PIONEER HI BRED INTERNATIONAL INC, 10-K, 1997-11-24

PIONEER HI BRED INTERNATIONAL INC
10-K, 1997-11-24
AGRICULTURAL PRODUCTION-CROPS

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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, 1997

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

<PAGE>

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 November 4, 1997, was $5,973,301,219. As of November 4, 1997,
65,756,873 shares of the Registrant's Common Stock, $1.00 par value, were
outstanding. As of November 4, 1997, there are also 164,445.86 shares of the
Registrant's Series A Convertible Preferred Stock outstanding to E.I. du Pont de
Nemours and Company (DuPont) which are convertible into 16,444,586 shares of the
Registrant's Common Stock upon transfer of beneficial ownership of such shares
of Preferred Stock to a person not a member of a DuPont group (generally defined
as an affiliate of DuPont) and under certain other limited circumstances.

<PAGE>

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, 1997. (Items 1, 2, and 3 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 27, 1998. (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, 1997 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, 1997 is incorporated
herein by reference.

ITEM 3. LEGAL PROCEEDINGS

The description of legal proceedings contained within footnote 6
in the Annual Report to Shareholders for the year ended August 31,
1997 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 Price Of And Dividends On 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, 1997 is incorporated
herein by reference.

Sales of Unregistered Securities: Pursuant to the Investment
Agreement, E.I. du Pont de Nemours and Company (DuPont) purchased
directly from Pioneer Hi-Bred International, Inc. (the "Company")
a new Series A Convertible Preferred Stock (the "Preferred
Stock") which represents an economic ownership in the Company
approximately equal to 20% of the Company's outstanding shares
before giving effect to the issuance and approximately 16 2/3%
after giving effect to the issuance at a Common Stock equivalent
price of $104 per share and $1.71 billion in the aggregate. The
Preferred Stock was exempt from registration under Section 4(2)
of Securities Act of 1933 because it was issued in a private
placement to an institutional accredited investor. After the
direct issuance of Preferred Stock to DuPont, the Company then
launched and completed a self-tender offer to purchase
approximately 16.4 million of its Common Stock, par value $1
("Common Stock") from its Shareholders. After giving effect to
the self-tender offer, DuPont had approximately a 20% Common
Stock equivalent equity interest in the Company.

<PAGE>

Shares of Preferred Stock are convertible (on the basis of 100
shares of Common Stock per 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, as defined in the Investment Agreement, and under certain
other limited circumstances.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data contained in the Annual Report to
Shareholders for the year ended August 31, 1997 is incorporated
herein by reference.

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, 1997 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, 1997
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, 1997; and the information responsive to the item
is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

On August 8, 1997, the Company filed a report on Form 8-K
reporting under Item 5, that Pioneer Hi-Bred International,
Inc. entered into a Research Alliance Agreement, Joint
Venture Formation Agreement, and Investment Agreement with
E. I du Pont de Nemours and Company. Related exhibits were
included under Item 7 of the report.

<PAGE>

FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
OF
PIONEER HI-BRED INTERNATIONAL, INC.
FOR THE FISCAL YEAR ENDED AUGUST 31, 1997

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, 1997 and 1996
Consolidated Statements of Income - years ended August 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity - years ended August 31, 1997,
1996 and 1995 Consolidated Statements of Cash Flows - years ended August 31,
1997, 1996 and 1995 Notes to Consolidated Financial Statements

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 Annual Report on Form 10-K............................ 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.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareholders
Pioneer Hi-Bred International, Inc.:

Under date of October 3 1997, we reported on the consolidated balance sheets of
Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1997 and
1996, 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,
1997, as contained in the 1997 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1997. In connection with our audits of
the aforementioned consolidated financial statements, we also have audited the
related 1997, 1996 and 1995 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, presents
fairly, in all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Des Moines, Iowa
October 3, 1997

PIONEER HI-BRED INTERNATIONAL, INC.
AND SUBSIDIARIES

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(In millions)

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> <C> <C>
Year ended August 31, 1997.............. $ 23 $ 6 $ 6 $ 23
-------- -------- ------- --------

Year ended August 31, 1996.............. $ 19 $ 5 $ 1 $ 23
-------- -------- ------- --------

Year ended August 31, 1995.............. $ 21 $ 2 $ 4 $ 19
-------- -------- ------- --------

*Represents accounts charged off as uncollectible, net of recoveries of bad debts.
</TABLE>

<PAGE>

INDEX

Exhibits to Annual Report on Form 10-K
Year Ended August 31, 1997
PIONEER HI-BRED INTERNATIONAL, INC.

Page
<S> <C>
Exhibit 3.1--Articles of Incorporation......................................................... 11-32
Exhibit 3.2--By-Laws ......................................................................... 33-46

Exhibit 4.1--Articles of Incorporation......................................................... 11-32
Exhibit 4.2--By-Laws ......................................................................... 33-46
Exhibit 4.3--Rights Agreement (Note 1)......................................................... 10
Exhibit 4.4--Specimen of Company's Common Stock Certificate (Note 2)........................... 10

Exhibit 10--Material Contracts
Executive Compensation Plans
.1 Stock Option Plan (Note 3).................................................... 10
.2 Deferred Compensation Plan (Note 4)........................................... 10
.3 Annual Deferred Compensation Plan (Note 5).................................... 10
.4 Supplemental Executive Retirement Plan (Note 6)............................... 10
.5 Restricted Stock Plan - Performance Based (Note 7)............................ 10
.6 Management Reward Program - Performance Based (Note 8)........................ 10
.7 Directors' Restricted Stock Plan.............................................. 47-52
Other Material Contracts
.8 Investment Agreement dated August 6, 1997 between the Company and E.I. du
Pont de Nemours and Company (Note 9).......................................... 10
.9 Formation Agreement dated August 6, 1997 between the Company and E.I. du
Pont de Nemours and Company (Note 10)......................................... 10
.10 Research Alliance Agreement dated August 6, 1997 between the Company and
E.I. du Pont de Nemours and Company (Note 11)................................. 10
.11 Preferred Seed Support Agreement dated August 6, 1997 between the Company
and E.I. du Pont de Nemours and Company (Note 12)............................. 10

Exhibit 11--Statement re: Computation of earnings per share................................... 53

Exhibit 13--Annual Report to Shareholders for the fiscal year ended August 31, 1997
.1 Description of the Company's business.......................................... 54-58
.2 Selected financial data........................................................ 59
.3 Consolidated net sales and operating income (loss) by product.................. 60
.4 Management's discussion and analysis of financial condition and results.......
of operations................................................................. 61-71
.5 Consolidated financial statements of the Registrant, together with
Independent Auditors' Report thereon.......................................... 72-92
.6 Research and product development............................................... 93
.7 Description of properties...................................................... 93-94
.8 Market for the Registrant's common stock....................................... 94

Exhibit 21--Subsidiaries of Registrant......................................................... 95-97

Exhibit 23--Consents of experts and counsel.................................................... 98

Exhibit 27--Financial data schedule............................................................ 101

See Notes for Exhibits to Annual Report on Form 10-K

</TABLE>

<PAGE>

INDEX

Notes for Exhibits to Annual Report on Form 10-K
Year Ended August 31, 1997
PIONEER HI-BRED INTERNATIONAL, INC.

Note 1. Incorporated herein by reference to Exhibit 1 of the Company's Form
8-A/A-1, filed March 14, 1995, and Exhibit 1 of the Company's Form
8-A/A-2, filed August 28, 1997.

Note 2. Incorporated herein by reference to Exhibit 4.5 of the Company's
Form S-8 Registration Statement, filed July 26, 1996.

Note 3. Incorporated herein by reference to Exhibit 4.1 of the Company's
Form S-8 Registration Statement, filed July 26, 1996.

Note 4. Incorporated herein by reference to Exhibit 10.2 of the Company's
1993 Annual Report on Form 10K, filed November 29, 1993.

Note 5. Incorporated herein by reference to Exhibit 10.3 of the Company's
1993 Annual Report on Form 10-K, filed November 29, 1993.

Note 6. Incorporated herein by reference to Exhibit 10.5 of the Company's
1996 Annual Report on Form 10-K, filed November 25, 1996.

Note 7. Incorporated herein by reference to Exhibit 10.6 of the Company's
1996 Annual Report on Form 10-K, filed November 25, 1996.

Note 8. Incorporated herein by reference to Exhibit 10.7 of the Company's
1996 annual Report on form 10-K, filed November 25, 1996.

Note 9. Incorporated herein by reference to Exhibit 1 of the Company's Form
8-K filed August 8, 1997.

Note 10. Incorporated herein by reference to Exhibit c(1)of the Company's
Schedule 13e-4 filed September 25, 1997.

Note 11. Incorporated herein by reference to Exhibit c(2) of the Company's
Schedule 13e-4 filed September 25, 1997.

Note 12. Incorporated herein by reference to Exhibit c(4) of the Company's
Schedule 13e-4 filed September 25, 1997.

<PAGE>

THIRD RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF PIONEER HI-BRED INTERNATIONAL, INC.

TO THE SECRETARY OF STATE OF THE STATE OF IOWA:

Pursuant to the provisions of Section 490.1007 of the Iowa Business
Corporation Act, Chapter 490, Code of Iowa, the undersigned Corporation adopts
the following Third Restated and Amended Articles of Incorporation

ARTICLE I

The name of the corporation shall be PIONEER HI-BRED INTERNATIONAL, INC.,
and its principal place of business shall be in the City of Des Moines, Polk
County, Iowa.

ARTICLE II

The duration of the Corporation's existence hereunder is perpetual.

ARTICLE III

The purpose or purposes for which the Corporation is organized are: This
Corporation shall have unlimited power to engage in and to do any lawful act
concerning any or all lawful businesses for which corporations may be organized
under Chapter 490 of the Code of Iowa.

ARTICLE IV

A. The aggregate amount of authorized capital stock of this Corporation
shall be $150,000,000 divided into (i) 150,000,000 shares, consisting of one
class designated as common and having a par value of One Dollar ($1.00) per
share, and (ii) 10,000,000 shares, consisting of one class designated as serial
preferred without par value.

B. 1. Each outstanding share of common stock shall entitle the holder
thereof to five votes on each matter properly submitted to the holders of shares
of common stock for their vote, consent, waiver, release or other action; except
that no holder shall be entitled to exercise more than one vote on any such
matter in respect of any share of common stock with respect to which there has
been a change in beneficial ownership during the thirty-six (36) months
immediately preceding the date on which a determination is made of the
shareholders who are entitled to take any such action.

2. A change in beneficial ownership of an outstanding share of
common stock shall be deemed to have occurred whenever a change occurs in any
person or group of persons who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares (i) voting
power, which includes the power to vote, or to direct the voting of such share;
(ii) investment power, which includes the power to direct the sale or other
disposition of such share; (iii) the right to receive or retain the proceeds of
any sale or other disposition of such share; or (iv) the right to receive any
distributions, including cash dividends, in respect of such share.

a. In the absence of proof to the contrary provided
in accordance with the procedures referred to in subparagraph (4) of this
paragraph B, a change in beneficial ownership shall be deemed to have occurred
whenever a share of common stock is transferred of record into the name of any
other person.

<PAGE>

b. In the case of a share of common stock held of record in
the name of a corporation, general partnership, limited partnership, voting
trustee, bank, trust company, broker, nominee or clearing agency, or in any
other name except a natural person, if it has not been established pursuant to
such procedures that there has been no change in the person o r persons who
direct the exercise of the rights referred to in clauses 2(i) through 2(iv) of
this paragraph with respect to such share of common stock during the period of
thirty-six months immediately preceding the date on which a determination is
made of the shareholders who are entitled t take any action (or since November
14, 1985 for any period ending on or before November 14, 1988), then a chang
in beneficial ownership shall be deemed to have occurred during such period.

c. In the case of a share of common stock held of record in
the name of any person as trustee, agent, guardian or custodian under the
Uniform Gifts to Minors Act as in effect in any state, a change in beneficial
ownership shall be deemed to have occurred whenever there is a change in th
beneficiary of such trust, the principal of such agent, the ward of such
guardian or th minor for whom such custodian is acting or in such trustee,
agent, guardian or custodian.

3. Notwithstanding anything in this paragraph B to the contrary,
no change in beneficial ownership shall be deemed to have occurred solely as a
result of:

a. any event that occurred prior to November 14, 1985 or
pursuant to the terms of any contract (other than a contract for the purchase
and sale of shares of common stock contemplating prompt settlement), including
contracts providing for options,rights of first refusal and similar arrangements
in existence on such date to which any holder of shares of common stock is a
party;
b. any transfer of any interest in shares of common
stock pursuant to a bequest or inheritance, by operation of law upon the death
of any individual, or by any other transfer without valuable consideration,
including a gift that is made in good faith and not for the purpose of
circumventing this Article IV;

c. any change in the beneficiary of any trust, or any
distribution of a share of common stock from trust, by reason of the birth,
death, marriage or divorce of any natural person, the adoption of any natural
person prior to age 18 or the passage of a given period of time or the
attainment by any natural person of a specific age, or the creation or
termination of any guardianship or custodial arrangement;

d. any appointment of a successor trustee, agent,
guardian or custodian with respect to a share of common stock if neither such
successor has nor its predecessor had the power to vote or to dispose of such
share of common stock without further instructions from others, whose identities
remain unchanged;

e. any change in the person to whom dividends or other
distributions in respect to a share of common stock are to be paid pursuant
to the issuance or modification of a revocable dividend payment order; or

f. except as provided in subparagraph (5) of this paragraph
B, any issuance of
a share of common stock by the Corporation or any transfer by the Corporation of
a share of common stock held in treasury, (i.e., the person acquiring the share
shall be deemed on the date of issuance or transfer by the Corporation to have
continuously beneficially owned such share for thirty-six (36) months), unless
otherwise determined by the Board of Directors at the time of authorizing such
issuance or transfer.

4. For purposes of this paragraph B, all determinations concerning
changes in beneficial ownership, or the absence of any such change, shall be
made by the Corporation. Written procedures designed to facilitate such
determinations shall be established by the Corporation and refined from time to
time. Such procedures shall provide, among other things,

<PAGE>

the manner of proof of facts that will be accepted and the frequency with which
such proof may be required to be renewed. The Corporation and any transfer agent
shall be entitled to rely on all information concerning beneficial ownership of
the common stock coming to their attention from any source and in any manner
reasonably deemed by them to be reliable, but neither the Corporation nor any
transfer agent shall be charged with any other knowledge concerning the
beneficial ownership of the common stock.

5. In the event of any stock split or stock dividend with respect
to the common stock, each share of common stock acquired by reason of such split
or dividend shall be deemed to have been beneficially owned by the same person
continuously from the same date as that on which beneficial ownership of the
share of common stock, with respect to which such share of common stock was
distributed, was acquired.

6. Each share of common stock, whether at any particular time the
holder thereof is entitled to exercise five votes for one, shall be identical to
all other shares of common stock in all other respects, and together all of the
common shares shall constitute a single class of shares of the Corporation.

7. Notwithstanding any provision in this paragraph B to the
contrary, if at any time the common stock will be ineligible for inclusion on
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System (or such other similar automated quotation
system as may exist at the time) so long as some but not all shares of common
stock have five votes per share, then, upon a determination by the Board of
Directors that the provisions of this paragraph B no longer are in the best
interests of the shareholders, and without any shareholder action, each
outstanding share of common stock shall entitle the holder thereof to one vote
on each matter properly submitted thereafter to the holders of common stock for
their vote, consent, waiver, release or other action.

C. The preferences, voting rights, if any, limitations and relative rights
of the serial preferred stock are as follows:

1. The holders of the preferred stock shall be entitled to receive
dividends when and as declared by the Board of Directors at such rate as shall
be fixed by resolution of the Board of Directors as hereafter provided, which
dividends shall be cumulative, before any dividends shall be paid or set apart
for payment on the common stock. The holders of the preferred stock shall have
no rights to share in any dividend or distribution of profits or assets of the
Corporation, whether in the form of cash, stock dividend or otherwise, except to
the extent specifically provided herein or in said resolutions of the Board of
Directors.

2. In the event of any liquidation, dissolution or winding up of
the Corporation, the holders of the preferred stock shall be entitled to be paid
such amounts as shall be fixed by resolution of the Board of Directors, as
hereafter provided, before any amount shall be paid on the common stock. After
the payment to the holders of the preferred stock of all such amounts to which
they are entitled pursuant to said resolutions of the Board of Directors, the
remaining assets and funds of the Corporation shall be divided and paid to the
holders of common stock. Neither the consolidation nor the merger of the
Corporation with or into any other corporation or corporations, nor a
reorganization of the Corporation alone, nor the sale or transfer by the
Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for the purpose of
this subparagraph (2).

3. The preferred stock shall be subject to redemption in whole or
in part at such price and at such time and place and in such manner as the Board
of Directors shall determine.

4. Each share of preferred stock shall be entitled to such
privileges of conversion, if any, as are provided and declared by the Board of
Directors at such time as the issue of which it is a part is established by the
Board of Directors.

<PAGE>

5. The preferred stock may be issued from time to time in series.
Authority is hereby expressly granted to the Board of Directors to authorize one
or more series of preferred stock and to fix the number of shares to constitute
such series and distinctive designations thereof and, with respect to each
series of preferred stock, to fix by resolution or resolutions providing for the
issuance of such series such variations in respect thereof as may be determined
by the Board of Directors. All shares of every series of preferred stock shall
be alike in every particular, and all series of preferred stock hereafter
created shall rank equally and be identical in all respects, except as to the
following rights and preferences which may constitute variations as between
different series of preferred stock:

a. The rate of the dividend on the shares of such
series;

b. The price at, and the terms and conditions upon which
shares may be redeemed;

c. The amount payable upon shares in the event of
involuntary liquidation;

d. The amount payable upon shares in the event of voluntary
liquidation;

e. Sinking fund provisions for the redemption or purchase
of shares;

f. The terms and conditions on which shares may be
converted, if the shares of
any series are issued with the privilege of conversion; and

g. Voting rights, if any.

D. The holder of any share of such common or serial preferred stock shall
have no preemptive rights to acquire any additional shares of the Corporation or
to acquire any treasury stock of the Corporation.

ARTICLE V

A. The number of directors of the Corporation shall be not less than
twelve (12) and not greater than sixteen (16), and, effective as of the annual
meeting of shareholders in 1982, the Board of Directors shall be divided into
three classes, designated Class I, Class II and Class III. Such classes shall be
as nearly equal in number as possible. The term of directors of one class shall
extend to each annual meeting of shareholders and in all cases as to each
director, until his successor shall be elected and shall qualify, or until his
earlier resignation, removal from office, death or incapacity. Additional
directorships resulting from an increase in number of directors shall be
apportioned among the classes as equally as possible. The initial term of office
of directors of Class I shall extend to the annual meeting of shareholders in
1983, that of Class II shall extend to the annual meeting in 1984, and that of
Class III shall extend to the annual meeting in 1985, and in all cases as to
each director until his successor shall be elected and shall qualify or until
his earlier resignation, removal from office, death or incapacity. At each
annual meeting of shareholders, the number of directors equal to the number of
directors of the class whose term extends to the time of such meeting shall be
elected to hold office until the third succeeding annual meeting of shareholders
after their election. The Board of Directors may, upon a majority vote of its
members, increase or decrease the number of directors within the limits set
forth above. Vacancies in the Board of Directors or new directorships created by
an increase in the number of directors shall be filled by majority vote of the
remaining members of the Board and the person filling such vacancy or
newly-created directorship shall serve out the remainder of the term for the
vacated directorship or, in the case of a new directorship, the term designated
for the class of directors of which that directorship is a part.

<PAGE>

B. The shareholders may at any time at a meeting expressly called for that
purpose remove any or all of the directors, only for cause, by a vote of
two-thirds of the shares then entitled to vote at an election of directors. For
purposes of this Article, removal "for cause" shall mean that the director to be
removed has been convicted of a felony by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal, or that the director to
be removed has been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation by a court of competent jurisdiction
and such adjudication is no longer subject to direct appeal.

C. This Article V may not be amended, altered or repealed without the
approval of two-thirds of the shares entitled to vote at the time such
amendment, alteration or repeal is proposed.

ARTICLE VI

The Board of Directors of this Corporation shall have the power to adopt a
corporate seal which shall be the corporate seal of this Corporation.

ARTICLE VII

The private property of the shareholders of this Corporation shall at all
times be exempt from liability of corporate debts of any kind and this Article
shall not be amended or repealed.

ARTICLE VIII

In the event that any shareholder shall become indebted to the
Corporation, the Corporation shall have a lien upon any shares of stock in this
Corporation owned by such shareholder for the full amount of such indebtedness.

ARTICLE IX

Stock in this Corporation shall be transferred only by assignment upon the
books of the Corporation, subject to and in accordance with such restrictions as
may be provided in the by-laws of this Corporation.

ARTICLE X

To the fullest extent permitted by the Iowa Business Corporation Act as
the same now exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or its stock-holders for monetary damages
for breach of fiduciary duty as a director. Any repeal or modification of this
ARTICLE X by the stockholders of the Corporation only shall be applied
prospectively, to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the personal liability of a
director of the Corporation existing immediately prior to such repeal or
modification.

The above Third Restated and Amended Articles of Incorporation do not
contain an amendment requiring the approval of the Corporation's shareholders,
and were unanimously adopted by the Corporation's Board of Directors on
September 9, 1996.

Dated this 15th day of January, 1997.

PIONEER HI-BRED INTERNATIONAL, INC.
SEAL
/s/ Jerry L. Chicoine
By: Jerry L. Chicoine
Title: Senior Vice President, CFO & Secretary

<PAGE>

STATE OF IOWA, COUNTY OF POLK:SS

On this 15th day of January, 1997, before me, a notary public in and for
the State of Iowa, personally appeared Jerry L. Chicoine, to me personally
known, who being by me duly sworn do say that he is the Senior Vice President,
CFO and Secretary, respectively of said corporation, that the corporate seal has
been affixed to this document and that said Third Restated and Amended Articles
of Incorporation were signed on behalf of said corporation by authority of its
Board of Directors and the said Jerry L. Chicoine acknowledges the execution of
said instrument to be the voluntary act and deed of said corporation by it
voluntarily executed.

/s/ Susan E. Griggs
By: Susan E. Griggs
Notary Public in and for the State of
Iowa

<PAGE>

Form of Articles of Amendment
of the
Third Restated and Amended Articles of Incorporation
of Pioneer Hi-Bred International, Inc.

To the Secretary of State of the State of Iowa:

Pursuant to the provisions of Section 490.1006 of the
Iowa Business Corporation Act, the undersigned corporation hereby
amends its Third Restated and Amended Articles of Incorporation
(the "Articles of Incorporation"), and for that purpose, submits
the following statement:

1. The name of the corporation is Pioneer Hi-Bred
International, Inc. (the Corporation).

2. On December 13, 1996, the Corporation adopted an
amendment to its Articles of Incorporation, the text
of which is attached hereto as Exhibit A.

3. The amendment was duly adopted by the board of
directors without shareholder approval, as
shareholder approval is not required pursuant to
Section 490.602 of the Iowa Business Corporation Act.

Dated: February 3, 1997

Pioneer Hi-Bred International, Inc.

By: /s/ Charles S. Johnson
Name: Charles S. Johnson
Title Chairman, President and CEO

<PAGE>

Exhibit A

DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
OF
PIONEER HI-BRED INTERNATIONAL, INC.

1. Designation and Amount.

(a) There shall be a series of Preferred Stock
of the Corporation created out of the authorized but unissued shares of the
capital stock of the Corporation, which series shall be designated Series A
Junior Participating Preferred Stock (the "Participating Preferred Stock"), to
consist of one hundred and fifty thousand (150,000) shares, without par value.

(b) Subject of paragraph 4(e) of this
designation, the number of shares of said series may at any time or from time to
time be increased or decreased by the Board of Directors notwithstanding that
shares of such series may be outstanding at such time of increase or decrease.

2. Dividend Rate.

(a) The holders of shares of Participating
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of each November, February, May and
August in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"),commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $230.00 or (b) 1,000 times the aggregate per share amount of
all cash dividends and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
par value of One Dollar ($1.00) per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Participating Preferred Stock.

(b) On or after the first issuance of any share
or fractional share of Participating Preferred Stock, no dividend on Common
Stock shall be declared unless concurrently therewith a dividend or distribution
is declared on the Participating Preferred Stock as provided in paragraph (a)
above; and the declaration of any such dividend on the Common Stock shall be
expressly conditioned upon payment or declaration of and provision for a
dividend on the Participating Preferred Stock as above provided. In the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $230.00 per share on the
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

<PAGE>

(c) Dividends shall begin to accrue and be
cumulative on outstanding shares of Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. The Board of
Directors may fix a record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive payment of a dividend
distribution declared thereon, which record date shall b no more than 30 days
prior to the date fixed for the payment thereof.

3. Dissolution, Liquidation and Winding Up. In the event of
any voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation (hereinafter referred to as a "Liquidation"), the
holders of Participating Preferred Stock shall receive at least $1,000.00 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Participating Preferred Stock shall be entitled to receive
at least an aggregate amount per share equal to 1,000 times the aggregate amount
to be distributed per share to holders of Common Stock (the "Participating
Preferred Liquidation Preference").

4. Voting Rights. The holders of shares of Participating
Preferred Stock shall have the following voting rights:

(a) Each share of Participating Preferred Stoc
shall entitle the holder thereof to five thousand (5,000) votes on all matters
submitted to a vote of the stockholders of the Corporation, except that no
holder of Participating Preferred Stock shall be entitled to exercise more than
one thousand (1,000) votes on any such matter in respect of any share of
Participating Preferred Stock if such holder would have been entitled to
exercise no more than one vote on any such matter in respect of any share of
Common Stock under Article IV.B of the Articles of Incorporation, had such
shares of Participating Preferred Stock been shares of Common Stock.

(b) Except as otherwise provided herein, or
by law, the Articles of Incorporation or the By-laws of the Corporation, the
holders of shares of Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.

(c) If and whenever dividends on the
participating Preferred Stock shall be in arrears in an amount equal to si
quarterly dividend payments, then and in such event the holders of the
Participating Preferred Stock, voting separately as a class (subject to the
provisions of subparagraph (d) below), shall be entitled at the next annual
meeting of the stockholders or at any special meeting to elect two (2)
directors. Each share of Participating Preferred Stock shall be entitled to one
vote, and holders of fractional shares shall have the right to a fractiona vote.
Upon election, such directors shall become additional directors of the
Corporation and the authorized number of directors of the Corporation shall
thereupon be automatically increased by such number of directors. Such right of
the holders of Participating Preferred Stock to elect directors may be exercised
until all dividends in default on the Participating Preferred Stock shall have
been paid in full, and dividends for the current dividend period declared and
funds therefor set apart, and when so paid and set apart, the right of the
holders of Participating Preferred Stock to elect such number of directors shall
cease, the term of such directors shall thereupon terminate, and the authorized
number of directors of the Corporation shall thereupon return to the number of
authorized directors otherwise in effect, but subject always to the same
provisions for the vesting of such special voting rights in the case of any such
future dividend default or defaults. The fact that

<PAGE>

dividends have been paid and set apart as required by the preceding sentence
shall be evidenced by a certificate executed by the President and the chief
financial officer of the Corporation and delivered to the Board of Directors.
The directors so elected by holders of Participating Preferred Stock shall serve
until the certificate described in the preceding sentence shall have been
delivered to the Board of Directors or until their respective successors shall
be elected or appointed and qualify.

At any time when such special voting rights have been so
vested in the holders of the Participating Preferred Stock, the Secretary of the
Corporation may, and upon the written request of the holders of record of 10% or
more of the number of shares of the Participating Preferred Stock then
outstanding addressed to such Secretary at the principal office of the
Corporation in the State of Iowa, shall, call a special meeting of the holders
of the Participating Preferred Stock for the election of the directors to be
elected by them as hereinabove provided, to be held in the case of such written
request within forty (40) days after delivery of such request, and in either
case to be held at the place and upon the notice provided by law and in the
By-laws of the Corporation for the holding of meetings of stockholders;
provided, however, that the Secretary shall not be required to call such a
special meeting (i) if any such request is received less than ninety (90) days
before the date fixed for the next ensuing annual or special meeting of
stockholders or (ii) if at the time any such request is received, the holders of
Participating Preferred Stock are not entitled to elect such directors by reason
of the occurrence of an event specified in the third sentence of subparagraph
(d) below.

(d) if, at any time when the holders of
Participating Preferred Stock are entitled to elect directors pursuant to the
foregoing provisions of this paragraph 4, the holders of any one or more
additional series of Preferred Stock are entitled to elect directors by reason
of any default or event specified in the Articles of Incorporation, as in effect
at the time of the designation for such series, and if the terms for such other
additional series so permit, the voting rights of the two or more series then
entitled to vote shall be combined (with each series having a number of votes
proportional to the aggregate liquidation preference of its outstanding shares).
In such case, the holders of Participating Preferred Stock and of all such other
series then entitled so to vote, voting as a class, shall elect such directors.
If the holders of any such other series have elected such directors prior to the
happening of the default or event permitting the holders of Participating
Preferred Stock to elect directors, or prior to a written request for the
holding of a special meeting being received by the Secretary of the Corporation
from the holders of not less than 10% of the then outstanding shares of
Participating Preferred Stock, then such directors so previously elected will be
deemed to have been elected by and on behalf of the holders of Participating
Preferred Stock as well as such other series, without prejudice to the right of
the holders of Participating Preferred Stock to vote for directors if such
previously elected directors shall resign, cease to serve or fail to stand for
reelection while the holders of Participatin g Preferred Stock are entitled to
vote. If the holders of any such other series are entitled to elect in excess of
two (2) directors, the Participating Preferred Stock shall not participate in
the election of more than two (2) such directors, and those directors whose
terms first expire shall be deemed to be the directors elected by the holders of
Participating Preferred Stock; provided that, if at the expiration of such terms
the holders of Participating Preferred Stock are entitled to vote in the
election of directors pursuant to the provisions of this paragraph 4, then the
Secretary of the Corporation shall call a meeting (which meeting may be the
annual meeting or special meeting of stockholders referred to in subparagraph
(c)) of holders of Participating Preferred Stock for the purpose of electing
replacement directors (in accordance with the provisions of this paragraph 4) to
be held on or prior to the time of expiration of the expiring terms referred to
above.

(e) Except as otherwise set forth herein or
required by law, the Articles of Incorporation or the By-laws of the Corporation
holders of Participating Preferred Stock shall have no special voting rights an
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for the taking of any
corporate action. No consent of the holders of outstanding shares of
Participating Preferred Stock at any time outstanding shall be required in order
to permit the Board of Directors to: (i) increase the number of authorized
shares of Participating Preferred Stock or to decrease such number to a

<PAGE>

number not below the sum of the number of shares of Participating Preferred
Stock then outstanding and the number of shares with respect to which there are
outstanding rights to purchase; or (ii) to issue Preferred Stock which is senior
to the Participating Preferred Stock, junior to the Participating Preferred
Stock or on a parity with the Participating Preferred Stock.

5. Redemption. The shares of Participating Preferred Stock
shall not be redeemable.

6. Conversion Rights. The Participating Preferred Stock is not
convertible into Common Stock or any other security of the Corporation.

<PAGE>

Articles of Amendment
of the
Third Restated and Amended Articles of Incorporation
of
Pioneer Hi-Bred International, Inc.

To the Secretary of State
of the State of Iowa

Pursuant to the provisions of Section 490.1006 of the Iowa Business
Corporation Act, the undersigned corporation hereby amends its Third Restated
and Amended Articles of Incorporation (the "Articles of Incorporation"), and for
that purpose, submits the following statement:

1. The name of the corporation is Pioneer Hi-Bred International, Inc.
(the "Corporation").

2. On August 5, 1997 the Corporation adopted an amendment to its Third
Restated and Amended Articles of Incorporation, the text of which is
attached hereto as Exhibit A.

3. The amendment was duly adopted by the Board of Directors of the
Corporation without shareholder approval, as shareholder approval is
not required pursuant to Section 490.602 of the Iowa Business
Corporation Act.

Dated: September 9th, 1997.

PIONEER HI-BRED INTERNATIONAL, INC.

By: /s/ John D. James
John D. James
Senior Vice President

<PAGE>

Exhibit A

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

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 602 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 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.

<PAGE>

(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 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.

<PAGE>

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]**
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

(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]* 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]* 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]* shares of Common Stock
(as 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
- ----------
* 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.
<PAGE>

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.

(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 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

<PAGE>
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 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

<PAGE>
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 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.

<PAGE>

"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-owned for purposes of this Agreement.

"Surrender Date" has the meaning specified in Section 6 above.

<PAGE>

"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).
<PAGE>

"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 9th day of September, 1997.

PIONEER HI-BRED INTERNATIONAL, INC.

By: /s/ John D. James
Name: John D. James
Title: Senior Vice President

(Corporate Seal)

Attest:

By: /s/ Jerry L, Chicoine
Name: Jerry L. Chicoine
Title: Senior Vice President and CFO

<PAGE>

ARTICLES OF CORRECTION FOR
PIONEER HI-BRED INTERNATIONAL, INC.

TO: SECRETARY OF STATE OF THE STATE OF IOWA:

Pursuant to ss. 490.124 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following Articles of Correction:

1. The name of the corporation is Pioneer Hi-Bred International,
Inc.

2. A description of the document to be corrected is as follows:

Articles of Amendment of the Third Restated and Amended
Articles of Incorporation of Pioneer Hi-Bred International,
Inc. in the form of the Certificate of Designations
attached as Exhibit A thereto.

3. The document to be corrected was filed by the Secretary of
State on September 10, 1997.

4. The incorrect statements in the document to be corrected are
contained in paragraphs (i), (iii) and (iv) of Section 6(a)
thereof and in the case of each such paragraph the incorrect
item is the reference to "[100]*" appearing therein and the
footnote referred to by each such reference.

5. The document was incorrect because it should have read as set
forth below in paragraph 6 and because the corresponding
footnote should in each case have been deleted.

6. The following is the correct statement and it should replace
the incorrect statement in the case of each of the foregoing
paragraphs: "100," and there should be no footnote.

Dated this 16th day of September, 1997.

PIONEER HI-BRED INTERNATIONAL, INC.

By: /s/ Jerry Chicoine
Jerry Chicoine,
Senior Vice President
and Chief Financial Officer

<PAGE>

RESTATED AND AMENDED BYLAWS

PIONEER HI-BRED INTERNATIONAL, INC.

ARTICLE I.

PRINCIPAL OFFICE

The principal office of the Corporation shall be located at 700 Capital
Square, 400 Locust Street in the City of Des Moines, in the County of Polk,
State of Iowa.

ARTICLE II.

MEETINGS OF SHAREHOLDERS

SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the fourth Tuesday of January of each year, beginning with the year 1988
at the hour of 2:00 P.M. for the purpose of electing directors and for the
transaction of such other business as may come before the meeting; PROVIDED,
HOWEVER, that the President may in any year designate an earlier date as the day
of the annual meeting that year. If the day fixed for the annual meeting as
herein provided shall be a legal holiday, and a different day is not designated
by the President, such meeting shall be held on the next succeeding business
day. If the election of directors shall not be held on the day designated herein
for any annual meeting or any adjournment thereof, the Board of Directors shall
cause the election to be held at a meeting of the shareholders as soon
thereafter as conveniently may be held.

SECTION 2. Special Meetings. Special meetings of shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Article of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of shareholders of at least 50% of all
of the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting. Such request shall state the purpose or purposes of
the proposed meeting. Business transacted at any special meeting of the
shareholders shall be limited to the purposes stated in the notice. Such request
by shareholders shall be signed, dated, and delivered to the corporation's
Secretary in one or more written demands. Any request by shareholders or
otherwise shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting of the shareholders shall be limited to the
purposes stated in the notice.

SECTION 3. Place of Meeting. The Board of Directors or the President may
designate any place, either within or without the State of Iowa, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders may designate any
place, either within or without the State of Iowa, as the place for the holding
of such meeting. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the registered office of the Corporation
in the State of Iowa.

SECTION 4. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) or more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, or the
Secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in

<PAGE>

the United States mail, addressed to the shareholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid.

SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Corporation may provide that the
stock transfer books shall be closed for a stated period, but not to exceed, in
any case, seventy (70) days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days and, for a meeting of shareholders, not less than ten (10) days, prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. If the transfer books are not closed and no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.

SECTION 6. Voting Lists. The officer or agent having charge of the
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original share ledger or transfer book, or a duplicate thereof kept in this
State, shall be prima facie evidence as to who are the shareholders entitled to
examine such list or share ledger or transfer book or to vote at any meeting of
shareholders.

SECTION 7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, a majority of the shareholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the Articles of
Incorporation a different vote is required, in which case, such express
provision shall govern and control the decision of such question.

SECTION 8. Proxies. Each shareholder shall at every meeting of the
shareholders be entitled to that number of votes as is determined by the
Corporation in accordance with Article IV of the Articles of Incorporation of
the Corporation, as presently in effect or as may be amended hereafter, upon
each matter submitted to vote of the shareholders to be voted in person or by
proxy executed in writing by said shareholder or by his duly authorized
attorney-in-fact, for each share of the capital stock having voting power held
by such shareholder. Such proxy shall be filed

<PAGE>

with the Secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after eleven (11) months from the date of its execution,
unless otherwise provided in the proxy.

SECTION 9. Voting of Shares by Certain Holders. Shares standing in the
name of another Corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the Bylaws of such Corporation may prescribe, or, in the
absence of such provision, as the Board of Directors of such Corporation may
determine.

Shares standing in the name of a deceased person, a minor, ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him
either in person or by proxy.

Shares standing in the name of the receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.

A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

Shares of its own stock belonging to this Corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any time, but shares of its own stock
held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.

SECTION 10. Inspectors. At any meeting of shareholders, the chairman of
the meeting may, or upon the request of any shareholder, shall appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting, based upon their
determination of the validity and effect of proxies; count all votes and report
the results; and do such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the shareholders. Each report of an
inspector shall be in writing and signed by him or by a majority of them if
there be more than one inspector acting at such meeting. If there is more than
one inspector, the report of the majority shall be the report of the inspectors.
The report of the inspector or inspectors on the number of shares represented at
the meeting and the results of the voting shall be prima facie evidence thereof.

SECTION 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all the
shareholders entitled to vote with respect to the subject matter thereof.

SECTION 12. Voting by Ballot. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.

SECTION 13. Shareholder Business Proposals. At any annual meeting of the
Corporation's shareholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder. Business may be properly brought before an annual meeting by a
shareholder only if written

<PAGE>

notice of the shareholder's intent to propose such business has been given,
either by personal delivery or by United States mail, first class postage
prepaid, to the Secretary of the Corporation no later than ninety days in
advance of such annual meeting, provided that in the event that less than ninety
days' notice or prior public disclosure of the date of such annual meeting is
given or made to shareholders, the shareholder's submission shall be timely if
received by the Secretary of the Corporation not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made (whichever first
occurs). Each notice of new business must set forth: (i) the name and address of
the shareholder who intends to raise the new business; (ii) the business desired
to be brought forth at the meeting and the reasons for conducting such business
at the meeting; (iii) a representation that the shareholder is a holder of
record of stock of the Corporation entitled to vote with respect to such
business and intends to appear in person or by proxy at the meeting to move the
consideration of such business; (iv) such shareholder's beneficial ownership of
the Corporation's voting stock; and (v) such shareholder's interest in such
business. The chairman of the meeting may refuse to acknowledge a motion to
consider any business that he determines was not made in compliance with the
foregoing procedures.

An adjourned meeting, if notice of the adjourned meeting is not required
to be given to shareholders, shall be regarded as a continuation of the original
meeting, and any notice of new business must meet the foregoing requirements
based upon the date on which notice or public disclosure of the date of the
original meeting was given or made. In the event of an adjourned meeting where
notice of the adjourned meeting is required to be given to shareholders, any
notice of new business made by a shareholder with respect to the adjourned
meeting must meet the foregoing requirements based upon the date on which notice
or public disclosure of the date of the adjourned meeting was given or made.

No action may be taken by the Board of Directors (whether through
amendment of the Bylaws or otherwise) to amend, alter, change or repeal,
directly or indirectly, the provisions of this Article II, Section 13 of the
Bylaws, unless two-thirds of the directors (based on the number of directors
then authorized, regardless of whether there are any vacancies) shall concur in
such action.

ARTICLE III.

BOARD OF DIRECTORS

SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.

SECTION 2. Number, Tenure and Qualifications. The number of directors
which shall constitute the whole Board shall be such number, not less than
twelve (12) nor more than sixteen (16), as may be determined from time to time
by vote of a majority of the entire Board of Directors. The directors shall be
divided into three (3) classes each of which shall be as nearly equal in number
as possible except as provided in Section 3 of this Article. The directors shall
be elected at an annual meeting of the shareholders, and shall hold an office
for a term of the lesser of (a) three (3) years or (b) until the end of the term
for the Class of Directors to which such Director has been elected and until his
successor is elected and qualified. A Director need not be a shareholder of this
Corporation.

SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors and
any directorship to be filled by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. Any director
elected to fill a vacancy created other than by reason of an increase in the
number of directors shall be elected for the unexpired term of his or her
predecessor in office.

<PAGE>

No action may be taken by the Board of Directors (whether through
amendment of the Bylaws or otherwise) to amend, alter, change or repeal,
directly or indirectly, the provisions of this Article III, Section 3 of the
Bylaws, unless two-thirds of the directors (based on the number of directors
then authorized, regardless of whether there are any vacancies) shall concur in
such action.

SECTION 4. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw, immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Iowa, for the holding of additional regular meetings without other
notice than such resolution.

SECTION 5. Special Meetings. Special Meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the State of Iowa, as the place for
the holding of such meeting.

SECTION 6. Notice. Notice shall be given at least 24 hours in advance of
the time set for such meeting and may be given by telephone or telegram. If
notice be given by telegram, such notice shall deem to be delivered when
delivered to the telegraph company. Any director may waive notice of a meeting
by written waiver, executed either before or after the time stated in the
notice. Attendance at a meeting shall constitute a waiver of notice of such
meeting, except where a director attends such meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.

SECTION 7. Quorum. A majority of the number of directors currently in
office shall constitute a quorum for transaction of business at any meeting of
the Board of Directors, provided, that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.

SECTION 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, the
Articles of Incorporation or these Bylaws. Members of the Board of Directors or
any committee designated by such board, may participate in a meeting of such
board or committee by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting.

SECTION 9. Informal Action. Unless specifically prohibited by statute, the
Articles of Incorporation or these Bylaws, any action required to be taken at a
meeting of the Board of Directors, or any other action which may be taken at a
meeting of the Board of Directors or of any committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee and filed with
the minutes of proceedings of the Board or committee as the case may be. Any
such consent signed by all the Directors or all the members of such committee
shall have the same effect as a unanimous vote, and may be stated as such in any
document filed with the Secretary of State, or issued for any other reason.

SECTION 10. Compensation. The Directors may be paid for their expenses, if
any, of attendance at such meeting of the Board of Directors, and may be paid a
fixed sum for attendance at each meeting of the Board of Directors, or a stated
salary or fee as such director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.

<PAGE>

SECTION 11. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to directors
who voted in favor of such action.

SECTION 12. Removal of Directors. The shareholders may at any time at a
meeting expressly called for that purpose remove any or all of the directors,
for cause, by a vote of two-thirds of the shares then entitled to vote at an
election of directors. For the purposes of this Section 12, removal "for cause"
shall mean that the director to be removed has been convicted of a felony by a
court of competent jurisdiction and such conviction is no longer subject to
direct appeal, or that the director to be removed has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Corporation
by a court of competent jurisdiction and such adjudication is no longer subject
to direct appeal. Any vacancy in the Board of Directors resulting from the
removal of a director shall be filled by majority vote of the remaining members
of the Board of Directors.

SECTION 13. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole board, designate an executive
committee and/or one or more other committees, each committee to consist of two
or more of the Directors of the Corporation, which, to the extent provided in
the resolution, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.

The Compensation Committee shall consist of no less than three and no more
than eight directors who are not at the time of their election employees of the
Corporation or otherwise entitled to participate in any compensation or
incentive plan administered by the Committee, except to the extent otherwise
determined by a majority of the directors who are not members of the
Compensation Committee. The Compensation Committee shall be responsible for all
executive compensation programs of the Corporation, including, without
limitation, stock incentive plans and shall evaluate and recommend to the Board
of Directors compensation for executive officers. It shall review summaries of
current compensation paid all other officers, and shall periodically report
changes in the compensation plans for all officers and employees to the Board of
Directors. It shall receive and review such reports of compensation and benefit
plan administration from the Corporation's management as it may require. The
Compensation Committee shall also review, and make recommendations concerning,
management structure and succession planning, management retirement policy, and
officer supervision and training to assure the full development of management
potential and an orderly succession of management.

The Nominating Committee shall consist of not less than three nor more
than nine directors and shall be responsible for establishing criteria for the
election of directors, reviewing management's evaluation of any officers
proposed for nomination to the Board of Directors, and reviewing the
qualifications of, and when appropriate interviewing, candidates who may be
proposed for nomination to the Board of Directors, including those nominees
recommended by shareholders. The Committee shall be responsible for recommending
to the Board of Directors, not less than 120 days prior to each annual meeting
of the shareholders, a slate of directors to be elected for the following year.
The Committee shall also perform such other duties in connection with the search
for qualified directors and the selection, election, or termination of directors
as the Board of Directors may request.

The Audit Committee shall consist of not less than three nor more than
nine directors, a majority of whom shall be independent directors. The Committee
shall have general oversight

<PAGE>

responsibility with respect to the Corporation's financial reporting. In
performing its oversight responsibility, the Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In addition, the Committee
shall review corporate policies relating to compliance with laws and
regulations, ethics, and conflicts, and (consistent with the NASDAQ listing
requirement) it shall conduct a review of all material related party
transactions on an ongoing basis. In undertaking the foregoing responsibilities,
the Audit Committee shall have unrestricted access, if necessary, to company
personnel and documents and shall be provided with the resources and assistance
necessary to discharge its responsibilities, including periodic reports from
management assessing the impact of regulation, accounting, and reporting or
other significant matters that may affect the Corporation. The Committee shall
have authority to appoint and dismiss the Corporation's director of internal
audit. The duties and responsibilities of the Audit Committee shall be set forth
in further detail in a charter developed by the Committee, provided that the
duties and responsibilities set forth therein shall be consistent with this
Section 13 and any resolution passed by a majority of the Directors relating to
the responsibilities of the Committee.

In addition, the Board of Directors may, by resolution passed by a
majority of the Directors, designate an executive committee and/or one or more
other committees, each committee to consist of two or more of the Directors of
the Corporation, which, to the extent provided in the resolution, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.

SECTION 14. Committee Minutes. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.

SECTION 15. Shareholder Nomination of Director Candidates. Subject to the
rights of holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, nominations for the election
of directors may be made by the Board of Directors or a committee appointed by
the Board of Directors or by any shareholder entitled to vote in the election of
directors generally. However, any shareholder entitled to vote in the election
of directors generally may nominate one or more persons for election as
directors at a meeting only if written notice of such shareholder's intent to
make such nomination or nominations has been given, either by personal delivery
or by United States mail, postage prepaid, to the Secretary of the Corporation
not later than (i) with respect to an election to be held at an annual meeting
of shareholders, ninety days prior to the anniversary date of the records date
set for the immediately preceding annual meeting of shareholders, and (ii) with
respect to an election to be held at a special meeting of shareholders for the
election of directors, the close of business on the tenth day following the date
on which notice of such meeting is first given to shareholders. Each such notice
shall set forth: (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Corporation if
so elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.

<PAGE>

No action may be taken by the Board of Directors (whether through
amendment of the Bylaws or otherwise) to amend, alter, change or repeal,
directly or indirectly, the provisions of this Article III, Section 15 of the
Bylaws, unless two-thirds of the directors (based on the number of directors
then authorized, regardless of whether there are any vacancies) shall concur in
such action.

ARTICLE IV.

OFFICERS

SECTION 1. Number. The officers of the Corporation shall be a President,
Vice President, Secretary and a Treasurer. The Board of Directors may also
choose additional Vice Presidents and one or more Assistant Secretaries and
Assistant Treasurers. Any two or more offices may be held by the same person,
except that the offices of President and Secretary shall not be held by the same
person.

SECTION 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Each officer shall hold office
until his successor shall have been duly elected or until his death or until he
shall resign or shall have been removed in the manner herein provided. Election
or appointment of an officer or agent shall not of itself create contract
rights.

SECTION 3. Other Officers. The Board of Directors may appoint such other
officers and agents, as it shall deem necessary, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Board.

SECTION 4. Removal. Any officer or agent elected or appointed by the Board
of Directors may be removed from office by the affirmative vote of a majority of
the Board of Directors at any meeting whenever in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.

SECTION 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, and new offices may be
filled by the Board of Directors, at any meeting thereof for the unexpired
portion of the term.

SECTION 6. President. The President shall be the principal executive
officer of the Corporation and shall, in general, supervise and control all of
the business and affairs of the Corporation. Unless otherwise provided by the
Board, he shall preside at all meetings of the shareholders and the Board of
Directors. He may sign, with the Secretary or any other proper officer of the
Corporation thereunto authorized by the Board of Directors, certificates for
shares of the Corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by the Board of Directors from time to time.

SECTION 7. Vice President. In the absence of the President, or in the
event of his inability or refusal to act, the Vice President, or if there shall
be more than one, the Vice Presidents, in the order determined by the Board of
Directors, shall perform the duties of the President, and when so acting, shall
have all powers of and be subject to all restrictions upon the President. Any
Vice President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the Corporation; and shall perform such other duties
as from time to time may be assigned to him by the President or by the Board of
Directors.

SECTION 8. Secretary. The Secretary shall: (1) attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required; (2) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (3) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such holder; (4) have general charge of the stock transfer
books of the Corporation; (5) perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors; and (6) have custody of the
corporate seal of the Corporation and have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his
signature. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.

SECTION 9. Assistant Secretary. The Assistant Secretary, or, if there be
more than one, the Assistant Secretaries, in the order determined by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.

SECTION 10. Treasurer. The Treasurer shall: (1) have charge and custody of
and be responsible for all funds and securities of the Corporation; (2) receive
and give receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such banks, trust companies or other
depositories as shall be designated by the Board of Directors; (3) disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements; (4) keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation; (5) render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation; and (6) perform all the
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors. If
required by the Board of Directors, give a bond in such sum and with such surety
or sureties as the Board of Directors may determine for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.

SECTION 11. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers, in the order determined by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.

SECTION 12. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.

<PAGE>

ARTICLE V.

CONTRACTS, LOANS AND CHECKS

SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.

SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.

SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents,
of the Corporation and in such manner as shall from time to time be determined
by resolution of the Board of Directors.

ARTICLE VI.

INDEMNIFICATION

SECTION 1. Indemnification. The Corporation shall indemnify every person
who is or was a party or involved (as a witness or otherwise)or is threatened to
be made a party or involved (as a witness or otherwise) (hereafter Indemnitee)
in any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, formal or informal, and
whether or not by or in the right of the Corporation or otherwise (hereafter a
"Proceeding"), by reason of the fact that he is or was a director, officer, or
employee of the Corporation, or while a director, officer or employee of the
Corporation, is or was serving at the request of the Corporation (or such
service was approved by the Corporate Management Committee (committee of
Executive Officers selected by the President) or successor committees) as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, or by reason of any action alleged to have been taken or
not taken by him while acting in any such capacity, against expenses (including
counsel fees and expenses when incurred) (hereafter "Expenses") and all
liability and loss, including judgment, fine, (including excise taxes assessed
with respect to an employee benefit plan), and penalties and amounts paid or to
be paid in settlement (whether with or without court approval) (hereafter
"Liabilities"), actually incurred by him in connection with such Proceeding, to
the fullest extent permitted by law as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment).
Notwithstanding anything in this Article to the contrary, except with respect to
a proceeding to enforce rights to indemnification or advancement of expenses
under this Article, the Corporation shall provide indemnification and
advancement of Expenses under this Article to persons seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the Board of Directors.

SECTION 2. Advancement of Expenses. The right to indemnification conferred
in this Article shall include the right to be paid by the Corporation the
Expenses incurred in connection with the proceeding in advance of the final
disposition thereof promptly after receipt by the Corporation of a request
therefor stating in reasonable detail the Expenses incurred, provided, however,
that to the extent required by law, the payment of such Expenses in advance of
the final disposition of a proceeding shall be made only upon the Corporation's
receipt of an undertaking by or on behalf of such person to repay such amounts
if it shall ultimately be determined that he is not entitled to be indemnified
under this Article or otherwise (this undertaking need not be secured and must
be accepted without reference to the ability to repay).

<PAGE>

SECTION 3. Determination. Any indemnification, under these Articles
(unless ordered by court or as otherwise provided in Section 2 for the
advancement of expenses) shall be made by the Corporation upon a determination
that the indemnification of the Indemnitee is proper in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (1) by the board of directors by majority vote of a quorum consisting of
directors not at the time parties to the Proceeding, (2) if a quorum cannot be
obtained, by a majority vote of a committee duly designated by the board of
directors, in which designation directors who are parties may participate,
consisting solely of two or more directors not at the time parties to the
proceeding, (3) by special legal counsel selected by the board of directors by
vote as set forth in clause "(1) or (2)" of this Section 3, if a quorum of the
board of directors cannot be obtained and a committee cannot be designated,
selected by majority vote of the full board of directors, in which selection
directors who are parties may participate, or (4) by the shareholders, but
shares owned by or voted under the control of directors who are at the time
parties to the proceeding shall not be voted on the determination.

SECTION 4. Partial Indemnification. If a person is entitled under this
Article to indemnification by the Corporation for some or a portion of
Liabilities and Expenses but not, however, for all of the total amounts thereof,
the Corporation shall nevertheless indemnify such person for the portion thereof
to which he is entitled.

SECTION 5. Specific Limitations On Indemnification. Notwithstanding
anything in these Bylaws to the contrary, the Corporation shall not be obligated
to make any payment under this Article for indemnification for Liabilities and
Expenses in connection with Proceedings settled without the consent of the
Corporation, which consent, however, shall not be unreasonably withheld.

SECTION 6. Payment and Factual Determinations. If a claim for
indemnification or advancement of expenses under this Article is not paid in
full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, the claimant may, at any time thereafter, bring
suit against the Corporation to recover the unpaid amount of the claim. The
claimant shall also be entitled to be paid the expenses of prosecuting such
claim to the extent he is successful in whole or in part on the merits or
otherwise in establishing his right to indemnification or to the advancement of
expenses.

SECTION 7. Other Rights. The right to indemnification, including the right
to the advancement of expenses, conferred in this Article shall not be exclusive
of any other rights to which a person seeking indemnification or advancement of
expenses hereunder may be entitled under any Articles of Incorporation, Bylaws,
agreement, vote of shareholders or directors, or otherwise. Subject to
applicable law, to the extent that any rights to indemnification or advancement
of expenses of such person under any such Articles of Incorporation, Bylaw,
agreement, vote of shareholders or directors, or otherwise, are broader or more
favorable to such person, the broader or more favorable rights shall control.

The Corporation shall have the express authority to enter into such
agreements as the Board of Directors deems appropriate for the indemnification
of, including the advancement of expenses to, present or future directors,
officers, employees and agents of the Corporation in connection with their
service to, or status with, the Corporation or any other corporation,
partnership, joint venture, trust or other enterprise, including any employee
benefit plan, for whom such person is serving at the request of the Corporation.

SECTION 8. Trust. The Corporation may create a fund of any nature which
may, but need not, be under the control of a trustee, or otherwise to secure or
insure in any manner its indemnification obligations, including its obligation
to advance expenses, whether arising under or pursuant to this Article or
otherwise.

<PAGE>

SECTION 9. Insurance. The corporation may purchase and maintain insurance
on behalf of an individual who is or was a director, officer, employee, or agent
of the corporation, or who, while a director, officer employee or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by that individual in
that capacity or arising from the individual's status as a director, officer,
employee, or agent, whether or not the corporation would have power to indemnify
that individual against the same liability.

SECTION 10. Contract. The right to indemnification, including the right to
advancement of expenses provided herein, shall be a contract right, shall
continue as to a person who has ceased to be a director, officer, employee, or
to serve in any other of the capacities described in Section 1, and shall inure
to the benefit of the heirs, personal representatives, executors and
administrators of such person. Notwithstanding any amendment, alteration, or
repeal of this Article or any of its provisions or the adoption of any provision
inconsistent with the Article or any of its provisions, any person, shall be
entitled to indemnification, including the right to the advancement of expenses,
in accordance with the provisions hereof with respect to any action taken or
omitted prior to such amendment, alteration, or repeal or adoption of such
inconsistent provision, except to the extent such amendment, alteration, repeal,
or inconsistent provision provides broader rights with respect to
indemnification, including the advancement of expenses, than the Corporation was
permitted to provide prior to the amendment, alteration, repeal, or the adoption
of such inconsistent provision or to the extent otherwise prescribed by law.

SECTION 11. Subrogation. In the event of any payment under this Article,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights.

SECTION 12. Notice of Proceedings. Indemnitee agrees promptly to notify
the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder, but Indemnitee's omission to so notify the
Corporation shall not relieve the Corporation from any liability which it may
have to Indemnitee under this Article unless such omission materially prejudices
the rights of the Corporation (including without limitation, the Corporation
having lost significant substantive or procedural rights with respect to the
defense of any Proceeding). If such omission does materially prejudice the
rights of the Corporation, the Corporation shall be relieved from liability
under this Article only to the extent of such prejudice; but such omission will
not relieve the Corporation from any liability which it may have to Indemnitee
otherwise than under this Article.

SECTION 13. Defense of Claims. The Corporation will be entitled to
participate at its own expense in any Proceeding of which it has notice. The
Corporation jointly with any other indemnifying party similarly notified of any
Proceeding will be entitled to assume the defense of Indemnitee therein, with
counsel reasonably satisfactory to Indemnitee. After notice from the Corporation
to Indemnitee of its election to assume the defense of Indemnitee in any
Proceeding, the Corporation will not be liable to Indemnitee under this Article
for any Expenses subsequently incurred by Indemnitee in connection with the
defense thereof, except as otherwise provided below. Indemnitee shall have the
right to employ its own counsel in any such Proceeding but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of Indemnitee unless: (i) the
employment of counsel by Indemnitee has been authorized by the Corporation; or
(ii) the Corporation shall not in fact have employed counsel to or cannot in
good faith without conflict assume the defense of Indemnitee in such Proceeding
or such counsel has not in fact assumed such defense; in each of which case the
fees and expenses of Indemnitee's counsel shall be advanced by the Corporation.

<PAGE>

SECTION 14. Other Entities. The board of directors may by resolution
provide for indemnification to officers, directors, or employees of other
entities not otherwise provided indemnification herein as it determines
appropriate.

SECTION 15. Employee Benefit Plans. A director, officer, or employee is
considered to be serving an employee benefit plan at the Corporation's request
if such person's duties to the Corporation also imposed duties on, or otherwise
involves services by, that person to the plan or to the participants in or
beneficiaries of the plan.

ARTICLE VII.

CERTIFICATES FOR SHARES AND THEIR TRANSFER

SECTION 1. Certificates for Shares. Every holder of shares in the
Corporation shall be entitled to have a certificate in such form as may be
determined by the Board of Directors. Such certificates shall be signed by the
President or Vice President and by the Secretary or Assistant Secretary and
shall be sealed with the seal of the Corporation or a facsimile thereof. The
signatures of the President or Vice President and the Secretary or Assistant
Secretary or other persons signing for the Corporation upon a certificate may be
facsimiles. If the certificate is countersigned by a transfer agent or
registered by a registrar, the signatures of the person signing for such
transfer agent or registrar also may be facsimiles. In case any officer or other
authorized person who has signed or whose facsimile signature has been place
upon such certificate for the Corporation, shall have ceased to be such officer
or employee or agent before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer or employee or agent
at the date of its issue. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the Corporation. All certificates surrendered
to the Corporation for transfer shall be canceled and no new certificate shall
be issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.

SECTION 2. Transfer of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.

SECTION 3. Registered Shareholder. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to, or interest in, such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.

ARTICLE VIII.

FISCAL YEAR

SECTION 1. Fiscal Year. This Corporation shall operate on a fiscal
year basis beginning September 1 of each year and ending August 31 of the
following year.

<PAGE>

ARTICLE IX.

DIVIDENDS

SECTION 1. Dividends. The Board of Directors, from time to time, may
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Articles of
Incorporation.

ARTICLE X.

WAIVER OF NOTICE

SECTION 1. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the Articles of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.

ARTICLE XI.

AMENDMENTS

SECTION 1. Amendments. Except where otherwise specifically noted, these
Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any
meeting of the Board of Directors of the Corporation by a majority vote of the
directors present at the meeting.

<PAGE>

AMENDED AND RESTATED
PIONEER HI-BRED INTERNATIONAL, INC.
DIRECTORS' RESTRICTED STOCK PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE

1.1 Establishment. Pioneer Hi-Bred International, Inc. hereby
establishes a stock reward plan for eligible Directors, as described herein,
which shall be known as the PIONEER HI-BRED INTERNATIONAL, INC. DIRECTORS'
RESTRICTED STOCK PLAN (hereinafter called the "Plan").

1.2 Purpose. The purpose of this Plan is to align the interests of
Directors 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) "Board" means the Board of Directors of Pioneer
Hi-Bred International, Inc.
(b) "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 the total of a) the number of shares of
common stock then outstanding and b) the number of shares of common stock
issuable upon conversion (whether or not then convertible) or otherwise of
Series A Convertible Preferred Stock (or Class B Common Stock, if Series A
Convertible Preferred Stock is converted to such class) 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 the total of a)
the number of shares of common stock then outstanding and b) the number of
shares of common stock issuable upon conversion (whether or not then
convertible) or otherwise of Series A Convertible Preferred Stock (or Class B
Common Stock, if Series A Convertible Preferred Stock is converted to such
class) 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.
(c) "Committee" means the Compensation Committee of the Board
or any successor Committee.
(d) "Company" means Pioneer Hi-Bred International, Inc., an
Iowa corporation. (e) "Fair Market Value" of a share of Common
Stock of the Company shall mean the
average of the highest and lowest selling prices.
(f) "Participant" means those Directors eligible under
Section 4.
(g) "Plan" means the Pioneer Hi-Bred International, Inc.
Directors' Restricted Stock Plan, as amended from time to time.
(h) "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.
(i) "Shares" means the common stock, $1 par value, of the
Company.

<PAGE>

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.

SECTION 4. ELIGIBILITY

To be eligible to participate in the Plan an individual must be a non-employee
Director of the Company.

SECTION 5. GRANT

The Program shall be operated according to the procedures set forth
below:

(a) Eligible Cash Compensation. A Participant may elect to
defer all or any part of the annual retainer compensation and regular quarterly
meeting fees otherwise expected to be payable for services to be rendered by the
Participant for serving on the Board of Directors (the "Board") from January 1,
1997 through December 31, 1999 (such payments collectively to be referred to
herein as the "Director's Fee") and to receive in lieu thereof Restricted Stock.

(b) Election to Participant. A Participant shall elect
participation in the Program pursuant to an irrevocable election before the
services are rendered giving rise to the payment of the Director's Fee.

(c) Duration of Restriction. Subject to the provisions of Article
III, the Restricted Stock issued to a Participant shall be subject to the
restrictions of the Program until December 31, 1999.

(d) Calculation of Restricted Stock. The Restricted Stock which
shall be issued to a Participant in lieu of payment of a Director's Fee shall be
derived by dividing the amount of the Participant's Director's Fee otherwise
expected to be payable to the Participant prior to January 1, 2000 but after
December 31, 1996, plus an additional five percent (5%), by the Fair Market
Value of a Share on December 31, 1996; provided, however, for a Participant
first elected to the Board after January 1, 1997, the Fair Market Value of a
Share shall be determined on December 31 immediately preceding the Participant's
participation in the Program. There will be no fractional shares. The number of
shares granted will be the number of shares derived above rounded up or down to
the nearest whole number.

SECTION 6. STOCK SUBJECT TO THE PLAN

6.1 Number. The total number of Shares that may be granted under the
Plan shall not exceed 25,000. 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.

<PAGE>

6.2 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.

6.3 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 7. SHARES OF RESTRICTED STOCK

7.1 Grant of Shares of Restricted Stock. Awards of Restricted Stock to
Participants shall be granted under an irrevocable election by Participants.

7.2 Transferability. 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.

7.3 Removal of Restrictions.

(A) Vesting of Restricted Stock.
(i) Unless earlier forfeited, as to one-third (or
such applicable fraction to reflect deferrals for a period less than 3 years) of
the shares of Restricted Stock representative of the annual retainer
compensation deferred by the Participant, the restrictions applicable to the
Restricted Stock issued for the benefit of the Participant shall lapse and the
Participant shall be entitled to the delivery of a stock certificate or
certificates on or shortly after December 31st of each year if Participant is
then a Director of the Company.

(ii) Unless earlier forfeited, as to one-twelfth (or
such applicable fraction to reflect deferrals made for a period less than 12
quarterly meetings) of the shares of Restricted Stock representative of the
regular quarterly meeting fees of the Director's Fee deferred by the
Participant, the restrictions applicable to the Restricted Stock issued for th
benefit of the Participant shall lapse upon the occurrence of a regular
quarterly meeting and attendance by the Participant, and the Participant shall
be entitled to the delivery of a stock certificate or certificates for such
shares; provided, however, the Company will not, unless otherwise requested,
issue such certificate(s) until December 31st of each year or shortly
thereafter.

(iii) Unless earlier forfeited, as to a
prorata number of shares of Restricted Stock which would otherwise vest in a
calendar year of the Program pursuant to Section 7.3 (A)(i) or (ii), th
restrictions applicable to the Restricted Stock issued for the benefit of the
Participant shall lapse and the Participant shall be entitled to the delivery of
a stock certificate or certificates upon the occurrence of any of the following:

(a) The date of the Participant's
death or disability;

(b) The end of the Participant's term
for which elected, if not then
re-elected (except if forfeited
under Section 7.3 B(ii);

<PAGE>

(d) Upon the occurrence of a Change
in Control.

(B) Forfeiture of Restricted Stock. Except as to shares of Restricted
Stock earlier vested, the Restricted Stock issued to the Participant shall be
entirely forfeited if:

(i) The Participant resigns (other than by
reason of disability) or is dismissed for cause from the Board during the
Participant's elected term; or

(ii) The Participant refuses to stand for an
election to the Board after having been nominated by the Board; or

(iii) As to one-twelfth (or such applicable
fraction to reflect deferrals made for a period less than 12 quarterly meetings)
of the shares of Restricted Stock awarded to a Participant representative of
regular quarterly meeting fees multiplied by the number of regular quarterly
meetings of the Board unattended by the Participant occurring in the preceding
calendar year shall be identified and forfeited on December 31 of each year.

For purposes of Section 7.3 (B)(i) above, a Participant shall be considered to
have been dismissed for cause if, and only if, the Participant is dismissed on
account of any act of (a) fraud or intentional misrepresentation, or (b)
embezzlement, misappropriation or conversion of assets or opportunities of the
Company or any direct or indirect majority-owned subsidiary of the Company.

7.4 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
service requirements) set forth in the Pioneer Hi-Bred International,
Inc. Directors' Restricted Stock Plan. 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.

7.5 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 7.5 thereafter shall be freely transferable by the
Participant, subject to any applicable legal requirements.

7.6 Voting Rights. For shares not forfeited, Participants shall have
full voting rights with respect to shares of Restricted Stock.

<PAGE>

7.7 Dividend Rights. For shares not forfeited, 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.

SECTION 8. AMENDMENT AND TERMINATION

8.1 Amendment. This Plan may be amended by the Board.

8.2 Termination. The Company reserves the right to terminate the Plan
at any time by action of the Board.

8.3 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 9. WITHHOLDING OF TAXES

9.1 Withholding of Taxes for Foreign Directors. 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 otherwise due to a
Participant any 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 10 - MISCELLANEOUS

10.1 No Contract of Employment. Nothing in this Plan shall be construed
as a contract of Board representation between the Company and any Participant.

10.2 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.

<PAGE>

10.3 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.

PIONEER HI-BRED INTERNATIONAL, INC.

By: /s/ Charles S. Johnson
Charles S. Johnson
President and CEO

/s/ Jerry L. Chicoine
Jerry L. Chicoine
Secretary

<PAGE>

EXHIBIT 11

PIONEER HI-BRED INTERNATIONAL, INC.
AND SUBSIDIARIES

COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)

Years Ended August 31,
1997 1996 1995 1994 1993
Number of shares of common
stock outstanding at
<S> <C> <C> <C> <C> <C>
beginning of the period............. 82,389 83,487 86,215 89,442 90,274

Weighted average number of
shares of common stock
issued during the period............ 156 75 128 90 148

Weighted average number of
shares of common stock
purchased for the treasury
during the period................... (253) (408) (1,832) (884) (308)
--------- --------- -------- --------- --------

Weighted average number of
shares of common stock
outstanding during the
period.............................. 82,292 83,154 84,511 88,648 90,114
---------- --------- -------- --------- --------

Income before cumulative
effect of changes in
accounting principles............... $ 242,830 $ 222,962 $ 182,590 $ 212,664 $ 137,453
--------- --------- --------- --------- --------

Income before cumulative
effect of changes in
accounting principles
per common share.................... $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.53
--------- --------- --------- --------- --------

Net income.............................. $ 242,830 $ 222,962 $ 182,590 $ 212,664 $ 120,484
--------- ------- --------- --------- --------

Earnings per common share............... $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.34
--------- --------- --------- --------- --------

</TABLE>

The common stock equivalents have not entered into the net income per share
computations because they would not have a material dilutive effect.

<PAGE>

THE COMPANY'S BUSINESS

Overview
The business of Pioneer Hi-Bred 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.

Hybrids, such as corn and sorghum, are crosses of two or more unrelated inbred
lines that can be reproduced only by crossing the original parent lines. As a
result, it is not beneficial for customers to plant saved seed, as the seed
produced will not have the same genetic attributes as the seed planted. Varietal
crops, such as soybeans and wheat, will reproduce themselves with little or no
genetic variation. Customers frequently plant saved grain from these products,
however, they are becoming increasingly aware of the advantages of purchasing
"new" seed every year.

Pioneer is the industry leader in research and product development and has been
for seventy-plus years. The Company owns what it believes to be the industry's
finest collection of crop genetics (germplasm) which has been the key to the
success of Pioneer in the past, and will be in the future. Our researchers are
well-established experts in the science of crop genetics. They are constantly
focused on improving our germplasm base using the latest in technology.

Integrating new technology is essential to crop genetic improvements. Currently,
Pioneer has more than 1,000 research agreements with third parties specializing
in technology that can help improve the core germplasm base. Alliances recently
entered into will allow Pioneer to map the genes that make up our seed products.
Pioneer was the first commercial seed company to undertake such a project. The
goal is to determine which genes, or groups of genes, control valuable traits
and eventually have the ability to arrange these genes to work more efficiently
in our commercial products.

In North America, the majority of Pioneer(R) brand seed is marketed through
independent sales representatives. In areas outside 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.

Product Summary
The Company's principal products are seed corn and soybean seed, which have
accounted for approximately 90 percent of total worldwide net sales and
substantially 100 percent of worldwide operating income 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.

Hybrid seed products typically generate some of the largest margins as a
percentage of sales for the Company. Seed corn provides the largest impact of
all products, in terms of dollars, to the financial bottom line. Therefore,
acreage shifts from corn to other crops can have a significant effect on the
Company's profitability. 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, these margins are narrower and
operations are more subject to year-to-year fluctuations.

Corn: Seed corn, in terms of both sales and profitability, is the Company's most
significant product. In 1997, sales of hybrid seed corn represented
approximately 78 percent of total Pioneer worldwide net sales.

<PAGE>

More than 80 percent of the world's corn is fed to livestock, and they are in
many ways the true end users for our products. The Company is focused on
developing superior corn hybrids for grain and silage as part of this market.

Grain and oilseed processors are also demanding more customized traits. The
Company is actively pursuing opportunities to provide unique value-added traits
for these customers as well.

Improving traditional agronomic traits continues to be important. Our
researchers are working to develop hybrids with superior harvestable yield, and
create products that reduce crop losses, grower input costs, and risk through
agronomic improvements such as insect, disease, and herbicide resistance.

Each year, Pioneer evaluates about 130,000 new experimental seed corn hybrids.
Prior to commercial sale, each hybrid passes through a four- to five-year
testing cycle. During this period, the hybrids are tested in a range of soil
types, stresses, and climatic conditions. Only hybrids that meet the Company's
highest standards make it to commercial status. In the past, we typically
introduced 15-20 new hybrids each year. However, we expect that number to
increase in the future. By the time a typical Pioneer(R) brand hybrid is offered
for sale, it has been tested at more than 150 locations and in more than 200
customer fields. This rigorous testing system helps Pioneer consistently develop
reliable, leading-edge new genetics with a total package of traits that deliver
superior value to our customers.

The Company's top-selling seed corn markets worldwide are the U.S., France,
Canada, and Italy. Estimated acreage planted within these markets in 1997
totaled 80 million, 8 million, 3 million, and 3 million acres, respectively.

Soybeans: Soybean seed is the Company's second largest product in terms of sales
and profitability. Worldwide soybean revenues accounted for approximately 12
percent of 1997 total consolidated revenues.

Each year, Pioneer soybean researchers plant more than 600,000 yield test plots
to measure performance of experimental varieties in many different environments.

Some of the most exciting new products currently in the soybean product lineup
are soybeans resistant to specific herbicides. These soybeans accounted for
approximately 17 percent of 1997 total soybean sales, and this percentage should
increase in the future.

Developing products for the specialty and identity-preserved markets is also
important to the soybean research focus. Pioneer researchers are leading the way
in developing soybean seed with improved meal and oil qualities suitable for
these markets.

Other key attributes our soybean research efforts are focused on include
creating products with increased harvestable yield and yield stability,
standability, disease and pest resistance, and emergence speed.

The Company's top-selling markets for soybean seed are the U.S. and Canada.
Total estimated acreage within these markets for 1997 was 71 million and 3
million acres, respectively.

End Use Focus
Within Pioneer Hi-Bred's overall research emphasis for our products, focusing on
the end use is an area of increasing importance. In the coming years, end users
such as livestock feeders, grain processors, food processors, and others are
expected to demand specific qualities in the crops they use as an input in
developing other products. In the future, the commodity grain market is expected
to segment based on these changing demands, which will increasingly influence
seed purchase decisions.

<PAGE>

The Company's emphasis on end-use markets was dramatically strengthened by an
alliance with DuPont, which was completed in early fiscal 1998. In the alliance,
Pioneer and DuPont will form a broad research alliance and a separate joint
venture company designed to speed the discovery and delivery of new crop traits
that benefit end users. A key focus of the research alliance will be to develop
corn, soybeans, and other oilseeds with traits that will deliver added value for
end users of these products. The joint venture, which will be owned equally by
Pioneer and DuPont, will work to create and capture value for those quality
traits. The joint venture will not be in the seed business. Pioneer will be
the preferred worldwide provider and marketer of quality trait seed for the
joint venture.

Product Sourcing
The Company has seed production facilities located throughout the world, in both
the Northern and Southern Hemispheres. In the production of its parent and
commercial seed, the Company generally provides the 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 seed stock, and other inputs necessary to
produce its commercial seed is adequate for planned production levels.

The principal risk in the production of seed is the environment, with weather
being the single largest variant. Pioneer lessens this risk by distributing
production across many locations around the world. Due to its global presence,
the Company can engage in seed production year-round. To ensure the highest
quality seed is made available, and to enhance the Company's ability to operate
in a global environment, Pioneer is actively engaged in ISO 9000 certification.
Pioneer is the first major agricultural seed company in the world to attain ISO
9000 registration. The certification, established by the International
Organization for Standardization, should allow Pioneer to move products more
easily from country to country.

Patents, Trademarks, and Technology
Pioneer maintains the ownership of and controls the use of its inbreds and
varieties by means of intellectual property rights, including but not limited
to, the use of patents, trademarks, and Plant Variety Protection Certificates.
Within the U.S., these rights essentially prohibit other parties from making,
using, selling, importing, or exporting seed produced from those inbreds and
varieties until such protection expires, usually well after the useful life of
the inbred or variety. Outside of the U.S., the level of protection afforded
varies from country to country according to local laws and international
agreements. As of August 31, 1997, Pioneer held 159 U.S. patents and 349 foreign
patents. The Company currently has over 700 patent applications pending on new
technologies and products moving toward commercialization.

The Company, and the industry as a whole, will be increasingly affected by new
patents, patent positions, and patent lawsuits. Pioneer has become increasingly
active in its patenting of inbreds, hybrids, and other products and processes
that relate to our business. 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 that will be necessary to
effectively compete in the marketplace.

No single patent Pioneer currently owns is vitally important to the Company's
business. However, a substantial number of patents have recently been applied
for, and some granted, in the area of biotechnology by Pioneer and others in the
industry. These patents relate to technology in the area of genetically
engineering insect, disease, and herbicide resistance into crops. If existing
and future patents in the area of biotechnology are upheld, it is uncertain
whether holders of these patents would allow this technology to be licensed by
others in the industry, and at what price. However, the Company will review
carefully all requests for licenses to its technology and to grant access when
it is commercially prudent to do so.

The Company's policy is to vigorously protect our intellectual property from
infringement.

<PAGE>

Seasonality of the Business
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 patterns between quarters by affecting the delivery of seed
and causing a shift in sales between quarters.

Competitive Conditions
The hybrid seed industry is characterized by intense competition and is based
primarily on product performance and price. The Company's objective is to
produce products that consistently out-perform the competition and so command a
premium price. The Company has been successful competing on that basis in the
past and expects to continue to do so in the future through its ongoing
investment in research and product development.

The primary markets for the Company's products are the U.S. and Canada (the
North American region) and Europe. Approximately 67 percent of total 1997 sales
were made within North America and 23 percent within Europe. The Company also
has operations in Latin America, Mexico, Africa, Asia, and the Middle East. Our
goal within developing nations is to aid the development of the existing seed
markets and establish businesses that can grow and prosper.

Pioneer is the industry leader in North American seed corn sales. The Company's
share of this market in 1997 is estimated to be approximately 42 percent. The
next six competitors held an estimated combined market share of approximately 32
percent, with the closest competitor holding approximately 11 percent. The
remainder of the market is divided among more than 300 companies selling
regionally.

The Company also has a leading seed corn market share in most of the countries
outside North America in which it operates. Significant markets in which the
company operates include France, Italy, Germany, Hungary, Mexico and
Brazil. The Company's market share within these countries ranges from near 10
percent to more than 60 percent.

Pioneer's principal market for soybean seed is North America. The Company's
share of the 1997 purchased-seed market totaled approximately 18 percent,
highest in the industry.

Research and Product Development
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 Company's seed research is done
through classical plant breeding and biotechnology techniques. 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.

At August 31, 1997, the Company employed approximately 940 people who directly
and indirectly engaged in research and product development activities. Of these,
390 scientists performed research in the agricultural seed area and eight in
microbial cultures. Of the 390 scientists performing research in agricultural
seeds, 65 are employed outside of North America.

During the three fiscal years ended August 31, 1997, the Company expended the
following amounts on research and product development:

Years ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Corn............................. $101 $ 90 $ 87
Soybeans......................... 14 12 10
Other Products................... 31 34 33
------ --- ---
$146 $136 $ 130
=== ==== ===
</TABLE>

Planned growth in breeding projects, research collaborations, and trait and
technology development contributed to the recent increase in research and
product development costs.

Risk Factors in Our Business
The annual volume of seed sold and related profit can be significantly affected
by forces beyond the Company's control. Two such factors are government
programs/approvals and weather. Government programs can affect, among other
things, crop acreage and commodity prices. Government regulatory approvals can
affect the timing of bringing new products to market. Weather and other factors
can affect commodity prices, product performance, the Company's seed field
yields, and planting decisions by customers which ultimately can impact acreage.

Intellectual property positions are becoming increasingly important within the
agricultural seed industry as genetically engineered products become a larger
part of the product landscape. At this point in time, it is uncertain who has
what patent rights within the industry for recent technology advancements.

Operating as a global company exposes Pioneer to the risks resulting from
currency fluctuations. We have policies in place to manage this risk. Product
performance against the competition will continue to be the key driver of
long-term success for the Company. While we have been able in the past to
develop products that on-average consistently out-perform the competition, rapid
change in technology and customer preference may result in competitive products
that are in greater demand.

General
The operations of Pioneer are subject to rules and regulations of various
regulatory agencies. Management believes that the Company is in compliance, in
all material respects, with all applicable rules and regulations, and that
compliance has not had a materially adverse effect on its operations or
financial condition.

At August 31, 1997, the Company employed approximately 5,000 people worldwide.

SELECTED FINANCIAL DATA
Consolidated Ten-Year Financial History

Years Ended August 31, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share and statistical amounts)

Summary Operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales....................... $ 1,784 $ 1,721 $ 1,532 $ 1,479 $ 1,343 $ 1,262 $1,125 $ 964 $ 867 $ 759
====== ====== ====== ====== ===== ===== ===== ====== ====== =======
Gross Profit.................... $ 867 $ 858 $ 760 $ 759 $ 700 $ 640 $ 549 $ 442 $ 391 $ 389
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Restructuring and Settlements... $ -- $ -- $ -- $ 45 $ (54) $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Income From Continuing
Operations................... $ 243 $ 223 $ 183 $ 213 $ 137 $ 152 $ 104 $ 73 $ 82 $ 84
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Net Income...................... $ 243 $ 223 $ 183 $ 213 $ 120 $ 152 $ 104 $ 73 $ 98 $ 65
====== ====== ====== ====== ====== ====== ====== ====== ====== =======

Per Common Share Data:
Income From Continuing
Operations................... $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ 0.78 $ 0.86 $ 0.88
Net Income...................... $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ 0.78 $ 1.03 $ 0.68
Growth in Earnings Per Share*... 10.1% 24.1% (10.0)% 56.9% (8.9)% 46.1% 47.4% (9.3)% (2.3)% 31.3%
Dividends Declared.............. $ 0.95 $ 0.83 $ 0.71 $ 0.59 $ 0.50 $ 0.40 $ 0.39 $ 0.39 $ 0.36 $ 0.35
Shareholders' Equity............ $ 13.96 $ 12.36 $ 10.94 $ 10.22 $ 9.23 $ 8.86 $ 7.51 $ 7.00 $ 6.62 $ 6.04

Balance Sheet Summary:
Current Assets.................. $ 901 $ 784 $ 770 $ 742 $ 717 $ 703 $ 606 538 $ 474 $ 450
Net Property & Other Assets..... $ 702 638 523 511 504 543 480 468 440 414
----- ----- ------ ------ ------ ------ ------ ----- ------ ------
Total Assets.................... $ 1,603 $ 1,422 $ 1,293 $1,253 $ 1,221 $ 1,216 $1,086 $1,006 $ 914 $ 864
====== ====== ====== ===== ===== ===== ===== ===== ====== ======

Current Liabilities............. $ 329 $ 288 $ 280 $ 232 $ 261 $ 286 $ 295 $ 294 $ 221 $ 209
Long-Term Debt.................. 19 25 18 66 68 74 67 19 17 28
Other Long-Term Liabilities..... 107 91 82 74 67 57 43 44 49 50
----- ------ ------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities............... $ 455 $ 404 $ 380 $ 372 $ 396 $ 417 $ 405 $ 357 $ 287 $ 287
====== ====== ====== ====== ====== ====== ====== ====== ====== ======

Shareholders' Equity............ $ 1,148 $ 1,018 $ 913 $ 881 $ 825 $ 799 $ 681 $ 649 $ 627 $ 577
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Dividends Declared.............. $ 79 $ 69 $ 60 $ 52 $ 45 $ 36 $ 35 $ 36 $ 34 $ 33
Average Shares Outstanding...... 82.3 83.2 84.5 88.6 90.1 90.8 90.9 93.5 95.4 95.5

Other Statistics:
Return on Ending Equity*........ 21.2% 21.9% 20.0% 24.1% 16.7% 19.0% 15.3% 11.2% 13.1% 14.6%
Return on Net Sales*............ 13.6% 13.0% 12.0% 14.4% 0.2% 12.1% 9.3% 7.5% 9.4% 11.1%
Return on Ending Assets*........ 15.2% 15.7% 14.2% 17.0% 11.2% 12.5% 9.6% 7.2% 9.0% 9.8%
Gross Profit on Net Sales....... 48.6% 49.9% 49.6% 51.3% 52.1% 50.7% 48.8% 45.8% 45.1% 51.2%
Dividends Declared as a % of
Net Income................ 32.5% 30.9% 32.8% 24.6% 37.4% 23.9% 33.8% 49.7% 34.7% 50.9%
Stock Price at August 31,....... $ 85.69 $ 55.13 $ 43.00 $ 31.25 $ 32.75 $ 26.50 $ 17.42 $ 13.25 $ 14.00 $ 11.75
Market Capitalization at
August 31, (in millions).... $7,045$ $ 4,542 $ 3,590 $ 2,694 $ 2,929 $ 2,392 $ 1,579 $ 1,229 $ 1,326 $ 1,122
Number of Employees............. 4,994 4,911 4,924 4,847 4,807 5,016 4,829 4,601 4,026 4,805

*Based on income from continuing operations before cumulative effect of accounting change

</TABLE>

<PAGE>

CONSOLIDATED NET SALES AND OPERATING INCOME (LOSS) BY PRODUCT

Years Ended August 31, 1997 % 1996 % 1995 % 1994 % 1993 %
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)

NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Corn............................... $ 1,385 77.6 $ 1,377 80.0 $ 1,227 80.0 $ 1,185 80.1 $ 1,077 80.2
Soybeans........................... 208 11.7 164 9.5 145 9.5 128 8.7 116 8.6
Other.............................. 191 10.7 180 10.5 160 10.5 166 11.2 150 11.2
------- ----- ------- ----- ------ ------ ------- ----- ------ -----
Total net sales........................ $ 1,784 100.0 $ 1,721 100.0 $ 1,532 100.0 $ 1,479 100.0 $ 1,343 100.0
======= ===== ======= ===== ======= ===== ======= ===== ====== =====

OPERATING INCOME (LOSS):
Corn............................... $ 402 29.0 $ 410 29.8 $ 359 29.3 $ 383 32.3 $ 354 32.9
===== ===== ====== ===== =====
Soybeans........................... 27 13.0 16 9.8 9 6.2 7 5.5 7 6.0
===== ===== ====== ===== =====
Other.............................. 11 5.8 (3) (1.6) (15) (9.4) (21) (12.6) (24) (16.0)
===== ==== ====== ===== =====
Restructuring and settlements...... -- -- -- -- -- -- 45 3.0 (53) (3.9)
------- ===== ------- ===== ------ ====== ------- ===== ------- ====
Product line operating income.......... $ 440 24.7 $ 423 24.6 $ 353 23.0 $ 414 28.0 $ 284 21.1
Indirect general and administrative
expense............................ (77) (4.4) (76) (4.4) (73) (4.7) (68) (4.6) (59) (4.4)
------- ----- ------- ----- ------ ------ ------- ----- ------ -----
Operating income....................... $ 363 20.3 $ 347 20.2 $ 280 18.3 $ 346 23.4 $ 225 16.7
Financial income (expense)............. 10 0.6 7 0.4 11 0.7 3 0.2 (6) (0.4)
------- ----- ------- ----- ------ ------ ------- ----- ------ -----
Income before items shown below........ $ 373 20.9 $ 354 20.6 $ 291 19.0 $ 349 23.6 $ 219 16.3
Provision for income taxes............. (127) (7.1) (127) (7.4) (106) (6.9) (134) (9.1) (86) (6.4)
Minority interest and other............ (3) (0.2) (4) (0.2) (2) (0.1) (2) (0.1) 4 0.3
------- ----- ------ ----- ------ ------ ------- ----- ------ -----
Income before cumulative effect of
accounting change.................. $ 243 13.6 $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 137 10.2
Cumulative effect of accounting
change, net........................ -- -- -- -- -- -- -- -- (17) (1.2)
------- ----- ------- ----- ------ ------ ------- ------ ------ -----

NET INCOME............................. $ 243 13.6 $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 120 9.0
======= ===== ======= ===== ====== ====== ======= ===== ====== =====

Income per common share:
Income before cumulative effect
of accounting change............. $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.53
Cumulative effect of accounting
change, net...................... -- -- -- -- (.19)
------- ------- ------ ------- ------
Net income......................... $ 2.95 $ 2.68 $ 2.16 $ 2.40 $ 1.34
======= ======= ======= ======= ======

Average shares outstanding............. 82.3 83.2 84.5 88.6 90.1

</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Pioneer continued its trend of earnings growth, once again achieving record
financial results in 1997. A recap of key financial data tells the story.

- Current year net income after tax totaled $243 million, or $2.95
per share, on sales of $1.784 billion. After tax income in 1996
totaled $223 million, or $2.68 per share, on sales of $1.721
billion. The result was per-share earnings growth totaling ten
percent for the current year.

- Return on Ending Equity (ROE) of 21 percent, sustained above
the targeted level of 20 percent for the fourth consecutive year.

The Company continues to perform on its primary financial goals - double-digit
earnings growth over time and maintaining 20 percent ROE.

Historically, the Company's growth has primarily been driven by North American
seed corn operations. In 1997, record sales and profits from our soybean
business, improved profitability from our other product seed lines, and strong
seed corn sales outside North America were the primary drivers for improved
current year income.

Fiscal 1997 marked a significant transition for our seed corn product line in
North America.

Our seed corn operations in North America provided outstanding results in 1997,
generating record product margins despite a reduction in units sold. When
combined with increased investments in corn research and product development,
North American operating income for corn decreased. Although these additional
costs ultimately reduced current year corn operating income below 1996 results,
they are a direct investment in our future profitability.

The reduction in units sold was primarily the result of a decrease in the
Company's North American market share. Depending on final corn acreage and
seeding rates, market share is estimated to decrease approximately two points.
This will result in the Company's leading market share in North America to total
approximately 42 percent. Lower unit sales of older, high-volume hybrids were
largely responsible for the market share decrease. Delayed regulatory approval
of our Bt corn products also contributed to the lower market share results.

Corn acreage rose modestly above 1996, positively impacting the current year.
Operating results in North America were also affected by a higher average seed
corn selling price, due in part to an increase in the list price of products and
a shift to higher-priced products. Per-unit seed corn costs increased as well,
however, the result was current year per-unit seed corn margins above 1996
levels.

Record North American soybean sales and profits in 1997 played a significant
role in current year results. Growth in acreage, market share, and strong unit
sales of glyphosate-resistant products pushed current year North American
soybean unit sales and operating results to record levels.

Operating income for other products improved significantly from a year ago. The
elimination of prior year losses from the sale of our vegetable products line
and liquidation of our specialty oils inventory in 1996 not present in 1997
positively impacted current year results. The balance of our other products
provided significant improvements in operating income in the current year.

Most operations outside North America also generated good earnings growth in
1997, primarily due to strong seed corn sales. Our operations in Europe, Mexico,
Asia, Africa, and the Middle East all posted increases in operating income from
a year ago. Conversely, Latin American operations did not meet expectations,
resulting from seed corn supply availability, product

<PAGE>

performance, and reduced corn acreage during the year. In total, seed corn unit
volumes outside North America increased from a year ago. Earnings growth for
these regions, however, were dampened by the strong U.S. dollar during the
period.

Management is optimistic that 1998 will be another good year. The Company
believes it is well positioned to grow North American seed corn market share in
1998 due to the excitement about the increased value and performance of our new
products. North American seed corn margins should also improve.

The Company introduced 27 new corn hybrids in limited volumes during 1997. These
new products have performed very well in wide-area testing, and are now
performing well in customers' fields. In addition to Bt corn, these new releases
include high-yielding conventional hybrids, products for the rapidly growing
high-oil market, hybrids with better disease resistance, as well as new white
and waxy corn hybrids for the starch industry. The Company's ability to quickly
increase supply of these products due to year-round production capabilities
should make them widely available in 1998.

Management believes that our new Bt corn products incorporate the best genetics
available and have stronger performance potential than any competitor Bt corn
product released to date. As a result, the Company should be in a better
position to compete for Bt corn market share in 1998 due to good placement of
its current year Bt corn products in the market, significantly larger supplies
of these products, and an entire season in which to market them.

Until recently, Pioneer has participated in the rapidly growing market for
high-oil corn in very limited volume. However, a recent agreement with DuPont
will bring more opportunities to compete for these acres in 1998 and the
potential to become a significant supplier in this market.

A continued shift by customers to higher-priced, higher-value new products is
expected to increase the average per-unit North American seed corn sales price.
Per-unit seed corn cost of sales in North America is expected to hold relatively
steady compared to 1997. When combined with the sales price effect, margins
should be positively affected in 1998.

Management believes that strong North American soybean operations will continue
into 1998 as our soybean products continue to perform well against the
competition. The demand for glyphosate-resistant products is expected to
increase significantly, and the Company will have larger supplies of these
products available for sale in 1998. As a result, sales of glyphosate-resistant
products are expected to represent a larger percentage of overall soybean sales
in 1998, and margins are expected to improve because of their premium sales
price over our elite varieties.

While operations outside North America are more difficult to predict, management
believes these operations will continue to grow and improve on results of 1997.

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 management's expectations noted in these forward-looking
statements include the weather, seed field yields, government
programs/approvals, commodity prices, changes in corn acreage, intellectual
property positions, product performance, customer preferences, currency
fluctuations, and costs.

<PAGE>

Year Ended August 31, 1997, Compared to the Year Ended August, 31, 1996

Hybrid Seed Corn
Current year seed corn operating income decreased $8 million, or two percent
from prior year results. Operations in North America played a significant role
in the decrease, primarily the result of fewer unit sales, increased per-unit
net margins, and higher investments in research and product development. Seed
corn operations outside North America provided increased operating income from a
year ago on higher unit sales, however, this was tempered by the stronger U.S.
dollar in the current year.

Corn Net Sales and Product Line Operating Income

Increase Increase
1997 (Decrease) 1996 (Decrease) 1995
- --------------------------------------------------------------------------------------------------------------------------------
(In millions)

NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C>
North America........ $ 907 $ (1) (0.1)% $ 908 $ 100 12.4 % $ 808
Europe............... 342 6 1.8 % 336 31 10.2 % 305
Other regions........ 136 3 2.3 % 133 19 16.7 % 114
-------- -------- -------- ------ --------
Total net sales.......... $ 1,385 $ 8 0.6 % $ 1,377 $ 150 12.2 % $ 1,227
======== ======== ===== ======== ======== ======== ========

OPERATING INCOME:
North America........ $ 266 $ (10) (3.6)% $ 276 $ 20 7.8 % $ 256
Europe............... 118 18 18.0 % 100 25 33.3 % 75
Other regions........ 18 (16) (47.1)% 34 6 21.4 % 28
-------- -------- -------- ------ --------
Total operating income.. $ 402 $ (8) (2.0) %$ 410 $ 51 14.2 % $ 359
===== ========== ===== === ======== =============== ======

UNIT SALES:
(80,000-kernel units)
North America........ 11.5 (0.6) (4.6)% 12.1 1.2 11.3 % 10.9
Europe............... 3.1 0.2 5.4 % 2.9 0.2 7.1 % 2.7
Other regions........ 2.3 (0.1) (4.7)% 2.4 0.5 22.3 % 1.9
------- -------- -------- ------ --------
Total unit sales......... 16.9 (0.5) (3.0)% 17.4 1.9 12.0 % 15.5
======= ======== ===== ======== ====== ======== ========

ACRES:
North America............ 83.3 0.6 0.7 % 82.7 8.5 11.4 % 74.2
======= ======== ===== ======== ====== ======== ========
</TABLE>

The primary drivers affecting North American operations are market share, market
size, and per-unit price and cost.

Seed corn market share in North America declined approximately two points in
1997, bringing the Company's estimated leading share of the North American
market to approximately 42 percent. The Company introduced a number of new
products in limited volumes this year which are targeted to replace hybrids that
have been leading sellers in recent years. Lower unit sales of these older
hybrids are largely responsible for the estimated current year market share
decrease.

The sale of two key hybrids, 3394 and 3489, accounted for approximately 23
percent and 28 percent of the Company's 1997 and 1996 North American hybrid seed
corn unit sales.

Delayed regulatory approval for our Bt corn products also contributed to the
current year market share decline. Despite regulatory approval for Bt corn
products coming late in the selling season, Pioneer sales representatives were
able to place Pioneer seed in more than 20 percent of the

<PAGE>

estimated North American Bt corn acres planted in 1997. However, due to the late
start, the Company was unable to attain its normal market presence for these
products.

Based on information to date, corn acreage in North America rose modestly above
1996 levels which positively affected operating income. Although operating
results in North America were affected by higher per-unit seed corn costs, the
average seed corn selling price also increased.

In 1997, the average net seed corn selling price per unit to customers in North
America increased seven percent resulting from the introduction of several new
elite products, which were priced at a premium, and an increase in list prices
across the entire product line. However, during the current year a change was
made to the Company's commission program, which eliminated some ties between the
commission and quantity savings discount programs. Reported quantity savings
discounts increased and reported net commission expense decreased accordingly.
As a result, reported net price for 1997 based on reported net sales only
reflects an increase of approximately five percent. Net selling price per unit
to customers, North American seed corn net margin per unit, and net compensation
to sales representatives were essentially unaffected by this program change.

Per-unit seed cost of sales increased approximately $2.50 in 1997, principally
due to the prior year cost of sales mix. Fiscal 1996 cost of sales included
large quantities of lower-priced carryover seed from the 1994 crop year. When
combined with the sales price effect, net seed corn margins increased
approximately $2.25 per unit. Provisions for inventory reserves in 1997 were
$1.98 per unit, compared to $2.22 per unit in 1996. The Company's policy is to
provide adequate reserves for inventory obsolescence. Approximately nine percent
of North American unit sales were reserved in 1997. We anticipate more rapid
obsolescence of older products with the increased introduction of new products.

North American research and product development costs for seed corn increased
$11 million, or 15 percent, to $86 million. The increase was the result of
additional spending on classical plant genetic activities and investments to
access technology that will help expand and improve the Company's germplasm
base.

As a result of investments in research and product development, the Pioneer
research program turned out 27 new corn hybrids in limited volumes for the North
American market in 1997. First-year sales of these new hybrids reached 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.

Seed corn operating results outside North America increased $2 million compared
to the prior year. European operations (Europe, CIS, Turkey, Australia, and
Japan) provided the largest impact, accounting for $18 million in additional
operating income. Strengthening of the U.S. dollar against European currencies
had a significant negative impact on current year reported results for European
operations. Excluding this impact, the region reflected an improvement of $32
million over 1996 results. Additional unit sales in Italy, Southern Europe, and
Central Europe were significant factors in the current year increase in
operating income. Market size and market share increases, individually or in
concert, played roles in these improvements.

Current year operating income in our Latin American region decreased $23 million
compared to last year. Supply availability and decreased corn acreage reduced
current year operating income in Brazil. Also affecting current year results was
a performance issue related to last season's top selling hybrid in Argentina. As
a result, operating income decreased due to reduced unit sales and higher cost
of sales. New and improved products for the region are in the pipeline and
should be widely available in 1998 as a result of production in North America.

<PAGE>

Operating income in Mexico improved $4 million from year-ago results as
favorable weather conditions and improved water supply resulted in increased
unit sales. Increased selling price per unit also favorably impacted current
year results.

Volume and price increases in several countries within Asia, Africa, and the
Middle East improved this region's current year operating results $3 million.
Markets within this geography continue to expand and the Company is well
positioned to benefit from that growth.

Soybean Seed
Soybean seed is the Company's second largest product in terms of revenue and
operating income. Current year soybean operating income improved $11 million, or
69 percent, over year ago results. The primary drivers for operating income
- -market size, market share, and price - had positive impacts on soybean
operations.

North American Soybean Unit Sales (in millions)

1997 1996 1995
---- ---- ----

13.511 11.345 10.961

North American Soybean Acreage (in millions)

1997 1996 1995
---- ---- ----

73.5 66.4 64.6

Estimated North American Soybean Market Share

1997 1996 1995
---- ---- ----

18.1% 17.2% 17.5%

North America accounts for approximately 98 percent of worldwide soybean unit
sales. Unit sales in North America increased 19 percent, or approximately 2.2
million units, over 1996 levels as a result of increased acreage and improved
market share. Favorable commodity prices drove an 11 percent increase in acres
planted to soybeans in the current year. Continued strong product performance
and the demand for glyphosate-resistant varieties contributed to market share
gains.

Net margin in North America improved approximately $.60 per unit 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 that are
sold at a premium, more than offset the increase in unit costs.

The demand for glyphosate-resistant products in North America was strong in
1997. The Company's current year unit sales of these products totaled 2.3
million units, or approximately 17 percent of total soybean unit sales, compared
to unit sales of less than 100,000 in 1996.

Other Products
Other products' current year operating results improved $14 million over those
recorded a year earlier. Current year comparisons were affected by the
elimination of prior year losses from the sale of our vegetable products line
and liquidation of our specialty oils inventory in 1996 not present in 1997,
which combined to improve current-year operating results $7 million over 1996
levels. Operating income for canola products in 1997 improved $3 million from
last year's results

<PAGE>

due to increased acreage and higher market share. Microbial product results
improved $2 million for the year on strong performance of premium inoculant
products. Annual results for alfalfa, sorghum, and miscellaneous other seed
products in total improved $5 million from a year ago, as well. Decreased
current year wheat sales in North America, the result of reduced acreage,
lowered operating income $3 million from 1996 levels.

Other Products Net Sales and Combined Product Line Operating Income (Loss)
<TABLE>
<CAPTION>
Increase Increase
1997 (Decrease) 1996 (Decrease) 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions)

NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C>
Alfalfa.............. $ 45 $ 13 40.6% $ 32 $ -- -- $ 32
Sorghum.............. 36 5 16.1% 31 5 19.2 % 26
Wheat................ 20 (5) (20.0)% 25 7 38.9 % 18
Sunflower............ 24 2 9.1% 22 3 15.8 % 19
Microbial products... 30 2 7.1% 28 1 3.7 % 27
Developing products.. 36 (6) (14.3)% 42 4 10.5 % 38
----- ------- ------- ------- -------- ------
Total net sales.......... $ 191 $ 11 6.1% $ 180 $ 20 12.5 % $ 160
====== ======== ======= ======== ======== ===== ========

Total combined
operating income
(loss)............... $ 11 $ 14 $ (3) $ 12 $ (15)
======== ======== ======== ======== ========
</TABLE>

These products provide the sales organization a full line of seed products,
significantly aiding in the sale of higher-margin products. In addition, the
opportunity for some of these product lines to generate greater levels of
operating income in the near term are promising.

Corporate and Other Items
Current year indirect general and administrative expenses, which totaled $77
million, were similar to those recorded a year earlier. Increased general costs
and higher legal expenses, resulting from technology claims and disputes, were
offset by the one-time effect of adopting FAS116 "Accounting for Contributions
Made and Contributions Received" during 1996, not present in the current year.

Net financial income increased $3 million from what was recorded a year earlier.
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
year interest expense $3 million. A current year gain from the sale of one
million shares of Mycogen Corporation 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.

The decrease in the effective tax rate from 36 percent in 1996 to 34 percent in
1997 was primarily attributable to the Company's operations outside the United
States. The Company's effective tax rate will vary based on the mix of earnings
and tax rates from the various countries in which it operates. Higher earnings
from our North American seed business may put upward pressure on the effective
tax rate in future years.

<PAGE>

Year Ended August 31, 1996, Compared to the Year Ended August, 31, 1995

Hybrid Seed Corn In 1996, seed corn operating income improved $51 million, or
14 percent, over 1995. Operations within North America accounted 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.

Higher seed corn unit sales were the primary factor contributing to the 1996
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 in 1996 was
responsible for the increase. The 1996 list price for all hybrids remained
unchanged from 1995.

Higher corn seeding rates and replant units reduced the Company's 1996 seed corn
market share to approximately 44 percent. Market share declines occurred in some
areas of the Northern Corn Belt after disappointing yields there in 1995. They
were partially offset by market share gains in other areas of North America.

Higher seed costs also affected 1996 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
affected 1996 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 and Latin America also played a
significant role in the increase in 1996 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 in 1996 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.

<PAGE>

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
Operations in North America accounted for virtually all of the 1996 worldwide
soybean seed operating income. Growth of this product line continued in 1996
resulting in an increase in operating income totaling $5 million, a 44 percent
increase in North American operating income over 1995.

Unit sales in North America for 1996 increased three percent, to 11.3 million
units, the result of increased acreage. List prices in 1996 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.

Other Products
Other product's operating results for 1996 improved $12 million over the prior
year, primarily the result of increased North American wheat acreage and
increased North American sorghum acreage and price.

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 1996 accounted 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.

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 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 $176 million in 1997, compared to $389 million and $140
million in 1996 and 1995, respectively. The effect on cash provided by operating
activities of building inventory levels and inventory liquidation have the
greatest impact on the Company in any given year. Excluding this effect, cash
provided by operating activities was $248 million in 1997, compared to $346
million and $208 million in 1996 and 1995, respectively.

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, 1997, totaled
$91 million, a $78 million increase from 1996 and $33 million higher than 1995.
Additional current year financing to international subsidiaries, funding for
research collaborations, and license agreement payments contributed to higher
levels of short-term borrowings in 1997. Increased sales in 1996 allowed for
lower levels of borrowing during that

<PAGE>

period. In 1997, short-term borrowings peaked at $250 million compared to $238
and $217 million in 1996 and 1995, respectively.

In 1997, short-term domestic investments peaked at $242 million compared to $234
million and $257 million in 1996 and 1995, respectively. Short-term investments
are made through a limited number of reputable institutions after evaluation of
their 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 1997 and 1998 Available Domestic Lines of Credit (in millions)
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Revolving $ 200 $ 200 $ 200 $ 200
Seasonal 100 100 -- --
------- ---------- ---------- ----------
Total $ 300 $ 300 $ 200 $ 200
======= ========= ========= =========
</TABLE>

The Company believes the domestic lines of credit available in 1998 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, 1998.

At year end, cash and cash equivalents totaled $97 million, down from $99
million at August 31, 1996. 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 $151
million in 1997 compared to $164 million in 1996 and $86 million in 1995. Fiscal
1997 and 1996 expenditures were higher than 1995 principally due to costs
associated with expanding production capacity and additional technology
acquisitions and research collaborations. Capital expenditures for 1998 are
expected to be approximately $160 million to $170 million and are expected to be
funded through earnings.

The quarterly dividend paid in July of 1997 increased to $.26 per share, up 13
percent from the $.23 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 Dividend Paid (in millions)

1997 1996 1995
---- ---- ----

$ 79 $ 69 $ 60

During 1997, the Company repurchased 369,000 shares of its stock under a Board
authorized repurchase plan at a total cost of $25 million. At August 31, 1997,
authorized shares remaining to be purchased under the plan totaled 2.1 million.

Alliance With DuPont
In August, 1997, the Company and E.I. du Pont de Nemours and Coompany (DuPont)
entered into an agreement that creates one of the world' s largest private
agricultural research and development collaborations. The agreement was
finalized in September, 1997. The companies also formed a joint venture that
will market improved quality traits that will increase the value of crops for
livestock feeders, grain processors, and other end users. The joint venture
will not sell seed. Pioneer will be the preferred worldwide provider and
marketer of quality trait seed for the joint venture. Contribution of tangible

<PAGE>

assets or cash to the joint venture are not expected to materially impact the
financial condition or results of operation of the Company in the near future.

DuPont also acquired a 20 percent interest in Pioneer through the purchase of
preferred voting shares for $1.7 billion. Pioneer used a portion of the proceeds
from the DuPont investment to purchase 20 percent of our outstanding shares
through a Dutch auction self-tender. The Company purchased the shares at $92.50
per share, and when combined with all other costs associated with the
transaction, will have approximately $180 million available for corporate
purposes.

The agreement, among other things, includes a standstill provision that
prohibits DuPont from increasing its ownership share in Pioneer for 16 years
without the consent of Pioneer. DuPont also gained two of the 15 seats on the
Pioneer board of directors.

Market Risks
The Company uses derivative instruments to manage risks associated with its
grower compensation costs and foreign-currency-based transactions.

The Company uses derivative instruments such as commodity futures and options to
hedge the commodity risk involved in compensating growers. Pioneer contracts
with independent growers to produce the Company's finished seed inventory.
Contracts with growers generally allow them to settle with Pioneer for the
market price of grain for a period of time following harvest. It is the
Company's policy to hedge commodity risk prior to setting the retail price of
seed. The hedge gains or losses are accounted for as inventory costs and
expensed as cost of goods sold when the associated crop inventory is sold. At
August 31, 1997, the net unrealized loss on these contracts for corn and
soybeans totaled $4 million. A ten percent change in the market price would
impact these net unrealized losses by approximately $4 million. The contract
volumes at year end depend upon the acreage contracted with growers, the crop
yield, the percentage growers have marketed to Pioneer, and the percentage of
crop hedged by the Company. Since these positions are a hedge to inventory
costs, any change in the cost of these positions is offset by an opposite change
in inventory costs.

The Company uses derivative instruments such as forward exchange contracts,
purchased options, and cross currency swaps to hedge
foreign-currency-denominated transactions such as exports, contractual flows,
and royalty payments. While derivative hedge instruments are subject to price
fluctuations from exchange and interest rate movements, the Company expects
these price changes to generally be offset by changes in the U.S. dollar value
of foreign sales and cash flows. Therefore, hedging gains and losses are matched
with the costs of the underlying exposures and accounted for in inventory,
sales, or net financial costs. At August 31, 1997, net unrealized gains from
foreign-currency hedge contracts totaled $4 million. A ten percent change in
exchange rates would impact these net unrealized gains by approximately $24
million.

The Company does not trade in commodity-based or financial instruments with the
objective of earning financial gain on rate or price fluctuations, nor does it
trade in these instruments when there are no underlying transaction related
exposures.

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.

<PAGE>

APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS

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 "North American Soybean Acreage" appears in the Management
Discussion and Analysis of the Annual Report to Shareholders in the form of a
bar graph

The table titled "Estimated 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 "Fiscal 1997 and 1998 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

<PAGE>

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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended August 31, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Des Moines, Iowa
October 3, 1997

CONSOLIDATED STATEMENTS OF INCOME

Years Ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share amounts)

<S> <C> <C> <C>
Net sales......................................................... $ 1,784 $ 1,721 $ 1,532
-------- ------- -------

Operating costs and expenses:
Cost of goods sold........................................... $ 771 $ 727 $ 642
Research and product development............................. 146 136 130
Selling...................................................... 374 382 354
General and administrative................................... 130 129 126
-------- ------- -------
$ 1,421 $ 1,374 $ 1,252
-------- ------- -------

Operating income............................................. $ 363 $ 347 $ 280

Investment income................................................. 22 22 23
Interest expense.................................................. (8) (11) (13)
Net exchange and other gains (losses)............................. (4) (4) 1
------- ------- -------

Income before items below.................................... $ 373 $ 354 $ 291

Provision for income taxes........................................ (127) (127) (106)
Minority interest and other....................................... (3) (4) (2)
-------- ------- -------

Net income................................................... $ 243 $ 223 $ 183
======== ======= =======

Net income per common share....................................... $ 2.95 $ 2.68 $ 2.16
======== ======= =======

Average shares outstanding........................................ 82.3 83.2 84.5

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

CONSOLIDATED BALANCE SHEETS

ASSETS August 31, 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(In millions)

CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents........................................ $ 97 $ 99
Receivables:
Trade........................................................ 256 208
Other........................................................ 45 35
Inventories...................................................... 440 382
Deferred income taxes............................................ 57 58
Other current assets............................................. 6 2
-------- --------

Total current assets......................................... $ 901 $ 784
-------- --------

LONG-TERM ASSETS..................................................... $ 93 $ 81
-------- --------

PROPERTY AND EQUIPMENT
Land and land improvements....................................... $ 64 $ 63
Buildings........................................................ 377 354
Machinery and equipment.......................................... 539 512
Construction in progress......................................... 60 56
-------- --------
$ 1,040 $ 985
Less accumulated depreciation.................................... 495 475
-------- --------
$ 545 $ 510
-------- --------

INTANGIBLES.......................................................... $ 64 $ 47
-------- --------

$ 1,603 $ 1,422
======== ========

See Notes to Consolidated Financial Statements.
</TABLE>

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY August 31, 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(In millions)

CURRENT LIABILITIES
<S> <C> <C>
Short-term borrowings............................................ $ 91 $ 13
Current maturities of long-term debt............................. 6 12
Accounts payable, trade.......................................... 85 89
Accrued compensation............................................. 60 65
Income taxes payable............................................. 26 63
Other............................................................ 61 46
-------- --------

Total current liabilities.................................... $ 329 $ 288
-------- --------

LONG-TERM DEBT....................................................... $ 19 $ 25
-------- --------

DEFERRED ITEMS
Retirement benefits.............................................. $ 80 $ 68
Income taxes..................................................... 20 16
--------- ---------
$ 100 $ 84
-------- --------

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 1997 - 92,948,963 shares;
1996 - 92,693,578 shares................................... 93 93
Additional paid-in capital....................................... 43 23
Retained earnings................................................ 1,436 1,272
Unrealized gain on available-for-sale securities, net............ 19 11
Cumulative translation adjustment................................ (26) (3)
-------- --------
$ 1,565 $ 1,396

Less:
Cost of common shares acquired for the treasury,
1997 - 10,726,028 shares; 1996 - 10,304,700 shares........ (393) (364)
Unearned compensation........................................ (24) (14)
-------- --------

$ 1,148 $ 1,018
-------- --------

$ 1,603 $ 1,422
======== ========

See Notes to Consolidated Financial Statements.
</TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions)

CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income................................................... $ 243 $ 223 $ 183
Noncash items included in net income:
Depreciation and amortization ........................... 89 77 74
Provision for doubtful accounts.......................... 6 5 2
(Gain) loss on disposal of assets........................ (5) (4) 1
Other noncash items, net................................. 7 1 6
Change in assets and liabilities, net:
Receivables.............................................. (77) (46) (20)
Inventories.............................................. (72) 43 (68)
Accounts payable and accrued expenses.................... (4) 61 (39)
Income taxes payable .................................... (38) 40 (8)
Other assets and liabilities............................. 27 (11) 9
-------- ------- -------

Net cash provided by operating activities................ $ 176 $ 389 $ 140
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets................................. $ 29 $ 15 $ 6
Capital expenditures......................................... (127) (116) (86)
Technology investments....................................... (24) (48) --
Other, net................................................... (7) 5 (2)
-------- ------- -------

Net cash used in investing activities.................... $ (129) $ (144) $ (82)
-------- --------- --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term borrowings (payments)......................... $ 81 $ (42) $ 45
Proceeds from long-term borrowings........................... -- 1 5
Principal payments on long-term borrowings................... (11) (55) (2)
Purchase of common stock..................................... (25) (62) (100)
Cash dividends paid.......................................... (79) (69) (60)
-------- ------- -------

Net cash used in financing activities.................... $ (34) $ (227) $ (112)
-------- -------- --------

Effect of foreign currency exchange rate
changes on cash and cash equivalents......................... $ (15) $ (3) $ 3
-------- -------- --------

Net increase (decrease) in cash and
cash equivalents......................................... $ (2) $ 15 $ (51)
Cash and cash equivalents, beginning.............................. 99 84 135
-------- ------- -------

CASH AND CASH EQUIVALENTS, ENDING................................. $ 97 $ 99 $ 84
======== ======== ========

SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments:
Interest................................................. $ 7 $ 14 $ 13
Income taxes ............................................ $ 158 $ 93 $ 117
Noncash investing and financing activities:
Technology investments acquired by the issuance
of long-term debt and the assumption of liabilities...... $ 10 $ 20 $ --

See Notes to Consolidated Financial Statements.

</TABLE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions)

COMMON STOCK
<S> <C> <C> <C>
Balance, beginning................................................... $ 93 $ 93 $ 93
Issuance in 1997 of 255,385 common shares for restricted
stock plan.................................................... -- -- --
-------- -------- --------
Balance ending....................................................... $ 93 $ 93 $ 93
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning................................................... $ 23 $ 18 $ 15
Common stock issued from treasury for restricted stock
plan.......................................................... 18 3 1
Tax benefits related to restricted stock plan.................... 2 2 2
-------- -------- --------
Balance, ending...................................................... $ 43 $ 23 $ 18
-------- -------- --------

RETAINED EARNINGS
Balance, beginning................................................... $ 1,272 $ 1,118 $ 995
Net income....................................................... 243 223 183
Cash dividends on common stock (1997 - $.95 per share;
1996 - $.83 per share; 1995 - $.71 per share).................. (79) (69) (60)
-------- -------- --------
Balance, ending...................................................... $ 1,436 $ 1,272 $ 1,118
-------- -------- --------

UNREALIZED GAIN ON AVAILABLE-FOR-SALE
SECURITIES, NET
Balance, beginning................................................... $ 11 $ -- $ --
Current unrealized gain.......................................... 8 11 --
-------- -------- --------
Balance, ending...................................................... $ 19 $ 11 $ --
-------- -------- --------

CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning................................................... $ (3) $ 1 $ (3)
Current translation adjustment................................... (23) (4) 4
-------- -------- --------
Balance, ending...................................................... $ (26) $ (3) $ 1
-------- -------- --------

TREASURY STOCK
Balance, beginning................................................... $ (364) $ (303) $ (207)
Purchase of common stock for the treasury (1997 - 369,000........
shares 1996 -1,148,900; shares; 1995 - 2,844,209
shares)....................................................... (25) (62) (100)
Common stock issued from (acquired for) the treasury:
For restricted stock plan (1997 - 17,522 shares;
1996 - 130,359 shares; 1995 - 226,088 shares) - 4 7
From restricted stock forfeitures and stock used to
satisfy withholding taxes (1997 - 69,850 shares;
1996 - 79,410 shares; 1995 - 109,539 shares)........... (4) (3) (3)
-------- -------- -------
Balance, ending...................................................... $ (393) $ (364) $ (303)
-------- -------- --------

UNEARNED COMPENSATION
Balance, beginning................................................... $ (14) $ (14) $ (12)
Net additions of common stock to restricted stock plan........... (18) (6) (8)
Amortization of unearned compensation............................ 8 6 6
-------- -------- --------
Balance, ending...................................................... $ (24) $ (14) $ (14)
-------- -------- --------

TOTAL SHAREHOLDERS' EQUITY AT YEAR END................................... $ 1,148 $ 1,018 $ 913
======== ======== ========

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

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 90 percent of the
Company's total net sales are from the sale of hybrid seed
corn and soybean seed primarily 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 at August 31, 1997 and 1996.

Inventories:

Inventories are valued at the lower of cost (first-in,
first-out method) or market. Independent growers are
contracted to produce the Company's finished seed inventory.
In accordance with the contract, the Company compensates
growers with bushel equivalents that can be marketed to the
Company for the market price of grain for a period of time
following harvest. The Company uses derivative instruments
such as commodity futures and options to hedge the commodity
risk involved in compensating growers. It is the Company's
policy to hedge commodity risk prior to setting the retail
price of seed. The hedge position gains or losses are
accounted for as inventory costs and expensed as cost of goods
sold when the associated crop inventory is sold.

Property and equipment:

Property and equipment is recorded at cost, net of an
allowance for loss on plant closings of $4 million and $9
million at August 31, 1997 and 1996, respectively.

<PAGE>

Depreciation is computed primarily by the straight-line method
over estimated service lives of two to forty years.

Long-term assets:

Certain long-term assets were classified as available-for-sale
securities. Available for-sale securities held at August 31,
1997, consisted of an equity security with a cost basis of $20
million and an unrealized gain of $30 million.
Available-for-sale securities held at August 31, 1996,
consisted of an equity security with a cost basis of $30
million and an unrealized gain of $17 million. During 1997,
the Company sold part of the equity security for $17 million,
resulting in a gain on sale of $7 million.

It was not practicable to estimate the fair value of the
Company's other equity security investments. As a result,
these investments are carried at their original cost basis of
approximately $8 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 eight years for the year ended August 31, 1997.
Accumulated amortization of $38 million and $28 million at
August 31, 1997 and 1996, 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 derivative instruments such
as forward exchange contracts, purchased options, and cross
currency swaps to hedge future firm commitments such as
exports, contractual flows, and royalties. While derivative
hedge instruments are subject to price fluctuations from
exchange and interest rate movements, these price changes
would generally be offset by changes in the U.S. dollar value
of foreign sales and cash flows. Therefore, hedging gains and
losses on 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.

<PAGE>

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.

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 $161 million
at August 31, 1997. 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.