the extent applicable,
shall apply; or
(B) there shall have occurred a Sale of Ag Products;
(any of such events, a "Trigger Event"), then, effective immediately
upon the occurrence of such Trigger Event (i) the Standstill Period
shall be extended, in respect of the sections indicated, and to the
extent provided, in Section 10.2(iv), (ii) the Company shall file and
use its commercially reasonable efforts to obtain and maintain the
effectiveness of a shelf registration statement on the terms set forth
in the Registration Rights Agreement, (iii) the Investor shall
immediately cause all Investor Nominees then serving on the Board to
offer their resignations from the Board, and the Company's obligations
to designate Investor Nominee to the Board pursuant to Section 5 shall
terminate, (iv) the parties' obligations and rights pursuant to the
provisions of Section 6.6(b) (but only with respect to Section 6.6(b)
in the case of a Trigger Event pursuant to clause (B) above or in the
case of a Trigger Event pursuant to clause (A) above occurring as a
result of a willful and substantial breach by the Investor of any
material term of the Joint Venture Agreement or the Research Alliance
Agreement), Section 6.7(a), Section 6.9, clauses (b) and (c) of
Section 8.1, Section 8.2, Section 8.3, and Section 8.8 shall
terminate, (v) the provisions of Section 6.3(g) shall thereafter
apply, and (vi) Section 6.1(A), Section 6.2(e), Section 6.6(a),
Section 6.6(b) (but only with respect to Section 6.6(b) in the case of
a Trigger Event pursuant to clause (A) above other than a Trigger
Event occurring as a result of a willful and substantial breach by the
<PAGE>
Investor of any material term of the Joint Venture Agreement or the
Research Alliance Agreement), Section 6.7(b)-(e) and Section 6.8 shall
remain in full force and effect in perpetuity. The Investor agrees
that it will not permit a transaction constituting a Sale of Ag
Products (including, without limitation, a transaction that would
otherwise be excluded from the definition of a Sale of Ag Products by
reason of the satisfaction of the conditions set forth in clauses (i)
through (v) of the proviso thereof) to be consummated or a binding
agreement with respect thereto to be entered into prior to the first
anniversary of the Closing Date.
SECTION 7
PRE-CLOSING COVENANTS
Section 7.1. Taking of Necessary Action. Each of the parties
hereto agrees to use its reasonable best efforts promptly to take or
cause to be taken all action and promptly to do or cause to be done
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Closing of the
transactions contemplated by this Agreement. Without limiting the
foregoing, the Investor and the Company (a) will use their reasonable
best efforts to make all filings, including filings under the HSR Act,
and obtain all other Regulatory Approvals necessary or, in the opinion
of the Investor or the Company, advisable in order to permit the
consummation of the transactions contemplated hereby and (b) will not
take actions (including by making other acquisitions of or investments
in any other Person) that could reasonably be expected to have the
effect of delaying or hindering the Closing of the transactions
contemplated hereby. Each party shall execute and deliver both before
and after the Closing such further certificates, agreements and other
documents and take such other actions as the other party may
reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
Section 7.2. Notifications. (a) At all times prior to the
Closing Date, the Investor shall promptly notify the Company and the
Company shall promptly notify the Investor in writing of any fact,
change, condition, circumstance or occurrence or nonoccurrence of any
event which will or is reasonably likely to (i) constitute a breach of
any representation or warranty of such party contained in the
Transaction Agreements; or (ii) result in the failure to satisfy the
conditions to be complied with or satisfied by it hereunder; provided,
that the delivery of any notice pursuant to this Section 7.2 shall not
limit or otherwise affect the remedies available hereunder to any
party receiving such notice.
(b) To the extent that the Investor or the Company is
required to make any filings with the Commission in connection with
the transactions contemplated by this Agreement, such party shall give
the other party a reasonable opportunity to review and comment on such
filings prior to the filing thereof with the Commission.
Section 7.3. No-Shop. From the date hereof until the Closing
or the earlier termination of this Agreement, except with respect to
an unsolicited Proposal to the extent required by the fiduciary
obligations of the Board of Directors of the Company, as determined in
good faith by the Board of Directors based on the advice of outside
counsel, the Company shall not and shall not permit or authorize any
of its Subsidiaries, Affiliates or Representatives to, directly or
indirectly, (i) solicit or initiate, or encourage the submission of,
any Proposal with respect to the Company, or (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any
information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Proposal, other than the
transaction contemplated hereby with the Investor.
Section 7.4. Share Listing. As soon as practicable but in
any event prior to the date that the Closing would otherwise have
occurred, the Company shall take reasonable action as is required to
cause the shares of Common Stock into which the shares of Series A
Convertible Preferred Stock are convertible to be listed for trading
on the NYSE.
Section 7.5. Registration Rights Agreement. At the Closing,
the Company and the Investor shall enter into the Registration Rights
Agreement.
Section 7.6. Pre-Closing Information. The Company shall (and
<PAGE>
shall cause each of its Subsidiaries to), from and after the date
hereof and until the Closing and subject to Section 8.1(a), afford to
the Investor and its Representatives reasonable access, upon
reasonable notice and in such manner as will not unreasonably
interfere with the conduct of the Company's business, to material
financial information regarding the Company. The Company will
reasonably promptly inform the Investor of the principal terms of any
Proposal with respect to which the Company has entered into
substantive discussions or negotiations.
SECTION 8
ADDITIONAL COVENANTS
Section 8.1. Certain Information. (a) Subject to applicable
law and the provisions of this Agreement, all information provided to
the Investor or the Company hereunder shall be provided in confidence
in accordance with the provisions of the Confidentiality Agreement
(the "Confidentiality Agreement"), dated March 13, 1997, between the
Company and the Investor.
(b) At such time as the Investor shall notify the Company
that it shall account for its investment in the Company pursuant to
the full equity method (including earnings and investments), the
Company will, at Investor's sole cost and expense, cooperate to the
extent necessary to furnish to the Investor all information that is
required by GAAP to enable the Investor to account for its investment
in such manner and the Company hereby consents to the Investor doing
so. To the extent reasonably requested by the Investor, the Company
will and will cause its Representatives to, at the Investor's sole
cost and expense, provide information regarding the Company and its
Subsidiaries, and otherwise cooperate with, the Investor so as to
enable the Investor to prepare financial statements in accordance with
GAAP and to comply with its disclosure requirements under securities
laws and regulations.
(c) From time to time upon reasonable advance request by the
Company, the Investor will notify the Company of the amount of each
class of Voting Securities then Beneficially Owned by the Investor
Group. From time to time upon reasonable advance request by the
Investor, the Company will provide the Investor with information known
to the Company with respect to the number of votes entitled to be
voted by shareholders of the Company at the time of such request;
provided, however, that the Company shall not be obligated pursuant to
this Section 8.1(c) to make any general solicitation of shareholders
of the Company in connection therewith.
Section 8.2. Right to Participate in Sale of the Company.
(a) Prior to the Closing and thereafter, so long as the Ownership Cap
is 18% or more, (I) the Company shall not enter into, and the Board
shall not publicly recommend to shareholders or approve, a definitive
agreement providing for a Change in Control Transaction and (II) the
Board shall not redeem the Preferred Stock Purchase Rights or
otherwise amend or modify the Amended Rights Agreement (or a
Substantially Similar Plan) to be inapplicable (including by taking
action to cause a Section 11(a)(ii) Event or Section 13 Event (each as
defined in the Amended Rights Agreement as in effect on the date
hereof), not to occur that, absent such action, would otherwise have
occurred, or to redeem the Preferred Stock Purchase Rights) to a
proposed Change in Control Transaction for which no definitive
agreement is entered into as a means, in any such case, intended to
permit a proposed Change in Control Transaction to be consummated
without causing a Triggering Event (as defined in the Amended Rights
Agreement) to occur or otherwise exempt such transaction therefrom,
unless prior thereto (i) the Investor shall have been given at least
30 days prior notice of the proposed Change in Control Transaction and
of the material terms thereof and a full and fair opportunity, as
conclusively determined by the Board in good faith and in the exercise
of its fiduciary duties, after consultation with outside counsel, to
participate in the Company's bidding process (the "Process")
undertaken by the Company (if any) in advance of such Change in
Control Transaction on terms, and to have any proposal submitted by
the Investor pursuant to clause (ii) below evaluated on a basis, no
less favorable to the Investor than those afforded to other interested
parties, (ii) the Investor shall have been permitted notwithstanding
the restrictions contained in Section 6.1, to submit a proposal for an
alternative transaction during the Interim Period (as defined below)
or in connection with such Process, subject in any event to the
Board's right to accept or reject any such proposal as may be made and
(iii) the Interim Period shall have terminated. "Interim Period" shall
mean the period commencing on the date of the delivery to the Investor
<PAGE>
by the Company of written notice (such notice, the "Change in Control
Transaction Notice") of its considering to take any action specified
in clause (I) or clause (II) of the preceding sentence and ending on
the date which is the later of (i) the 30th day thereafter, and (ii)
the public announcement by the Company of the taking of any action
specified in clause (I) or clause (II) of the preceding sentence. In
connection with the foregoing, the Investor agrees that if the Company
establishes procedures uniformly applicable to all interested parties
for the evaluation of proposals for a Change in Control Transaction
and if the Investor wishes to participate in the sale process, then,
the Investor will, subject to the Investor not violating applicable
law (other than violations based on claims or allegations of breach of
the Company's fiduciary duty), comply with such procedures as long as
such procedures (i) are applied uniformly to all interested parties
(and the Company agrees that it shall give the Investor at least one
Business Day's prior written notice if any such procedures are not to
be uniformly applied to all such interested parties), (ii) except as
conclusively determined by the Board in good faith and in the exercise
of its fiduciary duties, after consultation with outside counsel, do
not have a materially greater impact when applied to the Investor than
when applied to other participants, and (iii) except as provided in
Section 8.2(c) below and the Formation Agreement, shall not establish
procedures relating to the Joint Venture Agreement, or the entity
established thereby, or the Research Alliance Agreement, or the rights
and obligations of the Investor relating thereto. If the Company
rejects any offer made by the Investor pursuant to the Process, the
Company will advise the Investor in writing of the reasons for such
rejection.
(b) Following the consummation of a Change in Control
Transaction, unless either (x) any Person or 13D Group shall
Beneficially Own Common Securities representing an Equity Percentage
of more than 50% of the Company or of the common securities of the
company or other entity surviving such Change in Control Transaction
or (y) the Investor Group shall Beneficially Own Voting Securities
representing less than 5% of the Total Voting Power of the Company or
the voting power of the company or other entity surviving such Change
in Control Transaction (a Change in Control Transaction where neither
clause (x) nor (y) is satisfied, a "Surviving Change in Control
Transaction"), then (unless, in the case of clause (i) below, the
Company or other entity surviving such Change in Control Transaction
shall otherwise determine as to all of such provisions) (i) the
provisions of Section 6.1(A), Section 6.6, Section 6.7 (other than
clause (c) thereof to the extent that the Common Stock of the Company
or the voting securities of the company or other entity surviving such
Change in Control Transaction (1) is not entitled to more than one
vote per share or (2) is entitled to more than one vote per share, but
all shares of such class are so entitled), Section 6.8, Section 6.10,
Sections 8.1(b) and (c) and Sections 8.2(a) and (b), shall continue in
full force and effect through the balance of the Standstill Period
(except that the Ownership Cap shall be appropriately adjusted to
equal the ownership that the Investor Group would have owned after the
Surviving Change in Control Transaction if the Investor Group had
owned Common Securities equal to the Ownership Cap immediately prior
to the Surviving Change in Control Transaction), (ii) the provisions
of Section 5 and Section 6.2 shall terminate and (iii) the provisions
of Section 6.3(g) shall thereafter apply provided, however,
notwithstanding anything to the contrary contained in this Agreement
(other than the following sentence), that at and following such time
as (a) any Person or 13D Group shall Beneficially Own Common
Securities representing an Equity Percentage of more than 50% of the
Company or the company or other entity surviving such Change in
Control Transaction or (b) the Investor Group shall Beneficially Own
Voting Securities representing less than 5% of the Total Voting Power
of the Company or of the voting power of the company or other entity
surviving such Change in Control Transaction, then, in either case,
none of the provisions or obligations set forth in this Agreement
shall be applicable to the members of the Investor Group or to any
Other Investor Affiliate. Following a Surviving Change in Control
Transaction, the Company (or the surviving company or entity) shall
file and use its commercially reasonable efforts to obtain and
maintain the effectiveness of a shelf registration statement on the
terms set forth in the Registration Rights Agreement. Notwithstanding
anything to the contrary contained in the Agreement, following any
Change in Control Transaction, the provisions of Section 8.2(c) shall
apply to such Change in Control Transaction and, unless the Company or
other entity surviving such Change in Control Transaction shall
otherwise determine by written notice to the Investor at least 10 days
prior to the date by which the Investor must exercise its rights to
declare a Change in Control Release Event to occur as a result of such
Change in Control Transaction, the provisions of Section 8.2(c) and
<PAGE>
Section 6.9 shall apply to any Change in Control Transaction or
Competing Investment, as the case may be, arising thereafter with
respect to the Company or other entity surviving such Change in
Control Transaction.
(c) Without limiting the rights of the Investor set forth in
Section 8.2(a) hereof, the Investor shall have the right, exercisable
by delivering a notice (the "Change in Control Release Notice") to the
Company within the time period specified below, of its election to
immediately terminate the Formation Agreement (the election of the
Investor to so terminate the Formation Agreement, a "Change in Control
Release Event"), which termination shall be carried out, (i) if the
Change in Control Transaction resulting in such Change in Control
Release Event occurs or is consummated, or if the Company enters into,
or the Board publicly recommends to shareholders or approves, a
binding agreement providing for a Change in Control Transaction prior
to the sixth anniversary of the date of this Agreement (or, in the
case of a Change of Control Transaction involving a Person who is not
a Competitor, the fifth anniversary of the date of this Agreement), in
accordance with the provisions of Section 9.2(d)(X) of the Formation
Agreement as if an Involuntary Default described therein had occurred
(and as if the Investor was the non-defaulting "Party" for purposes of
Section 9.2(d)(X) of the Formation Agreement) upon consummation of the
Change in Control Transaction, and (ii) in all other cases, in
accordance with the provisions of Section 9.2(d)(Y) of the Formation
Agreement as if an Involuntary Default described therein had occurred
(and as if the Investor was the non-defaulting "Party" for purposes of
Section 9.2(d)(Y) of the Formation Agreement). A Change in Control
Release Event shall be irrevocable and binding upon the Investor and
the Company, except that (A) the Investor may, in the case of a
termination carried out in accordance with clause (i) of the preceding
sentence, rescind such Change in Control Release Event (in which event
all rights and obligations of the parties shall be as if no Change in
Control Release Event shall have ever occurred) for a period of five
Business Days after the determination of Fair Market Value (as defined
in, and calculated pursuant to, the Formation Agreement) by delivering
a written notice of such rescission to the Company within such period,
and (B) the Investor may rescind such Change in Control Release Event
(in which event all rights and obligations of the parties shall be as
if no Change in Control Release Event shall have ever occurred) for a
period of five Business Days following the entry of a final and
non-appealable Order as contemplated by the following sentence, and
(C) the Change in Control Release Event shall be automatically
rescinded (in which event all rights and obligations of the parties
shall be as if no Change in Control Release Event shall have occurred)
if the Change in Control Transaction which triggered such Change in
Control Release Event was not consummated, as advised in writing by
the Company to the Investor. The closing of the transfer of the
Investor's or the Company's Venture Interest, as applicable (as
defined in the Formation Agreement) following a Change in Control
Release Event shall be as soon as practicable following the expiration
or termination of all waiting periods, if any, under the HSR Act and
in any event no later than the later to occur of (I) 15 days after
delivery of the Change in Control Release Notice and (II) 5 business
days after the expiration or termination of all waiting periods, if
any, under the HSR Act, subject to no Order having been entered,
promulgated or enforce by a court or governmental authority of
competent jurisdiction which prohibits such transaction (and the
Investor and the Company shall use their commercially reasonable
efforts to have any such Order lifted or terminated in order to allow
consummation of such transaction unless and until such time as such
Order becomes final and non-appealable). The Change in Control Release
Notice, in order to result in the rights described above, must be
delivered by the Investor to the Company within twenty Business Days
after the earlier of (i) the public announcement by the Company of the
consummation of the Change in Control Transaction, and (ii) the
Company notifying the Investor in writing that the Change in Control
Transaction has been consummated (and the Company agrees to promptly
so notify the Investor); provided, however, that the Investor may
deliver a Change in Control Release Notice at any time after it
becomes aware of the consummation of a Change in Control Transaction
until twenty Business Days after either of the events described in
clauses (i) or (ii) above shall have occurred. Notwithstanding
anything to the contrary in this Agreement, following consummation of
Change in Control Transaction, the Investor may engage in discussions
with the Company (and/or the Person consummating such Change in
Control Transaction) as to matters relating to the Joint Venture
Agreement (including the entity established pursuant to the Formation
Agreement) and the Research Alliance Agreement, including the terms of
a purchase or sale of any interest therein..
<PAGE>
Section 8.3. Use of Proceeds. (a) Subject to the provisions
of this Agreement, as promptly as practicable, but in no event later
than five business days after the Closing, the Company shall commence
a self-tender offer (the "Offer") to purchase 16,444,586 shares of
Common Stock (the "Requisite Number") at a price per share not in
excess of $104 per share (the "Maximum Offer Price"), nor less than a
per share price to be determined in the sole discretion of the Company
after consultation with the Investor (the price range from such
maximum to minimum price, the "Per Share Price Range") net to the
seller in cash. Pursuant to the Offer, the Company will determine the
single per share price, within the Per Share Price Range, net to the
seller in cash (the "Offer Purchase Price") that it will pay for
shares properly tendered pursuant to the Offer, taking into account
the number of shares so tendered and the prices specified by the
tendering stockholders. The Company will select the lowest Offer
Purchase Price that will allow it to buy the Requisite Number of
shares of Common Stock (or such lesser number of shares as are
properly tendered and not withdrawn at prices within the Per Share
Price Range). All shares of Common Stock properly tendered at prices
at or below the Offer Purchase Price and not withdrawn will be
purchased at the Offer Purchase Price, subject to the terms and
conditions of the Offer. All shares of Common Stock acquired in the
Offer will be acquired at the Offer Purchase Price. Subject to the
terms and conditions thereof, the Offer shall expire at midnight New
York City time on the date that is 20 business days from the date the
Offer is first published or sent to holders of Common Stock; provided,
however, that the Company may (A) extend the Offer, if at the
scheduled expiration date of the Offer any of the conditions to the
Company's obligation to accept for payment, and pay for, shares of
Common Stock shall not have been satisfied or waived, until such time
as such conditions are satisfied or waived, (B) extend the Offer for
any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the
Offer and (C) extend the Offer for any reason on one or more occasions
for an aggregate period of not more than 5 business days beyond the
latest expiration date that would otherwise be permitted under clause
(A) or (B) of this sentence. No member of the Investor Group shall,
and the Investor shall use commercially reasonable efforts to cause
all Other Investor Affiliates not to, tender any shares of Common
Stock owned by them into the Offer.
(b) If the Company, pursuant to the Offer, shall have
purchased fewer than the Requisite Number of shares of Common Stock,
the Company shall use commercially reasonable efforts during the
remainder of the Company Buy Back Period to repurchase shares of
Common Stock from the shareholders of the Company other than the
Investor, any member of the Investor Group or any Other Investor
Affiliates in open market purchases or pursuant to additional
self-tender offers by the Company to the extent necessary so that the
Total Ownership Percentage of the Investor Group shall be equal to
Ownership Cap; provided, however, that in no event shall (i) unless
the provisions of clause (c) of this Section 8.3 are applicable, the
Company be required to pay greater than $104 per share of Common Stock
in any such repurchase, (ii) the aggregate amount paid by the Company
(deducting therefrom all amounts paid by the Investor to the Company
pursuant to paragraph (c) below) for shares of Common Stock pursuant
to the Offer and pursuant to additional repurchases under this Section
8.3(b) exceed the total Purchase Price, and (iii) the number of shares
of Common Stock acquired by the Company pursuant to the Offer and this
Section 8.3(b) exceed the Requisite Number.
(c) Following completion of the Offer, the Investor shall
have the right to designate in writing from time to time a maximum
price or prices at which the Company shall seek to purchase shares of
Common Stock that is in excess of $104 per share provided that at the
end of the Company Buy-Back Period, the Investor shall pay in cash in
immediately available funds to the Company an amount equal to the
excess, if any, of (x) the weighted average cost to the Company for
the purchase of all shares of Price Protected Common Stock (as defined
below) purchased by the Company during the Company Buy-Back Period
over (y) the Purchase Price, together with interest thereon at the
Company's borrowing rate under its bank lines of credit, for each day
the Company has incurred all or any portion of such excess. "Price
Protected Common Stock" shall mean all shares of Common Stock
purchased by the Company pursuant to the Offer and the first shares of
Common Stock purchased by the Company after the consummation of the
Offer at or below the maximum price or prices specified by the
Investor pursuant to this paragraph (c) which, taken together with the
number of shares of Common Stock purchased pursuant to the Offer, are
equal to the Requisite Number.
<PAGE>
(d) References herein to Requisite Number and price per
share of Common Stock shall be appropriately adjusted in the event of
any stock split, stock combination or similar adjustment in the number
of shares of Common Stock outstanding.
Section 8.4. Rights Agreement. From and after the date
hereof the Company shall not amend, modify, waive, terminate or
invalidate any provision of the Amended Rights Agreement or any
similar shareholder rights plan or similar device (a "Substantially
Similar Plan"), in a manner which would cause the Investor Group to
become an "acquiring person" under the Amended Rights Agreement or any
Substantially Similar Plan upon the exercise of any rights granted to
the Investor hereunder.
Section 8.5. Publicity. Except as required by Law or by
obligations pursuant to any listing agreement with any relevant
securities exchange, neither the Company or any of its Affiliates nor
the Investor or any of its Affiliates shall, without the prior written
consent of the other, which consent shall not be unreasonably withheld
or delayed, make any public announcement or issue any press release
with respect to the transactions contemplated by this Agreement. Prior
to making any public disclosure required by applicable Law or pursuant
to any listing agreement with any relevant national exchange, the
disclosing party shall consult with the other party, to the extent
feasible, as to the content of such public announcement or press
release. Notwithstanding the foregoing, the Investor and the Company
may, in meetings with securities and other financial analysts and
press interviews, disclose information (other than non-public
information) concerning the transactions contemplated hereby and the
Investor's investment in the Company and in a manner not inconsistent
with prior joint public announcements regarding the transactions and
in a manner consistent with the other terms of this Agreement.
Section 8.6. Legend. The Investor agrees to the placement on
certificates representing shares of Series A Convertible Preferred
Stock purchased by the Investor pursuant hereto, of a legend
substantially as set forth below (except that the first sentence of
such legend shall not be placed on any shares of Common Stock issuable
upon conversion of Series A Convertible Preferred Stock that have been
registered under the Securities Act or if, in the opinion of counsel,
such sentence is not required under the Securities Act), unless the
Company determines otherwise, in accordance with the opinion of
counsel:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
NON-U.S. JURISDICTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER JURISDICTIONS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS (INCLUDING PROVISIONS THAT RESTRICT THE TRANSFER OF SUCH
SECURITIES) OF AN INVESTMENT AGREEMENT DATED AS OF AUGUST 6, 1997
BETWEEN THE E.I. DU PONT DE NEMOURS AND COMPANY AND PIONEER HI-BRED
INTERNATIONAL, INC. (THE "COMPANY"), COPIES OF WHICH ARE ON FILE AT
THE OFFICES OF THE SECRETARY OF THE COMPANY."
Section 8.7. No Restrictions. For so long as the Total
Ownership Percentage of the Investor Group shall equal 10% or more, in
the aggregate, the Company will not take or recommend to its
shareholders any amendment to the Company's Articles of Incorporation
or Bylaws which would impose limitations on the legal rights of the
Investor Group as Company shareholders (other than those imposed
pursuant to this Agreement) based upon the size of security holding
permitted under this Agreement, the business in which a security
holder is engaged or other considerations applicable to the Investor
Group and not to security holders generally.
Section 8.8. Amendment to Articles of Incorporation. So long
as the Ownership Cap is 18% or more, the Company will propose, and the
Board shall recommend for adoption by the shareholders of the Company,
no later than the first annual meeting of shareholders following the
end of the Company Buy Back Period (or such earlier time as the Total
Ownership Percentage of the Investor Group shall equal the Ownership
Cap), and no less frequently than each annual meeting thereafter until
the Reclassification Amendment (as hereinafter defined) is adopted, an
amendment (the "Reclassification Amendment") to the Articles of
Incorporation of the Company providing for, and only for, (a) the
<PAGE>
authorization of a new class of common stock (in addition to the
Common Stock) to be designated as the Class B Common Stock and
consisting of the same number of authorized shares as the number of
authorized shares of Series A Convertible Preferred Stock and which
Class B Common Stock shall, as to each share, have the identical
rights, powers and preferences (including as to dividends, voting
rights, liquidation preference, restriction on transfer, adjustment
and conversion) as pertains to each share of Series A Convertible
Preferred Stock and (b) upon the adoption and effectiveness of the
Reclassification Amendment, the automatic reclassification of each
outstanding share of Series A Convertible Preferred Stock into one
validly issued and fully paid share of Class B Common Stock
(whereupon, all references to the Series A Convertible Preferred Stock
in this Agreement shall thereafter mean and refer to the corresponding
number of shares of Class B Common Stock). In connection with each
meeting of the Company's shareholders at which the Reclassification
Amendment is submitted for approval of the Company's shareholders, the
Company shall use its commercially reasonable efforts to cause the
adoption of the Reclassification Amendment by the shareholders of the
Company, including soliciting proxies in favor of the adoption of the
Reclassification Amendment by the shareholders of the Company. If,
after the date of the fifth annual meeting of the Company's
shareholders following the end of the Company Buy-Back Period, (x) the
Reclassification Amendment shall not have been approved by the
shareholders of the Company, and (y) the Investor shall have been
advised in writing by its regular independent public accounting firm
that unless the shares of Series A Convertible Preferred Stock owned
by the Investor Group are converted into Common Stock in accordance
with this Section 8.8, such firm cannot deliver its opinion that the
Investor is entitled to account for its investment in the Company on
the full equity accounting method (including earnings and investments)
(other than, in any such case referred to in this clause (y), as a
result of the failure of the Investor to fully exercise its rights
under this Agreement, including its rights to acquire Voting
Securities hereunder (but assuming for purposes hereof that the
Investor owned Voting Securities equal to the then applicable
Ownership Cap) or to designate Investor Nominees for election or
appointment to the Board or to have such Board members participate as
Board members in the management of the business and affairs of the
Company), then, at the written request of the Investor, both parties
will use commercially reasonable efforts to seek approval of the
Commission or its staff that would permit the Investor to account (or,
if such accounting has theretofore been allowed, to permit the
Investor to continue to account) for its investment in the Company on
the full equity accounting method (including earnings and investments)
without the conversion of the Series A Convertible Preferred Stock
owned by the Investor into Common Stock on the terms set forth below.
If the Commission or its staff shall not have approved such accounting
within six months after the Investor's written request referred to
above, the Investor shall have the option (the "Optional Conversion
Right"), which shall be exercisable by the Investor by delivering
written notice to the Company within 30 days after the end of such six
month period, to convert all of the Series A Convertible Preferred
Stock owned by the Investor Group into Common Stock as set forth in
Section 6(a)(iii) of the Certificate of Designation for the Series A
Convertible Preferred Stock. All Common Stock issued to the Investor
Group upon exercise of the Optional Conversion Right, together with
all other shares of Common Stock thereafter acquired by the Investor
pursuant to the Agreement, shall immediately upon each acquisition
thereof, be deposited by the Investor Group into a permanent voting
trust in accordance with applicable Law (the "Voting Trust") pursuant
to a perpetual voting trust agreement in a form reasonably
satisfactory to the Company, and, with respect to matters contained
therein which are not specifically contemplated hereby, in a form
reasonably satisfactory to the Investor, and with an independent trust
company, commercial bank or other financial institution reasonably
satisfactory to the Company and the Investor designated as voting
trustee (the "Voting Trustee"). Pursuant to such Voting Trust, the
aggregate number of Votes as the Investor Group would from time to
time have been able to vote if the Investor had not exercised the
Optional Conversion Right and continued to own the Series A
Convertible Preferred Stock will be voted by the Voting Trustee at the
direction of the Investor consistent with how such Votes could have
been voted under this Agreement if the Optional Conversion Right had
not been exercised, and the balance of the Votes attributable to all
shares of Common Stock deposited in the Voting Trust shall be voted by
the Voting Trustee pro rata in accordance with the votes of all
shareholders of the Company other than the members of the Investor
Group and the Other Investor Affiliates. The Voting Trust shall
provide for the release and delivery to the Investor of shares of
Common Stock, free of the restrictions of the Voting Trust, and the
<PAGE>
termination of the provisions thereof with respect to shares of Common
Stock, upon transfer of such shares by the Investor to unaffiliated
parties in accordance with the provisions of this Agreement. The
parties hereto hereby agree to enter into arrangements to permit the
timely tender into a tender or exchange offer of Common Stock subject
to the Voting Trust in a manner similar to that applied to the Series
A Convertible Preferred Stock. There shall not be any obligation to
deliver any shares of Common Stock to the Voting Trust, and the Voting
Trust shall immediately terminate if it has already been established,
at such time as all outstanding shares of Common Stock (or such
securities as the Common Stock has been converted into) has the same
votes per share if any, as all other such shares or other securities,
without any "time phased" voting.
Section 8.9. HSR Act Filings. Notwithstanding anything to
the contrary contained in this Agreement, the Investor Group shall be
entitled to make any HSR Act filing in connection with the Investor
Group's intention to acquire or its acquisition of Common Securities
pursuant to Section 6.1(A)(a)(iii) or Section 6.7 of this Agreement.
The Company shall use its reasonable best efforts to make all HSR
filings required to be made by it and to cause any waiting period
under HSR Act related to the Investor's and its filings to expire as
soon as practicable.
SECTION 9
CONDITIONS
Section 9.1. Conditions of Investor's Obligation. The
obligation of the Investor to purchase and pay for the Shares at the
Closing is subject to satisfaction or waiver of each of the following
conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects on and as of the
date of this Agreement. The Company shall have in all material
respects performed all obligations and complied with all agreements,
undertakings, covenants and conditions required hereunder to be
performed by it at or prior to the Closing.
(b) Compliance with Laws; No Adverse Action or Decision. No
Governmental Entity of competent jurisdiction shall have issued any
Order restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by the Transaction Agreements. No
action, suit or other proceeding by any Governmental Entity shall have
been instituted that seeks to restrain, enjoin, prohibit or otherwise
make illegal the performance of any of the Transaction Agreements or
the consummation of the transactions contemplated hereby or thereby.
(c) Consents. All Regulatory Approvals from any Governmental
Entity and all consents, waivers or approvals from any other Person
required for or in connection with the execution and delivery of the
Transaction Agreements and the consummation at the Closing by the
parties hereto and thereto of the transactions contemplated hereby and
thereby shall have been obtained or made on terms reasonably
satisfactory to the Investor, except for the failures to obtain such
Regulatory Approvals, consents, waivers and approvals which would not
reasonably be expected to have a Material Adverse Effect, and the
waiting period specified under the HSR Act shall have expired or been
terminated.
(d) Transaction Agreements. The Investor shall have received
counterpart originals or certified or other copies of the Transaction
Agreements.
(e) Registration Rights Agreements. The Investor shall have
received a fully executed counterpart of the Registration Rights
Agreement and the Registration Rights Agreement shall be in full force
and effect.
(f) Consummation of Certain Transactions. The closing under
the Joint Venture Agreement, and all transactions to be consummated in
connection therewith, shall have occurred.
Section 9.2. Conditions of the Company's Obligation. The
obligation of the Company to issue and sell the Shares at the Closing
is subject to satisfaction or waiver of each of the following
conditions precedent:
<PAGE>
(a) Representations and Warranties; Covenants. The
representations and warranties of the Investor contained in this
Agreement shall be true and correct on and as of the date of this
Agreement. The Investor shall have in all material respects performed
all obligations and complied with all agreements, undertakings,
covenants and conditions required hereunder to be performed by it at
or prior to the Closing.
(b) Compliance with Laws; No Adverse Action or Decision. No
Governmental Entity of competent jurisdiction shall have issued any
Order restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by the Transaction Agreements. No
action, suit or other proceeding by any Governmental Entity shall have
been instituted that seeks to restrain, enjoin, prohibit or otherwise
make illegal the performance of any of the Transaction Agreements or
the consummation of the transactions contemplated hereby or thereby.
(c) Consents. All Regulatory Approvals from any Governmental
Entity and all consents, waivers or approvals required for or in
connection with the execution and delivery of the Transaction
Agreements and the consummation at Closing by the parties hereto and
thereto on terms reasonably satisfactory to the Company, of the
transactions contemplated hereby and thereby shall have been obtained
or made, except for the failures to obtain such Regulatory Approvals,
consents, waivers and approvals which would not reasonably be expected
to have a material adverse effect on the ability of the Investor to
consummate the transactions contemplated by the Transaction
Agreements, and the waiting period specified under the HSR Act shall
have expired or been terminated.
(d) Transaction Agreements. The Company shall have received
all counterpart originals or certified or other copies of the
Transaction Agreements.
(e) Consummation of Certain Transactions. The closing under
the Joint Venture Agreement, and all transactions to be consummated in
connection therewith, shall have occurred.
SECTION 10
TERMINATION
Section 10.1. Termination. (a) Subject to Section 10.2
hereof, this Agreement may be terminated by notice in writing at any
time prior to the Closing by either the Investor or the Company if:
(i) the Closing shall not have occurred on or before
August 6, 1998; or
(ii) the Company and the Investor so mutually agree in
writing.
(b) Subject to Section 10.2 hereof, and without limiting any
liability of the Company or the Investor for any breach of its
obligations hereunder, this Agreement may be terminated by notice in
writing at any time prior to the Closing (x) by the Investor if a
Change in Control Transaction or a Competing Investment shall have
been consummated or if the Company has entered into a binding
agreement or a letter of intent with respect thereto or (y) by the
Company if a Change in Control Transaction shall have been consummated
or if the Company shall have entered into a binding agreement with
respect thereto.
(c) Subject to Section 10.2 hereof, if the Closing shall
occur, this Agreement may be terminated by one year's prior notice in
writing by either the Investor or the Company which notice may be
delivered at any time after the 15th anniversary of the date of this
Agreement.
Section 10.2. Effect of Termination. If this Agreement is
terminated in accordance with Section 10.1 hereof, this Agreement
shall become null and void and of no further force and effect except
that (i) the terms and provisions of this Section 10.2, Section 8.1(a)
and Section 11.1 (and, in the event this Agreement was terminated in
accordance with Section 10.1(c), then Section 6.2(d) and Section
6.3(f)) shall remain in full force and effect, (ii) so long as any
member of the Investor Group shall own any Series A Convertible
Preferred Stock, the provisions of Section 6.2(b) shall remain in
force and effect, (iii) any termination of this Agreement shall not
relieve any party hereto from any liability for any breach of its
<PAGE>
obligations hereunder, regardless of whether such party terminated
this Agreement pursuant to Section 10.1(a)(i); and (iv) subject to the
proviso to the first sentence in Section 8.2(b) hereof, in the event
that a Trigger Event or a Release Event shall have occurred, prior to
such termination, the provisions of Section 6.1(A), Section 6.2(e),
Section 6.3(g), Section 6.6 (to the extent with respect to a Trigger
Event, as provided in Section 6.10), Section 6.7(b) through (e) and
Section 6.8 shall remain in full force and effect.
SECTION 11
MISCELLANEOUS
Section 11.1. Fees and Expenses. Each party shall bear its
own expenses, including the fees and expenses of any Representatives
engaged by it, incurred in connection with the Transaction Agreements
and the transactions contemplated hereby and thereby.
Section 11.2. Survival. The representations, warranties,
covenants and agreements contained in or made pursuant to this
Agreement shall expire as of the consummation of the transactions to
be completed at the Closing, except (i) for the representations and
warranties contained in Sections 3.1, 3.2, 3.4(c), 4.1 and 4.2 which
shall survive without limitation, and (ii) the covenants and
agreements contained in or made pursuant to this Agreement which by
their terms are to survive after the Closing, which shall survive for
the period specified therein, provided, that if a claim or notice is
given with respect to any representation, warranty, covenant or
agreement prior to any such expiration date, the claim with respect to
such representation, warranty, covenant or agreement shall continue
indefinitely until such claim is finally resolved.
Section 11.3. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
given, if delivered personally, by telecopier or sent by first class
mail, postage prepaid, as follows:
(a) If to the Company, to:
Pioneer Hi-Bred International, Inc,
700 Capital Square
Des Moines, Iowa 50309
Attention: General Counsel
Telephone: 515-248-4800
Telecopier: 515-248-4844
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10044
Attention: Stephen Fraidin, Esq.
Telephone: 212-859-8000
Telecopier: 212-859-4000
(b) If to the Investor, to:
E.I. du Pont de Nemours and Company
Agricultural Products
Barley Mill Plaza #38
P.O. Box 80038
Wilmington, DE 19880-0038
Attention: William F. Kirk,
Vice President and General Manager
Telephone: 302-774-1000
Telecopier: 302-992-6184
With a copy to:
Skadden, Arps, Slate, Meagher
& Flom, LLP
919 Third Avenue
New York, New York 10022
Attention: Lou R. Kling, Esq.
Telephone: 212-735-3000
Telecopier: 212-735-2000
(c) If to any other holder of capital stock of the Company,
addressed to such holder at the address of such holder in the record
books of the Company; or to such other address or addresses as shall
<PAGE>
be designated in writing. All notices shall be effective when
received.
Section 11.4. Entire Agreement; Amendment. This Agreement
and the documents described herein or attached or delivered pursuant
hereto (including, without limitation, the Registration Rights
Agreement and the Rights Agreement Amendment) and the Confidentiality
Agreement set forth the entire agreement between the parties hereto
with respect to the matters provided herein and therein. Any provision
of this Agreement may be amended or modified in whole or in part at
any time by an agreement in writing among the parties hereto executed
in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate
as waiver thereof, nor shall any single or partial exercise by either
party of any right preclude any other or future exercise thereof or
the exercise of any other right.
Section 11.5. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to
constitute an original, but all of which together shall constitute one
and the same document.
Section 11.6. Governing Law; Submission to Jurisdiction.
This Agreement shall be governed by, and interpreted, in accordance
with, the laws of the State of Iowa applicable to contracts made and
to be performed in that state. The parties hereto irrevocably (a)
submit to the exclusive personal jurisdiction of any state or federal
court in the State of Illinois in any suit, action or other legal
proceeding relating to this Agreement; (b) agree that all claims in
respect of any such suit, action or other legal proceeding may be
heard and determined in, and enforced in and by, any such court; and
(c) waive any objection that they may now or hereafter have to venue
in any such court or that such court is an inconvenient forum.
Section 11.7. Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the Company's successors and assigns.
Section 11.8. Assignment. Except as otherwise expressly
provided in the last sentence of Section 6.9 hereof, neither this
Agreement nor any rights or obligations hereunder shall be assignable.
Section 11.9. Remedies; Waiver. To the extent permitted by
Law, all rights and remedies existing under this Agreement and any
related agreements or documents are cumulative to, and are exclusive
of, any rights or remedies otherwise available under applicable Law.
No failure on the part of any party to exercise, or delay in
exercising, any right hereunder shall be deemed a waiver thereof, nor
shall any single or partial exercise preclude any further or other
exercise of such or any other right.
Section 11.10. Specific Performance. Each party hereto
acknowledges that, in view of the uniqueness of the transactions
contemplated by this Agreement, the other party would not have an
adequate remedy at law for money damages in the event that this
Agreement has not been performed in accordance with its terms. Each
party therefore agrees that the other party shall be entitled to
specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
Section 11.11. Severability. If any provision of this
Agreement is determined to be invalid, illegal, or unenforceable, the
remaining provisions of this Agreement shall remain in full force and
effect provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially
adverse to any party. In the event of any such determination, the
parties agree to negotiate in good faith to modify this Agreement to
fulfill as closely as possible the original intent and purpose hereof.
To the extent permitted by law, the parties hereby to the same extent
waive any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, this Agreement has been executed on
behalf of the parties hereto by their respective duly authorized
officers, all as of the date first above written.
PIONEER HI-BRED INTERNATIONAL, INC.
By: /s/ Charles S. Johnson
-------------------------------
Name: Charles S. Johnson
<PAGE>
Title: President and Chief Executive Officer
E.I. DU PONT DE NEMOURS AND COMPANY
By: /s/ William F. Kirk
----------------------------------------
Name:
Title:
EXHIBIT A
Form of Registration Rights Agreement
EXHIBIT B
Form of Rights Agreement Amendment
EXHIBIT C
Form of Certificate of Designation
EXHIBIT D
Initial Investor Nominee Notice
EXHIBIT A
Form of Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated
as of ____________, 1997 between Pioneer Hi-Bred International,
Inc., an Iowa corporation (the "Company"), and E.I. du Pont de
Nemours and Company, a Delaware corporation (the "Holder").
RECITALS
WHEREAS, the Holder has purchased from the Company
pursuant to an Investment Agreement, dated as of _____________
___, 1997 (the "Investment Agreement"), between the Company and
the Holder, shares of the Company's Series A Convertible
Preferred Stock, par value $.01 per share (the "Series A
Convertible Preferred Stock");
WHEREAS, the parties hereto desire to set forth the
Holder's rights and the Company's obligations with respect to the
registration of the Registrable Securities pursuant to the
Securities Act; and
WHEREAS, the execution and delivery of this Agreement
by the parties hereto is a condition to the obligations of each
of the Company and the Holder under the Investment Agreement;
NOW, THEREFORE, in consideration of the covenants and
agreements of the Holder and the Company contained herein and in
the Investment Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions and Usage.
---------------------
As used in this Agreement:
1.1. Definitions.
-----------
"Board" shall mean the Board of Directors of the
Company.
"Class B Common Stock" shall mean the Class B Common
Stock of the Company, if and when authorized and issued to the
Holder.
<PAGE>
"Closing" shall mean the closing for the purchase of
the Series A Convertible Preferred Stock pursuant to the
Investment Agreement.
"Closing Date" shall mean the date of the Closing.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean the Common Stock, par value
$1.00 per share, of the Company.
"Continuously Effective," with respect to a specified
registration statement, shall mean that such registration
statement shall not cease to be effective and available for
transfers of Registrable Securities thereunder for longer than
either (i) any ten (10) consecutive business days, or (ii) an
aggregate of fifteen (15) business days during the period
specified in the relevant provision of this Agreement.
"Demand Registration" shall have the meaning set forth
in Section 2.1(i).
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Investment Agreement" shall have the meaning set forth
in the first Recital to this Agreement.
"Investor Group" shall have the meaning specified in
the Investment Agreement.
"Permitted Holder Group Transferee" shall mean any
wholly owned (other than directors' qualifying shares) United
States subsidiary of the Holder which, at the time of
determination, owns shares of Series A Convertible Preferred
Stock or Class B Common Stock acquired from the Holder during the
term of the Investment Agreement and in accordance with terms
thereof.
"Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
"Piggyback Registration" shall have the meaning set
forth in Section 3.
"Register," "registered," and "registration" shall
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act, and the declaration or ordering by the Commission
of effectiveness of such registration statement or document.
"Registrable Securities" shall mean the Common Stock
issuable upon conversion of the Series A Convertible Preferred
Stock or Class B Common Stock (which conversion shall be deemed
to occur upon the sale of such shares of Series A Convertible
Preferred Stock or Class B Common Stock to the underwriter or
underwriters in connection with any Registration hereunder) which
Series A Convertible Preferred Stock or Class B Common Stock the
Holder, or any Permitted Holder Group Transferee acquires in
accordance with the Investment Agreement and which is owned by
the Holder or such Permitted Holder Group Transferee on the date
of determination; provided, however, that Registrable Securities
shall not include any security of the Company acquired by the
Holder or any member of the Investor Group other than in
accordance with or in violation of the terms of the Investment
Agreement. In the event that the Common Stock is converted into
any other security pursuant to any merger, consolidation,
recapitalization, liquidation or other similar transaction, and
if any securities are distributed in respect of any Registrable
Securities, then all of such securities shall be considered
Registrable Securities for purposes of this Agreement.
"Registration Expenses" shall have the meaning set
forth in Section 7.1.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
<PAGE>
"Shelf Registration" means a Registration Statement
effected pursuant to Section 4.
"Shelf Registration Event" means the receipt by the
Company from the Investor at any time following the occurrence of
a Surviving Change in Control Transaction, a Release Event or a
Trigger Event (each, as defined in the Investment Agreement) of a
written request to file a shelf registration statement in
accordance with Section 4 provided that in no event may the
Investor give such notice at any time that the Total Ownership
Percentage (or percentage ownership of the common equity of any
other company or entity surviving a Surviving Change in Control
Transaction) of the Investor Group is 10% or more. In the event
of a Surviving Change in Control Transaction, or in the event the
Company or other company or entity that survives a Surviving
Change in Control Transaction determines that the provisions of
Section 8.2(b)(i) of the Investment Agreement will not apply to
the Company or such surviving company or entity, references
herein to the Company shall apply to the Company or other entity
surviving such Change in Control Transaction (the "Standstill
Successor") but in the event of any other Change in Control
Transaction, the provisions of Section 4 herein shall terminate.
"Shelf Registration Statement" means a Registration
Statement of the Company filed with the Commission or Form S-3
(or any successor form) for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act
(or any similar rule that may be adopted by the Commission)
covering some or all of the Registrable Securities, as
applicable.
"Transfer" shall mean and include the act of selling,
giving, transferring, creating a trust (voting or otherwise),
assigning or otherwise disposing of (other than pledging,
hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings); provided,
however, that any transfer or other disposition upon foreclosure
or other exercise of remedies of a secured creditor after an
event of default under or with respect to a pledge, hypothecation
or other transfer as security shall constitute a "Transfer."
"Underwriters' Representative" shall mean the managing
underwriter, or, in the case of a co-managed underwriting, the
managing underwriter designated as the Underwriters'
Representative by the co-managers.
"Violation" shall have the meaning set forth in Section
8.1.
1.2. Usage.
-----
(i) References to a Person are also references
to its successors in interest (by means of merger, consolidation
or sale of all or substantially all the assets of such Person or
otherwise, as the case may be) and permitted assigns.
(ii) References to a document are to it as
amended, waived and otherwise modified from time to time and
references to a statute or other governmental rule are to it as
amended and otherwise modified from time to time (and references
to any provision thereof shall include references to any
successor provision).
(iii) References to Sections, unless the context
otherwise requires.
(iv) The definitions set forth herein are
equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined.
(v) The term "including" and correlative terms
shall be deemed to be followed by "without limitation" whether
or not followed by such words or words of like import.
(vi) The term "hereof" and similar terms refer
to this Agreement as a whole.
(vii) The "date of" any notice or request given
pursuant to this Agreement shall be determined in accordance
with Section 12.2.
<PAGE>
Section 2. Demand Registration.
-------------------
2.1. (i) At any time after the third anniversary of
the Closing Date, and subject to compliance by the Holder with
the provisions of Section 6 of the Investment Agreement, if the
Holder shall make a written request to the Company, the Company
shall cause to be filed with the Commission a registration
statement, including all exhibits required by the Commission to
be filed therewith (a "Demand Registration Statement") meeting
the requirements of the Securities Act for an underwritten public
offering of Registrable Securities (a "Demand Registration"), and
the Holder shall be entitled to have included therein all or such
number of Registrable Securities as the Holder shall request in
writing; provided, however, that no request may be made pursuant
to this Section 2.1 if within twelve (12) months prior to the
date of such request a Demand Registration Statement pursuant to
this Section 2.1 shall have been declared effective by the
Commission. Any request made pursuant to this Section 2.1 shall
be addressed to the attention of the Secretary of the Company,
and shall specify the number of Registrable Securities to be
registered (which shall be not less than 1,500,000 shares,
provided, however that the Holder may request registration of any
amount of Registrable Securities where the Holder requests
registration (i) of all of its remaining Registrable Securities,
or (ii) pursuant to its last Demand Registration right), the
intended method of distribution thereof and that the request is
for a Demand Registration pursuant to this Section 2.1(i).
(ii) The Company shall be entitled to postpone
for up to 180 days, but in no event more than 180 days during
any 24 month period and no sooner than 180 days after the end of
any prior postponement under this Section 2.1(ii) or any
holdback period described in the first sentence of Section 9.1
the filing of any Demand Registration Statement otherwise
required to be prepared and filed pursuant to this Section 2.1
(or delay seeking effectiveness of a Demand Registration
Statement which has been filed), if the Board determines, in its
reasonable good faith judgment, that such Demand Registration
would materially interfere with, or require premature disclosure
of, any material financing, acquisition, reorganization or other
material transaction involving the Company or any of its
subsidiaries and the Company promptly gives the Holder notice of
such determination.
2.2. Following receipt of a request for a Demand
Registration, the Company shall:
(i) File the Demand Registration Statement with
the Commission as promptly as reasonably practicable, and,
subject to Section 2.1(ii), shall use the Company's commercially
reasonable efforts to have the Demand Registration Statement
declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to
the need to prepare current financial statements, conduct due
diligence and complete other actions that are reasonably
necessary to effect a registered public offering.
(ii) Use the Company's commercially reasonable
efforts to keep the relevant registration statement Continuously
Effective, if a Demand Registration Statement, for up to 60 days
or until such earlier date as of which all the Registrable
Securities under the Demand Registration Statement shall have
been disposed of in the manner described in the Registration
Statement, or such longer period (but in no event longer than
120 days) as in the judgment of counsel for the underwriters a
prospectus is required by law to be delivered in connection with
sales of Registrable Securities by an underwriter or dealer in
accordance with plan of distribution included in such Demand
Registration Statement. Notwithstanding the foregoing, if for
any reason the effectiveness of a Demand Registration Statement
pursuant to this Section 2 is delayed or suspended or filing of
the Demand Registration Statement or seeking effectiveness
thereof is postponed as permitted by Section 2.1(ii), the
commencement of the foregoing period shall be extended by the
aggregate number of days of such suspension or postponement.
2.3. The Company shall be obligated to effect not more
than six Demand Registrations, subject to the provisions of
Section 4.1. For purposes of the preceding sentence, a Demand
<PAGE>
Registration shall not be deemed to have been effected (i) unless
a Demand Registration Statement with respect thereto has become
effective, (ii) if after such Demand Registration Statement has
become effective, such Demand Registration Statement or the
related offer, sale or distribution of Registrable Securities
thereunder is interfered with by any stop order, injunction or
other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to
the Holder and such interference is not thereafter eliminated, or
(iii) if the conditions to closing specified in the underwriting
agreement entered into in connection with such registration are
not satisfied or waived, other than by reason of a failure on the
part of the Holder. If the Company shall have complied with its
obligations under this Agreement, a right to demand a
registration pursuant to this Section 2 shall be deemed to have
been satisfied upon the earlier of (x) the date as of which all
of the Registrable Securities included therein shall have been
distributed pursuant to the Registration Statement, and (y) the
date as of which such Demand Registration shall have been
Continuously Effective for a 60-day period or other period
specified in 2.2(ii) following the effectiveness of such Demand
Registration Statement, provided no stop order or similar order,
or proceedings for such an order, is thereafter entered or
initiated.
2.4. A registration pursuant to this Section 2 shall
be on such appropriate registration form of the Commission as
shall (i) be selected by the Company and be reasonably acceptable
to the Holder, and (ii) permit the distribution of the
Registrable Securities in accordance with the intended method or
methods of distribution specified in the request pursuant to
Section 2.1(i).
2.5. The Holder shall have the right to select the
underwriter or underwriters and manager or managers to administer
such offering; provided, however, that each Person so selected
shall be acceptable to the Company in its reasonable judgment.
2.6. The Company may not include in a Demand
Registration pursuant to Section 2.1 shares of Common Stock for
the account of the Company or any subsidiary of the Company, but
may include shares of Common Stock for the account of any other
person or entity who holds shares of Common Stock; provided,
however, that if the Underwriters' Representative of any offering
described in this Section 2.6 shall have informed the Company in
writing that in its opinion the total number of shares of Common
Stock that the Holder, and any other persons or entities desiring
to participate in such registration intend to include in such
offering is such as to materially and adversely affect the
success or pricing of such offering, then the Company shall
include in such Demand Registration all Registrable Securities
requested to be included in such registration by the Holder
together with up to such additional number of shares of Common
Stock that any other persons or entities entitled to participate
in such registration desire to include in such registration and
that the Underwriters' Representative has informed the Company
may be included in such registration without adversely affecting
the success of pricing of such offering; provided that the number
of shares of Common Stock to be offered for the account of all
such other persons and entities participating in such
registration shall be reduced or limited pro rata in proportion
to the respective number of shares of Common Stock requested to
be registered by such persons and entities to the extent
necessary to reduce the respective total number of shares of
Common Stock requested to be included in such offering to the
number of shares of Common Stock recommended by such
Underwriters' Representative.
Section 3. Piggyback Registration.
----------------------
3.1. If at any time after the third anniversary of the
Closing Date, the Company proposes to register (including for
this purpose a registration effected by the Company for the
account of the Company or shareholders of the Company other than
the Holder) shares of Common Stock or securities convertible or
exercisable into shares of Common Stock under the Securities Act
in connection with the public offering solely for cash on Form S-
1, S-2 or S-3 (or any replacement or successor forms) as soon as
practicable (but in not event less than ten (10) business days
prior to the date of filing any related Registration Statement),
<PAGE>
the Company shall promptly give the Holder written notice of such
registration (a "Piggyback Registration"). Upon the written
request of the Holder given within 10 days following the date of
such notice, the Company shall use commercially reasonable
efforts to cause to be included in such registration statement (a
"Piggyback Registration Statement," the Shelf Registration
Statement, the Demand Registration Statement and Piggyback
Registration Statement are hereinafter called collectively,
"Registration Statements" and, individually, a "Registration
Statement"), and use its commercially reasonable efforts to cause
to be registered under the Securities Act all the Registrable
Securities that the Holder shall have requested to be registered.
The Company shall have the absolute right to withdraw or cease to
prepare or file any Piggyback Registration Statement for any
offering referred to in this Section 3 without any obligation or
liability to the Holder; provided, that the Company shall
promptly notify the Holder in writing of any such action.
3.2. If the Piggyback Registration Statement relates
to an underwritten offering of Common Stock or securities
convertible or exercisable into shares of Common Stock and if the
Underwriters' Representative of such underwritten offering shall
inform the Company that in its opinion the inclusion in such
underwritten distribution of all or a specified number of such
Registrable Securities or of any other shares of Common Stock
requested to be included would materially and adversely effect
the success or pricing of such offering or of such distribution
by the underwriters, then the Company may, upon written notice to
the Holder, exclude from such underwritten offering (i) in the
event the Piggyback Registration Statement relates to an offering
for the account of the Company, shares of Common Stock requested
to be included by any persons or entities other than the Company,
pro rata in proportion to the respective number of shares of
Common Stock requested to be included by such persons and
entities, to the extent necessary to reduce the respective total
number of shares of Common Stock requested to be included in such
offering to the number of shares of Common Stock recommended by
such Underwriters' Representative and (ii) in the event the
Piggyback Registration Statement relates to an offering for the
account of any person or entity other than the Company,
(A) first, shares of Common Stock requested to be registered for
the account of any persons or entities other than the person or
entity making the initial request for such registration (the
"Requesting Party"), pro rata in proportion to the respective
number of shares of Common Stock requested to be registered by
such other persons and entities to the extent necessary to reduce
the respective total number of shares of Common Stock requested
to be included in such offering to the number of shares of Common
Stock recommended by such Underwriters' Representative,
(B) second, to the extent reduction as a result of clause (A) is
insufficient, shares of Common Stock requested to be registered
for the account of the Company, and (C) third, to the extent
reduction as a result of clauses (A) and (B) is insufficient,
shares of Common Stock requested to be registered for the account
of the Requesting Party.
The Company may decline to file a Piggyback
Registration Statement referred to in this Section 3.2 after
giving notice to the Holder, or withdraw such a Piggyback
Registration Statement after filing, or otherwise abandon any
such proposed underwritten offering; provided that the Company
shall promptly notify the Holder in writing of any such action.
3.3. The Holder may not participate in any
underwritten offering under Section 2.1 or Section 3.1 hereof
unless it completes and executes all customary questionnaires,
powers of attorney, custody agreements, underwriting agreements,
and other customary documents required under the customary terms
of such underwriting arrangements. In connection with any
underwritten offering under Section 2.1, 3.1 or 4.1, each of the
Holder and the Company shall be a party to the underwriting
agreement with the underwriters and may be required to make
certain customary representations and warranties (in the case of
the Holder only as to the Registrable Securities being sold by
the Holder and any Permitted Group Transferee in such
underwritten offering and the plan of distribution thereof) and
provide certain customary indemnifications for the benefit of the
underwriters.
3.4. The Holder shall be entitled to have its
Registrable Securities included in an unlimited number of
<PAGE>
Piggyback Registrations pursuant to this Section 3.
Section 4. Shelf Registration.
------------------
4.1. Upon the occurrence of a Shelf Registration
Event, the Company shall file with the Commission as promptly as
practicable, but in no event later than 20 business days after
the Shelf Registration Event, a Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by
the Holder and the Permitted Holder Group Transferees from time
to time in accordance with the methods of distribution elected by
the Holder and set forth in such Shelf Registration Statement
and, thereafter, shall use its commercially reasonable efforts to
cause such Shelf Registration Statement to be declared effective
under the Securities Act as promptly as practicable. If, on the
occurrence of a Shelf Registration Event, the Company does not
qualify to file a Shelf Registration Statement, then the Holder
shall be entitled to one additional Demand Registration pursuant
to Section 3, but at any time thereafter that the Company does so
qualify, it shall, as promptly as practicable, file a Shelf
Registration Statement.
4.2. The Company shall use its commercially reasonable
efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof
to be usable by the Holder and the Permitted Holder Group
Transferees for a period ending on the date twenty-four months
(the "Shelf Maintenance Period") after the occurrence of the
Shelf Registration Event (such date to be extended by the
aggregate number of days any Shelf Registration Statement shall
be subject to a Shelf Suspension) or such shorter period as shall
terminate when all the Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (but in no event prior to the applicable
period referred to in Section 4(3) of the Act and Rule 174
thereunder) (such period being the "Shelf Period").
4.3. The Company shall be entitled to postpone the
filing of any Shelf Registration Statement otherwise required to
be prepared and filed pursuant to this Section 4 (or delay
seeking, or maintaining continued, effectiveness of a Shelf
Registration Statement that has been filed) if the Board
determines in its reasonable good faith judgment, that such Shelf
Registration would materially interfere with, or require
premature disclosure of, any material financing, acquisition,
reorganization or other material transaction involving the
Company or any of its subsidiaries and the Company gives the
Holder notice of such determination (a "Shelf Suspension");
provided, however, that the Company shall not have postponed
pursuant to this Section 4.3, the commencement of the filing of,
delay the seeking the effectiveness of, or suspend the use of any
Shelf Registration Statement otherwise required to be prepared
and filed pursuant to this Section 4, (i) more than 180 days
during the Shelf Maintenance Period, (ii) for a period exceeding
180 days on any one occasion during or (iii) sooner than 90 days
after the end of any prior Shelf Suspension and provided,
further, that the Shelf Maintenance Period shall be extended by
the aggregate number of days of each Shelf Suspension. In the
case of a Shelf Suspension, the notice required above shall
request the Holder to suspend any sale or purchase, or offer to
sell or purchase the Registrable Securities, and to suspend any
sale or purchase, or offer to sell or purchase the Registrable
Securities, and to suspend use of the prospectus related to the
Shelf Registration in connection with any such sale or purchase
or offer to sell or purchase. The Company shall immediately
notify the Holder upon the termination of any Shelf Suspension,
shall amend or supplement the related prospectus, if necessary,
so it does not contain any untrue statement or omission therein
and shall furnish to the holders such numbers of copies of the
prospectus as so amended or supplemental as the Holder may
reasonably request. The Holder will advise the Company by at
least 5 business days' prior written notice if the Holder intends
to make any sale under the Shelf Registration Statement that
would constitute a "distribution" for purposes of Regulation M
under the Securities Act.
4.4. The Holder shall have the right to effect an
underwritten offering covering not fewer than 1,500,000 shares
pursuant to a Shelf Registration (in which case each such
underwritten offering shall constitute a Demand Registration for
<PAGE>
purposes of Section 2.3) and to select the underwriter or
underwriters and manager or managers to administer any offering
pursuant to a Shelf Registration; provided, however, that each
Person so selected shall be acceptable to the Company in its
reasonable judgment.
Section 5. Registration Procedures.
-----------------------
Whenever required under Section 2, Section 3 or Section
4 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as practicable:
5.1. Prepare and file with the Commission a
Registration Statement, including all exhibits required by the
Commission to be filed therewith, with respect to such
Registrable Securities and, subject to Section 2.1 and Section
4.3, use the Company's commercially reasonable efforts to cause
such Registration Statement to become effective; provided,
however, that before filing a Registration Statement or
prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of
the Registration Statement and prior to effectiveness thereof,
the Company shall furnish to counsel for the Holder and
underwriters, copies of all such documents in the form
substantially as proposed to be filed with the Commission at a
reasonable time prior to filing for review and comment by such
counsel.
5.2. Prepare and file with the Commission such
amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as
may be necessary to comply with the provisions of the Securities
Act and rules thereunder with respect to the distribution of all
securities covered by such Registration Statement and as may be
reasonably requested by the Holder or necessary to keep such
Registration Statement effective pursuant to Section 2.2(i) and
4.2. If the registration is for an underwritten offering, the
Company shall amend the Registration Statement or supplement the
prospectus whenever required by the terms of the underwriting
agreement. Pending such amendment or supplement the Holder and
all other members of the Investor Group, upon written notice by
the Company, shall cease making offers or Transfers of
Registrable Securities pursuant to the prior prospectus. In the
event that any Registrable Securities included in a Registration
Statement subject to, or required by, this Agreement remain
unsold at the end of the period during which the Company is
obligated to use its commercially reasonable efforts to maintain
the effectiveness of such Registration Statement, the Company may
file a post-effective amendment to the Registration Statement for
the purpose of removing such Securities from registered status.
5.3. Notify the Holder and the Underwriters'
Representative and (if requested) confirm such advise in writing,
as soon as practicable after notice thereof is received by the
Company (i) when the Registration Statement or any amendment
thereto has been filed or becomes effective, the prospectus or
any amendment or supplement to the prospectus included therein
has been filed, and, to furnish the Holder and the underwriters
with copies thereof, (ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the
prospectus included therein or for additional information, (iii)
if at any time the representations and warranties of the Company
contemplated by Section 3.3 cease to be true and correct, and
(iv) of the receipt by the Company of any notification with
respect to the suspension or qualification of the Registrable
Securities for offering or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
5.4. Promptly notify the Holder and the Underwriters'
Representative, if any, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act when
the Company becomes aware of the happening of any event as a
result of which the prospectus included in any Registration
Statement (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus and any
preliminary prospectus, in light of the circumstances under which
they were made) when such prospectus was delivered not misleading
or, if for any other reason it shall be necessary during such
time period to amend or supplement the prospectus in order to
<PAGE>
comply with the Securities Act and, in either case as promptly as
practicable thereafter, prepare and file with the Commission, and
furnish without charge to the Holder and the Underwriters'
Representative, if any, a supplement or amendment to such
prospectus which will correct such statement or omission or
effect such compliance.
5.5. If requested by the Underwriters' Representative
or the Holder, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the Underwriters'
Representative and the Holder agree should be included therein
relating to the plan of distribution with respect to such
Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities
being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms
of the underwritten (or best efforts underwritten) offering of
Registrable Securities to be sold in such offering; and make all
required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment.
5.6. Cooperate with the Holder and the Underwriters'
Representatives to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold
and not bearing any restrictive legends; and enable such
Registrable Securities to be in such denomination and registered
in such names as the Underwriters' Representative may request at
least two business days prior to the sale of Registrable
Securities to the underwriters.
5.7. Cooperate with the Holders in connection with any
filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"), and otherwise use its best
efforts to comply with the rules, by-laws and regulations of the
NASD as they apply to the registration.
5.8. Furnish to the Holder such numbers of copies of
the Registration Statement, any pre-effective or post-effective
amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act
and the rules thereunder, and such other related documents as the
Holder may reasonably request in order to facilitate the
distribution of Registrable Securities owned by the Holder.
5.9. Use the Company's commercially reasonable efforts
(i) to register and qualify the securities covered by such
Registration Statement under such other securities or blue sky
laws of such states or jurisdictions as shall be reasonably
requested by the Underwriters' Representative, and (ii) to obtain
the withdrawal of any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of the offer and
transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however,
that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
5.10. In the event of any underwritten offering, enter
into and perform the Company's obligations under an underwriting
agreement (including indemnification and contribution obligations
of underwriters or agents in the form set forth in Section 8), in
usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall
also cooperate with the Holder, and the Underwriters'
Representative for such offering in the marketing, and customary
selling efforts relating to the Registrable Securities, including
participating in customary "road show" presentations as may be
reasonably requested by the Underwriters' Representative.
5.11. Promptly notify the Holder of any stop order
issued or threatened to be issued by the Commission in connection
therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
5.12. Make available for inspection by the Holder, any
underwriter participating in such offering and the
representatives of the Holder and such underwriter all financial
<PAGE>
and other information as shall be reasonably requested by them,
and provide the Holder, any underwriter participating in such
offering and the representatives of the Holder and such
underwriter the reasonable opportunity to discuss the business
affairs of the Company with its principal executives and
independent public accountants who have certified the audited
financial statements included in such registration statement, in
each case all as necessary to enable them to exercise their due
diligence responsibilities under the Securities Act; provided,
however, that information that the Company determines, in its
reasonable and good faith judgment, to be confidential and which
the Company advises such Person in writing, is confidential shall
not be disclosed unless such Person signs a confidentiality
agreement reasonably satisfactory to the Company and the Holder
of Registrable Securities agrees to be responsible for such
Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
5.13. Use the Company's commercially reasonable
efforts to obtain a so-called "comfort letter" from its
independent public accountants, and legal opinions of counsel to
the Company addressed to the Holder, in customary form and
covering such matters of the type customarily covered by such
letters, and in a form that shall be reasonably satisfactory to
the Holder. The Company shall furnish to the Holder a signed
counterpart of any such comfort letter or legal opinion.
Delivery of any such opinion or comfort letter shall be subject
to the recipient furnishing such written representations or
acknowledgments as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
5.14. Provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by
such Registration Statement from and after a date not later than
the effective date of such Registration Statement.
5.15. Use commercially reasonable efforts to cause the
Registrable Securities covered by such Registration Statement to
continue to be listed on all exchanges where the Company's Common
Stock is listed and to be Registered with or approved by such
other United States or state governmental agencies or authorities
as may be necessary by virtue of the business and operations of
the Company to enable the Holder to consummate the distribution
of the Registrable Securities which are included in such
registration.
5.16. Take such other actions as are reasonably
required in order to expedite or facilitate the registration of
Registrable Securities included in such registration.
Section 6. Holder's Obligations.
--------------------
6.1 It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Agreement with respect to the Registrable Securities which are
included in such registration that the Holder shall furnish to
the Company such information regarding the Holder and any
participating Permitted Holder Group Transferee, the number of
the Registrable Securities owned by it and any participating
Permitted Holder Group Transferee, and the intended method of
distribution of such Registrable Securities as shall be required
to effect the registration of such Registrable Securities, and to
cooperate with the Company in preparing such registration.
6.2 The Holder agrees, and each Permitted Holder Group
Transferee shall be deemed by acceptance of Registrable
Securities to have agreed, that, upon receipt of any notice of
the Company pursuant to clauses (ii) through (iv) of Section 5.3
and Section 5.4 hereof, the Holder and each Permitted Holder
Group Transferee will discontinue disposition of such Registrable
Securities covered by such Registration Statement until such
Holder's or Permitted Holder Group Transferee's receipt of copies
of the supplemental or amended prospectus contemplated by Section
5.4 hereof, or until advised in writing (the "Advice") by the
Company that the use of the applicable prospectus may be resumed.
If the Company shall give any notice under clauses (ii) through
(iv) of Section 5.3 or Section 5.4 hereof during the period that
the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period
shall be extended by the number of days during such period from
<PAGE>
and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities
covered by such Registration Statement shall have received (x)
the copies of the supplemental or amended prospectus contemplated
by Section 5.4 (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental
prospectus is required).
Section 7. Expenses of Registration. Expenses in
connection with registrations pursuant to this Agreement shall be
allocated and paid as follows:
7.1. With respect to the first two Demand
Registrations effected pursuant to Section 2 hereof, the Company
shall bear and pay, and with respect to each additional Demand
Registration, the Holder shall bear and pay, all expenses
incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to such
Demand Registration, including all registration, filing and
National Association of Securities Dealers, Inc. fees, all fees
and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and
delivery expenses, and the reasonable fees and disbursements of
counsel for the Company, and of the Company's independent public
accountants, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance (the
"Registration Expenses"), but in no event shall the Company bear
underwriting discounts and commissions relating to Registrable
Securities or fees and expenses of Holder's counsel (which shall
be paid by the Holder) and provided that the Company shall not be
required to pay for any expenses of any registration begun
pursuant to Section 2 if the registration is subsequently
withdrawn at the request of the Holder (in which case the Holder
shall bear such expense), other than by reason of failure of the
Company to comply with Section 5.12 or if the proviso of such
section becomes applicable unless the Holder agrees that such
withdrawn registration shall constitute one of the Demand
Registrations under Section 2 hereof.
7.2. The Company shall bear and pay all Registration
Expenses incurred in connection with any Shelf Registrations
pursuant to Section 4 and any Piggyback Registrations pursuant to
Section 3 for the Holder, but excluding, incremental registration
and qualification fees and expenses (including underwriting
discounts and commissions relating to Registrable Securities) and
any incremental costs and disbursements (including fees and
expenses of the Holder's counsel) that result from the inclusion
of the Registrable Securities in any Piggyback Registrations
(each of which shall be paid by the Holder).
Section 8. Indemnification; Contribution. If any
Registrable Securities are included in a Registration Statement
under this Agreement:
8.1. To the extent permitted by applicable law, the
Company shall indemnify and hold harmless the Holder and each
Permitted Holder Group Transferee, each Person, if any, who
controls such Holder or Permitted Holder Group Transferee within
the meaning of the Securities Act, and each officer, director,
partner, and employee of the Holder and each Permitted Holder
Group Transferee, and any such controlling Person, against any
and all losses, claims, damages, liabilities and expenses (joint
or several), including reasonable attorneys' fees and
disbursements and expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit,
proceeding or investigation, or to which any of the foregoing
Persons may become subject under the Securities Act, the Exchange
Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are
based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein, or any amendments or supplements
thereto;
(ii) The omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or
<PAGE>
(iii) Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any applicable
state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this
Section 8.1 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or expense if such settlement
is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage,
liability or expense to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished to the Company by
the indemnified party expressly for use in connection with such
registration; provided, further, that the indemnity agreement
contained in this Section 8 shall not apply to any underwriter to
the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact,
or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the
final prospectus shall correct such untrue statement or alleged
untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such
person at or prior to the confirmation of sale to such person if
such underwriter was under an obligation to deliver such final
prospectus and failed to do so. The Company shall also indemnify
underwriters participating in the distribution, their officers,
directors, agents and employees and each person who controls such
persons (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) to the same extent as provided
above with respect to the indemnification of the Holder provided,
however, that no such underwriter shall be entitled to
indemnification under this Agreement if such person shall have
entered into a separate underwriting or indemnification agreement
with the Company.
8.2. To the extent permitted by applicable law, the
Holder shall indemnify and hold harmless the Company, each of its
directors, each of its officers who shall have signed the
registration statement, each Person, if any, who controls the
Company within the meaning of the Securities Act, and each
officer, director, partner, and employee of the Company and such
controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including
reasonable attorneys' fees and disbursements and expenses of
investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which
any of the foregoing may otherwise become subject under the
Securities Act, the Exchange Act or other federal or state laws,
insofar as such losses, claims, damages, liabilities and expenses
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with information furnished in
writing by the Holder specifically for use in connection with
such registration; provided, further, however, that the
indemnification required by this Section 8.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or expense if settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; provided, further, however, in no event shall the
liability of the Holder be greater in amount than the dollar
amount of the net proceeds by the Holder upon sale of Registrable
Securities giving rise to such indemnification obligation.
8.3. Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action,
suit, proceeding, investigation or threat thereof made in writing
for which such indemnified party may make a claim under this
Section 8, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; subject to the rights of an indemnified party to retain
its own counsel as hereinafter provided. The failure to deliver
written notice to the indemnifying party within a reasonable time
following the commencement of any such action, if materially
<PAGE>
prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 8 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party
otherwise than pursuant to this Section 8. Any fees and expenses
incurred by the indemnified party (including any fees and
expenses incurred in connection with investigating or preparing
to defend such action or proceeding) owed by the indemnifying
party hereunder shall be paid to the indemnified party, as
incurred, within thirty (30) days of written notice thereof to
the indemnifying party (subject to refund if it is ultimately
determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has
agreed to pay such fees and expenses or (ii) the indemnifying
party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any
such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to
it which are different from or in addition to those available to
the indemnifying party and that the assertion of such defenses
would create a conflict of interest such that counsel employed by
the indemnifying party could not faithfully represent the
indemnified party (in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the
defense of such action, claim or proceeding on behalf of such
indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such
action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified
parties, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to
such action, claim or proceeding, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such
additional counsel or counsels).
8.4. If the indemnification required by this Section 8
from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to in this Section 8:
(i) The indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by,
or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 8.1 and Section 8.2, any legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding; provided, however, that in no event
shall the Holder be required to contribute an amount greater than
the dollar amount of the net proceeds received by the Holder with
respect to the sale of any securities.
(ii) The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section
8.4 were determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable
<PAGE>
considerations referred to in Section 8.4(i). No Person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
8.5. If indemnification is available under this
Section 8 the indemnifying parties shall indemnify each
indemnified party to the full extent provided in this Section 8
without regard to the relative fault of such indemnifying party
or indemnified party or any other equitable consideration
referred to in Section 8.4.
8.6. The obligations of the Company, the Holder and
any Permitted Holder Group Transferee under this Section 8 shall
survive the completion of any offering of Registrable Securities
pursuant to a Registration Statement under this Agreement, and
otherwise.
Section 9. Holdback.
--------
9.1 If so requested by the Underwriters'
Representative in connection with an offering of any securities
covered by a registration statement filed by the Company, whether
or not securities of the Holder or any Permitted Holder Group
Transferee are included therein, the Holder shall agree not to
effect or permit any Permitted Holder Group Transferee to effect
any sale or distribution of shares of Common Stock including a
sale pursuant to Rule 144 under the Securities Act (except as
part of such underwritten registration) during the 7-day period
prior to, and during the 90-day period beginning on, the date
such registration statement is declared effective under the
Securities Act by the Commission, provided that the Holder is
timely notified of such effective date in writing by the Company
or such Underwriters' Representative. In order to enforce the
foregoing covenant, the Company shall be entitled to impose stop-
transfer instructions with respect to the Registrable Securities
of the Holder until the end of such period. The restrictions in
this Section 9 are in addition to and not in limitation of the
restrictions on transfer applicable to the Investor Group under
the Investment Agreement. The Holder shall not be subject to the
restrictions set forth in this Section 9.1 for longer than 90
days during any 12 month period.
9.2. If so requested by the Underwriters'
Representative in connection with an offering of any Registrable
Securities, the Company shall agree not to effect any sale or
distribution of shares of Common Stock during the 7-day period
prior to, and during the 90-day period beginning on, the date
such Registration Statement is declared effective under the
Securities Act by the Commission (or, in the case of an
underwriting under the Shelf Registration, the date of the
closing under the underwriting agreement). The Company agrees to
use its commercially reasonable efforts to obtain from each
holder of restricted securities of the Company the same as or
similar to those being registered by the Company on behalf of the
Holder, or any restricted securities convertible into or
exchangeable or exercisable for any of its securities, an
agreement not to effect any sale or distribution of such
securities (other than securities purchased in a public offering)
during any period referred to in this paragraph, except as part
of any such Registration Statement if permitted. Without
limiting the foregoing, if the Company grants any Person (other
than a holder of Registrable Securities) any rights to demand or
participate in a Registration, the Company agrees that the
agreement with respect thereto shall include such Person's
agreement as contemplated by the previous sentence.
Section 10. Amendment, Modification and Waivers;
Further Assurances.
------------------------------------
(i) This Agreement may be amended with the
consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the
written consent of the Holder to such amendment, action or
omission to act.
(ii) No waiver of any terms or conditions of this
<PAGE>
Agreement shall operate as a waiver of any other breach of such
terms and conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver
of such provision or of any other provision hereof. No written
waiver hereunder, unless it by its own terms explicitly provides
to the contrary, shall be construed to effect a continuing waiver
of the provisions being waived and no such waiver in any instance
shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall exercise
all such further instruments and documents and take all such
further action as any other party hereto may reasonably require
in order to effectuate the terms and purposes of this Agreement.
The Company shall cause the Standstill Successor to be bound by
the terms of this Agreement.
Section 11. Assignment; Benefit. This Agreement and
all of its provisions hereof shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests or obligations
hereunder may be assigned or delegated by the Holder to any
Person except a wholly owned direct or indirect subsidiary of the
Holder to whom the Holder shall have transferred all of the
Registrable Securities then owned by the Holder as permitted by,
and subject to the terms of, the Investment Agreement.
Section 12. Miscellaneous.
-------------
12.1 Governing Law; Submission to Jurisdiction. This
Agreement shall be governed by, and interpreted in accordance
with, the laws of the State of Iowa applicable to contracts made
and to be performed in that state. The parties hereto
irrevocably (a) submit to the exclusive personal jurisdiction of
any state or federal court in the State of Illinois in any suit,
action or other legal proceeding relating to this Agreement;
(b) agree that all claims in respect of any such suit, action or
other legal proceeding may be heard and determined in, and
enforced in and by, any such court; and (c) waive any objection
that they may now or hereafter have to venue in any such court or
that such court is an inconvenient forum.
12.2 Notices. All notices and requests given pursuant
to this Agreement shall be in writing and shall be made by hand-
delivery, first-class mail (registered or certified, return
receipt requested), confirmed facsimile or overnight air courier
guaranteeing next business day delivery to the relevant address
specified below:
(a) If to the Company, to:
Pioneer Hi-Bred International, Inc.
700 Capital Square
Des Moines, Iowa 50309
Attention: General Counsel
Telephone: 515-248-4800
Telecopier: 515-248-4844
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10044
Attention: Stephen Fraidin, Esq.
Telephone: 212-859-8000
Telecopier: 212-859-4000
(b) If to the Investor, to:
E.I. du Pont de Nemours and Company
Agricultural Products
Barley Mill Plaza #38
P.O. Box 80038
Wilmington, DE 19880-0038
Attention: William F. Kirk,
Vice President and
General Manager
<PAGE>
Telephone: 302-774-1000
Telecopier: 302-992-6184
With a copy to:
Skadden, Arps, Slate, Meagher
& Flom, LLP
919 Third Avenue
New York, New York 10022
Attention: Lou R. Kling, Esq.
Telephone: 212-735-3000
Telecopier: 212-735-2000
Except as otherwise provided in this Agreement, the date of each
such notice and request shall be deemed to be, and the date on
which each such notice and request shall be deemed given shall
be: at the time delivered, if personally delivered or mailed;
when receipt is acknowledged, if sent by facsimile; and the next
business day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next business day delivery.
12.3. Entire Agreement; Integration. This Agreement
supersedes all prior agreements between or among any of the
parties hereto with respect to the subject matter contained
herein and therein, and such agreements embody the entire
understanding among the parties relating to such subject matter.
12.4. Injunctive Relief. Each of the parties hereto
acknowledges that in the event of a breach by any of them of any
material provision of this Agreement, the aggrieved party may be
without an adequate remedy at law. Each of the parties therefore
agrees that in the event of such a breach hereof the aggrieved
party may elect to institute and prosecute proceedings in any
court of competent jurisdiction to enforce specific performance
or to enjoin the continuing breach hereof. By seeking or
obtaining any such relief, the aggrieved party shall not be
precluded from seeking or obtaining any other relief to which it
may be entitled.
12.5. Section Headings. Section headings are for
convenience of reference only and shall not affect the meaning of
any provision of this Agreement.
12.6. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original,
and all of which shall together constitute one and the same
instrument. All signatures need not be on the same counterpart.
12.7. Severability. If any provision of this
Agreement shall be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity and enforceability
of the remaining provisions of this Agreement, unless the result
thereof would be unreasonable, in which case the parties hereto
shall negotiate in good faith as to appropriate amendments
hereto.
12.8. Filing. A copy of this Agreement and of all
amendments thereto shall be filed at the principal executive
office of the Company with the corporate records of the Company.
12.9. Termination. This Agreement may be terminated
at any time by a written instrument signed by the parties hereto.
Unless sooner terminated in accordance with the preceding
sentences, this Agreement (other than Section 8 hereof) shall
terminate in its entirety on such date as the Total Ownership
Percentage (as defined in the Investment Agreement) of the Holder
shall be less than 2%, provided that any shares of Common Stock
previously subject to this Agreement shall not be Registrable
Securities following the sale of any such shares in an offering
registered pursuant to this Agreement.
12.10. Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, or where any
provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees
(including any fees incurred in any appeal) in addition to its
costs and expenses and any other available remedy.
12.11. No Third Party Beneficiaries. Nothing herein
expressed or implied is intended to confer upon any person, other
<PAGE>
than the parties hereto or their respective permitted assigns,
successors, heirs and legal representatives, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement; provided, however, that any Permitted Holder Group
Transferee shall be entitled to any rights, remedies, obligations
or liabilities conferred under or by reason of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the date first written
above.
E.I. DU PONT DE NEMOURS AND COMPANY
By: -----------------------------
Name:
Title:
PIONEER HI-BRED INTERNATIONAL, INC.
By: -----------------------------
Name:
Title:
EXHIBIT B
Form of Rights Agreement Amendment
AMENDMENT NO. 1, dated as of _________ __, 1997, to
AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of December 13,
1996 (the "Amended and Restated Rights Agreement"), between
Pioneer Hi-Bred International, Inc., an Iowa corporation (the
"Company"), and Bank Boston N.A. (formally known as The First
National Bank of Boston), a national banking association ("Rights
Agent").
On April 6, 1989, the Board of Directors of the Company
(the "Board") authorized and declared a dividend of one common
share purchase right (a "Right") for each share of Common Stock,
par value $1.00 per share, of the Company ("Common Stock")
outstanding at the Close of Business (as defined in the Amended
and Restated Rights Agreement) on April 6, 1989 (the "Record
Date"), each Right representing the right to purchase one
(subject to adjustment as provided in the Amended and Restated
Rights Agreement) share of Common Stock, upon the terms and
subject to the conditions set forth in the Amended and Restated
Rights Agreement, and has further authorized the issuance of one
Right with respect to each share of Common Stock that shall
become outstanding between the Record Date and the Distribution
Date (as defined in the Amended and Restated Rights Agreement);
provided, however, that Rights may be issued with respect to
shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date in accordance with the provisions
of Section 23 of the Amended and Restated Rights Agreement.
On December 13, 1994, the Board amended and modified,
and on December 13, 1996, the Board amended and restated, the
terms of the Rights Agreement, dated as of April 6, 1989, between
the Company and the Rights Agent, to, among other things, modify
the Rights so that each Right represents the right to purchase
one one-thousandth of a Preferred Share (as defined in the
Amended and Restated Rights Agreement). On _________ __, 1997,
the Board authorized the execution and delivery of this Amendment
No. 1, which amends such Amended and Restated Rights Agreement.
Accordingly, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
SECTION 1. AMENDMENTS. (a) The definition of
"Acquiring Person" contained in subsection 1(a) of the Amended
and Restated Rights Agreement is hereby amended in its entirety
to read as follows:
<PAGE>
"(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of the Trigger Amount or
more of the then outstanding Common Shares or was such a
Beneficial Owner at any time after the date hereof, whether or
not such person continues to be the Beneficial Owner of the
Trigger Amount or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (i) the term "Acquiring Person"
shall not include (A) the Company, (B) any Subsidiary of the
Company, (C) any employee benefit plan of the Company or of any
Subsidiary of the Company, (D) any Person or entity organized,
appointed or established by the Company for or pursuant to the
terms of any such plan acting in such capacity, (E) any
Grandfathered Person or (F) the Investor or any Permitted
Investor Transferee, but only to the extent of Common Shares held
or acquired by the Investor and any Permitted Investor Transferee
during the term of the Investment Agreement in accordance with
the terms of the Investment Agreement and, following the
termination of the Investment Agreement, only to the extent of
Common Shares Beneficially Owned by the Investor and any
Permitted Investor Transferee on the date of the termination (the
"Termination Date") of the Investment Agreement, it being
understood that (I) if, after the Termination Date, the Investor
or any Permitted Investor Transferee acquires Beneficial
Ownership of any Common Shares not owned by such person on the
Termination Date, the Investor or such Permitted Investor
Transferee will be deemed an Acquiring Person if, after giving
effect to such acquisition, such person would be an Acquiring
Person but for the provisions of this clause (F) and (II) if any
Permitted Investor Transferee ceases to be a wholly-owned (other
than directors' qualifying shares) United States Subsidiary of
the Investor, such Permitted Investor Transferee will be deemed
an Acquiring Person if such person would be an Acquiring Person
at such time but for the provisions of this clause (F); and
(ii) no Person shall become an "Acquiring Person" (x) as a result
of the acquisition of Common Shares by the Company which, by
reducing the number of Common Shares outstanding, increases the
proportional number of shares beneficially owned by such Person
together with all Affiliates and Associates of such Person,
provided, that if (1) a Person would become an Acquiring Person
(but for the operation of this clause (x)) as a result of the
acquisition of Common Shares by the Company, and (2) after such
share acquisition by the Company, such Person, or an Affiliate or
Associate of such Person, becomes the Beneficial Owner of any
additional Common Shares, then such Person shall be deemed an
Acquiring Person, or (y) if (1) within five Business Days after
such Person would otherwise have become or, if such Person did so
inadvertently, after such Person discovers that such Person would
otherwise have become, an Acquiring Person (but for the operation
of this clause (y)), such Person notifies the Board that such
Person did so inadvertently, and (2) within two Business Days
after such notification (or such greater period of time as may be
determined by action of the Board, but in no event greater than
five Business Days), such Person divests itself of a sufficient
number of Common Shares so that such Person is the Beneficial
Owner of such number of Common Shares that such Person no longer
would be an Acquiring Person."
(b) The definition of "Common Shares" contained in
subsection 1(g) of the Amended and Restated Rights Agreement is
hereby amended in its entirety to read as follows:
"(g) "Common Shares" when used with reference to the
Company shall mean the shares of Common Stock, par value of One
Dollar ($1.00) per share, of the Company or, in the event of a
subdivision, combination or consolidation with respect to such
shares of Common Stock, the shares of Common Stock resulting from
such subdivision, combination or consolidation; provided that, so
long as any Series A Convertible Preferred Stock remains
outstanding, (i) the number of Common Shares outstanding at any
time shall include all shares of Common Stock, par value $1.00
per share, of the Company issuable upon conversion of such
outstanding Series A Convertible Preferred Stock, whether or not
then convertible, and (ii) for purposes of Sections 3(a), (b)
(except for the first three sentences) and (c), Section 12,
Section 13, Section 15, Sections 16(a) and (c), Section 18,
Section 21, Section 22, Section 23 (except for the provisions of
(a)(i)), Section 26, Section 27 and Section 30 hereof, "Common
Shares" shall be deemed to mean both the shares of Common Stock,
par value $1.00 per share, then outstanding and shares of Series
<PAGE>
A Convertible Preferred Stock, used in the conjunctive or the
alternative, as the context may require. "Common Shares" when
used with reference to any Person other than the Company shall
mean the capital stock (or equity interest) with the greatest
combined economic and voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person
or Persons which ultimately control such first-mentioned Person."
(c) The definition of "Disinterested Directors" contained
in subsection 1(h) of the Amended and Restated Rights Agreement
is hereby deleted in its entirety.
(d) The definition of "Permitted Offer" contained in
subsection 1(k) of the Amended and Restated Rights Agreement is
hereby deleted in its entirety.
(e) The definition of "Trigger Amount" contained in
subsection 1(r) of the Amended and Restated Rights Agreement is
hereby amended in its entirety to read as follows:
"(r) "Trigger Amount" shall mean the lesser of:
(i) 15% or more of the Common Shares
then outstanding; or
(ii)10% or more of the Common Shares
then outstanding, but only when and if
such Common Shares represent one-fourth
(1/4) or more of the combined voting
power of the shares of Common Stock, par
value $1.00 per share, of the Company,
and the shares of Series A Convertible
Preferred Stock then outstanding. As to
any Beneficial Owner (and its Affiliates
and Associates) with respect to which
the Trigger Amount is being determined,
the voting power will be determined by
the Company in the ordinary course of
corporate governance relating to the
determination of voting power with
respect to actions submitted to a vote
of stockholders assuming such holder has
taken the necessary documentation steps
to have effectuated the right to have
five votes per Common Share with no
other estimation or assumption as to
holdings."
(f) Section 1 of the Amended and Restated Rights Agreement
shall be amended to add the following subsections (t) through
(x):
"(t) "Investment Agreement" means the Investment
Agreement, dated as of _____ __, 1997, between the Company and
the Investor.
(u) "Investor" shall have the meaning set forth in
the Investment Agreement.
(v) "Permitted Investor Transferee" shall mean any
wholly owned (other than directors' qualifying shares) United
States Subsidiary of the Investor which, at the time of
determination continues to be a wholly-owned (other than
directors' qualifying shares) United States Subsidiary of the
Investor and, owns shares of Series A Convertible Preferred Stock
acquired from the Holder or from the Company during the term of
the Investment Agreement and in accordance with the terms
thereof.
(w) "Series A Convertible Preferred Stock" means the
Series A Convertible Preferred Stock of the Company, par value
$.01 per share and, following any reclassification of the
Series A Convertible Preferred Stock into Class B Common Stock in
accordance with Section 8.8 of the Investment Agreement, the
Class B Common Stock (as defined in the Investment Agreement).
(x) "13D Group" shall mean any group of Persons who,
with respect to those acquiring, holding, voting or disposing of
Voting Securities would be required under Section 13(d) of the
Exchange Act and the rules and regulations thereunder to file a
statement on Schedule 13D with the Securities and Exchange
Commission as a "person" within the meaning of Section 13(d)(3)
of the Exchange Act, or who would be considered a "person" for
<PAGE>
purposes of Section 13(g)(3) of the Exchange Act."
(g) Section 13(d) of the Amended and Restated Rights
Agreement is hereby deleted in its entirety.
(h) The penultimate sentence of Section 3(a) of the
Amended and Restated Rights Agreement is hereby amended in its
entirety to read as follows: "As soon as practicable after the
Distribution Date, the Company will prepare and execute, the
Rights Agent will countersign and send, or cause to be sent, by
first-class, insured, postage prepaid mail, to each record holder
of Common Shares and Series A Convertible Preferred Stock as of
the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right
Certificate, substantially in the form of Exhibit B hereto (a
"Right Certificate"), evidencing, in the case of holders of
Common Shares, one Right for each Common Share so held, and, in
the case of holders of Series A Convertible Preferred Stock, one
Right for each share of Common Stock, par value $1.00 per share,
into which such Series A Convertible Preferred Stock is
convertible (whether or not then convertible)."
(i) The third sentence of Section 7(b) of the Amended
and Restated Rights Agreement is hereby amended in its entirety
to read as follows: "Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date
hereof and prior to the Distribution Date, the Company shall (i)
declare or pay any dividend on the Common Shares payable in
Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a
greater or lesser number of Common Shares, then in any such case,
each Common Share outstanding following such subdivision,
combination or consolidation shall continue to have one Right
(or, in the case of Series A Convertible Preferred Stock, one
Right for each share of Common Stock, par value $1.00 per share,
into which such Series A Convertible Preferred Stock is
convertible (whether or not then convertible) following such
subdivision, combination or consolidation) (subject to adjustment
as provided here) associated therewith and the Purchase Price
following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price
immediately prior to such event by a fraction the numerator of
which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event."
SECTION 2. EFFECT OF AMENDMENT. Except as modified by
this Amendment No. 1, the Amended and Restated Rights Agreement
shall remain in full force and effect.
SECTION 3. SEVERABILITY. If any term, provision,
covenant or restriction of this Amendment No. 1 is held by a
court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.
SECTION 4. GOVERNING LAW. This Amendment No. 1 shall
be deemed to be a contract made under the laws of the State of
Iowa and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
SECTION 5. COUNTERPARTS. This Amendment No. 1 may be
executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the date
and year first above written.
PIONEER HI-BRED INTERNATIONAL, INC.
By:
Name: Charles S. Johnson
Title: President and CEO
<PAGE>
By:
Name: Jerry Chicoine
Title: Vice President and Chief
Financial Officer
BANK BOSTON N.A.
the Rights Agent
By:
Name: Kathryn Anderson
Title: Administrative Manager
EXHIBIT C
Form of Certificate of Designation
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
PIONEER HI-BRED INTERNATIONAL, INC.
Pioneer Hi-Bred International, Inc., an Iowa corporation
(the "Corporation"), does hereby certify that the Board of
Directors of the Corporation duly adopted the following
resolution, at a meeting duly convened and held on August 5,
1997, in respect of a series of Preferred Stock of the
Corporation, pursuant to authority conferred upon the Board by
Article IV of the Articles of Incorporation of the Corporation
and in accordance with Section ____ of the Business Corporation
Act of the State of Iowa:
BE IT RESOLVED, that the issuance of a series of Preferred
Stock of the Corporation is hereby authorized, and the
designation, amount, powers, preferences and relative,
participating, optional and other special rights and
qualifications, limitations and restrictions thereof, of the
shares of such series of Preferred Stock of the Corporation, are
hereby fixed as follows:
1. DESIGNATION; CLASS AND AMOUNT; CERTAIN DEFINITIONS.
The series of Preferred Stock, the issuance of which is hereby
authorized, shall comprise 200,000 shares the distinctive serial
designation of which shall be "Preferred Stock, Series A", which
is sometimes herein referred to as "Series A Convertible
Preferred Stock". Each share of Series A Convertible Preferred
Stock shall be identical in all respects with all other shares of
Series A Convertible Preferred Stock. The number of shares of
Series A Convertible Preferred Stock which are purchased or
otherwise acquired by the Corporation or converted into Common
Stock shall be canceled and shall revert to authorized but
unissued shares of Series A Convertible Preferred Stock
undesignated as to series. The Corporation shall not issue, sell
<PAGE>
or otherwise transfer shares of Series A Convertible Preferred
Stock to any Person other than the members of the Investor Group.
Certain capitalized terms used herein have the meanings specified
therefor in Section 10 below.
2. DIVIDENDS. (a) Except as set forth in the Investment
Agreement, each Holder of shares of Series A Convertible
Preferred Stock shall participate with the holders of Common
Stock in all Dividends, when, as and if declared by the Board and
paid or distributed by the Corporation on or in respect of the
Common Stock on a share for share basis and in like tenor and
forms as the Dividend paid on the Common Stock as if all shares
of Series A Convertible Preferred Stock were converted into the
number of shares of Common Stock (whether or not the Series A
Convertible Preferred Stock is then so convertible) calculated in
accordance with Section 6 below, immediately prior to the record
date for such Dividend. Except as set forth above, holders of
shares of Series A Convertible Preferred Stock shall not be
entitled to receive any dividends. Except to the extent payable
in respect of dividends paid on the Common Stock, no interest, or
sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on shares of Series A
Convertible Preferred Stock.
(b) Dividends on the Series A Convertible Preferred Stock
in respect of each Dividend shall be payable, when and if
declared by the Board of Directors, concurrently with each date
of payment (each such date, a "Dividend Payment Date") by the
Corporation of Dividends on the Common Stock. Dividends payable
in cash shall be paid by wire transfer in immediately available
funds to the accounts designated by the respective Holders in
written notices given to the Corporation at least two Business
Days prior to the payment date or by such other means as may be
agreed to by the Corporation and the respective Holders.
(c) The Corporation will cause written notice of each
Dividend on the Series A Convertible Preferred Stock to be given
to each Holder within five Business Days after it is determined
by the Board of Directors.
3. VOTING RIGHTS. (a) Except as otherwise provided herein
or as required by law, the Holders of Series A Convertible
Preferred Stock shall not be entitled to any Vote.
(b) At any meeting called for the purpose of voting on (or
acting by written consent with respect to) any matter to be voted
upon by the holders of Common Stock of the Corporation, the
holders of shares of Series A Convertible Preferred Stock and the
holders of shares of Common Stock shall vote together as one
class on all matters so submitted to a vote of stockholders of
the Corporation. At any such meeting or in connection with any
such action by written consent, each share of Series A
Convertible Preferred Stock shall carry, as of the record date
applicable to such vote, a number of votes equal to the Per Share
Vote Amount as calculated by the Corporation for such meeting.
(c) In accordance with Section 6.2(b) of the Investment
Agreement, the Corporation will cause written notice of any vote
as to which holders of Common Stock are entitled to vote as a
separate class or voting group under the Articles of
Incorporation or Iowa Law (a "Class Vote"), to be given to each
Holder at least 15 Business Days prior to such Class Vote.
4. LIQUIDATION PREFERENCE. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, the Holders of shares of Series A
Convertible Preferred Stock then outstanding shall be entitled,
for each share of Series A Convertible Preferred Stock, to be
paid out of the assets of the Corporation available for
distribution to its stockholders the amount of cash or other
property that would be payable on the number of shares of Common
Stock then issuable upon conversion of such share of Series A
Convertible Preferred Stock (whether or not then convertible)
(such amount payable being adjusted appropriately to reflect any
stock split, stock dividend, reverse stock split, or any
transaction with comparable effect upon the Common Stock) (the
"Liquidation Preference"). This entitlement of the Holders of
shares of Series A Convertible Preferred Stock, to the extent
equal to $.01 for each share of Series A Convertible Preferred
Stock, shall be satisfied before any similar payment shall be
<PAGE>
made or any assets distributed to the holders of the Common Stock
or any other security junior in rank to the Series A Convertible
Preferred Stock as to distribution of assets upon such
dissolution, liquidation or winding up and otherwise shall be
satisfied on a pari passu basis with the holders of the Common
Stock. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to all of the
Holders of the outstanding shares of Series A Convertible
Preferred Stock, then the Holders of all such shares shall share
ratably in such distribution of assets in accordance with the
liquidation preference to which they are entitled. For the
purposes of this section, neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property
or assets of the Corporation nor the consolidation or merger of
the Corporation with one or more other corporations shall be
deemed to be a liquidation, dissolution or winding up, voluntary
or involuntary, unless such voluntary sale, conveyance, exchange
or transfer shall be in connection with a dissolution or winding
up of the business of the Corporation.
5. RESTRICTIONS ON TRANSFER. The shares of Series A
Convertible Preferred Stock are subject to the provisions of the
Investment Agreement (including the provisions thereof
restricting transfer of such stock).
6. CONVERSION. (a)(i) Concurrently with the transfer of
Beneficial Ownership of any share of Series A Convertible
Preferred Stock to any Person other than the Investor or another
member of the Investor Group or Other Investor Affiliate, such
share of Series A Convertible Preferred Stock shall convert into
[100] < FN > Number of shares of Common Stock each share is
convertible into is subject to adjustment prior to Closing in the
event of a stock split, stock combination or similar adjustment
in the number of shares of Common Stock outstanding./< FN > fully-
paid and non-assessable shares of Common Stock (as adjusted
pursuant to Section 6(c)), in accordance with the procedures
provided in clause (b) of this Section 6.
(ii) At any time (x) at the direction of the
Corporation, but only if the Corporation intends to recommend
approval of a Voting Amendment (as defined in the Investment
Agreement), and (y) at the direction of the Investor, following
the approval and effectiveness of a Voting Amendment, shares of
Series A Convertible Preferred Stock shall be mandatorily
convertible into fully-paid and non-assessable shares of Common
Stock, with each share of Series A Convertible Preferred Stock
being converted into [100] < FN> Number of shares of Common Stock
each share is convertible into is subject to adjustment prior to
Closing in the event of a stock split, stock combination or
similar adjustment in the number of shares of Common Stock
outstanding./< FN > shares of Common Stock (as adjusted pursuant to
Section 6(c)).
(iii) The Investor shall have the right, in
accordance with Section 8.8 of the Investment Agreement, at any
time that the Investor may exercise the Optional Conversion Right
(as defined in the Investment Agreement) in accordance with the
Investment Agreement, to cause all shares of Series A Convertible
Preferred Stock to be converted into fully-paid and non-
assessable shares of Common Stock, with each share of Series A
Convertible Preferred Stock being converted into [100] < FN > Number
of shares of Common Stock each share is convertible into is
subject to adjustment prior to Closing in the event of a stock
split, stock combination or similar adjustment in the number of
shares of Common Stock outstanding./< FN > shares of Common Stock
(as adjusted pursuant to Section 6(c)).
(iv) At any time that all outstanding shares of Common
Stock (or whatever security received upon conversion or exchange
thereof) have the same vote per share, if any, without any time
phase voting, all shares of Series A Convertible Preferred Stock
shall be convertible into fully-paid and non-assessable shares of
Common Stock, with each such share of Series A Convertible
Preferred Stock being converted into [100] < FN > Number of shares
of Common Stock each share is convertible into is subject to
adjustment prior to Closing in the event of a stock split, stock
combination or similar adjustment in the number of shares of
Common Stock outstanding./ < FN > shares of Common Stock (as
<PAGE>
adjusted pursuant to Section 6(c)).
(v) Except as set forth in this Section 6(a), the
shares of Series A Convertible Preferred Stock are not
convertible at the option of the Holder thereof.
(b) (i) Any Holder of shares of Series A Convertible
Preferred Stock required (or in the case of clauses (iii) or (iv)
above requesting) to convert any or all such shares into Common
Stock shall surrender the certificate(s) evidencing such shares
of Series A Convertible Preferred Stock of the Holder at the
office of the transfer agent appointed for the purpose of such
conversion by the Corporation. Such surrendered certificate(s),
if the Corporation shall so require, shall be duly endorsed to
the Corporation or in blank, or accompanied by proper instruments
of transfer to the Corporation or in blank.
(ii) The Corporation shall, within one Business Day
after such surrender of certificates evidencing shares of Series
A Convertible Preferred Stock accompanied by written notice and
in compliance with any other conditions contained herein, issue
and deliver, or cause to be issued and delivered, to the
Person(s) for whose account such certificate(s) evidencing shares
of Series A Convertible Preferred Stock were so surrendered, or
to the nominee(s) of such Person(s), certificates representing
the number of full shares of Common Stock to which such Person
shall be entitled pursuant to the then-applicable conversion
rate. Such conversion shall be deemed to have been made on the
date of such surrender of the certificate(s) evidencing shares of
Series A Convertible Preferred Stock to be converted (the
"Surrender Date") and the Person(s) entitled to receive the
Common Stock deliverable upon conversion of such Series A
Convertible Preferred Stock shall be treated for all purposes as
the record holder(s) of such Common Stock on such date and
thereafter. Conversion of Series A Convertible Preferred Stock
may otherwise be achieved in accordance with such procedures as
the Corporation and a majority of the Holders may agree.
(iii) In the event that fewer than all shares of
Series A Convertible Preferred Stock represented by a surrendered
certificate are to be converted hereunder, a new certificate
shall be issued at the Corporation's expense representing the
shares of Series A Convertible Preferred Stock not so converted.
(iv) In connection with the conversion of any shares of
Series A Convertible Preferred Stock, no fractions of shares of
Common Stock shall be issued, but in lieu thereof the Corporation
shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest
multiplied by the Market Price (as defined in the Investment
Agreement) per share of Common Stock on the day on which such
shares of Series A Convertible Preferred Stock are deemed to have
been converted.
(c) The conversion rate shall be adjusted from time to
time as follows:
(i) In case the Corporation shall, at any time or from
time to time while any of the shares of Series A Convertible
Preferred Stock are outstanding, (A) subdivide or reclassify its
outstanding shares of Common Stock into a larger number of
shares, or (B) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, the conversion rate
in effect immediately prior to such action shall be adjusted so
that the Holder of any shares of Series A Convertible Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which such Holder
would have owned or have been entitled to receive immediately
following such action had such shares of Series A Convertible
Preferred Stock been converted immediately prior thereto. An
adjustment made pursuant to this Section 6(c)(i) shall become
effective immediately after the close of business on the
effective date of a subdivision, reclassification or combination.
If, as a result of an adjustment made pursuant to this Section
6(c)(i), the Holder of any shares of Series A Convertible
Preferred Stock thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes of
capital stock of the Corporation, the Board of Directors shall
make an appropriate allocation of the adjusted conversion rate
between or among shares of such classes of capital stock in
accordance with the entitlements of the Common Stock underlying
<PAGE>
the Series A Convertible Preferred Stock in connection with such
adjustment.
(ii) Whenever an adjustment in the conversion rate is
required, the Corporation shall forthwith place on file with its
Transfer Agent a statement signed by its Chief Executive Officer,
Chief Financial Officer or a Vice President and by its Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer, stating
the adjusted conversion rate determined as provided herein. Such
statements shall set forth in reasonable detail such facts as
shall be necessary to show the reason and the manner of computing
such adjustment.
(d) (i) The Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its
authorized and unissued stock, such number of shares of its
Common Stock as shall from time to time be sufficient to effect
the conversion of all shares of Series A Convertible Preferred
Stock from time to time outstanding, solely for the purpose of
effecting such conversion. The Corporation shall, from time to
time, in accordance with the laws of the State of Iowa, increase
the authorized number of shares of Common Stock if at any time
the number of shares of authorized and unissued Common Stock
shall not be sufficient to permit the conversion of all the then
outstanding shares of Series A Convertible Preferred Stock.
(ii) The Corporation will pay any and all stamp and
transfer taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock upon conversion of shares of
Series A Convertible Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other
than that in which the shares of Series A Convertible Preferred
Stock so converted were registered and no such issuance or
delivery shall be made unless and until the person requesting
such issuance has paid to the Corporation the amount of any such
tax or has established to the satisfaction of the Corporation
that such tax has been paid.
(e) In case of (i) any reclassification or change of
outstanding shares of Common Stock (other than a change in par
value or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination) or
(ii) any consolidation or merger of the Corporation with one or
more other corporations (other than a consolidation or merger in
which the Corporation is the continuing corporation and which
does not result in any reclassification or change of outstanding
shares of Common Stock issuable upon conversion of Series A
Convertible Preferred Stock) or (iii) any sale or conveyance to
another corporation or other entity of all or substantially all
of the property of the Corporation, then the Corporation, or such
successor corporation or other entity, as the case may be, shall
make appropriate provision so that the holder of each share of
Series A Convertible Preferred Stock then outstanding shall have
the right to convert such share into the kind and amount of
shares of stock or other securities and property receivable upon
such consolidation, merger, sale, reclassification, change or
conveyance by a holder of the number of shares of Common Stock
into which such shares of Series A Convertible Preferred Stock
might have been converted immediately prior to such
consolidation, merger, sale, reclassification, change or
conveyance, subject to adjustment which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in Section 6(c). If the holders of Common Stock are entitled to
elect the consideration payable pursuant any consolidation,
merger, sale, conveyance or other transaction or event set forth
above, the Holders also shall be entitled to elect between such
forms of consideration. The provisions of this paragraph shall
apply similarly to successive consolidations, mergers, sales,
conveyances or other transactions or events.
(f) Whenever the number of shares of Common Stock into
which each share of Series A Convertible Preferred Stock is
convertible is adjusted as provided in this Section 6, the
Corporation shall promptly mail to the Holders a notice in
accordance with Section 8 below stating that the number of shares
of Common Stock into which the shares of Series A Convertible
Preferred Stock are convertible has been adjusted and setting
forth the new number of shares of Common Stock (or describing the
new stock, securities, cash or other property) into which each
<PAGE>
share of Series A Convertible Preferred Stock is convertible, as
a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when
such adjustment became effective.
7. LIMITED PRIORITY. The Series A Convertible Preferred
Stock shall, to the extent of the Liquidation Preference set
forth in Section 4, be senior in rank as to distribution of
assets upon any liquidation, dissolution or winding up of the
affairs of the Corporation, to the Common Stock, or any class of
equity securities of the Corporation which by its terms are
junior to the Series A Convertible Preferred Stock, unless the
Holders of 66 2/3 percent of the outstanding shares of the Series
A Convertible Preferred Stock shall otherwise consent.
8. NOTICES. The Corporation shall provide notice to each
Holder of any action taken or proposed to be taken or any
determination made by the Corporation and/or the Holder under the
terms of this Certificate of Designations. Notice of any such
action or determination by the Corporation and/or the Holder and
all other notices and other communications provided for in this
Certificate of Designations shall be delivered by facsimile and
by reputable overnight courier,
(a) If to the Company, to:
Pioneer Hi-Bred International, Inc,
700 Capital Square
Des Moines, Iowa 50309
Attention: General Counsel
Telephone: 515-248-4800
Telecopier: 515-248-4844
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Facsimile: (212) 859-4000
Attn.: Stephen Fraidin
or such other address as the Corporation shall have
furnished to the Holders in writing,
(b) if to a Holder, to the address and facsimile number of
such Holder listed on the Stock Books of the Corporation.
9. DEFINITIONS. Certain capitalized terms are used herein
as defined below:
"AFFILIATE" of a Person has the meaning set forth in Rule
12b-2 under the Exchange Act.
"ARTICLES OF INCORPORATION" means the Third Restated and
Amended Articles of Incorporation of the Corporation, as amended
from time to time.
"BENEFICIALLY OWNED" with respect to any securities means
having "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act, as in effect on
the date hereof, without limitation by the 60-day provision in
paragraph (d)(1)(i) thereof). The terms "Beneficial Ownership"
and "Beneficial Owner" have correlative meanings.
"BOARD" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of Iowa are
authorized or obligated by law or executive order to close.
"CERTIFICATE OF DESIGNATIONS" means this Certificate of
Designations, Powers, Preferences and Relative, Participating,
Optional or other Rights, and the Qualifications, Limitations or
Restrictions Thereof, creating the Series A Convertible Preferred
Stock.
"COMMON STOCK" means the Common Stock, par value $1.00 per
share, of the Corporation.
"COMMON VOTING POWER" means, in respect of any record date
for any meeting of stockholders (or action by written consent in
lieu of a meeting) the aggregate Votes represented by all then
<PAGE>
outstanding Voting Securities other than the Series A Convertible
Preferred Stock as determined by the Board in accordance with the
procedures set forth in the Articles of Incorporation based on
the actual Votes entitled to be voted at such meeting (excluding
any estimation of any kind, including as to who would have been
entitled to 5 Votes per share if such shareholders had taken the
requisite steps to obtain such Vote).
"DIVIDEND" means any dividend or distribution on or in
respect of the Common Stock of the Corporation, whether in cash,
additional shares of Common Stock or other property.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"HOLDER" means a holder of record of a share or shares of
Series A Convertible Preferred Stock.
"INVESTMENT AGREEMENT" means the Agreement, dated as of
August 6, 1997, between the Investor and the Corporation, as
amended and/or restated from time to time.
"INVESTOR" means E.I. du Pont de Nemours and Company.
"INVESTOR GROUP" shall have the meaning set forth in the
Investment Agreement.
"INVESTOR GROUP TOTAL OWNERSHIP PERCENTAGE" means, with
respect to the Investor Group calculated at a particular point in
time, the ratio, expressed as a percentage, of (a) the total
number of shares of Common Stock Beneficially Owned by the
Investor Group and issuable upon conversion of (whether or not
then convertible), or otherwise constituting the economic
equivalent of, all Common Securities (as defined in the
Investment Agreement) Beneficially Owned by the Investor Group,
over (b) the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable
upon conversion (whether or not then convertible) of, or
otherwise constituting the economic equivalent of, all
outstanding Common Securities; PROVIDED that in no event shall
the Investor Group Total Ownership Percentage of all Holders of
Series A Convertible Preferred Stock be greater than 20%.
"IOWA LAW" shall mean the Business Corporation Act of the
State of Iowa.
"LIQUIDATION PREFERENCE" has the meaning specified in
Section 4 above.
"OTHER INVESTOR AFFILIATE" shall have the meaning set forth
in the Investment Agreement.
"PER SHARE VOTE AMOUNT" means in respect of any record date
for any meeting of stockholders (or action by written consent in
lieu of a meeting) that number of Votes per share of Series A
Convertible Preferred Stock equal to (x) the Total Preferred Vote
Amount as of such record date amount divided by (y) the number of
shares of Series A Convertible Preferred Stock outstanding as of
such record date.
"PERSON" means any individual, corporation, company,
association, partnership, joint venture, limited liability
company, trust or unincorporated organization, group (within the
meaning of Rule 13d-5 under the Exchange Act) or a government or
any agency or political subdivision thereof.
"SERIES A CONVERTIBLE PREFERRED STOCK" has the meaning
specified in Section 1 above.
"STOCK BOOKS" means the stock transfer books of the
Corporation relating to its Common Stock and Preferred Stock.
"SUBSIDIARY" means, as to any Person, any other Person more
than fifty percent (50%) of the shares of the voting stock or
other voting interests of which are owned or controlled, or the
ability to select or elect more than fifty percent (50%) of the
directors or similar managers is held, directly or indirectly, by
such first Person or one or more of its Subsidiaries or by such
first Person and one or more of its Subsidiaries. A Subsidiary
that is directly or indirectly wholly-owned by another Person
except for directors' qualifying shares shall be deemed wholly-
<PAGE>
owned for purposes of this Agreement.
"SURRENDER DATE" has the meaning specified in Section 6
above.
"13D GROUP" shall mean any group of Persons who, with
respect to those acquiring, holding, voting or disposing of
Voting Securities would, assuming ownership of the requisite
percentage thereof, be required under Section 13(d) of the
Exchange Act and the rules and regulations thereunder to file a
statement on Schedule 13D with the Securities and Exchange
Commission as a "person" within the meaning of Section 13(d)(3)
of the Exchange Act, or who would be considered a "person" for
purposes of Section 13(g)(3) of the Exchange Act.
"TOTAL PREFERRED VOTE AMOUNT" means, in respect of the
record date for any meeting (or action by written consent in lieu
of a meeting) of shareholders of the Corporation to vote on any
matter, an aggregate number of Votes equal to (a) the Common
Voting Power as of such record date multiplied by (b) a fraction,
the numerator of which is the Investor Group Total Ownership
Percentage (expressed as a fraction carried to two decimal
places) as of such record date and the denominator of which is
1.00 minus the Investor Group Total Ownership Percentage
(expressed as a fraction carried to two decimal places) as of
such record date; provided that in no event shall the Total
Preferred Vote Amount be greater than 20% of Total Voting Power.
"TOTAL VOTING POWER" means in respect of any record date for
any meeting of stockholders (or action by written consent in lieu
of a meeting) the aggregate Votes represented by all then
outstanding Voting Securities as determined by the Board in
accordance with the procedures set forth in the Articles of
Incorporation based on the actual Votes entitled to be voted at
such meeting (excluding any estimation of any kind, including as
to who would have been entitled to 5 Votes per share if such
shareholders had taken the requisite steps to obtain such Vote).
"VOTES" shall mean, at any time, with respect to any Voting
Securities, the total number of votes that would be entitled to
be cast by the holders of such Voting Securities generally (by
the terms of such Voting Securities, the Articles of
Incorporation or any certificate of designations for such Voting
Securities) in a meeting for the election of directors held at
such time, including the votes that would be able to be cast by
holders of shares of Series A Convertible Preferred Stock in
accordance with the procedures set forth in the Articles of
Incorporation based on the actual number of Votes entitled to be
voted at such meeting (excluding any estimation of any kind,
including as to who would have been entitled to 5 Votes per share
if such shareholders had taken the requisite steps to obtain such
Vote).
"VOTING SECURITIES" means the shares of Common Stock, the
Series A Convertible Preferred Stock and any other securities of
the Corporation entitled to vote generally for the election of
directors, and any securities (other than employee stock options)
which are convertible into, or exercisable or exchangeable for,
Voting Securities.
IN WITNESS WHEREOF, Pioneer Hi-Bred International, Inc., has
caused this Certificate to be made under the seal of the
Corporation and signed and attested by the undersigned officers
of the Corporation this ____ day of ___________, 1997.
PIONEER HI-BRED INTERNATIONAL, INC.
By
Name:
Title:
(Corporate Seal)
Attest:
By
Name:
Title:
<PAGE>
EXHIBIT D
INITIAL INVESTOR NOMINEE
NOTICE PURSUANT TO SECTION 5.1(B)
1.Name of Investor Charles O. (Chad) Holliday,
Nominee Jr.
14A Information:
Age 49 (DOB 3/9/48)
Current Since 1995, Executive Vice
Position President, DuPont,
Chairman, DuPont Asia
Pacific and member of the
Office of the Chief
Executive. DuPont is a
global chemical, energy and
life sciences company.
Previous Senior Vice President,
Positions: DuPont (1992) President,
(Past 5 + DuPont Asia Pacific (1990)
years)
Other Analog Devices, Inc.
Directorships: DuPont Photmasks, Inc.
E.I. du Pont de Nemours and
Company
2.Name of Investor William F. (Bill) Kirk
Nominee
14A Information:
Age: 54 (DOB 9/11/42)
Current Since 1990, Vice President,
Position General Manager, DuPont
Agricultural Products.
Dupont is a global chemical
energy and life sciences
company.
Previous General Manager,
Positions: Agricultural
(Past 5+ years) Products (1985)
Other None
Directorships:
<PAGE>
Exhibit (C)4
PREFERRED SEED SUPPORT AGREEMENT
THIS AGREEMENT, effective this 6th day of August, 1997, is made
between Pioneer Hi-Bred International, Inc. ("Pioneer") and
Optimum Quality Grains, L.L.C., a Delaware limited liability
company (hereinafter referred to as the "Venture") owned equally
by Pioneer and E.I. du Pont de Nemours and Company ("DuPont").
W I T N E S S E T H:
WHEREAS, Pioneer and DuPont have entered into various documents
relating to the Venture dated the 6th day of August, 1997, (in
the aggregate "Venture Agreements") pursuant to which, among
other things, DuPont and Pioneer will be establishing and funding
the Venture for the development and sale of Quality Trait Seed as
defined herein;
WHEREAS, the Venture and Pioneer (the "Parties") contemplate that
the technology or germplasm necessary to develop the Quality
Trait Seed will be sub-licensed by the Venture to Pioneer for
combination with Pioneer's crop lines and germplasm for the
purpose of developing Quality Trait Seed for sale by Pioneer on
behalf and in support of the Venture;
WHEREAS, the Parties contemplate that after the combination of
the Venture's Quality Traits with selected crop lines and
germplasm owned or licensed by Pioneer or the Venture, the
resulting Quality Trait Seed will be sold by Pioneer to Seed
Customers and/or Venture Customers with certain royalties and
premiums being remitted to the Venture;
WHEREAS, the Parties contemplate that the Quality Trait Seed
marketed by Pioneer to support the business of the Venture shall
in certain instances be sold or licensed to contract producers
for production of Quality Trait Grain and that Pioneer will
implement some portion of such grain production on behalf of and
in support of the Venture;
WHEREAS, Pioneer is the owner of certain Quality Trait Seed and
that Pioneer will sell such seed to Seed Customers for the
Venture consistent with the marketing plan set by the Venture,
with certain royalties, premiums and commissions being remitted
to the Venture; and
WHEREAS, It is further contemplated that the Venture will provide
market assistance to Pioneer for the sale of Quality Trait Seed.
NOW, THEREFORE, Pioneer and the Venture (collectively the
"Parties") desire that this document set forth that Preferred
Seed Supply Agreement.
ARTICLE 1 - DEFINITIONS
- -----------------------
As used herein, the following terms shall have the following
meanings:
A. "Proprietary Property" - all patents, trade secrets,
germplasm, parent lines, hybrids, pedigree or breeding
information, breeding processes and procedures and related
information, written or oral, that is the subject of this
Agreement;
B. "Quality Traits" - shall mean characteristics which result
in modifications of the plant, grain composition or its
attributes that have a value to end-users of grain, grain
products or plant materials and which command value in the
market and such value is capable of being captured;
C. "Venture Products" - all, grain, grain products or plant
material developed by or for the Venture that have as a
component a Quality Trait;
D. "Quality Trait Seed" - shall mean seed products developed
by or on behalf of the Venture which contain a Quality
Trait;
E. "Combined Quality Trait Seed" - a Quality Trait Seed
developed by Pioneer from Proprietary Property licensed by
the Venture to Pioneer;
<PAGE>
2
F. "Pioneer Quality Trait Seed" - a Quality Trait Seed owned
and developed solely by Pioneer based solely on unique
characteristics of the germplasm that result in a Quality
Trait;
G. "Research Alliance" - the relationship between Pioneer and
DuPont as set forth in a Research Alliance Agreement
executed by Pioneer and DuPont;
H. "Seed Customer" - users of Quality Trait Seed; and
I. "Venture Customers" - users of Venture Products.
ARTICLE 2 - INTENTION OF THE PARTIES
- ------------------------------------
The Parties agree that the purpose of this Agreement is to
generally set forth the intent and framework upon which the
Venture and Pioneer shall base their commercial relationship. It
is acknowledged that this relationship is unique and given the
complexity and uncertainty of how the business opportunity may
develop in the future the Parties agree to use their best
cooperative efforts to resolve disputes and issues consistent
with the general principles set forth herein.
ARTICLE 3 - PREFERRED SUPPLIER
- ------------------------------
A. The Parties agree that the Venture shall be entitled to the
benefit of a reliable supply of Quality Trait Seed to the
marketplace to be developed and sold by Pioneer to market
segments or Venture Customers identified by the Venture, as well
as those Seed Customers identified by Pioneer as aligned with the
Venture marketing plan. Pioneer will be the Venture's preferred
worldwide provider and the preferred marketer of all of such
Quality Trait Seed.
B. The Parties acknowledge that in certain circumstances it
will be appropriate that there are exceptions to the status of
Pioneer as the preferred seed supplier to the Venture. Pioneer
recognizes that there are currently third-party seed companies
that supply Quality Trait Seed to the market on behalf of the
Venture. The need for additional exceptions may arise from time
to time in the future including when Pioneer does not have the
capacity to meet the demand of the Venture for any particular
line of Quality Trait Seed or when the Venture is unable to
provide the necessary freedom to operate to Pioneer for the
purpose of developing or selling Quality Trait Seed. Any such
decision to add additional seed companies to those supporting the
Venture shall be made by the Venture respecting the intent for a
preferred seed supply status for Pioneer.
C. Pioneer shall retain all revenues from the sale of Quality
Trait Seed sold by Pioneer exclusive of premiums, royalties or
commissions paid to the Venture as set forth in Article 9. The
term "sale" as used herein with respect to the disposition of
seed shall mean that such disposition is made in accordance with
the Venture's licensing program incorporating Pioneer's licensing
program for its seed.
ARTICLE 4 - QUALITY TRAIT SEED PRODUCT DEVELOPMENT
- --------------------------------------------------
A. The Venture and Pioneer agree to cooperate to enhance
Pioneer's understanding of the needs of the Venture to
successfully implement the Venture's business plan including
identification and specific description of anticipated Venture
Products, Venture Product advancement and life cycle management
strategies and in forecasting demand for such Venture Products.
This cooperation is further intended to assist in the
identification of quality traits, enabling technologies and
related freedom to operate issues such that the collaborative
efforts of Pioneer and DuPont through their Research Alliance can
support the business of the Venture and support Pioneer in its
capacity as the developer of Quality Trait Seed on behalf of the
Venture. The Parties acknowledge that the development of Quality
Trait Seed will require the highest levels of cooperation and
communication between the Venture and Pioneer and between
Pioneer, DuPont and the Venture through the activities of the
Research Alliance that support the Venture.
B. The Venture shall license to Pioneer on a perpetual basis
the necessary Venture Proprietary Property for combination with
<PAGE>
3
Pioneer Proprietary Property for development of Quality Trait
Seed to be sold by Pioneer on behalf of the Venture. ("Combined
Quality Trait Seed"). Pioneer may also develop Quality Trait Seed
without use of Venture Proprietary Property ("Pioneer Quality
Trait Seed"), which will be marketed by the Venture and sold by
Pioneer to Seed Customers. The term "perpetual" as used herein
shall mean that the Pioneer licenses from the Venture shall not
terminate; however, any consideration for such licenses shall not
be payable beyond the legal limit for such payments under the
laws of the United States or the European Community.
ARTICLE 5 - SUPPLY OF QUALITY TRAIT SEED
- ----------------------------------------
A. All sales, licensing, or use of Quality Trait Seed to or by
Seed Customers shall be made consistent with the Venture
marketing plan for Venture Products.
B. All Quality Trait Seed developed by Pioneer as discussed
above shall be distributed by Pioneer to Seed Customers and to
support the business of the Venture, as more fully set forth
below.
C. The Parties shall agree upon the mechanics of providing a
long-term Venture Product forecast from the Venture and shall
utilize such forecast in developing a Quality Trait Seed supply
plan to develop estimates for the purpose of allowing Pioneer to
determine and produce the appropriate amount of seed it needs to
plant for both parent seed and hybrid seed production (or
varietal production in the case of certain oilseeds) in order to
have available the Quality Trait Seed necessary to meet the
demand in the commercial planting season that follows two years
after the Estimate Year ("the Commercial Planting Year"). The
Venture will participate and follow normal practice and timelines
used within Pioneer for seed supply and demand planning.
D. Prior to each Commercial Planting Year during the term of
this Agreement, Pioneer shall use its best efforts to have
available for delivery in a timely fashion to its Seed Customers
or contract growers of the Venture the Quality Trait Seed in
sufficient supply to meet the estimates discussed in Paragraph C.
All of such Quality Trait Seed shall comply with written
warranties for such products as established by the Venture with
regard to their Quality Traits and shall meet the customary
warranties of seed products sold by Pioneer.
E. If Pioneer's supply of Quality Trait Seed is significantly
greater than the demand for such seed, including management of
the inventory on a carry-over basis to the next sales season,
then the Parties shall agree upon an equitable method of risk
sharing for the costs of production of the oversupply.
F. The base price of such Quality Trait Seed sold by Pioneer
shall be determined by Pioneer based upon its reasonable and
customary pricing practices. Quality Trait premiums, royalties,
or license fees shall be established by the Venture. The
commissions for Venture activities supporting seed sales of
Pioneer shall be established by mutual agreement of the Parties.
Each of these are more fully set forth in Article 9 below.
G. Pioneer and the Venture shall cooperate with each other in
making decisions as to which pollinators, sterile females,
hybrids, or varieties are appropriate for delivery of the Quality
Traits to support the business of the Venture; however, Pioneer
shall have the final decision regarding the selection of the
appropriate pollinator, sterile females, hybrids, or variety for
development, production and sale after combination with the
necessary Venture Proprietary Property to produce the desired
Quality Trait Seed. Pioneer has a good faith obligation to not
limit market access for the Venture as a result of these
decisions.
ARTICLE 6 - FUTURE PRODUCTS
- ---------------------------
In the event that the Venture continues to develop various
varieties of Quality Trait Grains or other related product,
whether for food, feed or industrial markets, this Agreement
shall extend to each and every one of those products.
ARTICLE 7 - CONFIDENTIALITY
- ---------------------------
A. The Parties shall consider all written information furnished
<PAGE>
4
by each other as confidential to be confidential and shall not
disclose any such information to any person, or use such
information itself for any purpose other than those specified in
this Agreement, unless the receiving parties obtain prior written
permission from the disclosing party to do so. No party shall
advertise, publish, or disclose the nature of the relationship
described in this Agreement to any third parties who do not have
a need to know, because of their relationships with Pioneer,
DuPont or the Venture, the fact that the parties have contracted
for the provision of services hereunder nor shall information
relating to this Agreement be disclosed without the other party's
prior written permission.
B. The above obligations of confidentiality and non-use shall
not apply to:
(i) information which at the time of disclosure can be
demonstrated to be previously known to the receiving
parties; or
(ii) information which at the time of disclosure has been
published which shall mean that the public in at
least one country has had an opportunity to become
aware of it (whether or not the public is free to
make use of it); or which after disclosure is
published, unless the publication of that information
is a result of any breach of the obligation of
confidentiality contained herein, except that a
compilation of information in a form not itself
published but comprising items of information each
separately published shall not be excluded from the
obligations as to confidentiality contained herein;
(iii) information obtained by the recipient from a third
party legitimately in possession of it and having a
right to disclose it; or
(iv) disclosures required pursuant to law.
C. The parties may from time to time enter into separate
confidentiality agreements for sharing information which they
deem sensitive.
D. The obligations set forth in this ARTICLE 7 -
CONFIDENTIALITY shall survive and be binding upon the parties for
two (2) years from the termination of this Agreement as set forth
herein.
ARTICLE 8 - OWNERSHIP OF AND ACCESS TO INTELLECTUAL PROPERTY
- ------------------------------------------------------------
A. The Parties acknowledge that the Venture shall be the owner
or assignee of certain Quality Trait technology owned by Pioneer
and DuPont prior to execution of this Agreement and as provided
in the Venture Agreements, and the Venture shall be the exclusive
licensee of all Quality Trait technology developed through the
Research Alliance evidenced by the agreement between Pioneer and
DuPont executed prior to this Agreement, whether developed
through Collaborative Efforts or Independent Efforts, as those
terms are defined in the Research Alliance Agreement. It is the
intention of the Parties that all Proprietary Property owned or
licensed by the Venture shall be licensed preferably to Pioneer
for development and production by Pioneer of Quality Trait Seed
for sale on behalf of the Venture as contemplated herein;
however, the parties recognize that in the certain circumstances
that the Venture may utilize additional third party seed
companies for supplying Quality Trait Seed to Seed Customers and
to the marketplace. Accordingly, in such circumstances, the
Venture shall grant non-exclusive licenses to certain of the
Venture Proprietary Property to third party seed companies for
production of Quality Trait Seed for sale on behalf of the
Venture on terms no more favorable than those for the similar
licenses to Pioneer.
B. Pioneer shall, as it relates to fulfilling its commitments
hereunder, bear the cost of maintaining and obtaining Pioneer
Proprietary Rights and its associated freedom to operate anywhere
in the world where protection is feasible and desirable by the
Venture Board. In the event that Pioneer should develop any
pollinator, hybrid, or variety that contains Venture Proprietary
Property and that Pioneer and the Venture agree it is in the best
interest of Pioneer or the Venture to seek patent or plant
<PAGE>
5
variety protection on such pollinator, hybrid or variety, then
Pioneer shall have the responsibility and the cost of filing,
prosecution and enforcement of any such patent or plant variety
protection.
C. The Venture shall bear the costs of maintaining and
obtaining all Venture Proprietary Property and associated
enabling technology necessary for Pioneer to develop Quality
Trait Seed, including securing the appropriate freedom to operate
anywhere in the world as it may be necessary to facilitate the
purpose of the Venture.
D. Each Party shall cooperate in requiring its employees and
agents to cooperate in the execution of any documents necessary
to facilitate compliance with the provisions of this Agreement.
ARTICLE 9 - REVENUE SHARING
- ---------------------------
A. The Parties agree that the following principles shall guide
the sources of revenue capture by the Venture:
i. Premiums or royalties captured in Quality Trait Seed in
addition to basic seed value.
ii. Premiums or royalties paid to the Venture for the sale
of Venture Products.
iii. Value captured from sales of Venture Products.
iv. Commissions for marketing assistance provided by the
Venture in support of certain Pioneer seed sales.
B. Additionally, Pioneer may serve as a collection point for
the revenue streams through a license granted to the purchaser or
contract producer of the Quality Trait Seed, as appropriate, and
pass on the royalty, premium or commission to the Venture as
described in the examples below:
i. The Parties agree that the Pioneer licenses under the
Venture Proprietary Property for development of Combined
Quality Trait Seed to be sold on behalf of the Venture shall
bear a royalty determined by the Parties, which royalty in
each case shall be at fair market value giving consideration
to the value that can be captured by the farmer/purchaser of
the Quality Trait Seed or the value to the end-user customer
of the Venture.
ii. The Parties agree that Pioneer shall pay to the Venture
a Quality Trait premium on all Quality Trait Seed sold by
Pioneer. The Quality Trait premium shall be determined by
the Venture giving consideration to the value that can be
captured by the farmer/purchaser of the Pioneer Quality
Trait Seed or the value of the Quality Trait to the end-
users of the Venture.
iii. The Parties agree that all royalties or Quality Trait
premiums payable by Pioneer to the Venture shall be
reconsidered and adjusted based on market conditions.
iv. It is acknowledged by the Parties that the Venture, at
its discretion, may assist Pioneer in the marketing of seed
that is not Quality Trait Seed. In such case the Venture
shall be paid a commission commensurate with the volume of
seed that is sold by Pioneer as the result of such
assistance and in the amount that the Parties shall agree
upon prior to such marketing assistance, being provided by
the Venture.
v. The parties agree that if the ability to capture value
for a Quality Trait Seed diminishes or disappears at the
farmer level and Pioneer desires to continue to sell such
seed, then Pioneer shall pay the Venture a royalty for use
of the Venture Proprietary Property that is contained in
such seed.
C. Pioneer may collect such license fee, royalty or Quality
Trait premium from the farmer or contract producer through a
license agreement to be executed by the farmer or contract
producer. The Parties shall mutually develop and agree upon the
terms and the form of any such license.
<PAGE>
6
ARTICLE 10 - QUALITY TRAIT GRAIN PRODUCTION
- -------------------------------------------
The parties acknowledge that a primary business of the Venture is
the supply of Venture Products to end-users. To assist in supply
of those Venture Products, Pioneer agrees to make its worldwide
crop production resources available for assisting the Venture
with the management of contracting with growers to produce
Venture Products from Quality Trait Seed. The Parties shall
share expertise, databases and know-how to assist in the
management of the contract growers.
ARTICLE 11 - REGULATORY RESPONSIBILITIES
- ----------------------------------------
The Parties acknowledge that the Venture Products will be subject
to different regulatory requirements in different countries.
Pioneer shall bear all responsibility and cost for seeking,
maintaining and enforcing regulatory approval for selling the
Quality Trait Seed. The Venture shall bear all responsibility
and cost for seeking, maintaining and enforcing all regulatory
approvals necessary for selling the Venture Products. The Venture
shall be responsible for the expenses associated with obtaining
necessary approvals and non-objections for the sale of transgenic
products.
ARTICLE 12 - DISPUTE RESOLUTION
- -------------------------------
Any dispute involving the application or interpretation of this
Agreement shall be arbitrated in accordance with the rules of the
American Arbitration Association in the City of Des Moines, Iowa,
which arbitration shall be final and binding upon the Parties.
ARTICLE 13 - MODIFICATIONS
- --------------------------
The parties may agree to modifications to this Agreement. Any
such modifications are enforceable only if agreed to in writing
by both parties, except as set forth below.
ARTICLE 14 - INDEMNIFICATION
- ----------------------------
Pioneer shall indemnify and hold harmless the Venture pursuant to
the terms of that separate agreement entered into between Pioneer
and DuPont on even date herewith, and Pioneer and the Venture, by
cross-reference of said separate agreement, incorporate it
herein.
ARTICLE 15 - NO WAIVER OF RIGHTS
- --------------------------------
The failure of any party hereto at any time to enforce any of the
terms, provisions or conditions of this Agreement shall not be
construed as a waiver of the same or of the right of any party to
enforce the same on any subsequent occasion.
ARTICLE 16 - NOTICES
- --------------------
Any notice required or permitted to be given to any party for all
of the purposes hereof shall be mailed by registered mail, return
receipt requested, or hand delivered, addressed as follows:
To DuPont: E.I. du Pont de Nemours and Company
DuPont Legal
1007 Market Street
Wilmington, Delaware 19898
ATTENTION: General Counsel
Telephone No.: 302-773-0177
Facsimile No.: 302-773-4679
To Pioneer: Pioneer Hi-Bred International, Inc.
700 Capital Square
400 Locust Street
Des Moines, IA 50309
ATTENTION: General Counsel
Telephone No.: 515-248-4800
Facsimile No.: 515-248-4844
To the Venture: Optimum Quality Grains
10700 Justin Drive
Urbandale, IA 50322
or to such other address or addresses as any of the parties shall
designate by notice given as herein required. Notices shall be
effective upon receipt by the party to whom they are addressed.
<PAGE>
7
ARTICLE 17 - TERM AND TERMINATION
- ---------------------------------
A. Unless terminated pursuant to this provision, this Agreement
shall automatically renew from year to year so long as the
Venture is in existence.
B. Either party may terminate this Agreement for breach as the
term is defined herein. For purposes of this Agreement, "breach"
shall be defined to occur only if either party willfully fails to
substantially comply with any material term of this Agreement
(including any arbitration decision) after written notice from
the non-breaching party and after one hundred eighty days (180)
opportunity to remedy such breach. In case of any dispute
over payments, the tender of such payments into an escrow with an
independent third party subject to legal resolution of a dispute
shall not constitute a breach.
C. The Parties agree that this is not a guaranteed production
contract and that due to the many risks and uncertainties in seed
production, in addition to the provisions of Article 20,
Force Majeure, failure of Pioneer to fulfill the demand for
Quality Trait Seed for reasons beyond Pioneer's reasonable
control shall not result in a breach of Pioneer's obligations
under this Agreement.
D. Should either Pioneer or DuPont terminate this Agreement,
their rights and obligations shall be governed by Article IX of
the Formation Agreement entered into between them on even date
herewith and any subsequent modifications thereto.
ARTICLE 18 - COMPLIANCE WITH LAWS
- ---------------------------------
A. Each party shall be responsible for complying with all
applicable laws, regulations, court decrees, ordinances and other
rules of the United States and of each state, territory,
municipality or other political subdivision having or exercising
jurisdiction in connection with the subject matter of this
Agreement.
B. If any party discovers any variance between any law and any
action of a party hereto, it shall inform the other party of such
variance promptly in writing. Each party shall indemnify and
hold the other party harmless from any liability or penalty
levied on that party for non-compliance with law by that party,
third parties or any division of government.
C. This Agreement shall be governed by the laws of the State of
Iowa.
ARTICLE 19 - SUBCONTRACTING AND ASSIGNMENT
- ------------------------------------------
No party shall assign this Agreement or any license granted
hereunder to any other party without the prior written consent of
the other parties, which consent shall not be unreasonably
withheld. However, any party may assign this Agreement to a
subsidiary company, provided, however, that such party shall
remain liable for the performance of its obligations under this
Agreement by such parent or subsidiary.
ARTICLE 20 - FORCE MAJEURE
- --------------------------
No Party shall be liable to the other Party for loss or damage
resulting from any delay or failure to perform its contractual
obligations within the time specified due to acts of God, war,
acts of the public enemy, riot, civil commotion, sabotage,
federal, state or municipal action or regulation (including
delays, failure or refusal by any regulatory or other agency to
act on or grant permits, licenses or rate increases), strikes or
other labor troubles (not related to Pioneer employees), fires,
flood, drought or other adverse environmental conditions, or any
other causes, contingencies or circumstances within or without
of the United States not subject to either party's control, which
prevent or hinder performance hereunder.
ARTICLE 21 - INVALID PROVISIONS
- -------------------------------
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provisions shall be fully
severable; this Agreement shall be construed and enforced as if
<PAGE>
8
such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement; and the remaining provisions
of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable
provisions or by its severance from this Agreement.
ARTICLE 22- COMPLETE AGREEMENT
- ------------------------------
This Agreement along with the L.L.C. Agreement, the Formation
Agreement, the Research Alliance Agreement and any Ancillary
Agreements constitutes the entire Agreement among the parties and
supersedes and merges all prior agreements with respect to the
subject matter discussed herein and any warranty, representation,
promise or condition in connection therewith not expressly
incorporated herein shall not be binding upon any party. No
modification, extension or waiver of this Agreement or any of its
provisions shall be binding unless in writing signed by a duly
authorized representative of each of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
Pioneer HI-BRED INTERNATIONAL, Optimum Quality Grains, L.L.C.
INC. (Pioneer)
By: /s/ Charles S. Johnson By: /s/ William F. Kirk
--------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended August 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number : 0-7908
PIONEER HI-BRED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Iowa
(State or other jurisdiction of incorporation or organization)
42-0470520
(I.R.S. Employer Identification No.)
700 Capital Square, 400 Locust, Des Moines, Iowa 50309
(Address of principal executive offices)
(515) 248-4800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock ($1.00 par value) New York Stock Exchange
EDGARWATCH Page 1 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Title of class
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of October 9, 1996, was $5,127,129,984. As of October 9, 1996,
82,378,119 shares of the Registrant's Common Stock, $1.00 par value, were
outstanding.
EDGARWATCH Page 2 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
1. Registrant incorporates by reference portions of the Pioneer Hi-Bred
International, Inc. Annual Shareholders' Report for the year ended August
31, 1996. (Items 1 and 2 of Part I, Items 5, 6, 7 and 8 of Part II.)
2. Registrant incorporates by reference portions of the Pioneer Hi-Bred
International, Inc. Proxy Statement for the annual meeting of shareholders
on January 28, 1997. (Items 10, 11, 12 and 13 of Part III).
PART I
ITEM 1. BUSINESS
The description of business contained in the Annual Report to
Shareholders for the year ended August 31, 1996 is incorporated
herein by reference.
ITEM 2. PROPERTIES
The description of properties contained in the Annual Report to
Shareholders for the year ended August 31, 1996 is incorporated
herein by reference.
ITEM 3. LEGAL PROCEEDINGS
The description of legal proceedings contained within footnote 7 in
the Annual Report to Shareholders for the year ended August 31, 1996
is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market information for the Registrant's Common Stock contained in
the Annual Report to Shareholders for the year ended August 31, 1996
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data contained in the Annual Report to
Shareholders for the year ended August 31, 1996 is incorporated
herein by reference.
EDGARWATCH Page 3 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations contained in the Annual Report to Shareholders
for the year ended August 31, 1996 is incorporated herein by
reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant, together
with the report thereon of KPMG Peat Marwick LLP contained in the
Annual Report to Shareholders for the year ended August 31, 1996 are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later
than December 10, 1996; and the information responsive to the item
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later
than December 10, 1996; and the information responsive to the item
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later
than December 10, 1996; and the information responsive to the item
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14(a) not later
than December 10, 1996; and the information responsive to the item
is incorporated herein by reference.
EDGARWATCH Page 4 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements of Pioneer Hi-Bred
International, Inc. and subsidiaries filed are listed on
page 6.
(a) 2. Financial Statement Schedules
The financial statement schedules of Pioneer Hi-Bred
International, Inc. and subsidiaries filed are listed on
page 6.
(a) 3. Exhibits
The exhibits to the Annual Report of Pioneer Hi-Bred
International, Inc. filed are listed on page 9.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the fourth quarter of
the year ended August 31, 1996.
EDGARWATCH Page 5 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
OF
PIONEER HI-BRED INTERNATIONAL, INC.
FOR THE FISCAL YEAR ENDED AUGUST 31, 1996
INDEX
Financial Statements
The following consolidated financial statements of Pioneer Hi-Bred
International, Inc. and subsidiaries are incorporated by reference in Part II,
Item 8:
Independent Auditors' Report Consolidated Balance Sheets - August 31, 1996 and
1995 Consolidated Statements of Income - years ended August 31, 1996, 1995 and
1994 Consolidated Statements of Shareholders' Equity - years ended August 31,
1996, 1995 and 1994 Consolidated Statements of Cash Flows - years ended August
31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Financial Statement Schedules
The following financial statement schedules of Pioneer Hi-Bred International,
Inc. and subsidiaries are submitted in response to Part IV, Item 14:
Independent Auditors' Report................................................ 7
Schedule II - Valuation and Qualifying Accounts............................. 8
Exhibits to the Annual Report............................................... 9
All other financial statement schedules have been omitted as not required, not
applicable, or because all the data are included in the financial statements.
</TABLE>
EDGARWATCH Page 6 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Independent Auditors' Report
To the Shareholders
Pioneer Hi-Bred International, Inc.
Under date of October 4, 1996, we reported on the consolidated balance sheets of
Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended August 31,
1996, as contained in the 1996 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1996. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related 1996, 1995 and 1994 financial statement schedule II. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Des Moines, Iowa
October 4, 1996
EDGARWATCH Page 7 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance At Charged To Balance
Beginning Costs And Deductions At End
Description Of Period Expenses (Recoveries)* Of Period
Allowance for Doubtful Accounts:
<S> <C> <C> <C> <C>
Year ended August 31, 1996....... $ 19 $ 5 $ 1 $ 23
------- ------ ------ ------
Year ended August 31, 1995....... $ 21 $ 2 $ 4 $ 19
------- ------ ------ ------
Year ended August 31, 1994....... $ 19 $ 5 $ 3 $ 21
------- ------ ------ ------
</TABLE>
* Represents accounts charged off as uncollectible, net of recoveries of bad
debts.
EDGARWATCH Page 8 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
INDEX
Exhibits to Annual Report on Form 10-K
Year Ended August 31, 1996
PIONEER HI-BRED INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Page
<S> <C>
Exhibit 3.1--Articles of Incorporation (Note 1)............................... 10
Exhibit 3.2--By-Laws (Note 2)................................................. 10
Exhibit 4.1--Articles of Incorporation (Note 1)............................... 10
Exhibit 4.2--By-Laws (Note 2)................................................. 10
Exhibit 4.3--Rights Agreement (Note 3)........................................ 10
Exhibit 4.4--Specimen of Company's Common Stock Certificate (Note 4).......... 10
Exhibit 10--Material Contracts
.1 Stock Option Plan (Note 5)....................................... 10
.2 Deferred Compensation Plan (Note 6).............................. 10
.3 Annual Deferred Compensation Plan (Note 7)....................... 10
.4 Consulting Agreement with a Director (Note 8).................... 10
.5 Supplemental Executive Retirement Plan........................... 11-27
.6 Restricted Stock Plan - Performance Based........................ 28-36
.7 Management Reward Program - Performance Based.................... 37-44
Exhibit 11--Statement re: Computation of earnings per share.................. 45
Exhibit 13--Annual Report to Shareholders for the fiscal year ended August 31, 1996
.1 Description of the Company's business............................ 46-47
.2 Selected financial data.......................................... 48
.3 Consolidated net sales and operating income (loss) by product
statement....................................................... 49
.4 Management's discussion and analysis of financial condition and results
of operations................................................... 50-58
.5 Consolidated financial statements of the Registrant, together with the
report thereon.................................................. 59-77
.6 Research and product development................................. 78
.7 Description of properties........................................ 79
.8 Market for the Registrant's common stock......................... 80
Exhibit 21--Subsidiaries of Registrant........................................ 81-84
Exhibit 23--Consents of experts and counsel................................... 85
Exhibit 27--Financial data schedule........................................... 86
</TABLE>
See Notes for Exhibits to Annual Report on Form 10-K
EDGARWATCH Page 9 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
INDEX
Notes for Exhibits to Annual Report on Form 10-K
Year Ended August 31, 1996
PIONEER HI-BRED INTERNATIONAL, INC.
Note 1. Incorporated herein by reference to Exhibit 4.2 of the Company's
Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927)
Note 2. Incorporated herein by reference to Exhibit 4.3 of the Company's
Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927)
Note 3. Incorporated herein by reference to Exhibit 1 of the Company's
Form 8-A/A-1, filed March 14, 1995 (file #95520632)
Note 4. Incorporated herein by reference to Exhibit 4.5 of the Company's
Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927)
Note 5. Incorporated herein by reference to Exhibit 4.1 of the Company's
Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927)
Note 6. Incorporated herein by reference to Exhibit 10.2 of the Company's
1993 Annual Report on Form 10-K, filed November 29, 1993
Note 7. Incorporated herein by reference to Exhibit 10.3 of the Company's
1993 Annual Report on Form 10-K, filed November 29, 1993
Note 8. Incorporated herein by reference to Exhibit 10.5 of the Company's
1995 Annual Report on Form 10-K, filed November 28, 1995
EDGARWATCH Page 10 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
Amendment and Restatement
Section 1.1. Amendment and Restatement. Pioneer Hi-Bred International, Inc.
hereby amends and restates the Pioneer Hi-Bred International, Inc. Supplemental
Executive Retirement Plan (the `Plan'). The amended and restated Plan shall
apply only with respect to Participants who are employed by the Company or its
Subsidiaries on or after the effective date of this amendment and restatement.
Section 1.2. Effective Date. The effective date of the amended and restated
Plan is March 14, 1989.
Section 1.3. Purpose. The purpose of the Plan is to supplement the
retirement benefits provided to selected executive employees under the Pioneer
Hi-Bred International, Inc., Retirement Plan and to provide equitable retirement
and survivor benefits for key executive employees, their surviving spouses, and
Beneficiaries.
ARTICLE II
Definitions
As used in this Plan, the following terms shall have the following
meanings:
Section 2.1. "Actuarial Equivalent" means a benefit having the same value
as the benefit which such Actuarial Equivalent replaces. The determination of an
Actuarial Equivalent shall be based on an annual interest rate assumption of
eight percent (8%) and the 1984 Unisex Pension Mortality Table with the ages in
said table set back one (1) year.
Section 2.2. "Base Income" means the average of the Executive's
Compensation in the last full Calendar Year prior to the Executive's Normal
Retirement, Early Retirement, Death, or Disability determination, whichever
occurs first, and the three immediately preceding Calendar Years.
Section 2.3. "Beneficiary" means the person or persons designated pursuant
to Section 4.9 by a Participant, or subsequent to the Participant's death, the
Participant's spouse, to receive the benefits under this Plan if the Participant
and the Participant's spouse do not live to receive benefits through the Term
Certain Expiration Date. If such designation is not made, "Beneficiary" means
the legal representative of the Participant or of the Participant's spouse, if a
spouse survives the Participant.
Section 2.4. "Board of Directors" means the Board of Directors of Pioneer
Hi-Bred International, Inc. or a committee of the Board of Directors appointed
to administer the Plan.
EDGARWATCH Page 11 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Section 2.5. "Calendar Year" means the twelve-month period beginning
January 1 and ending December 31.
Section 2.6. "Change in Control" means (a) the acquisition, whether
directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "1934 Act")), or of record, of
securities of Pioneer Hi-Bred International, Inc. representing twenty-five
percent (25%) or more in number of any class of its then outstanding voting
securities by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of
the 1934 Act), including any corporation or group of associated persons acting
in concert, other than (I) the Company and/or (II) any employee pension benefit
plan (within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended) of the Company, including a trust established
pursuant to any such plan, or (b) the nomination and election of twenty-five
percent (25%) or more of the members of the Board of Directors of Pioneer
Hi-Bred International, Inc., without recommendation of such Board of Directors.
The ownership of record of twenty-five percent (25%) or more in number of any
class of the then outstanding voting securities of Pioneer Hi-Bred
International, Inc. by a person engaged in the business of acting as a nominee
for unrelated beneficial owners shall not in and of itself be deemed to
constitute a Change in Control.
Section 2.7. "Company" means Pioneer Hi-Bred International, Inc., an Iowa
corporation, and all wholly-owned subsidiaries of Pioneer Hi-Bred International,
Inc.
Section 2.8. "Compensation" means all amounts paid or allocated by the
Company to the Executive for services rendered to the Company, including any
bonuses, restricted stock grants valued on the date of grant) and any amounts
which the Executive would have received but for the Executive's election to
defer the compensation in return for the unsecured promise of the Company to
make payments after retirement or other termination of employment.
Notwithstanding the above definition, Compensation shall not include:
(a) Company contributions to any qualified pension or
profit-sharing plan.
(b) Director's fees.
(c) Amounts paid as reimbursement for expenses incurred on
behalf of the Company.
(d) Amounts includible in the income of the Executive due to
personal use of Company automobiles, aircraft, or other
facilities or services, or due to payment of travel
expenses for the Executive's spouse.
(e) Incidental benefits paid on behalf of the Executive such
as hospitalization insurance, health and accident
insurance and group life insurance.
(f) Extraordinary and nonrecurring expenses such as severance
pay, lump sum payments made to terminate an employment
contract, and relocation expenses, including mortgage
interest differential payments and relocation bonuses.
(g) Dividends paid on restricted stock.
Compensation shall include all amounts contributed under a salary reduction
agreement by the Participant to a plan maintained by the Company pursuant to
Section 401(k) or Section 125 of the Internal Revenue Code of 1986, as amended.
EDGARWATCH Page 12 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Section 2.9. "Competitive Activities" means (a) engaging, directly or
indirectly, whether as an employee, independent contractor, consultant, or
otherwise, in a business similar to the business of the Company, during the
period of the Executive's employment with the Company, and/or (b) owning,
managing, operating, controlling, being employed by or having a financial
interest in, or being connected in any manner with the ownership, management,
operation, or conduct of any such similar business, provided that mere ownership
(directly, indirectly or beneficially) of the stock of a corporation
representing less than five percent (5%) of such corporation's outstanding stock
shall not be considered a Competitive Activity.
Section 2.10. "Date of Potential Change in Control" means the date as of
which the Board of Directors determines that a Potential Change of Control has
occurred under Section 5.2 of Article V.
Section 2.11. "Disability" means permanent long-term disability for which
the Executive would be entitled to disability benefits under any Company
long-term disability plan. Such determination shall be made in the sole
discretion of the Board of Directors and the decision of the Board of Directors
shall be final.
Section 2.12. "Early Retirement" means retirement prior to age 65 by a
Participant who remains in Full-Time Employment until age 55 or, if later, the
date on which the Participant completes five (5) years of service with the
Company.
Section 2.13. "Executive" means a key executive employee of the Company who
is designated as such by the Board of Directors under Section 3.1.
Section 2.14. "Full-Time Employment" means employment as a full-time
salaried employee of the Company or its Subsidiaries, including any period of
determined Disability.
Section 2.15. "Integration Benefits" means the sum of (a) Social Security
benefits, (b) retirement benefits provided by any jurisdiction outside the
United States, whether coverage is mandatory or elective, (c) retirement or
survivorship benefits received under any pension or profit sharing plan of the
Company that qualifies for treatment under Section 401 of the Internal Revenue
Code of 1986, as amended, but not including benefits received under a plan
including a cash or deferred arrangement (within the meaning of Section 401(k)
of the Internal Revenue Code of 1986, as amended) or an employee stock ownership
plan (within the meaning of Section 4975(e)(7) of the Internal Revenue Code of
1986, as amended), And (d) retirement or survivorship benefits received under
any pension or profit sharing plan of the Company maintained for the benefit of
nonresident alien employees with no U.S. source income. For purposes of this
Plan, "Social Security benefits" shall be deemed to be those benefits which
would be payable to the Participant or, in the event of the Participant's death,
the benefits which would be payable to the Participant's surviving spouse, at
the Participant's Social Security retirement age. For purposes of this Plan, a
Participant shall be deemed to have elected to receive any benefits the
Participant is entitled to receive under any qualified plan in the form of
15-year certain and life annuity based on the actuarial assumptions contained in
such qualified plan, or, if no actuarial assumptions are contained in such
qualified plan, based upon the actuarial assumptions specified in the Pioneer
Hi-Bred International, Inc. Retirement Plan. The retirement benefits provided by
any jurisdiction outside the United States shall be deemed to be an amount
certified by a consulting firm selected by the Company. Subject to the
foregoing, the Participant's Integration Benefits shall be determined by the
Corporate Human Resources Department as of the date of the Participant's Normal
Retirement, Early Retirement, death, or Disability determination and shall not
thereafter be adjusted on account of cost-of-living adjustments; or otherwise.
EDGARWATCH Page 13 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Section 2.16. "Involuntary Termination of Employment" means (a) the
termination of employment of a Participant by the Company other than Termination
for Cause, (b) the resignation or retirement of a Participant for Stated Good
Reason, or (c) in the case of a Participant who is in the Full-Time Employment
of a domestic Subsidiary, either (I) the sale of a substantial portion of the
assets of the Subsidiary within the meaning of Section 280G of the Internal
Revenue Code of l986, as amended, or (II) the acquisition by an unrelated third
party of ownership of more than fifty percent (50%) of the then outstanding
stock, capital, or profits interest of the Subsidiary. The Board of Directors,
in its sole discretion, shall determine whether the acquisition by an unrelated
third party of ownership of an interest in a foreign subsidiary constitutes an
Involuntary Termination of Employment.
Section 2.17. "Letter of Credit" means one or more irrevocable agreements
maintained by the Company under which the Minimum Amount is available for the
account of the Company.
Section 2.18. "Minimum Amount" means an amount that is no less than one
hundred percent (100%) of the change-in-control benefits that would be provided
under Section 4.8 of this Plan if each Participant were entitled to
change-in-control benefits on the Date of Potential Change in Control.
Section 2.19. "Named Fiduciary" means the Corporate Human Resources
Department of Pioneer Hi-Bred International, Inc.
Section 2.20. "Normal Retirement" means retirement by a Participant who
remains in the employ of the Company until age 65 at any time on or after the
Participant attains age 65.
Section 2.21. "Participant" means an Executive who is designated as
eligible to participate in this Plan by the Board of Directors.
Section 2.22. "Plan" means the Pioneer Hi-Bred International, Inc.
Supplemental Executive Retirement Plan, as amended from time to time.
Section 2.23. "Potential Change in Control" means
(A) The execution by Pioneer Hi-Bred International, Inc. of a written
agreement which, if consummated, would constitute a Change in Control.
(B) A public announcement (including any filing with the Securities and
Exchange Commission) by any "person" (within the meaning of Sections 13(d) and
14(d)(2) of the 1934 Act) including any corporation or group of associated firms
acting in concert, other than (I) the Company and/or (II) any employee pension
benefit plan (within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended) of the Company including a trust
established pursuant to such plan, of an intention to take or consider taking
actions which, if consummated, would constitute a Change in Control.
EDGARWATCH Page 14 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
(C) The acquisition, whether directly, indirectly, beneficially (within the
meaning of Rule 13d-3 of the 1934 Act), or of record, of securities of Pioneer
Hi-Bred International, Inc. representing fifteen percent (15%) or more in number
of any class of its then outstanding voting securities by any "person" (within
the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), including any
corporation or group of associated persons acting in concert, other than (I) the
Company and/or (II) an employee pension benefit plan (within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended)
of the Company, including a trust established pursuant to any such plan. For
purposes of this Section 2.23(C), the ownership of record of fifteen percent
(15%) or more in number of any class of the then outstanding voting securities
of Pioneer Hi-Bred International, Inc. by a person engaged in the business of
acting as a nominee for unrelated beneficial owners shall not in and of itself
be deemed to constitute a Potential Change in Control.
(D) The occurrence of any other event that the Board of Directors
determines is a Potential Change in Control.
Section 2.24. "Stated Good Reason" means a written determination by a
Participant that he reasonably and in good faith cannot continue to fulfill the
responsibilities for which he was employed. The Participant's determinations
will be conclusively presumed to be reasonable and in good faith if, without the
Participant's express written consent the Company (a) reduces the Participant's
base salary or rate of compensation as in effect immediately prior to the Change
in Control, or as the same may have been increased thereafter, (b) fails to
continue any bonus plans in which the Participant was entitled to participate
immediately prior to the Change in Control, substantially in the form then in
effect, (c) fails to continue in effect any benefit or compensation plan in
which the Participant is participating immediately prior to the Change in
Control (or plans providing substantially similar benefits), (d) assigns to the
Participants any duties inconsistent with the Participant's duties,
responsibilities or status immediately prior to the Change in Control, or
changes the Participant's reporting responsibilities, titles or offices, or (e)
requires the Participant to change the location of his job or office, so that
the Participant will be based at a location more than thirty (30) miles distant
by public highway from the location of his job or office immediately prior to
the Change in Control.
Section 2.25. "Subsidiary" means a corporation in which a majority of the
voting securities outstanding at the time is owned directly or indirectly by the
Company and/or by one or more of its other subsidiaries, or a non-corporate
entity in which a majority of the capital or profits interest is owned directly
or indirectly by the Company and/or by one or more of its other subsidiaries.
Section 2.26. "Target Pre-Retirement Survivor Benefit" means the product of
the applicable percentage multiplied by the Participant's Base Income.
Participant's Age at Date of Death Applicable Percentage
Less than 50 years 75%
50 to less than 55 years 70%
55 to less than 60 years 65%
60 to less than 65 years 60%
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However, for purposes of this definition, "Base Income" shall be the
Participant's Compensation in the last Calendar Year completed prior to the
Participant's death in which the Participant was not disabled, subject to bonus
and restricted stock grant recomputations substituting a four-year average of
incentive bonuses paid and restricted stock granted for such Calendar Year and
the three preceding Calendar Years in lieu of the incentive bonus paid and
restricted stock granted in that Calendar Year.
Section 2.27. "Target Retirement Benefit" means the product of sixty
percent (60%) and the Participant's Base Income.
Section 2.28. "Term Certain Expiration Date" means the fifteenth
anniversary of the event, retirement or death, which causes payment of benefits
under the Plan to commence.
Section 2.29. "Termination for Cause" means the termination of employment
of a Participant as a direct result of an act or acts of dishonesty constituting
a felony under the laws of the United States or the State of Iowa and resulting
or intended to result directly or indirectly in gain or personal enrichment at
the expense of the Company. An act or acts of dishonesty constituting a felony
will be deemed to occur only if the act or acts constituting the felony are
established either by (a) the specific admission of the Participant, or (b) a
final nonappealable judgment of a court of competent jurisdiction.
Section 2.30. "Trust" means the Pioneer Hi-Bred International, Inc.
Supplemental Executive Retirement Plan Trust established under the Pioneer
Hi-Bred International, Inc. Supplemental Executive Retirement Plan Trust
Agreement.
Section 2.31. "Trust Agreement" means the Pioneer Hi-Bred International,
Inc. Supplemental Executive Retirement Plan Trust Agreement.
Section 2.32. "Trustee" means the banking organization named in the Trust
to hold and administer money and property in accordance with the Trust
Agreement.
Section 2.33. "Trust Fund" means all money and property delivered to the
Trustee by the Company under the Trust Agreement, all investments and
reinvestments made therewith or proceeds thereof and all earnings and profits
thereon, less all payments and charges authorized under the Trust Agreement.
ARTICLE III
Participation
Section 3.1. Participation. The Board of Directors shall have the sole
discretion, from time to time, to designate which Executives shall participate
in this Plan. This designation shall be by resolution of the Board of Directors.
EDGARWATCH Page 16 of 88
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ARTICLE IV
Benefits and Distributions
Section 4.1. Normal Retirement Benefits. If a Participant remains in the
Full-Time Employment of the Company until age 65, the Participant shall receive
a normal retirement benefit. The amount of the Participant's annual normal
retirement benefit shall be equal to the Target Retirement Benefit reduced by
the Integration Benefits. The Participant's annual normal retirement benefit, as
so determined, shall be divided by twelve (12) to determine the Participant's
monthly normal retirement benefits. The Participant's monthly normal retirement
benefits shall be paid on the first day of each month with benefit payments
commencing on the first day of the month immediately following the month of such
Participant's retirement. The Participant's normal retirement benefits shall be
paid in the form of an annuity for the Participant's life.
Section 4.2. Early Retirement Benefits. The Board of Directors may grant
early retirement benefits to a Participant who is in Full-Time Employment
provided the Participant has at least five years of service with the Company and
is at least age 55. The Board of Directors, in its sole discretion, may provide
that early retirement benefits begin at any time after the granting of Early
Retirement rather than at age 65. The amount of the Participant's annual early
retirement benefit shall be determined by the Board of Directors. The
Participant's annual early retirement benefit, as so determined, shall be
divided by twelve (12) to determine the Participant's monthly early retirement
benefit. The Participant's monthly early retirement benefits shall be paid on
the first day of each month with benefit payments commencing on the first day of
the month determined by the Board of Directors as the date early retirement
benefit payments shall commence. The Participant's early retirement benefits
shall be paid in the form of an annuity for the Participant's life.
Section 4.3. Post-Retirement Death Benefits. If a Participant dies after
benefits become payable under Section 4.1 or Section 4.2, but before the
Participant receives payment of normal or early retirement benefits for 180
months, the Participant's surviving spouse, or in the event the Participant's
spouse does not survive him or such spouse dies prior to the Term Certain
Expiration Date, the Participant's Beneficiary, shall be entitled to receive a
post-retirement death benefit. The amount of the annual post-retirement death
benefit shall be equal to the Participant's Target Retirement Benefit reduced by
the amount of Integration Benefits. The annual post-retirement death benefit, as
so determined, shall be divided by twelve (12) to determine the monthly
post-retirement death benefits. The monthly post-retirement death benefits shall
be paid on the first day of each month, with benefit payments commencing on the
first day of the month immediately following the month of the Participant's
death and continuing until the Term Certain Expiration Date. If the
Participant's spouse survives the Term Certain Expiration Date, the
Participant's spouse shall be entitled to receive a continuing post-retirement
death benefit in an amount equal to two-thirds (2/3) of the Participant's Target
Retirement Benefit reduced by the Integration Benefits. The surviving spouse's
continuing post-retirement death benefits shall be paid in the form of an
annuity for the life of the Participant's surviving spouse.
EDGARWATCH Page 17 of 88
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Section 4.4. Pre-Retirement Survivor Benefits. If a Participant dies prior
to age 65 but while in Full-Time Employment and if the Participant is survived
by the participant's spouse, the Participant's spouse shall receive a
pre-retirement survivor benefit. In the event the Participant's spouse does not
survive him or the Participant's spouse survives but does not live until the
Term Certain Expiration Date, the designated Beneficiary shall receive a
pre-retirement survivor benefit. The amount of the annual pre-retirement
survivor benefit payable to the Participant's surviving spouse shall be equal to
the Target Pre-Retirement Survivor Benefit reduced by the Integration Benefits.
The amount of the annual pre-retirement survivor benefit payable to a
Beneficiary other than the Participant's surviving spouse shall be equal to the
Target Pre-Retirement Survivor Benefit less Integration Benefits to which the
Participant's spouse would have been entitled through the Term Certain
Expiration Date. The annual pre-retirement survivor benefit, as so determined,
shall be divided by twelve (12) to determine the monthly pre-retirement survivor
benefit. The monthly pre-retirement survivor benefits shall be paid on the first
day of each month, with benefit payments commencing on the first day of the
month immediately following the month of the Participant's death and continuing
until the Term Certain Expiration Date.
Section 4.5. Termination of Employment Benefits. Except as provided in
Section 4.8, if a Participant's employment terminates prior to age 65, either by
the Company or by the Participant, and either with or without cause, no further
amounts shall be paid under any provision of this Plan, unless the Board of
Directors, in its sole discretion, shall provide that benefits will be paid
regardless of the Participant's termination of employment, provided that death,
Early Retirement and determined Disability shall not be deemed a termination of
employment for purposes of this Section 4.5.
Section 4.6. Lump Sum Payment. At any time, in the sole discretion of the
Board of Directors, the Actuarial Equivalent of the future benefits due under
the Plan on behalf of any recipient may be computed and paid in one lump sum.
Section 4.7. Prohibition of Competitive Activities. Except as provided in
Section 4.8, if a Participant engages in Competitive Activities, no further
benefits shall be payable under any provision of this Plan.
Section 4.8. Change-in-Control Benefits.
(a) Notwithstanding any other provision of this Plan, in the event of the
Involuntary Termination of Employment of a Participant within five (5) years
following a Change in Control, the Participant shall receive change-in-control
benefits. Such change-in-control benefits shall be paid in lieu of and not in
addition to any other benefits payable under this Plan.
(b) If, on the date of the Participant's Involuntary Termination of
Employment, the sum of the Participant's age and years of service equals at
least fifty-five (55), the amount of the Participant's change-in-control
benefits shall be an amount equal to the lump sum present value, as of the date
of the Participant's Involuntary Termination of Employment, of the monthly
normal retirement benefits that would be payable under this Plan determined as
if the Participant had (i) remained in Full-Time Employment until age 65, (ii)
retired on such date, and (iii) received monthly normal retirement benefit
payments for 180 months. In all other cases, in the event of the Involuntary
Termination of Employment of a Participant, the amount of the Participant's
change-in-control benefits shall be an amount equal to the lump sum present
value as of the date of the Participant's Involuntary Termination of Employment
of the monthly early retirement benefits that would be payable under this Plan
determined as if the Participant had (i) remained in Full-Time Employment until
EDGARWATCH Page 18 of 88
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age 55 (or, if later, the date on which would have completed five (5) years of
service), (ii) retired on such date and (iii) received monthly early retirement
benefit payments for 180 months equal to The Actuarial Equivalent of the
Participant's normal retirement benefits.
(c) The Participant's change-in-control benefits shall be paid in a lump
sum no later than sixty (60) days following the Participant's Involuntary
Termination of Employment. In the event of the Participant's death following the
date of the Participant's Involuntary Termination of Employment but prior to
payment of the change-in-control benefits, the Participant's change-in-control
benefits shall be paid to the Participant's spouse, or, in the event the
Participant's spouse does not survive him, the Participant's Beneficiary.
(d) For purposes of determining the present value of such normal or early
retirement benefits for purposes of this Section 4.8, the interest rate
assumption shall be the rate used by the Pension Benefit Guaranty Corporation to
determine the present value of an immediate benefit upon plan termination as of
the first day of the month immediately preceding the date of the Participant's
Involuntary Termination of Employment.
Section 4.9. Designation of Beneficiary. The Participant, or, subsequent to
the Participant's death, the Participant's spouse may designate a beneficiary or
beneficiaries, primary and contingent, to receive any post-retirement death
benefits or pre-retirement survivor benefits payable under this Plan if the
Participant and the Participant's spouse do not live to receive benefits through
the Term Certain Expiration Date. Such designation shall be in writing, signed
by the Participant or the Participant's spouse, as the case may be, and
delivered to the Corporate Human Resources Department of the Company, to be
effective when received by the Corporate Human Resources Department. The
Participant, or the Participant's spouse, as the case may be, shall have the
right to change such designation, without the consent of any prior beneficiary,
by filing a new designation, in the same manner, with the Corporate Human
Resources Department of the Company. Any such changes shall be deemed to revoke
all prior designations, unless a contrary intention is expressly stated in the
change of designation. In the event such designation is not made, any remaining
payments to be paid under this Plan shall be paid to the legal representative of
the Participant or of the Participant's spouse, if a spouse survives the
Participant.
Section 4.10. Facility of Payment. If the Board of Directors determines
that a Participant, his spouse or Beneficiary is unable to care for his affairs
and a legal representative has not been appointed for such person, the Board of
Directors may (but shall not be required to) direct that any payments made
hereunder shall be made to a spouse, parent, child, or other blood relative of
such person, or to anyone found by the Board of Directors properly to have
incurred expense for the support and maintenance of such Participant, his spouse
or Beneficiary, so long as, under applicable law, such payments are permitted
and discharge completely all liabilities of the Company under the Plan.
Section 4.11. Taxes. The Company shall deduct from any distributions under
this Plan the amount of any taxes required to be withheld from such distribution
by any federal, state or local government. The Participants, their spouses,
Beneficiaries and personal representatives shall bear any and all federal,
state, local or other taxes imposed on amounts distributed under this Plan.
EDGARWATCH Page 19 of 88
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ARTICLE V
Funding of Benefits
Section 5.1. Notification. Immediately upon gaining knowledge that a
Potential Change in Control has occurred or is likely to occur, a member or
members of the Board of Directors shall notify the President of Pioneer Hi-Bred
International, Inc. The notification shall be a written certification of such
member or members to the President setting forth the facts upon which such
knowledge is based.
Section 5.2. Meeting of the Board of Directors. Upon receipt of the
notification required by Section 5.1 of this Article V, the President or any two
members of the Board of Directors shall call a special meeting of the Board of
Directors to determine whether a Potential Change in Control has occurred. If
the Board of Directors determines that a Potential Change in Control has
occurred, the Board of Directors shall direct the appropriate officers of
Pioneer Hi-Bred International Inc. to fund the Trust in accordance with Section
5.3 of this Article V.
Section 5.3. Funding the Trust. On the Date of potential Change in Control,
or as soon as is administratively feasible following the Date of Potential
Change in Control, Pioneer Hi-Bred International, Inc. shall contribute to the
Trust (a) a Letter of Credit in the Minimum Amount, or (b) cash or property
equal in value to the Minimum Amount. In the event that Pioneer Hi-Bred
International, Inc. funds the Trust with a Letter of Credit, the Board of
Directors shall cause the Minimum Amount to be drawn and contributed to the
Trust upon the occurrence of a Change in Control, or earlier in the discretion
of the Board of Directors.
Section 5.4. The Trust. The Trust Fund shall be held and administered for
the sole purpose of providing deferred compensation to Participants in
accordance with the provisions of this Plan and the Trust Agreement and
defraying reasonable expenses of administration in accordance with the
provisions of the Trust Agreement; provided that if (a) Pioneer Hi-Bred
International, Inc. is unable to pay its debts as they mature or as they become
due or (b) Pioneer Hi-Bred International, Inc. files or has filed against it any
proceedings under the bankruptcy laws of the United States or the State of Iowa,
the Trust Fund shall be used to satisfy the claims of the general creditors of
Pioneer Hi-Bred International, Inc.
ARTICLE VI
Administration and Amendment of Plan
Section 6.1. Authority of Board of Directors. The Plan shall be
administered by the Board of Directors. 'The Board of Directors shall have
plenary authority to select employees who are eligible to participate in the
Plan, to make all determinations required under the Plan, to interpret the Plan,
to decide all questions of fact arising under the Plan, to formulate rules and
regulations covering the operation of the Plan and to make all other
determinations necessary or desirable in the administration of the Plan. The
decision of the Board of Directors on any questions concerning or involving the
interpretation or administration of the Plan shall be final and conclusive.
While this Plan is intended to supplement the benefits provided under the
Pioneer Hi-Bred International, Inc. Retirement Plan, in interpreting or
administering this Plan, the Board of Directors need not consider or be bound by
any interpretation of the provisions of the Pioneer Hi-Bred International, Inc.
Retirement Plan or the manner in which such plan is administered.
EDGARWATCH Page 20 of 88
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Section 6.2. Claim for Benefits. Any claim for benefits shall be made in
writing to the Named Fiduciary. The claim for benefits shall be reviewed by the
Named Fiduciary and the Board of Directors. If any part of the claim is denied,
the Named Fiduciary shall provide a written notice, within ninety (90) days
after the receipt of the claim by the Named Fiduciary, setting forth: (a) the
specific reasons for the denial; (b) specific reference to the provision of this
Plan or any agreement entered into between the Participant and the Company upon
which the denial is based; (c) any additional information the claimant should
furnish to perfect the claim; and (d) the steps to be taken if a review of the
denial is desired.
If a claim is denied and a review is desired, the Participant (or the
Participant's Beneficiary, as the case may be) shall notify the Named Fiduciary
in writing within sixty (60) days. In requesting a review, the Participant or
Beneficiary may review this Plan or any documents relating to it and submit any
written issues and comments he may feel appropriate. In its sole discretion the
Board of Directors shall then review the claim and provide a written decision
within sixty (60) days. This decision shall state the specific reasons for the
decision and shall include reference to specific provisions of the Plan or any
agreement entered into between the Participant and the Company on which the
decision is based.
Section 6.3. Information Concerning Integration Benefits. The recipient of
benefits under any provision of this Plan shall be required to inform the
Company of any amount of Social Security benefits, retirement benefits provided
by any jurisdiction outside the United States or any other amount which might
affect benefits under this Plan, to be received by the recipient. If such
information is requested by the Company, but adequate information is not
received prior to five (5) days before the payment date of any payment dependent
on the information requested, the benefit payment may be delayed, without
interest, until ten (10) days after such information is received.
Section 6.4. Amendment and Termination. The Plan may at any time be
amended, modified or terminated by the Board of Directors. Prior to a Change in
Control, no amendment, modification or termination shall, without the written
consent of the affected Participant, spouse or Beneficiary, reduce the benefits
any such person was receiving under this Plan. In the event of a Change in
Control, no amendment, modification or termination shall, without the written
consent of the affected Participant, spouse, or Beneficiary, reduce the benefits
such person was receiving or the benefits that would be paid upon the
Participant's retirement, death, or termination of employment, including the
benefits that would be paid upon the Participant's Involuntary Termination of a
Participant following a Change in Control, under the terms of the Plan
immediately prior to the Change in Control.
ARTICLE VII
Miscellaneous
Section 7.1. No Assignment. The right of a Participant (or Beneficiary, as
the case may be) to receive any distribution under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, levy or charge, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber, levy or charge the same shall be void;
provided, however, that the right to receive payment is transferable by the laws
of descent and distribution.
EDGARWATCH Page 21 of 88
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Section 7.2. Unsecured Claim. The right of any Participant (or his
Beneficiary or personal representative) to receive any distribution under the
Plan (directly from the Company or through the Trust) shall be an unsecured
claim against the general assets of the Company, and neither the Plan nor the
Trust entitle a Participant (or his Beneficiary or personal representative) to a
greater priority than the Company's general creditors. Assets, if any, which may
be set aside by the Company for accounting purposes shall not in any way be held
in trust for, or be subject to, any prior claims by the Participant or his
Beneficiary. The Company shall have no duty whatsoever to purchase any assets
for purposes of providing benefits under this Plan. The Company's promise to pay
the benefits provided under this Plan shall be a contractual obligation that is
not evidenced by notes or secured in any way.
Section 7.3. No Rights in Life Insurance. If the Company elects to purchase
one or more life insurance contracts to provide the Company with funds to make
payments under this Plan, the Company shall at all times be the sole and
complete owner and beneficiary of such contracts, and shall have the
unrestricted right to use all amounts and to exercise all options and privileges
thereunder without the knowledge or consent of the Participant, his Beneficiary,
or any other person, and no Participant, Beneficiary, or person, other than the
Company, shall have any right, title, or interest whatsoever in or to any such
contract. The Participant shall cooperate with all reasonable requests made by
the Company or any insurance carrier selected by the Company to determine
whether the Participant is insurable at standard rates, including any requests
made by the Company or such insurance carrier that the Participant submit to a
medical examination, or provide other information relevant to a determination of
whether the Participant is insurable at standard rates, including the
Participant's current health status, health history of the Participant and any
family members, and the activities engaged in by the Participant including
dangerous or illegal activities.
Section 7.4. No Contract of Employment. Nothing in this Plan shall be
construed as a contract of employment between the Company and any Participant.
Nothing in this Plan shall be deemed to constitute a contract for services
between the Company and the Participant, and nothing contained in this Plan
shall be deemed to give the Participant any right to continue furnishing
services to the Company or the Company any right to demand such services. Except
as provided in Section 4.8, nothing in this Plan shall be construed as a
limitation of the right of the Company to discharge the Participant, with or
without cause.
Section 7.5. Binding Effect. This Plan shall be binding upon the Company,
its successors and assigns, and upon the Participant, his spouse, his
Beneficiary, and their heirs, legatees, executors and personal or legal
representatives.
Section 7.6. Gender; Headings. Any masculine pronoun shall include the
feminine and the singular shall include the plural, and vice versa. The headings
in this Plan are for convenience of reference only.
Section 7.7. Severability. If any provision of this Plan is held to be
illegal, invalid, or unenforceable, such illegality, invalidity, or
unenforceability shall not affect the remaining provisions of this Plan, and
such provisions shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never been inserted herein.
Section 7.8. Governing Law. This Plan shall be governed by the laws of the
State of Iowa without reference to the principles of conflicts of law therein.
EDGARWATCH Page 22 of 88
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers.
PIONEER HI-BRED INTERNATIONAL, INC.
By: /s/ Thomas N. Urban
-------------------------------
Thomas N. Urban
President
By: /s/Dale L. Porter
---------------------------
Dale L. Porter
Secretary
TO: Corporate Human Resources Department
Pioneer Hi-Bred International, Inc.
Suite 700, Capital Square
Des Moines, Iowa 50309
RE: Beneficiary Designation
Gentlemen:
Pursuant to Section 4.9 of the Pioneer Hi-Bred International, Inc. Supplemental
Executive Retirement Plan, effective as amended and restated March 14, 1989, I
hereby designate that benefits payable under Sections 4.4, 4.5, or 4.8(c) of the
Plan be paid to the following person(s) in the indicated proportions (if none
indicated, benefits shall be payable in equal proportion to each person
designated):
(Designated Beneficiaries) (Proportion)
========================= ==============
========================= ==============
If any person is deceased at the time of any payment to be made under the Plan,
the payment allocable to that person shall be made to the following person(s) in
the indicated proportions (if none indicated, benefits shall be payable in equal
proportion to each person designated):
(Designated Beneficiaries) (Proportion)
========================== ==============
========================== ==============
Notwithstanding any provision of the Plan and this designation to the contrary,
in the event that my spouse survives me, he/she [shall] [shall not] have the
right to revoke any designation of beneficiaries made herein and thereupon
designate the person(s) to receive the benefits described in Sections 4.3, 4.4,
or 4.7 of the Plan.
This beneficiary designation shall remain in full force unless and until
canceled or superseded by written notice executed by me and delivered to you
before my death.
Very truly,
--------------------------
EDGARWATCH Page 23 of 88
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AMENDMENT TO THE SERP
1) "Fiscal" replaces the word "Calendar" in Sections 2.2 and 2.26.
2) Section 2.5 be deleted in its entirety.
3) A new Section 2.7 should be added which shall read in its entirety
as follows:
Section 2.7 "Company Long-Term Disability Plan" means a group
disability plan which is sponsored by the Company or one of its
Subsidiaries and for which premiums are paid by the Company or one of
its Subsidiaries or which is funded by the Company or one of its
Subsidiaries without the payment of premiums by the Participant. It
does not include a plan or a portion of the plan for which premiums
are paid by the Participant.
4) The first sentence of Section 2.8 be deleted and replaced with the
following:
"Compensation" means all amounts paid or allocated by the Company to
the Executive for services rendered to the Company, including any
bonuses, restricted stock grants and any amounts which the Executive
would have received but for the Executive's election to defer the
compensation in return for the unsecured promise of the Company to
make payments after retirement or other termination of employment.
Restricted stock grants, bonuses and other compensation will be
included as part of compensation for the Fiscal Year in which the
service was rendered. Restricted Stock will be valued on the date of
grant without regards to restrictions.
5) The following language in Section 2.12 should be deleted:
"any Long-Term disability plan sponsored by the Company or a
subsidiary" and replaced with: "Company Long-Term Disability Plan"
6) Capitalize Company Long Term Disability Plan in Section 2.11.
7) A new Section 2.12 should be added which reads as follows:
Section 2.12. "Disability Retirement" means retirement of a
participant who has a disability and who has requested disability
retirement, and that is accepted and approved by the Board of
Directors in its sole discretion prior to a participant reaching age
65.
8) Section 2.12 shall be deleted and replaced with the following:
Section 2.12 "Early Retirement" means retirement accepted and approved
by the Board of Directors in its sole discretion prior to a
Participant reaching age sixty-five (65) who remains in Full Time
Employment until age fifty-five (55), or if later, the date of which
the Participant completes five (5) years of service with the Company.
9) A new Section 2.14 be added which shall read in its entirety as
follows:
Section 2.14 "Fiscal Year" means the 12 month period beginning
September 1 and ending August 31.
EDGARWATCH Page 24 of 88
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10) The following should be included at the end of Section 2.14:
"unless Disability Retirement is accepted and approved by the board of
directors."
11) The second sentence of Section 2.15 shall be deleted and replaced with
the following:
For purposes of this Plan, "Social Security Benefits" shall be deemed
to be zero until the Participant first begins receiving Social
Security benefit payments. Thereafter, Social Security benefits shall
equal the actual amount of Social Security benefits which the
Participant receives when the Participant first begins receiving
benefits.
12) The following should be included after "Subject to the foregoing" in
the last sentence of Section 2.15:
"and as set forth in Article IV."
13) The following sentence be added after the last sentence of 2.26:
For purposes of the recomputation, restricted stock grants and bonuses
will be included in Compensation for the Fiscal Year in which the
services was rendered. Restricted stock will be valued on the date of
grant without regards to restrictions.
14) The following shall be added after the end of the second sentence of
Section 4.1:
If necessary, the normal retirement benefit will be adjusted when the
Participant begins receiving Social Security Benefits.
15) The first three sentences of Section 4.2 shall be deleted and replaced
with the following:
Section 4.2 Early Retirement Benefits. If early retirement is accepted
and approved by the Board of Directors in its sole discretion, a
Participant who is in Full Time Employment and has reached age
fifty-five (55) and has five (5) years of service will receive an
early retirement benefit. The amount of the Participant's early
retirement benefit shall be equal to the Target Retirement Benefit
reduced by the Integration Benefits. If necessary, the early
retirement benefit will be adjusted when the Participant begins to
receive Social Security benefits.
16) A new Section 4.3 should be added which reads as follows:
Section 4.3. Disability Retirement Benefits. If the Participant so
requests, and if Disability Retirement is accepted and approved by the
Board of Directors in its sole discretion, a Participant who has a
disability will receive a disability retirement benefit in lieu of any
benefits that might be paid under Section 4.1 or 4.2. The amount of
the Participant's disability retirement benefit shall be equal to the
Target Retirement Benefit reduced by the Integration Benefit and the
amount that the Participant is receiving under any Company Long-Term
Disability Plan.
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Prior to being entitled to receive benefits described under clauses
(c) and (d) of the first sentence of Section 2.15 because the
Participant is receiving disability benefits, there will be no
reduction for such benefits. After the Participant is entitled to
receive benefits described under clauses (c) and (d) of the first
sentence of Section 2.15, disability retirement benefits will be
recalculated with a reduction for such benefits as described in
Section 2.15.
If necessary, the disability retirement benefit will be adjusted when
the Participant begins to receive Social Security Benefits. It also
will be adjusted based upon any adjustment in the benefits that are
payable under any Company long term disability plan.
The Participant's annual disability retirement benefit, as so
determined shall be divided by twelve (12) to determine the
Participant's monthly disability retirement benefits. The
Participant's monthly disability retirement benefits shall be paid on
the first day of each month with benefit payments commencing on the
first day of the month immediately following the month Disability
Retirement is approved. The Participant's disability retirement
benefits shall be paid in the form of an annuity for the Participant's
life.
17) The following language should be deleted from the first sentence of
Section 4.3:
"4.1 or Section 4.2 but before the Participant receives payment of
normal or early retirement benefits for 180 months" and replaced with
"4.1, Section 4.2 or Section 4.3 but before the Participant receives
payment of normal, early or disability retirement benefits for 180
months,"
18) The second sentence of Section 4.3 should be deleted and replaced with
the following:
The amount of annual post-retirement death benefits shall be equal to
the annual benefit payable to the Participant under Section 4.1, 4.2
or 4.3 except as set forth below. Reductions for Social Security
benefits and Company Long-Term Disability Plan payments will no longer
be based upon what was paid to the Participant but will be adjusted
based upon the amount of the benefits payable under a Company
Long-Term Disability Plan or amount of Social Security benefits
payable to the surviving spouse or other Beneficiary because of the
Participant's death. If Participant was receiving disability
retirement benefits, and the Participant did not receive benefits
described under clauses (c) and (d) of the first sentence of Section
2.15, post-retirement death benefits will also be reduced by the
payments to surviving spouse or the Participant's Beneficiary received
from benefits described under clauses (c) and (d) of the first
sentence of Section 2.15.
19) The following should be deleted from the fifth sentence of Section
4.3:
"or the Participant's Target Retirement Benefit reduced by the
Integration Benefits" and replaced by the following: "of the amount of
annual post-retirement death benefits that the surviving spouse was
receiving at the Term Certain Expiration Date."
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20) The following should be added at the end of the third sentence of
Section 4.4:
"and the amount of benefits the surviving spouse receives under a
Company Long-Term Disability Plan."
21) The following language should be deleted from the fourth sentence of
Section 4.4:
"to which the Participant's spouse would have been entitled through
the Term Certain Expiration Date" and replaced with the following:
"and the amount of benefits the Beneficiary receives under a Company
long term disability plan."
22) Add the following at the end of Section 4.4:
For the purposes of this Section only, the Social Security Benefits
included in the Integration Benefits shall be the Social Security
Benefits payable to the Surviving Spouse or other beneficiary because
of the Participant's death. If necessary, the benefit will be adjusted
based upon the amount of the benefits payable under a Company long
term disability plan or amount of Social Security benefits payable to
the surviving spouse or other Beneficiary. The monthly pre-retirement
death benefits for Beneficiaries other than the surviving spouse
should only be paid until the Term Certain Expiration Date.
23) In Section 4.5 replace "and determined Disability" with "Disability
and Disability Retirement".
24) In the last sentence of Section 4.8(b) delete the following:
"equal to the Actuarial Equivalent of the Participant's normal
retirement benefits."
25) The following shall be added after the last sentence of Section
4.8(d):
For the purposes of this Section 4.8, Social Security Benefits
included in the Integration Benefits will be zero.
26) The following section be added at Section 4.12:
Section 4.12 Benefits Calculations.
If necessary, the Company will calculate a benefit based on estimated
bonus, restricted stock awards and compensation. The estimates will be
determined by the Company in its sole discretion. The Company will
recalculate the benefits based on the actual amounts and will adjust
the next payment so that that payment and all previous payments equal
the amount the employee would have been entitled to if the employee
had received his benefits based on the actual amount from the
beginning of the payments. Thereafter, payments will be based on the
actual amounts.
27) The following should replace "retirement" in the third sentence of
Section 6.4 "Normal, Early or Disability Retirement".
28) In Sections 4.5 and 7.4, "Section 4.8" should be replaced with
"Section 4.9".
29) The section numbers be renumbered as appropriate to reflect the above
changes.
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PIONEER HI-BRED INTERNATIONAL, INC.
RESTRICTED STOCK PLAN -- PERFORMANCE BASED
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment. Pioneer Hi-Bred International, Inc. hereby establishes a
stock reward plan for key management employees, as described herein, which shall
be known as the PIONEER HI-BRED INTERNATIONAL, INC. RESTRICTED STOCK PLAN --
PERFORMANCE-BASED (hereinafter called the "Plan").
1.2 Effective Date. The effective date of the Plan is September 1, 1995.
1.3 Purpose. The purpose of this Plan is to align the interests of key
management employees with the long-term interest of shareholders through the
ownership and retention of Company stock.
SECTION 2. DEFINITIONS
Whenever used herein, the following terms shall have the meanings set forth
below:
(a) "Base Salary" means a Participant's base annual salary as of August 31
of the Plan Year without reduction for contributions or deferrals to various
plans.
(b) "Board" means the Board of Directors of Pioneer Hi-Bred International,
Inc.
(c) "Change in Control" means (i) the acquisition, whether directly,
indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities and
Exchange Act of 1934, as amended (the "1934 Act")), or of record, of securities
of Pioneer Hi-Bred International, Inc. representing twenty-five percent (25%) or
more in number of any class of its then outstanding voting securities by any
"person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act),
including any corporation or group of associated persons action in concert,
other than (A) the Company and/or (B) any employee pension benefit plan (within
the meaning of Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended) of the Company, including a trust established pursuant to any
such plan, or (ii) the nomination and election of twenty-five percent (25%) or
more of the members of the Board of Directors of the Company without
recommendation of such Board of Directors. The ownership of record of 25% or
more in number of any class of the then outstanding voting securities of the
Company by a person engaged in the business of acting as nominee for unrelated
beneficial owners shall not in and of itself be deemed to constitute a Change in
Control.
(d) "CIC Participant" means an employee 1) who would have been eligible for
a grant in respect of the Plan Year prior to the Plan Year in which the Change
in Control occurs regardless of whether he or she was terminated after the Plan
Year but before the grant or 2) who but for his or her termination, would have
been eligible for a grant in respect of the Plan Year in which the Change in
Control occurred.
(e) "Committee" means the Compensation Committee of the Board or any
successor Committee.
(f) "Company" means Pioneer Hi-Bred International, Inc., an Iowa
corporation, and any division or subsidiary thereof.
(g) "Corporate Management Committee" means the Company's committee of
executive officers selected by the chief executive officer or any successor
committee. (h) "The Cumulative Three Years Earnings Per Share" means for a given
Plan Year the sum of the Earnings Per Share for the Plan Year and the two
previous Plan Years. Plan year for years prior to the effective date shall be
the Company's fiscal year.
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(i) "Earnings Per Share" means the after tax earnings per share of
outstanding stock plus or minus adjustments to remove the impact of unusual or
nonrecurring events.
(j) "EPS Growth Percentage" means the percentage that corresponds to the
Cumulative Three Years Earnings Per Share for the given Plan Year as shown on
Attachment 1 or as may be modified prior to the Plan Year by the Compensation
Committee. Minimum is 0% with no maximum. Interpolation of actual results is
computed between table points. Points beyond 25% are calculated using the same
methodology used in calculating the EPS Growth Percentage on Attachment 1.
(k) "EPS Multiplier" means the multiplier as calculated in Section 5.2.
(l) "Fair Market Value" of a share of Common Stock of the Company shall
mean, with respect to the date in question, either (x) the average of the
highest and lowest selling prices or (y) the closing sale price of such stock,
as selected by the Committee; or if the Company's Common Stock is not quoted by
NASDAQ, traded on a national exchange, or otherwise traded publicly, the value
determined, in good faith, by the Committee.
(m) "Involuntary Termination of Employment" means (a) the termination of
employment of a CIC Participant by the Company other than Termination for Cause,
(b) the resignation or retirement of a CIC Participant for Stated Good Reason,
or (c) in the case of a CIC Participant who is in the full-time employment of a
domestic Subsidiary, either (I) the sale of a substantial portion of the assets
of the Subsidiary within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, or (II) the acquisition by an unrelated third party of
ownership of more than fifty percent (50%) of the then outstanding stock,
capital, or profits interest of the Subsidiary. The Board of Directors, in its
sole discretion, shall determine whether the acquisition by an unrelated third
party of ownership of an interest in a foreign subsidiary constitutes an
Involuntary Termination of Employment.
(n) "Key Management Employee" means those employees eligible under Section
4.
(o) "Operations Committee" means the Company Committee of officers
responsible for various operations as selected by the chief executive officer or
any successor committee.
(p) "Outstanding Stock" means the weighted average daily stock outstanding
without giving effect to the dilutive impact of outstanding options.
(q) "Participant Pay Band" means that Pay Band for which the Participant is
categorized pursuant to Section 5.3.
(r) "Pay Band Target Percentage" means the Reward targets as a percent of
Base Salary for a Pay Band or portion thereof as set forth in Section 5.4.
(s) "Participant" means a Key Management Employee who is awarded and holds
Restricted Stock pursuant to the Plan.
(t) "Pay Band" means job evaluation categories I - VI. The Pay Band may be
further divided or consolidated as necessary.
(u) "Plan" means the Pioneer Hi-Bred International, Inc. Restricted Stock
Plan -- Performance-Based, as amended from time to time.
(v) "Plan Year" means the 12 month period beginning September 1 and ending
August 31.
(w) "Prior to the Plan Year" means either prior to or within the first
ninety days of the Plan Year.
(x) "Restricted Stock" means the common stock, $1.00 par value, of Pioneer
Hi-Bred International, Inc. which is issued or granted pursuant to the Plan.
(y) "Shares" means the common stock, $1 par value, of the Company.
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(z) "Stated Good Reason" means a written determination by a CIC Participant
that he reasonably and in good faith cannot continue to fulfill the
responsibilities for which he was employed. This determination will be
conclusively presumed to be reasonable and in good faith if, without the CIC
Participant's express written consent, the Company (a) reduces the CIC
Participant's base salary or rate of compensation as in effect immediately prior
to the Change in Control, or as the same may have been increased thereafter, (b)
fails to continue any bonus plans in which the CIC Participant was entitled to
participate immediately prior to the Change in Control, substantially in the
form then in effect, (c) fails to continue in effect any benefit or compensation
plan in which the CIC Participant is participating immediately prior to the
Change in Control (or plans providing substantially similar benefits), (d)
assigns to the CIC Participants any duties inconsistent with the CIC
Participant's duties, responsibilities or status immediately prior to the Change
in Control, or changes the CIC Participant's reporting responsibilities, titles
or offices, or (e) requires the CIC Participant to change the location of his
job or office, so that the Participant will be based at a location more than
thirty (30) miles distant by public highway from the location of his job or
office immediately prior to the Change in Control.
(aa) "Subsidiary" means a corporation in which the majority of the voting
securities outstanding at the time is owned directly or indirectly by Pioneer
Hi-Bred International, Inc. and/or by one or more of its other subsidiaries, or
a non-corporate entity in which a majority of the capital or profits interest is
owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or one
or more of its other subsidiaries.
(ab) "Termination for Cause" means the termination of employment of a CIC
Participant as a direct result of an act or acts of dishonesty, constituting a
felony under the laws of the United States or the State of Iowa and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company. An act or acts of dishonesty constituting a felony will
be deemed to occur only if the act or acts constituting the felony are
established either by (a) the specific admission of the Participant or (b) a
final noappealable judgment of a court of competent jurisdiction.
SECTION 3. ADMINISTRATION
3.1 Administration. The Plan shall be administered by the Committee. The
Committee shall have authority to make all determinations required under the
Plan, to interpret the Plan, to decide questions of facts arising under the
Plan, to formulate rules and regulations covering the operation of the Plan and
to make all other determinations necessary or desirable in the administration of
the Plan. The decisions of the Committee on any questions concerning or
involving the interpretation or administration of the Plan shall be final and
conclusive.
3.2 Delegation of Authority. The Committee may delegate to any officer of
the Company its duties under the Plan pursuant to such conditions or limitations
as the Committee may establish, except that only the Committee may administer
the Plan for Participants who are subject to Section 16 of the Securities
Exchange Act of 1934.
SECTION 4. ELIGIBILITY
To be eligible to participate in the Plan an individual must be on
full-time, regular status on the United States or Canadian payroll. To be
eligible to receive grants, such employee must be eligible as of the last day of
the Plan Year and as of the date of the grant except as set forth below.
Employees who meet the following conditions are also eligible to receive a
grant: 1) eligible on the last day of the Plan Year, 2) before the date of the
grant employment terminates because of normal retirement, death, or total and
permanent disability, or employment terminates after early retirement is
accepted and approved by the Committee, and 3) the employee is not terminated
for cause as determined by the Committee prior to the date of the grants. This
eligibility exception does not mean that grants of stock will be accelerated.
Additionally, the employee must be in one of the Pay Bands a) I - III
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(inclusive), b) IV with recommendation of the Corporate Officer to whom the
employee's business unit reports and approval by the Operations Committee, or c)
(as an exception) with the approval of the Corporate Management Committee. Prior
to the Plan Year, the Committee may adjust which Pay Band an employee must be in
to be eligible. Other employees of the Company or its affiliates approved by the
Committee will also be eligible and entitled to grants including officers not on
the United States or Canadian payroll.
SECTION 5. GRANT
5.1 Nature of Goal. Grants will be based upon three-year EPS growth.
5.2 EPS Multipliers.
The EPS Multiplier is that multiplier as set forth below, or as approved by
the Committee Prior to the Plan Year, that corresponds to EPS Growth Percentage.
EPS Growth Percentage Multiplier*
0% 0.00
1% 0.08
2% 0.17
3% 0.25
4% 0.33
5% 0.42
6% 0.50
7% 0.58
8% 0.67
9% 0.75
10% 0.83
11% 0.92
12% 1.00
13% 1.00
14% 1.00
15% 1.25
16% 1.40
17% 1.55
18% 1.70
19% 1.85
20% 2.00
21% 2.05
22% 2.10
23% 2.15
24% 2.20
25% 2.25
*Minimum is 0% with no maximum. Interpolation of actual results is
computed between table points. Beyond 25% each 1% increase in the EPS Growth
Percentage corresponds to an .05 increase in the multiplier.
5.3 Pay Band. Each employee is assigned or reassigned to a Pay Band. An
appropriate Pay Band for an employee is determined by considering job factors
such as: 1) impact, 2) complexity, 3) knowledge, skills and competencies, and 4)
experience.
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5.4 Pay Band Target Percent. The following table sets forth the targets as
a percent of Base Salary for each respective Pay Band:
Pay Band Target
CEO 75%
I 60%
II 45-50%*
III 25-40%*
IV 10%
*The exact Pay Band Target Percent will be determined prior to the Plan
Year depending upon market data.
Such Pay Band Target Percentage may be modified by the Committee Prior to
the Plan Year. If a Key Management Employee moves from 1 eligible Pay Band or
portion thereof to another in a Plan Year the Pay Band Target Percent will be
adjusted pro rata for the portion of the year in each Pay Band.
5.5 Grant. a) Shares of the Restricted Stock will be granted under the Plan
equal in value to i) EPS multiplier, multiplied by the Pay Band Target
Percentage multiplied by Base Salary, or ii) such lesser value as the Committee
shall determine in its sole discretion.
b)The shares to be granted will be determined as of the grant date, or such
other date approved by the Committee, based on the Fair Market Value of a share
of Common Stock the trading day before the grant. Such value shall be without
reference to any restrictions on transfer. Such grants will be made following
the end of the Plan Year.
c) The calculation in clause i) of Section 5.5(a), for a Key Management
Employee who was eligible at the end of the Plan Year but not eligible during
some period of the Plan Year will be reduced pro rata for the portion of the
Plan Year he was not eligible.
5.6 Maximum. In no event will the reward be in excess of a maximum set for
each Pay Band as approved by the Committee prior to the Plan Year but any such
reward is subject to the overriding maximum reward described below. In no event
will the maximum value of a reward (valued at the date of grant without regard
to restrictions) to an individual employee under this Plan exceed three million
dollars for a Plan Year.
SECTION 6. COMMITTEE CERTIFICATION
Before any grant is made the Committee must certify that the multiplier
level was in fact reached and all other material terms of the Plan were
satisfied.
SECTION 7. CHANGE IN CONTROL BENEFITS
7.1 Benefits. Notwithstanding any other provision of this Plan, in the
event of the Involuntary Termination of Employment of a CIC Participant within
three (3) years following a Change in Control, the CIC Participant shall receive
a cash amount equal to the Change in Control benefits. Such Change in Control
benefits shall be paid in lieu of and not in addition to any other benefits for
the Plan Year under this Plan.
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7.2 Amount. The amount of the Change in Control benefit shall equal the
amount calculated in clause a(i) of Section 5.5 (with no reduction) prorated for
the portion of the Plan Year before Involuntary Termination of Employment of a
CIC Participant and subject to the maximum set forth in the second sentence of
Section 5.6. In addition, if the Involuntary Termination of Employment is after
a Plan Year, but prior to a grant in respect of that Plan Year, in addition to
the amount paid for the Plan Year in which the Involuntary Termination of
Employment occurred, the CIC participant shall receive an amount equal to the
calculation under clause a(i) of Section 5.5 (with no reduction) for the Plan
Year prior to the Involuntary Termination subject to the maximum set forth in
the second sentence of Section 5.6.
7.3 Amendment & Termination. No amendment or termination of the Plan, 1
year prior to or after a Change in Control, will affect the payments under this
Section 7 for Involuntary Termination of Employment after the Change in Control.
SECTION 8. STOCK SUBJECT TO THE PLAN
8.1 Number. The total number of Shares that may be granted under the Plan
shall not exceed 1,750,000. These Shares may consist, in whole or in part, of
authorized but unissued Shares or Shares reacquired by the Company, including
without limitation, Shares purchased in the open market, and not reserved for
any other purpose.
8.2 Reacquired Shares. If, at any time, Shares issued pursuant to the Plan
shall have been reacquired by the Company in connection with the restrictions
herein imposed on such shares, such reacquired Shares again shall become
available for issuance under the Plan at any time prior to its termination.
8.3 Adjustment in Capitalization. In the event of any change in the
outstanding Shares of the Company by reason of a stock dividend, stock split,
recapitalization, merger, consolidation, combination, or exchange of shares or
other similar corporate change, the aggregate number and kind of Shares issuable
under this Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
SECTION 9. SHARES OF RESTRICTED STOCK
9.1 Grant of Shares of Restricted Stock. Awards of Restricted Stock to
Participants shall be granted under a Restricted Stock Agreement between the
Company and the Participant which shall provide that the shares subject to any
such award shall be subject to such forfeiture and other conditions, including
the provisions of Section 9.6 hereof, for such period of time as the Committee
shall designate.
9.2 Transferability. Subject to Section 9.7 through 9.9 hereof, the shares
of Restricted Stock granted to a Participant may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated as long as the shares
are subject to forfeiture or other conditions as provided in the Plan, and as
set forth in the Restricted Stock Agreement pursuant to which such shares were
granted.
9.3 Removal of Restrictions. Except as otherwise provided herein, or as may
be required by applicable law, shares of Restricted Stock covered by each
Restricted Stock Agreement made under this Plan will become freely transferable
by the Participant upon the expiration of a period of time following the date of
grant as specified in terms of the Restricted Stock Agreement.
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9.4 Other Restrictions. The Company may impose such other restrictions on
any shares granted pursuant to this Plan as it may deem advisable, including,
without limitation, restrictions on the transfer until all amounts owing to the
Company are paid and any withholding relating to the Restricted Stock have been
paid, and restrictions required by the federal securities laws, by the
requirements of any stock exchange upon which such shares or shares of the same
class are then listed and by any state securities laws applicable to such
shares.
9.5 Legends and Escrow. In addition to any other legends or restrictions,
the Company specifically reserves the right to place on each certificate or
account representing shares of Restricted Stock a legend as follows:
"The sales or other transfer of shares of stock represented by
this certificate (account), whether voluntary, involuntary, or by
operation of law, is subject to the restrictions on transfer and
forfeiture conditions (which include the satisfaction of certain
employment service requirements) set forth in the Pioneer Hi-Bred
International, Inc. Restricted Stock Plan -- Performance-Based and in
a Restricted Stock Agreement. A copy of such plan and agreement may be
inspected at the offices of the Secretary of the Company."
All shares of Restricted Stock shall be held by the Committee in escrow
on behalf of the Participant awarded such shares, together with a Power of
Attorney executed by the Participant, in form satisfactory to the Committee and
authorizing the Company to transfer such shares as provided in the Restricted
Stock Agreement, until such time as all restrictions imposed on such shares
pursuant to the Plan and the Restricted Stock Agreement have expired or been
earlier terminated.
9.6 Termination of Employment. In the event that, prior to the removal of
restrictions on shares of Restricted Stock as contemplated by Section 9.3, a
Participant's employment with the Company terminates for any reason other than
normal retirement, death, total and permanent disability or early retirement
accepted and approved by the Committee, then any shares subject to time period
restrictions or forfeiture conditions at the date of such termination shall
automatically be forfeited to the Company. A Participant shall not forfeit any
rights to Restricted Stock previously granted to him, solely because he or she
ceases to qualify as a Key Management Employee.
9.7 Normal Retirement, Death or Total, Permanent Disability and Early
Retirement. In the event that, prior to the removal of restrictions on shares of
Restricted Stock as contemplated by Section 9.3, a Participant's employment with
the Company terminates because of normal retirement, death or total and
permanent disability, any uncompleted portion of a time period restriction or
forfeiture conditions, as set forth in the terms of the Restricted Stock
Agreement, shall be waived by the Company. If early retirement is accepted and
approved by the Committee in its sole discretion any uncompleted portion of a
time period restriction or forfeiture condition, as set forth in the terms of
the Restricted Stock Agreement, shall be waived. The shares released from such
restrictions pursuant to this Section 9.7 thereafter shall be freely
transferable by the Participant, subject to any applicable legal requirements.
9.8 Change in Control. Upon a Change in Control, all restrictions shall
lapse on shares of Restricted Stock granted under this Plan.
9.9 Waiver at the Committee's Discretion. Notwithstanding the above, the
Committee also may waive all restrictions on shares of Restricted Stock at any
time, in its sole discretion. The shares released from such restrictions
pursuant to this Section 9.9 thereafter shall be freely transferable by the
Participant, subject to any applicable legal requirements.
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9.10 Voting Rights. Participants shall have full voting rights with respect
to shares of Restricted Stock.
9.11 Dividend Rights. Except as the Committee may otherwise determine,
Participants shall have full dividend rights with any such dividends being paid
currently. If all or part of a dividend is paid in shares of stock, the dividend
shares shall be subject to the same restrictions on transferability as the
shares of Restricted Stock that are the basis for the dividend.
9.12 Security Interest in Shares of Restricted Stock. In connection with
the execution of any Restricted Stock Agreement, the Committee may require that
a Participant grants to the Company a security interest in the shares of
Restricted Stock issued or granted pursuant to this Plan to secure the payment
of any sums then owing or thereafter coming due to the Company, including income
tax withholdings, to the Company by such Participant. This security interest
shall continue until the shares of Restricted Stock are no longer held by the
Committee in escrow on behalf of the Participant pursuant to Section 9.5 and are
no longer subject to restrictions pursuant to the Plan.
SECTION 10. WITHHOLDING OF TAXES
The Company may require, as a condition to any grant under the Plan or to
the release of any restrictions, security interest or escrow hereunder, that the
Participant pay to the Company, in cash, any federal, state or local taxes of
any kind required by law to be withheld with respect to any grant, vesting or
delivery of Restricted Stock. The Committee, in its sole discretion, may permit
Participants to pay such taxes a) through the withholding of Restricted Stock
otherwise deliverable to such Participant in connection with such vesting or
delivery or b) the delivery to the Company of Shares otherwise acquired by the
Participant. The Restricted Stock withheld by the Company or Shares tendered to
the Company for the satisfaction of tax withholding obligations under this
section shall be valued in the same manner as used in computing the withholding
taxes under applicable law. The Company, to the extent permitted or required by
law, shall have the right to deduct from any payment of any kind (including
salary or bonus) otherwise due to a Participant any federal, state or local
taxes of any kind required by law to be withheld with respect to any grant,
vesting or delivery of Restricted Stock under the Plan, or to retain or sell
without notice a sufficient number of the Restricted Stock granted or to be
granted to such Participant to cover any such taxes, provided that the Company
shall not sell any such Restricted Stock if such sale would be considered a sale
by such Participant for purposes of Section 16 of the Exchange Act.
SECTION 11. SHAREHOLDER APPROVAL
This Plan will not be effective unless the shareholders approve the Plan by
a majority of the vote in a separate shareholder vote.
SECTION 12. AMENDMENT AND TERMINATION
12.1 Amendment. Except as set forth in Section 7.3, this Plan may be
amended by the Board without shareholder approval except as otherwise required
by the law. Any such amendment will not apply to the Plan Year in which such
amendment was adopted or earlier Plan Years.
12.2 Termination. The Company reserves the right to terminate the Plan at
any time by action of the Board except as set forth in Section 7.3. After a
Change in Control any termination will not apply to the Plan Year in which such
termination was adopted or any earlier Plan Year.
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12.3 Existing Restrictions. Neither amendment nor termination of this Plan
shall affect any shares previously issued or any restrictions previously issued
or any restrictions previously imposed on such shares pursuant to this Plan.
SECTION 13. PROVISIONS APPLICABLE SOLELY TO INSIDERS
Persons subject to Section 16 of the 1934 Act with respect to securities of the
Company , may have to comply with additional rules imposed by the Company to
ensure compliance with Section 16.
SECTION 14 - MISCELLANEOUS
14.1 No Contract of Employment. Nothing in this Plan shall be construed as
a contract of employment between the Company and any Participant. Nothing in
this Plan shall be deemed to constitute a contract for services between the
Company and a Participant, and nothing contained in the Plan shall be deemed to
give a Participant any right to continue furnishing services to the Company or
the Company any right to demand such services. Nothing in this Plan shall be
construed as an elimination of the right of the Company to discharge a
Participant, with or without cause.
14.2 Severability. If any provision of this Plan is held to be illegal,
invalid, or unenforceable, such illegality, invalidity or unenforceability shall
not affect the remaining provisions of this Plan, and such provision shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never been inserted.
14.3 Governing Law. This Plan shall be governed by the laws of the State of
Iowa without reference to the principles of conflict of laws therein.
Notwithstanding the foregoing, this Plan shall be administered as to constitute
a plan of performance-based compensation under all applicable federal tax laws.
PIONEER HI-BRED INTERNATIONAL, INC.
By:/s/ Charles S. Johnson
--------------------------
Charles S. Johnson
President and CEO
/s/ Jerry L. Chicoine
- -----------------------
Jerry L. Chicoine
Secretary
EDGARWATCH Page 36 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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PIONEER HI-BRED INTERNATIONAL, INC.
MANAGEMENT REWARD PROGRAM -- PERFORMANCE-BASED
ARTICLE 1 - ESTABLISHMENT OF THE PLAN
Section 1.1 - Establishment of the Plan
The Company hereby establishes the Pioneer Hi-Bred International, Inc.,
Management Reward Program -- Performance- Based (the "Plan").
Section 1.2 - Effective Date
The effective date of the Plan is September 1, 1995.
Section 1.3 - Purpose
The Plan is designed to focus management efforts on the earnings and return
on equity of the company and to reward results achieved in relation to those
goals.
ARTICLE 2 - DEFINITIONS
Section 2.1 - Base Salary
Base Salary means a Participant's base annual salary as of August 31 of the
Plan Year without reduction for contributions or deferrals to various plans.
Section 2.2 - Board
Board means the Board of Directors of Pioneer Hi-Bred International, Inc.
Section 2.3 - Change in Control
Change in Control means (i) the acquisition, whether directly, indirectly,
beneficially (within the meaning of Rule 13d-3 of the Securities and Exchange
Act of 1934, as amended (the "1934 Act")), or of record, of securities of
Pioneer Hi-Bred International, Inc. representing twenty-five percent (25%) or
more in number of any class of its then outstanding voting securities by any
"person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act),
including any corporation or group of associated persons acting in concert,
other than (A) the Corporation and/or (B) any employee pension benefit plan
(within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended) of the Corporation, including a trust established
pursuant to any such plan, or (ii) the nomination and election of twenty-five
percent (25%) or more of the members of the Board of the Corporation without
recommendation of such Board. The ownership of record of 25% or more in number
of any class of the then outstanding voting securities of the Corporation by a
person engaged in the business of acting as nominee for unrelated beneficial
owners shall not in and of itself be deemed to constitute a Change in Control.
Section 2.4 - CIC Participant
"CIC Participant" means an employee 1) who would have been eligible for a
reward in respect of the Plan Year prior to the Plan Year in which the Change in
Control occurs or 2) who but for his or her termination, would have been
eligible for a reward in respect of the Plan Year in which the Change in Control
occurred.
EDGARWATCH Page 37 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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Section 2.5 - Committee
Committee means the Compensation Committee of the Board or any successor
committee.
Section 2.6 - Company
Company means Pioneer Hi-Bred International, Inc., an Iowa Corporation and
any division or Subsidiary thereof.
Section 2.7 - Corporate Management Committee
Corporate Management Committee means the Company's committee of executive
officers selected by the chief executive officer or any successor committee.
Section 2.8 - Earnings Per Share (EPS)
Earnings Per Share means the after tax earnings per share of outstanding
stock plus or minus adjustments to remove the impact of unusual or nonrecurring
events.
Section 2.9 - EPS Growth Percentage
EPS Growth Percentage means the percentage that corresponds to the Earnings
Per Share for the given Plan Year as shown on Attachment 1 or as may be modified
prior to the Plan Year by the Compensation Committee. Minimum is 0% with no
maximum. Interpolation of actual results is computed between table points.
Points beyond 25% will be determined by the percentage the Earnings Per Share
exceeds the Earnings Per Share set forth in the 13% row for the previous year.
Section 2.10 - EPS Multiplier
EPS Multiplier means the multiplier as calculated in Section 4.2(a).
Section 2.11 - Involuntary Termination of Employment
Involuntary Termination of Employment means (a) the termination of
employment of a CIC Participant by the Company other than Termination for Cause,
(b) the resignation or retirement of a CIC Participant for Stated Good Reason,
or (c) in the case of a CIC Participant who is in the full-time employment of a
domestic Subsidiary, either (I) the sale of a substantial portion of the assets
of the Subsidiary within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, or (II) the acquisition by an unrelated third party of
ownership of more than fifty percent (50%) of the then outstanding stock,
capital, or profits interest of the Subsidiary. The Board, in its sole
discretion, shall determine whether the acquisition by an unrelated third party
of ownership of an interest in a foreign subsidiary constitutes an Involuntary
Termination of Employment.
Section 2.12 - Outstanding Stock
Outstanding Stock means the weighted average daily stock outstanding
without giving effect to the dilutive impact of outstanding options.
Section 2.13 - Participants
Participants means an employee who is eligible to participate in this Plan
under Article 3.
EDGARWATCH Page 38 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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Section 2.14 - Participant Pay Band
Participant Pay Band means that Pay Band for which the Participant is
categorized pursuant to Section 4.4.
Section 2.15 - Pay Band
Pay Band means job evaluation categories I - VI. The Pay Bands may be
further divided or consolidated as necessary.
Section 2.16 - Pay Band Target Percentage
Pay Band Target Percentage means the Reward targets as a percent of Base
Salary for a Pay Band or portion thereof as set forth in Section 4.6.
Section 2.17 - Plan
Plan means Pioneer Hi-Bred International, Inc., Management Reward Program
- -- Performance-Based, as amended from time to time.
Section 2.18 - Plan Year
Plan Year means the 12 month period beginning September 1 and ending August
31.
Section 2.19 - Prior to the Plan Year
Prior to the Plan Year means either prior to or within the first 90 days of
the Plan Year.
Section 2.20 - Return on Equity (ROE)
Return on Equity (ROE) means net income over ending shareholders equity
with adjustments to remove the impact of unusual or nonrecurring events.
Section 2.21 - Reward
Reward means the reward under this Plan.
Section 2.22 - ROE Modifier
ROE Modifier means the modifier as calculated in Section 4.2(b).
Section 2.23 - Stated Good Reason
Stated Good Reason means a written determination by a CIC Participant that
he reasonably and in good faith cannot continue to fulfill the responsibilities
for which he was employed. The CIC Participant's determinations will be
conclusively presumed to be reasonable and in good faith if, without the CIC
Participant's express written consent, the Company (a) reduces the CIC
Participant's base salary or rate of compensation as in effect immediately prior
to the Change in Control, or as the same may have been increased thereafter, (b)
fails to continue any bonus plans in which the CIC Participant was entitled to
participate immediately prior to the Change in Control, substantially in the
form then in effect, (c) fails to continue in effect any benefit or compensation
plan in which the CIC Participant is participating immediately prior to the
Change in Control (or plans providing substantially similar benefits), (d)
assigns to the CIC Participants any duties inconsistent with the CIC
Participant's duties, responsibilities or status immediately prior to the Change
EDGARWATCH Page 39 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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in Control, or changes the CIC Participant's reporting responsibilities, titles
or offices, or (e) requires the CIC Participant to change the location of his
job or office, so that the CIC Participant will be based at a location more than
thirty (30) miles distant by public highway from the location of his job or
office immediately prior to the Change in Control.
Section 2.24 - Subsidiary
Subsidiary means a corporation in which the majority of the voting
securities outstanding at the time is owned directly or indirectly by Pioneer
Hi-Bred International, Inc. and/or by one or more of its other subsidiaries, or
a non-corporate entity in which a majority of the capital or profits interest is
owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or one
or more of its other subsidiaries.
Section 2.25 - Termination for Cause
Termination for Cause shall mean the termination of employment of a CIC
Participant as a direct result of an act or acts of dishonesty, constituting a
felony under the laws of the United States or the State of Iowa and resulting or
intended to result directly or indirectly in gain or personal enrichment at the
expense of the Company. An act or acts of dishonesty constituting a felony will
be deemed to occur only if the act or acts constituting the felony are
established either by (a) the specific admission of the Participant or (b) a
final nonappealable judgment of a court of competent jurisdiction.
ARTICLE 3 - ADMINISTRATION
Section 3.1 - Administration
The Plan shall be administered by the Committee. The Committee shall have
authority to make all determinations required under the Plan, to interpret the
Plan, to decide questions of facts arising under the Plan, to formulate rules
and regulations covering the operation of the Plan and to make all other
determinations necessary or desirable in the administration of the Plan. The
decisions of the Committee on any questions concerning or involving the
interpretation or administration of the Plan shall be final and conclusive.
Section 3.2 - Delegation of Authority
The Committee may delegate to any officer of the Company its duties under
the Plan pursuant to such conditions or limitations as the Committee may
establish, except that only the Committee may administer the plan for
Participants who are subject to Section 16 of the Securities Exchange Act of
1934.
ARTICLE 4 - ELIGIBILITY
Section 4.1 - Eligibility
To be eligible to participate in the Plan an individual must be on
full-time, regular status on the United States or Canadian payroll. To be
entitled to receive a reward such employee must be on such payroll as of the
last day of the Plan year. Additionally, the employee must be in one of the
following Pay Bands: a)I - IV (inclusive), b)V with approval of the corporate
officer to whom the employee's business unit reports, or c)(as an exception)
with the approval of the Corporate Management Committee. Prior to the Plan Year
the Committee may adjust which pay band an employee must be in to be eligible.
Other employees of the Company or its affiliates approved by the Committee will
also be eligible and entitled to Rewards including officers not on the U.S. or
Canadian payroll.
EDGARWATCH Page 40 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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Section 4.2 - Other Plans
Participants are not eligible for profit sharing or any sales incentive
program. Employees eligible for sales incentive programs are not eligible to
participate in the Plan.
ARTICLE 5 - REWARD
Section 5.1 - Nature of Goal
Rewards will be based upon EPS growth.
Section 5.2 - Multipliers
a) EPS Multiplier. The EPS Multiplier is that multiplier as set forth
below, or as approved by the Committee Prior to the Plan Year, that corresponds
to EPS Growth Percentage.
EPS Growth Percentage Multiplier*
0% 0.00
1% 0.08
2% 0.17
3% 0.25
4% 0.33
5% 0.42
6% 0.50
7% 0.58
8% 0.67
9% 0.75
10% 0.83
11% 0.92
12% 1.00
13% 1.00
14% 1.00
15% 1.25
16% 1.40
17% 1.55
18% 1.70
19% 1.85
20% 2.00
21% 2.05
22% 2.10
23% 2.15
24% 2.20
25% 2.25
*Minimum is 0% with no maximum. Interpolation of actual results is computed
between table points. Beyond 25% each 1% increase in the EPS Growth Percentage
corresponds to an .05 increase in the multiplier.
EDGARWATCH Page 41 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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b) ROE Modifier. ROE Modifier is that modifier as set forth below, or as
approved by the Committee Prior to the Plan Year, that corresponds to Return on
Equity.
ROE Modifier*
16%** .80
17% .85
18% .90
19% .95
20% 1.00
21% 1.05
22% 1.10
23% 1.15
24%*** 1.20
*Minimum is .80 with a maximum of 1.20. Interpolation of actual results is
computed between table points.
**Less than or equal to
***Greater than or equal to
Section 5.3 - Participant Pay Band
Each employee is assigned or reassigned to a Pay Band. An appropriate Pay
Band for an employee is determined by considering job factors such as: 1 impact,
2) complexity, 3) knowledge, skill and competencies, and 4) experience.
Section 5.4 - Pay Band Target Percent
The following table sets forth the targets as a percent of Base Salary for
each respective Pay Band:
Pay Band Target
CEO 62%
I 47%
II 32-37%*
III 12-27%*
IV 5-12%*
V 2-4%*
Such Pay Band Target Percentage may be modified by the Committee Prior to
the Plan Year. If a Key Management Employee moves from 1 eligible Pay Band or
portion thereof to another in a Plan Year, the Pay Band Target Percentage will
be adjusted pro rata for the portion of the year in each Pay Band.
*The exact Pay Band Target Percent will be determined prior to the Plan
Year depending upon market data.
EDGARWATCH Page 42 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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Section 5.5 - Reward
a) The Reward equals i) EPS Multiplier, multiplied by ROE Modifier,
multiplied by Pay Band Target Percentage, multiplied by Base Salary, or ii) such
lesser amount the Committee shall determine in its sole discretion.
b) The calculation in clause i) of Section 5.5(a), for an Eligible Employee
who was eligible at the end of the Plan Year but not eligible during some period
of the Plan Year will be reduced pro rata for the portion of the Plan Year he
was not eligible.
Section 5.6 - Maximum Reward
The Reward received by a Participant will in no event exceed $3 million for
a Plan Year.
ARTICLE 6 - COMMITTEE CERTIFICATION
Section 6.1 - Committee Certification
Before any Reward is paid, the Committee must certify that the multiplier
and modifier levels were in fact reached and all other material terms of the
Plan were satisfied.
ARTICLE 7 - PAYMENT
Section 7.1 - Payment
Participants will be paid their Reward less all applicable withholdings and
deductions within 75 days following the Plan year.
ARTICLE 8 - CHANGE IN CONTROL BENEFITS
Section 8.1 - Benefits
Notwithstanding any other provision of this Plan, in the event of the
Involuntary Termination of Employment of a CIC Participant within three (3)
years following a Change in Control, the CIC Participant shall receive Change in
Control benefits. Such Change in Control benefits shall be paid in lieu of and
not in addition to any other benefits for that Plan Year under this Plan.
Section 8.2 - Amount
The amount of the Change in Control benefit shall equal the amount
calculated in clause a(i) of Section 5.5 (with no reduction) prorated for the
portion of the Plan Year before Involuntary Termination of Employment of the CIC
Participant.
Section 8.3 - Amendment & Termination
No amendment or termination of the Plan one year prior to or after a Change
in Control will affect payments under this Article 8 for Involuntary Termination
of Employment after a Change in Control.
EDGARWATCH Page 43 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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ARTICLE 9 - SHAREHOLDER APPROVAL
Section 9.1 - Shareholder Approval
This Plan will not be effective unless the shareholders approve the Plan by
a majority of the vote in a separate shareholder vote.
ARTICLE 10 - AMENDMENT AND TERMINATION OF THE PLAN
Section 10.1 - Amendment
Except as set forth in Section 8.3 the Plan may be amended by the Board
without shareholder approval except as otherwise required by law. Any such
amendment will not apply to the Plan Year in which such amendment was adopted or
earlier Plan Years.
Section 10.2 - Termination
The Company reserves the right to terminate the Plan at any time by action
of the Board; except as set forth in Section 8.3. After a Change in Control any
termination will not apply to the Plan Year in which such termination was
adopted or any earlier Plan Year.
ARTICLE 11 - MISCELLANEOUS
Section 11.1 - No Contract of Employment
Nothing in this Plan shall be construed as a contract of employment between
the Company and any Participant. Nothing in this Plan shall be deemed to
constitute a contract for services between a Company and a Participant, and
nothing contained in the Plan shall be deemed to give a Participant any right to
continue furnishing services to the Company or the Company any right to demand
such services. Nothing in this Plan shall be construed as an elimination of the
right of the Company to discharge a Participant, with or without cause.
Section 11.2 - Severability
If any provision of this Plan is held to be illegal, invalid, or
unenforceable, such illegality, invalidity or unenforceability shall not affect
the remaining provisions of this Plan, and such provision shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never been
inserted.
Section 11.3 - Governing Law
This Plan shall be governed by the laws of the State of Iowa without
reference to the principles of conflict of laws therein. Notwithstanding the
foregoing, this Plan shall be administered as to constitute a plan of
performance-based compensation under all applicable federal tax laws.
PIONEER HI-BRED INTERNATIONAL, INC.
By:/s/ Charles S. Johnson
--------------------------------
Charles S. Johnson
President and CEO
/s/ Jerry L. Chicoine
- -------------------------
Jerry L. Chicoine
Secretary
EDGARWATCH Page 44 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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EXHIBIT 11
PIONEER HI-BRED INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended August 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Number of shares of common
stock outstanding at
beginning of the period....... 83,487 86,215 89,442 90,274 90,829
Weighted average number of
shares of common stock
issued during the period...... 75 128 90 148 52
Weighted average number of
shares of common stock
purchased for the treasury
during the period............. (408) (1,832) (884) (308) (92)
-------- ------- ------- ------- -------
Weighted average number of
shares of common stock
outstanding during the
period........................ 83,154 84,511 88,648 90,114 90,789
-------- ------- ------- ------- -------
Income before cumulative
effect of changes in
accounting principles......... $222,962 $182,590 $212,664 $137,453 $152,160
------- ------- ------- ------- -------
Income before cumulative
effect of changes in
accounting principles
per common share.............. $ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68
------- ------- ------- ------- -------
Net income....................... $222,962 $182,590 $212,664 $120,484 $152,160
------- ------- ------- ------- -------
Earnings per common share........ $ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68
------- ------- ------- ------- -------
</TABLE>
The common stock equivalents have not entered into the net income per share
computations because they would not have a dilutive effect.
EDGARWATCH Page 45 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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The Company's Business
Pioneer Hi-Bred's business is the broad application of the science of genetics.
Pioneer was founded in 1926 to apply newly discovered genetic techniques to
hybridize corn. Today, the Company develops, produces, and markets hybrids of
corn, sorghum, and sunflowers; and varieties of soybeans, alfalfa, wheat, and
canola.
Hybrids, crosses of two or more unrelated inbred lines, can be reproduced only
by crossing the original parent lines. Thus, a grower must purchase new seed
each year to obtain the original hybrid. Varietal crops, such as soybeans and
wheat, will reproduce themselves with little or no genetic variation. Growers
can save grain from the previous crop for planting. Growers are becoming
increasingly aware of the advantages of purchasing "new" seed every year,
although in times of cash-flow crisis, they may tend to forgo those advantages.
Pioneer maintains the ownership of and controls the use of inbreds and varieties
through patents and the Plant Variety Protection Act. Within the U.S., this
essentially prohibits other parties from selling seed produced from those
inbreds and varieties until such protection expires, usually well after the
useful life of the seed. Outside of the U.S., the level of protection afforded
varies from country to country according to local law and international
agreement. Pioneer also applies for patents on new hybrids moving toward
commercialization. The Company believes it is vital that products developed by
its research programs remain proprietary. They must remain so in order to
provide the economic return necessary to support continued research and product
development, and to generate an adequate return to the Company's shareholders.
Sales by Region - 1996
(in millions) Corn Soybeans Other Total
North America............. $ 908 $ 160 $ 89 $ 1,157
Europe.................... $ 336 $ 4 $ 63 $ 403
Latin America............. $ 84 $ - $ 13 $ 97
Other Regions............. $ 49 $ - $ 15 $ 64
The Company's principal products are hybrid seed corn and soybean seed, which
have accounted for approximately 89 percent of total net sales and substantially
100 percent of operating profits over the last five years. These products are
expected to maintain a dominant role in the Company's results of operations for
the foreseeable future. Approximately 67 percent of total 1996 sales were made
within the U.S. and Canada (the North America region) and 23 percent in Europe.
Our goal within developing nations is to aid the development of the existing
seed markets and establish businesses that can grow and prosper.
Two significant factors that determine the volume of seed sold and the related
profit are government policies and weather. Government policies affect, among
other things, crop acreage and commodity prices. Weather can affect commodity
prices, product performance, the Company's seed field yields, and planting
decisions made by farmers. Compared to hybrid seed, sales and profits from
non-hybrid seed are more heavily dependent on commodity prices and the
competition from farmer-saved seed. As a result, the margins are narrower and
contributions are subject to year-to-year fluctuations.
In North America, the majority of Pioneer brand seed is marketed through
independent sales representatives, most of whom are also farmers. In areas
outside of the traditional Corn Belt, seed products are often marketed through
dealers and distributors who handle other agricultural supplies. Pioneer
products are marketed outside North America through a network of subsidiaries,
joint ventures, and independent producer-distributors.
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The hybrid seed industry is characterized by intense competition. In 1996,
Pioneer seed corn held an estimated market share of 44 percent in North America.
The next six competitors held an estimated combined market share of 27 percent
with the closest competitor holding approximately 10 percent. The remainder of
the market is divided among more than 300 companies selling regionally. The
Company's 1996 purchased soybean seed market share is estimated at 17 percent,
highest in the industry.
Pioneer has a leading market share position in most countries outside North
America in which it operates. Significant markets in which the Company operates
include: France, Italy, Germany, Hungary, Austria, Mexico, and Brazil. The
Company's market share within these countries ranges form near 10 percent to
more than 60 percent.
Competition in the seed industry is based primarily on product performance and
price. The Company's objective is to produce products which consistently
out-perform the competition and so command a premium price. The Company has been
successful competing on that basis and expects to continue to do so through its
ongoing investment in research and product development. The future success of
the Company depends heavily on the results of these research activities.
Continued improvement in the performance of the Company's products is necessary
to maintain profit margins and market share.
The Company's research and product development activities are directed at
products with significant market potential. Pioneer believes it possesses the
largest single proprietary pool of germplasm in the world from which to develop
new hybrid and varietal seed products. The majority of the Company's seed
research is done through classical plant breeding techniques. However, the use
of biotechnology is expected to have an impact on future results, both for
Pioneer and the seed industry at large. Certain of our current products require
government approval before commercialization.
It is expected a larger number of our future products will also require such
government approval.
In the production of its commercial seed, the Company generally provides the
parent seed stock, detasseling and roguing labor, and certain other production
inputs. The balance of the labor, equipment, and inputs are supplied by
independent growers. The Company believes the availability of growers, parent
stock, and other inputs necessary to produce its commercial seed is adequate for
planned production levels.
Pioneer continues to pursue ISO 9000 certification and has 35 sites certified in
six countries, including 19 production sites in the U.S. Certification with
these standards will allow us to move product more easily from country to
country.
Pioneer brand microbial products include inoculants for high-moisture corn
silage, hay, and other forages, and direct-fed microbial products for livestock.
This product line is focused on the research and development of products
containing naturally occurring microorganisms.
The nutrition and industry markets (NIM) group is the worldwide focal point for
addressing opportunities driven by the "end-use" markets. The primary mission of
the NIM group is to ensure that Pioneer is the premier seed supplier in this
end-use market segment.
At August 31, 1996, the Company employed approximately 4,700 people worldwide.
Because the seed business is highly seasonal, the Company's interim results will
not necessarily indicate the results for the full year. Substantially all seed
sales are made from late second quarter through the end of the third quarter
(February 1 through May 31) of the fiscal year. Typically, the Company operates
at a loss during the first and fourth quarters. Varying climatic conditions can
change the earnings pattern between quarters. These conditions affect the
delivery of seed and can cause a shift in sales between quarters.
EDGARWATCH Page 47 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
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SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Consolidated Ten-Year Financial History
Years Ended August 31,1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------
(In millions, except per share and statistical amounts)
Summary Operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales..................$1,721 $1,532 $1,479 $1,343 $1,262 $1,125 $ 964 $ 867 $ 759 $ 710
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Gross Profit...............$ 858 $ 760 $ 759 $ 700 $ 640 $ 549 $ 442 $ 391 $ 389 $ 349
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Restructuring and Settlements $ -- $ -- $ 45 $ (54) $ -- $ -- $ -- $ -- $ --
===== ===== ===== ==== ===== ===== ===== ===== =====
$........................--
Income From Continuing
Operations...............$ 223 $ 183 $ 213 $ 137 $ 152 $ 104 $ 73 $ 82 $ 84 $ 64
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Net Income.................$ 223 $ 183 $ 213 $ 120 $ 152 $ 104 $ 73 $ 98 $ 65 $ 54
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Per Common Share Data:
Income From Continuing
Operations...............$ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ 0.78 $ 0.86 $ 0.88 $ 0.67
Net Income.................$ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ 0.78 $ 1.03 $ 0.68 $ 0.56
Growth in Earnings Per
Share*.................... 24.1% (10.0)% 56.9% (8.9)% 46.1% 47.4% (9.3)% (2.3)% 31.3% (20.2)%
Dividends Declared.........$ 0.83 $ 0.71 $ 0.59 $ 0.50 $ 0.40 $ 0.39 $ 0.39 $ 0.36 $ 0.35 $ 0.26
Shareholders' Equity.......$12.36 $10.94 $10.22 $ 9.23 $ 8.86 $ 7.51 $ 7.00 $ 6.62 $ 6.04 $ 5.70
Balance Sheet Summary:
Current Assets.............$ 784 $ 770 $ 742 $ 717 $ 703 $ 606 $ 538 $ 474 $ 450 $ 465
Net Property & Other Assets 638 523 511 504 513 480 468 440 414 401
------ ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Assets...............$1,422 $1,293 $1,253 $1,221 $1,216 $1,086 $1,006 $ 914 $ 864 $ 866
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Current Liabilities........$ 288 $ 280 $ 232 $ 261 $ 286 $ 295 $ 294 $ 221 $ 209 $ 228
Long-Term Debt............. 25 18 66 68 74 67 19 17 28 33
Other Long-Term Liabilities 91 82 74 67 57 43 44 49 50
------ ------ ------ ------ ------ ------ ------ ------ ------
59
Total Liabilities..........$ 404 $ 380 $ 372 $ 396 $ 417 $ 405 $ 357 $ 287 $ 287 $ 320
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Shareholders' Equity.......$1,018 $ 913 $ 881 $ 825 $ 799 $ 681 $ 649 $ 627 $ 577 $ 546
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Dividends Declared.........$ 69 $ 60 $ 52 $ 45 $ 36 $ 35 $ 36 $ 34 $ 33 $ 25
Average Shares Outstanding. 83.2 84.5 88.6 90.1 90.8 90.9 93.5 95.4 95.5 95.8
Other Statistics:
Return on Ending Equity*... 21.9% 20.0% 24.1% 16.7% 19.0% 15.3% 11.2% 13.1% 14.6% 11.7%
Return on Net Sales*....... 13.0% 12.0% 14.4% 10.2% 12.1% 9.3% 7.5% 9.4% 11.1% 9.0%
Return on Ending Assets*... 15.7% 14.2% 17.0% 11.2% 12.5% 9.6% 7.2% 9.0% 9.8% 7.4%
Gross Profit on Net Sales.. 49.9% 49.6% 51.3% 52.1% 50.7% 48.8% 45.8% 45.1% 51.2% 49.2%
Dividends Declared as a % of
Net Income............ 30.9% 32.8% 24.6% 37.4% 23.9% 33.8% 49.7% 34.7% 50.9% 46.2%
Stock Price at August 31,..$55.13 $43.00 $31.25 $32.75 $26.50 $17.42 $13.25 $14.00 $11.75 $11.92
Market Capitalization at
August 31, (in millions) $4,542 $3,590 $2,694 $2,929 $2,392 $1,579 $1,229 $1,326 $1,122 $1,142
Number of Employees........ 4,738 4,924 4,847 4,807 5,016 4,829 4,601 4,026 4,805 5,235
</TABLE>
*Based on income from continuing operations before cumulative effect of
accounting change
EDGARWATCH Page 48 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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<TABLE>
<CAPTION>
Consolidated Net Sales and Operating Income (Loss) by Product
Years Ended August 31, 1996 % 1995 % 1994 % 1993 % 1992 %
- -----------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Corn......................... $1,377 80.0 $1,227 80.0 $ 1,185 80.1 $1,077 80.2 $1,013 80.3
Soybeans..................... 164 9.5 145 9.5 128 8.7 116 8.6 109 8.6
Other........................ 180 10.5 160 10.5 166 11.2 150 11.2 140 11.1
----- ----- ----- ----- ------ ----- ------ ---- ----- -----
Total Net Sales................. $1,721 100.0 $1,532 100.0 $ 1,479 100.0 $1,343 100.0 $1,262 100.0
===== ===== ===== ===== ====== ===== ===== ===== ===== =====
OPERATING INCOME (LOSS):
Corn......................... $ 410 29.8 $ 359 29.3 $ 383 32.3 $ 354 32.9 $ 317 31.3
===== ===== ===== ==== =====
Soybeans..................... 16 9.8 9 6.2 7 5.5 7 6.0 8 7.3
===== ===== ===== ==== =====
Other........................ (3) (1.6) (15) (9.4) (21)(12.6) (24)(16.0) (30) (21.4)
===== ==== ===== ===== =====
Restructuring and Settlements -- -- -- -- 45 3.0 (53) (3.9) -- --
---- ===== ---- ==== ---- ===== ----- ==== ----- =====
Product Line Operating Income... $ 423 24.6 $ 353 23.0 $ 414 28.0 $ 284 21.1 $ 295 23.3
Indirect General and Administrative
Expense...................... (76) (4.4) (73) (4.7) (68) (4.6) (59) (4.4) (52) (4.1)
----- ----- ----- ----- ------ ----- ----- ----- ----- -----
- ----
Operating Income................ $ 347 20.2 $ 280 18.3 $ 346 23.4 $ 225 16.7 $ 243 19.2
Financial Income (Expense)...... 7 0.4 11 0.7 3 0.2 (6) (0.4) (3) (0.2)
----- ----- ----- ----- ------ ----- ------ ---- ----- -----
Income Before Items Shown Below. $ 354 20.6 $ 291 19.0 $ 349 23.6 $ 219 16.3 $ 240 19.0
Income Taxes.................... (127) (7.4) (106) (6.9) (134) (9.1) (86) (6.4) (87) (6.9)
Minority Interest and Other..... (4) (0.2) (2) (0.1) (2) (0.1) 4 0.3 (1) --
----- ----- ----- ----- ------ ------ ----- ---- ----- -----
Income Before Cumulative Effect of
Accounting Change............ $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 137 10.2 $ 152 12.1
Cumulative Effect of Accounting
Change, Net.................. -- -- -- -- -- -- (17) (1.2) -- --
----- ----- ----- ----- ------ ----- ------ ---- ----- -----
NET INCOME...................... $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 120 9.0 $ 152 12.1
===== ===== ===== ===== ====== ===== ===== ==== ===== =====
Income Per Common Share:
Income Before Cumulative Effect
of Accounting Change....... $ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68
Cumulative Effect Of Accounting
Change, Net................ -- -- -- (.19) --
----- ----- ------ ------ -----
Net Income................... $ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68
===== ===== ====== ===== =====
Average Shares Outstanding...... 83.2 84.5 88.6 90.1 90.8
</TABLE>
EDGARWATCH Page 49 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Year Ended August 31, 1996, Compared to the Year Ended August 31, 1995
Pioneer once again achieved outstanding financial results, posting record
earnings in 1996. After-tax earnings in 1996 were $223 million, on sales of $1.7
billion. After-tax earnings in 1995 totaled $183 million, on sales of $1.5
billion. Earnings per share were $2.68 in 1996, a 24 percent increase over 1995
earnings of $2.16 per share. Return on Ending Equity (ROE) was above the
targeted level of 20 percent for the third consecutive year. At the same time,
we continued to increase our investment in research and product development.
Current year sales and earnings were positively impacted by strong corn sales in
North America, Europe, Latin America, and Asia. Higher sales of soybeans and
other products also contributed to the improvement in earnings.
An estimated 11 percent increase in corn acreage was the primary driver for
higher 1996 sales and operating income in North America. Corn acreage rose over
1995 levels as a result of changes in government programs and higher corn
commodity prices. An increase in the average per-unit sales price of the
Company's seed corn sold in North America also positively impacted 1996 sales
revenue and operating income. Higher seed costs in North America partially
offset this improvement.
Operations outside North America also generated good earnings growth in 1996.
Operating income in Europe improved as several countries experienced increases,
either individually or in combination, in the three primary drivers: market
size, market share, and sales price. Latin American and Asian operations also
continued to grow, providing additional operating income over 1995 levels
largely by capturing the benefits of larger markets.
North American soybean operations had record results in 1996. Higher sales and
operating income from a year earlier resulted from increased market size. In
addition, wheat and sorghum operations also positively impacted current year
operating income.
Management is optimistic that 1997 will be another good year. North American
corn acreage is expected to be similar to or slightly higher than 1996 levels.
Higher commodity costs related to the 1996 crop will push per-unit seed corn
cost of sales higher in 1997. However, the average seed corn sales price is
expected to increase, which should keep overall margins similar to or better
than 1996 levels. While results in regions outside North America are more
difficult to predict, management believes that the Company is on target for
future growth in these regions and will build on the record results of 1996.
As we look forward, all indications point to continued strong financial
performance. As always, uncertainties exist that could affect the Company's
expectations, and fluctuations in expected results are likely as more
information becomes available. Some of the important factors that could cause
actual results to vary significantly from our expectations include weather, seed
field yields, government programs/approvals, commodity prices, changes in corn
acreage, intellectual property positions, product performance, customer
preferences, currency fluctuations, and costs.
Hybrid Seed Corn
In 1996, seed corn operating income improved $51 million, or 14 percent, over
last year. Operations within North America account for $20 million of the
increase. European operations improved $25 million over 1995, with Latin America
and Asia accounting for virtually all of the remaining improvement.
EDGARWATCH Page 50 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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Corn Net Sales and Product Line Operating Income
<TABLE>
<CAPTION>
Increase Increase
1996 (Decrease) 1995 (Decrease) 1994
- ---------------------------------------------------------------------------------------------------------
(In millions)
NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C>
North America.... $ 908 $ 100 12.4% $ 808 $ (38) (4.5)% $ 846
Europe........... 336 31 10.2% 305 84 38.0% 221
Latin America.... 84 18 27.3% 66 10 17.9% 56
Other regions.... 49 1 2.1% 48 (14) (22.6)% 62
------ ------- ------ ----- ------
Total net sales..... $ 1,377 $ 150 12.2% $ 1,227 $ 42 3.5% $ 1,185
====== ======= ===== ====== ====== ====== ======
OPERATING INCOME:
North America.... $ 276 $ 20 7.8% $ 256 $ (21) (7.6)% $ 277
Europe........... 100 25 33.3% 75 6 8.7% 69
Latin America.... 21 3 16.7% 18 (1) (5.3)% 19
Other regions.... 13 3 30.0% 10 (8) (44.4)% 18
------ ------- ------ ----- ------
Total operating income$ 410 $ 51 14.2% $ 359 $ (24) (6.3)% $ 383
======= ======= ====== ====== ====== ====== ======
UNIT SALES:
(80,000-kernel units)
North America.... 12.1 1.2 11.4% 10.9 (0.9) (7.6)% 11.8
Europe........... 2.9 0.2 7.1% 2.7 0.5 23.1% 2.2
Latin America.... 1.3 0.4 30.5% 0.9 -- 3.5% 0.9
Other regions.... 1.1 0.1 14.7% 1.0 -- (5.9)% 1.0
------ ------- ------ ----- ------
Total unit sales.... 17.4 1.9 12.0% 15.5 (0.4) (2.6)% 15.9
====== ======= ===== ====== ====== ======= ======
ACRES:
North America.... 82.7 8.5 11.4% 74.2 (7.8) (9.5)% 82.0
====== ======= ===== ====== ====== ======= ======
</TABLE>
Higher seed corn unit sales were the primary factor contributing to the North
American improvement, principally the result of an increase in market size. Corn
acreage in 1996 increased approximately 11 percent over the prior year. In 1995,
government programs reduced the number of corn acres planted. In 1996, no
government restrictions and higher commodity prices encouraged the planting of
more corn acres. Although overall corn acreage rose in North America, extremely
wet field conditions in the Ohio River Valley region prohibited corn acres from
reaching our customers' original planting intentions. Some were forced to switch
to soybeans or other crops, which reduced our margin opportunities in that
region.
In North America, current year seed corn unit sales increased approximately 1.2
million units, or 11 percent, over the previous year, the result of a
world-class Pioneer sales and supply organization meeting the changing needs of
customers. Sales of two key hybrids accounted for approximately 28 percent of
the Company's 1996 and 1995 North American seed corn hybrid unit sales.
North American operating income was also positively affected by an approximate
one percent increase in the average seed corn selling price per unit. A shift by
customers to higher-priced, better-performing premium hybrids was responsible
for the increase. The 1996 list price for all hybrids remained unchanged from
1995.
EDGARWATCH Page 51 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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Higher corn seeding rates and replant units lead management to believe that the
Company's 1996 seed corn market share will be approximately 44 percent, a slight
decrease from the previous year. Market share declines occurred in some areas of
the Northern Corn Belt after disappointing yields in that region in 1995. Those
were partially offset by market share gains in other areas of North America.
Management is confident that the new hybrids introduced in 1996 and those
planned for 1997 will help regain market share.
Higher seed costs also impacted current year results. The smaller crop harvested
in 1995 compared to 1994 and higher commodity costs increased the average
per-unit cost of sales approximately $1.00. Increased provisions for inventory
reserves also impacted current year results. Provisions in 1996 were $2.22 per
unit, compared to $1.31 per unit in 1995. The increase in 1996 was the result of
reserving inventory for a few particular hybrids and the higher production cost
of the 1995 seed crop.
Operations in the Company's European region (Europe, CIS, Turkey, Australia, and
Japan) and Latin America also played a significant role in the increase in seed
corn operating income.
Record unit sales of corn grain hybrids across all of Southern Europe accounted
for virtually the entire increase in European operating income in 1996.
Increased market size and market share in Spain and increased market share and
price in Italy and Greece were the significant factors contributing to this
improvement.
Latin American operations improved principally the result of increased market
size in Argentina due to a strong commodity price within the country.
Worldwide research and product development expenses for corn totaled $90
million, a three percent increase over 1995, as the Company continued its
emphasis on developing improved products for customers. The increase was due to
the expansion of biotechnology projects, research collaborations, and trait and
technology development.
For 1996, Pioneer research efforts created 24 new corn hybrids for release to
customers in North America. There are also 47 hybrids currently in the later
stages of testing, which have average yields greater than the current leader
package released in 1996. Pioneer is bringing new products to the market faster
than before, with the goal to always provide greater benefit to our customers.
Worldwide fixed selling and administrative expenses for corn increased $16
million, or nine percent, from 1995 levels. The major components of this
increase were a greater emphasis on the efforts of our nutrition and industry
markets (NIM) group and higher incentive compensation costs. Excluding these
items, fixed selling and administrative expenses increased one percent over
1995. Variable selling costs (commissions and shipping costs) as a percentage of
sales were comparable between the years.
Soybean Seed
The Company's second largest product in terms of revenue and operating income is
soybean seed. Operations in North America account for virtually all of the
worldwide soybean seed operating income. Growth of this product line over the
last several years continues, as evidenced by the $5 million, or 44 percent,
increase in North American operating income over a year ago.
EDGARWATCH Page 52 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
North American Soybean Market Share
1996 1995 1994
-------------------------------------
17.2% 17.5% 16.4%
North American Soybean Acreage
(in millions)
1996 1995 1994
-------------------------------------
66.4 64.6 63.8
North American Soybean Unit Sales
(in millions) 1996 1995 1994
-------------------------------------
11.338 10.961 9.396
Unit sales in North America increased three percent, to a record 11.3 million
units, the result of increased acreage. Current year list prices increased the
average per-unit sales price, however, higher per-unit cost of sales, the result
of higher commodity costs, offset most of the sales price improvement.
Twenty-one new soybean varieties were introduced in 1996. Five of these
varieties were resistant to the herbicide glyphosate -- the first large-scale
release of soybean varieties developed by using a combination of gene transfer
technology and traditional plant breeding. These new releases are evidence of
the Company's goal to provide higher-yielding and more valuable products to
customers.
Other Products
Other products operating results for 1996 improved $12 million over the prior
year, resulting from the improvement of several products. Increased North
American wheat acreage and increased North American sorghum acreage and price
contributed to the current year improvement.
Other Products Net Sales and Combined Product Line Operating (Loss)
<TABLE>
<CAPTION>
Increase Increase
1996 (Decrease) 1995 (Decrease) 1994
- -----------------------------------------------------------------------------------------------------------
(In millions)
NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C>
Alfalfa............. $ 32 $ -- -- $ 32 $ -- -- $ 32
Sorghum............. 31 5 19.2% 26 3 13.0% 23
Wheat............... 25 7 38.9% 18 -- -- 18
Sunflower........... 22 3 15.8% 19 3 18.8% 16
Microbial products.. 28 1 3.7% 27 3 12.5% 24
Developing products. 42 4 10.5% 38 (15) (28.3)% 53
------ ------- ------ ------ -------
Total net sales..... $ 180 $ 20 12.5% $ 160 $ (6) (3.6)% $ 166
====== ======= ====== ====== ====== ======= =======
Total combined
operating (loss).. $ (3) $ 12 $ (15) $ 6 $ (21)
====== ======= ====== ====== =======
</TABLE>
EDGARWATCH Page 53 of 88
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While these products as a whole operate at a loss, they provide the sales
organization a complete lineup of seed products to meet the needs of our
customers. As such, they support and contribute to the sales of the Company's
two major products, seed corn and soybean seed. In addition, the prospects for
some of these product lines to generate greater levels of operating profit in
the near-term are promising.
Corporate and Other Items
Indirect general and administrative expenses increased $3 million, or four
percent, in 1996. Higher incentive compensation costs were partially offset by
decreases in several expense categories resulting from active fixed cost
management.
Translation gains in Mexico recorded in 1995 not matched by the same or similar
items in the current year account for virtually all of the $4 million change in
net financial income.
The effective tax rate of 36 percent for 1996 was substantially unchanged from
the 36.5 percent effective tax rate for 1995.
The Company will be more affected by new patents, patent positions, and patent
lawsuits in the future than it has been in the past. However, this is an area in
which Pioneer has become increasingly active through its research, patenting,
alliance, and monitoring activities. Pioneer believes that its current patent
positions, technologies, germplasm, and sales force place the Company in a good
position to freely develop and commercialize the products which will be
necessary to effectively compete in the market place.
Year Ended August 31, 1995, Compared to the Year Ended August 31, 1994
Hybrid Seed Corn
Planted corn acreage had a significant impact on 1995 operating income in North
America. Acreage planted to corn decreased ten percent from 1994. A major factor
contributing to the acreage decrease was a change in the U.S. government
set-aside program which required farmers participating in the 1995 feed grain
program to keep their corn acres at 92.5 percent or less of their historical
corn acreage base, down from 100 percent in 1994.
In addition, high cotton prices induced some farmers in the South to switch
acreage to cotton while wet conditions in the Corn Belt forced affected farmers
to switch acreage from corn to other crops such as soybeans. Others were never
able to plant a crop. As a result, the Company sold approximately 900,000 fewer
units in 1995.
Seed corn pricing was also a major factor in 1995 financial results. The average
per-unit sales price increased three percent due to an increase in the list
price of key hybrids and a higher-priced sales mix. The higher-priced sales mix
occurred as customers shifted their purchases to higher-priced,
better-performing hybrids, which are more profitable to growers and to Pioneer.
The Company's 1995 seed corn market share approximated 45 percent - comparable
to 1994. Maintaining market share was a challenge in a year when high levels of
seed inventory throughout the industry led to aggressive competition. Our sales
and supply management groups were able to use the flexibility of our product
lineup to respond to the changing needs of customers, providing them with
appropriate products when and where they were needed as growing conditions
changed.
EDGARWATCH Page 54 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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Higher seed corn yields from the 1994 crop also provided positive results,
reducing the average per unit cost of seed corn by $.80 per unit. Higher
operational fixed costs and provisions for inventory losses offset $7 million of
the improvements gained in production costs. Provisions for inventory reserves
totaled $1.31 per unit in 1995 compared to $.93 per unit in 1994.
Research expenses for corn in North America increased $11 million, or 18
percent, from 1994 levels. Planned growth in winter nursery costs and expansion
of biotechnology projects were the main factors contributing to this increase.
North American fixed selling and administrative expenses for seed corn decreased
$4 million, or five percent, from 1994 levels, the result of lower performance
incentive costs. Variable selling costs (commissions and shipping costs) as a
percentage of sales in North America increased from 1994 because of additional
expenses incurred shipping product to customers who switched seeds due to
weather related problems.
The Company's European region showed an increase in operating income from 1994.
Approximately $11 million of this change was the result of the weakening of the
U.S. dollar against certain European currencies. On a constant dollar basis,
1995 European operations provided a slight decrease in operating income from
1994.
Italian operations posted gains in operating income over 1994, the result of
lower production costs and fewer inventory writedowns. An increase in the
average unit sales price, an increase in market size, and market share gain over
1994 also contributed to the improvement.
In 1994, the Company acquired the remaining 65 percent interest in the French
entity, which handled distribution and marketing of PioneerAE brand products.
Increased sales and expenses were reported because the subsidiary was reflected
in the 1995 financials on a consolidated basis for the first time. Overall,
consolidated country operating income for France decreased due to fewer unit
sales.
Operating income in Hungary and Germany each decreased as unit sales declined
and inventory writedowns increased.
Mexico's operating income decreased due largely to the devaluation of the
Mexican peso. Also, nearly 35 percent fewer acres were planted to seed corn in
Northeast and Northwest regions because of drought, subsidy reductions, and
NAFTA quotas. These factors reduced unit sales 25 percent.
In Asia seed corn operating income in 1995 improved from 1994 levels. Increased
market size and market share in the Philippines, increased market size in
Indonesia, and cost savings contributed to the improvement in this region.
Soybean Seed
In 1995, North American operations accounted for virtually all of the worldwide
soybean seed operating income. North American unit sales increased 17 percent
from 1994, a result of market share gains and increased acreage. A continued
recognition of the value associated with Pioneer brand soybeans provided for
market share gains, as customers understood that planting Pioneer soybean seed,
much like Pioneer seed corn, provides economic value.
North American soybean acreage increased as poor weather conditions forced
customers who planned to plant corn to switch to soybeans. Higher overall
acreage and increased market share contributed $6 million more to operating
income than in 1994.
EDGARWATCH Page 55 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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The average sales price of soybean seed decreased approximately three percent
from 1994 levels, the result of bulk sales and early payment discounts. However,
contribution per unit remained the same because of lower cost of sales, the
result of lower commodity costs.
Increased investments in research and additional fixed selling and general and
administrative expenses reduced operating income $4 million from 1994.
Other Products
Operating results for other products increased from those recorded a year ago.
After allocation of fixed costs, these products as a whole were not profitable,
however, they provide value beyond the financial bottom line. These products
provide the sales organization a full line of seed products, significantly
aiding in the sale of higher margin products.
Corporate Items
Indirect general and administrative expenses increased $5 million in 1995, a
seven percent increase over 1994. The major components of this increase were
personnel costs and increased charitable contributions.
Net interest income for 1995 increased $2 million compared to a year ago because
of higher interest rates earned on current year investments and decreased
interest expense on lower levels of external borrowing.
Net exchange gain increased $6 million from 1994 levels. The strengthening of
certain European currencies against the U.S. dollar and translation gains in
Mexico accounted for a majority of the improvement.
A reduction in taxes on foreign earnings reduced the 1995 effective tax rate to
36.5 percent, compared to 38.5 percent in 1994.
Restructuring and Settlements
On July 13, 1994, the U.S. Circuit Court of Appeals affirmed a prior court's
decision in the Company's lawsuit against Holden Foundation Seeds, Inc.,
awarding Pioneer damages for lost profits from the misappropriation of
germplasm. In August, the Company received the settlement plus interest totaling
$52 million. The Company also incurred $7 million of restructuring charges.
Liquidity and Capital Resources
Due to the seasonal nature of the agricultural seed business, the Company
generates most of its cash from operations during the second and third quarters
of the fiscal year. Cash generated during this time is used to pay the
commercial paper borrowings and accounts payable, which are the Company's
primary sources of credit during the first and fourth quarters of the fiscal
year. Any excess funds available are invested, primarily in short-term
commercial paper.
Historically, the Company has financed growth through earnings. Cash provided by
operating activities was $389 million in 1996, compared to $140 million and $331
million in 1995 and 1994, respectively. Collections on increased sales and lower
inventory levels were largely responsible for the high levels of cash provided
by operating activities for 1996. Higher inventory levels and a decrease in
accounts payable and accrued expenses contributed to the decrease in cash
provided by operating activities during 1995. Cash flow in 1994 was favorably
impacted by the settlement and collection of damages on the Holden suit.
EDGARWATCH Page 56 of 88
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Most of the Company's financing is done through the issuance of commercial paper
in the U.S., backed by revolving and seasonal lines of credit. In addition,
foreign lines of credit and direct borrowing agreements are relied upon to
support overseas financing needs. Short-term debt at August 31, 1996, totaled
$13 million, a $45 million decrease from 1995 and $1 million lower than 1994.
Increased sales in 1996 and the collection of damages on the Holden suit during
August of 1994 allowed for lower levels of borrowing during those periods. In
1996, short-term borrowings peaked at $238 million compared to $217 and $164
million in 1995 and 1994, respectively.
At August 31, 1995, the Company had a $100 million private medium-term note
program of which $50 million was available. The medium term note matured in
February, 1996.
In 1996, short-term domestic investments peaked at $234 million compared to $257
million and $326 million in 1995 and 1994, respectively. Short-term investments
are made through a limited number of reputable institutions after evaluation of
investment procedures and credit quality. Pioneer invests in only high-quality,
short-term securities, primarily commercial paper. Individual securities must
meet credit quality standards, and the portfolios are monitored to ensure
diversification among issuers.
Fiscal 1996 and 1997 Available Domestic Lines of Credit
(in millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
----------------------------------------------------
Revolving $ 200 $ 200 $ 200 $ 200
Seasonal 100 100 - -
---- ---- ----- ----
Total $ 300 $ 300 $ 200 $ 200
==== ==== ===== ====
The Company believes the domestic lines of credit available in 1997 are
sufficient to meet domestic borrowing needs. Revolving line of credit agreements
expire August, 2001. The Company also has a seasonal revolving credit facility
to meet peak borrowing needs which expires August, 1997.
At year end, cash and cash equivalents totaled $99 million, up from $84 million
at August 31, 1995. It is the Company's policy to repatriate excess funds
outside the U.S. not required for operating capital or to fund asset purchases.
Capital expenditures, including business and technology investments, were $164
million in 1996 compared to $86 million in 1995 and $79 million in 1994. In
1996, total expenditures were higher, principally due to expanded production
capacity and technology acquisitions. Capital expenditures for 1997 are expected
to approximate $125 million and are expected to be funded through earnings.
Dividends paid in July of 1996 increased to $.23 per share, up 15 percent from
the $.20 per share dividend paid the prior four quarters. The Company's dividend
policy is to annually pay out 40 percent of a four-year rolling average of
earnings.
Annual Dividends Paid
(in millions) 1994 1995 1996
-----------------------------
$ 52 $ 60 $ 69
During 1996, 1.5 million shares of the Company's stock were repurchased under a
Board authorized repurchase plan at a total cost of $62 million. At August 31,
1996, authorized shares remaining to be purchased under the plan totaled 2.5
million.
EDGARWATCH Page 57 of 88
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PIONEER HI BRED INTERNATIONAL INC 10-K
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Effects of Inflation
Inflation typically is not a major factor in the Company's operations. The cost
of seed products is largely influenced by seed field yields and commodity prices
which are not impacted by inflation. Costs normally impacted by inflation-wages,
transportation, and energy-are a relatively small part of the total operations.
APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS
The table titled "Sales by Region - 1996" appears in The Company's Business of
the Annual Report to Shareholders in the form of a bar graph.
The table titled "North American Soybean Market Share" appears in the Management
Discussion and Analysis of the Annual Report to Shareholders in the form of a
bar graph
The table titled "North American Soybean Average" appears in the Management
Discussion and Analysis of the Annual Report to Shareholders in the form of a
bar graph
The table titled "North American Soybean Unit Sales" appears in the Management
Discussion and Analysis of the Annual Report to Shareholders in the form of a
bar graph
The table titled "Fiscal 1996 and 1997 Available Domestic Lines of Credit"
appears in the Management Discussion and Analysis of the Annual Report to
Shareholders in the form of a bar graph
The table titled "Annual Dividends Paid" appears in the Management Discussion
and Analysis of the Annual Report to Shareholders in the form of a bar graph
EDGARWATCH Page 58 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Independent Auditors' Report
To the Shareholders Pioneer Hi-Bred International, Inc.:
We have audited the accompanying consolidated balance sheets of Pioneer Hi-Bred
International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended August 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pioneer Hi-Bred
International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended August 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
October 4, 1996
EDGARWATCH Page 59 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Income
Years Ended August 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C>
Net sales............................................. $ 1,721 $ 1,532 $ 1,479
------ ------ ------
Operating costs and expenses:
Cost of goods sold................................ $ 727 $ 642 $ 606
Research and product development.................. 136 130 114
Selling........................................... 382 354 335
General and administrative........................ 129 126 123
Restructuring and settlements..................... -- -- (45)
------ ------ ------
$ 1,374 $ 1,252 $ 1,133
------ ------ ------
Operating income.................................. $ 347 $ 280 $ 346
Investment income..................................... 22 23 19
Interest expense...................................... (11) (13) (11)
Net exchange gain (loss).............................. (4) 1 (5)
------ ------ ------
Income before items below......................... $ 354 $ 291 $ 349
Provision for income taxes............................ (127) (106) (134)
Minority interest and other........................... (4) (2) (2)
------ ------ ------
Net income........................................ $ 223 $ 183 $ 213
====== ====== ======
Net income per common share........................... $ 2.68 $ 2.16 $ 2.40
====== ====== ======
Average shares outstanding............................ 83.2 84.5 88.6
</TABLE>
See Notes to Consolidated Financial Statements.
EDGARWATCH Page 60 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Balance Sheets
ASSETS August 31, 1996 1995
- -----------------------------------------------------------------------------------------------------
(In millions)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents............................ $ 99 $ 84
Receivables:
Trade............................................. 208 163
Other............................................. 35 46
Inventories.......................................... 382 426
Deferred income taxes................................ 58 49
Other current assets................................. 2 2
------ ------
Total current assets.............................. $ 784 $ 770
------ ------
LONG-TERM ASSETS........................................ $ 81 $ 41
------ ------
PROPERTY AND EQUIPMENT
Land and land improvements........................... $ 63 $ 61
Buildings............................................ 354 331
Machinery and equipment.............................. 512 481
Construction in progress............................. 56 37
------ ------
$ 985 $ 910
Less accumulated depreciation........................ 475 438
------ ------
$ 510 $ 472
------ ------
INTANGIBLES............................................. $ 47 $ 10
------ ------
$ 1,422 $ 1,293
====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
EDGARWATCH Page 61 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY August 31, 1996 1995
- -----------------------------------------------------------------------------------------------------
(In millions)
CURRENT LIABILITIES
<S> <C> <C>
Short-term borrowings................................ $ 13 $ 58
Current maturities of long-term debt................. 12 53
Accounts payable, trade.............................. 89 58
Accrued compensation................................. 65 45
Income taxes payable................................. 63 23
Other................................................ 46 43
------ ------
Total current liabilities......................... $ 288 $ 280
------ ------
LONG-TERM DEBT.......................................... $ 25 $ 18
------ ------
DEFERRED ITEMS
Postretirement benefits.............................. $ 40 $ 37
Other................................................ 44 38
------- -------
$ 84 $ 75
------ ------
CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARIES....................... $ 7 $ 7
------ ------
SHAREHOLDERS' EQUITY Capital stock:
Preferred, authorized 10,000,000 shares; issued none $ -- $ --
Common, $1 par value; authorized 150,000,000 shares;
issued 92,693,578 shares....................... 93 93
Additional paid-in capital........................... 23 18
Retained earnings.................................... 1,272 1,118
Unrealized gain on available-for-sale securities, net 11 --
Cumulative translation adjustment.................... (3) 1
------ ------
$ 1,396 $ 1,230
Less:
Cost of common shares acquired for the treasury, 1996
-- 10,304,700 shares; 1995 -- 9,206,749 shares. (364) (303)
Unearned compensation............................. (14) (14)
------ ------
$ 1,018 $ 913
------ ------
$ 1,422 $ 1,293
====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
EDGARWATCH Page 62 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Years Ended August 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income........................................ $ 223 $ 183 $ 213
Noncash items included in net income:
Depreciation ................................. 65 61 60
Amortization.................................. 12 13 15
Restructuring of operations................... -- -- 3
Provision for doubtful accounts............... 5 2 5
(Gain) loss on disposal of assets............. (4) 1 2
Foreign currency exchange (gain) loss......... (4) 2 4
Other noncash items........................... 5 4 (8)
Change in assets and liabilities, net:
Receivables................................... (46) (20) (31)
Inventories................................... 43 (68) 26
Accounts payable and accrued expenses......... 61 (39) 23
Income taxes payable ......................... 40 (8) 12
Other assets and liabilities.................. (11) 9 7
------ ------ ------
Net cash provided by operating activities..... $ 389 $ 140 $ 331
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets...................... $ 15 $ 6 $ 6
Payments received on notes receivable............. 12 6 9
Disbursements for notes receivable................ (2) (4) (6)
Capital expenditures.............................. (116) (86) (79)
Technology investments............................ (48) -- --
Other, net........................................ (5) (4) (8)
------ ------ ------
Net cash used in investing activities......... $ (144) $ (82) $ (78)
------ ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term borrowings (payments).............. $ (42) $ 45 $ (47)
Proceeds from long-term borrowings................ 1 5 3
Principal payments on long-term borrowings........ (55) (2) (5)
Purchase of common stock.......................... (62) (100) (113)
Cash dividends paid............................... (69) (60) (52)
------ ------ ------
Net cash used in financing activities......... $ (227) $ (112) $ (214)
------ ------ ------
Effect of foreign currency exchange rate
changes on cash and cash equivalents.............. $ (3) $ 3 $ --
------ ------ ------
Effect of change in year-end of the Company's international
subsidiaries on cash and cash equivalents......... $ -- $ -- $ 4
------ ------ ------
Net increase (decrease) in cash and cash
equivalents................................. $ 15 $ (51) $ 43
Cash and cash equivalents, beginning.................. 84 135 92
------ ------ ------
CASH AND CASH EQUIVALENTS, ENDING..................... $ 99 $ 84 $ 135
====== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
EDGARWATCH Page 63 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Years Ended August 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
(In millions)
COMMON STOCK
<S> <C> <C> <C>
Balance, beginning and ending............................ $ 93 $ 93 $ 93
------- ------ ------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning....................................... $ 18 $ 15 $ 13
Common stock issued from treasury for restricted stock plan 3 1 1
Tax benefits related to restricted stock plan......... 2 2 1
------- ------ ------
Balance, ending.......................................... $ 23 $ 18 $ 15
------- ------ ------
RETAINED EARNINGS
Balance, beginning....................................... $ 1,118 $ 995 $ 835
Net income............................................ 223 183 213
Change in reporting period of international subsidiaries -- -- (1)
Cash dividends on common stock (1996 -- $.83 per share;
1995 -- $.71 per share; 1994 -- $.59 per share).... (69) (60) (52)
------- ------ ------
Balance, ending.......................................... $ 1,272 $ 1,118 $ 995
------- ------ ------
UNREALIZED GAIN ON AVAILABLE-FOR-SALE SECURITIES, NET
Balance, beginning....................................... $ -- $ -- $ --
Current unrealized gain............................... 11 -- --
------- ------ ------
Balance, ending.......................................... $ 11 $ -- $ --
------- ------ ------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning....................................... $ 1 $ (3) $ (7)
Current translation adjustment........................ (4) 4 4
------- ------ ------
Balance, ending.......................................... $ (3) $ 1 $ (3)
------- ------ ------
TREASURY STOCK
Balance, beginning....................................... $ (303) $ (207) $ (97)
Purchase of common stock for the treasury (1996 --1,148,900
shares; 1995 -- 2,844,209 shares; 1994 -- 3,325,200 shares)(62) (100) (113)
Common stock issued for restricted stock plan, net of forfeitures
and stock used to satisfy withholding taxes
(1996 -- 50,949 shares; 1995 -- 116,549 shares; 1994 --
97,336 shares)..................................... 1 4 3
------- ------ ------
Balance, ending.......................................... $ (364) $ (303) $ (207)
------- ------ ------
UNEARNED COMPENSATION
Balance, beginning....................................... $ (14) $ (12) $ (12)
Net additions of common stock to restricted stock plan (6) (8) (4)
Amortization of unearned compensation................. 6 6 4
------- ------ ------
Balance, ending.......................................... $ (14) $ (14) $ (12)
------- ------ ------
TOTAL SHAREHOLDERS' EQUITY AT YEAR END...................... $ 1,018 $ 913 $ 881
======= ====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
EDGARWATCH Page 64 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company's business is the broad application of the science of
genetics. Pioneer was founded in 1926 to apply newly discovered
genetic techniques to hybridize corn. Today, the Company
develops, produces, and markets hybrids of corn, sorghum, and
sunflowers; varieties of soybeans, alfalfa, wheat, and canola;
and microorganisms useful in crop and livestock production.
Approximately 89 percent of the Company's total net sales are
from the sale of hybrid seed and soybean seed within the regions
of North America and Europe.
Consolidation policy:
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
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 amounts reported
in the financial statements. Actual results could differ from
those estimates.
Cash equivalents:
The Company considers all liquid investments with a maturity at
purchase of three months or less to be cash equivalents.
Receivables:
Receivables are stated net of an allowance for doubtful accounts
of $23 million and $19 million at August 31, 1996 and 1995,
respectively.
Inventories:
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Gains or losses on commodity hedging
transactions are included as a component of inventory.
Property and equipment:
Property and equipment is recorded at cost, net of an allowance
for loss on plant closings of $9 million at August 31, 1996 and
1995. Depreciation is computed primarily by the straight-line
method over estimated service lives of two to forty years.
EDGARWATCH Page 65 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Long-term assets:
Certain long-term assets were classified as available-for-sale
securities. No available-for-sale securities were owned at August
31, 1995. Available-for-sale securities held at August 31, 1996,
consisted of an equity security with an original cost of $30
million and an unrealized gain of $17 million.
Intangibles:
Intangible assets are stated at amortized cost and are amortized
by the straight-line method over one-to twenty-year periods, with
the weighted-average amortization period approximating 12 years
for the year ended August 31, 1996. Accumulated amortization of
$36 million and $32 million at August 31, 1996 and 1995,
respectively, have been netted against these assets.
Basis of accounting:
Subsidiary and asset acquisitions are accounted for by the
purchase method.
Translation of foreign currencies and foreign exchange hedging:
All assets and liabilities in the balance sheets of foreign
subsidiaries whose functional currency is other than the U.S.
dollar are translated at year-end exchange rates. Translation
gains and losses are not included in determining net income but
are accumulated as a separate component of shareholders' equity.
However, for subsidiaries considered to be operating in highly
inflationary countries and for certain other subsidiaries, the
U.S. dollar is the functional currency, and translation gains and
losses are included in determining net income. Foreign currency
transaction gains and losses are included in determining net
income.
The Company uses a combination of forward foreign exchange
contracts and foreign currency option contracts to hedge open
foreign-denominated payables and receivables and also to hedge
firm sales and purchase commitments with its foreign
subsidiaries. Unrealized gains and losses on hedges of existing
foreign-denominated payables or receivables are included in
other assets or liabilities and are recognized in net exchange
gain (loss) in conjunction with the revaluation of the
foreign-currency-denominated transaction. Unrealized gains and
losses related to qualifying hedges of firm sales and purchase
commitments are deferred and recognized in income when the
future sales or purchases are recognized, or immediately if the
commitment is canceled. Option premiums paid are amortized to
income over the life of the contract.
Income taxes:
Income taxes are computed in accordance with SFAS No. 109.
Deferred income taxes have been provided on temporary
differences in the financial statement and income tax bases of
certain assets and liabilities.
EDGARWATCH Page 66 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Deferred income taxes have not been provided on the
undistributed earnings or the cumulative translation adjustment
of the foreign subsidiaries to the extent the Company intends to
reinvest such undistributed earnings indefinitely or to
repatriate them only to the extent that no additional income tax
liability is created. The cumulative amount of the undistributed
net income and translation adjustment of such subsidiaries is
approximately $172 million at August 31, 1996. The Company files
consolidated U.S. federal income tax returns with its domestic
subsidiaries; therefore, no deferred income taxes have been
provided on the undistributed earnings of those subsidiaries.
Pension plans:
The Company's domestic and Canadian operations have defined
benefit pension plans covering substantially all their
employees. The plans provide benefits that are based on average
monthly earnings of the employees. The funding policy is to
contribute annually an amount to fund pension cost as
actuarially determined by an independent pension consulting
firm.
Other postretirement benefits:
The Company sponsors a health care plan and a life insurance
plan which provide benefits to eligible retirees. The Company's
contribution is based on age and years of service at retirement.
The health insurance plan contains the cost-sharing features of
coinsurance and/or deductibles. The life plan is paid for by the
Company. Benefits under both plans are based on eligibility
status for pension and length of service. Substantially all of
the Company's U.S. and Canadian full-time employees may become
eligible for these benefits upon reaching age 55 and having
worked for the Company at least five years.
Deferred executive compensation and supplemental retirement
benefit plans:
The estimated liability for the deferred executive compensation
and supplemental retirement benefit plans is being accrued over
the expected remaining years of active employment.
Restricted stock and stock option plans:
The Company has a restricted stock plan and a non-qualified
stock option plan. The Company amortizes as compensation expense
the cost of stock acquired for the restricted stock plan by the
straight-line method over the five-year restriction period. No
compensation expense is recorded under the non-qualified stock
option plan.
In 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes a fair
value-based method of accounting for stock-based compensation
plans. While its adoption is encouraged for all stock-based
plans, companies may continue applying the current accounting
treatment prescribed by the provisions of APB Opinion No. 25
"Accounting for Stock Issued to Employees." Companies continuing
to apply the provisions of APB Opinion No. 25 must, however,
provide certain pro forma disclosures as if SFAS No. 123 were
adopted for all stock-based compensation plans. The Company will
retain the current accounting method for stock-based
compensation plans and will provide the necessary disclosures as
required in fiscal 1997.
EDGARWATCH Page 67 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Other:
In 1995, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
was issued. This statement requires the review of the recorded
values of long-lived assets (including intangibles) when facts
and circumstances indicate that the carrying values may not be
recoverable. In addition, the statement requires certain
adjustments for closing and sale costs to the carrying values of
assets to be disposed. The Company will adopt SFAS No. 121 in
fiscal 1997, as required. Management believes its adoption will
not have a material effect on the carrying values of long-lived
assets.
Note 2. Inventories
The composition of inventories is as follows:
<TABLE>
<CAPTION>
August 31, 1996 1995
- -----------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C>
Finished seed................................ $ 209 $ 280
Unfinished seed.............................. 163 140
Supplies and other........................... 10 6
------ ------
$ 382 $ 426
====== ======
</TABLE>
Unfinished seed represents the Company's cost of parent seed,
detasseling and roguing labor, and certain other production
costs incurred by the Company to produce its seed supply. Much
of the balance of the labor, equipment, and production costs
associated with planting, growing, and harvesting the seed is
supplied by independent growers, who contract specific acreage
for the production of seed for the Company. The compensation of
the independent growers is determined based upon yield,
contracted acreage, and commodity prices. The commitment for
grower compensation is accrued as seed is delivered to the
Company. Accrued grower compensation was $11 million and $6
million at August 31, 1996 and 1995, respectively.
The Company uses commodity futures and options to hedge grower
compensation costs. At August 31, 1996 and 1995, the Company had
futures contracts with brokers on notional quantities amounting
to 17 million bushels and 7 million bushels, respectively for
corn, and 6 million bushels and 5 million bushels, respectively
for soybeans. At August 31, 1996, unrealized losses on these
contracts were $2 million.
Note 3. Current Borrowings, Lines of Credit, Long-Term Debt, and
Guarantees
At August 31, 1996, the Company had domestic lines of credit
totaling $200 million available to be used as support for the
issuance of the Company's commercial paper. There was no
commercial paper outstanding at August 31, 1996. Commercial
paper outstanding at August 31, 1995, was $43 million at a
weighted average interest rate of 5.9 percent.
EDGARWATCH Page 68 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
In addition, the Company's foreign subsidiaries have lines of
credit and direct borrowing agreements totaling $44 million,
substantially all of which are unsecured. At August 31, 1996,
short-term borrowings of $13 million were outstanding under
these lines of credit at a weighted average interest rate of 8.9
percent. At August 31, 1995, short-term borrowings of $15
million were outstanding under foreign subsidiary lines of
credit at a weighted average interest rate of 17.8 percent.
The long-term debt at August 31, 1996, bears interest at varying
rates and requires annual principal payments through fiscal
2011. The maturities of long-term debt for the next five fiscal
years, in millions, are as follows: $12, $6, $14, $0.3, and $1.
The Company has guaranteed the repayment of principal and
interest on certain obligations of Village Court Associates, an
affiliated real estate venture. At August 31, 1996, such
guarantees totaled approximately $23 million.
Note 4. Income Taxes
The provision for income taxes is based on income before income
taxes as follows:
<TABLE>
<CAPTION>
Years Ended August 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
United States.............................. $ 266 $ 198 $ 272
Foreign.................................... 88 93 77
------ ------ -------
$ 354 $ 291 $ 349
====== ====== =======
</TABLE>
The provision for income taxes is composed of the following
components:
<TABLE>
<CAPTION>
August 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
(In millions)
Current:
<S> <C> <C> <C>
Federal................................ $ 83 $ 59 $ 101
State.................................. 11 10 15
Foreign................................ 44 36 29
------ ------ -------
$ 138 $ 105 $ 145
------ ------ -------
Deferred:
Federal................................ $ (9) $ 4 $ (12)
State.................................. (1) - (2)
Foreign................................ (1) (3) 3
------ ------ -------
$ (11) $ 1 $ (11)
------ ------ -------
$ 127 $ 106 $ 134
====== ====== =======
</TABLE>
EDGARWATCH Page 69 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at August 31, 1996 and 1995, are presented below:
<TABLE>
<CAPTION>
August 31, 1996 1995
- ---------------------------------------------------------------------------------------------------
(In millions)
Deferred tax assets:
<S> <C> <C>
Allowance for doubtful accounts............ $ 6 $ 6
Inventories................................ 33 23
Benefits/compensation...................... 35 32
Deferred profit............................ 8 10
Nondeductible reserves..................... 8 3
Net operating loss carryforwards........... 5 8
Other...................................... 7 7
------ ------
Total gross deferred tax asset.......... $ 102 $ 89
Less valuation allowance................ (8) (11)
------ ------
Total deferred tax asset................ $ 94 $ 78
------ ------
Deferred tax liabilities:
Property and equipment..................... $ (46) $ (41)
Unrealized gain on available-for-sale securities (6) --
Other...................................... -- (1)
------ ------
Total deferred tax liability............ $ (52) $ (42)
------ ------
Net deferred tax asset.................. $ 42 $ 36
====== ======
</TABLE>
The net operating loss carryforwards result from various
international subsidiaries. The expiration of these net
operating losses range from 1997 to indefinite. Utilization of
these losses is dependent upon earnings generated in the
respective subsidiaries. A valuation allowance for the losses
and certain other items has been set up where appropriate.
The net change in the total valuation allowance for the year
ended August 31, 1996, was a decrease of $3 million. There was
no change as of the end of August 31, 1995.
Following is a reconciliation of the statutory U.S. Federal
income tax rate to the Company's actual worldwide effective
income tax rate:
<TABLE>
<CAPTION>
Years Ended August 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. Federal income tax rate............. 35.0 % 35.0 % 35.0 %
State income taxes, net of Federal income tax benefit 1.8 2.4 2.5
Effect of taxes on foreign earnings................ -- (0.9) 1.8
Foreign Sales Corporation.......................... (0.5) (0.7) (1.1)
Other.............................................. (0.3) 0.7 0.3
---- --- ----
Actual effective income tax rate............... 36.0 % 36.5 % 38.5 %
==== ==== ====
</TABLE>
EDGARWATCH Page 70 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Note 5. Pension Plans and Other Postretirement Benefits
Qualified pension plans:
The components of pension expense relating to qualified defined
benefit pension plans for the years ended August 31, 1996, 1995,
and 1994, consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
Service cost................................... $ 7 $ 7 $ 6
Interest cost on projected benefit obligation.. 11 11 9
Actual return on plan assets................... (14) (12) (11)
Net amortization and deferral.................. (1) (1) (1)
------ ------ ------
Pension expense............................ $ 3 $ 5 $ 3
====== ====== ======
</TABLE>
The following table sets forth the plans' funded status as of
June 30, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------------------------------------
(In millions)
Actuarial present value of benefit obligations:
<S> <C> <C>
Vested benefit obligation........................... $ 101 $ 96
====== ======
Accumulated benefit obligation...................... $ 108 $ 102
====== ======
Plan assets at fair value, primarily stocks and bonds... $ 179 $ 158
Projected benefit obligation............................ 153 147
------ ------
Plan assets in excess of projected benefit obligation... $ 26 $ 11
Unrecognized net (gain)/loss............................ (11) 9
Unrecognized prior service cost......................... 2 2
Unrecognized transition asset, net (recognized over 16 years) (8)
------
(10)
Pension asset....................................... $ 9 $ 12
====== ======
</TABLE>
Plan assets include common stock of the Company totaling $14
million and $11 million at June 30, 1996 and 1995, respectively.
In determining the present value of benefit obligations, a
discount rate of 8 percent was used in 1996 and 1995. The
expected long-term rate of return on plan assets was 9 percent
and the assumed rate of increase in compensation levels was 6.5
percent in both years.
Non-qualified pension plans:
The components of pension expense relating to non-qualified
pension plans for the years ended August 31, 1996, 1995, and
1994, consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
Service cost................................... $ 1 $ 2 $ 1
Interest cost on projected benefit obligation.. 3 3 2
Net amortization and deferral.................. 1 1 1
------ ------ ------
Pension expense............................ $ 5 $ 6 $ 4
====== ====== ======
</TABLE>
EDGARWATCH Page 71 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
The following table sets forth the plans' funded status as of
August 31, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------
(In millions)
Actuarial present value of benefit obligations:
<S> <C> <C>
Vested benefit obligation.................. $ 16 $ 7
====== ======
Accumulated benefit obligation............. $ 16 $ 8
====== ======
Plans' assets at fair value.................... $ -- $ --
Projected benefit obligation................... 37 39
------ ------
Plans' assets less than projected benefit
obligation................................... $ (37) $ (39)
Unrecognized net loss.......................... 4 10
Unrecognized prior service cost................ 11 11
Unrecognized transition asset, net............. 1 1
------ ------
Pension liabilities........................ $ (21) $ (17)
====== ======
</TABLE>
In determining the present value of benefit obligations, a
discount rate of 8 percent was used in 1996 and 1995. The
assumed rate of increase in compensation levels used was 8
percent in both years.
Other postretirement benefit plans:
The components of postretirement benefits cost expensed for the
years ended August 31, 1996, 1995, and 1994, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
Service cost -- benefits earned during the year.... $ 2 $ 2 $ 2
Interest cost on accumulated postretirement benefit
obligation....................................... 3 2 3
Return on assets................................... -- -- --
Net amortization and deferral...................... -- -- 1
------ ------ ------
Other postretirement benefits cost............. $ 5 $ 4 $ 6
====== ====== ======
</TABLE>
The following table sets forth the plans' funded status as of
August 31, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------
(In millions)
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees.............................................. $ (12) $ (12)
Other fully eligible plans' participants.............. (8) (7)
Other active plans' participants...................... (20) (17)
------ ------
$ (40) $ (36)
Plans' assets at fair value........................... -- --
------ ------
Accumulated postretirement benefit obligation in excess of
plans' assets....................................... $ (40) $ (36)
Unrecognized prior service cost....................... (1) (1)
Unrecognized net loss................................. 1 --
------ ------
Accrued postretirement benefits cost.............. $ (40) $ (37)
====== ======
</TABLE>
EDGARWATCH Page 72 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
For 1996 and 1995, the discount rate used in determining the
accumulated postretirement benefit obligation was 8 percent. A
9.5 percent annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1996. This rate was
assumed to decrease gradually to 5.5 percent in year 2004 and
remain at that level thereafter. A one-percentage-point increase
in the assumed health care cost trend rates would increase the
accumulated postretirement benefit obligation as of August 31,
1996, by approximately $7 million and the total of the service
and interest cost components of net postretirement health care
cost for the year then ended by approximately $1 million.
Note 6. Commitments and Contingencies
Pioneer has a development/license agreement with a third party
granting Pioneer the right to develop and produce an elite Bt
transgenic corn line which, when combined with other elite
inbreds, would provide commercially viable yield levels,
agronomic performance, and European corn borer (ECB) control.
Under terms of the agreement, the Company is committed to
compensate based upon 1) determination of commercial level ECB
protection 2) regulatory approval and 3) the cumulative sale of
specified quantities of licensed corn seed worldwide. The
Company believes that all requirements for payment are likely to
be met in fiscal 1997. Contingent payments under this agreement
total $26 million, and will be amortized ratably over the
expected cycle of the relevant products.
Note 7. Legal Matters
Since April, 1996, DeKalb Genetics Corporation ("DeKalb") has
filed five lawsuits against Pioneer. The lawsuits allege that
insect resistant corn products that use a Bt gene, and corn
products resistant to a glufosinate herbicide, infringe on
certain DeKalb patents.
After reviewing the Company's intellectual property position,
all of DeKalb's patent filings, and DeKalb's lawsuits, Pioneer
believes DeKalb's claims are without merit. Pioneer has denied
DeKalb's allegations and raised defenses that, if successful,
would render DeKalb's patents invalid. Pioneer believes that
disposition of the lawsuits will not have a materially adverse
affect on the consolidated financial position and results of
operations of the Company. Pioneer also does not expect delays
in the introductions of advanced corn hybrids with insect and
herbicide resistance because of these lawsuits.
Note 8. Financial Instruments
Foreign exchange:
The Company uses foreign currency hedge instruments to manage
the effect of exchange rate fluctuations on the U.S. dollar
value of cash flows of foreign operations and the income effect
of foreign-currency-denominated transactions. The primary
financial instruments used are foreign exchange forward
contracts, purchased foreign currency options, and cross
currency swaps. In some countries, foreign currency hedge
instruments are not available or are cost prohibitive. The
exposures in these countries are addressed through managing net
asset positions and borrowing in local currency, or investing in
U.S. dollars.
EDGARWATCH Page 73 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
While the hedge instruments are subject to risk of loss from
exchange rate movement, we expect these losses would generally
be offset by gains in the U.S. dollar value of foreign sales
and/or cash flows. The Company does not trade these instruments
with the objective of earning financial gains on the exchange
rate price fluctuations alone, nor does it trade in currencies
for which there are no underlying exposures.
The notional amounts for contracts in place at August 31, 1996
and 1995, are shown in the following table in U.S. dollars.
These contracts generally mature in less than one year.
<TABLE>
<CAPTION>
August 31, 1996 1995
- --------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C>
Forwards..................................... $ 79 $ 129
Options Purchased............................ 14 18
Swaps........................................ 26 34
------ ------
$ 119 $ 181
====== ======
</TABLE>
At August 31, 1996, deferred unrealized gains and losses from
hedging firm purchase and sale commitments, based on broker
quoted prices, were $0.5 million and $6 million, respectively.
Credit risk:
The Company's financial instruments subject to credit risk are
primarily trade accounts receivable, cash and cash equivalents,
and foreign currency exchange contracts. The Company is exposed
to credit risk of nonperformance by counterparties. Generally,
the Company does not require collateral or other security to
support customer receivables or foreign currency exchange
contracts. The counterparties to the Company's hedge instruments
are major financial institutions. The Company evaluates the
creditworthiness of the counterparties to hedge instruments and
has never experienced, nor does it anticipate, nonperformance by
any of its counterparties.
The Company had the following significant concentrations of
trade accounts receivables, and cash and cash equivalents
subject to credit risk:
<TABLE>
<CAPTION>
August 31, 1996 1995
- ----------------------------------------------------------------------------------
(In millions)
<S> <C> <C>
United States................................ $ 141 $ 92
Italy........................................ $ 57 $ 57
Brazil....................................... $ 19 $ 16
Argentina.................................... $ 11 $ 12
Central Europe............................... $ 9 $ 8
</TABLE>
Within the U.S., the majority of the Company's business is
conducted with individual farm operators located throughout the
country. Outside the U.S., the majority of the Company's
business is transacted with distributors and cooperatives, some
being government sponsored.
EDGARWATCH Page 74 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Fair value:
The Company estimated the fair value of its financial
instruments by discounting the expected future cash flows using
the current interest rates which would apply to each class of
financial instruments, except for foreign currency contracts for
which quotes from brokers were used.
The fair value of cash equivalents, receivables, short-term
borrowings, long-term debt, and foreign currency contracts
approximates carrying value at August 31, 1996.
Note 9. Restructuring and Settlements
On July 13, 1994, the U.S. Circuit Court of Appeals affirmed a
prior court's decision in the Company's lawsuit against Holden
Foundation Seeds, Inc., awarding Pioneer damages for lost
profits from the misappropriation of germplasm. In August 1994,
the Company received the settlement plus interest totaling
approximately $52 million. The Company also incurred $7 million
of restructuring charges.
Note 10. Capital Stock
Restricted stock plans:
The Company has a restricted stock plan under which shares of
the Company's common stock are held by the Company for officers
and key employees. Such stock is subject to an agreement
requiring forfeiture by the employee in the event of termination
of employment within five years of the date of grant other than
as a result of retirement, death, or disability. The maximum
number of shares authorized for grant under this plan is
1,750,000 shares. No shares have been granted as of August 31,
1996.
Under previous restricted stock plans, 824,899 shares of the
Company's common stock are held for officers and key employees.
The maximum number of shares authorized for grant under these
plans is 5,250,000 shares, of which 2,157,323 had been granted
as of August 31, 1996.
Stock option plan:
During 1996, the Company adopted a non-qualified stock option
plan. The plan authorizes options covering three million shares
of the Company's common stock. Options under the plan are
exercisable one-third in each of years three, four, and five
from the date of grant. The options expire after ten years from
the date of grant. Options are forfeited upon termination for
reasons other than retirement, death, or disability. During the
year, options were granted covering 973,000 shares at an
exercise price of $43 per share. All such options remain
outstanding as of August 31, 1996.
Voting rights:
Generally, each share of common stock is entitled to five votes
per share if the share has been beneficially owned continuously
by the same person for a period of 36 consecutive months
preceding the record date for the relevant shareholders'
meeting. All other shares are entitled to one vote per share.
EDGARWATCH Page 75 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Share repurchase:
At August 31, 1996, authorized shares remaining to be purchased
under a Board authorized repurchase plan approximated 2.5
million.
Note 11. Geographic Data
Certain financial information concerning the Company's domestic
and foreign operations is as follows:
<TABLE>
<CAPTION>
Years Ended August 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
(In millions)
Net sales (by source):
<S> <C> <C> <C>
United States.......................... $ 1,435 $ 1,271 $ 1,270
Europe................................. 387 349 249
Other.................................. 222 189 190
------ ------ -------
Total sales.......................... $ 2,044 $ 1,809 $ 1,709
Less intergeographical sales, primarily
United States....................... 323 277 230
------ ------ -------
$ 1,721 $ 1,532 $ 1,479
====== ====== =======
Operating income (by source):
United States.......................... $ 334 $ 269 $ 341
Europe................................. 56 53 33
Other.................................. 33 31 40
------ ------ -------
$ 423 $ 353 $ 414
Indirect general and administrative expense (76) (73) (68)
------ ------ ------
$ 347 $ 280 $ 346
====== ====== =======
Identifiable assets at August 31:
United States.......................... $ 701 $ 736 $ 668
Europe................................. 224 212 197
Other.................................. 244 210 201
------ ------ -------
$ 1,169 $ 1,158 $ 1,066
Corporate.............................. 253 135 187
------ ------ -------
$ 1,422 $ 1,293 $ 1,253
====== ====== =======
Export Sales:
Primarily Europe....................... $ 20 $ 15 $ 18
====== ====== =======
</TABLE>
Note 12. Unaudited Quarterly Financial Data
Summarized unaudited quarterly financial data for 1996 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended November 30 February 29 May 31 August 31
- --------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.................. $ 92 $ 281 $ 1,168 $ 180
Gross profit............... $ 8 $ 107 $ 691 $ 52
Net income (loss).......... $ (49) $ 4 $ 303 $ (35)
Net income (loss) per
common share (1)....... $ (.59) $ .05 $ 3.64 $ (.42)
Cash dividends per
common share(1)........ $ .20 $ .20 $ .20 $ .23
</TABLE>
EDGARWATCH Page 76 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Summarized unaudited quarterly financial data for 1995 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended November 30 February 28 May 31 August 31
- --------------------------------------------------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.................. $ 69 $ 277 $ 1,049 $ 137
Gross profit............... $ 2 $ 104 $ 632 $ 21
Net income (loss).......... $ (48) $ 9 $ 272 $ (50)
Net income (loss) per
common share (1)....... $ (.57) $ .11 $ 3.23 $ (.59)
Cash dividends per
common share (1)....... $ .17 $ .17 $ .17 $ .20
</TABLE>
(1) As a result of rounding, the total of the four quarters'
earnings and cash dividends per share may not equal the earnings
and cash dividends per share for the year.
Note 13. Supplemental Cash Flow Information
Certain financial information concerning the Consolidated
Statements of Cash Flows is as follows:
<TABLE>
<CAPTION>
Years Ended August 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
(In millions)
Cash payments:
<S> <C> <C> <C>
Interest............................... $ 14 $ 13 $ 13
Income taxes........................... $ 93 $ 117 $ 145
Noncash investing and financing activities:
Intangibles acquired by the issuance of
long-term debt........................... $ 20 $ -- $ --
</TABLE>
EDGARWATCH Page 77 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
Research and Product Development
At August 31, 1996, the Company employed 917 people who directly and indirectly
engage in research and product development activities. Of these, 360 scientists
performed research in the agricultural seed area and 11 in microbial cultures.
Of the 360 scientists performing research in agricultural seeds, 52 are employed
outside of North America and 121 are focused on biotechnology research. Total
research expenditures for 1996 were $136 million. During the three fiscal years
ended August 31, 1996, the Company expended the following amounts on research
and product development:
Years Ended August 31, 1996 1995 1994
- --------------------------------------------------------------------------------
(In millions)
Corn........................... $ 90 $ 87 $ 75
Soybeans....................... 12 10 9
Other Products................. 34 33 30
------ ------ ------
Total........................ $ 136 $ 130 $ 114
====== ====== ======
Planned growth in biotechnology projects, research collaborations, and trait and
technology development makes up most of the increase over 1995. The investment
in research has increased yearly since 1973, supporting the Company's commitment
to improving products through research and product development.
Properties
Pioneer owns and operates 22 commercial seed corn conditioning plants in North
America. These plants are located in Illinois (4), Indiana (4), Iowa (8),
Michigan (1), Nebraska (2), Texas (1), and Ontario, Canada (2).
Seed corn, unlike commercial corn, must be harvested and dried before freezing
temperatures can limit germination potential. Because of this, seed drying
capacity is a critical factor. The dryers at the North American plants have a
total capacity of two million bushels and, depending on factors such as seed
moisture content, can be filled 11 times before fall weather presents a
significant freeze risk.
At normal capacity, the husking and sorting units at the North American plants
can handle 54,580 bushels of ear corn per hour. In total, these plants have the
capacity to condition 14,400 units per hour. In a normal year, seed conditioning
is completed by early February. These plants have the facilities to store 10
million bushels of bulk seed and 15.6 million units of bagged seed corn,
including cold storage for 7.4 million units.
In North America, conditioning of other commercial PioneerAE brand seed is
performed at a total of 17 plants, six of which also condition corn. Pioneer
also owns interests in 24 commercial production plants in 21 countries outside
North America. Parent seed is conditioned at nine locations in North America and
at ten locations outside North America. Six of these facilities also condition
commercial Pioneer brand seed.
The Company's plant breeders conduct research at 50 stations in the U.S. and
Canada. There are 28 stations which conduct research on corn; four of those
conduct research on more than one crop. There are 22 stations which conduct
research on seeds other than corn. One of these stations conducts research on
more than one crop. In addition to these research efforts, Pioneer conducts seed
research at 43 locations throughout the rest of the world.
EDGARWATCH Page 78 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
In addition to the research stations, approximately 273,000 square feet of
laboratory, greenhouse, and office space located in Johnston, Iowa are also
devoted to plant breeding, biotechnology, and microbial product research.
Additional production facilities for microbial products are located at
Company-owned properties in Durant, Iowa and Buxtehude, Germany. A livestock
nutrition farm, located in Sheldahl, Iowa conducts research for the nutrition
and industry markets (NIM) group and for microbial products.
Pioneer also owns 5,783 acres of agricultural land in the U.S. used primarily
for research activities. Of this, 1,000 acres located in Johnston, Iowa are
under commercial and residential development. As properties are developed, they
are either sold or retained as equity projects.
Company properties, substantially all of which are owned, were subject to
aggregate encumbrances of $1 million on August 31, 1996. The Company believes
that all properties, including machinery, equipment, and vehicles, are well
maintained, suitable for their intended uses, and adequately insured.
EDGARWATCH Page 79 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
On November 7, 1995, the Company's stock began trading on the New York Stock
Exchange. Prior to that date, the Company's stock was traded in the National
Association of Securities Dealers National Market System. The range of closing
prices for these shares for the past two years follows:
1996 1995
-------------------------------------------------------------------
Quarter: High Low High Low
First............. 57 3/8 42 3/4 35 1/4 30
Second............ 60 1/8 49 1/4 38 3/4 32 3/4
Third............. 57 51 1/4 39 1/4 32 1/2
Fourth............ 57 1/4 49 3/4 45 1/2 38 3/4
On August 31, 1996, there were approximately 3,900 accounts representing
approximately 20,000 shareholders of the Company's 82,388,878 outstanding
shares. Quarterly dividends paid for the years ended August 31, 1996 and 1995
are as follows:
Cash Dividends Per Share 1996 1995
---------------------------------------------------------------
Quarter:
First........................... $ .20 $ .17
Second.......................... $ .20 $ .17
Third........................... $ .20 $ .17
Fourth.......................... $ .23 $ .20
The stock of the Company became publicly traded in 1973 and quarterly dividends
have been paid continuously since that time. It is anticipated that dividends
will continue to be paid in the future. The Company's stock is included in the
Standard & Poors Composite Stock Price Index.
EDGARWATCH Page 80 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 21
PIONEER HI-BRED INTERNATIONAL, INC.
SUBSIDIARIES OF THE REGISTRANT
The following are all of the subsidiaries of the Registrant, and are included in
its audited consolidated financial statements filed with its Annual Report on
Form 10-K for the fiscal year ended August 31, 1996. Each subsidiary listed is
wholly-owned by the Registrant or one of the Registrant's wholly owned
subsidiaries, except as otherwise indicated.
Place of
Subsidiary Incorporation
Subsidiaries of the Registrant:
The Advantage Corp. USA
Green Meadows, Ltd. USA
Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico
PHI Communications Company, Inc. USA
PHI Financial Services, Inc. USA
PHI Insurance Co. USA
PHI Insurance Services, Inc. USA
PHI Mexico, S.A. de C.V. (99%) Mexico
PHI Specialty Products USA
Pioneer Hi-Bred Australia, Pty. Ltd. Australia
Pioneer Hi-Bred FSC Ltd. (0.45%) Jamaica
Pioneer Hi-Bred Limited Canada
Pioneer Hi-Bred Production, Ltd. Canada
Pioneer Hi-Bred Puerto Rico, Inc. USA
Pioneer Overseas Corporation USA
Pioneer Sementes Ltda. (74.39%) Brazil
Pioneer Vegetable Genetics, Inc. USA
Semillas Pioneer Chile Ltda. (99.74%) Chile
Semillas Pioneer, S.A. Spain
EDGARWATCH Page 81 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Place of
Subsidiary Incorporation
Subsidiaries of Pioneer Overseas Corporation, a wholly owned
subsidiary of the Registrant:
Agri-Genetic Realty, Inc. (30%) Philippines
Grainfield Co., Ltd. (35%) Thailand
Hibridos Pioneer de Mexicanos S.A. de C.V. (96%) Mexico
MISR Pioneer Seeds Company S.A.E. (80.39%) Egypt
P. T. Pioneer Hibrida Indonesia (80%) Indonesia
PartAgri SARL (50%) France
PHI Genetics (Pty) Limited South Africa
PHI Hi-Bred (Pty) Limited South Africa
PHI Seeds Proprietary Ltd. (99.99%) Botswana
Pioneer Argentina, S.A. Argentina
Pioneer France Mais S.A. (99.44%) France
Pioneer Genetique S.A.R.L. (99%) France
Pioneer Hi-Bred Agricultural Technologies, Inc. Philippines
Pioneer Hi-Bred Europe, Inc. USA
Pioneer Hi-Bred FSC Ltd. (99.55%) Jamaica
Pioneer Hi-Bred Italia S.p.A. (90%) Italy
Pioneer Hi-Bred Japan Co., Ltd. (52%) Japan
Pioneer Hi-Bred Korea, Inc. USA
Pioneer Hi-Bred Magyarorszag Kft. (90%) Hungary
Pioneer Hi-Bred Northern Europe GmbH Germany
Pioneer Hi-Bred S.A.R.L. (99.8%) France
Pioneer Hi-Bred Seeds Agro S.R.L. Romania
Pioneer Hi-Bred Seeds, Inc. JV (95%) Ethiopia
Pioneer Hi-Bred Sementes de Portugal, S.A. (99.96%) Portugal
Pioneer Hi-Bred Thailand Co., Ltd. (94.5%) Thailand
Pioneer Overseas Corporation (Thailand) Ltd. (99.96%) Thailand
Pioneer Overseas Research Corporation USA
Pioneer Pakistan Seed Limited (80%) Pakistan
Pioneer Saaten GmbH Austria
Pioneer Seed Company (Zimbabwe) (Private) Limited (95%) Zimbabwe
Pioneer Seed Holding Nederland B.V. Netherlands
Pioneer Seeds, Inc. USA
Pioneer Semena Holding GmbH (99%) Austria
Pioneer Sementes Ltda. (25.61%) Brazil
Pioneer Sjeme D.o.o. (10%) Croatia
Pioneer Tohumculuk A.S. (99.98%) Turkey
Pioneer Trading Ltd. (51%) Turks & Caicos
Semillas Hibridas Pioneer S.A. (75%) Colombia
Semillas Pioneer Chile Ltda. (0.26%) Chile
Semillas Pioneer de Venezuela C.A. Venezuela
SPIC PHI Seeds Inc. (40%) India
Swazi-American (PHI) Seeds, Ltd. (70%) Swaziland
Ukranian-American Russian Zorya-Nasinnya (33.33%) Ukraine
EDGARWATCH Page 82 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Place of
Subsidiary Incorporation
Subsidiaries of Green Meadows, Ltd., a wholly owned
subsidiary of the Registrant:
Green Meadows Development Board USA
Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico
Iowa India Investments Company Ltd. USA
PHI Mexico, S.A. de C.V. (1%) Mexico
Pioneer France Mais S.A. (0.08%) France
Village Court, Inc. USA
Subsidiaries of PHI Insurance Services, Inc., a wholly-owned
subsidiary of the Registrant:
Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico
Pioneer Insurance Services, Inc. - An insurance Agency USA
Subsidiary of Pioneer Genetique S.A.R.L., a wholly owned subsidiary
of Pioneer Overseas Corporation and Pioneer Seeds, Inc.:
Pioneer France Mais S.A. (.08%) France
Subsidiaries of Pioneer Hi-Bred Europe, Inc., a wholly owned
subsidiary of Pioneer Overseas Corporation:
Pioneer Hi-Bred Magyarorszag Kft. (10%) Hungary
Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal
Pioneer Tohumculuk A.S. (0.01%) Turkey
Subsidiary of Pioneer Hi-Bred Korea, Inc., a wholly owned
subsidiary of Pioneer Overseas Corporation:
Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal
Subsidiaries of Pioneer Hi-Bred Limited, a wholly owned
subsidiary of the Registrant:
Pioneer France Mais S.A. (0.08%) France
Pioneer Hi-Bred S.A.R.L. (0.20%) France
Subsididary of Pioneer Overseas Research Corporation, a wholly
owned subsidiary of Pioneer Overseas Corporation:
Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal
Subsidiaries of Pioneer Seed Holding Nederland B.V., a wholly
owned subsidiary of Pioneer Overseas Corporation:
Hellaseed S.A. (51%) Greece
Pioneer France Mais S.A. (0.08%) France
Pioneer Hi-Bred Slovakia S.R.O. Slovakia
EDGARWATCH Page 83 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Place of
Subsidiary Incorporation
Subsidiaries of Pioneer Seeds, Inc., a wholly
owned subsidiary of Pioneer Overseas Corporation:
Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico
MISR Pioneer Seed Company S.A.E. (0.01%) Egypt
P.T. Pioneer Hibrida Indonesia (20%) Indonesia
PHI Seeds Proprietary Limited (0.01%) Botswana
Pioneer France Mais S.A. (0.08%) France
Pioneer Genetique S.A.R.L. (1%) France
Pioneer Hi-Bred Italia S.p.A. (10%) Italy
Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal
Pioneer Semena Holding GmbH (1%) Austria
Pioneer Sjeme D.o.o. (90%) Croatia
Pioneer Tohumculuk A.S. (0.01%) Turkey
EDGARWATCH Page 84 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 23
CONSENTS OF EXPERTS AND COUNSEL
INDEPENDENT AUDITORS' CONSENT
The Board of Directors Pioneer Hi-Bred International, Inc.
We consent to incorporation by reference in the registration statement No.
333-08927 on Form S-8 of our report dated October 4, 1996, relating to the
consolidated balance sheets of Pioneer Hi-Bred International, Inc. and
subsidiaries as of August 31, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended August 31, 1996,
which report appears in the August 31, 1996, annual report on Form 10-K of
Pioneer Hi-Bred International, Inc.
/s/KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Des Moines, Iowa
November 22, 1996
EDGARWATCH Page 85 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5
MULTIPLIER 1,000,000
PERIOD-TYPE YEAR
FISCAL-YEAR-END AUG-31-1996
PERIOD-END AUG-31-1996
CASH 43
SECURITIES 56
RECEIVABLES 266
ALLOWANCES 23
INVENTORY 382
CURRENT-ASSETS 784
PP&E 985
DEPRECIATION 475
TOTAL-ASSETS 1422
CURRENT-LIABILITIES 288
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 93
OTHER-SE 925
TOTAL-LIABILITY-AND-EQUITY 1422
SALES 1721
TOTAL-REVENUES 1721
CGS 863
TOTAL-COSTS 863
OTHER-EXPENSES 511
LOSS-PROVISION 0
INTEREST-EXPENSE 11
INCOME-PRETAX 350
INCOME-TAX 127
INCOME-CONTINUING 223
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 223
EPS-PRIMARY 2.68
EPS-DILUTED 2.68
EDGARWATCH Page 86 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report or amendment thereto to
be signed on its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT) PIONEER HI-BRED INTERNATIONAL, INC.
/s/ Charles S. Johnson
-------------------------------------------------
(NAME AND TITLE) Charles S. Johnson, President and Chief Executive
Officer and Director
DATE November 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Charles S. Johnson
-------------------------------------------------
(NAME AND TITLE) Charles S. Johnson, President and Chief Executive
Officer and Director
DATE November 22, 1996
/s/ Thomas N. Urban
-------------------------------------------------
(NAME AND TITLE) Thomas N. Urban, Chairman of the Board of Directors
DATE November 22, 1996
/s/ Jerry L. Chicoine
-----------------------------------------------------
(NAME AND TITLE) Jerry L. Chicoine, Senior Vice President, Chief
Financial Officer and Corporate Secretary to the Board
DATE November 22, 1996
/s/ Dwight G. Dollison
-----------------------------------------------------
(NAME AND TITLE) Dwight G. Dollison, Vice President and Treasurer
DATE November 22, 1996
/s/ Brian G. Hart
-----------------------------------------------------
(NAME AND TITLE) Brian G. Hart, Vice President and Corporate Controller
DATE November 22, 1996
/s/ C. Robert Brenton
-----------------------------------------------------
(NAME AND TITLE) C. Robert Brenton, Director
DATE November 22, 1996
/s/ Dr. Pedro Cuatrecasas
-----------------------------------------------------
(NAME AND TITLE) Dr. Pedro Cuatrecasas, Director
DATE November 22, 1996
EDGARWATCH Page 87 of 88
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-K
- --------------------------------------------------------------------------
/s/ Dr. Ray A. Goldberg
----------------------------------------------------
(NAME AND TITLE) Dr. Ray A. Goldberg, Director
DATE November 22, 1996
/s/ Fred S. Hubbell
----------------------------------------------------
(NAME AND TITLE) Fred S. Hubbell, Director
DATE November 22, 1996
/s/ Dr. F. Warren McFarlan
----------------------------------------------------
(NAME AND TITLE) Dr. F. Warren McFarlan, Director
DATE November 22, 1996
/s/ Dr. Owen J. Newlin
----------------------------------------------------
(NAME AND TITLE) Dr. Owen J. Newlin, Director
DATE November 22, 1996
/s/ Dr. Virginia Walbot
----------------------------------------------------
(NAME AND TITLE) Dr. Virginia Walbot, Director
DATE November 22, 1996
/s/ H. Scott Wallace
----------------------------------------------------
(NAME AND TITLE) H. Scott Wallace, Director
DATE November 22, 1996
/s/ Fred W. Weitz
----------------------------------------------------
(NAME AND TITLE) Fred W. Weitz, Director
DATE November 22, 1996
/s/ Herman H.F. Wijffels
----------------------------------------------------
(NAME AND TITLE) Herman H.F. Wijffels, Director
DATE November 22, 1996
/s/ Nancy Y. Bekavac
----------------------------------------------------
(NAME AND TITLE) Nancy Y. Bekavac, Director
DATE November 22, 1996
/s/ Luiz Kaufmann
----------------------------------------------------
(NAME AND TITLE) Luiz Kaufmann, Director
DATE November 22, 1996
EDGARWATCH Page 88 of 88
<PAGE>
- ------------------------------------------------------------------------------
PIONEER HI BRED INTERNATIONAL INC 10-Q
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Internet Financial Network PIONEER HI BRED INTERNATIONAL INC 10-Q
07/08/1997 Page 1
Internet Financial Network
Smart Doc
PIONEER HI BRED INTERNATIONAL INC
Document 10-Q
Filing Date: 07/08/1997
Exhibit List
EX-27
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Document Sections
<S> <C> <C>
PART I - FINANCIAL INFORMATION ...........................................................................3
CONSOLIDATED CONDENSED BALANCE SHEETS ....................................................................7
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ..........................................................10
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ..........................................................13
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS .....................................................15
PART II - OTHER INFORMATION ..............................................................................23
Item 6. - Exhibits and Reports on Form 8-K ...............................................................23
Full Contents
700 Capital Square, 400 Locust, Des Moines, Iowa 50309 ...................................................1
PART I - FINANCIAL INFORMATION ...........................................................................3
CONSOLIDATED CONDENSED BALANCE SHEETS ....................................................................7
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ..........................................................10
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ..........................................................13
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS .....................................................15
PART II - OTHER INFORMATION ..............................................................................23
Item 6. - Exhibits and Reports on Form 8-K ...............................................................23
</TABLE>
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
---------------------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- -------
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended May 31, 1997
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
Commission File Number : 0-7908
PIONEER HI-BRED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Iowa 42-047052
- --------------------------------------------- ---------------------
(State or other jurisdiction of incorporation (I.R.S. Employer or
organization) Identification No.)
700 Capital Square, 400 Locust, Des Moines, Iowa 50309
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (515) 248-4800
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 27, 1997
- ------------------------------ -----------------------------
Common Stock ($1.00 par value) 82, 222, 935
================================================================================
EDGARWATCH Page 1 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -- May 31, 1997,
August 31, 1996, and May 31, 1996.............................. 3-4
Consolidated Condensed Statements Of Operations-- Three Months
and Nine Months Ended May 31, 1997 and May 31, 1996............ 5
Consolidated Condensed Statements Of Cash Flows-- Nine Months
Ended May 31, 1997 and May 31, 1996............................ 6
Notes to Consolidated Condensed Financial Statements............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8-13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 14
Signatures................................................................ 15
</TABLE>
EDGARWATCH Page 2 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
<CAPTION>
May 31, August 31, May 31,
ASSETS 1997 1996 1996
---------- ----------- --------
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents........... $ 183 $ 99 $ 227
Accounts and notes receivable, net.. 489 243 407
Inventories:
Finished seed..................... 288 209 262
Unfinished seed................... 94 163 77
Other............................. 7 10 7
Deferred income taxes............... 59 58 47
Prepaid expenses and other current
assets............................ 11 2 10
--------- -------- -------
Total current assets $ 1,131 $ 784 $ 1,037
LONG-TERM ASSETS........................ 87 81 90
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and allowances
May 31, 1997 - $499
August 31, 1996 - $484
May 31, 1996 - $474................. 542 510 500
INTANGIBLES............................. 66 47 44
-------- -------- --------
$ 1,826 $ 1,422 $ 1,671
======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
EDGARWATCH Page 3 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in millions)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' May 31, August 31, May 31,
EQUITY 1997 1996 1996
----------- ---------- -------
CURRENT LIABILITIES
<S> <C> <C> <C>
Short-term borrowings................. $ 28 $ 13 $ 15
Current maturities of long-term debt.. 5 12 8
Accounts payable, trade............... 167 89 182
Accrued compensation.................. 52 65 47
Income taxes payable.................. 181 63 154
Other accruals........................ 49 46 51
-------- -------- --------
Total current liabilities........... $ 482 $ 288 $ 457
-------- -------- --------
LONG-TERM DEBT............................ $ 32 $ 25 $ 30
-------- -------- --------
DEFERRED ITEMS
Postretirement benefits............... $ 42 $ 40 $ 39
Other................................. 46 44 43
-------- -------- --------
$ 88 $ 84 $ 82
-------- -------- --------
MINORITY INTEREST IN SUBSIDIARIES........ $ 7 $ 7 $ 7
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock, no par value......... $ -- $ -- $ --
Common stock, $1 par value............ 93 93 93
Additional paid-in capital............ 41 23 20
Retained earnings..................... 1,499 1,272 1,326
Unrealized gain on available-for-sale
securities, net..................... 17 11 16
Cumulative translation adjustment..... (13) (3) (5)
-------- -------- --------
$ 1,637 $ 1,396 $ 1,450
Less: Cost of common shares
acquired for the treasury........... (393) (364) (339)
Unearned compensation............... (27) (14) (16)
-------- -------- --------
$ 1,217 $ 1,018 $ 1,095
-------- -------- --------
$ 1,826 $ 1,422 $ 1,671
======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
EDGARWATCH Page 4 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
-------------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales.......................... $ 1,288 $ 1,168 $ 1,642 $ 1,541
-------- -------- -------- --------
Operating costs and expenses:
Cost of goods sold............... $ 513 $ 442 $ 700 $ 638
Research and product development. 40 35 103 97
Selling.......................... 189 187 305 306
General and administrative....... 31 26 96 93
-------- -------- -------- --------
$ 773 $ 690 $ 1,204 $ 1,134
-------- -------- -------- --------
Operating income................. $ 515 $ 478 $ 438 $ 407
Investment income.................. 7 7 16 16
Interest expense................... (2) (3) (6) (10)
Net exchange and other gains (losses) (1) -- -- (1)
-------- -------- -------- --------
Income before items shown
below.......................... $ 519 $ 482 $ 448 $ 412
Provision for income taxes......... (187) (178) (161) (10)
Minority interest and other........ -- (1) (2) (3)
-------- -------- -------- --------
Net income....................... $ 332 $ 303 $ 285 $ 258
======== ======== ======== ========
Income per common share*........... $ 4.04 $ 3.64 $ 3.46 $ 3.10
Dividends per common share*........ $ .23 $ .20 $ .69 $ .60
Weighted average number of common
shares outstanding................ 82.2 83.1 82.3 83.3
</TABLE>
* Not in millions
See Notes to Consolidated Condensed Financial Statements.
EDGARWATCH Page 5 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
<TABLE>
<CAPTION>
Nine Months Ended
May 31, May 31,
1997 1996
----------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income....................................... $ 285 $ 258
Noncash items included in net income:
Depreciation and amortization.................. 64 55
Gain on sale of available-for-sale securities.. (7) --
Other.......................................... 1 8
Net change in assets and liabilities............. (75) 130
-------- --------
Net cash provided by operating activities...... $ 268 $ 451
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................. $ (85) $ (76)
Proceeds on sale of available-for-sale securities 17 --
Other............................................ (31) (48)
-------- --------
Net cash used in investing activities.......... $ (99) $ (124)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds on short-term borrowings. $ 17 $ (39)
Purchase of treasury stock....................... (24) (37)
Dividends paid................................... (57) (50)
Principal payments on long-term borrowings....... (11) (54)
-------- --------
Net cash used in financing activities.......... $ (75) $ (180)
-------- --------
Effect of foreign currency exchange rate changes on
cash and cash equivalents........................ $ (10) $ (4)
-------- --------
Net increase in cash and cash equivalents....... $ 84 $ 143
Cash and cash equivalents, beginning............... 99 84
-------- --------
CASH AND CASH EQUIVALENTS, ENDING.................. $ 183 $ 227
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for:
Interest................................ $ 5 $ 12
======== ========
Income taxes............................ $ 54 $ 16
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
EDGARWATCH Page 6 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PIONEER HI-BRED INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to fairly present the financial
position as of May 31, 1997 and 1996, and the results of operations and cash
flows for the nine months ended May 31, 1997 and 1996. Because of the
seasonal nature of the Company's business, the results of operations for the
nine months ended May 31, 1997, may not be indicative of the results to be
expected for the full year.
2. The Company has guaranteed the repayment of principal and interest on
certain obligations of Village Court Associates, an affiliated real estate
venture. At May 31, 1997, such guarantees totaled approximately $23 million.
3. Since April 1996, Dekalb Genetics Corporation ("DeKalb") has filed five
lawsuits against Pioneer. The lawsuits allege that insect-resistant corn
products that use a Bt gene, and corn products resistant to glufosinate
herbicide, infringe on certain DeKalb patents.
After reviewing the Company's intellectual property position, all of
DeKalb's patent filings, and DeKalb's lawsuits, Pioneer believes DeKalb's
claims are without merit. Pioneer has denied DeKalb's allegations and raised
defenses that, if successful, would render DeKalb's patents invalid. Pioneer
believes that disposition of the lawsuits will not have a materially adverse
affect on the consolidated financial position and results of operations of
the Company. Pioneer also does not expect delays in the introductions of
advanced corn hybrids with insect and herbicide resistance because of these
lawsuits.
4. In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" (SFAS 128), which is intended to simplify the
earnings per share computation and increase comparability of earnings per
share on an international basis. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, and requires
restatement of all prior period earnings per share data presented. The
adoption of SFAS 128 is not expected to have a significant impact on the
Company's financial statements.
EDGARWATCH Page 7 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
PIONEER HI-BRED INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
unaudited condensed consolidated financial statements and notes, and with the
Company's audited financial statements and notes for the fiscal year ended
August 31, 1996.
MATERIAL CHANGES IN FINANCIAL CONDITION:
Due to the seasonal nature of the agricultural seed business, the Company
generates most of its cash from operations during the second and third quarters
of the fiscal year. Cash generated during this time is used to meet the cash
needs of the period and to pay the commercial paper and accounts payable which
are the Company's primary sources of financing during the first and fourth
quarters of the fiscal year. Any excess funds are invested, primarily in
short-term commercial paper.
Most of the Company's financing is done through the issuance of commercial
paper in the U.S., backed by revolving and seasonal lines of credit. In
addition, foreign lines of credit and direct borrowing agreements are relied
upon to support overseas financing needs. Short-term debt at May 31, 1997,
consisted of $28 million in direct borrowings from foreign banks.
During fiscal 1997, the Company has the following domestic lines of credit
available:
(in millions)
....... Revolving Seasonal Total
.......
First quarter.. $200 $100 $300
Second quarter. $200 $100 $300
Third quarter.. $200 $ -- $200
Fourth quarter. $200 $ -- $200
Increased credit sales at May 31, 1997, contributed to the current year
increase in accounts receivable when compared to prior year results.
Property and equipment at May 31, 1997, increased over the same period a
year earlier mainly due to the construction of additional production capacity in
Latin America combined with other newly constructed facilities in Johnston,
Iowa.
At May 31 1997, intangibles increased from prior year levels due to payments
associated with an agreement for the right to develop and produce elite Bt
transgenic corn hybrids.
EDGARWATCH Page 8 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
MATERIAL CHANGES IN RESULTS OF OPERATIONS:
Due to the seasonality of the seed business, partial-year results and
quarter-to-quarter comparisons are not always meaningful. Accordingly, such
quarterly comparisons are not emphasized. Typically, most of the Company's
revenue and operating profit are generated in the third quarter.
Net income for the nine months ended May 31, 1997, was $285 million, or
$3.46 per share, on sales of $1.642 billion, compared to net income of $258
million, or $3.10 per share, on sales of $1.541 billion for the first nine
months of fiscal 1996.
Nine months into fiscal 1997, the Company is on track for another year of
record earnings and better than 20 percent return on equity. As usual, there is
some uncertainty in predicting annual results. However, Northern Hemisphere seed
corn operations are the most significant component of consolidated results, and
with the third quarter just completed, more than 90 percent of projected annual
sales are recorded and much is known about the three drivers of seed corn
profitability - market share, market size, and price (net margin) per unit.
Fiscal 1997 marks a time of significant transition for our North American
seed corn product line. Depending on final corn acreage and seeding rates, the
Company's share of the North American seed corn market is estimated to be
approximately 42 percent to 42.5 percent. This is a decrease of approximately a
point and one half to two points from 1996 levels. The Company introduced a
number of new products this year targeted to replace hybrids that have in recent
years dominated the North American seed corn market. Falling unit sales of these
older hybrids are largely responsible for the estimated current year market
share decrease.
An expected increase in North American market size combined with an increase
in net seed corn margin per unit will also impact current year results. Corn
acreage in North America is projected to rise modestly above 1996 levels. And,
although operating results in North America will be impacted by higher per-unit
seed corn costs, the average seed corn selling price is expected to increase as
well. The introduction of significant volumes of new products in fiscal 1997 is
expected to increase the net selling price per unit in North America. The result
should be higher current year per-unit seed corn margins of approximately $2 per
unit.
In response to the growing market demand for new genetics with targeted
attributes, the Company introduced 27 new corn hybrids this year in North
America. First year sales of these new hybrids are expected to reach nearly
600,000 units, four times more than any previous group of new product
introductions. These new hybrids are expected to account for approximately 40
percent of next year's Pioneer seed corn sales in North America and will be the
foundation for future market share.
The most prominent demand for new genetic corn products this season was
Bt-corn. Despite regulatory approval for its Bt-corn products coming late in the
selling season, Pioneer sales representatives were able to place into the market
more than 300,000 units of the new Bt-corn products introduced in 1997. Those
units covered approximately 20 percent of the estimated North American Bt-corn
acres planted in 1997. Because of the late start, the Company was unable to
attain its normal market presence for these products. This lost opportunity also
affected current year market share results. In total, eight Bt-corn hybrids were
introduced in 1997. Management believes these new Bt-corn products incorporate
the best genetics available and have stronger performance potential than any
Bt-corn product released to date. The Company is in excellent position to grow
its Bt-corn market share in 1998 due to good placement in the market of the 1997
Bt-corn sales, expected larger available supplies of these Bt-corn products, and
an entire season in which to market them.
EDGARWATCH Page 9 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
The demand for new genetics extends beyond Bt-corn products. The Company's
continuous effort to expand and improve its germplasm base includes the testing
of products with improved agronomic qualities, as well as value-added traits for
livestock producers and other end-users. Only well-tested products that
demonstrate reliable performance and value potential for our customers will be
brought to the market. The Company will continue to be patient in its testing to
provide new traits in the best genetics. While we believe this disciplined
approach to product development has contributed to the recent decline in our
market share, we are certain it best serves the long-term interests of our
customers and shareholders.
In addition, the Company continues to vigorously defend the value (price) of
its new products with customers. Some competitors have sacrificed the value of
these new technologies in an attempt to capture market share. The Company
believes it is essential to protect the value of these new products, and also
recognizes the challenge this creates in our efforts to protect and grow market
share.
Despite these recent challenges, management believes the Company is well
positioned to grow market share in 1998. The 27 newly-introduced corn hybrids
have performed very well in wide-area testing. Besides Bt-corn products, these
new releases include hybrids with better disease resistance, as well as products
for the rapidly growing high-oil corn market and new white and waxy corn hybrids
for the starch industry. Our research indicates that this new lineup may be
stronger than the one introduced in 1990, which drove the record-setting growth
in sales and market share over the subsequent five years. Due to the Company's
ability to quickly increase supply, these products should be widely available in
1998.
There is also excitement surrounding soybean operations. Results in 1997
will reflect record sales and profits from our soybean business. Fueled by
growth in acres, market share, and strong unit sales of glyphosate-resistant
products, current year North American soybean unit sales will exceed seed corn
unit sales. Given that glyphosate-resistant varieties are priced at a premium to
our elite soybean varieties, they will significantly enhance soybean operating
results.
Although results in regions outside North America are more difficult to
predict, on the whole, management believes the Company should post higher
earnings from these operations as well. Europe, Mexico, Asia, Africa, and the
Middle East will all post increases in operating income from a year ago. While
Latin American operations are expected to fall below prior year results, the
extent is unknown and will be determined by the volume of sales recorded in
fourth quarter of the current year. In total, unit volumes outside North America
are expected to grow, however, the strong dollar will likely dampen reported
earnings from many of our foreign operations and increase non-operating
financial expenses.
As we look forward, all indications point to continued strong financial
performance. However, uncertainties exist that could affect the Company's
expectations, and fluctuations in expected results are likely as more
information becomes available. Some of the important factors that could cause
actual results to vary significantly from our expectations include weather,
government programs/approvals, commodity prices, changes in corn acreage,
intellectual property positions, product performance, customer preferences,
currency fluctuations, and costs.
Nine Months Ended May 31, 1997 compared to the Nine Months Ended May 31, 1996
Operating income for the first nine months of fiscal 1997 increased $31
million from the same period a year earlier. Additional seed corn units sales
outside North America and increased North American soybean unit sales were the
primary factors for the increase.
EDGARWATCH Page 10 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
Net Sales and Operating Profit
(Unaudited, in millions)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
May 31, May 31,Increase/ May 31, May 31, Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
---------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Corn:
North America..... $ 768 $ 741 $ 27 $ 882 $ 853 $ 29
Europe............ 238 202 36 338 321 17
Other Regions..... 15 19 (4) 69 61 8
-------- -------- -------- -------- -------- --------
$ 1,021 $ 962 $ 59 $ 1,289 $ 1,235 $ 54
Soybeans............ 174 136 38 182 146 36
Other............... 93 70 23 171 160 11
-------- -------- -------- -------- -------- --------
Total net sales....... $ 1,288 $ 1,168 $ 120 $ 1,642 $ 1,541 $ 101
======== ======== ======== ======== ======== ========
Operating profit :
Corn................ $ 468 $ 448 $ 20 $ 443 $ 432 $ 11
Soybean............. 46 30 16 31 17 14
Other............... 20 15 5 22 13 9
-------- -------- -------- -------- -------- --------
Product line operating
profit ........... $ 534 $ 493 $ 41 $ 496 $ 462 $ 34
Indirect general and
administrative
expenses........ (19) (15) (4) (58) (55) (3)
-------- -------- ------- -------- -------- --------
Operating income...... $ 515 $ 478 $ 37 $ 438 $ 407 $ 31
======== ======== ======== ======== ======== ========
Units delivered:
Corn:...............
North America..... 9.7 9.7 -- 11.3 11.3 --
Europe........... 2.1 1.7 0.4 3.0 2.8 0.2
Other Regions.... 0.2 0.4 (0.2) 1.2 1.0 0.2
-------- -------- -------- -------- -------- --------
12.0 11.8 0.2 15.5 15.1 0.4
======== ======== ======== ======== ======== ========
Soybean - North America 11.0 9.4 1.6 11.6 10.0 1.6
======== ======== ======== ======== ======== ========
</TABLE>
SEED CORN
North America
Operating profit in North America was virtually unchanged between years.
Current year unit sales through third quarter are similar to those recorded in
the previous year. Although seed price per unit increased compared to the prior
year, higher costs offset most of the year-to-date improvement. Increased
investment in research and product development also impacted current year
results.
EDGARWATCH Page 11 of 17
<PAGE>
PIONEER HI BRED INTERNATIONAL INC 10-Q
- --------------------------------------------------------------------------------
In 1997, the average net seed corn selling price per unit to customers in
North America is expected to increase approximately seven percent from the
introduction of several new elite products, which are priced at a premium, and
an increase in list prices across the entire product line. During the current
year, a change was made to the Company's commission program which eliminated
some ties between commissions and quantity savings discount programs. As a
result, reported net price for the first nine months of fiscal 1997 reflected an
increase of approximately four percent due to an increase in reported quantity
savings discounts. Reported net commission expense decreased accordingly. Net
selling price per unit to customers, North American seed corn net margin per
unit, and net compensation to sales representatives are essentially unaffected
by this program change.
Current year per-unit seed costs have increased, offsetting most of the unit
sales price improvement. Higher commodity costs related to the 1996 crop has
pushed per-unit seed corn cost of sales higher than what was recorded the
previous year.
Classical plant genetic improvement activities along with investments made
to access technology which will help expand and improve the Company's germplasm
base are increasing research and product development costs. As a result,
research and product development costs for seed corn recorded to date have
increased $8 million, or approximately 15 percent from a year ago. Annually,
these costs are estimated to increase approximately 10 percent.
Other Regions
Seed corn operating results outside North America increased $12 million for
the first nine months of fiscal 1997 compared to the same period in the previous
year. European operations provided the largest impact, providing $21 million in
additional operating income compared to a year ago. Strengthening of the U.S.
dollar against European currencies had a significant negative impact on current
year reported results. On a constant dollar basis, European operations improved
$42 million for the current period over results recorded last year. The majority
of the constant dollar increase was due to additional unit sales in Italy,
Southern Europe, and Central Europe. Market size and market share increases,
individually or in concert, played roles in these improvements.
Current year-to-date Mexico operations have improved $3 million. Favorable
weather conditions and improved water supply have resulted in increased
year-to-date unit sales. Increased per-unit sales price also impacted current
period results. These factors should improve annual operations over the prior
year.
Latin American operations decreased $11 million for the first nine months of
1997 compared to the same period a year ago. Production problems in Brazil have
reduced our available supply of seed within certain areas of Central Latin
America. Also impacting current year results were performance issues related to
last season's top selling hybrid in Argentina, which has reduced year-to-date
sales there. As a result, year-to-date unit sales are trailing those from the
previous year. New and improved products for the region are in the pipeline and
should be widely available as a result of production in North America. While
this supply will be available, at a higher cost, for the region's current
selling season, it is unknown whether it will be available in time for the early
sales season which falls within fiscal 1997.
Because of good planting conditions this year, the Company expects that a
higher percentage of its annual Northern Hemisphere corn sales were recorded
through the first three quarters of fiscal 1997 than in 1996. Therefore, on a
worldwide basis, we expect fewer fourth quarter corn unit sales in fiscal 1997
than in 1996.
EDGARWATCH Page 12 of 17
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PIONEER HI BRED INTERNATIONAL INC 10-Q
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SOYBEANS
Year-to-date soybean operating income improved over 75 percent from the
prior year, almost entirely the result of record North American operations.
Soybean operations continue to grow, and have improved on the record results
reflected a year ago. All three primary drivers for operating income: market
size, market share, and net unit price had positive impacts for soybean
operations.
Unit sales have increased over 15 percent, or approximately 1.6 million
units, from 1996 levels, fueled by increased acreage and improved market share.
Favorable commodity prices have resulted in additional acres planted to soybeans
in the current year, while continued strong product performance contributed to
market share gains.
Net margin improved from a year ago despite higher commodity costs. An
increase in list prices for the current year, combined with the sales price
effect of glyphosate-resistant products which are sold at a premium, more than
offset the increase in unit costs.
OTHER PRODUCTS
Other products current year operating results improved $9 million over those
recorded a year earlier. Current period comparisons were impacted by the prior
year liquidation of our specialty oils inventory and sale of our vegetable
products line, which combined to improve current year operating results $4
million. Operating income for canola products improved $3 million from year ago
results due to increased acreage and higher market share. Microbial product
results also improved for the first three quarters of 1997 as strong performance
of premium inoculant products pushed operating income $2 million higher.
Year-to-date alfalfa, sunflower, and sorghum products improved from year ago
results, as well. Decreased current year wheat sales in North America, the
result of reduced acreage, lowered other products operating results $3 million
from the same period last year.
INDIRECT GENERAL AND ADMINISTRATIVE EXPENSES
Current year indirect general and administrative expenses increased $3
million, or five percent, over 1996 levels. Increase general costs and higher
legal expense, resulting from technology claims and disputes, were partially
offset by the one-time effect of adopting FAS116 "Accounting for Contributions
Made and Contributions Received" during 1996 not present in the current year.
EDGARWATCH Page 13 of 17
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PIONEER HI BRED INTERNATIONAL INC 10-Q
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NET FINANCIAL AND TAXES
Current period net financial income for the first nine months of fiscal 1997
increased $5 million from what was recorded in the prior year. The retirement of
the medium-term note program in February 1996, combined with a lower average
level of short-term borrowing in the current year, reduced current period
interest expense $4 million. A current year gain from the sale of one million
shares of Mycogen Corp. stock improved net financial income $7 million, however,
this was offset almost entirely by an increase in recorded net exchange losses
principally due to the strengthening of the U.S. dollar against European
currencies. Both of these items are included in net exchange and other gains
(losses).
The estimated fiscal 1997 worldwide tax rate of 36 percent reflected through
the third quarter is the same as what was reflected on an annual basis for
fiscal 1996. The worldwide effective tax rate reflected through the third
quarter of fiscal 1996 was 36.5 percent. The effective tax rate reflected for
the third quarter is based on all information available to date, however, the
effective tax rate on an annual basis may vary from what is reflected in the
current period. The level of profits generated in foreign countries with tax
rates different from those in the United States and the impact from the
repatriation of foreign earnings through the remainder of the year will
influence the final reported effective tax rate.
EDGARWATCH Page 14 of 17
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PIONEER HI BRED INTERNATIONAL INC 10-Q
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PIONEER HI-BRED INTERNATIONAL, INC.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
a.Exhibits
Financial Data Schedule (Exhibit 27).
b.Reports on Form 8-K
No reports on Form 8-K were filed with the Commission during the three months
ended May 31, 1997.
EDGARWATCH Page 15 of 17
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PIONEER HI BRED INTERNATIONAL INC 10-Q
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PIONEER HI-BRED INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER HI-BRED INTERNATIONAL, INC.
(Registrant)
By /s/CHARLES S. JOHNSON
----------------------------------------
CHARLES S. JOHNSON
Chairman, President, and Chief Executive Officer
By /s/JERRY L. CHICOINE
----------------------------------------
JERRY L. CHICOINE
Senior Vice President and Chief Financial Officer
Dated: July 8, 1997
EDGARWATCH Page 16 of 17
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PIONEER HI BRED INTERNATIONAL INC 10-Q
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ARTICLE 5
MULTIPLIER 1,000,000
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END AUG-31-1997
PERIOD-START SEP-01-1996
PERIOD-END MAY-31-1997
CASH 56
SECURITIES 127
RECEIVABLES 513
ALLOWANCES 24
INVENTORY 389
CURRENT-ASSETS 1131
PP&E 1034
DEPRECIATION 492
TOTAL-ASSETS 1826
CURRENT-LIABILITIES 482
BONDS 0
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 93
OTHER-SE 1124
TOTAL-LIABILITY-AND-EQUITY 1826
SALES 1642
TOTAL-REVENUES 1642
CGS 803
TOTAL-COSTS 803
OTHER-EXPENSES 401
LOSS-PROVISION 0
INTEREST-EXPENSE 6
INCOME-PRETAX 446
INCOME-TAX 161
INCOME-CONTINUING 285
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 285
EPS-PRIMARY 3.46
EPS-DILUTED 3.46
EDGARWATCH Page 17 of 17
