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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(e) OF THE
SECURITIES EXCHANGE ACT OF 1934)
PIONEER HI-BRED INTERNATIONAL, INC.
(Name of Issuer)
E. I. DU PONT DE NEMOURS AND COMPANY, PIONEER HI-BRED
INTERNATIONAL, INC., DELTA ACQUISITION SUB, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00
(Title of Class of Securities)
723686101
(CUSIP Number of Class of Securities)
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Roger W. Arrington William DeMeulenaere
Associate General Counsel Corporate Counsel
E. I. du Pont de Nemours and Company Pioneer Hi-Bred International, Inc.
1007 Market Street 800 Capital Square
Wilmington, DE 19898, 400 Locust Street
(302) 774-1000 Des Moines, Iowa 50309
(515) 248-4820
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(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of
1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: /X/
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$7,615,313,533 $1,523,063
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* For purposes of calculating the filing fee only, the transaction value
equals $7,615,313,533.
** The amount of the filing fee, calculated in accordance with Rule 0-11(b)
promulgated pursuant to the Securities Exchange Act of 1934, as amended,
equals $1,523,063.
/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration number, or the form or
schedule and the date of its filing.
Amount Previously Paid: _______$1,523,063_______________________________________
Form or Registration No.: _______Schedule 14A___________________________________
Filing Party: _______Pioneer Hi-Bred International, Inc.________________________
Date Filed: _______July 1, 1999_________________________________________________
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INTRODUCTION
This Rule 13e-3 Transaction Statement (the "13e-3 Statement") of Pioneer
Hi-Bred International, Inc., an Iowa corporation ("Pioneer" or "Company"), E. I.
Du Pont De Nemours and Company, a Delaware corporation ("DuPont"), and Delta
Acquisition Sub, Inc., an Iowa corporation and a wholly owned subsidiary of
DuPont ("DAC"), relates to an Agreement and Plan of Merger, dated as of March
15, 1999 (the "Merger Agreement"), among Pioneer, DuPont and DAC pursuant to
which Pioneer will merge with and into DAC (the "Merger"), with the result being
that Pioneer will become a wholly owned subsidiary of DuPont. The Merger
Agreement and the Merger have already been approved by the boards of directors
of the Company, DuPont and DAC. This Statement is intended to satisfy the
reporting requirements of Section 13(e) of the Securities Exchange Act of 1934,
as amended (the "Act"). A copy of the Merger Agreement filed by the Company as
Appendix A to the Company's Proxy Statement/Prospectus (the "Proxy Statement")
which is filed as Exhibit (d) to this 13e-3 Statement.
The cross-reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement of
the information required to be included in response to the items of this 13e-3
Statement. The information in the Proxy Statement, including all appendices
thereto, is hereby expressly incorporated herein by reference and the responses
to each item in this 13e-3 Statement are qualified in their entirety by the
information contained in the Proxy Statement.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
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(a) The information set forth in the Proxy Statement under the caption "SUMMARY--The
Companies" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under the caption "DESCRIPTION
OF PIONEER CAPITAL STOCK" is incorporated herein by reference.
(c-d) The information set forth in the Proxy Statement under the caption "SUMMARY--
Market Prices and Dividends" is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Proxy Statement under the caption "SPECIAL
FACTORS--Background of the Merger" is incorporated herein by reference. DuPont
purchased 164,445.86 shares of Pioneer voting preferred stock for an aggregate
purchase price of $1.71 billion, representing approximately 16.7% of Pioneer's
common equity and voting power at the time of the purchase. The shares were
purchased at a per share common equivalent price, taking into account Pioneer's
1998 three-for-one stock split of approximately $35 per share. Pioneer
purchased, at approximately $31 per share, approximately 49.4 million shares of
Pioneer's outstanding common stock (taking into account the stock split) through
a Dutch auction self-tender.
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2
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Set forth below is a list of purchases of Pioneer common stock by Pioneer
since September 1, 1995 (the beginning of Pioneer's third full fiscal year
preceding the date of this 13e-3 Statement):
PURCHASES OF PIONEER COMMON STOCK BY PIONEER
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RANGE
--------------------
FISCAL QUARTER(1) AMOUNT OF SHARES USD VALUE AVG PRICE HIGH LOW
- -------------------- ---------------- -------------- ---------- --------- ---------
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FY1996 Q1
Q2 57,300 $ 947,905 $ 16,5428 $ 17.558 $ 16.538
Q3 2,046,900 $ 36,386,515 $ 17.7764 $ 18.350 $ 17.100
Q4 1,342,500 $ 24,459,838 $ 18.2196 $ 19.017 $ 17.100
FY1997 Q1
Q2 747,000 $ 16,620,450 $ 22.2496 $ 22.350 $ 21.558
Q3 360,000 $ 8,197,438 $ 22.7707 $ 23.058 $ 22.517
Q4
FY1998 Q1 64,383 $ 1,985,143 $ 30.8333 $ 30.833 $ 30.833
Q2 1,639,800 $ 56,150,445 $ 34.2423 $ 35.916 $ 33.071
Q3 2,835,500 $ 100,218,001 $ 35.3440 $ 40.477 $ 32.857
Q4 2,028,100 $ 73,509,700 $ 36.2456 $ 40.258 $ 31.988
FY1999 Q1 593,200 $ 15,628,945 $ 26.3468 $ 30.420 $ 24.830
Q2 637,500 $ 18,085,362 $ 28.3692 $ 30.300 $ 27.410
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(1)Pioneer's fiscal year ends August 31. The fiscal quarters end November
30, February 28, May 31 and August 31.
ITEM 2. IDENTITY AND BACKGROUND.
This 13e-3 Statement is filed jointly by Pioneer, the issuer of the
securities which are the subject of the Rule 13e-3 transaction, DuPont and DAC.
Each of Pioneer and DAC is a corporation organized under the laws of the state
of Iowa. DuPont is a corporation organized under the laws of the state of
Delaware. DuPont is an affiliate of Pioneer because of its ownership of 20% of
shares of Pioneer common stock and because DuPont has designated members on the
Pioneer board of directors. The principal business of Pioneer is the development
and distribution of genetically enhanced seed stock for agricultural use. DuPont
is a science company, delivering science-based solutions that make a difference
in people's lives in food and nutrition; health care; apparel; home and
construction; electronics; and transportation. DAC is a wholly owned subsidiary
of DuPont that has been organized for the purpose of consummating the Merger and
has no other business activities. The address of Pioneer is 800 Capital Square,
400 Locust Street, Des Moines, Iowa 50309. The address of DuPont and DAC is 1007
Market Street, Wilmington, Delaware 19898.
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(a)-(d),(g) Set forth below is information regarding the directors and executive officers of
Pioneer:
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NAME BACKGROUND
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Peg Armstrong-Gustafson............. Ms. Armstrong was elected to her present position as Vice President and
Director, Worldwide Product Marketing in December 1997. She had served as
Director, Worldwide Corn Product Marketing from 1993 to 1997.
Wayne L. Beck....................... Mr. Beck was elected to his present position as Vice President, Supply
Management, effective March 1993, and since 1988 has served as Director of
North American Seed Division-Production.
Nancy V. Bekavac ................... Since July 1990, Ms. Bekavac has been President of Scripps College,
(Director) Claremont, California. Ms. Bekavac is also a Director of Electro
</TABLE>
3
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NAME BACKGROUND
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Rent Corp., Van Nuys, California (a computer and electronic test and
measurement rental company).
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Carrol D. Bolen..................... Mr. Bolen was elected to his present position as Vice President effective
January 1983. From 1995 to March 1998, Mr. Bolen served as Vice President
and Director of Legal and Government Affairs. Mr. Bolen served as Director
of the Company's Specialty Plant Products Division from September 1988
until 1994, when he was appointed Director of Business Development.
C. Robert Brenton .................. Since 1990, Mr. Brenton has been Chairman of the Board of Brenton Banks,
(Director) Inc., and is currently Chairman and a Director of Brenton Banks, Inc., Des
Moines, Iowa.
Dr. Anthony J. Cavalieri............ Dr. Cavalieri was elected to his present position as Vice President
effective March 1995, and serves as Director, Trait and Technology
Development. From December 1990 to January 1994, Dr. Cavalieri was
Director, Technology Support, and from January 1994 to March 1995 was
Director, Trait and Technology Development.
Jack A. Cavanah..................... Mr. Cavanah was elected to his present position as Vice President effective
March 1991, and serves as Director, Product Characterization and
Commercialization.
Jerry L. Chicoine .................. Mr. Chicoine was elected to his present position as Executive Vice
(Director) President and Chief Operating Officer effective September 1997. Mr.
Chicoine was elected as a Director of Pioneer in March 1998 to fill the
term of a Director who resigned in March 1998. Mr. Chicoine also has served
as Corporate Secretary since March 1990. Mr. Chicoine served as Senior Vice
President from March 1990 to September 1997 and as Chief Financial Officer
from March 1990 to November 1997. Mr. Chicoine is a director of FBL
Financial Group, Inc., Des Moines, Iowa (a financial services company) and
a director of Edge Technologies, Inc., Ames, Iowa (a research based
technology company).
Dwight G. Dollison.................. Mr. Dollison was elected to his present position as Vice President and
Treasurer effective March 1995 and previously held the position of
Treasurer from 1988 to 1995.
Thomas M. Hanigan................... Mr. Hanigan was elected to his present position as Vice President-- Chief
Information Officer in March 1999. Mr. Hanigan was first elected Vice
President effective March 1995, and serves as Director, Information
Management. From July 1993 to March 1995, Mr. Hanigan was the Director of
Information Management of the Company.
Brian G. Hart....................... Mr. Hart was elected Chief Financial Officer in November 1997. Mr. Hart has
been serving as Vice President since March 1995 and continues to serve in
that position. Mr. Hart was Corporate Controller from September 1990 until
November 1997.
James R. Houser..................... Mr. Houser was elected to his present position as Vice President effective
March 1995 and has served as Director, European Operations since November
1997. In 1992, Mr. Houser was named Director of the Company's Microbial
Genetics Division. From 1995
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4
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NAME BACKGROUND
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to November 1997, Mr. Houser served as Director of Nutrition and Industry
Markets.
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John D. James....................... Mr. James was elected to his present position as Senior Vice President
effective March 1994. Mr. James previously held the position of Vice
President and Group Executive for the Company from March 1991 to March
1994.
Dr. Herbert H. Jervis............... Dr. Jervis joined Pioneer in November 1996, was elected to his present
position as Vice President in May 1997 and also serves as Chief
Intellectual Property Counsel. From 1990 to 1996, Dr. Jervis was Associate
Patent Counsel at SmithKline Beecham Pharmaceuticals, Philadelphia,
Pennsylvania.
Charles O. Holliday, Jr. ........... Since October 1997, Mr. Holliday has served as President and Chief
(Director) Executive Officer of DuPont. Since July 1997, he has served as a Director
of DuPont. From October 1995 to October 1997, he served as Executive Vice
President and member of the Office of the Chief Executive of DuPont. He
also served as Chairman of DuPont Asia Pacific from 1995 to 1997. He served
as Senior Vice President of DuPont from 1992 to 1995 and as President of
DuPont Asia-Pacific from 1990 to 1995. He also is a director of Analog
Devices, Inc., Norwood, Massachusetts (an integrated circuit manufacturer).
He is a member of The Business Council and the Business Roundtable and
serves on the Chancellor's Advisory Council for Enhancement at the
University of Tennessee and is a trustee of the Winterthur Museum and
Gardens. Mr. Holliday was selected by DuPont to be nominated as one of its
representatives on the Board of the Company.
Fred S. Hubbell .................... Since February 1, 1999, Mr. Hubbell has been a member of the Executive
(Director) Committee of ING Financial Services International for ING Group (a global
financial services company headquartered in Holland). From October 1997 to
January 31, 1999, Mr. Hubbell was President and Chief Executive Officer of
US Life and Annuity Operations for ING Group. From April 1993 to October
1997, Mr. Hubbell served as Chairman of Equitable of Iowa Companies, Des
Moines, Iowa (a life insurance and annuities company). Mr. Hubbell held the
positions of Chief Executive Officer from April 1989 to October 1997 and
President from May 1987 to October 1997 of Equitable of Iowa Companies. Mr.
Hubbell is also a Director of The Macerich Company, Santa Monica,
California (a shopping center REIT).
Charles S. Johnson ................. Mr. Johnson was named Chairman of the Board of the Company in December
(Director) 1996. Mr. Johnson has served as President and Chief Executive Officer of
Pioneer since September 1995. Mr. Johnson previously was President and
Chief Operating Officer from March 1995 to September 1995. Mr. Johnson was
Executive Vice President from March 1993 to March 1995. Since 1973, Mr.
Johnson has served in an executive position with the Company. Mr. Johnson
is also a Director of The Principal Financial Group (a financial services
company) and Gaylord Container Corporation (a national
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5
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NAME BACKGROUND
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manufacturer and distributor of brown paper and packaging products), both
of Des Moines, Iowa.
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Luiz Kaufmann ...................... Mr. Kaufmann is a consultant for private equity investments and is
(Director) currently involved with the development of investment projects aimed at the
acquisition of a controlling interest in companies with potential for
substantial capital appreciation. From 1993 to April 1998, Mr. Kaufmann was
the President and Chief Executive Officer of Aracruz Celulose S.A., Rio de
Janeiro, Brazil (a pulp producer). From 1990 to 1993, he was the Executive
Vice President and a member of the Board of Petropar S.A., Porto Alegre,
Brazil (an investment holding company). Mr. Kaufmann is also a Director of
Ferrovia Sul Atlantic, Curitiba, Brazil (a major railroad in southern
Brazil) and Lojas Americanas, Rio de Janeiro, Brazil (a large retail
company).
William F. Kirk .................... Mr. Kirk is a Senior Vice President of DuPont. He was Vice President and
(Director) General Manager of DuPont Agricultural Products from 1990 to November 1997.
Mr. Kirk was selected by DuPont to be nominated as one of its
representatives on the Board of the Company.
Mary A. McBride..................... Ms. McBride was elected to her present position as Vice President,
Worldwide Marketing in March 1991.
Dr. Richard L. McConnell............ Dr. McConnell was elected to his present position as Senior Vice President
and Director, Research and Product Development in March 1994. From March
1991 to March 1994, he held the position of Vice President, Director of
North America Research.
Dr. F. Warren McFarlan ............. Dr. McFarlan is the Albert E. Gordon Professor of Business Administration,
(Director) Harvard University Graduate School of Business Administration and has been
tenured since 1973. Dr. McFarlan is a Director of Providian Financial
Corporation, San Francisco, California (a credit card company) and Computer
Sciences Corporation, Los Angeles, California (a computer system
integration company).
Dr. James E. Miller................. Dr. Miller was elected to his present position as Vice President in March
1995 and has served as Director, Product Development since August 1997.
From January 1994 to August 1997, Dr. Miller held the position of Director,
Oilseeds and Field Crops Research. From February 1990 to January 1994, Dr.
Miller held the position of Director, Soybean Research.
Paul E. Schickler................... Mr. Schickler was elected to his present position as Vice President of the
Company effective March 1995 and serves as Director, Administration (Human
Resources, Learning and Development, Real Estate Management and Corporate
Communications). From 1990 to March 1995, Mr. Schickler was Director of
Finance for North American Operations.
Leon R. Shearer..................... Mr. Shearer was elected to his present position as Vice President in August
1997 and also serves as General Counsel. From 1987 to August 1997, Mr.
Shearer was a practicing attorney and the
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6
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NAME BACKGROUND
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managing partner of Shearer, Templer and Pingle, a law firm in West Des
Moines, Iowa.
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Duane A. Suess...................... Mr. Suess was elected to his present position as Corporate Controller in
November 1997. From November 1993 to November 1997, Mr. Suess served as tax
director.
Harold F. Thorne.................... Mr. Thorne was elected to his present position as Vice President of Pioneer
in March 1995, and serves as Operations Director, Africa, Asia, Middle East
and Pacific. From 1994 to 1995, Mr. Thorne was Director of Operations for
Africa, Middle East, Asia and Pacific and also Director of Government
Affairs. From 1988 to 1994, Mr. Thorne was Director of Business Development
of the Company.
Thomas N. Urban .................... Mr. Urban was elected Corporate Vice President in 1974; President of
(Director) Pioneer in 1979; CEO and President in 1981; and Chairman, President and CEO
in 1984. He remained Chairman of the Board, but relinquished his position
as President and CEO in 1995 to become a Visiting Professor at Harvard
University in the Graduate School of Business (1995-1997). Mr. Urban
retired as Chairman of the Board on December 31, 1996. Mr. Urban is also a
Director of Sigma Aldrich Corporation, St. Louis, Missouri (a research
chemicals company) and PIC International Group PLC, London, England (the
world's leading provider of genetically improved pigs used for breeding);
Chairman of the Board of Trustees of the Carnegie Institution of
Washington, Washington, D.C.; and member of the Board of Trustees of the
FINE Foundation.
Dr. Virginia Walbot ................ Since 1989, Dr. Walbot has been a Professor at Stanford University,
(Director) Department of Biological Sciences, Stanford, California.
H. Scott Wallace ................... Mr. Wallace is the Director of Defender Legal Services, for the National
(Director) Legal Aid and Defender Association, Washington, D.C. From 1992 to 1997, Mr.
Wallace was a criminal justice and government relations consultant. From
1985 to 1992, Mr. Wallace was Legislative Director, National Association of
Criminal Defense Lawyers, Washington, D.C.
John T. Watson...................... Mr. Watson was elected to his present position as Vice President of Pioneer
in March 1991, and serves as Assistant Operations Director, Africa, Asia,
Middle East and Pacific.
Fred W. Weitz ...................... Since 1995, Mr. Weitz has been the President of Essex Meadows, Inc., Des
(Director) Moines, Iowa (an operator of proprietary retirement communities and owner
of commercial real estate). From 1964 to 1995, Mr. Weitz was the President
of The Weitz Corporation, Des Moines, Iowa (a building construction and
real estate development company). Mr. Weitz is also a Director of The
Principal Financial Group (a financial services company), Wilian Holding
Company (parent company of Economy Forms Corp., a manufacturer of concrete
forms) and Access Air Holdings, Inc. (a holding company of an airline) all
of Des Moines, Iowa.
Robert K. Wichmann.................. Mr. Wichmann was elected to his present position as Vice President, North
American Seed Sales in March 1986.
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7
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NAME BACKGROUND
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Herman H.F. Wijffels ............... Since March 1999, Dr. Wijffels has been President of the Netherlands Social
(Director) and Economic Council, The Hague, The Netherlands. From 1986 to March 1999,
Dr. Wijffels was Chairman of the Executive Board of Rabobank Nederland, The
Netherlands (a cooperative banking organization doing business
internationally). Dr. Wijffels is also Chairman of DSM NV (a chemical
company) and a director of Hollandsche Beton Groep NV (a construction
company), both from The Netherlands.
</TABLE>
The business address for each of the executive officers and directors of
Pioneer listed above is c/o Pioneer Hi-Bred International, Inc. at the address
listed above.
Set forth below is information regarding the directors and executive
officers of DuPont:
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NAME BACKGROUND
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Curtis J. Crawford ................. Mr. Crawford is President and Chief Executive Officer of ZiLOG, Inc., a
(Director) producer of application specific standard products in the semiconductor
industry. From 1995 to January 1998, Mr. Crawford was group president,
Microelectronics Group, Lucent Technologies, Inc. and also served as
president, Intellectual Property Division, from October 1997. From 1993 to
1995, he was president of AT&T Microelectronics, a business unit of AT&T
Corporation. Mr. Crawford is a director of ITT Industries, Inc., and ZiLOG,
Inc.
Louisa C. Duemling ................. Mrs. Duemling is a member of the board of governors of the Nature
(Director) Conservancy and the board of trustees of the Chesapeake Bay Foundation.
Archie W. Dunham ................... Mr. Dunham is President and Chief Executive Officer of Conoco, Inc. an
(Director) integrated, international energy company. He is a former Executive Vice
President and Senior Vice President of DuPont, Executive Vice
President-exploration production of Conoco and Senior Vice President of
DuPont Polymers and DuPont Chemicals and Pigments. He is a director of
Louisiana Pacific Corporation, Phelps Dodge Corporation, the American
Petroleum Institute, the U.S.-Russia Business Council and the Greater
Houston Partnership, a director and vice chairman of the National Petroleum
Council and a director and chairman of the United States Energy Association
Mr. Dunham also serves on the board of trustees of the Memorial Hermann
Healthcare System in Houston, the Houston Grand Opera, Houston Symphony,
George Bush Presidential Library and the Smithsonian Institution.
Edward B. duPont ................... Mr. duPont was Chairman of Atlantic Aviation Corporation, the principal
(Director) business of which is the charter, completion, storage, operation and
maintenance of aircraft. He serves as a director of Wilmington Trust
Corporation, a trustee of Christian Care Corporation and the University of
Delaware, President and a trustee of Eleutherian Mills-Hagley Foundation,
and Vice President and a trustee of Longwood Foundation, Inc.
Richard R. Goodmanson............... Since May 1999, Mr. Goodmanson has been an Executive Vice President and a
Chief Operating Officer of DuPont. From 1996 to
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8
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NAME BACKGROUND
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April 1999, he was President and Chief Executive Officer of America West
Airlines. From 1992 to 1996, he was Senior Vice President of Operations for
Frito-Lay Inc. (division of PepsiCo).
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Charles O. Holliday, Jr. ........... Mr. Holliday is presently the Chairman of the DuPont Board. Since October
(Director) 1997, Mr. Holliday has served as President and Chief Executive Officer of
DuPont. Since July 1997, he has served as a director of DuPont. From
October 1995 to October 1997, he served as Executive Vice President and
member of the Office of the Chief Executive of DuPont. He also served as
Chairman of DuPont Asia Pacific from 1995 to 1997. He served as Senior Vice
President of DuPont from 1992 to 1995 and as President of DuPont
Asia-Pacific from 1990 to 1995. He also is a director of Analog Devices,
Inc., Norwood, Massachusetts (an integrated circuit manufacturer). He is a
member of The Business Council and the Business Roundtable and serves on
the Chancellor's Advisory Council for Enhancement at the University of
Tennessee and is a trustee of the Winterthur Museum and Gardens.
Lois D. Juliber .................... Ms. Juliber is Executive Vice President and Chief of Operations, Developed
(Director) Markets, Colgate-Palmolive Company, the principal business of which is the
production and marketing of consumer products. She formerly served as
President, Colgate-Palmolive North America and Chief Technological Officer
of Colgate-Palmolive. Ms. Juliber is a member of the board of trustees of
Wellesley College and the Brookdale Foundation.
Kurt M. Landgraf.................... Since May 1999, Mr. Landgraf has been a Chief Operating Officer of DuPont.
Since September 1997, he has been an Executive Vice President of DuPont.
Mr. Landgraf is also Chairman of DuPont Europe and Chairman and CEO of
DuPont Pharmaceuticals Company. From December 1996 to October 1997, he was
Chief Financial Officer of DuPont. From 1993 to December 1996, he was
President and Chief Executive Officer of DuPont Merck Pharmaceutical
Company.
Joseph A. Miller, Jr................ Since 1996, Mr. Miller has been Chief Science and Technology Officer of
DuPont. Since 1994, he has been a Senior Vice President of DuPont.
Stacey J. Mobley.................... Since May 1999, Mr. Mobley has been Chief Administrative Officer of DuPont.
Since May 1992, he has been a Senior Vice President of DuPont.
Gary M. Pfeiffer.................... Since October 1997, Mr. Pfeiffer has been a Senior Vice President and Chief
Financial Officer of DuPont. From April 1994 to October 1997, he was Vice
President and General Manager, DuPont Nylon-North America.
Dennis H. Reilley................... Since May 1999, Mr. Reilley has been an Executive Vice President and a
Chief Operating Officer of DuPont. From November 1997 to May 1999 he was a
Senior Vice President of DuPont. From July 1996 to November 1997, he was
Vice President and General Manager of
Lycra-Registered Trademark-/Tetrathane-Registered Trademark-. From October
1995 to July 1996, he was Vice President and General Manager of Specialty
</TABLE>
9
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<CAPTION>
NAME BACKGROUND
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Chemicals. From September 1991 to October 1995, he was Vice President and
General Manager of DuPont White Pigment and Mineral Products.
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William K. Reilly .................. Mr. Reilly is President and Chief Executive Officer of Aqua International
(Director) Partners, L.P., which finances water supply and wastewater treatment in
developing countries. He formerly served as administrator of the United
States Environmental Protection Agency, the Payne visiting professor at the
Institute for International Studies at Stanford University and President of
World Wildlife Fund and The Conservation Foundation. Mr. Reilly is a
director of Conoco, Inc., Evergreen Holdings, Inc., and Royal Carribean
International and a trustee of The National Geographic Society, Presidio
Trust and World Wildlife Fund. He also serves on the board of Yale
University Corporation and is Chairman of American Farmland Trust and the
Environmental Education and Training Institute of North America.
Howard J. Rudge..................... From March 1994, he has been a Senior Vice President and General Counsel.
H. Rodney Sharp, III ............... Mr. Sharp is President of the Board of Trustees of Longwood Foundation,
(Director) Inc., and a director of Wilmington Trust Corporation. He is a trustee of
St. Augustine's College (Raleigh, North Carolina) and a trustee and
director of Christina Care Corporation. Mr. Sharp also serves as treasurer
and a director of Planned Parenthood of Delaware and a director of First
Call for Help, Inc., and the YMCA of Delaware.
Charles M. Vest .................... Mr. Vest is President of the Massachusetts Institute of Technology. He is a
(Director) former provost and Vice President of Academic Affairs and dean of
Engineering of the University of Michigan. Mr. Vest is a director of
International Business Machines Corporation, a fellow of the American
Association for the Advancement of Science, and a member of the National
Academy of Engineering and the President's Committee of Advisors on Science
and Technology. He is vice chair of the Council on Competiveness.
Sanford I. Weill ................... Mr. Weill is Chairman and co-Chief Executive Officer of Citigroup Inc., a
(Director) diversified financial services company. He formerly served as Chairman and
Chief Executive Officer of Travelers Group. He is a director of AT&T
Corporation and Citigroup Inc., and a member of The Business Council and
The Business Roundtable. He also serves as Chairman of the board of
trustees of Carnegie Hall and Chairman of the board of overseers of the
Joan and Sanford I. Weill Medical College and Graduate School of Medical
Sciences of Cornell University.
Edgar S. Woolard, Jr. .............. Mr. Woolard served as a Chairman of the Board, Chief Executive Officer,
(Director) President and Chief Operating Officer, Vice Chairman and Executive Vice
President. He is Chairman of the Board of Conoco, Inc., a director of Apple
Computer, Inc., and Citigroup Inc. and a Member of The Business Council. He
also serves as a trustee of Protestant Episcopal Theological Seminary and
the Winterthur Museum and Gardens.
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10
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The business address for each of the executive officers and directors of
DuPont listed above is c/o E. I. du Pont de Nemours and Company at the address
listed above.
<TABLE>
<S> <C>
(e)-(f) None of Pioneer, DuPont, DAC, their executive officers, directors or controlling
persons has during the last five years (a) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (b) been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of the proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of these
laws.
(g) Each director and executive officer of Pioneer, DuPont and DAC is a citizen of
the United States, except Luiz Kaufmann, a director of Pioneer, is a citizen of
Brazil, and Herman H.F. Wijffels, a director of Pioneer, is a citizen of The
Netherlands.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a)(1)(2) The information set forth in the Proxy Statement under the captions "QUESTIONS
AND ANSWERS ABOUT THE MERGER" and "SPECIAL FACTORS--Background of the Merger" is
incorporated herein by reference.
(b) None
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the captions "MERGER
CONSIDERATION," "SPECIAL FACTORS--Background of the Merger" and "THE MERGER
AGREEMENT" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under the caption "SUMMARY--
Interests of Members of Pioneer's Board of Directors and Management in the
Merger" and "SPECIAL FACTORS--Interests of Members of Pioneer's Board of
Directors and Management in the Merger" is incorporated herein by reference.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)(b),(e) The information set forth in the Proxy Statement under the captions "SPECIAL
FACTORS--Plans for Pioneer After the Merger" and "SPECIAL FACTORS-- Background
of the Merger".
(c)-(d) As a result of the transactions described herein, the current board of directors
of Pioneer will be replaced by designees of DuPont and Pioneer will cease
issuing dividends to Pioneer shareholders effective as of the closing of the
merger.
(f) The registration under section 12(g)(4) of the Exchange Act of 1934 of the
shares of Pioneer common stock, par value $1.00, will be terminated upon
completion of the merger because Pioneer will become a wholly owned subsidiary
of DuPont. In addition, the shares of Pioneer common stock that are currently
listed on the New York Stock Exchange will be delisted immediately following the
merger.
(g) DuPont is currently reviewing the terms of Pioneer's 5 3/4% Senior Notes due
January 15, 2009 with respect to financial reporting obligations after the
effective time of the merger. Pioneer provides reports to holders of these
Senior Notes pursuant to agreements relating to the Senior Notes.
</TABLE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the caption "MERGER
FINANCING" is incorporated herein by reference.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
(b) The information set forth in the Proxy Statement under the caption "MERGER
FINANCING" is incorporated herein by reference.
(c)(d) The information set forth in the Proxy Statement under the caption "MERGER
FINANCING" is incorporated herein by reference. No arrangements with respect to
the financing or repayment of any debt financing that may be incurred in
connection with the transaction have been made.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
<TABLE>
<S> <C>
(a)-(c) The information set forth in the Proxy Statement under the captions "QUESTIONS
AND ANSWERS ABOUT THE MERGER," "SPECIAL FACTORS--Reasons for the Merger;
Recommendation of the Board of Directors," and "SPECIAL FACTORS--Background of
the Merger," is incorporated herein by reference.
(d) The information set forth in the Proxy Statement under the captions "SUMMARY--
Federal Income Tax Consequences," "SPECIAL FACTORS--Certain Effects of the
Merger; New York Stock Exchange Delisting; Operations of Pioneer after the
Merger" and "SPECIAL FACTORS--U.S. Federal Income Tax Consequences" is
incorporated herein by reference.
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the captions "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Reasons for the Merger;
Recommendation of the Board of Directors," and "SPECIAL FACTORS-- Purpose and
Structure for the Merger" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under the captions "SUMMARY--
Opinion of Financial Advisor for Pioneer," "SPECIAL FACTORS--Reasons for the
Merger; Recommendation of the Board of Directors," "SPECIAL FACTORS--Opinion of
Financial Advisor for Pioneer," and "SPECIAL FACTORS--Opinions of Financial
Advisors for DuPont" is incorporated herein by reference.
(c) The transaction is structured to require approval of the holders of shares of
Pioneer common stock representing a majority of the outstanding votes of the
shareholders. It is not structured to require approval from the unaffiliated
security holders.
(d) The outside directors did not retain an unaffiliated representative to act on
the behalf of the unaffiliated security holders.
(e) The information set forth in the Proxy Statement under the captions "SPECIAL
FACTORS--Background of the Merger" and "SPECIAL FACTORS--Reasons for the Merger;
Recommendations of the Board of Directors" is incorporated herein by reference.
(f) Not applicable.
</TABLE>
12
<PAGE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
<TABLE>
<S> <C>
(a)-(b) The DuPont board of directors received opinions from its financial advisors,
Credit Suisse First Boston Corporation and Salomon Smith Barney Inc., two
leading investment banking firms. In addition, such firms provided written
presentations to the DuPont board of directors relating to their respective
opinions. The Pioneer board of directors received an opinion from its financial
advisors, Lazard Freres, a leading investment banking firm. In addition, Lazard
Freres provided a written presentation to the Pioneer board of directors
relating to its opinion. The information set forth in the Proxy Statement under
the captions "SUMMARY--Opinion of Financial Advisor for Pioneer," "SPECIAL
FACTORS--Background of the Merger," and "SPECIAL FACTORS--Opinion of Financial
Advisor for Pioneer," "SPECIAL FACTORS--Opinions of Financial Advisors for
DuPont" is incorporated herein by reference.
(c) The Lazard Freres Opinion, dated March 14, 1999, and written presentation
materials are available for inspection and copying at the offices of Pioneer at
400 Locust Street, 800 Capital Square, Des Moines, Iowa 50309 during regular
business hours by any interested Pioneer Shareholder or his representative who
has been so designated in writing. The Salomon Smith Barney Inc. Opinion dated
March 15, 1999 and written presentation materials and the Credit Suisse First
Boston Corporation Opinion dated March 15, 1999 and written presentation
materials are available for inspection and copying at the offices of DuPont at
1007 Market Street, Wilmington DE 19898, during regular business hours and by
any interested Pioneer shareholder or by his representative who has been so
designated in writing. The information set forth in the Proxy Statement under
the caption "SPECIAL FACTORS--Opinions of Financial Advisors to DuPont" is
incorporated herein by reference.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the caption "SPECIAL
FACTORS--Interests of Members of Pioneer's Board of Directors and Management in
the Merger" is incorporated herein by reference. Dupont currently owns
49,333,758 shares of Pioneer common stock representing approximately 20% of the
equity of Pioneer.
(b) Set forth below is a list of transactions in the class of equity securities of
Pioneer effected by officers and directors of Pioneer during the past 60 days.
Each of these transactions is a purchase of Pioneer common stock, either through
Pioneer's stock purchase plan or through Pioneer's 401(k) plan, as indicated
below.
</TABLE>
<TABLE>
<CAPTION>
NO. OF
NAME DATE SHARES PRICE/SHARE TRANSACTION TYPE
- -------------------------------------------------------- --------- ------------ ----------- -----------------
<S> <C> <C> <C> <C>
Dr. James E. Miller..................................... 5/7/99 2.6801 $ 37.3125 SPP
6/8/99 2.6403 $ 37.8750 SPP
Paul E. Schickler....................................... 5/28/99 11.667 $ 37.5 401k
Leon R. Shearer......................................... 5/28/99 14.053 $ 37.5 401k
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES
<TABLE>
<S> <C>
The information set forth in the Proxy Statement under the captions "THE MERGER
AGREEMENT" and "SPECIAL FACTORS--Background of the Merger" is incorporated
herein by reference.
</TABLE>
13
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the captions
"SUMMARY--Votes Required; Record Date for Voting" and "SPECIAL FACTORS--Interest
of Members of Pioneer Board of Directors and Management in the Merger" is
incorporated herein by reference.
(b) The information set forth in the Proxy Statement under the caption "SPECIAL
FACTORS--Reasons for the Merger; Recommendation of the Board of Directors" is
incorporated herein by reference.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
<TABLE>
<S> <C>
(a) The information set forth in the Proxy Statement under the captions "COMPARATIVE
RIGHTS OF SHAREHOLDERS--Appraisal Rights of Dissenting Shareholders" and
"APPENDIX F" is incorporated herein by reference.
(b)-(c) Not applicable.
</TABLE>
ITEM 14. FINANCIAL INFORMATION
<TABLE>
<S> <C>
(a) The information set forth in Pioneer's Annual Report on Form 10-K, as amended,
for the fiscal year ended August 31, 1998 and in Pioneer's Quarterly Report on
Form 10-Q dated as of March 31, 1999 is incorporated herein by reference.
(b) Not applicable.
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
<TABLE>
<S> <C>
(a) None.
(b) The information set forth in the Proxy Statement under the caption "SPECIAL
MEETING--Solicitation of Proxies" is incorporated herein by reference.
</TABLE>
ITEM 16. ADDITIONAL INFORMATION
<TABLE>
<S> <C>
The entirety of the Proxy Statement is incorporated herein by reference.
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
(a) None.
(b) Opinion of Lazard Freres & Co., LLC (incorporated herein by reference to
Appendix B to the Proxy Statement).
Opinion of Credit Suisse First Boston Corporation (incorporated by reference to
Appendix C to the Proxy Statement).
Opinion of Salomon Smith Barney Inc. (incorporated by reference to Appendix D to
the Proxy Statement).
Written Board Presentation Materials prepared by Lazard Freres & Co., LLC.
Written Board Presentation Materials prepared by Credit Suisse First Boston
Corporation.
Written Board Presentation Materials prepared by Salomon Smith Barney Inc.
(c) Agreement and Plan of Merger, dated as of March 15, 1999, by and among Pioneer,
Dupont, and DAC (incorporated herein by reference to Appendix A to the Proxy
Statement).
(d) Preliminary Copy of Letter to Shareholders.
Preliminary Copy of Notice of Special Meeting.
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Preliminary Proxy Statement (filed by Pioneer, DuPont and DAC on July 2, 1999
and incorporated herein by reference).
(e) The appraisal rights of dissenting shareholders under Iowa law (incorporated
herein by reference to Appendix F to the Proxy Statement.)
(f) Not applicable.
</TABLE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
PIONEER HI-BRED INTERNATIONAL, INC.
By: /s/ Brian Hart
Name: Brian Hart
Title: Chief Financial Officer
E.I. DUPONT DE NEMOURS AND COMPANY
By: /s/ Gary Pfeiffer
Name: Gary Pfeiffer
Title: Chief Financial Officer
DELTA ACQUISITION SUB, INC.
By: /s/ Gary Pfeiffer
Name: Gary Pfeiffer
Title: President
July 1, 1999
</TABLE>
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
99.17(b)(1) Opinion of Lazard Freres & Co., LLC (included as Appendix B to the preliminary Proxy Statement,
which is filed herewith as Exhibit 99.17(d)(3)).
(2) Opinion of Credit Suisse First Boston Corporation (included as Appendix C to the preliminary Proxy
Statement, which is filed herewith as Exhibit 99.17(d)(3)).
(3) Opinion of Salomon Smith Barney Inc. (included as Appendix D to the preliminary Proxy Statement,
which is filed herewith as Exhibit 99.17(d)(3)).
(4) Written Board Presentation Materials prepared by Lazard Freres & Co., LLC.
(5) Written Board Presentation Materials prepared by Credit Suisse First Boston
(6) Written Board Presentation Materials prepared by Salomon Smith Barney.
99.17(c) Agreement and Plan of Merger, dated as of March 15, 1999, by and among Pioneer, DuPont and DAC
(included as Appendix A to the preliminary Proxy Statement, which is filed herewith as Exhibit
99.17(d)(3)).
99.17(d)(1) Preliminary Copy of Letter to Shareholders.
99.17(d)(2) Preliminary Copy of Notice of Special Meeting.
99.17(d)(3) Preliminary Proxy Statement.
99.17(e) Appraisal Rights of dissenting shareholders under Iowa law (included as Appendix F to the
preliminary Proxy Statement, which is filed herewith as Exhibit 99.17(d)(3)).
</TABLE>
<PAGE>
Exhibit 99.17(b)(4)
================================================================================
PROJECT PRAIRIE
Presentation to the Board of Directors
================================================================================
LAZARD FRERES & CO. LLC MARCH 2, 1999
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Discussion Topics
o Valuation
o Merger Partners
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Valuation Methodologies
o Discounted Cash Flow
o Comparable Public Companies
o Comparable Precedent Transactions
- 1 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Prairie Valuation Analysis Summary(1)
(Dollars per share)
[GRAPH]
- 2 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Prairie Historical Performance
($ in millions, except per share)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 759 $ 867 $ 964 $1,125 $1,262 $1,343
% Growth -- 14.2% 11.2% 16.7% 12.2% 6.4%
EBITDA $ 196 $ 178 $ 189 $ 244 $ 304 $ 346
% Margin 25.8% 20.5% 19.6% 21.7% 24.1% 25.8%
EBIT $ 146 $ 128 $ 132 $ 189 $ 243 $ 279
% Margin 19.2% 14.7% 13.7% 16.8% 19.3% 20.8%
Earnings Per Share $ 0.29 $ 0.29 $ 0.26 $ 0.38 $ 0.56 $ 0.61
Market Share 35.2% 34.2% 35.5% 36.9% 39.6% 42.8%
Yield Advantage (bu/acre) 3.0 4.4 7.1 7.8 7.5 7.1
<CAPTION>
CAGR
1994 1995 1996 1997 1998 88-98
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,479 $1,532 $1,721 $1,784 $1,835 9.2%
% Growth 10.1% 3.6% 12.3% 3.7% 2.9%
EBITDA $ 376 $ 355 $ 425 $ 455 $ 454 8.8%
% Margin 25.5% 23.2% 24.7% 25.5% 24.7%
EBIT $ 301 $ 280 $ 347 $ 363 $ 359 9.4%
% Margin 20.4% 18.3% 20.2% 20.3% 19.6%
Earnings Per Share $ 0.70 $ 0.72 $ 0.89 $ 0.98 $ 1.08 14.1%
Market Share 44.8% 44.7% 43.8% 41.5% 41.8%
Yield Advantage (bu/acre) 5.6 4.7 5.9 6.3 5.5
</TABLE>
- ----------
Source: Company information.
- 3 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Summary of Projections
($ in millions, except per share)
<TABLE>
<CAPTION>
2004
1998-2004 NA Corn
1998 Margin 1999 Margin 2000 Margin 2004 Margin CAGR Market Share
- ----------------------------------------- ------------------ ----------------- ---------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
'99 Target $1,835 $1,995 $2,196 $3,300 10.3% 50.0%
Recent Historical Growth 1,835 1,995 2,189 3,034 8.7% 47.8%
Moderate Growth 1,835 1,995 2,133 2,722 6.8% 45.8%
Slow Growth 1,835 1,995 2,088 2,501 4.3% 43.8%
'99 Analyst(1) 1,914 2,026
EBIT (2)
'99 Target $365 20% $421 21% $522 24% $1,061 32% 19.5%
Recent Historical Growth 365 20% 421 21% 504 23% 771 25% 13.3%
Moderate Growth 365 20% 421 21% 476 22% 614 23% 9.1%
Slow Growth 365 20% 421 21% 448 21% 487 19% 4.9%
'99 Analyst(1) 453 23% 498 24%
EPS
'99 Target $1.08 $1.08 $1.41 $3.26 20.2%
Recent Historical Growth 1.08 1.08 1.36 2.29 13.3%
Moderate Growth 1.08 1.08 1.27 1.79 8.8%
Slow Growth 1.08 1.08 1.19 1.40 4.4%
'99 Analyst(1) 1.13 1.27
</TABLE>
- ----------
(1) Based on Merrill Lynch (02/03/99), Salomon Smith Barney (01/08/99), Credit
Suisse First Boston (10/28/98), Morgan Stanley Dean Witter (10/27/1998)
research reports.
(2) Excludes Optimum.
- 4 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
The Environment Post August 1997
o Asian/emerging market crisis
o Weakened farm economy
o Perceptions of value creation related to traits
o Competitive behavior
- 5 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Summary of Projections
($ in millions except per share)
<TABLE>
<CAPTION>
%change %change %change %change
1998 to '97 Target 1999 to '97 Target 2000 to '97 Target 2001 to '97 Target 1998 - 2001 CAGR
--------------------- ---------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales
'97 Target $2,038 $2,316 $2,642 $2,919 12.7%
'99 Target 1,835 (10%) 1,995 (14%) 2,196 (17%) 2,475 (15%) 10.5%
EBIT
'97 Target $480 640 $831 $1,022 28.6%
'99 Target(1) 365 (24%) 421 (34%) 522 (37%) 644 (37%) 20.8%
EPS
'97 Target $1.27 $1.77 $2.33 $2.91 39.2%
'99 Target 1.08 (15%) 1.08 (39%) 1.41 (39%) 1.86 (36%) 19.9%
</TABLE>
- ----------
(1) Excludes Optimum.
- 6 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Discounted Cash Flow - Core Business
($ per share)
[GRAPH]
- 7 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Incremental Value to Base DCF from R&D Pipeline and Optimum
($ per share)
[GRAPH]
- --------------------------------------------------------------------------------
Key Assumptions
o Value incremental to core business pro formas
o Probability adjusted for technical and commercial success
Project Probability
------- -----------
Corn Rootworm 90%
Molds & Mycotoxins 80%
o Terminal value based on 1% growth in perpetuity in 2014 for R&D and
12x EBITDA multiples for Optimum.
- --------------------------------------------------------------------------------
- 8 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Summary Valuation
($ per share)
<TABLE>
<CAPTION>
10% Discount Rate 12% Discount Rate
---------------------------- ----------------------------
EBITDA Exit Multiple EBITDA Exit Multiple
---------------------------- ----------------------------
10x 12x 14x 10x 12x 14x
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Core Business + R&D Pipeline & Optimum
`99 Target $39.14 $44.92 $50.70 $34.69 $39.89 $45.08
Recent Historical Growth 30.87 35.27 39.66 27.22 31.17 35.12
Moderate Growth 26.31 29.95 33.60 23.09 26.36 29.64
Slow Growth 22.58 25.62 28.66 19.72 22.45 25.18
Widening Yield Gap:
By one-half bushel per acre per year(1) 6.30 6.30 6.30 4.74 4.74 4.74
By incremental one-half bushel per acre per year(2) 3.97 3.97 3.97 3.10 3.10 3.10
Germplasm Royalty(3) 1.82 1.82 1.82 1.77 1.77 1.77
</TABLE>
- ----------
(1) Value of widening the yield gap by .5 bushel/acre per year, capitalized
FY08 with 1% perpetuity growth rate, Yield adv. capped at 15.
(2) Incremental Value of widening the yield gap by additional incremental .5
bushel/acre per year capitalized FY08 with 1% perpetuity growth rate,
Yield adv. capped at 15.
(3) Probability weighted average of 10%, 25%, and 50% royalty on all
historical and projected contaminated sales, probability of 15%, 70%, 15%,
respectively.
- 9 -
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Public Comparable Trading Companies
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Group Group
Median Mean AHP MONSANTO DIAMOND PRAIRIE NOVARTIS
------ ---- --- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Market Information:
Share Price as of 03/01/99 $ 58.94 $ 45.31 $ 52.44 $ 22.50 SFr 2,515.0
Shares Outstanding 1,327.25 652.35 991.49 239.45 68.49
Equity Value $ 78,225.0 $ 29,559.5 $ 51,991.4 $ 5,387.6 SFr 172,241.1
Enterprise Value 80,669.4 34,019.5 56,306.4 5,624.6 164,263.1
I/B/E/S EPS Growth 12.7% 19.8% 9.9% 14.5% 12.3%
Calendarized Multiples:
Enterprise Value / Sales
1998E 4.8 x 4.9 x 5.9 x 4.0 x 2.3 x 3.0 x 5.1 x
1999E 4.3 4.1 5.5 3.2 2.1 2.7 5.0
2000E 3.4 3.6 5.0 2.9 2.0 2.5 4.6
Enterprise Value / EBITDA
1998E 19.3 x 21.1 x 20.0 x 18.7 x 9.8 x 12.1 x 17.8 x
1999E 16.0 16.0 18.5 15.5 9.3 10.5 16.5
2000E 13.4 12.9 16.4 14.1 8.3 8.6 14.7
Enterprise Value / EBITA
1998E 23.2 x 26.9 x 22.2 x 24.1 x NA NA 21.4 x
1999E 20.2 21.3 20.7 19.0 NA NA 19.8
2000E 17.4 17.3 18.4 17.2 NA NA 17.6
Enterprise Value / EBIT
1998E 23.4 x 26.7 x 24.3 x 29.8 x 13.1 x 15.1 x 21.8 x
1999E 21.3 20.8 22.5 26.9 12.4 12.9 20.1
2000E 16.9 16.4 19.7 23.2 10.6 10.2 17.9
Share Price/ EPS (Broker)
1998E 36.7 x 40.7 x 33.1 x 51.2 x 18.3 x 20.2 x 27.7 x
1999E 28.8 32.7 30.7 56.8 17.1 19.0 25.0
2000E 21.8 24.8 26.7 42.7 14.1 14.8 21.9
Share Price/ EPS (IBES)
1998E 42.2 x 42.8 x 33.1 x 51.2 x 18.3 x 19.8 x 27.7 x
1999E 27.8 32.5 30.7 53.2 18.4 18.7 24.9
2000E 24.7 27.2 27.1 39.9 16.7 16.7 22.2
<CAPTION>
60 Trading Days
Before Ann.
-----------------------
ASTRA DELTA &
ZENECA PINE(1) DEKALB (1)
------ ------- ----------
<S> <C> <C> <C>
Current Market Information:
Share Price as of 03/01/99 (P) 25.31 $ 32.81 $ 33.13
Shares Outstanding 1,779.01 38.04 34.61
Equity Value (P) 45,026.6 $ 1,248.3 $ 1,146.5
Enterprise Value 43,732.1 1,324.3 1,256.5
I/B/E/S EPS Growth 9.5% NA NA
Calendarized Multiples:
Enterprise Value / Sales
1998E 7.6 x 4.5 x 2.5 x
1999E 5.3 3.5 2.3
2000E 3.9 3.0 2.0
Enterprise Value / EBITDA
1998E 32.9 x 20.1 x 17.2 x
1999E 19.6 14.2 11.6
2000E 12.7 11.2 8.4
Enterprise Value / EBITA
1998E 39.8 x NA NA
1999E 25.6 NA NA
2000E 16.0 NA NA
Enterprise Value / EBIT
1998E 39.8 x 22.1 x 22.6 x
1999E 25.6 15.2 14.3
2000E 16.0 11.9 9.7
Share Price/ EPS (Broker)
1998E 59.0 x 39.2 x 34.1 x
1999E 35.2 26.9 21.7
2000E 21.6 21.1 14.7
Share Price/ EPS (IBES)
1998E 59.0 x NA NA
1999E 21.3 NA NA
2000E 19.4 NA NA
</TABLE>
- ----------
(1) Assumes normalized price 60 days prior to Monsanto announcement.
-10-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Public Comparable Pharmaceutical Trading Companies
<TABLE>
<CAPTION>
Group Group GLAXO SCHERING BRISTOL
Median Mean ELI LILLY WELLCOME PLOUGH MYERS
------ ---- --------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Current Market Information:
Share Price as of 03/01/99 $ 93.81 (P) 19.16 $ 55.00 $ 128.63
Shares Outstanding 1,124.67 3,630.00 1,478.22 1,013.12
Equity Value $ 105,508.2 (P) 69,550.8 $ 81,302.2 $ 130,312.5
Enterprise Value 106,718.1 71,273.8 80,549.2 130,599.5
I/B/E/S EPS Growth 16.5% 6.1% 15.4% 12.8%
Calendarized Multiples:
Enterprise Value / Sales
1998E 9.1 x 9.3 x 10.7 x 9.1 x 10.1 x 7.1 x
1999E 8.2 8.2 9.5 8.2 8.8 6.4
2000E 7.2 7.3 8.3 7.2 7.8 5.9
Enterprise Value / EBITDA
1998E 25.7 x 28.7 x 30.9 x 22.2 x 31.8 x 22.8 x
1999E 21.3 24.5 27.1 19.8 28.1 20.3
2000E 19.0 21.3 23.5 17.4 24.5 18.2
Enterprise Value / EBITA
1998E 28.8 x 32.2 x 35.2 x 25.3 x 34.3 x 25.7 x
1999E 23.4 27.3 30.6 22.5 30.3 22.7
2000E 20.7 23.6 26.3 19.7 26.4 20.4
Enterprise Value / EBIT
1998E 29.7 x 32.8 x 36.6 x 25.3 x 34.8 x 25.7 x
1999E 24.0 27.8 31.7 22.5 30.7 22.7
2000E 21.3 24.0 27.0 19.7 26.7 20.4
Share Price/ EPS (Broker)
1998E 45.5 x 46.5 x 48.6 x 37.6 x 46.4 x 35.8 x
1999E 34.5 38.8 41.2 33.5 40.8 31.6
2000E 29.5 33.2 34.8 29.5 35.1 28.3
Share Price/ EPS (IBES)
1998E 47.2 x 45.5 x 49.4 x 38.9 x 47.2 x 35.9 x
1999E 35.7 38.3 40.8 34.2 39.9 31.6
2000E 32.3 33.0 34.6 32.3 34.2 28.0
<CAPTION>
WARNER
MERCK LAMBERT PFIZER
----- ------- ------
<S> <C> <C> <C>
Current Market Information:
Share Price as of 03/01/99 $ 159.50 $ 68.88 $ 133.13
Shares Outstanding 1,191.06 826.96 1,400.23
Equity Value $ 189,974.5 $ 56,956.6 $ 186,405.3
Enterprise Value 193,195.3 57,833.0 186,630.3
I/B/E/S EPS Growth 13.4% 22.3% 18.8%
Calendarized Multiples:
Enterprise Value / Sales
1998E 7.3 x 5.7 x 14.9 x
1999E 6.5 4.9 13.1
2000E 5.9 4.4 11.7
Enterprise Value / EBITDA
1998E 25.6 x 25.7 x 42.3 x
1999E 21.3 21.0 33.9
2000E 19.0 18.2 28.3
Enterprise Value / EBITA
1998E 28.0 x 28.8 x 48.0 x
1999E 23.2 23.4 38.2
2000E 20.7 20.3 31.7
Enterprise Value / EBIT
1998E 29.1 x 29.7 x 48.8 x
1999E 24.0 24.0 38.7
2000E 21.3 20.7 32.0
Share Price/ EPS (Broker)
1998E 36.1 x 45.5 x 75.6 x
1999E 31.2 34.5 59.0
2000E 27.7 28.6 48.5
Share Price/ EPS (IBES)
1998E 37.1 x 47.2 x 62.8 x
1999E 32.5 35.7 53.8
2000E 28.7 29.1 44.1
</TABLE>
-11-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Precedent Transactions -- Multiples
($ in millions)
<TABLE>
<CAPTION>
Ann.
Date Buyer / Target Business of Target
- ---- -------------- ------------------
<S> <C> <C>
9/28/98 AgrEvo Wholesale insect resistant seeds
Cargill Hybrid Seeds
7/15/98 Monsanto Company Manufacture and wholesale garden seeds, such as
Plant Breeding Intl Cambridge wheat, barley, oil seed rape, pulses and potato
6/29/98 Monsanto Company World's leading producer of corn-seed for tropical
Cargill Inc. National Seed climates.
Businesses (Cargill Inc.)
5/11/98 Monsanto Company(1) Researches and produces agricultural seed and
DeKalb (1998 100% gross-up) swine breeding stock
5/11/98 Monsanto Company(2) (3) Researches and produces agricultural seed and
DeKalb (Blended Value) swine breeding stock
5/11/98 Monsanto Company Breeds, produces, conditions and markets
Delta & Pine Land Company proprietary cotton planting varieties in the U.S. and
other cotton producing nations.
8/7/97 E.I. Du Pont de Nemours & Co. Provide agricultural genetic research, specializing
Pioneer Hi-Bred (20%) in seed biotechnology
1/6/97 Monsanto Company Corn-seed producer and two seed distributors.
Holdens Foundation Seeds Inc.,
1/15/96 DowElanco Agricultural biotechnology company that
Mycogen Corp. develops and markets technology-based products
and provides crop protection services.
<CAPTION>
Transaction Value / LTM
Equity vs. ----------------------------------------------- Price Per
Transaction Sales (x) EBITDA (x) EBIT (x) Share / One
Ann. Value ------------ ------------- ------------- LTM Month
Date Buyer / Target ($ millions) LTM LFY +1 LTM LFY +1 LTM LFY +1 EPS (x) Premium (%)
- ---- -------------- ---------- --- ------ --- ------ --- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/28/98 AgrEvo $650 6.0x na na na 186.0x na na na
Cargill Hybrid Seeds 650
7/15/98 Monsanto Company 523 19.8 na na na na na na na
Plant Breeding Intl Cambridge 523
6/29/98 Monsanto Company 1,400 5.7 na na na 60.0 na na na
Cargill Inc. National Seed 1,400
Businesses (Cargill Inc.)
5/11/98 Monsanto Company(1) 3,611 7.9 7.0 52.9 40.5 66.9 51.7 111.5 42.5
DeKalb (1998 100% gross-up) 3,721
5/11/98 Monsanto Company(2) (3) 2,352 5.3 4.6 35.0 26.8 44.3 34.2 72.6 na
DeKalb (Blended Value) 2,462
5/11/98 Monsanto Company 1,857 10.0 5.4 52.7 22.9 59.3 24.7 94.5 (1.8)
Delta & Pine Land Company 1,932
8/7/97 E.I. Du Pont de Nemours & Co. 1,700 4.7 4.2 17.5 14.9 21.3 17.7 72.7 43.0
Pioneer Hi-Bred (20%) 1,700
1/6/97 Monsanto Company 1,020 22.7 na na na na na na na
Holdens Foundation Seeds Inc., 1,020
1/15/96 DowElanco 403 3.7 3.4 nm 70.4 nm nm nm 17.6
Mycogen Corp. 422
---------------------------------------------------------------------------------
Mean: 9.5x 4.9x 39.5x 35.1x 73.0x 32.1x 87.8x 25.3%
Median: 6.0 4.6 43.9 26.8 59.7 29.4 83.6 30.0
High: 22.7 7.0 52.9 70.4 186.0 51.7 111.5 43.0
Low: 3.7 3.4 17.5 14.9 21.3 17.7 72.6 (1.8)
---------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Assumes purchase price of approximately 60% of shares not owned by
Monsanto grossed up to 100% of Dekalb
(2) Total transaction value equals transaction value of 5/22/98 purchase of
approximately 60% of Dekalb plus transaction value of 2/1/96 purchase of
approximately 40% of Dekalb
(3) 40% purchased at $229m.
-12-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Imputed Share Price Based on Precedent Transaction Premiums
($ per share)
Premiums Paid One Month Prior to Announcement
[GRAPH]
-13-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Premiums Paid for Deals Over $500 Million
[GRAPH]
-14-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Analysis at Various Prices
($ in millions, except per share amount)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Share Price $22.50 $30.00 $35.00 $40.00 $45.00 $50.00
Premium to Current Price 0.0% 33.3% 55.6% 77.8% 100.0% 122.2%
Equity Value $5,388 $7,184 $8,381 $9,578 $10,775 $11,973
Enterprise Value 5,638 7,434 8,631 9,828 11,025 12,223
<CAPTION>
Prairie (1)
----------
Enterprise Value as a Multiple of:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
1998E $1,835 3.1x 4.1x 4.7x 5.4x 6.0x 6.7x
1999E 1,995 2.8 3.7 4.3 4.9 5.5 6.1
EBITDA
1998E $449 12.6x 16.6x 19.2x 21.9x 24.6x 27.2x
1999E 498 11.3 14.9 17.3 19.7 22.1 24.5
EBIT
1998E $359 15.7x 20.7x 24.1x 27.4x 30.8x 34.1x
1999E 403 14.0 18.4 21.4 24.4 27.3 30.3
Equity Value as a Multiple of:
Net Income
1998E $270 19.9x 26.6x 31.0x 35.4x 39.9x 44.3x
1999E 260 20.8 27.7 32.3 36.9 41.5 46.1
<CAPTION>
Publicly Precedent Transactions
Prairie (1) Traded Comparables ------------------------------------------
---------- ------------------ AgrEvo/ Midas/ Midas/ Midas/
Enterprise Value as a Multiple of: Midas Avg. Cargill Cargill Dekalb(2) Delta
----- ---- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
1998E $1,835 4.0x 4.9x 6.0x 5.7x 5.3x 10.0x
1999E 1,995 3.2 4.1 -- -- 4.6 5.4
EBITDA
1998E $449 18.7x 21.1x -- -- 35.0x 52.7x
1999E 498 15.5 16.0 -- -- 26.8 22.9
EBIT
1998E $359 29.8x 26.7x NM 60.0x 44.3x 59.3x
1999E 403 26.9 20.8 -- -- 34.2 24.7
Equity Value as a Multiple of:
Net Income
1998E $270 51.2x 40.7x -- -- 72.6x 94.5x
1999E 260 56.8 32.7 -- -- 54.5 44.5
</TABLE>
- ----------
(1) Prairie Jan. '99 Target case.
(2) Represents blended value equal to transaction value of 5/22/98 purchase of
approximately 60% of Dekalb plus transaction value of 2/1/96 purchase of
approximately 40% of Dekalb.
-15-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Transaction Considerations
o Valuation
o Type of consideration
- Cash versus stock
- Stock
o Exchange ratios: fixed vs. floating
o Collars vs. no collars
o Timing
- Public tender followed by merger versus merger
o Other potential interested parties
-16-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Potential Interested Parties
($ in billion)
<TABLE>
<CAPTION>
Market Strategic
Value (bn) Business Fit Feasibility Comments
---------- ------------ ----------- ------------------------------------------------
<S> <C> <C> <C> <C>
AHP $78.2 Low High o Prairie not as good a fit as Midas; fit with
current Ag product line
Astra Zeneca 72.4 Medium Medium o Focused on Astra merger; potential exit
from AgChem
Bayer 25.0 Medium Medium o Financial wherewithal and dilution
Dow Chemical 22.2 Medium Medium o Financial wherewithal and dilution
Hoechst/AgrEvo 26.5 High Medium o Focused on Rhone-Poulenc merger
Novartis 118.3 High High o Good fit; strong financial position
</TABLE>
-17-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Accretion/Dilution of Buyer Universe
($ in millions, except per share amount)
<TABLE>
<CAPTION>
AHP(1) Astra Zeneca Bayer
--------------- --------------- ---------------
1999 2000 1999 2000 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Stand Alone EPS for
Acquiror Shareholders $1.92 $2.17 $1.90 $2.08 $2.37 $2.58
100% Stock
Pro Forma EPS $1.73 $1.98 $1.66 $1.84 $1.65 $1.84
$ Accretion/(Dilution) (0.19) (0.19) (0.25) (0.26) (0.71) (0.74)
% Accretion/(Dilution) (9.9%) (9.0%) (13.2%) (12.2%) (30.1%) (28.6%)
Pretax Synergies to Break-even 474 484 848 861 1,200 1,239
50/50 Cash and Stock
Pro Forma EPS $1.69 $1.95 $1.66 $1.85 $1.69 $1.90
$ Accretion/(Dilution) (0.23) (0.22) (0.26) (0.25) (0.68) (0.67)
% Accretion/(Dilution) (12.2%) (10.3%) (13.3%) (11.8%) (28.7%) (26.1%)
Pretax Synergies to Break-even 549 525 807 785 984 974
100% Cash
Pro Forma EPS $1.64 $1.92 $1.66 $1.86 $1.73 $1.99
$ Accretion/(Dilution) (0.28) (0.26) (0.26) (0.24) (0.63) (0.58)
% Accretion/(Dilution) (14.7%) (11.8%) (13.5%) (11.4%) (26.7%) (22.6%)
Pretax Synergies to Break-even 625 566 767 709 767 709
<CAPTION>
Dow Chemical(1) Diamond (1) Novartis
------------- ------------- --------------
1999 2000 1999 2000 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Stand Alone EPS for
Acquiror Shareholders $4.95 $5.51 $2.86 $3.14 $69.37 $77.89
100% Stock
Pro Forma EPS $3.55 $4.05 $2.47 $2.74 $63.30 $71.65
$ Accretion/(Dilution) (1.41) (1.47) (0.39) (0.40) (5.97) (6.13)
% Accretion/(Dilution) (28.4%) (26.6%) (13.6%) (12.9%) (8.6%) (7.9%)
Pretax Synergies to Break-even 753 785 735 768 737 757
50/50 Cash and Stock
Pro Forma EPS $3.44 $4.03 $2.49 $2.77 $62.94 $71.61
$ Accretion/(Dilution) (1.52) (1.49) (0.37) (0.37) (6.33) (6.17)
% Accretion/(Dilution) (30.6%) (27.0%) (12.9%) (11.7%) (9.1%) (7.9%)
Pretax Synergies to Break-even 689 676 656 653 752 733
100% Cash
Pro Forma EPS $3.28 $4.00 $2.51 $2.81 $62.55 $71.57
$ Accretion/(Dilution) (1.67) (1.51) (0.35) (0.33) (6.72) (6.21)
% Accretion/(Dilution) (33.7%) (27.5%) (12.2%) (10.4%) (9.7%) (8.0%)
Pretax Synergies to Break-even 625 566 576 539 767 709
</TABLE>
- ----------
Note: Diamond Purchase accounting acquisition of Prairie with 100% stock at $40
per share. Goodwill per year: $342 million without write-off.
(1) 25% in process R&D write-down.
-18-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Diamond/Prairie -- Remaining Public Float Outstanding 80%,
25% In-process R&D Write-off
($ in million, except per share amount)
<TABLE>
<CAPTION>
For Year Ended December 31,
--------------------------------------------------------------------
At $35 per share At $40 per share At $45 per share
---------------- ---------------- ----------------
1999 2000 1999 2000 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
o All Stock(1)(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.53 2.81 2.47 2.74 2.40 2.67
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.32) (0.33) (0.39) (0.40) (0.45) (0.47)
% Accretion/(Dilution) (11.3%) (10.6%) (13.6%) (12.9%) (15.8%) (15.1%)
Pretax Synergies to Break-even 599 623 735 768 871 912
- ------------------------------------------------------------------------------------------------------------------------
o 55 Stock/45 Cash(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.55 2.84 2.48 2.77 2.42 2.70
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.30) (0.30) (0.37) (0.37) (0.44) (0.44)
% Accretion/(Dilution) (10.6%) (9.6%) (13.0%) (11.8%) (15.4%) (14.1%)
Pretax Synergies to Break-even 537 533 664 665 791 797
- ------------------------------------------------------------------------------------------------------------------------
o All Cash(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.58 2.89 2.51 2.81 2.44 2.74
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.28) (0.26) (0.35) (0.33) (0.42) (0.40)
% Accretion/(Dilution) (9.8%) (8.1%) (12.2%) (10.4%) (14.7%) (12.6%)
Pretax Synergies to Break-even 460 423 576 539 693 655
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Assumes purchase accounting.
(2) Assumes goodwill amortized over 25 years.
-19-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Diamond/Prairie -- Remaining Public Float Outstanding 80%,
50% In-process R&D Write-off
($ in million, except per share amount)
<TABLE>
<CAPTION>
For Year Ended December 31,
--------------------------------------------------------------------
At $35 per share At $40 per share At $45 per share
---------------- ---------------- ----------------
1999 2000 1999 2000 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
o All Stock(1)(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.59 2.86 2.53 2.80 2.47 2.74
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.27) (0.28) (0.33) (0.34) (0.38) (0.41)
% Accretion/(Dilution) (9.4%) (9.0%) (11.5%) (11.0%) (13.5%) (12.9%)
Pretax Synergies to Break-even 502 525 621 654 741 782
- ------------------------------------------------------------------------------------------------------------------------
o 55 Stock/45 Cash(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.61 2.90 2.55 2.83 2.49 2.77
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.25) (0.25) (0.31) (0.31) (0.37) (0.37)
% Accretion/(Dilution) (8.7%) (7.8%) (10.8%) (9.8%) (12.8%) (11.8%)
Pretax Synergies to Break-even 439 435 550 551 661 666
- ------------------------------------------------------------------------------------------------------------------------
o All Cash(2)
Stand Alone EPS for Diamond Shareholders $2.86 $3.14 $2.86 $3.14 $2.86 $3.14
Pro forma EPS 2.64 2.99 2.58 2.88 2.51 2.82
- ------------------------------------------------------------------------------------------------------------------------
$ Accretion/(Dilution) (0.22) (0.20) (0.28) (0.26) (0.34) (0.32)
% Accretion/(Dilution) (7.7%) (6.3%) (9.8%) (8.2%) (11.9%) (10.1%)
Pretax Synergies to Break-even 362 325 462 425 562 525
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Assumes purchase accounting.
(2) Assumes goodwill amortized over 25 years.
-20-
<PAGE>
PROJECT PRAIRIE
- --------------------------------------------------------------------------------
Recent Stock Price Performance(1)
[GRAPH]
-21-
<PAGE>
Exhibit 99.17(b)(5)
March 7, 1999 CONFIDENTIAL
Materials Prepared for the Board of Directors
Project Prairie
<PAGE>
CONFIDENTIAL 1
- --------------------------------------------------------------------------------
Project Prairie
Overview of Presentation
- --------------------------------------------------------------------------------
o Strategic Benefits of the Transaction
o Summary Terms of the Transaction
o Summary Valuation of Prairie
o Summary of Synergies
o Market and Transaction Perspectives
o Summary Merger Consequences
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 2
- --------------------------------------------------------------------------------
Project Prairie
Strategic Benefits of the Transaction
- --------------------------------------------------------------------------------
o The transaction represents another step
Increases Emphasis toward Diamond's strategic objective of
On Life Sciences increasing its emphasis on Life Sciences
o 1999E Revenues from Life Sciences
increases to 21% from 17%
o Full integration of the Prairie marketing
Improves Market Access organization will enhance the market
for Ag Enterprise access for Diamond's CPP business
o Prairie has leading positions in key crops
such as corn and soybeans
o Seed industry has undergone dramatic
transformation
Industry Consolidation
o Virtually every publicly traded seed
company, and many private independents,
have been acquired by large agricultural
chemical/biotech companies
o Most extensive library of elite corn
germplasm
Prairie the Premier
Seed Company in World o World class marketing organization
o North American corn market share of 42%
o Diamond has concluded that additional
Opportunity to Extract synergies can be obtained with full
Synergies integration of Prairie with Diamond
o Combination of both revenue enhancement
and cost reduction synergies
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 3
- --------------------------------------------------------------------------------
Project Prairie
Summary Terms of the Transaction
- --------------------------------------------------------------------------------
Price and Form of o $40 per outstanding Prairie common share,
Consideration or $7.7 billion for the 192 million
outstanding common Prairie shares not
owned by Diamond
o 41 - 45% of Prairie outstanding common
shares not owned by Diamond are acquired
for cash
o 55 - 59% of Prairie outstanding common
shares not owned by Diamond are exchanged
for $40 of Diamond common stock, which, at
Friday's (3/5/99) closing price of $53.56
translates into an exchange ratio of
0.7468 of a Diamond common share for every
Prairie common share
o The actual exchange ratio will be
determined five trading days before the
date of the Prairie shareholder vote,
based on the average closing price of
Diamond common stock for the 10
consecutive trading days ending on the
fifth trading day prior to the shareholder
vote
Structure o Two-step cash and stock merger of Prairie
with a Diamond subsidiary
o First step accomplished through cash
tender offer for up to 45% of outstanding
Prairie common shares not owned by Diamond
o Second step accomplished through the
exchange of the remaining Prairie common
shares not held by Diamond for either
Diamond common shares or cash, at the
election of the holder of Prairie common
stock
o The receipt of Diamond common stock is
expected to be tax-free to Prairie
shareholders
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 4
- --------------------------------------------------------------------------------
Project Prairie
Summary Terms of the Transaction
- --------------------------------------------------------------------------------
Family Voting o Prairie has agreed to encourage major
Wallace family shareholders to file an
amended Schedule 13D indicating their
support for the transaction
o There is no voting agreement with, or
irrevocable proxy granted by, Wallace
family shareholders
Diamond Voting o [Diamond will exchange its Prairie Class B
common stock for 5-vote common stock of
Prairie]
o Diamond will vote its shares such that its
voting power is no greater than its
percentage equity ownership
Other Terms o No termination fees
o [Prairie agrees to waive standstill
provision of the Investment Agreement,
although such provision would be
reinstated if Diamond did not obtain
majority ownership after the tender offer]
o [Diamond will not acquire or agree to
acquire any entity if there is a
reasonable possibility that it could
adversely affect the antitrust review of
this transaction]
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 5
- --------------------------------------------------------------------------------
Project Prairie
Summary Valuation of Prairie
- --------------------------------------------------------------------------------
The valuation range for Prairie on a stand-alone basis is $32.17 to $36.85
per share and $38.52 to $43.88 per share including 100% of the synergies.
($ in Billions, except per share)
==========================================================================
METHODOLOGY RANGE
--------------------------------------------------------------------------
Prairie Stand-Alone
Discounted Cash Flow Analysis $7.9 - $ 9.1
Comparable Acquisitions Analysis 8.0 - 13.8
--------------------
Enterprise Value Reference Range $8.0 - $ 9.1
Potential Value of Litigation(1) 0.2 - 0.3
Less: Estimated Golden Parachute Payments 0.0 - (0.1)
Less: Net Debt (0.4)
--------------------
Equity Value Reference Range $7.8 - $ 8.9
Shares Outstanding (MM) 241
Equity Value Per Share $32.17 - $36.85
Market Price at 3/5/99 $22.81
Premium / (Discount) 41% - 62%
Synergies(1)
DCF Value of Synergies $1.2 - $1.3
Shares Not Owned by Diamond 192
--------------------
Value of Synergies Per Share $6.36 - $7.03
Stand-Alone plus 100% of the Synergy Value Per Share $38.52 - $43.88
Stand-Alone plus 50% of the Synergy Value Per Share $35.35 - $40.37
--------------------------------------------------------------------------
(1) Based on discussions with Diamond Management.
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 6
- --------------------------------------------------------------------------------
Project Prairie
Summary Valuation of Prairie: Two Methodologies
- --------------------------------------------------------------------------------
The following table outlines the range of multiples implied by the DCF and
Comparable Acquisition value ranges for Prairie.
<TABLE>
<CAPTION>
==================================================================================
MULTIPLE OF FISCAL 1999E(1):
------------------------------------------
METHODOLOGY REVENUES EBITDA EBIT
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Discounted Cash Flow Analysis 4.1x - 4.8x 15.4x - 17.7x 18.9x - 21.7x
Comparable Acquisitions Analysis 5.2 - 7.2 19.4 - 26.6 23.7 - 32.6
---------- ------------ ------------
Enterprise Value Reference Range 4.2x - 4.8x 15.5x - 17.7x 19.0x - 21.7x
----------------------------------------------------------------------------------
(1) Diamond Case Projections.
</TABLE>
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 7
- --------------------------------------------------------------------------------
Project Prairie
Summary of Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DCF Valuation Summary
($ in Billions)
==========================================================================================
DIAMOND CASE(1) PRAIRIE MANAGEMENT CASE(2)
------------------------------------------------------------------------------------------
<S> <C> <C>
Base Business (including Biotech pipeline)
PV of Cash Flows $2.7 - $2.8 $1.6 - $1.7
PV of Terminal Value 5.0 - 6.0 8.4 - 9.6
----------- -------------
$7.7 - $8.8 $10.1 - $11.3
Optimum
PV of Cash Flows $0.2 - $0.2 $0.2 - $0.2
PV of Terminal Value 0.4 - 0.5 0.4 - 0.5
----------- -------------
$0.5 - $0.7 $0.5 - $0.7
50% of Optimum $0.3 - $0.4 $0.3 - $0.4
------------------------------------------------------------------------------------------
Enterprise Value Reference Range $7.9 - $9.1 $10.3 - $11.7
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) Based on 10 year projections.
(2) Based on 5 year projections provided to CSFB on February 26, 1999.
</TABLE>
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 8
- --------------------------------------------------------------------------------
Project Prairie
Selected Comparable Acquisitions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ in Millions)
====================================================================================================================================
IMPLIED ENT. VALUE AS A MULTIPLE OF LTM:
ENTERPRISE --------------------------------
DATE ACQUIROR/TARGET DESCRIPTION VALUE REVENUE EBITDA EBIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/28/98(1) AgrEvo/ Producer of hybrid seeds for the $ 650 6.1x NA NA
Cargill Hybrid Seeds North America North American corn market
6/29/98 Monsanto Co./ International producer of corn, $1,400 5.6x NA NA
Cargill International Seed Operations sunflower, rape seed, alfalfa,
wheat and rice seeds
5/11/98 Monsanto Co./ Marketer and developer of genetic $3,766(2) 8.0x 61x 80x
DEKALB Genetics Corporation hybrid seeds and hybrid swine
breeding stock
5/11/98 Monsanto Co./ Marketer and developer of cotton $1,887 9.8x 52x 58x
Delta and Pine Land Company (pending) planting seeds
8/7/97 DuPont/ Producer of genetic hybrid seeds $8,441(2) 4.5x 18x 22x
Pioneer Hi-Bred International, Inc. and microbial products used in
crop and livestock production
</TABLE>
- --------------------------------------------------------------------------------
Source: SDC, news releases and financial documents where available.
(1) Terminated on 2/4/99.
(2) Enterprise value implied for 100% of the target.
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 9
- --------------------------------------------------------------------------------
Project Prairie
Summary of Comparable Acquisitions Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Comparable Acquisitions Valuation Summary
($ in Billions)
===================================================================================
PRAIRIE RESULTS MULTIPLE RANGE IMPLIED ENTERPRISE VALUE
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Business
LTM Revenues $1.8 5.5x - 8.0x $10.1 - $14.7
LTM EBITDA 0.4 18.0x - 3.0x $ 7.8 - $13.0
LTM EBIT 0.3 22.0x - 40.0x $ 7.4 - $13.6
-----------------------------------------------------------------------------------
Enterprise Value Reference Range $ 8.0 - $13.8
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 10
- --------------------------------------------------------------------------------
Project Prairie
Summary of Synergies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================
VALUE
PEAK EBIT IMPACT -----------------
SOURCE OF SYNERGIES KEY ASSUMPTIONS ($MM) $MM
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distribution and o Savings of about 10% of combined costs in $ 50 $ 250 - $ 275
Marketing North America
Substitute Roundup o Possible settlement of litigation could result in 44 160 - 180
Ready ("RUR") for substitution of RUR (premium: $3/acre) for LL
Liberty Link ("LL") (premium: $1.15/acre) on 14 million acres
Increased CPP o Incremental revenues of $75MM at a margin of 38 165 - 185
Revenues 50%
Admin. and Other Cost o R&D cost savings of $40MM 100 510 - 560
Savings o Administration cost savings of $60MM
Information o Savings of about 20% of combined IS costs, or 25 135 - 150
Systems Cost Savings $25MM annually
------------ -----------------
$256 $1,220 - $1,350
============ =================
-------------------------------------------------------------------------------------------------------------------
Source: Diamond Management.
</TABLE>
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 11
- --------------------------------------------------------------------------------
Project Prairie
Prairie Stock Price Performance
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 12
- --------------------------------------------------------------------------------
Project Prairie
Diamond Stock Price Performance
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 13
- --------------------------------------------------------------------------------
Project Prairie
Relative Stock Price Performance Since August 1997
- --------------------------------------------------------------------------------
Indexed Stock Price Performance
[GRAPH]
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 14
- --------------------------------------------------------------------------------
Project Prairie
Prairie/Diamond Historical Trading Relationship
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 15
- --------------------------------------------------------------------------------
Project Prairie
Trading vs. Transaction Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Billions)
=====================================================================================
3/5/99 PRAIRIE AUGUST 7, 1997
CLOSE ACQUISITION TRANSACTION (1)
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Premium to Current Market ($22.81) -- 75% 36%(2)
Premium to 30-Day Average ($25.33) (10)% 58% --
Premium to 52-Week High ($41.38) (45)% (3)% --
Premium to 52-Week Low ($21.56) 6% 86% --
Equity Value $ 5.5 $ 9.6 --
Net Debt 0.4 0.4 --
Enterprise Value $ 5.9 $ 10.0 $ 8.4
Enterprise Value as a Multiple of:
----------------------------------
Net Sales
FY 1998A/LTM 3.2x 5.5x 4.5x
FY 1999E 3.1 5.2 --
FY 2000E 2.8 4.9 --
EBITDA
FY 1998A/LTM 13.1x 22.4x 18.0x
FY 1999E 11.4 19.4 --
FY 2000E 9.4 16.1 --
EBIT
FY 1998A/LTM 16.3x 28.0x 22.0x
FY 1999E 13.9 23.8 --
FY 2000E 11.2 19.2 --
Equity Value as a Multiple of:
------------------------------
Net Income
FY 1998A/LTM 22.1x 39.0x --
FY 1999E 21.1 37.2 --
FY 2000E 16.9 29.7 --
-------------------------------------------------------------------------------------
(1) Enterprise value implied for 100% of Prairie.
(2) Represents deal price of $34.67 over August 6, 1997 close of $25.52.
</TABLE>
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
CONFIDENTIAL 16
- --------------------------------------------------------------------------------
Project Prairie
Summary Merger Consequences
- --------------------------------------------------------------------------------
=====================================================================
2000 2001
---------------------------------------------------------------------
Stand-Alone EPS(1)
Diamond(2) $ 3.56 $ 4.81
Prairie $ 1.35 $ 1.66
With 40% R&D Write-off
Diamond Pro Forma EPS $ 3.27 $ 4.55
Accretion/(Dilution) (8.0)% (5.4)%
Without 40% R&D Write-off
Diamond Pro Forma EPS $ 3.15 $ 4.43
Accretion/(Dilution) (11.4)% (7.9)%
---------------------------------------------------------------------
(1) Source: Management Projections.
(2) Pro forma for Leopard split-off.
- --------------------------------------------------------------------------------
CREDIT FIRST
SUISSE BOSTON
<PAGE>
Exhibit 99.17(b)(6)
Confidential
PRESENTATION TO THE BOARD OF DIRECTORS
OF E.I. DU PONT DE NEMOURS AND COMPANY
March 6, 1999
SALOMON SMITH BARNEY
---------------------
A member of citigroup
<PAGE>
Summary of Key Transaction Terms(a)
Consideration - $40.00 per Prairie share
- 45% cash, 55% Dakota common stock
- 75% premium to Prairie pre-announcement price(b)
Structure - [Two step offer]
- [Step 1: Tender offer for up to 41%]
- [Step 2: Cash election merger (fixed value on stock
portion)]
Accounting - Purchase accounting treatment
Tax - Stock portion of consideration tax-free to Prairie
shareholders
Key Conditions - Prairie stockholder approval
(a) Represents tentative understanding as of 3/5/99.
(b) Price of $22.8125 as of 3/5/99.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
2
<PAGE>
Transaction Context
- - Dakota commitment to enhancing the growth of Life Sciences segment --
-- Market expectation of significant corporation action
-- Transaction will create an entity with $7.5 billion of 1999 EBITDA
- - Existing Dakota relationship with Prairie
-- Technology sharing agreement and joint venture
-- 20% equity ownership
- - Accelerating industry consolidation - opportunity scarcity
- - Synchronization with value-illumination efforts including tracking stock
- - Prairie is key to an ongoing acquisition strategy in Life Sciences
SALOMON SMITH BARNEY
---------------------
A member of citigroup
3
<PAGE>
Prairie Stock Price Performance
[GRAPH]
SALOMON SMITH BARNEY
---------------------
A member of citigroup
4
<PAGE>
Premium Analysis
Prairie Prairie 52 Prairie 52 Average
3/5/99 Week Low Week High Premium in
Price $20.63 $42.69 Precedent
$22.81 Deals (a)
SALOMON SMITH BARNEY
---------------------
A member of citigroup
5
<PAGE>
Prairie Merger Rationale
- - Acquisition of leading integrated corn and soybean seed player
- - Last major public row crop seed producer - significant scarcity value
- - Prairie is research focused, with clear vision for commercialization of
biotechnology
- - Market share and brand equity act provides market access for Dakota's gene
science capabilities
- - Dakota gains control over its sole source of seed market access
- - Allows additional access to Prairie's patent estate and research
capabilities
- - Realize significant synergy opportunities not available under current
joint venture
SALOMON SMITH BARNEY
---------------------
A member of citigroup
6
<PAGE>
Pro Forma DLS/Prairie Business Mix Would be Similar to Monsanto
[GRAPH]
SALOMON SMITH BARNEY
---------------------
A member of citigroup
7
<PAGE>
Dakota Comparable Companies Analysis(a)
[GRAPH]
2000 P/E(b)
40.5x 18.1x 16.9x 13.7x 13.5x 12.2x
MTC DOW DAK ROH BAY PPG
[GRAPH]
Firm Value/LTM Revenues
4.1x 2.2x 1.6x 1.4x 1.3x 1.0x
MTC DAK ROH PPG DOW BAY
[GRAPH]
Firm Value/LTM EBITDA
19.8x 9.6x 7.1x 6.7x 6.6x 6.2x
MTC DAK DOW PPG ROH BAY
[GRAPH]
Firm Value/LTM EBIT
35.0x 13.0x 11.3x 9.6x 9.2x 8.6x
MTC DAK DOW ROH BAY PPG
SALOMON SMITH BARNEY
---------------------
A member of citigroup
8
<PAGE>
Comparable Company Analysis - Life Sciences
<TABLE>
<CAPTION>
Valuation Multiples Stock Equity P/E(b) Growth Cash P/E(d)
(Dollars in Millions, Except Price (a) Value 1999 2000 Rate (c) 1999 2000
Stock Price)
<S> <C> <C> <C> <C> <C> <C> <C>
American Home Products (AHP) $60.81 $82,721 32.2x 28.0x 12.0% 25.3x 22.6x
Monsanto (MTC) (f) 46.19 32,065 57.7 40.5 22.0 22.7 19.5
Novartis AC (NVTSY) 86.50 107,782 23.7 21.1 14.0 19.3 17.6
Zeneca Group (ZEN) 39.75 37,725 26.3 21.4 16.0 20.8 17.6
Median -- -- 29.3x 24.7x 15.0% 21.8x 18.5x
Mean -- -- 35.0 27.8 16.0 22.0 19.3
Dakota - Street (g) $51.81 51,030 19.4x 16.9x 9.0% 13.0x 11.8x
Dakota - Internal (g) 51.81 51,030 17.7 14.6 9.0 12.2 10.6
Prairie - Street 22.19 5,337 18.6 16.2 15.0 14.0 12.6
22.19 5,337 17.8 14.8 15.0 13.5 11.7
<CAPTION>
Valuation Multiples Firm Firm Value/LTM S&P
(Dollars in Millions, except Value (e) Revenues EBITDA EBIT Rating
Stock Price)
<S> <C> <C> <C> <C> <C>
American Home Products (AHP) $85,254 6.3x 21.5x 26.1x A
Monsanto (MTC) (f) 38,945 4.1 19.8 35.0 A
Novartis AC (NVTSY) 102,526 4.8 17.9 21.9 AAA
Zeneca Group (ZEN) 38,631 4.4 18.0 21.8 AA
Median $62,099 4.6x 18.9x 24.0x
Mean 66,339 4.9 19.3 26.2
Dakota - Street (g) $57,016 2.2x 9.6x 13.0x AA-
Dakota - Internal (g) 57,016 2.2 9.6 13.0 AA-
Prairie - Street 5,572 3.0 12.8 16.4 A+
5,572 3.0 12.8 16.4 A+
</TABLE>
Note: EBITDA, EBIT, Net Income to Common, and EPS adjusted for unusual and
nonrecurring items.
LTM: Latest Twelve Months
NM: Not Meaningful
(a) Stock prices as of 3/4/99.
(b) Earnings estimates from First Call as of 3/4/99.
(c) Growth rates are long term secular growth rates from First Call.
(d) Price / (Earnings plus LTM Depreciation and Amortization per diluted
share).
(e) Firm Value equals equity value (all diluted shares at the stock price less
any option proceeds) plus straight debt, minority interest, straight
preferred stock, all out of the money convertibles, less investments in
unconsolidated affiliates and cash.
(f) Pro forma estimates to include closed and announced acquisitions on a full
year basis.
(g) Pro forma for Conoco split-off, and net debt from Dakota estimates. Pro
forma estimates to include Herberts acquisition.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
9
<PAGE>
Transaction Valuation Summary
($ in millions, except per share)
- ---------------------------------------------------
Overview
- ---------------------------------------------------
Transaction Price per Share $40.00
Prairie Shares Outstanding 240.5
Transaction Equity Value 9,618.9
Net Debt 385.0
Transaction Firm Value $10,003.9
- ---------------------------------------------------
- --------------------------------------------------------------------------------
FV / LTM Price / 2000
Revenues EBITDA EBIT EPS Cash EPS
- --------------------------------------------------------------------------------
Prairie @ Transaction Price 5.5x 23.1x 29.5x 29.2x 22.7x
Precedent Transaction Median 5.4 -- -- -- --
Multiples
Prairie @ Current Price
($22.19)(a) 3.0 12.8 16.4 16.2 12.6
Dakota @ Current Price
($51.81)(a) 2.2 9.6 13.0 16.9 11.8
- --------------------------------------------------------------------------------
(a) As of 3/4/99.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
10
<PAGE>
Comparison with Initial Dakota Investment
- --------------------------------------------------------------------------------
Initial Investment Current Transaction
- --------------------------------------------------------------------------------
% of Total Shares Acquired 20% 80%
Announcement Date August 7, 1997 March 8, 1999 (a)
Dakota Stock Price (b) $67.06 $51.81
Prairie Stock Price (c) $24.67 $22.19
Acquisition Price (d) $34.67 $40.00
Premium Paid (e) 41% 80%
Transaction Value $1.7 billion $7.7 billion
Acquisition Currency Cash 45% Cash / 55% Stock
- --------------------------------------------------------------------------------
(a) Planned date - subject to Board approval.
(b) Initial as of 7/31/97. Current as of 3/4/99.
(c) Initial as of 7/31/97. Adjusted from $74 for 3-for-1 stock split. Current
as of 3/4/99.
(d) Adjusted from $104 for 3-for-1 stock split.
(e) Based on stock price one week prior to announcement.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
11
<PAGE>
Prairie Valuation Summary
[GRAPH]
SALOMON SMITH BARNEY
---------------------
A member of citigroup
12
<PAGE>
SALOMON SMITH BARNEY
---------------------
A member of citigroup
13
<PAGE>
Quantitative Projections Summary (a)
<TABLE>
<CAPTION>
Projected Fiscal Year CAGR
Ending August 31,
----------------------
(Dollars in millions, except per share data) 1999 2008 1999-2008
======================================================================== ============
<S> <C> <C> <C>
Revenues - Prairie Case $1,995.0 $4,748.7 10.1%
Revenues - Dakota Case 1,945.0 3,392.0 6.4
Revenues - Dakota Sensitized Case 1,976.3 3,725.8 7.3
- ------------------------------------------------------------------------ ------------
EBITDA - Prairie Case $516.0 $1,698.0 14.2%
EBITDA - Dakota Case 526.0 1,191.0 9.5
EBITDA - Dakota Sensitized Case 518.0 1,357.4 11.3
- ------------------------------------------------------------------------ ------------
Net Income - Prairie Case (b) $287.6 $1,158.9 16.7%
Net Income - Dakota Case (b) 288.5 783.3 11.7
Net Income - Dakota Sensitized Case 280.1 893.2 13.8
- ------------------------------------------------------------------------ ------------
</TABLE>
(a) Projections provided by Prairie and Dakota management, respectively.
(b) Net income figures are extrapolated as they were not provided by the
Company.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
14
<PAGE>
The Most Applicable Precedents Include Only a Narrow Subset of Transactions
Comparable Private Market Transaction Precedents
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Date Target Acquiror Implied Acquisition Multiples Premium to
Announced Firm Value Sales EBITDA EBIT Pre-Announced Price(a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5/11/98 Delta & Pine Land Monsanto $1,944 10.1x 50.7x 60.1x NM
5/11/98 DEKALB Genetics Monsanto 3,735 8.0 58.9 76.7 200%
6/29/98 Cargill Monsanto 1,400 5.6 NA NA NA
International
Seed
Businesses
4/30/98 Mycogen Dow 1,133 5.2 NM NM 40%
AgroSciences
8/7/97 Prairie Dakota 8,570 4.8 19.0 23.6 41%
9/28/98 Cargill Hybrid AgrEvo 350 3.3 NA NA NA
Seed
North America(b)
TBA Prairie Dakota 10,004 5.5 23.1 29.5 75%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Premium to price one week prior to initial sale or purchase announcement.
(b) Bid withdrawn on 2/4/99. Original offer of $650 million was lowered to
$350 million on 11/11/98.
SALOMON SMITH BARNEY
---------------------
A member of citigroup
15
<PAGE>
Accretion / Dilution Analysis - Dakota Sensitized
Case with Synergies
[GRAPH]
SALOMON SMITH BARNEY
---------------------
A member of citigroup
16
<PAGE>
[Pioneer Logo]
PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Pioneer Hi-Bred International, Inc. and E. I. du
Pont de Nemours and Company have agreed to a merger in which DuPont will acquire
the remaining approximately 80 percent of Pioneer not presently owned by DuPont.
If the merger is completed, Pioneer shareholders, other than DuPont, will
receive $40 for each Pioneer share they own. Pioneer shareholders may elect to
receive the $40 in shares of DuPont common stock based on the average trading
price of DuPont common stock over the 10-trading day period ending on
, 1999, which is three trading days before the date of the special
meeting of Pioneer shareholders that we will hold to approve the merger or may
choose to receive the $40 in cash. Only 45 percent of the aggregate
consideration paid by DuPont will be in the form of cash and the remaining 55
percent will be in the form of DuPont common stock. If, in the aggregate,
Pioneer shareholders choose to receive cash for more than 45 percent of the
total number of shares of Pioneer common stock outstanding and not owned by
DuPont, those elections will be cut back proportionately and they will instead
receive a portion of the merger consideration in the form of DuPont common
stock. Conversely, if, in the aggregate, Pioneer shareholders elect to receive
shares of DuPont common stock for more than 55 percent of the total number of
shares of Pioneer common stock outstanding and not owned by DuPont, those
elections will be cut back proportionately and they will instead receive a
portion of the merger consideration in the form of cash. We intend that the
merger will be tax-free to Pioneer shareholders for that portion of the
consideration they receive in DuPont common stock.
After the acquisition, Pioneer will remain intact as an operating entity and
be a wholly owned subsidiary of DuPont under the Pioneer name and remain
headquartered in Des Moines, Iowa.
We cannot complete the merger unless Pioneer shareholders vote to approve
it. Pioneer will hold a special meeting of its shareholders to vote on the
merger agreement. YOUR VOTE IS VERY IMPORTANT.
This document is a proxy statement for Pioneer to use in soliciting proxies
for the Pioneer special meeting. This document is also a prospectus of DuPont
relating to the issuance of shares of DuPont common stock in connection with the
merger. This document gives you detailed information about the merger and
includes the merger agreement.
FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK FACTORS" BEGINNING ON
PAGE 18.
I am very enthusiastic about this merger. Bringing the talents and resources
of our two companies more closely together will ensure we can more quickly
deliver potential value to farmers and the broadening agricultural marketplace.
The terms of the merger realize the benefits of that value for our shareholders.
I join all other members of the Pioneer board of directors in recommending that
you vote in favor of this merger.
Charles S. Johnson
Chairman, President and Chief Executive Officer
Pioneer Hi-Bred International, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SECURITIES TO BE ISSUED UNDER THIS PROXY
STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROXY STATEMENT/PROSPECTUS DATED , 1999, WAS FIRST MAILED TO SHAREHOLDERS
ON OR ABOUT , 1999.
<PAGE>
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1999
To the Shareholders of Pioneer Hi-Bred International, Inc.:
Notice is hereby given that a special meeting of shareholders of Pioneer
Hi-Bred International, Inc. will be held on , 1999, at [ ],
local time, at for the following purpose:
To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of March 15, 1999, among E. I. du Pont de
Nemours and Company, a Delaware corporation, Delta Acquisition Sub,
Inc., a Delaware corporation and a wholly owned subsidiary of DuPont,
and Pioneer, and approve the related merger pursuant to which Pioneer
will merge with and into Delta Acquisition Sub. If the merger is
completed, the Pioneer shareholders, other than DuPont, will receive $40
in consideration for each share of common stock of Pioneer, par value
$1.00 per share, issued and outstanding immediately prior to the merger.
The consideration will either be in the form of cash or DuPont common
stock. A copy of the merger agreement is set forth as APPENDIX A to the
attached Proxy Statement/ Prospectus.
Pioneer reserves the right to abandon the merger at any time prior to the
consummation of the merger upon the terms and subject to the conditions of the
merger agreement.
The board of directors of Pioneer has fixed the close of business on ,
1999 as the record date for the determination of shareholders entitled to notice
of and to vote at the Pioneer special meeting. Only shareholders of record at
such time will be entitled to notice of and to vote at the Pioneer special
meeting. A list of Pioneer shareholders entitled to vote at the Pioneer special
meeting will be available for examination, during ordinary business hours,
beginning on the date of [TWO DAYS AFTER NOTICE OF THE MEETING] until and during
the meeting.
A form of Proxy and a Proxy Statement/Prospectus containing more detailed
information with respect to the matters to be considered at the Pioneer special
meeting accompany this notice.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL OF THE MERGER.
You are cordially invited and urged to attend the Pioneer special meeting in
person. If you attend the Pioneer special meeting and desire to revoke your
Proxy and vote in person you may do so. In any event, a Proxy may be revoked at
any time before it is voted.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE PIONEER SPECIAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING
SOLICITED BY THE BOARD OF DIRECTORS, WHETHER OR NOT YOU PLAN TO ATTEND THE
PIONEER SPECIAL MEETING. AN ADDRESSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THAT PURPOSE.
By Order of the Board of Directors,
Charles S. Johnson
Chairman, President and Chief
Executive Officer
Pioneer Hi-Bred International, Inc.
Des Moines, Iowa
, 1999
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE BUSINESS OF PIONEER?
A. Pioneer is in the business of the broad application of the science of
genetics to produce, develop and market corn, soybean and other crop seeds
and other products used in the agricultural industry. We believe the key to
our past and future long-term success in the marketplace is our proprietary
and industry leading collection of crop genetics, or germplasm. Our
germplasm is the product of years of agricultural research by our own
scientists and through over 2,000 research agreements with others.
Q. WHAT IS PIONEER'S CURRENT RELATIONSHIP WITH DUPONT, BEFORE THE MERGER?
A. In 1997, to expand our research capabilities, we entered into a three-part
strategic alliance with DuPont, itself a world class leader in industrial
products, genetics and life sciences. Our partnership includes a broad
research collaboration with DuPont, which takes advantage of the two
companies' expertise, technology and know-how concerning quality grain
traits, agronomic traits, industrial use traits, genomics and enabling
technology for developing seed, grain, grain products, plant materials and
other crop improvements products. We also have established a commercial
joint venture called Optimum Quality Grains, L.L.C., in which each party
owns a 50 percent interest, which seeks to create, maximize and capture
value for quality traits in seed, grain, grain products and plant materials
delivered through corn, soybeans and other selected oil seeds. A key
component of Optimum is a preferred seed support agreement between Optimum
and Pioneer. Optimum is not in the seed business and looks to Pioneer to be
its preferred worldwide provider and preferred marketer of quality trait
seeds pursuant to the preferred seed support agreement. DuPont also made an
approximate 20 percent equity investment in Pioneer under arrangements that
included a 16 year standstill on DuPont in order to maintain our
independence while enhancing our long-term shareholder value.
Q. WHY IS PIONEER NOW MERGING WITH DUPONT?
A. Since 1997, the pace of change in the agricultural industry has accelerated.
Seed and grain processing businesses have consolidated and have combined
with larger chemical, pharmaceutical and life sciences companies. To remain
competitive and a leader in the global marketplace we need to bring new
products to the market faster than ever before. Our relationship with DuPont
and the effective collaboration of our scientists over the last 18 months
has confirmed our choice of DuPont as the ideal partner to accomplish this
goal. At the same time, we saw that the need to obtain the mutual consent of
our two organizations to pursue opportunities and differences of opinion as
to how to divide the costs and rewards of these opportunities were hampering
our ability to develop new products as efficiently as possible. These
inefficiencies and procedural obstacles would be eliminated or minimized as
a result of a combination of the companies. More recently, DuPont informed
us of its consideration of pursuing a number of possible significant
alternative transactions in the pharmaceutical and life sciences businesses,
and in particular that it had engaged in discussions concerning a possible
business combination with the Monsanto Company as a means of significantly
expanding DuPont's pharmaceutical and life sciences businesses. We told
DuPont that its combination with Monsanto could negatively affect our
relationship with DuPont. Together, we concluded that combining our
companies in a transaction that fairly recognizes the value of Pioneer was
in the best interests of both companies and our shareholders.
Q. WHAT ARE THE BENEFITS OF THE MERGER?
A. We believe that the merger, in which DuPont will pay $40 per share in the
form of cash and DuPont common stock for the
1
<PAGE>
approximately 80 percent of Pioneer it does not presently own, fully
recognizes Pioneer's value. The price represents a 63 percent premium over
the closing price of Pioneer's stock prior to our announcement on March 12,
1999 that we were in discussions with DuPont regarding a possible business
combination transaction. In addition, by combining Pioneer and DuPont, we
will create a leading agricultural science organization. This combination
will generate significant value for our shareholders by rapidly and
effectively capitalizing on opportunities in the marketplace. The merged
companies will expand upon the research alliance and the Optimum joint
venture. There will also be the potential of cost savings for Pioneer as it
becomes part of the larger DuPont organization.
Q: WHAT DO I NEED TO DO WITH MY PROXY CARD?
A: After you have carefully read this document, indicate on your proxy card how
you want to vote. Sign and mail the proxy card in the enclosed prepaid
return envelope marked "Proxy" as soon as possible, so that your shares may
be represented and voted at the special meeting as indicated below:
Pioneer Special Meeting
, 1999
[ ] p.m., local time
[INSERT ADDRESS]
In order for us to complete the merger, holders entitled to exercise a
majority of the votes attributable to the outstanding common shares of
Pioneer must approve the merger agreement. If you do not vote your shares,
the effect will be a vote against the merger agreement. THE BOARD OF
DIRECTORS OF PIONEER UNANIMOUSLY RECOMMENDS VOTING "FOR" THE MERGER
AGREEMENT.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your shares will not be voted unless you follow the directions your broker
provides to you regarding how to vote your shares.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted. Just
send in a later dated, signed proxy card to Pioneer's Secretary or to Boston
EquiServe at the address below before the meeting or attend the meeting in
person and vote.
BankBoston
c/o Boston EquiServe
P.O. Box 8040
Boston, MA 02266-8040
Q: WHAT DO I NEED TO DO WITH THE FORM OF ELECTION AND LETTER OF TRANSMITTAL?
A: You must complete the enclosed form of election and specify the number of
your Pioneer shares that you wish to be converted into cash and/or DuPont
common stock in the merger. The form of election must be sent, together with
the letter of transmittal and your Pioneer stock certificates, to the
exchange agent at the address below:
First Chicago Trust Co. of New York
a division of EquiServe
P.O. Box 2500
Jersey City, New Jersey 07303-2500
Please note that your election to receive cash and/or DuPont common stock is
subject to proration and that you may not receive all of the cash or all of
the shares of DuPont common stock that you elect to receive.
In order to receive the merger consideration as promptly as possible
following the closing of the merger, whether you are electing to receive
cash or shares of DuPont, the exchange agent must receive your validly
completed election form together with the letter of transmittal and your
Pioneer stock certificates by 5:00 p.m., New York City time on [the business
day next preceding the date of the meeting]. AFTER THIS DEADLINE, YOU MAY
NOT ELECT TO RECEIVE DUPONT COMMON STOCK IN THE MERGER.
2
<PAGE>
Q. WHAT DO I NEED TO DO IF I WANT TO RECEIVE DUPONT COMMON STOCK FOR ANY OR ALL
OF MY PIONEER SHARES IN THE MERGER WITH DUPONT?
A: In order to receive DuPont common stock for any or all of your shares the
exchange agent must receive your validly completed election form together
with the letter of transmittal and your Pioneer stock certificates by 5:00
p.m., New York City time on [the business day next preceding the date of the
meeting.] After this deadline, you may not elect to receive DuPont common
stock in the merger.
Q: WHAT DO I NEED TO DO IF I WANT TO RECEIVE CASH FOR ANY OR ALL OF MY PIONEER
SHARES IN THE MERGER?
A: You should complete the enclosed form of election and specify that you wish
to receive cash for any or all of your shares in the merger. The form of
election must be sent, together with the letter of transmittal and your
Pioneer stock certificates to the exchange agent at the address and time
listed above. If Pioneer shareholders wish to receive cash for more than 45
percent of the outstanding Pioneer shares not owned by DuPont, the right to
receive cash will be subject to proration and a portion of the merger
consideration received will be in the form of DuPont common stock instead.
In the event you fail to return the form of election and other documents on
time you will still be deemed to have made an election to receive cash for
all of your Pioneer shares; however failure to send in the election form and
related documents could delay your actual receipt of cash. Promptly
following the merger, the exchange agent will mail a letter of transmittal
to any shareholder who has not returned a form of election together with a
letter of transmittal. Pioneer shareholders must complete the letter of
transmittal and submit their stock certificates in order to receive the
merger consideration.
Q: WHAT IF MY BROKER HOLDS MY STOCK CERTIFICATES FOR ME IN "STREET NAME" AND
CANNOT MAIL THEM IN?
A: In the event your Pioneer shares are held in "street name," your broker will
provide you with instructions as to making an election to receive cash
and/or shares of DuPont common stock.
Q: WHERE CAN I GET ADDITIONAL FORMS OF ELECTION OR OTHER INFORMATION?
A: We have retained [ ] as information agent to assist you in
connection with the merger. You may call [ ] at - - (toll
free) in the United States or Canada or at - - (collect) elsewhere
to request additional documents and to ask any questions.
Q: WHAT IF I HAVE SHARES IN THE PIONEER DIVIDEND REINVESTMENT PLAN?
A: If you are a participant in the Pioneer Dividend Reinvestment Plan, check the
applicable box in the form of election and letter of transmittal.
Participants in the Pioneer Dividend Reinvestment Plan do not need to send
their stock certificates with respect to their Pioneer Dividend Reinvestment
Plan shares. See General Instruction 13 of the form of election and letter
of transmittal.
Q: CAN I REVOKE MY FORM OF ELECTION?
A: Yes. You can revoke your form of election for any or all of your Pioneer
shares by giving written notice to the exchange agent prior to 5:00 p.m.,
New York City time on [same date as above].
Q: CAN I MAKE PARTIAL ELECTIONS?
A: Yes. The election form provides for an election to be made for cash and/or
DuPont common stock with respect to all or any portion of your Pioneer
shares. You may make an election to receive DuPont common stock for some of
your Pioneer shares and cash for the balance. Just complete the election
form and mail in your letter of transmittal and stock certificates so that
you have made the elections you wish
3
<PAGE>
for all of your Pioneer shares. Elections to receive cash and/or DuPont
stock are subject to proration among Pioneer shareholders.
Q: WHAT HAPPENS TO MY PIONEER STOCK CERTIFICATES IF THE MERGER IS TERMINATED?
A: The exchange agent will promptly return your Pioneer stock certificates in
the same amount. In the unlikely event that the merger does not close
promptly after the date of the Pioneer shareholders meeting, Pioneer
reserves the right, in order to facilitate continued orderly trading during
the interim period, to return to the Pioneer shareholders, the certificates
representing shares as to which Pioneer shareholders have made cash
elections.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. Having
obtained what we believe to be all material regulatory clearances, we now
must obtain the approval of Pioneer shareholders. We hope to complete the
merger on or shortly after , the date of the special meeting to approve
the merger. However, we cannot assure you as to when or if the merger will
occur.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both companies file reports and other information with the SEC. You may read
and copy this information at the SEC's public reference facilities. Please
call the SEC at 1-800-SEC-0330 for information about these facilities. This
information is also available at the Internet site the SEC maintains at
http://www.sec.gov and at the offices of the New York Stock Exchange. You
can also request copies of these documents from either Pioneer or DuPont.
Q: WHO CAN ANSWER MY QUESTIONS?
You may contact:
Pioneer Hi-Bred International, Inc.
Investor Relations
400 Locust Street
800 Capital Square
Des Moines, Iowa 50309
(515) 248-4800
You may also contact our information agent:
[ ]
4
<PAGE>
SUMMARY
This summary highlights selected information from this document. It does not
contain all of the information that is important to you. We urge you to read
carefully the entire document and the other documents referred to in this
document to fully understand the merger. For a guide as to where you can obtain
more information on Pioneer and DuPont generally, see "WHERE YOU CAN FIND MORE
INFORMATION." We have included page references in parentheses to direct you to a
more complete description of the topics presented in this summary.
THE MERGER
We propose a merger between Pioneer and DuPont. As a result of the proposed
merger, Pioneer will in effect continue as a wholly owned subsidiary of DuPont.
Each Pioneer shareholder, other than DuPont, will receive $40 for each share
they own. Each shareholder can receive the $40 in the form of cash, in shares of
DuPont stock, or a combination of both, as determined by the shareholder subject
to the requirement that 45 percent of the total consideration paid by DuPont
will be in cash and 55 percent in DuPont stock. See "MERGER CONSIDERATION."
THE COMPANIES
(SEE PAGE 23)
Pioneer Hi-Bred International, Inc.
800 Capital Square
400 Locust Street
Des Moines, IA 50309
515-248-4800
The business of Pioneer is the broad application of the science of genetics.
Pioneer was founded in 1926 to apply then newly discovered genetic techniques to
hybridize corn. Today Pioneer 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.
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, DE 19898
302-774-1000
DuPont is a science company, delivering science-based solutions that make a
difference in people's lives in food and nutrition; healthcare; apparel; home
and construction; electronics; and transportation. Founded in 1802, DuPont
operates in 65 countries and has 92,000 employees.
PIONEER PER SHARE MARKET PRICE INFORMATION
(SEE PAGE 85)
Shares of Pioneer common stock are listed on the New York Stock Exchange
under the symbol "PHB." For the five trading days before we issued a press
release stating that Pioneer and DuPont were in negotiations regarding a
possible business combination transaction, the average closing price on the New
York Stock Exchange Composite Transactions Tape of Pioneer common stock was
$22.90 per share. On , [day before S-4 is effective], 1999, Pioneer
common stock closed at $ per share.
As of June 22, 1999, 239,470,394 shares of Pioneer common stock were
outstanding and employee stock options to purchase 4,173,700 shares of Pioneer
common stock were outstanding.
OPINION OF FINANCIAL ADVISOR FOR PIONEER
(SEE PAGE 35)
Lazard Freres delivered a written opinion to the Pioneer board of directors
that, as of March 14, 1999, the consideration to be received pursuant to the
merger agreement was fair to the holders of shares of Pioneer common stock other
than DuPont and its affiliates from a financial point of view. This opinion was
based upon and subject to the factors and assumptions which are set forth in the
written opinion. This opinion is not a recommendation to any Pioneer shareholder
as to how to vote. We have attached this opinion to this document as APPENDIX B.
You should read it carefully.
5
<PAGE>
OPINIONS OF FINANCIAL ADVISORS FOR DUPONT
(SEE PAGE 40)
Credit Suisse First Boston Corporation and Salomon Smith Barney Inc.
delivered separate written opinions to the DuPont board of directors that, as of
the dates of the opinions, the consideration to be paid by DuPont in the merger
was fair, from a financial point of view, to DuPont. These opinions were based
on important factors, assumptions and limitations that are described in the
written opinions. We have attached these opinions to this document as APPENDIX C
and APPENDIX D, respectively. You should read them carefully. These opinions are
directed to the DuPont board of directors and are not recommendations to any
Pioneer shareholders as to how to vote on matters relating to the merger.
VOTES REQUIRED; RECORD DATE FOR VOTING
(SEE PAGE 21)
You can vote at the special meeting of Pioneer shareholders if you owned
shares of Pioneer common stock at the close of business on , 1999, the
record date. The affirmative vote of the holders entitled to exercise a majority
of the votes attributable to the outstanding shares of Pioneer common stock is
required to approve the merger.
If you do not vote your shares, the effect will be a vote against the merger
agreement.
The exact number of votes which the holders of Pioneer common stock can cast
at the special meeting cannot be determined as of the date of this Proxy
Statement/Prospectus. This is because a Pioneer shareholder has until
, 1999 to establish whether any shares owned by that shareholder are
entitled to cast five votes per share. Under Pioneer's charter, each share of
common stock beneficially continuously owned by the same person since
, 1996 can cast five votes per share. All other shares carry one
vote per share.
DuPont owns 49,333,758 shares of common stock of Pioneer, representing
approximately 20.6 percent of the total outstanding shares of Pioneer common
stock. Although DuPont's shares carry five votes per share, DuPont cannot vote
in excess of 20 percent of our company's total voting power except in limited
circumstances under our control. DuPont has agreed to vote its 20 percent voting
power in favor of the merger.
RECOMMENDATION TO SHAREHOLDERS
(SEE PAGE 33)
All of the members of the board of directors of Pioneer recommend that you
vote "FOR" the proposal to approve the merger agreement. To review the reasons
for the merger in detail, see "THE MERGER--Reasons for the Merger;
Recommendation of the Board of Directors."
PIONEER STOCK OPTIONS
(SEE PAGE 90)
Outstanding options to buy shares of Pioneer common stock granted under
Pioneer's employee stock option plan will fully vest on completion of the
merger. Holders of options may choose to receive, for each Pioneer share covered
by the option, an option to buy a fraction of a share of DuPont common stock
worth $40 at an exercise price which is adjusted to take into account the
exchange ratio. Alternatively, option holders may elect to receive in cash the
spread between $40 and the option exercise price, subject to a limit on the
total cash paid to redeem the Pioneer options.
COMPLETION OF THE MERGER
(SEE PAGE 96)
Before we can complete the merger, we must satisfy a number of conditions.
These include:
(1) the approval of the merger agreement by Pioneer shareholders,
(2) the absence of any legal prohibitions against the merger,
(3) material compliance by Pioneer and DuPont with their obligations under the
merger agreement and the accuracy of the parties' respective representations
and warranties, and
6
<PAGE>
(4) completion of DuPont's exchange offer and cash tender offer to implement the
second step of its previously announced plan to establish Conoco Inc. as a
fully independent company.
We will merge shortly after all of the conditions to the merger have been
satisfied or waived. We expect to complete the merger on or shortly after
, 1999, the date of the Pioneer shareholder meeting to approve the
merger, but we cannot be certain when or if the conditions will be satisfied or
waived.
TERMINATION OF THE MERGER AGREEMENT
(SEE PAGE 97)
DuPont and Pioneer may mutually agree in writing to terminate the merger
agreement at any time without completing the merger, even after the shareholders
of Pioneer have approved it.
In addition, either DuPont or Pioneer may decide to terminate the merger
agreement if:
(1) the merger has not been completed by December 1, 1999, unless extended under
specific circumstances,
(2) the shareholders of Pioneer fail to approve the merger agreement,
(3) the other company breaches certain of its obligations under the merger
agreement in a material manner, or
(4) a final court order prohibits the merger.
The merger agreement granted Pioneer the right to terminate the merger
agreement prior to April 29, 1999 if Pioneer had received a superior proposal
from a third party and the board of directors of Pioneer believed that it had
the ffiduciary duty to enter into a transaction with the third party.
The merger agreement also grants DuPont the right to terminate the merger
agreement if the Pioneer board of directors ceases to recommend the merger to
you, our shareholders.
INTERESTS OF MEMBERS OF PIONEER'S BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER
(SEE PAGE 48)
Pioneer's directors and executive officers have interests in the merger that
may conflict with those of Pioneer shareholders. These interests include the
vesting of unvested stock options, the lapse of restrictions on restricted
stock, cash bonuses and management retention agreements. You should be aware of
these interests because they may conflict with yours.
Based on information available as of June 22, 1999:
- executive officers and directors of Pioneer hold 781,993 shares of
restricted Pioneer common stock; those restrictions will lapse on
completion of the merger, which will permit such officers and directors to
receive the merger consideration paid to Pioneer shareholders generally as
to all such shares;
- executive officers of Pioneer hold 3,118,000 options of which 2,148,630
are unvested; those options will fully vest on completion of the merger,
and will entitle the holders to receive, for each share of Pioneer common
stock covered by those options, either an option to buy a fraction of a
share of DuPont common stock worth $40 at an equitably adjusted exercise
price or, subject to a limit on the total cash paid to redeem Pioneer
options, cash equal to the spread between $40 and the exercise price of
their current options;
- in connection with the merger, financial targets under Pioneer bonus plans
will be deemed to have been met, which will entitle executive officers of
Pioneer to aggregate cash bonuses equal to approximately $6.2 million;
- although not anticipated, if the employment of all executive officers was
terminated following the merger under circumstances that entitled them to
severance benefits under Pioneer's existing severance plans, the aggregate
severance to be paid to them would be
7
<PAGE>
$44.2 million (this figure does not include applicable gross-up payments);
- executive officers of Pioneer will also be eligible to receive gross-up
payments, which are additional cash payments to make them whole after
accounting for any applicable parachute payment excise tax liabilities;
and
- 21 executive officers of Pioneer have entered into management retention
agreements which, subject to completion of the merger, will provide the
individuals who stay with Pioneer for periods of one, two or three years
after the merger (four years with respect to Mr. Johnson) with
substantially the same compensation and benefits they currently receive
and, upon termination of employment during the agreement or following the
term of the agreement, substantially the same benefits, including change
of control enhancements under Pioneer's existing severance plan and
accelerated vesting and enhancements of benefits under Pioneer's
supplemental retirement plan and deferred compensation plan.
COMPARISON OF RIGHTS OF PIONEER SHAREHOLDERS AND DUPONT STOCKHOLDERS
(SEE PAGE 100)
After the merger, the Pioneer shareholders who receive DuPont common stock
for their shares of Pioneer common stock will become stockholders of DuPont.
Since DuPont is a Delaware corporation, their rights will be governed by
Delaware law instead of Iowa law.
FEDERAL INCOME TAX CONSEQUENCES
(SEE PAGE 51)
The parties intend that the merger be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. It is a condition to each of DuPont's and Pioneer's
obligation to consummate the merger that its respective tax counsel deliver an
opinion to the effect that the merger will qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. Assuming that the
merger qualifies as such a reorganization, none of Pioneer, DuPont or Delta
Acquisition Sub, Inc. will recognize any gain or loss as a result of the merger.
In addition, holders of shares of Pioneer common stock who exchange their shares
solely for shares of DuPont common stock will not recognize gain or loss in the
merger. Holders of shares of Pioneer common stock who exchange their shares for
cash or for both DuPont common stock and cash may recognize gain, but not in
excess of the amount of cash received.
You should consult your own tax advisor for a full understanding of the tax
consequences as they apply to you.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
(SEE PAGE 55)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires merger
parties to furnish certain information and materials relating to the competitive
nature of the businesses of the parties and the industries in which they operate
to the Antitrust Division of the Department of Justice and the Federal Trade
Commission and requires that a specified waiting period expire or be terminated
before the merger can be completed. On March 22, 1999, we filed the required
information with the Antitrust Division of the Department of Justice and the
Federal Trade Commission. On April 22, 1999, we recertified our
Hart-Scott-Rodino filing with the Department of Justice. This action started a
new 30-day waiting period and gave Pioneer and DuPont time to respond to
questions raised by the Department of Justice. The Federal Trade Commission
granted early termination of the Hart-Scott-Rodino waiting period, effective on
May 21, 1999. Even after termination of the waiting period, the Antitrust
Division of the Department of Justice and the Federal Trade Commission will have
the authority to challenge the merger on antitrust grounds before or after the
merger is completed. In addition, the merger is subject to review by the
Commission of the European Community. On May 17, 1999, we made the applicable
filings with the Merger Task Force of the Commission of the European Community
and on June 21, 1999 the required approval of the European
8
<PAGE>
Commision was obtained. The parties do not believe that any other material
regulatory approvals are required.
APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS
(SEE PAGE 106)
Under Iowa law, Pioneer shareholders may dissent from the merger and have
the fair value of their shares paid to them in cash. To exercise this right,
Pioneer shareholders must follow specific procedures. These procedures include
filing notices with Pioneer and not voting in favor of the merger. For more
information on how to exercise these rights, see Appraisal Rights of Dissenting
Shareholders under Iowa law, set forth in APPENDIX F to this document.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables show summary historical financial data for each
company.
Explanation of periods presented:
- Pioneer's fiscal year ends on August 31 of each year.
- DuPont's fiscal year ends on December 31 of each year.
- Unless the context otherwise indicates, a reference to a Pioneer fiscal
year refers to the calendar year in which that fiscal year was completed.
Some of the information in the following tables is based on the historical
financial information of the companies presented in prior filings with the SEC.
When you read the summary financial information provided in the following
tables, you should also read the historical financial information in prior
filings. For instructions on how to obtain documents each of the companies has
filed with the SEC, see "WHERE YOU CAN FIND MORE INFORMATION."
Pioneer's historical financial information for each fiscal year presented
was derived from the Pioneer historical consolidated financial statements, which
were audited by KPMG Peat Marwick LLP, independent certified public accountants.
DuPont's historical financial information for each fiscal year presented was
derived from the DuPont historical consolidated financial statements, which were
audited by PricewaterhouseCoopers LLP, independent accountants.
10
<PAGE>
PIONEER SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION. The table
below shows selected historical financial information about Pioneer. You should
read this information in conjunction with Pioneer's consolidated financial
statements, including the notes that are included with these consolidated
financial statements. In the opinion of Pioneer management, the unaudited
consolidated historical interim financial statements reflect all adjustments,
consisting of only normal recurring items, that are necessary for the fair
presentation of financial position and results of operations for those periods.
See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
---------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995 1994
--------- ----------- --------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Operations:
Net Sales....................................... $ 376 $ 381 $ 1,835 $ 1,784 $ 1,721 $ 1,532 $ 1,479
--------- ----------- --------- --------- --------- --------- ---------
Gross Profit.................................... $ 98 $ 111 $ 890 $ 867 $ 858 $ 760 $ 759
--------- ----------- --------- --------- --------- --------- ---------
Restructuring and Settlements................... $ -- $ -- $ -- $ -- $ -- $ -- $ 45
--------- ----------- --------- --------- --------- --------- ---------
Net Income (Loss)............................... $ (72) $ (56) $ 270 $ 243 $ 223 $ 183 $ 213
--------- ----------- --------- --------- --------- --------- ---------
Per Common Share Data:
Net Income (Loss)
Basic......................................... $ (0.30) $ (0.25) $ 1.13 $ 0.98 $ 0.89 $ 0.72 $ 0.80
Diluted....................................... $ (0.30) $ (0.25) $ 1.08 $ 0.98 $ 0.89 $ 0.72 $ 0.80
Growth in Earnings Per Share:
Basic......................................... N/A N/A 15.3% 10.1% 24.1% (10.0)% 56.9%
Diluted....................................... N/A N/A 10.2% 10.1% 24.1% (10.0)% 56.9%
Dividends Declared.............................. $ 0.20 $ 0.17 $ 0.37 $ 0.32 $ 0.28 $ 0.24 $ 0.20
Book Value...................................... $ 4.59 $ 4.72 $ 5.18 $ 4.65 $ 4.12 $ 3.65 $ 3.41
Balance Sheet Summary:
Current Assets.................................. $ 1,646 $ 1,858 $ 1,039 $ 901 $ 784 $ 770 $ 742
Net Property & Other Assets..................... 743 700 678 702 638 523 511
--------- ----------- --------- --------- --------- --------- ---------
Total Assets.................................. $ 2,389 $ 2,558 $ 1,717 $ 1,603 $ 1,422 $ 1,293 $ 1,253
--------- ----------- --------- --------- --------- --------- ---------
Current Liabilities............................. $ 961 $ 1,270 $ 345 $ 329 $ 288 $ 280 $ 232
Long-Term Debt.................................. 205 18 5 19 25 18 66
Other Long-Term Liabilities..................... 123 112 120 107 91 82 74
--------- ----------- --------- --------- --------- --------- ---------
Total Liabilities............................. $ 1,289 $ 1,400 $ 470 $ 455 $ 404 $ 380 $ 372
--------- ----------- --------- --------- --------- --------- ---------
Shareholders' Equity............................ $ 1,100 $ 1,158 $ 1,247 $ 1,148 $ 1,018 $ 913 $ 881
--------- ----------- --------- --------- --------- --------- ---------
Dividends Declared, Common...................... $ 48 $ 47 $ 83 $ 79 $ 69 $ 60 $ 52
Dividends Declared, Preferred................... $ -- $ -- $ 9 $ -- $ -- $ -- $ --
Average Shares Outstanding--Basic............... 239.8 220.5 231.5 246.9 249.5 253.5 265.9
Average Shares Outstanding--Diluted............. 239.8 220.5 250.3 247.5 249.8 253.5 265.9
</TABLE>
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<PAGE>
DUPONT SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION. The table
below shows selected historical financial information about DuPont. You should
read this information in conjunction with DuPont's consolidated financial
statements, including the notes that are included with these consolidated
financial statements. In the opinion of DuPont management, the unaudited
consolidated historical interim financial statements reflect all adjustments,
consisting of only normal recurring items, that are necessary for the fair
presentation of financial position and results of operations for these periods.
See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Operations:
Sales.......................... $ 6,295 $ 6,194 $ 24,767 $ 24,089 $ 23,644 $ 24,500 $ 22,518
--------- --------- --------- --------- --------- --------- ---------
Income from Continuing
Operations................... $ 628 $ 637 $ 1,648(a) $ 1,432(b) $ 2,931 $ 2,858 $ 2,205
--------- --------- --------- --------- --------- --------- ---------
Per Common Share Data:
Income from Continuing
Operations
Basic........................ $ 0.55 $ 0.56 $ 1.45(a) $ 1.26(b) $ 2.60 $ 2.43 $ 1.61
Diluted...................... $ 0.55 $ 0.55 $ 1.43(a) $ 1.24(b) $ 2.56 $ 2.41 $ 1.60
Dividends Declared............. $ 0.35 $ 0.315 $ 1.365 $ 1.23 $ 1.115 $ 1.015 $ 0.91
Book Value..................... $ 12.33 $ 10.11 $ 12.18 $ 9.77 $ 9.19 $ 7.28 $ 9.18
Balance Sheet Summary:
Total Assets................... $ 41,967 $ 39,797 $ 38,536 $ 36,689 $ 32,342 $ 32,748 $ 32,577
--------- --------- --------- --------- --------- --------- ---------
Long-Term Borrowings and
Capital Lease Obligations.... $ 4,566 $ 6,402 $ 4,495 $ 5,897 $ 5,052 $ 5,646 $ 6,338
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(a) 1998 results include a charge of $982 ($0.87 per share--basic; $0.86 per
share--diluted) for write-off of purchased in-process research and
development as required by FASB Interpretation No. 4, a charge of $350
($0.31 per share--basic and diluted) for certain productivity improvement
initiatives, and a gain of $121 ($0.11 per share--basic and diluted) from
sale of the company's interest in CONSOL Energy Inc.
(b) 1997 results include a charge of $1,466 ($1.30 per share--basic; $1.28 per
share--diluted) for write-off of purchased in-process research and
development as required by FASB Interpretation No. 4 and a charge of $220
($0.19 per share--basic and diluted) associated with divestiture of certain
printing and publishing businesses.
12
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA OF DUPONT
(Unaudited) (dollars in millions, except per share data)
The following table presents summary selected unaudited pro forma combined
statements of income and other financial data of DuPont. The information is
presented as if the acquisition of the remaining approximately 80 percent of
Pioneer had occurred as of the beginning of the period for the statements of
income and on March 31, 1999 for balance sheet and other financial data. The
unaudited pro forma data were prepared by DuPont to illustrate the estimated
effects on DuPont of:
- The disposition of Conoco through the exchange offer, the cash offer, and
the transactions directly associated with Conoco's initial public offering
and separation from DuPont, principally:
-- The Conoco exchange offer. On , 1999, DuPont acquired
XXX,XXX,XXX outstanding shares of DuPont common stock from United States
persons in exchange for XX,XXX,XXX shares of Conoco Class B common stock
owned by DuPont. For purposes of these unaudited pro forma combined
financial statements it is assumed, for illustrative purposes only, that
a maximum of 184.1 million shares of DuPont common stock are received in
the exchange offer.
-- The cash offer. On , 1999, DuPont acquired X,XXX,XXX
outstanding shares of DuPont common stock for $X,XXX from holders of
DuPont stock that were not United States persons. For purposes of these
unaudited pro forma combined financial statements it is assumed, for
illustrative purposes only, that a maximum of 11.8 million shares of
DuPont common stock were received in the cash offer.
-- Conoco's initial public offering. In October 1998, DuPont received the
$4,228 proceeds from Conoco's initial public offering in repayment of a
portion of Conoco's intercompany indebtedness to DuPont.
-- Conoco debt issuances. In April 1999, Conoco completed the sale of
senior debt securities, and DuPont received from Conoco the net proceeds
of $3,970 in repayment of a portion of Conoco's intercompany
indebtedness and accrued interest owed to DuPont. In May 1999, Conoco
issued commercial paper and DuPont received $1,022 in repayment of
Conoco's remaining intercompany indebtedness to DuPont.
- The acquisition of the remaining approximately 80 percent of Pioneer not
presently owned by DuPont, principally:
(1) The estimated purchase priced for Pioneer of $7,731, consisting of:
-- $3,425 representing cash payments for the purchase, at $40 per share, of
45 percent of the outstanding shares of Pioneer not presently owned by
DuPont;
-- $4,180 representing 59.5 million shares of DuPont stock, with an assumed
market value of $70.25 per share, to be issued in exchange for 55
percent of the outstanding shares of Pioneer not presently owned by
DuPont;
-- $76 representing 80 percent of the estimated fair value of options to
purchase DuPont common stock that are expected to be issued upon
consummation of the proposed acquisition in exchange for the outstanding
vested options to purchase Pioneer common stock under Pioneer's employee
stock option plan; and
-- $50 representing DuPont's estimated direct costs of acquisition;
(2) Under the purchase method of accounting, the identifiable assets
acquired and liabilities assumed are assigned a portion of the purchase
price, normally equal to their estimated fair values at the date of
acquisition. Any excess of the purchase price over the sum of the
13
<PAGE>
amounts assigned to identifiable assets acquired, less liabilities
assumed, is recorded as goodwill. Because DuPont already owns
approximately 20 percent of Pioneer, the historical Pioneer information
and the unaudited pro forma adjustments in the unaudited pro forma
combined balance sheet as of March 31, 1999 only reflect the
approximately 80 percent of Pioneer that DuPont is proposing to acquire.
(3) Amortization of purchase price over the estimated useful lives of
assets acquired and incremental interest expense associated with the
cash portions of the purchase price.
(4) The effect of non-recurring items, principally purchased in-process
research and development and the excess of estimated fair value over
Pioneer's historical cost of inventory.
See "FINANCIAL INFORMATION--Unaudited Pro Forma Combined Financial Statements of
DuPont" for additional information regarding these pro forma financial
statements.
The unaudited pro forma adjustments shown in the unaudited pro forma
combined income statements are based on estimates and assumptions that DuPont
believes are reasonable and factually supportable based on the information that
was available at the time these unaudited pro forma combined financial
statements were prepared. It is likely that the actual allocation of purchase
price will differ from the amounts included in these unaudited pro forma
combined financial statements. As such, it is also likely that the actual
amortization of fair values will differ from the amounts included in these
unaudited pro forma combined financial statements. The actual interest expense
incurred by DuPont to finance the cash portions of the purchase price will
depend on the amounts borrowed and interest rates in effect at the time the
proposed acquisition is consummated and thus may vary from the amounts shown in
the unaudited pro forma combined income statements. Similarly, the actual number
of shares of DuPont common stock issued to effect the acquisition will be
determined based on the average trading price of DuPont common stock over the
ten day trading period ending three trading days before the date of the special
meeting of Pioneer shareholders.
The unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred had the proposed
acquisition occurred on the dates assumed, nor is this information necessarily
indicative of actual future operating results or financial position that will
result after the proposed transaction is consummated. Specifically, unaudited
pro forma combined financial statements do not include future benefits or
synergies that are expected to result from the acquisition. In addition, the
unaudited pro forma combined provision for income taxes may not represent the
amounts that would have resulted had DuPont and Pioneer filed consolidated
income tax returns during periods presented.
On a combined basis, there were no material transactions between DuPont and
Pioneer during the periods presented. There are no material differences between
the accounting policies of DuPont and Pioneer.
In the unaudited pro forma combined financial data, DuPont's and Pioneer's
historical information was derived as follows:
For DuPont - from the historical consolidated financial statements of DuPont
for the year ended December 31, 1998, as included in DuPont's Form 10-K for the
year ended December 31, 1998, and for the three months ended March 31, 1999, as
included in DuPont's Form 10-Q for the period ended March 31, 1999.
For Pioneer - DuPont's fiscal year ends December 31. Pioneer's fiscal year
ends August 31. Because the two fiscal years end more than 93 days apart, it is
necessary to adjust Pioneer's historical consolidated income statement to an
annual basis that is within 93 days of DuPont's fiscal year-end. For the year
ending December 31, 1998, this was accomplished by subtracting Pioneer's
reported loss
14
<PAGE>
for the three month period September 1 to November 30, 1997 from the income
reported by Pioneer as included in its Form 10-K for its fiscal year ended
August 31, 1998 and adding Pioneer's reported loss for the three month period
September 1 to November 30, 1998 as included in Pioneer's Form 10-Q for the
three months ended November 30, 1998. For the three months and period ended
March 31, 1999, Pioneer's historical income statement and balance sheet
information are based on unaudited consolidated historical interim financial
statements as included in Pioneer's Form 10-Q for the three months ended
February 28, 1999.
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
UNAUDITED COMBINED AS OF
PRO FORMA AND FOR THE
COMBINED FOR THE THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA FOR DUPONT
Sales......................................................................... $ 26,619 $ 6,599
Other income.................................................................. 1,034 33
------- -------
Total....................................................................... 27,653 6,632
------- -------
------- -------
Cost of goods sold and other operating costs and expenses..................... 19,658 4,815
Selling, general and administrative expenses.................................. 2,673 650
Interest expense.............................................................. 727 168
Purchased in-process research and development and other charges............... 2,076 40
------- -------
Total....................................................................... 25,134 5,673
------- -------
Income from continuing operations before income taxes and minority
interests................................................................... $ 2,519 $ 959
Provision for income taxes.................................................... 901 394
Minority interests in earnings of consolidated subsidiaries................... 27 16
------- -------
Income from continuing operations............................................. $ 1,591 $ 549
------- -------
------- -------
Earnings per share--continuing operations
Basic....................................................................... $ 1.59 $ 0.55
Diluted..................................................................... $ 1.57 $ 0.55
Weighted average number of shares outstanding:
Basic....................................................................... 992 991
Diluted..................................................................... 1,009 1,002
OTHER FINANCIAL DATA FOR DUPONT
Cash and cash equivalents................................................... $ 1,182
Working capital (deficit)................................................... (2,225)
Property, plant and equipment--net.......................................... 15,545
Total assets................................................................ 40,926
Long-term borrowings and capital lease obligations.......................... 4,771
Minority interests.......................................................... 470
Stockholders' equity........................................................ 11,234
</TABLE>
15
<PAGE>
COMPARATIVE PER SHARE UNAUDITED PRO FORMA DATA
Presented below are the earnings, dividends and book value per common share
data for Pioneer on a historical and pro forma equivalent basis and for DuPont
on a historical and a pro forma combined basis. The pro forma equivalent data is
based on an assumed exchange ratio of .569395 share of DuPont common stock for 1
share of Pioneer common stock times the unaudited pro forma combined per common
share data. The exchange ratio was calculated using an assumed price of $70.25
per share for DuPont common stock which is the same assumed price used to
prepare the unaudited pro forma combined financial statements of DuPont
($40/$70.25 = .569395). We combined Pioneer historical financial information and
unaudited pro forma consolidated financial information of DuPont using the
purchase method of accounting for business combinations. See "Unaudited Pro
Forma Combined Financial Data" on page .
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS YEAR ENDED
FEBRUARY 28, 1999 ENDED AUGUST 31, 1998
------------------------ FEBRUARY 28, 1999 ------------------------
EQUIVALENT ----------------- EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL HISTORICAL PRO FORMA
----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PIONEER--HISTORICAL AND EQUIVALENT PRO FORMA
Diluted Earnings per common share............... $ 0.01 $ 0.31 $ (0.30) $ 1.08 $ 0.89
Cash Dividends declared per common share........ $ 0.10 $ 0.20 $ 0.20 $ 0.37 $ 0.78
Book Value per common share..................... $ 4.59 $ 6.32 $ 4.59 $ 5.18 N/A
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------------ ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
DUPONT--HISTORICAL AND COMBINED
PRO FORMA
Diluted Earnings per common share............... $ 0.55 $ 0.55 $ 1.43 $ 1.57
Cash Dividend declared per common share......... $ 0.35 $ 0.35 $ 1.365 $ 1.365
Book Value per common share..................... $ 12.33 $ 11.10 $ 12.18 N/A
</TABLE>
MARKET PRICES AND DIVIDENDS INFORMATION
Both Pioneer and DuPont list their common stock on the New York Stock
Exchange under the symbols "PHB" and "DD." The following table shows the range
of the high and low sale prices of shares of Pioneer common stock and DuPont
common stock, as reported on the New York Stock Exchange Composite Transactions
Tape for each quarterly period during the last two years. DuPont's fiscal year
is the same as the calendar year. Pioneer's fiscal year is from September 1 to
August 31. Accordingly, the prices for each of the fiscal quarters shown below
do not cover the exact same dates for DuPont and Pioneer. Pioneer has paid a
$0.10 dividend for the first three quarters for the fiscal year ending August
31, 1999 and during the fourth quarter for the fiscal year ended August 31, 1998
and has declared a $0.10 dividend payable July 9, 1999 for Pioneer's third
quarter ended May 31, 1999. Pioneer has paid a $0.08667 dividend during the
first three quarters for the fiscal year ended August 31, 1998 and during the
fourth quarter for the fiscal year ended August 31, 1997. For the first three
quarters for the fiscal year ending August 31, 1997, Pioneer paid a $0.077
dividend. The merger agreement prohibits Pioneer from paying any dividends other
than our regular quarterly dividends until the merger is completed. DuPont has
paid a $0.35 dividend during each of the last three quarters of
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<PAGE>
the fiscal year ended December 31, 1998 and for the first quarter of the fiscal
year ended December 31, 1999, and a $0.315 dividend during each of the last
three quarters of the fiscal year ended December 31, 1997 and a $.285 dividend
during the first quarter of such fiscal year.
All information takes into account the DuPont two-for-one stock split in
April 1997 and the Pioneer three-for-one stock split in April 1998.
<TABLE>
<CAPTION>
PIONEER COMMON STOCK
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
PIONEER
1997:
First Fiscal Quarter................................................................. -- --
Second Fiscal Quarter................................................................ $ 24.208 $ 20.083
Third Fiscal Quarter................................................................. 24.500 19.250
Fourth Fiscal Quarter................................................................ 31.333 23.000
1998:
First Fiscal Quarter................................................................. 34.708 28.479
Second Fiscal Quarter................................................................ 36.229 32.667
Third Fiscal Quarter................................................................. 42.688 32.500
Fourth Fiscal Quarter................................................................ 41.750 30.688
1999:
First Fiscal Quarter................................................................. 34.813 22.125
Second Fiscal Quarter................................................................ 30.385 23.063
Third Fiscal Quarter................................................................. 38.750 20.625
</TABLE>
<TABLE>
<CAPTION>
DUPONT COMMON STOCK
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
DUPONT
1997:
First Fiscal Quarter................................................................. $ 57.625 $ 46.375
Second Fiscal Quarter................................................................ 62.875 49.750
Third Fiscal Quarter................................................................. 69.750 60.688
Fourth Fiscal Quarter................................................................ 64.938 50.188
1998:
First Fiscal Quarter................................................................. 70.438 52.625
Second Fiscal Quarter................................................................ 84.438 67.125
Third Fiscal Quarter................................................................. 79.500 52.250
Fourth Fiscal Quarter................................................................ 66.500 51.688
1999:
First Fiscal Quarter................................................................. 60.125 50.063
Second Fiscal Quarter................................................................ 74.875 58.250
</TABLE>
17
<PAGE>
RISK FACTORS
You should consider the following matters in deciding whether to vote in
favor of the merger. You also should consider the other information included and
incorporated by reference in this document.
SINCE THE EXCHANGE RATIO WILL BE FIXED THREE DAYS PRIOR TO THE SPECIAL MEETING,
AND THE CLOSING OF THE MERGER WILL NOT OCCUR UNTIL AFTER THE SPECIAL MEETING,
YOU CANNOT BE SURE OF THE VALUE OF THE DUPONT COMMON STOCK YOU WILL RECEIVE ON
THE CLOSING DATE.
- The exchange ratio will be determined three trading days prior to the
shareholders meeting by using the average closing prices for the
10-trading day period preceding , 1999. As a result, if you
elect in the merger to receive DuPont common stock for any of your shares
of Pioneer common stock, the value of the DuPont common stock received by
you on the closing date may be greater or less than $40.
THE CLOSING OF THE MERGER COULD BE DELAYED UNTIL SUBSTANTIALLY AFTER THE SPECIAL
MEETING.
- The merger agreement requires the merger to be completed as soon as
possible after our shareholders approve the merger at the special meeting.
Accordingly, we expect the merger to close on or about , 1999.
However, although we do not expect this to occur, one or more of the other
conditions for completion of the merger, may not be satisfied at that
time. In that case, the closing of the merger could be delayed up until
December 1, 1999 in order to satisfy those conditions. Under limited
circumstances, Pioneer and DuPont may have an additional period of time
after December 1, 1999 to satisfy conditions in order to close the merger.
YOU MAY NOT RECEIVE THE FORM OF CONSIDERATION THAT YOU HAVE ELECTED.
- Your ability to receive either DuPont common stock worth $40 or $40 in
cash for each share of Pioneer common stock you own is subject to the
limitation that 45 percent of the aggregate consideration paid by DuPont
will be in the form of cash and the remaining 55 percent will be in the
form of DuPont common stock. Holders who exercise dissenting rights for
their shares of Pioneer common stock will be treated as having made a cash
election. If proration results, you may not necessarily receive the type
of consideration specified in your election. See "THE MERGER--Merger
Consideration."
IT IS POSSIBLE THAT DUPONT'S OR PIONEER'S TAX COUNSEL WILL BE UNABLE TO DELIVER
A TAX OPINION TO THE EFFECT THAT THE MERGER WILL QUALIFY AS A REORGANIZATION
WITHIN THE MEANING OF SECTION 368(A) OF THE INTERNAL REVENUE CODE AND THE MERGER
WILL NOT CLOSE.
- It is a condition to each of DuPont's and Pioneer's obligation to
consummate the merger that its respective tax counsel deliver an opinion
to the effect that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. In the event
DuPont's or Pioneer's tax counsel is unable to deliver such tax opinion,
including, as a result of a significant decrease in the value of DuPont
common stock after the exchange rate is set and prior to the closing, such
party will have the right not to proceed to close the merger. See "Special
Factors--U.S. Federal Income Tax Consequences" for a general discussion of
the material U.S. federal income tax consequences of the merger.
18
<PAGE>
DUPONT MAY BE PERCEIVED TO HAVE AN ADVANTAGE OVER THIRD PARTIES WHO ALSO MIGHT
BE INTERESTED IN ACQUIRING US, AND THEREFORE THESE THIRD PARTIES MAY BE
DISCOURAGED FROM CONTACTING US OR NEGOTIATING WITH US REGARDING POSSIBLE
TRANSACTIONS THAT COULD BE SUPERIOR FROM A FINANCIAL VIEWPOINT TO THE PIONEER
SHAREHOLDERS THAN THE MERGER WITH DUPONT.
The following factors may discourage other companies from trying to or
proposing to combine with us:
- The merger agreement with DuPont does not permit us to solicit an
alternative proposal from third parties. However the merger agreement does
permit us to respond to an unsolicited inquiry, indication of interest or
proposal relating to an offer that provides to Pioneer shareholders a
greater value than the DuPont transaction and if the Pioneer board of
directors determines it is required by its fiduciary obligations to do so.
We are, however, required to promptly inform DuPont if we engage in
substantive discussions with a third party. The merger agreement does not
require us to tell DuPont the identity of the third party or the terms of
any third party proposal.
- Pioneer's unilateral right to terminate the merger agreement to accept a
superior proposal from a third party expired on April 29, 1999. However,
after that date, a third party could still make a proposal that might
cause our shareholders to fail to approve the merger at the special
meeting. In that case, either DuPont or Pioneer could terminate the merger
agreement after the special meeting was held. In addition, if Pioneer
ceases to recommend approval to its shareholders, DuPont may terminate the
merger agreement.
- Because DuPont already owns 20 percent of our common stock, it would be
less expensive for DuPont to increase the consideration it was willing to
pay for the remaining 80 percent of Pioneer as compared to what a third
party would have to pay to acquire 100 percent of Pioneer.
- The investment agreement between the parties also contains certain
provisions that may discourage other companies from seeking to acquire or
combine with us. Most importantly, if a third party acquires us, DuPont
has the option to purchase our interest in our Optimum joint venture for
fair market value as determined by an independent investment banking firm.
If DuPont purchases our interest in Optimum, DuPont would also have the
right to require Pioneer to continue to be the worldwide marketer of
quality trait seed. Pioneer, however, would have access to Optimum's
technology to sell quality trait seed. See "Special Factors-- Background."
- If Pioneer terminates the merger agreement in order to accept a superior
proposal or if DuPont terminates because Pioneer's board has ceased to
recommend the merger or in other circumstances generally involving third
party offers, the parties' investment agreement terminates, other than
DuPont's rights described immediately above.
EXECUTIVE OFFICERS AND DIRECTORS OF PIONEER ARE COVERED BY AGREEMENTS AND OTHER
ARRANGEMENTS THAT MAY CREATE POTENTIAL CONFLICTS OF INTEREST WITH PIONEER
SHAREHOLDERS REGARDING THE MERGER.
- When considering the recommendation of the board of directors of Pioneer,
you should be aware that executive officers and directors of Pioneer have
interests in the merger that are different from yours. These interests may
create potential conflicts of interest. Our board of directors was aware
of these potential conflicts of interest when it approved the merger. See
"SPECIAL FACTORS--Interests of Members of Pioneer's Board of Directors and
Management in this Merger."
19
<PAGE>
DUPONT MAY BE INVOLVED IN FUTURE ACQUISITIONS AND OTHER TRANSACTIONS.
DuPont, in the ordinary course and on a regular basis, engages in
discussions with other companies in the industries in which it operates
concerning possible acquisitions, mergers, divestitures, joint ventures,
research alliances and other similar types of transactions. These types of
transactions are often dilutive to earnings, particularly on a pro forma basis
and in the early years following their completion. Historically, while a number
of such discussions have resulted in announced or completed transactions, in
many instances either or both parties involved determined not to proceed with a
transaction, whether through lack of interest, inability to reach agreement, or
otherwise. DuPont is currently engaged in such discussions in a number of
different areas with other companies and, in this regard, announced at its
Annual Meeting of Stockholders in April 1999 that it would seek to enter into an
alliance to strengthen its pharmaceutical business. No assurances can be given,
however, that any such discussions will result in any announced or completed
transaction. Conversely, it is also possible that such discussions or any
discussions that might occur in the future could result in a transaction which
might be material to DuPont.
THE VALUE OF DUPONT STOCK MAY BE AFFECTED BY DUPONT'S TRACKING STOCK PROPOSAL.
DuPont has recently announced that the DuPont board has authorized DuPont's
preparations for the issuance of a "tracking" stock for its life sciences
businesses. DuPont's shareholders must approve an amendment to DuPont's
certificate of incorporation to create the tracking stock. DuPont may, however,
decide to delay issuing the tracking stock or ultimately determine not to issue
the tracking stock, or the DuPont shareholders may not approve the amendment to
the certificate of incorporation. The status of DuPont's tracking stock proposal
may affect the value of DuPont's stock.
20
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
If we can meet the terms and conditions of the merger agreement, Pioneer
will merge with and into Delta Acquisition Sub, which will then change its name
to Pioneer and continue to be a wholly owned subsidiary of DuPont. In the
merger, each share of Pioneer common stock issued and outstanding immediately
before the merger will be converted, at the election of the Pioneer shareholders
and subject to proration, into (a) a fraction of a share of DuPont common stock
with a value of $40 based on the average trading price of such shares shortly
prior to the special meeting or (b) $40 in cash. You are urged to read the copy
of the merger agreement which is attached to this document as APPENDIX A.
At the Pioneer special meeting, shareholders of Pioneer will vote on a
proposal to approve and adopt the merger agreement and approve the merger.
THE PIONEER BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF PIONEER VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
THE AFFIRMATIVE VOTE OF THE HOLDERS ENTITLED TO EXERCISE A MAJORITY OF THE
VOTES ATTRIBUTABLE TO THE OUTSTANDING SHARES OF PIONEER COMMON STOCK IS REQUIRED
TO APPROVE THE MERGER.
Only holders of record of shares of Pioneer common stock at the close of
business on , 1999 will be entitled to receive notice of and vote at the
Pioneer special meeting. As of June 22, 1999, there were 239,470,394 shares of
Pioneer common stock entitled to vote. The exact number of votes which the
holders of the outstanding shares of Pioneer common stock will be entitled to
cast at the special meeting cannot be determined at the date of this proxy
statement/prospectus because a shareholder of Pioneer common stock has until
, 1999, to establish, in accordance with the procedures set out in
APPENDIX E, that the shareholder is entitled to more votes than indicated on the
shareholder's proxy. Holders of shares of Pioneer common stock entitled to vote
representing a majority of the outstanding votes, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Pioneer special meeting.
Under Pioneer's articles of incorporation, each share of common stock
beneficially continuously owned by the same person since , 1996 can
cast five votes per share. All other shares carry one vote per share. APPENDIX E
to this proxy statement/prospectus outlines the procedures for determining when
changes in beneficial ownership are deemed to occur.
On June 22, 1999, Pioneer directors and executive officers and their
affiliates were deemed to beneficially own 4,469,434 shares of Pioneer common
stock, excluding all shares which may be acquired upon exercise of options. This
is approximately 2 percent of the then outstanding shares of Pioneer common
stock. Each of the directors and executive officers of Pioneer has indicated
that he or she intends to vote these shares for approval and adoption of the
merger agreement and approval of the merger. DuPont has agreed in the merger
agreement to vote the 20 percent voting power attributable to the common stock
owned by DuPont in favor of the merger.
We will have a list of Pioneer shareholders entitled to vote at the Pioneer
special meeting available during normal business hours at the offices of
Pioneer, 800 Capital Square, 400 Locust Street, Des Moines, Iowa 50309 beginning
on the date of [two days after notice of meeting] until and during the meeting.
HOW SHARES WILL BE VOTED AT THE SPECIAL MEETING
The affirmative vote of the holders entitled to exercise a majority of the
votes attributable to the outstanding shares of Pioneer common stock is required
for approval of the merger. If you abstain or
21
<PAGE>
fail to vote your shares, it will have the same effect as voting against the
merger. Shares represented by a proxy will be voted at the special meeting as
specified in the proxy. Properly executed proxies that do not contain voting
instructions will be voted "FOR" approval and adoption of the merger agreement
and approval of the merger.
We will count properly executed proxies marked "Abstain" for purposes of
determining whether there is a quorum. However, the shares that any of these
proxies represent will not be voted at the special meeting and therefore will
have the same effect as a vote against the merger.
Under New York Stock Exchange rules, your broker cannot vote your shares of
Pioneer common stock without specific instructions from you. Unless you follow
the directions your broker provides to you regarding how to instruct your broker
to vote your shares, your shares will not be voted.
HOW TO REVOKE A PROXY
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person or otherwise revoking your proxy.
You may revoke a proxy previously given by you at any time before the
special meeting by delivering a duly executed revocation or a proxy bearing a
later date to [insert name, title,] 800 Capital Square, 400 Locust Street, Des
Moines, Iowa 50309 or to [insert name, title] Equiserve at BankBoston, c/o
Boston Equiserve, P.O. Box 8040, Boston, MA 02266-8040.
In addition, you may revoke your proxy by voting your shares in person at
the Pioneer special meeting.
SOLICITATION OF PROXIES
We will pay the cost of soliciting proxies from you. We will also pay the
cost of printing and mailing this document. In addition to solicitation by mail,
our directors, officers and employees may solicit proxies from you by telephone,
in person or through other means. We will not compensate these people for this
solicitation, but we will reimburse them for reasonable out-of-pocket expenses
they have in connection with this solicitation. We will also arrange for
brokerage firms, fiduciaries and other custodians to send solicitation materials
to the beneficial owners of shares held of record by those persons. We will
reimburse these brokerage firms, fiduciaries and other custodians for their
reasonable out-of-pocket expenses. will assist in the solicitation
of proxies by Pioneer for a fee of $ , plus reimbursement of reasonable
out-of-pocket expenses. We will indemnify our proxy solicitor against specific
liabilities and expenses, including liabilities and expenses under the federal
securities laws.
We have retained [ ] as information agent to
asist you in connection with the merger. Pioneer stockholders may call
[ ] at - - (toll free) in the United States or Canada or at
- - (collect) elsewhere to request additional documents and to ask any
questions.
22
<PAGE>
THE COMPANIES
PIONEER
The business of Pioneer is the broad application of the science of genetics.
Founded in 1926 to apply then newly-discovered genetic techniques to hybridize
corn, Pioneer has been the industry leader in research and product development
for more than 70 years. Pioneer owns what it believes to be the industry's
finest collection of crop genetics (germplasm), which has been the key to the
company's success in the past and is expected to be the key to its success in
the future. Pioneer's research and development is focused on improving the
germplasm base by integrating new technology essential to crop genetic
improvements. Pioneer was the first commercial seed company to undertake
collaborations on a wide scale with other organizations and scientists
throughout the world to improve core germplasm and better understand crop
genetics.
We have traditionally maintained our approach of maintaining the
independence of our company. Since 1985, our articles of incorporation has
included special voting rights that give Pioneer shareholders who have
continuously held their shares for three years five votes per share, as compared
to one vote per share for all other short-term shareholders. Jean Wallace
Douglas and Robert B. Wallace, descendants of Henry Wallace, Pioneer's founder,
own approximately 14.1 percent of our common stock and because of their
long-term ownership, an even larger percentage of the company's voting power. We
also have a board of directors classified into three groups with each group
being elected every three years. In 1989, we adopted a shareholder rights plan
designed to make it prohibitively expensive for a shareholder to accumulate a
large potentially controlling block without first coming to our board, who can
protect the interests of all our shareholders.
We have long recognized, notwithstanding the fact that we have the largest
internal research organization in the seed business, that we could not rely
solely on the efforts of our own scientists. We have aggressively sought to
expand our research and development collaborations with others. Currently,
Pioneer manages more than 2,000 research agreements. Over 200 of these
agreements are collaborations with entities specializing in technology that can
help improve our core germplasm base. The remainder are focused on building
extensive relationships with scientists throughout the world to improve research
in other areas. Pioneer believes that its research collaborations improve its
ability to deliver improved products. Pioneer emphasizes research for improving
the profitability of farmers through both agronomic and end-use grain
improvements. Agronomic traits increase crop yield or reduce growers' costs.
Pioneer delivers such improvements as increased bushels per acre and increased
resistance to insects, diseases and herbicides. End-use grain improvement is an
area of increasing importance. Pioneer expects to experience increasing demand
from end users such as livestock feeders, grain processors, food processors, and
others for specific qualities in the crops they use as an input in developing
other products. We significantly expanded our capabilities in end-use traits in
1997 when we entered into our strategic alliance with DuPont. We had concluded
that DuPont would be an ideal partner for us because of its leadership in
research and development in the life sciences and our common culture and
corporate philosophy.
Our partnership includes the agricultural industry's broadest research
alliance as well as our Optimum joint venture. Optimum seeks to create, maximize
and capture value for quality traits in seed, grain, grain products and plant
materials delivered through corn, soybeans and other selected oil seeds. A key
component of this joint venture is a preferred seed support agreement between
the joint venture and us. The joint venture is not in the seed business and will
look to us to be its preferred worldwide provider and preferred marketer of
quality trait seeds.
DUPONT
DuPont is a world leader in science and technology in a range of
disciplines, including high-performance materials, specialty chemicals,
pharmaceuticals and biotechnology. DuPont has a
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portfolio of 2,000 trademarks and brands, including such well-known consumer
brands as Lycra-Registered Trademark-, Teflon-Registered Trademark-,
Stainmaster-Registered Trademark-, Kevlar-Registered Trademark-,
Nomex-Registered Trademark-, Tyvek-Registered Trademark-,
Dacron-Registered Trademark-, Cordura-Registered Trademark-,
Corian-Registered Trademark-, SilverStone-Registered Trademark-, and
Mylar-Registered Trademark-. DuPont operates 200 manufacturing and processing
facilities in 65 countries worldwide.
DuPont presents its results in eight reportable segments--Agriculture &
Nutrition, Nylon Enterprise, Performance Coatings & Polymers, Pharmaceuticals,
Pigments & Chemicals, Polyester Enterprise, Specialty Fibers, and Specialty
Polymers. The balance of DuPont's continuing operations is reported in an Other
segment and consists of DuPont's photomasks, safety resources and global
services businesses, and certain divested businesses of printing and publishing,
medical products and coal. Prior to , 1999, DuPont also had petroleum
operations conducted through Conoco, which were reported in DuPont's financial
statements as discontinued operations. DuPont and its subsidiaries, excluding
Conoco Inc., employ approximately 92,000 people worldwide and have annual
revenues of approximately $25 billion.
On , 1999, DuPont commenced an exchange offer to implement the second
step of its previously announced plan to establish Conoco Inc. as a fully
independent company. Pursuant to the exchange offer, DuPont offered its holders
of DuPont stock who are United States persons an opportunity to exchange on a
tax-free basis some or all of their DuPont common stock for shares of Conoco
Class B common stock. Pursuant to the exchange offer, DuPont stockholders who
elected to participate received shares of Conoco Class B common stock for
each DuPont share tendered. DuPont accepted an aggregate of DuPont shares
under the exchange offer. In connection with the exchange offer, DuPont also
commenced a cash tender to acquire DuPont shares for $ in cash from
holders of DuPont stock who are non-United States persons. The terms and
conditions of the exchange offer and cash tender offer were described in the
public filings of DuPont. See also "WHERE YOU CAN FIND MORE INFORMATION" for
more information.
The Conoco exchange offer and related cash tender offer were completed on
, 1999. Accordingly Pioneer shareholders will not have the ability to
participate in such offers.
On March 10, 1999, DuPont announced the proposed creation of a "tracking
stock" for its life sciences businesses. The amendment of DuPont's certificate
of incorporation to create this tracking stock, which is intended to provide
investors an opportunity to invest in a security the terms of which more closely
track the economic performance of DuPont's life sciences businesses, must be
approved by DuPont stockholders. If the tracking stock is issued, the existing
DuPont common stock is expected to more closely mirror the performance of its
businesses other than life sciences. In February 1999, the Clinton
Administration proposed changes to the federal income tax laws, as part of its
budget package, that, if enacted, could adversely affect the tax consequences
relating to the issuance of tracking stock, and, as a result, could adversely
affect DuPont's plan to issue the tracking stock for its life sciences
businesses. It is presently unclear whether this proposal will be enacted into
law and, if so, what form it would take.
As of December 31, 1998, Wilmington Trust Corporation, Wilmington, Delaware,
beneficially owned an aggregate of 75,717,172 shares of DuPont's common stock,
or 6.6 percent of the DuPont shares outstanding at the time. The shares held by
Wilmington Trust are held of record for trust, estate, custody or agency
accounts and at December 31, 1998 included 14,167,867 shares held in the DuPont
Flexitrust, a trust created by DuPont to satisfy obligations of DuPont under
various employee benefit and compensation plans. Based on public filings, there
is no reported stockholder that owns five percent or more of either series of
DuPont preferred stock.
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SPECIAL FACTORS
BACKGROUND OF THE MERGER
As part of our 1997 partnership, DuPont bought an equity interest in Pioneer
consisting of 164,445.86 shares of voting preferred stock for $1.71 billion.
These preferred shares represented approximately 16.7 percent of our common
equity and voting power at the time of purchase. DuPont bought these shares at a
per share common equivalent price, taking into account our 1998 three-for-one
stock split, of approximately $35 per share. This price represented a 37 percent
premium over the trading price of our common stock before that investment was
announced. In accordance with the 1997 agreement, Pioneer used approximately
$1.52 billion of the proceeds from the DuPont investment to purchase, at
approximately $31 per share, approximately 49.4 million shares of Pioneer's
outstanding common stock (taking into account the stock split) through a Dutch
auction self-tender. After completion of our self-tender, DuPont held
approximately 20 percent of Pioneer's equity and voting power. In accordance
with the 1997 agreement, DuPont's preferred shares were reclassified in 1998
into 49,333,758 shares of a new class B common stock of Pioneer with the same
economic and voting rights as the preferred shares.
Although closely aligned with DuPont, we also maintained our policy of
independence. Under the terms of the investment agreement, DuPont has the right
to nominate two directors to the Pioneer board. Charles O. Holliday, Jr.,
Chairman and Chief Executive Officer of DuPont and William F. Kirk, a Senior
Vice President of DuPont, are DuPont's representatives on our current 14-member
board. Our board also includes two members of Pioneer senior management, Charles
S. Johnson, President and Chief Executive Officer of Pioneer and Jerry Chicione,
the Chief Operating Officer of Pioneer. The remainder of our 14 member board
consists of outside directors. The investment agreement also includes a 16-year
standstill that prohibits DuPont, without our board's consent, from buying or
offering to buy additional shares of Pioneer and from taking any other action,
including making public proposals, to acquire us or to seek control of Pioneer
or its management, board or policies. DuPont is prohibited until September 2000
from disposing of the Pioneer stock it currently owns except by way of a pro
rata dividend to DuPont's stockholders. DuPont's standstill obligations remain
in effect even if a third party attempts, or makes a proposal, to acquire us.
Pioneer made commitments concerning a change in control of our company,
including, among other things:
- to give DuPont notice, including as to the material terms thereof, before
entering into an agreement that would result in a change in control;
- to give DuPont a fair and equal opportunity, as determined by our board,
to participate in any bidding process leading up to a change in control,
and the right to submit a competing proposal; and
- to give DuPont, if a change in control occurs, the right to buy our
interest in Optimum at its fair market value, as determined by an
independent investment banker. If DuPont bought our interest in Optimum,
DuPont would also have the right to require Pioneer to continue to be the
worldwide marketer of quality trait seed. Pioneer would have access to
Optimum's technology to sell quality trait seed.
In the 18 months since the first transaction, the spirit of collaboration
between the research departments of Pioneer and DuPont has confirmed our view
that DuPont and Pioneer share a common culture and commitment to maintaining
leadership in the marketplace through long-term investment in research. Our
joint venture requires that major policy decisions be approved by both
organizations. We have had some disagreements with DuPont as to how the
potential costs and value of business opportunities should be allocated between
us. We saw that this could result in slowing the process of developing and
bringing new products to the market. Accordingly, both Pioneer and DuPont see
greater potential value in our joint venture particularly if these operating and
decision-making
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inefficiencies can be eliminated or minimized. The parties have had, and
continue to have, discussions as to the best ways to accomplish this. Both
parties believe that consummation of the merger will eliminate or minimize these
areas of disagreement.
There have also been significant changes and consolidation in the
agricultural seed industry and life sciences generally and with respect to our
company. Our competitors are growing by acquisition and are themselves aligning
with or being acquired by other chemical, pharmaceutical and life sciences
companies of significant size. For instance, Monsanto has committed substantial
funds to acquire assets in the agricultural seed industry. The changing
landscape makes it imperative that Pioneer accelerate the pace at which we bring
our products to the market. Therefore, Pioneer accelerated its research spending
and anticipated even further increases to remain competitive. In addition, in
the wake of these consolidations over the past 18 months, some of our
competitors have initiated unusually aggressive pricing and free seed programs
which have constrained our ability to increase profit margins. Pioneer
understood that it had to be even more effective than other companies because
its opportunity to capture value was primarily limited to seed. As part of our
continuing efforts to enforce our intellectual property rights, we initiated
lawsuits in the fall of 1998 alleging that Cargill Inc. and the DeKalb and
Asgrow subsidiaries of Monsanto have misappropriated Pioneer genetics.
Against this general background, Pioneer internally discussed and
reconsidered its strategy of maintaining independence versus other alternatives.
Also, during the approximately 18 months since Pioneer and DuPont formed their
joint venture and entered into their other arrangements, the two companies have
had numerous discussions concerning other possible collaborative efforts.
Discussions between Pioneer and DuPont regarding the possibility of combining
our two companies arose early in 1999. On January 4, 1999, Messrs. Holliday and
Kirk met with Messrs. Johnson and Chicoine. Mr. Holliday indicated that DuPont
was considering expanding its presence in the life sciences and pharmaceutical
industries and was reviewing a number of possible significant acquisitions and
business combinations. Mr. Holliday also indicated that DuPont was considering
the possibility of issuing tracking stock to permit DuPont shareholders to
realize greater value inherent in this segment of DuPont's business. Mr.
Holliday then mentioned that DuPont had engaged in discussions with Monsanto
regarding a possible business combination of Monsanto and DuPont. Given
Pioneer's relationship with Monsanto, Mr. Holliday believed it was incumbent
upon him to let Pioneer know of DuPont's plans in this regard so that Pioneer
and DuPont could mutually decide on the course of DuPont's future relationship
with Pioneer if DuPont were to effect a transaction with Monsanto. Mr. Holliday
also informed Mr. Johnson that Monsanto was aware that he was going to raise
this issue with Mr. Johnson. Mr. Holliday indicated DuPont's preference to keep
its relationship with Pioneer intact in some fashion rather than end the
alliance. Mr. Johnson responded that he needed more time to think through the
potential issues.
On January 6, 1999, Mr. Holliday and Mr. Johnson met. The purpose of this
meeting was to discuss Pioneer's reaction to the January 4, 1999 discussion. Mr.
Johnson stated that if DuPont proceeded to combine with Monsanto, the
relationship between DuPont and Pioneer would likely be negatively affected.
First, Mr. Johnson shared his view of the potential difficulties in DuPont
receiving regulatory clearance for the combination with Monsanto unless DuPont
divested its ownership interest in Pioneer or otherwise took actions necessary
to satisfy regulators. Second, although Pioneer would continue to have
substantial rights to a broad research alliance with DuPont in light of Monsanto
being a part of the DuPont corporate family, the spirit of cooperation that was
essential to such alliance would in Mr. Johnson's judgment undoubtedly be lost.
This was not only because Monsanto is a competitor, but also because Pioneer,
through its substantial genetics misappropriation litigation against Monsanto's
seed subsidiaries, would be litigating against its partner. In addition,
Monsanto, through its subsidiaries, has certain litigation pending against
Pioneer. It was suggested that the prospects would likely be unworkable for both
Pioneer and DuPont. As an alternative to the termination of their relationship,
Mr. Johnson suggested the possibility, that, before combining with Monsanto,
DuPont first
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acquire the remaining interest in Pioneer not owned by DuPont. Mr. Johnson said
that any business combination between DuPont and Pioneer must recognize the full
value inherent in Pioneer and that, on a very preliminary basis, he was
considering prices in the range of twice the current market (which was then
approximately $30 per share). Mr. Holliday indicated if that course was pursued,
it would be important to DuPont to maintain the continuity in the management and
workforce of Pioneer.
On the following day, January 7, 1999, Mr. Holliday called Mr. Johnson and
expressed DuPont's interest in pursuing discussions to determine the feasibility
of a business combination in which DuPont would acquire the remaining 80 percent
of Pioneer not owned by DuPont.
On January 13, 1999, Mr. Holliday and other senior executives of DuPont met
with Messrs. Johnson, Chicoine and other senior executives of Pioneer to discuss
the timing of a possible transaction between DuPont and Pioneer and its
connection to any possible transaction between DuPont and Monsanto. Because of
the uncertainty resulting from regulatory concerns and relating to the existing
litigation with Monsanto, Pioneer indicated that it would be opposed to DuPont
effecting a business combination with Monsanto first and then seeking to
negotiate and obtain the requisite approvals for a subsequent transaction with
Pioneer. Mr. Holliday stated that while DuPont wished to resolve Pioneer's
concerns regarding DuPont's interest in Monsanto, DuPont needed to quickly reach
a resolution with Pioneer both as to the feasibility of a mutually acceptable
transaction between them and as to Pioneer's position with respect to its DuPont
relationship if no such transaction were agreed to. If no transaction with
Pioneer was to be effected, DuPont wanted to be in a position to pursue one or
more alternative transactions in the life sciences industry, including possibly
with Monsanto. Mr. Holliday also informed Mr. Johnson that he had made Monsanto
aware of his discussions with Mr. Johnson concerning a possible transaction
between DuPont and Pioneer.
On January 18 and 20, 1999, Mr. Holliday and Mr. Johnson discussed several
issues relating to a potential transaction, including Mr. Johnson's view that
DuPont common stock be used, at least in part, to achieve favorable tax
treatment. Mr. Holliday also emphasized that it was important to DuPont if a
business combination were to occur to preserve the continuity of Pioneer
management and workforce following any possible acquisition and indicated that
he intended to keep the Pioneer franchise and operations essentially intact and
headquartered in Des Moines.
On January 22, 1999, Pioneer discussed the possible transaction with Lazard
Freres, its outside financial advisors, and Fried, Frank, Harris, Shriver &
Jacobson, its outside legal advisors.
On January 24, 1999, Mr. Holliday and Mr. Johnson met. Mr. Holliday again
emphasized the importance to DuPont of continuity in the Pioneer management and
workforce, including keeping Mr. Johnson in place as the head of Pioneer at
least until Mr. Johnson's planned retirement in 2004. Mr. Holliday indicated his
view that Mr. Johnson would report directly to Mr. Holliday and be a part of
DuPont's Office of Chief Executive. Mr. Johnson felt that with appropriate
management retention arrangements in place, DuPont could retain a significant
number of Pioneer's senior executives and key employees to assure the continuity
of Pioneer's business franchise. The key to these arrangements would be to
ensure that these employees would receive at least the same benefits if they
stayed with DuPont over a one to three year period following the merger that
they would have been entitled to receive under their existing severance
benefits. Mr. Holliday then discussed that, in terms of price, he was
considering a range of $30 to $35 per share, but that he had not yet fully
reviewed these pricing levels with DuPont's senior management or its board or
with its financial advisors. Mr. Johnson responded that he also had not obtained
the views of his management, Pioneer's board or Lazard but that his impression
was that pricing had to be at least in the $40 to $45 per share range, payable
all in the form of DuPont common stock. Mr Johnson also indicated that any
increase in the value of DuPont stock between the time a deal was struck and
closing should inure to the benefit of Pioneer shareholders. The discussion
again focused on the use of DuPont stock as a medium for exchange.
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Mr. Holliday and Mr. Johnson agreed that they would direct their respective
management and financial advisory teams to meet promptly to discuss valuations
and structure of a possible combination.
On January 26 and January 27, 1999, Mr. Johnson called the Pioneer outside
board members to update them on the talks with DuPont.
Between January 25 and February 24, 1999, members of senior management of
Pioneer and DuPont and their financial advisors met on various occasions to
discuss valuation and structure. The issues discussed included:
- DuPont and Pioneer continued to differ as to the appropriate valuation of
Pioneer. Initially, the DuPont representative indicated DuPont viewed the
standalone value of Pioneer without taking into account any synergies as
fully reflected in the then current market trading range for Pioneer stock
of $22 to $25 per share. Later, the DuPont representatives indicated that
they would not be prepared to pay in excess of the $30 to $35 per share
range while Pioneer's representative continued to argue that the price
must be at least $40 per share, payable all in DuPont stock. We also
sought to have the exchange ratio fixed at the time of signing of the
merger agreement, so that increases or decreases thereafter in the value
of DuPont stock would be for the account of Pioneer shareholders. DuPont
continued to insist that the merger be based on a fixed dollar price, with
the exchange ratio determined shortly before closing;
- DuPont's representatives stated that, because DuPont common stock had, in
their view, significant up-side potential relative to its then current
market price, a lower nominal value was justified. DuPont also wished to
pay as much cash as would still enable Pioneer shareholders who elected
DuPont common stock to receive that stock in a tax-free exchange;
- DuPont wished to structure the transaction in two steps with an initial
cash tender offer by DuPont for a portion of the shares of Pioneer common
stock not owned by DuPont, followed by a second step merger in which the
balance of the shares of Pioneer common stock would be converted into
DuPont common stock. This structure would enable DuPont to acquire at the
completion of the first step a majority of Pioneer's outstanding common
shares, although not necessarily of its outstanding voting power since any
shares bought by DuPont would only carry one vote per share under
Pioneer's five-for-one voting structure. This first step could be
completed as soon as 20 business days after commencement of the offer,
subject to extension in order to satisfy U.S. or foreign antitrust waiting
periods, as compared to the 90 to 120 days expected to complete a one-step
merger; and
- DuPont continued to defer progressing its discussions with Monsanto, which
was kept informed by DuPont of the general progress being made in the
DuPont-Pioneer discussions, to determine whether an acceptable combination
with Pioneer could be agreed upon. However, DuPont on several occasions
expressly stated that, unless substantial progress was being made in
discussions between DuPont and Pioneer, DuPont was prepared to proceed
with further discussions with Monsanto. In this regard, DuPont indicated
that it might reconsider pursuing a transaction with Pioneer if Pioneer
first solicited other bidders, a process which, in DuPont's judgment,
could slow the execution of a DuPont-Pioneer merger agreement, as well as
increase the risk of no transaction being agreed to by the parties. DuPont
noted that it viewed Pioneer's agreement to this as reflective of
Pioneer's overall commitment to a DuPont-Pioneer transaction. Pioneer
responded that if necessary, it was prepared to remain an independent
company and that it would fully enforce its rights under its alliance
agreements and pursue its pre-existing litigation against Monsanto over
its germplasm if DuPont were to negatively affect its relationship with
Pioneer.
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Before the Pioneer board meeting scheduled for March 2, 1999, DuPont
delivered a term sheet and DuPont's legal advisors, Skadden, Arps, Slate,
Meagher & Flom LLP delivered a draft merger agreement detailing other aspects of
DuPont's proposal, including:
- that Pioneer agree not to solicit other third party bids;
- that Pioneer not be able to terminate the merger agreement to accept third
party proposals;
- that Pioneer pay an unspecified termination fee if Pioneer were unable to
consummate the merger in certain circumstances generally involving third
party bids;
- that Pioneer would remain subject to its obligations under its 1997
agreement with DuPont but that Pioneer would waive the standstill
limitations imposed on DuPont during the pendency of its merger proposal
and thereby give DuPont unilateral freedom, without first obtaining
Pioneer's consent, to make new public proposals to acquire Pioneer if a
third party were to emerge with a superior proposal;
- that Pioneer obtain a voting agreement from members of the Wallace family
who are significant Pioneer shareholders to vote in favor of the DuPont
transaction and against any other proposal; and
- that Pioneer, immediately on signing, convert DuPont's Class B stock into
common stock with five votes per share, so long as DuPont could vote only
that number of votes as equaled its economic interest and that any excess
votes would be voted in proportion to how Pioneer's other shares were
voted.
On March 1 and March 2, 1999, the Pioneer board met in New York. On the
evening of March 1(st), the board of directors, excluding Messrs. Holliday and
Kirk, reviewed the history of the negotiations, Pioneer's germplasm litigation,
the respective companies' performances and Pioneer's rights under the alliance
agreements with DuPont if our relationship with DuPont was negatively impacted.
When the board meeting resumed on March 2, 1999, Mr. Holliday first made a
presentation to the Pioneer board regarding DuPont's interest in combining with
Pioneer. Mr. Holliday and Mr. Kirk then left the meeting and did not
subsequently participate in any of the discussions or votes regarding the
proposed transaction. Management, Lazard and Fried Frank gave presentations to
the board. Management gave a status update regarding the talks with DuPont and
management's insistence that the price be at least $40 per share in a tax-free
reorganization. Lazard reviewed valuation models and other relevant matters and
commented, on a preliminary basis and subject to the final terms of the merger
agreement, that $40 could be viewed as fair to Pioneer's shareholders, other
than DuPont, from a financial point of view. Fried Frank reviewed the board of
directors' fiduciary duties in connection with a possible transaction with
DuPont, including the board's duties in determining whether to insist that
Pioneer, before signing an agreement with DuPont, canvas other companies who
might be interested in purchasing Pioneer at a price higher than the price
DuPont was willing to pay. Fried Frank also discussed the implications of the
"deal protection" or "lock-up" arrangements requested by DuPont.
After the presentations, the board of directors met and discussed the
potential benefits and risks of engaging in a transaction with DuPont. One
concern expressed by several members of the board was that if Pioneer insisted
on conducting a pre-agreement market check, there was a risk that DuPont might
not wait the time necessary for Pioneer to obtain firm indications of interest
from other possible bidders, particularly in light of its stated desire to
continue pursuing a possible transaction with Monsanto and that DuPont
therefore, would instead abandon its proposal to combine with Pioneer. The board
members also discussed that there were a limited number of possible bidders with
the financial resources sufficient to acquire Pioneer and that there was no
assurance that any such third parties, several of whom were themselves engaged
in significant business combinations, would be interested in pursuing a
transaction superior to the one being proposed by DuPont. The board members also
considered its negotiation position because of Pioneer's rights under the
alliance
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agreements, its germplasm litigation and its ability to remain independent.
After discussion, the board directed management to go forward with their talks
with DuPont to seek an all stock transaction for at least $40 per share in a
one-step merger, with the exchange ratio fixed at signing of the merger
agreement. The board indicated that, although it was willing not to solicit
alternative bids, the merger agreement must not unduly burden Pioneer from
accepting a higher bid from a third party, if one were to emerge after
announcement of the transaction with DuPont. Accordingly, the board believed the
merger agreement should permit Pioneer to terminate the agreement if a superior
proposal emerged without Pioneer being obligated to pay any break-up fees and
that no voting agreement between DuPont and the Wallace family stockholders
should be permitted.
On March 2, 1999, Messrs. Johnson and Chicoine met with Messrs. Holliday and
Kirk to deliver the proposal consistent with the board's directions.
At a meeting in Des Moines on March 3, 1999, Pioneer management met with
DuPont management to discuss Pioneer's five-year business plan, including its
pipeline research projects. See "FINANCIAL PROJECTIONS."
On March 5, 1999, there was a telephone call between Messrs. Holliday and
Johnson. During the call, Mr. Holliday indicated that DuPont was now prepared to
offer $40 per share, but reiterated that DuPont wanted a two-step transaction
structure with 45 percent of the consideration paid by DuPont to be in cash and
the remaining 55 percent in stock, and with the exchange ratio to be determined
based on the closing price of DuPont common stock during a specified trading
period shortly before completion of the merger.
As part of its proposal, DuPont also wanted to prohibit Pioneer from
soliciting offers to acquire Pioneer from other third parties and DuPont also
requested that it be permitted immediately to exchange the Pioneer Class B
common shares owned by it for an equal number of shares of Pioneer common stock
with 5 votes per share subject to the same limitations on voting as DuPont had
earlier proposed. DuPont was willing to consider allowing Pioneer to have the
right to terminate the merger agreement to accept an unsolicited superior
proposal during the pendency of DuPont's tender offer, and tentatively agreed
that in light of DuPont's 20 percent ownership position in Pioneer that it would
not insist that Pioneer pay any break-up fees if Pioneer exercised this
termination right or otherwise. Pioneer said it would be willing to consider the
exchange of DuPont's Class B common stock into common stock and the combination
of cash and DuPont common stock as merger consideration as long as the
transaction could be treated as a tax-free reorganization. However, Pioneer
expressed a strong preference for structuring the transaction in one step due,
among other reasons, to the fact that it would not be possible to determine
whether DuPont would have a majority of Pioneer's voting power after completion
of its tender offer. This was a problem because if after the merger, DuPont
lacked a majority of Pioneer's voting power after the tender offer, the Pioneer
board could not ensure that the second step of the merger would occur.
On March 5, 1999, there was a telephonic meeting of the Pioneer board of
directors to update the directors on the talks with DuPont.
During the following few days, both parties attempted to negotiate the terms
of the transaction other than price which had been tentatively set at $40 per
share payable 45 percent in cash and 55 percent in stock, with the exchange
ratio to be determined shortly before closing. Some of the main issues at this
point were:
- whether the transaction would be structured as a two-step tender offer
followed by a merger or as a one-step merger transaction;
- whether the Pioneer board would have the ability to negotiate with and
provide confidential information to third parties who made unsolicited
indications of interest in acquiring Pioneer;
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- whether Pioneer would be required to disclose the identity of any third
party who made an alternative proposal and the terms thereof and whether
Pioneer would agree to other deal protection features requested by DuPont;
- whether, and for how long after the public announcement of the merger, the
Pioneer board would have the ability to terminate the merger agreement if
Pioneer received a superior offer that the Pioneer board believed it had a
fiduciary duty to accept;
- whether during the pendency or following termination of the merger
agreement with DuPont, DuPont would continue to remain bound by its
standstill obligations under the 1997 investment agreement with Pioneer,
including its obligation not to make public proposals for Pioneer not
approved by Pioneer's board, whether DuPont would continue to have its
rights to be included in any bidding process for Pioneer if a superior
proposal were to emerge and confirmation that DuPont would retain its
rights to purchase Pioneer's interest in Optimum as a result of a change
in control to a third party and to require Pioneer to market quality trait
seed for it;
- whether DuPont would agree to Pioneer's request that DuPont commit not to
combine with or agree to combine with Monsanto or other companies in the
seed business prior to completion of DuPont's transaction with Pioneer,
that DuPont commit to pay Pioneer significant liquidated damages in the
event DuPont were to breach this covenant and that DuPont not take other
action or make any other acquisition that could result in a material delay
in obtaining all governmental approvals required to consummate the merger;
and
- whether DuPont would agree to the terms of the management retention
arrangements with key members of Pioneer executive management.
In a Dow Jones newswire released in the morning on Friday, March 12, 1999,
Dow Jones claimed that a Pioneer spokesman dismissed the speculation that
Pioneer was discussing a bid from DuPont by saying Pioneer was sticking to its
long-held position of remaining independent. A few hours later Pioneer issued a
press release which announced that it was in discussions with DuPont regarding a
possible business combination.
By March 13, 1999, the parties came to agreement on all of the open issues
as follows:
- the transaction would be structured as a one-step merger transaction;
- the Pioneer board would have the ability to negotiate with third parties
with respect to an unsolicited proposal, inquiry or indication of interest
relating to a superior proposal if the board decided that it was its
fiduciary duty to do so, so long as Pioneer notified DuPont that it was
having substantive negotiations with a third party. However, Pioneer would
not be obligated under the merger agreement to identify the party or the
terms of the discussions;
- prior to April 29, 1999, which was 45 days after the announcement of the
merger, the Pioneer board may unilaterally terminate the merger agreement
to accept a proposal from a third party that the board of directors
determines to be superior;
- prior to the expiration of the Hart-Scott-Rodino waiting period, DuPont
would be prohibited from acquiring Monsanto and other specified companies
or entering into transactions in the seed business with such companies or
entering into transactions in the seed business that make antitrust
approval for the DuPont-Pioneer merger less likely to be obtained. After
the expiration of the Hart-Scott-Rodino period, DuPont could commit to or
effect any such acquisition or transaction so long as it waives antitrust
and litigation related conditions to the DuPont-Pioneer merger to the
extent not satisfied by reason of such acquisition or transaction and, in
certain limited circumstances, increase the merger price by an interest
factor. In the event that DuPont enters into any transaction with Monsanto
prior to the expiration of the Hart-Scott-Rodino waiting period, Pioneer
would be permitted to seek a court order requiring DuPont to abandon
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the Monsanto transaction and be entitled, as liquidated damages, to
repurchase DuPont's stock in Pioneer at $8.58 per share, 25 percent of its
closing market price on March 12, 1999;
- DuPont's standstill obligations and its rights to advance notice of
transactions between Pioneer and third parties and to participate in any
bidding process leading up to a change in control of Pioneer with a third
party that had been agreed to in 1997 would remain intact and unchanged
throughout the pendency of the merger agreement, even if a third party
proposal were to emerge, and would only expire if Pioneer terminated the
merger agreement in order to accept a higher bid or if DuPont terminated
the merger agreement in certain specified circumstances generally
involving third parties; and
- DuPont's rights contained in the investment agreement with respect to its
ability to buy out Pioneer's interest in Optimum for fair market value and
related rights will survive termination of the investment agreement.
On March 14, 1999, Pioneer had a telephonic board meeting among all members,
other than the two DuPont directors and two other outside directors who were
unable to attend the meeting, to review the merger agreement and the proposed
transaction with DuPont. Management reviewed the status of discussions, the
economic terms of the merger and the arrangements regarding management. Lazard
then delivered its oral opinion to the board of directors that, as of March 14,
1999 the consideration to be received by Pioneer shareholders, other than DuPont
and its affiliates, was fair from a financial point of view. Lazard's opinion
was set forth in writing in a letter dated as of March 14, 1999. Fried Frank
then reviewed the board's fiduciary obligations and the terms of the merger
agreement. Fried Frank reviewed several special factors applicable to the
proposed merger with DuPont. Because of DuPont's preexisting 20 percent
ownership interest and its representation on the Pioneer board, the merger could
be viewed by the SEC as a transaction with an affiliate. The SEC requires that
additional information be disclosed in this proxy statement by us in this
context and that a transaction statement on Schedule 13E-3 be filed at the SEC
with this proxy statement. At the conclusion of these presentations the
management members of the board, Messrs. Johnson and Chicoine, left the meeting
to permit the outside directors to discuss the transaction independently and ask
questions of Lazard and Fried Frank. The outside board members present then
unanimously approved the merger agreement. Messrs. Johnson and Chicoine then
returned to the meeting and unanimously approved the merger agreement. The two
outside board members unable to attend the board meeting approved the merger
agreement later that evening.
PURPOSE AND STRUCTURE FOR THE MERGER
Pioneer's purpose for the merger between Pioneer and DuPont is to generate
significant value for Pioneer shareholders through teaming up with Pioneer's and
DuPont's largely complementary research and development capabilities and making
more effective use of their respective sales and marketing infrastructure.
DuPont's and Pioneer's combined research and development capabilities in
biotechnology will create a stronger platform on which to shorten the product
development cycle. The merger would expand upon Pioneer's and DuPont's research
and development alliance and enhance the operation of their joint venture,
Optimum Quality Grains, L.L.C.
The merger has been structured as a one-step transaction. If the merger is
approved by the Pioneer shareholders and all other conditions to the merger are
satisfied, Pioneer will merge with and into Delta Acquisition Sub, which will
then change its name to Pioneer and continue to be a wholly owned subsidiary of
DuPont. As a consequence of the merger, Pioneer will be 100 percent owned by
DuPont.
To approve the merger, the Pioneer shareholders entitled to exercise a
majority of the votes attributable to the outstanding shares of Pioneer common
stock must vote in favor of the merger agreement. DuPont has agreed to vote the
20 percent voting power attributable to common stock
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<PAGE>
owned by it in favor of the merger. Approval of the merger by a majority vote of
unaffiliated Pioneer shareholders is not required.
If the merger is completed, the Pioneer shareholders who elect to receive
DuPont common stock will enjoy the value generated by the Pioneer/DuPont merger
after the closing of the merger through their ownership of DuPont common stock.
As owners of DuPont common stock, they will have an indirect ownership stake in
Pioneer, which will in effect become a wholly owned subsidiary of DuPont,
although the Pioneer business will represent a small portion of the combined
company.
Pioneer shareholders who do not elect to receive stock, but rather choose to
receive cash in exchange for their shares of Pioneer common stock, will also
enjoy the value generated by the Pioneer/ DuPont merger. The $40 they receive in
exchange for each of their shares of Pioneer common stock represents a
substantial premium over the average trading value of shares of Pioneer common
stock prior to the announcement that merger discussions between us were taking
place.
The discussion in this document of the merger and the description of the
principal terms and conditions of the merger agreement and the merger is a
summary only. You should refer to the merger agreement for the details of the
merger and the terms and conditions of the merger agreement. We have attached a
copy of the merger agreement to this document as APPENDIX A. See "THE MERGER
AGREEMENT."
Other agreements between the parties, including the investment agreement and
the research alliance, have been filed with Pioneer's publicly filed documents.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
At a telephonic meeting on March 14, 1999, the Pioneer board of directors
unanimously approved the merger agreement and authorized and approved the
merger. At that meeting, the board of directors decided to recommend that the
shareholders of Pioneer vote in favor of the approval and adoption of the merger
agreement and the approval of the merger at the Pioneer special meeting.
The board of directors considered the following material factors that
supported its decision:
(1) the opinion of its financial advisors, Lazard Freres, that as of
March 14, 1999, the consideration to be received pursuant to the merger
agreement was fair to the shareholders of Pioneer from a financial point of
view. This opinion was based upon and subject to the factors and assumptions
set forth therein and is attached as APPENDIX B to this document. The
opinion was considered together with the financial analysis presented to the
board of directors by Lazard Freres. A description of the opinion and
analysis is included below under "--Opinion of Financial Advisor for
Pioneer";
(2) the recent changes in the agricultural seed industry which have made
it necessary to bring new products to the market faster than ever before;
(3) various alternatives to the merger, including the alternative of
remaining independent and the alternative of seeking other buyers for the
company, and the risks associated with each of those alternatives;
(4) the terms of the merger agreement, including the lack of a
termination fee and Pioneer's right to terminate the merger agreement
pursuant to the fiduciary duties of the board in the event a third party
makes a superior proposal, and the negotiation process that led up to the
merger agreement;
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(5) the social and economic effects of the merger on the employees,
customers, suppliers and others who deal with Pioneer and its subsidiaries
and on the communities in which they operate, including:
- DuPont's intention to maintain the same management team and workforce
and keep Pioneer headquartered in Des Moines, Iowa; and
- that Charles S. Johnson, the current CEO of Pioneer, will become the
head of DuPont's seed division and will report to the CEO of DuPont as
part of the Office of the Chief Executive of DuPont.
(6) the past performance and reputation of DuPont and the belief that
Pioneer and DuPont have similarities in their culture and vision,
particularly in their commitment to research as a means of bringing new
products to the market;
(7) the current and past trading prices of shares of Pioneer common
stock and DuPont common stock as compared to each other and to other
companies in the seed industry; and
(8) the past financial and operational performance of Pioneer and
DuPont.
The discussion above describes the material factors considered by the board
of directors in its consideration of the merger. After considering these
factors, and taking into account the recommendation of management, the board of
directors concluded that the positive factors described above outweighed the
negative factors described above. Because of the variety of factors considered,
the board of directors did not find it practicable to, and did not make specific
assessments of, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. The determination was made
after consideration of all of the factors together. In addition, individual
members of the Pioneer board of directors may have given different weights to
different factors.
THE BOARD OF DIRECTORS OF PIONEER UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
OF PIONEER VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
APPROVAL OF THE MERGER.
POSITION OF DUPONT REGARDING FAIRNESS
Based on the conclusions of Pioneer's board of directors (excluding the
directors designated by DuPont) and the support of Pioneer's outside directors,
DuPont has concluded that the merger is fair to Pioneer's shareholders (other
than DuPont). DuPont did not find it practicable to quantify or otherwise attach
relative weights to any of the specific factors considered by Pioneer's board of
directors.
PLANS FOR PIONEER AFTER THE MERGER
DuPont plans to maintain Pioneer as a separate subsidiary of DuPont,
operating under the Pioneer brand name and headquartered in Des Moines, Iowa.
Except as otherwise described in the merger agreement, and except for the
transactions contemplated by the merger agreement, DuPont has no current plans
or proposals which relate to or would result in: (a) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving Pioneer;
(b) a sale or transfer of a material amount of assets of Pioneer; (c) any change
in the management of Pioneer or any change in any material term of the
employment contract of any executive officer; or (d) any other material change
in Pioneer's corporate structure or business.
Nevertheless, DuPont may initiate a review of Pioneer and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the merger in order best to organize and coordinate the activities of
Pioneer and DuPont, including the activities of the Optimum joint venture.
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<PAGE>
OPINION OF FINANCIAL ADVISOR FOR PIONEER
Pioneer retained Lazard to act as its financial advisor in connection with a
possible business combination with DuPont. Lazard delivered its written opinion
to the Pioneer board to the effect that, as of March 14, 1999 and based upon and
subject to the factors and assumptions set forth therein, the consideration is
fair to the Pioneer shareholders, other than DuPont and its affiliates, from a
financial point of view.
THE FULL TEXT OF THE LAZARD OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE,
GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY LAZARD, IS ATTACHED HERETO AS APPENDIX B. THE LAZARD OPINION
SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY BY THE PIONEER SHAREHOLDERS. THE
LAZARD OPINION IS LIMITED TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF
THE CONSIDERATION TO BE PAID IN THE MERGER TO THE PIONEER SHAREHOLDERS OTHER
THAN DUPONT AND ITS AFFILIATES, AND DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION OF PIONEER TO ENGAGE IN THE MERGER, OR CONSTITUTE A
RECOMMENDATION TO ANY PIONEER SHAREHOLDER AS TO HOW SUCH HOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER. THE LAZARD OPINION ALSO DOES NOT CONSTITUTE AN OPINION OR
IMPLY ANY CONCLUSION OF LAZARD AS TO THE LIKELY FUTURE TRADING VALUE OF THE
SHARES OF PIONEER COMMON STOCK OR DUPONT COMMON STOCK. THE LAZARD OPINION IS
NECESSARILY BASED ON ECONOMIC, MONETARY, MARKET AND OTHER CONDITIONS AS THEY
WERE IN EFFECT ON, AND THE INFORMATION MADE AVAILABLE AS OF, THE DATE OF THE
LAZARD OPINION. THE SUMMARY OF THE LAZARD OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE LAZARD OPINION ATTACHED HERETO AS APPENDIX B.
In the course of performing its review and analyses for rendering its
opinion, Lazard:
- reviewed the financial terms and conditions of the merger agreement;
- analyzed certain historical business and financial information relating to
Pioneer and DuPont;
- reviewed various financial forecasts and other data provided to Lazard by
Pioneer relating to the business and prospects of Pioneer;
- reviewed various publicly available financial forecasts and other data
with respect to the business and prospects of DuPont;
- participated in discussions with members of the senior managements of
Pioneer and DuPont with respect to the businesses and prospects of Pioneer
and DuPont, respectively, the strategic objectives of each and the
possible financial benefits which might be realized following the merger;
- reviewed public information with respect to certain other companies in
lines of business Lazard believes to be generally comparable to those of
Pioneer and DuPont;
- reviewed the financial terms of certain comparable business combinations
involving companies in lines of business Lazard believes to be generally
comparable to the business of Pioneer, and in other industries generally;
- reviewed the historical stock prices and trading volumes of shares of
Pioneer common stock and DuPont common stock; and
- conducted such other financial studies, analyses and investigations as
Lazard deemed appropriate.
Lazard relied upon the accuracy and completeness of the financial and other
information provided by Pioneer and DuPont and reviewed by Lazard for purposes
of the Lazard opinion, and did not assume any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Pioneer or DuPont or any issues relating to
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solvency. With respect to the financial forecasts of Pioneer, Lazard assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of Pioneer as to the future
financial performance of Pioneer. With respect to the publicly available
financial forecasts regarding DuPont, at the direction of management of DuPont,
Lazard assumed that they were consistent with the views of management of DuPont
as to the future financial performance of DuPont. Lazard assumed no
responsibility for and expressed no view as to such forecasts and projections or
the assumptions on which they were based. Pioneer informed Lazard and Lazard
assumed that the merger will qualify as a tax-free reorganization for U.S.
federal income tax purposes.
Lazard was not authorized to, and did not solicit, any indications of
interest from any third party with respect to the purchase of all or part of
Pioneer. The Lazard opinion is limited to the fairness, from a financial point
of view, to the holders of shares of Pioneer common stock other than DuPont and
its affiliates of the consideration and does not address Pioneer's underlying
business decision to undertake the merger. In addition, the Lazard opinion did
not address the future trading value of DuPont common stock or shares of Pioneer
common stock. Moreover, the Lazard opinion was directed to the board of
directors of Pioneer and did not constitute a recommendation to any shareholder
as to how such shareholder should vote with respect to the merger. Lazard's
engagement and the Lazard Opinion was for the benefit of the board of directors
of Pioneer and was not intended to confer rights or remedies upon DuPont, any
shareholders of Pioneer or any other person.
In rendering its opinion, Lazard assumed that the merger would be
consummated on the terms described in the merger agreement, without any waiver
of any material terms or conditions by Pioneer and that obtaining the necessary
regulatory approvals for the merger would not have an adverse effect on Pioneer
or DuPont.
The following is a summary of certain of the financial analyses used by
Lazard in connection with providing the Lazard opinion to the Pioneer board of
directors:
DISCOUNTED CASH FLOW ANALYSIS
Lazard performed a discounted cash flow analysis for Pioneer based upon a
range of terminal multiples of earnings before interest, taxes, depreciation and
amortization ("EBITDA") of 10.0x to 14.0x and a range of discount rates from 10
percent to 12 percent. Lazard performed the analysis based upon the core seed
business of Pioneer, including research and development related to this
business, (the "Core Business") and also upon the core seed business with the
addition of cash flow expected to be generated from a few specific traits in
Pioneer's research and development pipeline and from Optimum (the "Adjusted Core
Business"). In the analysis, Lazard used four alternative sets of forecasts: (i)
forecasts assuming slow growth ("Slow Growth"); (ii) forecasts assuming moderate
growth ("Moderate Growth"), (iii) forecasts based on the historical growth of
Pioneer from 1988 to 1998 ("Recent Historical Growth"); and (iv) forecasts based
upon management's target growth rate ("Target Growth"). The Target Growth
forecasts are those set forth under "FINANCIAL PROJECTIONS."
For the Core Business analysis, Lazard calculated ranges of implied per
share equity values for Pioneer as follows:
<TABLE>
<CAPTION>
ADJUSTED CORE
CASE CORE BUSINESS BUSINESS
- -------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
Slow Growth....................................... $ 15.74 to $23.22 $ 19.72 to $28.66
Moderate Growth................................... $ 19.11 to $28.15 $ 23.09 to $33.60
Recent Historical Growth.......................... $ 23.24 to $34.22 $ 27.22 to $39.66
Target Growth..................................... $ 30.71 to $45.25 $ 34.69 to $50.70
</TABLE>
Lazard also conducted a sensitivity analysis with respect to competitive
yield advantage per acre of land and potential recoveries (including royalties
or other payments) from litigation relating to Pioneer's germplasm. The
sensitivity analysis showed potential increases in implied per share values
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<PAGE>
shown on the table above ranging from an additional (a) $1.77 to $1.82 based on
potential recoveries from litigation and (b) $4.74 to $6.30 for increased
competitive yield advantage of one-half bushel per acre per year and $3.10 to
$3.97 for an additional one-half bushel per acre per year increase.
PUBLIC COMPARABLE LIFE SCIENCE TRADING COMPANIES ANALYSIS
Lazard reviewed and compared certain financial information relating to
Pioneer and DuPont to corresponding financial information, ratios and public
market multiples for six other life science companies Lazard deemed to be
comparable to Pioneer and DuPont. The companies included in the analysis were:
- AHP Inc.
- Monsanto Company
- Novartis Inc.
- AstraZeneca, using the pro forma financial information for the merger of
Astra AB and Zeneca Group, PLC
- Delta & Pine Land Company
- DeKalb Genetics Corporation
Using publicly available information, Lazard calculated the following
estimated median multiples with respect to Pioneer, DuPont and the comparable
companies:
<TABLE>
<CAPTION>
MULTIPLE 1998 1999 2000
- --------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Median enterprise value as a multiple of sales....................... 4.8x 4.3x 3.4x
Median enterprise value as a multiple of EBITDA...................... 19.3x 16.0x 13.4x
Median enterprise value as a multiple of EBITA(1).................... 23.2x 20.2x 17.4x
Median enterprise value as a multiple of EBIT(2)..................... 23.4x 21.3x 16.9x
Median share price as a multiple of earnings per share ("EPS")....... 36.7x 28.8x 21.8x
Median share price as a multiple of EPS based on an average of
publicly available analyst forecasts from IBES(3).................. 42.2x 27.8x 24.7
</TABLE>
- ------------------------------
(1) Earnings before interest, taxes and amortization
(2) Earnings before interest and taxes
(3) A commonly used source for publicly available analysts' forecasts
Using the trading multiples calculated in the public comparable companies
analysis, Lazard estimated an implied equity value per share range of $30.00 to
$40.00 for Pioneer.
None of the comparable companies is identical to Pioneer or DuPont.
Accordingly, the preceding analysis necessarily involves complex considerations
and judgments concerning differences in financial and operating characteristics
of companies and other factors that could affect the public trading value of
Pioneer, DuPont and the comparable companies.
PUBLIC COMPARABLE PHARMACEUTICAL TRADING COMPANIES ANALYSIS
Lazard reviewed and compared certain financial information relating to
Pioneer and DuPont to corresponding financial information, ratios and public
market multiples for seven other pharmaceutical
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<PAGE>
companies that Lazard deemed to be comparable to Pioneer and DuPont. The
companies included in the analysis were:
- Eli Lilly & Company
- Glaxo Wellcome PLC
- Schering Plough Corporation
- Bristol-Myers Squibb Company
- Merck & Co., Inc.
- Warner-Lambert Company
- Pfizer Inc.
Using publicly available information, Lazard calculated the following
estimated median multiples with respect to the comparable pharmaceutical
companies:
<TABLE>
<CAPTION>
MULTIPLE 1998 1999 2000
- --------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Median enterprise value as a multiple of sales....................... 9.1x 8.2x 7.2x
Median enterprise value as a multiple of EBITDA...................... 25.7x 21.3x 19.0x
Median enterprise value as a multiple of EBITA....................... 28.8x 23.4x 20.7x
Median enterprise value as a multiple of EBIT........................ 29.7x 24.0x 21.3x
Median share prices as a multiple of EPS............................. 45.5x 34.5x 29.5x
Median share price as a multiple of EPS based on an average of
publicly available analyst forecasts from IBES..................... 47.2x 35.7x 32.3x
</TABLE>
None of the comparable companies is identical to Pioneer or DuPont.
Accordingly, the preceding analysis necessarily involves complex considerations
and judgments concerning differences in financial and operating characteristics
of companies and other factors that could affect the public trading value of
Pioneer, DuPont and the comparable companies.
SELECTED PRECEDENT TRANSACTIONS ANALYSIS
Using publicly available information, Lazard reviewed and analyzed certain
financial and operating information relating to selected transactions in the
seed industry since 1996 (for purposes of this section, the "Selected Precedent
Transactions"). The Selected Precedent Transactions and the dates the
transactions were announced are as follows:
- AgrEvo's abandoned acquisition of Cargill Hybrid Seeds (North America)
(September 1998)
- Monsanto Company's acquisition of Plant Breeding International Cambridge
(July 1998)
- Monsanto Company's acquisition of Cargill Inc. National Seed Business
(International) (June 1998)
- Monsanto Company's acquisition of 60 percent of DeKalb (May 1998)
- Monsanto Company's pending acquisition of Delta & Pine Land Company (May
1998)
- DuPont's acquisition of 20 percent of Pioneer (August 1997)
- Monsanto Company's acquisition of Holdens Foundation Seeds Inc. (January
1997)
- DowElanco's acquisition of 13 percent of Mycogen Corporation (January
1996)
Lazard compared, among other things, the transaction value of the Selected
Precedent Transactions as a multiple of last twelve months' ("LTM") sales, LTM
EBITDA and LTM EBIT and
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latest fiscal year plus one year forward ("LFY+1") sales, LFY+1 EBITDA and LFY+1
EBIT. The ranges of the transaction values as multiples of LTM sales, LTM EBITDA
and LTM EBIT for such acquisitions, where data was publicly available, were as
follows: (a) transaction values as multiples of LTM sales ranged from 3.7x to
22.7x (with a median of 6.0x); (b) transaction values as multiples of LTM EBITDA
ranged from 17.5x to 52.9x (with a median of 43.9x); and (c) transaction values
as multiples of LTM EBIT ranged from 21.3x to 186.0x (with a median of 59.7x).
The ranges of the transaction values as multiples of LFY+1 sales, LFY+1 EBITDA
and LFY+1 EBIT for such acquisitions, where data was publicly available, were as
follows: (a) transaction values as multiples of LFY+1 sales ranged from 3.4x to
7.0x (with a median of 4.6x); (b) transaction values as multiples of LFY+1
EBITDA ranged from 14.9x to 70.4x (with a median of 26.8x); and (c) transaction
values as multiples of LFY+1 EBIT ranged from 17.7x to 51.7x (with a median of
29.4x). Lazard also noted the premium paid over the closing stock prices one
month prior to the announcement of the acquisitions of DeKalb, Delta & Pine Land
Company, 20.0 percent of Pioneer and Mycogen Corp., which ranged from -1.8
percent to 43.0 percent (with a median of 30.0 percent). Using the trading
multiples calculated in the selected precedent transactions analysis, Lazard
estimated an implied equity value per share range of $30.00 to $50.00 for
Pioneer.
None of the precedent transactions is identical to the merger. Accordingly,
the preceding analysis necessarily involves complex considerations and judgments
concerning differences between the precedent transactions and the merger.
PRECEDENT TRANSACTION PREMIUMS ANALYSIS
Lazard calculated a range of premiums paid for the following selected
transactions in the seed industry:
- Monsanto Company's pending acquisition of Delta & Pine Land Company (May
1998)
- Archer Daniels Midland Company's acquisition of 45 percent of United Grain
Growers Ltd. (May 1999)
- Monsanto Company's acquisition of 40 percent of DeKalb (February 1996)
- E. I. du Pont's acquisition of 20 percent of Pioneer (August 1997)
- Monsanto Company's acquisition of 5 percent of Calgene (March 1996)
- Monsanto Company's acquisition of 45 percent of Calgene (January 1997)
- Monsanto Company's acquisition of 60 percent of DeKalb (May 1998)
- Pioneer's acquisition of 13 percent of Mycogen Corporation (September
1995)
Lazard calculated a range of premiums paid over the closing stock prices one
month prior to the announcement of the transaction of -1.8 percent to 79.0
percent. Based upon that range of premiums paid and using the March 1, 1999
closing Pioneer stock price of $22.50, Lazard estimated an implied equity value
per share range of $22.10 to $40.28 for Pioneer.
PREMIUMS PAID FOR DEALS OVER $500 MILLION ANALYSIS
Lazard calculated a median premium paid for all acquisition transactions
valued over $500 million announced in each month from January 1998 through
February 1999. Based upon a range of monthly median premiums paid of 16.8
percent to 56.1 percent and using the March 1, 1999 closing Pioneer stock price
of $22.50, Lazard calculated an implied equity value per share range of $26.33
to $35.10 for Pioneer.
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The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Lazard, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Lazard opinion.
The Lazard opinion necessarily involved making complex considerations and
judgments concerning differences in the potential financial and operating
characteristics of the precedent transactions. In arriving at its opinion,
Lazard considered the results of its analyses and did not attribute particular
weight to any one analysis or factor considered by it. The analyses performed by
Lazard, particularly those based on forecasts, are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Lazard analysis of the fairness of the merger consideration, from a
financial point of view, to the shareholders of Pioneer. The foregoing summary
does not purport to be a complete description of the analyses prepared by
Lazard.
Lazard is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for estate, corporate and other purposes. Lazard was
selected to act as financial advisor to the Pioneer board of directors because
of its expertise and its reputation in investment banking and mergers and
acquisitions and its familiarity with Pioneer.
In addition to the financial advisory services referred to above, Lazard has
from time to time provided investment banking and related services to Pioneer
for which Lazard has received customary fees. In the ordinary course of its
business, Lazard or its affiliates may actively trade the securities of Pioneer
or DuPont for its own account and for the accounts of its customers and,
accordingly, at any time may hold a long or short position in such securities.
Pioneer and Lazard have entered into a letter agreement dated March 1, 1999
relating to the services to be provided by Lazard in connection with the merger
and the transactions related thereto, pursuant to which Pioneer has agreed to
pay Lazard the following fees in the context of the merger or the transactions
related thereto: (a) a fee of $5,000,000 payable upon the announcement of the
merger, the payment of which shall be credited against any fee payable pursuant
to clause (b); and (b) a fee equal to 0.225 percent of the aggregate
consideration payable in any transaction with DuPont or a third party based on
(1) 100 percent of the Pioneer stock in the case of an acquisition by a third
party or (2) 90 percent in the case of an acquisition by DuPont, payable upon
the earlier of the acquisition of beneficial ownership of a majority of
Pioneer's voting securities and completion of the merger. In the event that a
transaction other than a merger is completed, Lazard and Pioneer will mutually
agree in good faith upon a fee to be paid to Lazard which will appropriately
compensate Lazard for the transaction. Pioneer's board of directors was aware of
this fee structure and took it into account in considering the Lazard opinion
and in approving the merger and the transactions related thereto and
contemplated thereby. Pioneer also agreed to reimburse Lazard for certain
out-of-pocket expenses incurred in connection with the engagement. In addition,
Pioneer agreed to indemnify Lazard against certain liabilities, including
liabilities under the federal securities law, relating to or arising out of its
engagement.
OPINIONS OF FINANCIAL ADVISORS FOR DUPONT
CREDIT SUISSE FIRST BOSTON
Credit Suisse First Boston has acted as financial advisor to DuPont in
connection with the merger. DuPont selected Credit Suisse First Boston based on
Credit Suisse First Boston's experience, expertise
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and familiarity with DuPont and its business. Credit Suisse First Boston is an
internationally recognized investment banking firm and, as a customary part of
its business, evaluates businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, DuPont requested
that Credit Suisse First Boston evaluate the fairness, from a financial point of
view, to DuPont of the consideration to be paid by DuPont in the merger. On
March 14, 1999, Credit Suisse First Boston rendered to the DuPont board an oral
opinion, subsequently confirmed by delivery of a written opinion dated March 15,
1999, the date of the merger agreement, to the effect that, as of the date of
the opinion and based on and subject to the matters stated in the opinion, the
consideration to be paid by DuPont in the merger was fair, from a financial
point of view, to DuPont.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION DATED MARCH
15, 1999 TO THE DUPONT BOARD, WHICH DESCRIBES THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. CREDIT SUISSE FIRST BOSTON'S OPINION IS ADDRESSED TO THE
DUPONT BOARD AND RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW,
OF THE CONSIDERATION TO BE PAID BY DUPONT IN THE MERGER, DOES NOT ADDRESS ANY
OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE
MERGER. THE SUMMARY OF CREDIT SUISSE FIRST BOSTON'S OPINION INCLUDED IN THIS
PROXY STATEMENT/ PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and publicly available business and financial information relating to
DuPont and Pioneer. Credit Suisse First Boston also reviewed other information
relating to DuPont and Pioneer, including financial forecasts that DuPont and
Pioneer provided to or discussed with Credit Suisse First Boston, and met with
the managements of DuPont and Pioneer to discuss the businesses and prospects of
DuPont and Pioneer.
Credit Suisse First Boston also considered financial and stock market data
of DuPont and Pioneer and compared those data with similar data for other
publicly held companies in businesses similar to DuPont and Pioneer and
considered, to the extent publicly available, the financial terms of other
business combinations and other transactions recently proposed or effected.
Credit Suisse First Boston also considered other information, financial studies,
analyses and investigations and financial, economic and market criteria that it
deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by Credit Suisse First Boston and relied on the
information being complete and accurate in all material respects. With respect
to financial forecasts, Credit Suisse First Boston was advised, and assumed,
that the forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of DuPont and
Pioneer as to the future financial performance of DuPont and Pioneer and the
cost savings, strategic benefits and other potential synergies, including the
amount, timing and achievability of these cost savings and other synergies,
anticipated to result from the merger. Credit Suisse First Boston also assumed,
with DuPont's consent, that the merger will be treated as a tax-free
reorganization for federal income tax purposes.
Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of DuPont or Pioneer, and was not furnished with any evaluations or
appraisals. Credit Suisse First Boston's opinion was necessarily based on
information available to, and financial, economic, market and other conditions
as they existed and could be evaluated by, Credit Suisse First Boston on the
date of its opinion. Credit Suisse First Boston did not express any opinion as
to the actual value of the DuPont common stock when issued in the
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merger or the prices at which the DuPont common stock will trade after the
merger. Although Credit Suisse First Boston evaluated the consideration to be
paid by DuPont in the merger from a financial point of view, Credit Suisse First
Boston was not requested to, and did not, recommend the specific consideration
payable in the merger. The consideration payable in the merger was determined
between DuPont and Pioneer. No other limitations were imposed on Credit Suisse
First Boston with respect to the investigations made or procedures followed by
Credit Suisse First Boston in rendering its opinion.
In preparing its opinion to the DuPont board, Credit Suisse First Boston
performed a variety of financial and comparative analyses, including those
described below. The summary of Credit Suisse First Boston's analyses described
below is not a complete description of its analyses. The preparation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is difficult to summarize. In arriving at its opinion, Credit
Suisse First Boston made qualitative judgments as to the significance and
relevance of each analysis and factor considered by it. Accordingly, Credit
Suisse First Boston believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters. Many of these factors are beyond the control of DuPont and
Pioneer. No company, transaction or business used in Credit Suisse First
Boston's analyses as a comparison is identical to DuPont or Pioneer or the
proposed merger, nor is an evaluation of the results of those analyses entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis do not necessarily
reflect actual values or predict future results or values, which may be
significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston's
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
the factors considered by the DuPont board of directors in its evaluation of the
proposed merger and should not be viewed as determinative of the views of the
DuPont board of directors or management with respect to the merger or the
consideration payable in the merger.
The following is a summary of the material analyses underlying Credit Suisse
First Boston's opinion to the DuPont board in connection with the merger and
presented to the DuPont board at its March 14, 1999 meeting:
DISCOUNTED CASH FLOW ANALYSIS. Credit Suisse First Boston estimated the
present value of the unlevered after-tax free cash flows that Pioneer's base
business, excluding its 50 percent interest in the Optimum Quality Grains joint
venture with DuPont, could produce on a stand-alone basis. Credit Suisse First
Boston evaluated Pioneer's projected free cash flows under two scenarios. The
first scenario, a Pioneer management case, was based on financial projections
through 2004 provided by Pioneer management. The second scenario, a DuPont
management case, was based on financial projections through 2009 developed by
DuPont management. Ranges of terminal values were estimated using multiples of
terminal year earnings before interest, taxes, depreciation and amortization,
commonly referred to as EBITDA, for Pioneer's base business of 11.0x to 12.0x.
The free cash flow streams and terminal values were then discounted to present
value using discount rates ranging from
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10.5 percent to 11.5 percent. This analysis indicated implied enterprise
reference ranges for Pioneer's base business of approximately $10.1 billion to
$11.3 billion using the Pioneer management case and approximately $7.7 billion
to $8.8 billion using the DuPont management case.
Credit Suisse First Boston then estimated the present value of the future
streams of unlevered after-tax free cash flows that Pioneer's 50 percent
interest in the Optimum Quality Grains joint venture could produce through 2008
based on financial projections provided by DuPont management. Ranges of terminal
values were estimated by applying perpetual growth rates of 5 percent to 6
percent to the unlevered after-tax free cash flow in 2009. The free cash flow
streams and terminal values were then discounted to present value using discount
rates ranging from 13 percent to 14 percent. This analysis indicated an implied
enterprise reference range for the Optimum Quality Grains joint venture of
approximately $0.5 billion to $0.7 billion or approximately $0.3 billion to $0.4
billion for Pioneer's 50 percent interest in the joint venture.
The combined enterprise reference range of Pioneer's base business and its
50 percent interest in the Optimum Quality Grains joint venture was
approximately $10.3 billion to $11.7 billion using the Pioneer management case
for Pioneer's base business and approximately $7.9 billion to $9.1 billion using
the DuPont management case for Pioneer's base business.
SELECTED MERGER AND ACQUISITIONS ANALYSIS. Using publicly available
information, Credit Suisse First Boston analyzed the purchase prices and implied
transaction multiples paid or proposed to be paid in the following selected
transactions in the agricultural seed industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- ------------------------------------------- -------------------------------------------
<S> <C>
- AgrEvo Cargill Hybrid Seeds North America
- Monsanto Company Cargill International Seed Operations
- Monsanto Company DeKalb Genetics Corporation
- Monsanto Company Delta Pine and Land Company
- DuPont Pioneer Hi-Bred International, Inc.
(DuPont's 20 percent investment in Pioneer)
</TABLE>
All multiples were based on historical financial information available at the
time of the announcement of the relevant transaction. Applying a range of
selected multiples for the selected transactions of latest 12 months sales,
EBITDA and earnings before interest and taxes to corresponding financial data
for Pioneer resulted in an implied enterprise reference range for Pioneer of
approximately $8.0 billion to $13.8 billion.
PIONEER STAND-ALONE REFERENCE RANGE. On the basis of the valuation
methodologies applied in the Discounted Cash Flow Analysis and the Selected
Merger and Acquisitions Analysis, Credit Suisse First Boston derived an
enterprise reference range for Pioneer on a stand-alone basis, including
Pioneer's 50 percent interest in the Optimum Quality Grains joint venture, of
approximately $8.0 billion to $9.1 billion. Based on estimates provided by
DuPont management of the potential quantification of certain outstanding
litigation and the estimated net debt of Pioneer at May 31, 1999, Credit Suisse
First Boston derived an implied equity reference range for Pioneer on a
stand-alone basis of approximately $7.7 billion to $8.9 billion, or
approximately $31.97 to $36.82 per share.
SYNERGIES ANALYSIS. Credit Suisse First Boston estimated the present value
of the unlevered after-tax free cash flows that DuPont could derive through 2009
from synergies anticipated by the management of DuPont to result from the
merger. Ranges of terminal values were estimated by applying a perpetual growth
rate of 0 percent to the unlevered after-tax free cash flow in 2009. The
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unlevered after-tax cash flow streams and estimated terminal values were then
discounted to present value using discount rates ranging from 10.5 percent to
11.5 percent. This analysis indicated an implied value for the synergies of
approximately $1.2 billion to $1.3 billion. Credit Suisse First Boston then
subtracted certain transaction related costs, such as integration costs and
estimated payments to Pioneer employees based on Pioneer's severance plan, to
derive an estimated value of the synergies, net of transaction related costs, of
approximately $5.89 to $6.14, for each outstanding share of Pioneer common stock
not owned by DuPont.
AGGREGATE REFERENCE RANGE BASED ON PIONEER STAND-ALONE REFERENCE RANGE AND
SYNERGIES ANALYSIS. Based on the Pioneer stand-alone reference range of
approximately $31.97 to $36.82 per share and the value of the synergies
anticipated by the management of DuPont to result from the merger, net of
transaction related costs, of approximately $5.89 to $6.14 per share, Credit
Suisse First Boston derived an aggregate equity reference range for Pioneer of
approximately $37.86 to $42.96 per share.
PRO FORMA MERGER ANALYSIS. Credit Suisse First Boston analyzed the
potential pro forma effect of the merger on DuPont's earnings per share during
calendar years 2000 and 2001 after giving effect to the synergies anticipated by
the management of DuPont to result from the merger. This analysis indicated that
the merger would be dilutive to DuPont's earnings per share in 2000 and 2001.
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS. In the course of preparing its opinion, Credit Suisse First
Boston considered other information and data, including, among other things, the
trading characteristics of Pioneer common stock and DuPont common stock and
equity research coverage of Pioneer and DuPont.
MISCELLANEOUS. Pursuant to the terms of Credit Suisse First Boston's
engagement, DuPont has agreed to pay Credit Suisse First Boston for its
financial advisory services upon completion of the merger an aggregate fee of up
to $15,000,000. DuPont also has agreed to reimburse Credit Suisse First Boston
for its out-of-pocket expenses, including the fees and expenses for legal
counsel and any other advisor retained by Credit Suisse First Boston, and to
indemnify Credit Suisse First Boston and related persons and entities against
liabilities, including liabilities under the federal securities laws, arising
out of Credit Suisse First Boston's engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to DuPont unrelated to the proposed merger, for which
services Credit Suisse First Boston and its affiliates have received
compensation. In the ordinary course of business, Credit Suisse First Boston and
its affiliates may actively trade the debt and equity securities of both DuPont
and Pioneer for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
SALOMON SMITH BARNEY
At the meeting of the board of directors of DuPont held on March 7, 1999,
Salomon delivered its oral opinion, to the effect that, as of such date, the
merger consideration was fair to DuPont from a financial point of view. At a
subsequent meeting of the Board of Directors on March 14, 1999, Salomon affirmed
its opinion that the merger consideration, as of such date, was fair to DuPont
from a financial point of view. Salomon confirmed its oral opinion in a written
opinion dated March 14, 1999.
SHAREHOLDERS ARE URGED TO READ THE SALOMON OPINION IN ITS ENTIRETY FOR
INFORMATION WITH RESPECT TO THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY SALOMON IN RENDERING ITS
OPINION. REFERENCES TO THE SALOMON OPINION IN THIS PROXY STATEMENT/ PROSPECTUS
AND THE SUMMARY OF THE SALOMON OPINION SET FORTH BELOW ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE SALOMON OPINION, WHICH IS INCLUDED
AS APPENDIX D TO THIS PROXY
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STATEMENT/PROSPECTUS. THE SALOMON OPINION DOES NOT CONSTITUTE A RECOMMENDATION
CONCERNING HOW HOLDERS OF PIONEER COMMON STOCK SHOULD VOTE WITH RESPECT TO THE
MERGER AGREEMENT OR THE MERGER.
In connection with rendering its opinion, Salomon reviewed certain publicly
available information concerning Pioneer and certain other financial information
concerning Pioneer, including financial forecasts, that were provided to Salomon
by DuPont and Pioneer. Salomon discussed the past and current business
operations, financial condition and prospects of Pioneer with certain officers
and employees of DuPont and Pioneer. Salomon also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon assumed
and relied upon the accuracy and completeness of the information reviewed by it
for purposes of its opinion, and Salomon did not assume any responsibility for
independent verification of such information. With respect to the financial
forecasts prepared by DuPont and Pioneer, Salomon was advised by the managements
of DuPont and Pioneer, respectively, that such forecasts were reasonably
prepared on bases reflecting its best currently available estimates and
judgments, and Salomon expressed no opinion with respect to such forecasts or
the assumptions on which they were based. Salomon did not assume any
responsibility for any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of Pioneer.
The Salomon opinion is necessarily based upon conditions as they existed and
could be evaluated on the date of such opinion. The Salomon opinion does not
address DuPont's underlying business decision to effect the merger, and it does
not express any view on the effect on DuPont of the merger and related
transactions. The Salomon opinion is directed only to the fairness, from a
financial point of view, to DuPont of the merger consideration.
The following is a summary of the report presented on March 7, 1999 and
confirmed on March 14, 1999, by Salomon to the board of directors of DuPont in
connection with the rendering of its oral opinion:
IMPLIED TRANSACTION PREMIUMS. Salomon reviewed certain implied transaction
premiums using a range of prices per share of Pioneer common stock for the
12-month period ended March 5, 1999. Salomon noted that the merger consideration
represented a premium of:
(A) 75.3 percent to the closing stock price on March 5, 1999, of $22.81;
(B) 93.9 percent to the 52-week trading low of $20.63, which occurred on
March 4, 1999; and
(C) (-6.3 percent) to the 52-week trading high of $42.69, which occurred on
May 11, 1998.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow ("DCF")
methodology, Salomon calculated the present value of the projected future cash
flows for Pioneer (without giving effect to the merger or any synergy estimates
expected to be realized as a result of the merger). The DCF analysis of Pioneer
was based on two separate sets of projections provided by Pioneer management
(the "P Case") and DuPont management (the "D Case"), respectively. In addition,
Salomon analyzed a sensitivity to the projections prepared by DuPont which
reflected certain information contained in the Pioneer projections (the "DS
Case"). Finally, with respect to each set of projections, Salomon performed a
DCF analysis taking into account certain potential synergies and cost savings
("Synergies") which might be achieved in the merger.
Under each case, Salomon aggregated (x) the present value of the free cash
flows over the applicable forecast period with (y) the present value of the
range of terminal values described below. As part of the DCF analysis, Salomon
used discount rates ranging from 11.0 percent to 13.0 percent. The range of
terminal values was generally calculated by applying multiples (ranging from
11.0x to
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13.0x Pioneer's EBITDA) for the last year of the forecast period. The DCF
analyses based on the following cases resulted in the following ranges of values
per share of Pioneer common stock:
(A) P Case--$34.90 to $45.90
(B) P Case with Synergies--$42.20 to $55.10
(C) D Case--$24.50 to $32.50
(D) D Case with Synergies--$31.80 to $41.50
(E) DS Case--$28.50 to $37.50
(F) DS Case with Synergies--$35.80 to $46.60
COMPARABLE PUBLIC COMPANIES ANALYSIS--PIONEER. Salomon reviewed certain
publicly available financial and operating information of four public companies
consisting of:
(1) American Home Products
(2) Novartis AG
(3) Zeneca Group
(4) Monsanto
In that review, estimated 1999 and 2000 price/earnings multiples, 1999 and
2000 price/cash earnings multiples (defined as price/(earnings plus last twelve
months depreciation and amortization per diluted share)) and firm value/last
twelve months revenues, EBIT and EBITDA multiples were developed from Salomon's
research and First Call calendarized mean estimates as of March 1999. The
comparable companies listed above were chosen because they operate in the life
sciences industry, as does Pioneer. Salomon believed that the most applicable
comparable company for its review was Monsanto. For this analysis Salomon used
trading information as of March 4, 1999.
The review indicated that:
(A) the closing price per share as a multiple of estimated 1999 earnings
ranged from 23.7x to 57.7x, with a mean of 35.0x and a median of 29.3x,
for the comparable companies;
(B) the closing price per share as a multiple of estimated 2000 earnings
ranged from 21.1x to 40.5x, with a mean of 27.8x and a median of 24.7x,
for the comparable companies;
(C) the closing price per share as a multiple of estimated 1999 cash
earnings ranged from 19.3x to 25.3x, with a mean of 22.0x and a median of
21.8x, for the comparable companies;
(D) the closing price per share as a multiple of estimated 2000 cash
earnings ranged from 17.6x to 22.6x, with a mean of 19.3x and a median of
18.5x, for the comparable companies;
(E) firm value as a multiple of last twelve months revenues ranged from 4.1x
to 6.3x, with a mean of 4.9x and a median of 4.6x;
(F) firm value as a multiple of last twelve months EBIT ranged from 21.8x to
35.0x, with a mean of 26.2x and a median of 24.0x, for the comparable
companies; and
(G) firm value as a multiple of last twelve months EBITDA ranged from 17.9x
to 21.5x, with a mean of 19.3x and a median of 18.9x, for the comparable
companies.
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This comparable public companies analysis resulted in values ranging from
$23.00 to $29.00 per share of Pioneer common stock.
ACQUISITION PREMIUM ANALYSIS. Using publicly available information, Salomon
reviewed the acquisition premiums paid on acquisitions in the price range from
$5 billion to $15 billion during the period from January 1, 1998 to March 4,
1999. Salomon reviewed the premiums paid over the stock price for each acquired
company both one day prior to the announcement date and four weeks prior to the
announcement date, dividing the acquisitions into cash transactions and stock
transactions. The average premium to the stock price one day prior to the
announcement date for the reviewed cash transactions was 37.4 percent, and the
average premium to the stock price four weeks prior to the announcement date for
cash transactions was 24.3 percent. The average premium to the stock price one
day prior to the announcement date for the reviewed stock transactions was 47
percent, and the average premium to the stock price four weeks prior to the
announcement date for stock transactions was 54.2 percent. The average premium
to the stock price one day prior to the announcement date for all reviewed
transactions was 40 percent, and the average premium to the stock price four
weeks prior to the announcement date for all transactions was 44.1 percent.
Applying an acquisition premium of 40 percent to the range of $23.00-$29.00
produced by the comparable public companies analysis valuation of Pioneer
described above, the acquisition premium analysis resulted in values ranging
from $32.25 to $40.50 per share of Pioneer common stock.
COMPARABLE TRANSACTIONS ANALYSIS. Using publicly available information,
Salomon reviewed six transactions in the life sciences industry. These
transactions were:
(1) Monsanto/Delta & Pine Land
(2) Monsanto/DEKALB Genetics
(3) Monsanto/Cargill International Seed Businesses
(4) Dow AgroSciences/Mycogen
(5) DuPont/Pioneer (original investment)
(6) AgrEvo/Cargill Hybrid Seed North America
The review showed that for these transactions the acquisition value as a
multiple of last twelve months sales ranged from 3.3x to 10.1x. The acquisition
value as a multiple of last twelve months EBIT for the respective acquisitions
ranged from 23.6x to 76.7x, although statistics for two of the transactions were
unavailable and statistics for one transaction were not meaningful. The
acquisition value as a multiple of last twelve months EBITDA for the respective
acquisitions ranged from 19.0x to 58.9x, although statistics for two of the
transactions were unavailable and statistics for one transaction were not
meaningful. This comparable transactions analysis resulted in values ranging
from $36.50 to $51.75 per share of Pioneer common stock.
The foregoing is a summary of the material financial analyses furnished by
Salomon to the DuPont Board of Directors but it does not purport to be a
complete description of the analyses performed by Salomon or of its
presentations to the DuPont Board of Directors. The preparation of financial
analyses and fairness opinions is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. Salomon made no attempt to assign specific weights to particular
analyses or factors considered, but rather made qualitative judgments as to the
significance and relevance of the analyses and factors considered. Accordingly,
Salomon believes that its analyses (and the summary set forth above) must be
considered as a whole, and that selecting portions of such analyses and of the
factors considered by Salomon, without considering all of such analyses and
factors considered by Salomon, could create a misleading or incomplete view of
the processes underlying the analyses conducted by Salomon and its opinion. With
regard to the comparable public company analyses summarized above, Salomon
selected comparable public companies on the basis of
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various factors, including the size of the public company and similarity of the
line of business; however, no public company utilized as a comparison in such
analysis, and no transaction utilized as a comparison in the comparable
transaction analyses summarized above, is identical to Pioneer or the merger
with DuPont. As a result, these analyses are not purely mathematical, but also
take into account differences in financial and operating characteristics of the
comparable companies and other factors that could affect the transaction or
public trading value of the comparable companies and transactions to which
Pioneer and the merger are being compared. In its analyses, Salomon made
numerous assumptions with respect to Pioneer, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Pioneer. Any estimates contained in Salomon's
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. Estimates of values of companies do not purport to
be appraisals or necessarily to reflect the prices at which companies may
actually be sold. Because such estimates are inherently subject to uncertainty,
none of Pioneer, DuPont, DuPont's Board of Directors, Salomon or any other
person assumes responsibility if future results or actual values differ
materially from the estimates. Salomon's analyses were prepared solely as part
of Salomon's analysis of the fairness of the merger consideration and were
provided to DuPont's Board of Directors in that connection.
Salomon is an internationally recognized investment banking firm engaged,
among other things, in the valuation of businesses and their securities in
connection with mergers and acquisitions, restructuring, leveraged buyouts,
negotiated underwriting, competitive biddings, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes. DuPont selected Salomon Smith Barney to act as its financial
advisor on the basis of Salomon's international reputation and Salomon's
familiarity with DuPont. Salomon and its predecessors and affiliates have
previously rendered investment banking and financial advisory services to
DuPont, for which they received customary compensation. In addition, in the
ordinary course of its business, Salomon and its affiliates (including Citigroup
Inc.) may actively trade the debt and equity securities of both DuPont and
Pioneer for its own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Pursuant to Salomon's engagement letter, DuPont has agreed to pay Salomon a
fee of $13,000,000 upon consummation of the merger. DuPont has also agreed to
reimburse Salomon for its reasonable travel and other out-of-pocket expenses
incurred in connection with its engagement (including the reasonable fees and
disbursements of its counsel) and to indemnify Salomon against certain
liabilities and expenses relating to or arising out of its engagement, including
certain liabilities under the federal securities laws.
The fairness opinion and analyses of Salomon Smith Barney were only one of
the factors considered by the DuPont Board of Directors in determining to
approve the merger agreement and the merger. The merger consideration was
determined by arm's-length negotiations between DuPont, which consulted with
Salomon in the process, and Pioneer, and was not established by Salomon.
INTERESTS OF MEMBERS OF PIONEER'S BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER
When you consider the recommendation of the board of directors of Pioneer,
you should be aware that executive officers and directors of Pioneer may have
interests in the merger that are different from your interests. These interests
may create potential conflicts of interest. The Pioneer board of directors was
aware of these interests when it approved the merger and the merger agreement.
To our knowledge, the executive officers and directors do not have any material
interest in the merger, apart from their interests as holders of shares of
Pioneer common stock, other than those described below.
CHANGE IN CONTROL. The consummation of the merger will constitute a "change
in control" under applicable Pioneer employee benefit plans.
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PIONEER STOCK OPTIONS AND RESTRICTED STOCK. Pioneer has issued stock
options and restricted stock to certain executive officers, key employees and
non-employee directors under its Restricted Stock Plan, Stock Option Plan and
Directors' Restricted Stock Plan. Under the terms of these plans, Pioneer stock
options that are outstanding as of the completion of the merger will become
fully vested and exercisable, and the restrictions on outstanding restricted
stock will lapse as of that date. Holders of restricted stock will have the same
right to receive the merger consideration as do holders of Pioneer common stock
generally. Under the merger agreement, each outstanding Pioneer stock option
will, at the election of the optionee, be converted into either an option to
purchase a fraction of a share of DuPont common stock worth $40 at an equitably
adjusted exercise price or, subject to a limit on the total cash paid, a right
to receive cash equal to the spread between $40 and the exercise price of the
option.
In addition, if the employment of a participant in the Restricted Stock Plan
is terminated during any of the three years following the merger under
circumstances that would entitle him or her to severance benefits under
Pioneer's Change in Control Severance Compensation Plan for Management
Employees, the participant will be entitled to receive a lump sum cash payment
equal to the value of the award that he or she would have received for that
year, but prorated for the period prior to termination.
The number of stock options which will become vested under the terms of the
existing plans as a result of the merger with respect to Pioneer's chief
executive officer, its other four most highly compensated executive officers and
its other 17 executive officers as a group, are as follows: Charles S. Johnson,
608,000; Jerry L. Chicoine, 306,500; Dr. Richard L. McConnell, 212,000; John D.
James, 206,000; Robert K. Wichmann, 80,000; and other 17 executive officers as a
group, 736,130.
The number of shares of restricted stock on which restrictions under the
terms of the existing plans will lapse as a result of the merger held by
Pioneer's chief executive officer, its other four most highly compensated
executive officers, its other 17 executive officers as a group and its
non-employee directors as a group, are as follows: Charles S. Johnson, 151,849;
Jerry L. Chicoine, 78,451; Dr. Richard L. McConnell, 53,840; John D. James,
54,549; Robert K. Wichmann, 41,993; other 17 executive officers as a group,
393,111; and non-employee directors as a group, 8,200.
PIONEER CASH BONUSES. Pioneer executive officers as well as key employees
are eligible to receive cash bonuses under Pioneer's Annual Reward Program
formally known as its Management Reward Program--Performance Based. Upon the
merger and pursuant to the terms of the merger agreement, participants in this
plan will be paid a bonus for Pioneer's 1999 fiscal year based on Pioneer's
actual performance or on the assumption that Pioneer had met its financial
targets for its 1999 fiscal year, whichever results in the greater bonus. In
addition, executive officers and other key executives will receive the cash
equivalent of a restricted stock award for Pioneer's 1999 fiscal year under the
Pioneer Restricted Stock Plan based on Pioneer's actual performance or on the
assumption that Pioneer had met its financial targets for its 1999 fiscal year,
whichever results in the greater bonus. See "The Merger Agreements--Benefit
Plans--Treatment of Pioneer Bonus Plans." If Pioneer meets (or is assumed to
have met) its financial targets for its 1999 fiscal year, the aggregate cash
payment to be made to the five most highly compensated executive officers of
Pioneer for the year ended August 31, 1999 would be $2.9 million, and the
aggregate cash payment to be made to all other executive officers as a group
would be $3.3 million. If the closing of the merger occurs after August 31,
1999, executive officers will receive cash payments for the 2000 fiscal year
using the foregoing formulas, but prorated for the portion of the fiscal year
prior to the closing.
In addition, if the employment of a participant in the Annual Reward Program
is terminated during any of the three years following the merger under
circumstances that would entitle him or her to severance benefits under
Pioneer's Change in Control Severance Compensation Plan for Management
Employees, the participant will be entitled to receive a lump sum cash payment
equal to
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the value of the award that he or she would have received for that year, but
prorated for the period prior to termination.
PIONEER CHANGE IN CONTROL SEVERANCE COMPENSATION PLAN FOR MANAGEMENT
EMPLOYEES. Pioneer maintains a severance plan in which all of its executive
officers and other key managers participate, including its five most highly
compensated executive officers.
If a covered individual's employment is terminated within three years
following the merger under circumstances which entitle him or her to severance
payments and benefits under the plan, he or she will be entitled to the
following:
- a lump sum cash payment equal to three times the sum of his or her annual
base salary and incentive bonus payments (including the value of
restricted stock grants); and
- continued medical, dental and life insurance benefits for a period of 12
months.
Terminations of employment entitling a covered executive officer to the
foregoing severance benefits consist of any termination by the surviving
corporation other than for cause, and termination by the covered individual for
stated good reason, as defined in the plan, in each case within three years
following the merger.
If any payment made under any plan or arrangement to a covered executive
officer is subject to any excise tax under Section 4999 of the Internal Revenue
Code, an additional cash payment will be made to place that person in the same
net after-tax position as would have been the case if no excise tax were
imposed.
Although not anticipated, it is presently estimated that, if the employment
of the five most highly compensated executive officers of Pioneer was terminated
immediately following the merger under circumstances entitling those persons to
severance benefits under Pioneer's severance plan, those persons would be
entitled to severance benefits of, in the aggregate, $19.7 million. It is also
presently estimated that the severance benefits payable to all other Pioneer
executive officers under Pioneer's severance plan upon a like termination of
employment would be, in the aggregate, $24.5 million. These figures do not
include applicable gross-up payments.
DEFERRED COMPENSATION AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. Pioneer
maintains deferred compensation and supplemental executive retirement plans in
which executive officers participate. Upon certain terminations of employment
within five years following the merger, covered executive officers would receive
enhanced benefits (including full vesting and a deemed increase in service) in a
lump sum within 10 days following termination. The terminations under which
these benefits are payable include termination by the surviving corporation
other than for cause, and termination by the covered executive officer for
stated good reason. With respect to the applicable Pioneer supplemental
executive retirement plan, it is presently estimated that, if the employment of
the five most highly compensated executive officers of Pioneer was terminated
immediately following the merger under circumstances entitling those persons to
the full vesting and deemed increase in service under this plan, those persons
would be entitled to benefits under this plan of, in the aggregate, $26.6
million. It is also presently estimated that the benefits payable to all other
Pioneer executive officers under this plan upon a like termination of employment
would be, in the aggregate, $25.8 million.
With respect to the applicable Pioneer deferred compensation plan, it is
presently estimated that, if the employment of the five most highly compensated
executive officers of Pioneer was terminated immediately following the merger
under circumstances entitling those persons to the full vesting of benefits
under this plan, those persons would become vested, in the aggregate, in $5.2
million of benefits under this plan in addition to benefits that are currently
vested under this plan. It is also presently estimated that, upon a like
termination of employment, all other Pioneer executive officers would become
vested, in the aggregate, in $20.4 million of benefits under this plan in
addition to benefits that are currently vested under this plan.
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INDEMNIFICATION AGREEMENTS. Pioneer has entered into indemnification
agreements with each of its directors and executive officers. These
indemnification agreements provide for indemnification of the covered individual
to the fullest extent permitted by law in any proceeding to which the covered
individual is or may become a party by reason of his or her status as an officer
or director of Pioneer. Upon a change in control of Pioneer (which, under the
indemnification agreements, will occur on shareholder approval of the merger),
Pioneer must deliver a standby letter of credit to each covered individual,
naming that covered individual as the sole beneficiary of the letter, as a means
of securing Pioneer's obligations under the agreement. The merger agreement also
provides for indemnification of directors and officers. See "THE MERGER
AGREEMENT--Indemnification and Insurance."
MANAGEMENT RETENTION AGREEMENTS. Under the merger agreement, Pioneer and
DuPont have agreed that Pioneer may enter into Management Retention Agreements
with up to 21 executive officers. These agreements have been entered into. See
"THE MERGER AGREEMENT--Benefit Plans--Employee Retention Agreements."
CERTAIN EFFECTS OF THE MERGER; NEW YORK STOCK EXCHANGE DELISTING; OPERATIONS OF
PIONEER AFTER THE MERGER
As a result of the merger, Pioneer shareholders who receive cash for their
shares of Pioneer common stock will not have an equity interest in DuPont and
will therefore not share in any of the future earnings and potential growth of
DuPont.
Upon consummation of the merger, shares of Pioneer common stock will be
delisted from the New York Stock Exchange and deregistered under the Securities
Exchange Act of 1934. Except as otherwise described in this proxy statement,
Pioneer currently expects that it will initially be operated after the merger in
a manner similar to that of its current operations. See "SPECIAL FACTORS--Plans
for Pioneer After the Merger."
U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinions of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel
to DuPont, and Fried, Frank, Harris, Shriver & Jacobson, special counsel to
Pioneer, the material federal income tax consequences of the merger to DuPont,
Pioneer and the holders of Pioneer common stock who are citizens or residents of
the United States or who are domestic corporations are discussed below. The
discussion below is based upon current provisions of the Internal Revenue Code,
currently applicable Treasury regulations promulgated thereunder, and judicial
and administrative decisions, all of which are subject to change possibly with
retroactive effect. The discussion below is for general information only and
does not purport to address all aspects of federal income taxation that may
affect particular stockholders in light of their particular circumstances, that
are generally assumed to be known by investors or that may affect stockholders
subject to special treatment under the federal income tax laws. See
"--Qualifications" below. The discussion assumes that the shares of Pioneer
common stock are held as capital assets. In addition, no information is provided
herein with respect to the tax consequences of the merger under foreign, state
or local laws.
Neither Pioneer nor DuPont has requested a ruling from the Internal Revenue
Service ("IRS") with regard to any of the federal income tax consequences of the
merger, and the opinions of counsel, as described below, to be delivered as
conditions to the merger will not be binding on the IRS and there can be no
assurance that the IRS or the courts will not take a contrary view.
TAX OPINION. As conditions to their respective obligations to consummate
the merger, DuPont must receive an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP and Pioneer must receive an opinion of Fried, Frank, Harris, Shriver &
Jacobson (which condition Pioneer does not intend to waive without re-soliciting
proxies from shareholders of Pioneer), subject to the assumptions set forth
below, to the effect that, based upon present federal income tax law, the merger
will qualify as a
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reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Assuming that the merger qualifies as a reorganization:
(1) none of Pioneer, DuPont or Delta Acquisition Sub will recognize gain
or loss as a result of the merger,
(2) the Pioneer shareholders that exchange their shares of Pioneer
common stock solely for shares of DuPont common stock will not recognize
gain or loss in the merger, and
(3) the Pioneer shareholders that exchange their shares of Pioneer
common stock for shares of DuPont common stock and cash or solely for cash
will recognize gain, if any, in the merger but not in excess of the amount
of cash received.
These opinions will be based on, among other things:
(1) certain representations and statements of DuPont, Pioneer and Delta
Acquisition Sub,
(2) the assumption that such representations and statements will be
complete and accurate as of the effective time of the merger,
(3) the assumption that the merger and related transactions will take
place in accordance with all of the terms of the merger agreement and as
described in this proxy statement/prospectus, and
(4) considerations relating to the value of the DuPont common stock
received in the merger.
The following discussion addresses certain federal income tax consequences
of the merger to a Pioneer stockholder, assuming that the merger qualifies as a
reorganization.
ONLY SHARES OF DUPONT COMMON STOCK RECEIVED.
Except as discussed below with respect to cash received in lieu of a
fractional share of DuPont common stock, a Pioneer stockholder who receives
solely shares of DuPont common stock in exchange for such holder's shares of
Pioneer common stock will not recognize gain or loss. The tax basis of the
shares of DuPont common stock received in the merger will be the same as the tax
basis of the shares of Pioneer common stock exchanged therefor. The holding
period of the shares of DuPont common stock received in the merger will include
the holding period of the shares of Pioneer common stock exchanged therefor.
ONLY CASH RECEIVED.
A Pioneer stockholder who receives solely cash in the merger in exchange for
such stockholder's shares of Pioneer common stock generally will recognize
capital gain or loss measured by the difference between the amount of cash
received with respect to each share of Pioneer common stock and the tax basis of
each such share of Pioneer common stock exchanged therefor. Such capital gain or
loss will be long-term capital gain or loss if the stockholder's holding period
with respect to its Pioneer common stock exceeds one year as of the effective
time of the merger. If, however, any such stockholder actually or constructively
owns shares of DuPont common stock after the merger, as a result of constructive
ownership of shares of Pioneer common stock that are exchanged for shares of
DuPont common stock in the merger, or as a result of prior actual or
constructive ownership of shares of DuPont common stock, or for any other
reason, the consequences to such stockholder may be similar to those discussed
below under "--Shares of DuPont Common Stock and Cash Received--Treatment of
Gain Recognized," except that the amount of consideration treated as a dividend
would not be limited to the amount of such stockholder's gain realized in the
transaction. See also "--Shares of DuPont Common Stock and Cash Received--Effect
of Overlapping or Constructive Ownership," for a general discussion of the
effect of a stockholder's overlapping or constructive ownership on the
dividend/capital gain issue.
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SHARES OF DUPONT COMMON STOCK AND CASH RECEIVED.
GENERAL. Except as discussed below with respect to cash received in lieu of
a fractional share of DuPont common stock, a Pioneer stockholder that receives
both shares of DuPont common stock and cash in exchange for shares of Pioneer
common stock will realize gain or loss equal to the difference between (1) the
sum of the cash and the fair market value of the DuPont common stock received
and (2) such stockholder's adjusted tax basis in its shares of Pioneer common
stock exchanged therefor. Such gain will be recognized only to the extent of
cash received, however, and no loss will be recognized on the exchange. For this
purpose gain or loss must be calculated separately for each identifiable block
of shares surrendered in the exchange, and a loss realized on one block of
shares cannot be used to offset a gain realized on another block of shares. The
ability to allocate cash and DuPont common stock among different blocks of
Pioneer common stock is unclear under current law and stockholders are urged to
consult their tax advisors regarding the ability to make such an allocation. Any
recognized capital gain will be long-term capital gain if the stockholder's
holding period with respect to its Pioneer common stock exceeds one year as of
the effective time of the merger.
TREATMENT OF GAIN RECOGNIZED. Any such gain recognized will be taxed as
gain from the sale or exchange of stock (I.E., capital gain) except in the
circumstances (primarily cases where there is overlapping or constructive
ownership or where the stock election is oversubscribed) described in this
paragraph. A Pioneer stockholder will be required to treat any gain recognized
as a dividend, to the extent of the stockholder's ratable share of earnings and
profits, if, as a result of the deemed redemption described in step (2) below,
such stockholder's interest in DuPont was not reduced sufficiently enough to
cause the cash received to be not "essentially equivalent to a dividend" under
Section 302 of the Internal Revenue Code. Whether a stockholder's interest was
reduced sufficiently enough to cause the cash received to be not "essentially
equivalent to a dividend" requires a determination based on a stockholder's
particular facts and circumstances. However, the IRS has indicated in published
rulings that a distribution that results in any reduction in interest of a
small, minority stockholder in a publicly held corporation will sufficiently
reduce the stockholder's interest in the corporation if the stockholder
exercises no control with respect to corporate affairs. In addition, if the
deemed redemption described in step (2) below is "substantially
disproportionate" with respect to the stockholder, the gain recognized will be
taxed as capital gain. The deemed redemption generally will be substantially
disproportionate if the percentage of DuPont common stock owned after the deemed
redemption described in step (2) below is less than 80 percent of the percentage
of DuPont common stock owned after step (1) below. For purposes of determining
whether a stockholder's interest has been reduced, a Pioneer stockholder will be
treated as if such stockholder had engaged in a hypothetical transaction in
which the stockholder and all other Pioneer stockholders (1) received solely
shares of DuPont common stock in exchange for all of their shares of Pioneer
common stock, and (2) thereafter had a portion of such shares of DuPont common
stock redeemed for the cash portion of the merger consideration. A Pioneer
stockholder's hypothetical interest in DuPont after step (1) is compared to such
stockholder's interest in DuPont subsequent to the deemed redemption in step
(2). In each case, subject to limited exceptions, shares of DuPont common stock
actually or constructively owned, under the constructive ownership rules
described in "--Effect of Overlapping or Constructive Ownership" below, by such
stockholder will be considered owned for purposes of applying these tests.
EFFECT OF OVERLAPPING OR CONSTRUCTIVE OWNERSHIP. Under the applicable
constructive ownership rules of Section 318 of the Internal Revenue Code, a
stockholder will, in general, be treated as owning shares owned by some family
members and other related entities, or that are subject to options owned or
deemed owned by such person. The actual or constructive ownership of such shares
of Pioneer common stock may have the effect of causing a Pioneer stockholder
that would otherwise qualify for capital gain treatment to fail to so qualify
and subject such stockholder to dividend treatment on the cash portion of the
merger consideration to the extent of the stockholder's ratable share of
earnings
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and profits, even if such stockholder receives solely cash in the merger.
Therefore, Pioneer shareholders who (1) constructively own shares of Pioneer
common stock, or (2) actually or constructively own shares of DuPont common
stock, should consult their tax advisors as to the tax consequences of receiving
cash, whether such stockholder intends to make a stock election or not.
TAX BASIS AND HOLDING PERIOD OF SHARES OF DUPONT COMMON STOCK RECEIVED IN
THE MERGER. The tax basis of each share of DuPont common stock received in the
merger will be the same as the tax basis of the shares of Pioneer common stock
exchanged therefor, increased by the amount of gain recognized on the exchange
with respect to such shares of Pioneer common stock, decreased by the tax basis
of any portion of such shares of Pioneer common stock which are converted into
cash in lieu of receipt of a fractional share of DuPont common stock, and
further decreased by the amount of cash received with respect to such shares of
Pioneer common stock, other than cash received in lieu of a fractional share
interest. The holding period of the shares of DuPont common stock received will
include the holding period of the shares of Pioneer common stock exchanged
therefor.
FRACTIONAL SHARES.
If a Pioneer stockholder receives cash in lieu of a fractional share of
DuPont common stock in the merger, such cash amount will be treated as received
in exchange for the fractional share of DuPont common stock. Gain or loss
recognized as a result of that exchange will be equal to the cash amount
received for the fractional share of DuPont common stock reduced by the
proportion of the stockholder's tax basis in shares of Pioneer common stock
exchanged and allocable to the fractional share of DuPont common stock.
PIONEER STOCKHOLDER REPORTING REQUIREMENTS.
A Pioneer stockholder who exchanges Pioneer common stock for DuPont common
stock or exchanges Pioneer common stock for a combination of DuPont common stock
and cash pursuant to the merger will be required to retain records and file with
such stockholder's federal income tax return for the taxable year in which the
merger takes place a statement setting forth all relevant facts in respect of
the nonrecognition of gain or loss upon such exchange. The statement is required
to include:
(1) the shareholder's tax basis in the shares of Pioneer common stock
surrendered in the merger, and
(2) the fair market value of the DuPont common stock received in the
merger as of the effective time of the merger and the amount of any cash
received in the merger.
QUALIFICATIONS.
As noted above, the foregoing discussion does not address aspects of U.S.
federal income taxation that may be relevant to all Pioneer shareholders who are
subject to special provisions of U.S. federal income tax law. For example, the
discussion does not address aspects of U.S. federal income taxation that may be
relevant to:
- dealers in securities or currencies,
- traders in securities,
- financial institutions,
- tax-exempt organizations,
- insurance companies,
- persons holding shares of Pioneer common stock as part of a hedging,
"straddle," conversion or other integrated transaction,
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- non-United States persons,
- persons whose functional currency is not the United States dollar or
- persons who acquired their shares of Pioneer common stock pursuant to
the exercise of employee stock options or otherwise as compensation.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS,
PIONEER SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, WHETHER GAIN, IF ANY, WILL BE TREATED AS CAPITAL GAIN OR A
DIVIDEND, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REGULATORY MATTERS
At the time the merger agreement was signed, we could not have completed the
merger until we gave notification and furnished information to the Federal Trade
Commission and the Antitrust Division of the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act and the specified waiting period
requirements were satisfied. The specified waiting period is 30 days after the
initial filing unless additional information is requested. The parties filed the
required notification and report forms with the Federal Trade Commission and the
Antitrust Division on March 22, 1999. On April 22, 1999, the parties recertified
our Hart-Scott-Rodino filing with the Department of Justice. This action started
a new 30-day waiting period and gave DuPont and Pioneer time to respond to
questions raised by the Department of Justice. The Federal Trade Commission
granted early termination of the waiting period, effective as of May 21, 1999.
In addition, the merger was subject to review by the Commission of the European
Community. We made the applicable filings with the Commission of the European
Community on May 17, 1999 and received the requisite approval of the European
Commission on June 21, 1999. We do not expect to be required to receive any
other material regulatory approval in order to consummate the merger.
However, there still can be no assurance that the merger will not be delayed
because of the antitrust laws. At any time before or after completion of the
merger, the Federal Trade Commission, the Antitrust Division, a state
governmental authority or a private person or entity could seek under the
antitrust laws to enjoin the merger or to cause DuPont to divest, in whole or in
part, any of its assets or businesses, including assets and businesses of
Pioneer. We cannot guarantee that a challenge to the merger will not be made or
that, if a challenge is made, DuPont will prevail. Our obligations to complete
the merger are dependent on the condition that there be no order, decree or
injunction of any court of competent jurisdiction that prohibits the merger. See
"THE MERGER AGREEMENT-- Best Efforts; Antitrust Matters." For a description of
our obligations to seek regulatory approvals, see "THE MERGER AGREEMENT--Best
Efforts; Antitrust Matters."
RESALE RESTRICTIONS
All shares of DuPont common stock received by Pioneer shareholders in the
merger will be freely transferable, except those received by "affiliates," as
that term is defined under the Securities Act of 1933, of Pioneer at the time of
the Pioneer special meeting. DuPont common stock received by affiliates may be
resold by them only in transactions permitted by the resale provisions of Rule
144 or Rule 145 under the Securities Act, or as otherwise permitted under the
Securities Act. Persons who may be considered to be Pioneer affiliates generally
include individuals or entities that Pioneer controls, are controlled by them,
or are under common control with them, and may include some of its officers and
directors as well as its principal shareholders. The merger agreement requires
Pioneer to use their reasonable best efforts to cause each of their respective
affiliates to execute a written agreement to comply with these requirements.
Under the terms of the merger agreement, certificates surrendered for exchange
by any affiliate of Pioneer will not be exchanged for shares of DuPont common
stock until DuPont has received these agreements from the affiliates of Pioneer.
See "APPENDIX A--Agreement and Plan of Merger--Section 5.17 Affiliate Letters."
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FINANCIAL PROJECTIONS
The financial projections set forth below have not been examined or compiled
by the independent accountants and accordingly, the independent accountants do
not express an opinion or any other form of assurance with respect thereto. The
reports of the independent accountants incorporated in this document by
reference relate to the historical financial information of Pioneer and DuPont.
They do not extend to the financial projections and should not be read to do so.
Such financial projections are not meant to be a presentation of prospective
financial information.
Pioneer provided DuPont with certain non-public financial projections which
were prepared by Pioneer's management for DuPont's use in connection with its
evaluation of the merger. The material portions are set forth below:
<TABLE>
<CAPTION>
PROJECTED FISCAL YEAR
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ---------
<CAPTION>
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Target Growth Core Business
Revenues.............................................. $ 1,995 $ 2,196 $ 2,475 $ 2,726 $ 3,013 $ 3,300
EBITDA(1)............................................. 516 622 769 893 1,029 1,180
EBIT(2)............................................... 421 522 664 783 914 1,060
Unlevered Net Income(3)............................... 282 350 445 525 612 711
Free Cash Flow(4)..................................... 186 255 364 435 527 631
</TABLE>
----------------------------------
(1) Earnings before interest, taxes, depreciation and amortization.
(2) Earnings before interest and taxes (excludes contribution from Optimum
joint venture).
(3) Earnings before interest, taxed at 33 percent effective tax rate.
(4) Unlevered Net Income plus depreciation and amortization, less capital
expenditures, technology investments and changes in working capital.
Pioneer's Target Growth Core Business forecasts integrate assumptions for
all global businesses. The main driver for the forecasts, however, are the
assumptions related to the North American corn market. Pioneer assumes that the
North American corn market size will remain unchanged at 83 million acres.
Pioneer's market share is projected to grow to approximately 50 percent in 2004
from 42 percent in 1998. The compound annual growth rate of gross prices from
1999 to 2004 is projected to be 4.4 percent. Base genetic prices grow at a 3
percent annual growth rate. The premium for the Corn Borer trait is expected to
remain unchanged at $26 per unit and units sales grow to 8.0 million in 2004.
In addition, Pioneer assumed that the North American soybean market would
remain at approximately 75 million acres. Gross prices grow 2 percent annually.
Fixed costs estimates include 10 percent annual growth in research and 5 percent
annual growth in other areas. Pioneer's assumed tax rate is 33 percent for the
entire projection period. No incremental value from potential litigation is
included in these forecasts.
Pioneer also provided information on additional cash flow expected to be
generated from a few specific traits in Pioneer's research and development
pipeline. These cash flows were probability adjusted for technical and
commercial success. The incremental operating income derived from corn rootworm
products is projected to be $11 million in 2002 and $150 million in 2014. The
incremental operating income derived from mold and mycotoxin products is
projected to be $103 million in 2004 and $153 million in 2014. This incremental
operating income is not included in the Target Growth Core Business forecasts.
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FINANCIAL INFORMATION
SELECTED HISTORICAL FINANCIAL DATA
The following tables show summary historical financial data for each
company.
Explanation of periods presented:
- Pioneer's fiscal year ends on August 31 of each year.
- DuPont's fiscal year ends on December 31 of each year.
- Unless the context otherwise indicates, a reference to a Pioneer fiscal
year refers to the calendar year in which that fiscal year was completed.
Some of the information in the following tables is based on the historical
financial information of the companies presented in prior filings with the SEC.
When you read the summary financial information provided in the following
tables, you should also read the historical financial information in the prior
filings. For instructions on how to obtain documents each of the companies has
filed with the SEC, see "WHERE YOU CAN FIND MORE INFORMATION."
Pioneer's historical financial information for each fiscal year presented
was derived from the Pioneer historical consolidated financial statements which
were audited by KPMG Peat Marwick LLP, independent certified public accountants.
DuPont's historical financial information for each fiscal year presented was
derived from the DuPont historical consolidated financial statements which were
audited by PricewaterhouseCoopers LLP, independent accountants.
PIONEER SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION. The table
below shows selected historical financial information about Pioneer. You should
read this information in conjunction with Pioneer's consolidated financial
statements, including the notes that are included with these consolidated
financial statements. In the opinion of Pioneer management, the unaudited
consolidated historical interim financial statements reflect all adjustments,
consisting of only normal recurring items, that are necessary for the fair
presentation of financial position and results of operations for those periods.
See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
---------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995 1994
--------- ----------- --------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Operations:
Net Sales....................................... $ 376 $ 381 $ 1,835 $ 1,784 $ 1,721 $ 1,532 $ 1,479
--------- ----------- --------- --------- --------- --------- ---------
Gross Profit.................................... $ 98 $ 111 $ 890 $ 867 $ 858 $ 760 $ 759
--------- ----------- --------- --------- --------- --------- ---------
Restructuring and Settlements................... $ -- $ -- $ -- $ -- $ -- $ -- $ 45
--------- ----------- --------- --------- --------- --------- ---------
Net Income (Loss)............................... $ (72) $ (56) $ 270 $ 243 $ 223 $ 183 $ 213
--------- ----------- --------- --------- --------- --------- ---------
Per Common Share Data:
Net Income (Loss)
Basic......................................... $ (0.30) $ (0.25) $ 1.13 $ 0.98 $ 0.89 $ 0.72 $ 0.80
Diluted....................................... $ (0.30) $ (0.25) $ 1.08 $ 0.98 $ 0.89 $ 0.72 $ 0.80
Growth in Earnings Per Share
Basic......................................... N/A N/A 15.3% 10.1% 24.1% (10.0)% 56.9%
Diluted....................................... N/A N/A 10.2% 10.1% 24.1% (10.0)% 56.9%
Dividends Declared.............................. $ 0.20 $ 0.17 $ 0.37 $ 0.32 $ 0.28 $ 0.24 $ 0.20
Book Value...................................... $ 4.59 $ 4.72 $ 5.18 $ 4.65 $ 4.12 $ 3.65 $ 3.41
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
---------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- ----------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Summary:
Current Assets.................................. $ 1,646 $ 1,858 $ 1,039 $ 901 $ 784 $ 770 $ 742
Net Property & Other Assets..................... 743 700 678 702 638 523 511
--------- ----------- --------- --------- --------- --------- ---------
Total Assets.................................. $ 2,389 $ 2,558 $ 1,717 $ 1,603 $ 1,422 $ 1,293 $ 1,253
--------- ----------- --------- --------- --------- --------- ---------
Current Liabilities............................. $ 961 $ 1,270 $ 345 $ 329 $ 288 $ 280 $ 232
Long-Term Debt.................................. 205 18 5 19 25 18 66
Other Long-Term Liabilities..................... 123 112 120 107 91 82 74
--------- ----------- --------- --------- --------- --------- ---------
Total Liabilities............................. $ 1,289 $ 1,400 $ 470 $ 455 $ 404 $ 380 $ 372
--------- ----------- --------- --------- --------- --------- ---------
Shareholders' Equity............................ $ 1,100 $ 1,158 $ 1,247 $ 1,148 $ 1,018 $ 913 $ 881
--------- ----------- --------- --------- --------- --------- ---------
Dividends Declared, Common...................... $ 48 $ 47 $ 83 $ 79 $ 69 $ 60 $ 52
Dividends Declared, Preferred................... $ -- $ -- $ 9 $ -- $ -- $ -- $ --
Average Shares Outstanding--Basic............... 239.8 220.5 231.5 246.9 249.5 253.5 265.9
Average Shares Outstanding--Diluted............. 239.8 220.5 250.3 247.5 249.8 253.5 265.9
</TABLE>
DUPONT SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION. The table
below shows selected historical financial information about DuPont. You should
read this information in conjunction with DuPont's consolidated financial
statements, including the notes that are included with these consolidated
financial statements. In the opinion of DuPont management, the unaudited
consolidated historical interim financial statements reflect all adjustments,
consisting of only normal recurring items, that are necessary for the fair
presentation of financial position and results of operations for these periods.
See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Operations:
Sales.......................... $ 6,295 $ 6,194 $ 24,767 $ 24,089 $ 23,644 $ 24,500 $ 22,518
Income from Continuing
Operations................... $ 628 $ 637 $ 1,648(a) $ 1,432(b) $ 2,931 $ 2,858 $ 2,205
--------- --------- --------- --------- --------- --------- ---------
Per Common Share Data:
Income from Continuing
Operations
Basic........................ $ 0.55 $ 0.56 $ 1.45(a) $ 1.26(b) $ 2.60 $ 2.43 $ 1.61
Diluted...................... $ 0.55 $ 0.55 $ 1.43(a) $ 1.24(b) $ 2.56 $ 2.41 $ 1.60
Dividends Declared............. $ 0.35 $ 0.315 $ 1.365 $ 1.23 $ 1.115 $ 1.015 $ 0.91
Book Value..................... $ 12.33 $ 10.11 $ 12.18 $ 9.77 $ 9.19 $ 7.28 $ 9.18
Balance Sheet Summary:
Total Assets................... $ 41,967 $ 39,797 $ 38,536 $ 36,689 $ 32,342 $ 32,748 $ 32,577
--------- --------- --------- --------- --------- --------- ---------
Long-Term Borrowings & Capital
Lease Obligations............ $ 4,566 $ 6,402 $ 4,495 $ 5,897 $ 5,052 $ 5,646 $ 6,338
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(a) 1998 results include a charge of $982 ($0.87 per share--basic; $0.86 per
share--diluted) for write-off of purchased in-process research and
development as required by FASB Interpretation No. 4, a charge of $350
($0.31 per share--basic and diluted) for certain productivity improvement
initiatives, and a gain of $121 ($0.11 per share--basic and diluted) from
sale of the company's interest in CONSOL Energy Inc.
(b) 1997 results include a charge of $1,466 ($1.30 per share--basic; $1.28 per
share--diluted) for write-off of purchased in-process research and
development as required by FASB Interpretation No. 4 and a charge of $220
($0.19 per share--basic and diluted) associated with divestiture of certain
printing and publishing businesses.
58
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA OF DUPONT
(Unaudited) (dollars in millions, except per share data)
The following table presents summary selected unaudited pro forma combined
statements of income and other financial data of DuPont. The information is
presented as if the acquisition of the remaining approximately 80 percent of
Pioneer had occurred as of the beginning of the period for the statements of
income and on March 31, 1999 for balance sheet and other financial data. The
unaudited pro forma data were prepared by DuPont to illustrate the estimated
effects on DuPont of:
- The disposition of Conoco through the exchange offer, the cash offer, and
the transactions directly associated with Conoco's initial public offering
and separation from DuPont, principally:
-- The Conoco exchange offer. On , 1999, DuPont acquired
XXX,XXX,XXX outstanding shares of DuPont common stock from United States
persons in exchange for XX,XXX,XXX shares of Conoco Class B common stock
owned by DuPont. For purposes of these unaudited pro forma combined
financial statements it is assumed, for illustrative purposes only, that
a maximum of 184.1 million shares of DuPont are received in the exchange
offer.
-- The cash offer. On , 1999, DuPont acquired X,XXX,XXX
outstanding shares of DuPont common stock for $X,XXX from holders of
DuPont stock that were not United States persons. For purposes of these
pro forma statements it is assumed, for illustrative purposes only, that
a maximum of 11.8 million shares of DuPont common stock were received in
the cash offer.
-- Conoco's initial public offering. In October 1998, DuPont received the
$4,228 proceeds from Conoco's initial public offering in repayment of a
portion of Conoco's intercompany indebtedness to DuPont.
-- Conoco debt issuances. In April 1999, Conoco completed the sale of
senior debt securities, and DuPont received from Conoco the net proceeds
of $3,970 in repayment of a portion of Conoco's intercompany
indebtedness and accrued interest owed to DuPont. In May 1999, Conoco
issued commercial paper and DuPont received $1,022 in repayment of
Conoco's remaining intercompany indebtedness to DuPont.
- The acquisition of the remaining approximately 80 percent of Pioneer not
presently owned by DuPont, principally:
(1) The estimated purchase priced for Pioneer of $7,731, consisting of:
-- $3,425 representing cash payments for the purchase, at $40 per share, of
45 percent of the outstanding shares of Pioneer not presently owned by
DuPont;
-- $4,180 representing 59.5 million shares of DuPont stock, with an assumed
market value of $70.25 per share, to be issued in exchange for 55
percent of the outstanding shares of Pioneer not presently owned by
DuPont;
-- $76 representing 80 percent of the estimated fair value of options to
purchase DuPont common stock that are expected to be issued upon
consummation of the proposed acquisition in exchange for the outstanding
vested options to purchase Pioneer common stock under Pioneer's employee
stock option plan; and
-- $50 representing DuPont's estimated direct costs of acquisition;
(2) Under the purchase method of accounting, the identifiable assets
acquired and liabilities assumed are assigned a portion of the purchase
price, normally equal to their estimated fair values at the date of
acquisition. Any excess of the purchase price over the sum of the
59
<PAGE>
amounts assigned to identifiable assets acquired, less liabilities
assumed, is recorded as goodwill. Because DuPont already owns
approximately 20 percent of Pioneer, the historical Pioneer information
and the unaudited pro forma adjustments in the unaudited pro forma
combined balance sheet as of March 31, 1999 only reflect the
approximately 80 percent of Pioneer that DuPont is proposing to acquire.
(3) Amortization of purchase price over the estimated useful lives of
assets acquired and incremental interest expense associated with the
cash portions of the purchase price.
(4) The effect of non-recurring items, principally purchased in-process
research and development and the excess of estimated fair value over
Pioneer's historical cost of inventory.
See "--Unaudited Pro Forma Combined Financial Statements of DuPont" for
additional information regarding these pro forma financial statements.
The unaudited pro forma adjustments shown in the unaudited pro forma
combined income statements are based on estimates and assumptions that DuPont
believes are reasonable and factually supportable based on the information that
was available at the time these unaudited pro forma combined financial
statements were prepared. It is likely that the actual allocation of purchase
price will differ from the amounts included in these unaudited pro forma
combined financial statements. As such, it is also likely that the actual
amortization of fair values will differ from the amounts included in these
unaudited pro forma combined financial statements. The actual interest expense
incurred by DuPont to finance the cash portions of the purchase price will
depend on interest rates in effect at the time the proposed acquisition is
consummated and thus may vary from the amounts shown in the unaudited pro forma
combined income statements. Similarly, the actual number of shares of DuPont
common stock issued to effect the acquisition will be determined based on the
average trading price of DuPont common stock over the ten day trading period
ending three trading days before the date of the special meeting of Pioneer
shareholders.
The unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred had the proposed
acquisition occurred on the dates assumed, nor is this information necessarily
indicative of actual future operating results or financial position that will
result after the proposed transaction is consummated. Specifically, unaudited
pro forma combined financial statements do not include future benefits or
synergies that are expected to result from the acquisition. In addition, the
unaudited pro forma combined provision for income taxes may not represent the
amounts that would have resulted had DuPont and Pioneer filed consolidated
income tax returns during periods presented.
On a combined basis, there were no material transactions between DuPont and
Pioneer during the periods presented. There are no material differences between
the accounting policies of DuPont and Pioneer.
In the pro forma combined financial data, DuPont's and Pioneer's historical
information was derived as follows:
For DuPont - from the historical consolidated financial statements of DuPont
for the year ended December 31, 1998, as included in DuPont's Form 10-K for the
year ended December 31, 1998, and for the three months ended March 31, 1999, as
included in DuPont's Form 10-Q for the period ended March 31, 1999.
For Pioneer - DuPont's fiscal year ends December 31. Pioneer's fiscal year
ends August 31. Because the two fiscal years end more than 93 days apart, it is
necessary to adjust Pioneer's historical consolidated income statement to an
annual basis that is within 93 days of DuPont's fiscal year-end. For the year
ending December 31, 1998, this was accomplished by subtracting Pioneer's
reported loss
60
<PAGE>
for the three month period September 1 to November 30, 1997 from the income
reported by Pioneer as included in its Form 10-K for its fiscal year ended
August 31, 1998 and adding Pioneer's reported loss for the three month period
September 1 to November 30, 1998 as included in Pioneer's Form 10-Q for the
three months ended November 30, 1998. For the three months and period ended
March 31, 1999, Pioneer's historical income statement and balance sheet
information are based on unaudited consolidated historical interim financial
statements as included in Pioneer's Form 10-Q for the three months ended
February 28, 1999.
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
UNAUDITED COMBINED AS OF
PRO FORMA AND FOR THE
COMBINED FOR THE THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA FOR DUPONT
Sales......................................................................... $ 26,619 $ 6,599
Other income.................................................................. 1,034 33
------- -------
Total....................................................................... 27,653 6,632
------- -------
------- -------
Cost of goods sold and other operating costs and expenses..................... 19,658 4,815
Selling, general and administrative expenses.................................. 2,673 650
Interest expense.............................................................. 727 168
Purchased in-process research and development and other charges............... 2,076 40
------- -------
Total....................................................................... 25,134 5,673
------- -------
Income from continuing operations before income taxes and minority
interests................................................................... 2,519 959
Provision for income taxes.................................................... 901 394
Minority interests in earnings of consolidated subsidiaries................... 27 16
------- -------
Income from continuing operations............................................. $ 1,591 $ 549
------- -------
------- -------
Earnings per share--continuing operations
Basic....................................................................... $ 1.59 $ 0.55
Diluted..................................................................... $ 1.57 $ 0.55
Weighted average number of shares outstanding:
Basic....................................................................... 992 991
Diluted..................................................................... 1,009 1,002
OTHER FINANCIAL DATA FOR DUPONT
Cash and cash equivalents................................................... $ 1,182
Working capital (deficit)................................................... (2,225)
Property, plant and equipment--net.......................................... 15,545
Total assets................................................................ 40,926
Long-term borrowings and capital lease obligations.......................... 4,771
Minority interests.......................................................... 470
Stockholders' equity........................................................ 11,234
</TABLE>
61
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF DUPONT
(Unaudited) (dollars in millions, except per share data)
The following unaudited pro forma combined financial statements of DuPont
for the year ended December 31, 1998, the three months ended March 31, 1999 and
as of March 31, 1999 were prepared by DuPont to illustrate the estimated effects
on DuPont of:
- The disposition of Conoco through the exchange offer, the cash offer, and
the transactions directly associated with Conoco's initial public offering
and separation from DuPont, principally:
-- The Conoco exchange offer. On , 1999, DuPont acquired
XXX,XXX,XXX outstanding shares of DuPont common stock from United States
persons in exchange for XX,XXX,XXX shares of Conoco Class B common stock
owned by DuPont. For purposes of these unaudited pro forma combined
financial statements it is assumed, for illustrative purposes only, that
a maximum of 184.1 million shares of DuPont are received in the exchange
offer.
-- The cash offer. On , 1999, DuPont acquired X,XXX,XXX
outstanding shares of DuPont common stock for $X,XXX from holders of
DuPont stock that were not United States persons. For purposes of these
pro forma statements it is assumed, for illustrative purposes only, that
a maximum of 11.8 million shares of DuPont common stock were received in
the cash offer.
-- Conoco's initial public offering. In October 1998, DuPont received the
$4,228 proceeds from Conoco's initial public offering in repayment of a
portion of Conoco's intercompany indebtedness to DuPont.
-- Conoco debt issuances. In April 1999, Conoco completed the sale of
senior debt securities, and DuPont received from Conoco the net proceeds
of $3,970 in repayment of a portion of Conoco's intercompany
indebtedness and accrued interest owed to DuPont. In May 1999, Conoco
issued commercial paper and DuPont received $1,022 in repayment of
Conoco's remaining intercompany indebtedness to DuPont.
- The acquisition of the remaining approximately 80 percent of Pioneer not
presently owned by DuPont as described in this document.
These transactions and their effect on DuPont are further described in the
notes to these unaudited pro forma combined financial statements. To the extent
these events are not reflected in the historical consolidated income statements
of DuPont, the unaudited pro forma combined income statements assume that these
transactions occurred as of the beginning of the periods presented. To the
extent these events are not reflected in the historical consolidated balance
sheet of DuPont as of March 31, 1999, the unaudited pro forma combined balance
sheet assumes that these transactions occurred as of March 31, 1999.
The unaudited pro forma combined financial statements are presented in two
parts. Part 1 illustrates the estimated effects on DuPont of the exchange offer,
the cash offer, and the transactions directly associated with Conoco's initial
public offering and separation from DuPont. As noted above, these transactions
were completed on or before , 1999. Part 2 illustrates the
estimated effects to DuPont of the proposed acquisition of the remaining
approximately 80 percent of Pioneer not presently owned by DuPont. This
transaction has not been completed. As such, Part 2 of the unaudited pro forma
combined financial statements use as its starting point the unaudited pro forma
balances from Part 1.
DuPont believes the assumptions used to prepare the unaudited pro forma
combined financial statements provide a reasonable basis for presenting the
significant effects directly attributable to the transactions listed above. The
unaudited pro forma combined financial statements do not purport to
62
<PAGE>
represent what the results of operations or financial position of DuPont would
actually have been if these transactions had in fact occurred on such dates or
to project the results of operations or financial position of DuPont for any
future period or date. These unaudited pro forma combined financial statements
should be read in connection with, and are qualified by reference to, the
historical consolidated financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" located in DuPont's
1998 Form 10-K and DuPont's Form 10-Q for the quarter ended March 31, 1999,
which DuPont has filed with the SEC, and which have been incorporated in this
document by reference. To find out where you can get copies of DuPont's SEC
filings See "WHERE YOU CAN FIND MORE INFORMATION" on page XX.
PART 1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF DUPONT
The following unaudited pro forma consolidated financial statements of
DuPont for the year ended December 31, 1998, the three months ended March 31,
1999, and as of March 31, 1999 were prepared by DuPont to illustrate the
estimated effects on DuPont of the Conoco exchange offer, the cash offer, and
the transactions directly associated with Conoco's initial public offering and
separation from DuPont. These transactions and their estimated effects on DuPont
are further described in the notes to these unaudited pro forma consolidated
financial statements. These transactions were completed on or before
, 1999. To the extent these transactions were not reflected in
the historical consolidated income statements of DuPont, the unaudited pro forma
consolidated income statements assume that these transactions occurred as of the
beginning of the periods presented. To the extent these transactions are not
reflected in the historical consolidated balance sheet of DuPont, the unaudited
pro forma consolidated balance sheet assumes that these transactions occurred as
of March 31, 1999.
[THE UNAUDITED PRO FORMA INFORMATION THAT FOLLOWS HAS BEEN COMPILED, IN PART,
ON THE BASIS OF AN ASSUMED EXCHANGE RATIO OF 2.37131 SHARES OF CONOCO CLASS
B COMMON STOCK FOR EACH SHARE OF DUPONT COMMON STOCK. THIS ASSUMED RATIO IS
EQUAL TO THE RATIO OF THE CLOSING SALE PRICE OF DUPONT COMMON STOCK ($70.25
PER SHARE) TO THAT OF CONOCO CLASS A COMMON STOCK ($29.625 PER SHARE) ON
JUNE 4, 1999. SUCH ASSUMED RATIO IS FOR ILLUSTRATIVE PURPOSES ONLY. THE
ACTUAL EXCHANGE RATIO WILL BE DETERMINED AT A LATER DATE. APPLYING THIS
ASSUMED RATIO TO THE 436.5 MILLION SHARES OF CONOCO CLASS B COMMON STOCK
OWNED BY DUPONT RESULTS IN A MAXIMUM OF 184.1 MILLION SHARES OF DUPONT
COMMON STOCK BEING RECEIVED UNDER THE EXCHANGE OFFER. THIS UNAUDITED PRO
FORMA INFORMATION ASSUMES, FOR ILLUSTRATIVE PURPOSES ONLY, THE ACQUISITION
OF 11.8 MILLION SHARES OF DUPONT COMMON STOCK UNDER THE CASH OFFER FOR $825.
THE EXCHANGE OFFER AND CASH OFFER ARE EXPECTED TO BE COMPLETED PRIOR TO THE
ACQUISITION BY DUPONT OF THE REMAINING APPROXIMATELY 80 PERCENT OF PIONEER
NOT PRESENTLY OWNED BY DUPONT.]
63
<PAGE>
PART 1
PRO FORMA CONSOLIDATED INCOME STATEMENT OF DUPONT
YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
----------- --------------- ------------
<S> <C> <C> <C>
Sales................................................................... $ 24,767 $ $ 24,767
Other Income............................................................ 981 981
----------- --- ------------
Total............................................................... 25,748 25,748
----------- ------------
----------- ------------
Cost of Goods Sold and Other Operating Costs and Expenses............... 18,424 18,424
Selling, General & Administrative Expenses.............................. 2,115 2,115
Interest Expense........................................................ 520 (4)(a) 516
Purchased In-Process Research and Development and Other Charges......... 2,076 2,076
----------- --- ------------
Total............................................................... 23,135 (4) 23,131
----------- --- ------------
Income from Continuing Operations Before Income Taxes and Minority
Interests............................................................. 2,613 4 2,617
Provision for Income Taxes.............................................. 941 (24)(b) 917
Minority Interests in Earnings of Consolidated Subsidiaries............. 24 24
----------- --- ------------
Income from Continuing Operations....................................... $ 1,648 $ 28 $ 1,676
----------- --- ------------
----------- --- ------------
Earnings Per Share--Continuing Operations:
Basic............................................................... $ 1.45 $ 1.79(c)
Diluted............................................................. $ 1.43 $ 1.76(c)
Weighted Average Number of Shares Outstanding:
Basic............................................................... 1,129 933(c)
Diluted............................................................. 1,145 948(c)
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
64
<PAGE>
PART 1
PRO FORMA CONSOLIDATED INCOME STATEMENT OF DUPONT
THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
----------- ------------- -------------
<S> <C> <C> <C>
Sales.................................................................. $ 6,295 $ $ 6,295
Other Income........................................................... 18 18
----------- ------ ------
Total.............................................................. 6,313 6,313
----------- ------
----------- ------
Cost of Goods Sold and Other Operating Costs and Expenses.............. 4,566 4,566
Selling, General & Administrative Expenses............................. 535 535
Interest Expense....................................................... 96 23(a) 119
Purchased In-Process Research and Development and Other Charges........ 40 40
----------- ------ ------
Total.............................................................. 5,237 23 5,260
----------- ------ ------
Income from Continuing Operations Before Income Taxes and Minority
Interests............................................................ 1,076 (23) 1,053
Provision for Income Taxes............................................. 432 (10)(b) 422
Minority Interests in Earnings of Consolidated Subsidiaries............ 16 16
----------- ------ ------
Income from Continuing Operations...................................... $ 628 ($ 13) $ 615
----------- ------ ------
----------- ------ ------
Earnings Per Share--Continuing Operations:
Basic.............................................................. $ 0.55 $ 0.66(c)
Diluted............................................................ $ 0.55 $ 0.65(c)
Weighted Average Number of Shares Outstanding:
Basic.............................................................. 1,127 931(c)
Diluted............................................................ 1,138 942(c)
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
65
<PAGE>
PART 1
PRO FORMA CONSOLIDATED BALANCE SHEET OF DUPONT
MARCH 31, 1999
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash & Cash Equivalents................................................ $ 1,003 $ (95)(a) $ 908
Accounts & Notes Receivable............................................ 5,399 5,399
Inventories............................................................ 3,566 3,566
Deferred Income Taxes.................................................. 596 596
Other Current Assets................................................... 227 227
----------- ----------- ------------
Total Current Assets................................................. 10,791 (95) 10,696
Property, Plant and Equipment--Net..................................... 14,817 14,817
Investment in Affiliates............................................... 1,801 1,801
Other Assets........................................................... 5,908 5,908
Net Assets of Discontinued Operations.................................. 8,650 (8,650)(a) --
----------- ----------- ------------
Total Assets........................................................... $ 41,967 $ (8,745) $ 33,222
----------- ----------- ------------
----------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable....................................................... $ 1,900 $ $ 1,900
Short-Term Borrowings & Capital Lease Obligations...................... 9,232 (4,071)(b) 5,161
Income Taxes........................................................... 374 374
Other Accrued Liabilities.............................................. 3,157 3,157
----------- ----------- ------------
Total Current Liabilities............................................ 14,663 (4,071) 10,592
Long-Term Borrowings & Capital Lease Obligations....................... 4,566 4,566
Other Liabilities...................................................... 7,663 7,663
Deferred Income Taxes.................................................. 478 478
----------- ----------- ------------
Total Liabilities.................................................... 27,370 (4,071) 23,299
Minority Interests..................................................... 464 464
Preferred Stock........................................................ 237 237
Common Stock........................................................... 342 342
Additional Paid-in Capital............................................. 7,866 7,866
Reinvested Earnings.................................................... 6,933 8,735(a) 15,668
Accumulated Other Comprehensive Loss................................... (526) 349(a) (177)
Common Stock Held in Trust for Unearned Employee Compensation And
Benefits, at Market.................................................. (719) (719)
Treasury Stock......................................................... -- (13,758)(c) (13,758)
----------- ----------- ------------
Total Stockholders' Equity........................................... 14,133 (4,674) 9,459
----------- ----------- ------------
Total Liabilities and Stockholders' Equity............................. $ 41,967 $ (8,745) $ 33,222
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
66
<PAGE>
PART 1
NOTES TO PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS OF DUPONT
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated income statements for the year ended
December 31, 1998 and for the three months ended March 31, 1999 and the
unaudited pro forma consolidated balance sheet as of March 31, 1999 have been
prepared from the historical consolidated financial statements of DuPont for the
year ended December 31, 1998 as included in DuPont's Form 10-K for the year
ended December 31, 1998 and for the three months ended March 31, 1999 as
included in DuPont's Form 10-Q for the period ended March 31, 1999. The
historical consolidated financial statements of DuPont as set forth in its Form
10-K for the year ended December 31, 1998 and in its Form 10-Q for the period
ended March 31, 1999 present Conoco's petroleum operations as discontinued
operations.
The unaudited pro forma consolidated income statements give effect to the
Conoco exchange offer, the cash offer, and the transactions directly associated
with the initial public offering and separation as described below. These
transactions and their estimated effects on DuPont are described in the notes to
these unaudited pro forma consolidated financial statements. These transactions
were completed on or before , 1999. To the extent these transactions
were not reflected in the historical consolidated income statements of DuPont,
the unaudited pro forma consolidated income statements assume that these
transactions occurred as of the beginning of the periods presented. To the
extent these transactions are not reflected in the historical consolidated
balance sheet of DuPont, the unaudited pro forma consolidated balance sheet
assumes that these transactions occurred as of March 31, 1999.
The initial public offering of the Class A common stock of Conoco,
previously a wholly owned subsidiary of DuPont, commenced on October 21, 1998,
and the Class A common stock began trading on the New York Stock Exchange on
October 22, 1998. The initial public offering represented DuPont's first step in
the planned divestiture of its entire petroleum business. DuPont received the
$4,228 net proceeds from the offering in repayment of a portion of Conoco's
intercompany indebtedness to DuPont. After the initial public offering, DuPont
retained 100 percent of Conoco Class B common stock. At March 31, 1999, Conoco
Class B common stock represented approximately 70 percent of Conoco's
outstanding common stock and approximately 92 percent of the combined voting
power of all classes of voting stock of Conoco.
In April 1999, Conoco sold $4,000 in senior debt securities. Conoco used the
net proceeds of $3,970 to repay a portion of the intercompany indebtedness and
accrued interest owed to DuPont. In May 1999, Conoco issued commercial paper and
used the proceeds of $1,022 to repay its remaining intercompany indebtedness to
DuPont.
In 1999, DuPont commenced the exchange offer to United States
persons. Under the terms of the exchange offer, DuPont offered to exchange the
436.5 million shares of Conoco Class B common stock owned by DuPont for a
predetermined number of shares of DuPont common stock. At the same time, DuPont
commenced a cash offer to purchase up to XX,XXX,XXX from holders of DuPont
common stock that were not United States persons at a price of $XX.XX per share.
On , 1999, DuPont completed the exchange offer and the cash offer.
The XXX,XXX,XXX shares of DuPont stock acquired under these offers were recorded
as an increase to treasury stock. Shares acquired under the exchange offer were
recorded at an amount equal to the market value of the Conoco Class B shares
distributed in the exchange offer and at the cash price paid for shares acquired
under the cash offer. The exchange offer resulted in a net gain to DuPont equal
to the difference
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<PAGE>
between the market value and the carrying value of the Conoco Class B shares,
net of direct expenses of the disposition. The gain is included as a component
of the gain on disposal of discontinued operations and therefore not a part of
the pro forma consolidated income from continuing operations. No gain or loss
was recognized from the cash offer.
[THIS UNAUDITED PRO FORMA INFORMATION HAS BEEN COMPILED, IN PART, ON THE
BASIS OF AN ASSUMED EXCHANGE RATIO OF 2.37131 SHARES OF CONOCO CLASS B COMMON
STOCK FOR EACH SHARE OF DUPONT COMMON STOCK. THIS ASSUMED RATIO IS EQUAL TO THE
RATIO OF THE CLOSING SALE PRICE OF DUPONT COMMON STOCK ($70.25 PER SHARE) TO
THAT OF CONOCO CLASS A COMMON STOCK ($29.625 PER SHARE) ON JUNE 4, 1999. SUCH
ASSUMED RATIO IS FOR ILLUSTRATIVE PURPOSES ONLY. THE ACTUAL EXCHANGE RATIO WILL
BE DETERMINED AT A LATER DATE. THIS PRO FORMA INFORMATION HAS ALSO BEEN PREPARED
ASSUMING THE EXCHANGE OF 100 PERCENT OF THE 436.5 MILLION SHARES OF CONOCO CLASS
B COMMON STOCK OWNED BY DUPONT FOR 184.1 MILLION SHARES OF DUPONT COMMON STOCK
UNDER THE EXCHANGE OFFER. THIS UNAUDITED PRO FORMA INFORMATION ALSO ASSUMES, FOR
ILLUSTRATIVE PURPOSES ONLY, THE ACQUISITION OF 11.8 MILLION SHARES OF DUPONT
COMMON STOCK UNDER THE CASH OFFER FOR $825. THE EXCHANGE OFFER AND CASH OFFER
ARE EXPECTED TO BE COMPLETED PRIOR TO THE ACQUISITION BY DUPONT OF THE REMAINING
APPROXIMATELY 80 PERCENT OF PIONEER NOT PRESENTLY OWNED BY DUPONT.]
The unaudited pro forma adjustments described in Note 2 are based upon
currently available information and contain certain estimates and assumptions.
DuPont believes the estimates and assumptions provide a reasonable basis for
presenting the significant estimated effects on DuPont of Conoco's initial
public offering, Conoco repayments of intercompany indebtedness to DuPont, the
exchange offer, and the cash offer. DuPont believes that the unaudited pro forma
adjustments give appropriate effect to these estimates and assumptions and are
properly applied in the unaudited pro forma consolidated financial statements.
2. PRO FORMA ADJUSTMENTS
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS
(a) Interest expense for continuing operations in the historical
consolidated income statements reflected an allocation to discontinued
operations as provided under EITF Issue 87-24. The pro forma basis interest
expense results from the assumed repayment of DuPont's short-term commercial
paper borrowings with actual proceeds received from Conoco in connection with
the initial public offering and repayment of intercompany indebtedness of
DuPont. This is consistent with DuPont's actual use of proceeds received from
Conoco as a result of these transactions. Pro forma interest also reflects
assumed additional commercial paper borrowings of $825 required to purchase
DuPont common stock under the cash offer. Pro forma interest calculations are
based on historical interest rates paid by DuPont on short-term commercial paper
borrowings for the periods presented. For the year ended December 31, 1998,
average commercial paper rates were 5.6 percent. For the three months ended
March 31, 1999, average commercial paper rates were 5.1 percent. To the extent
Conoco's payments to DuPont were in excess of commercial paper borrowings, the
excess was not assumed to benefit pro forma results.
(b) The pro forma provision for income taxes includes the tax effect of the
pro forma interest adjustment and benefit due to increased utilization of
foreign tax credits when DuPont's provision for income taxes is computed on a
standalone basis.
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<PAGE>
(c) THE UNAUDITED PRO FORMA EARNINGS PER SHARE AND WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING ARE PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY--SEE NOTE 1
ABOVE.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The unaudited pro forma consolidated balance sheet assumes that DuPont
will exchange 100 percent of its holdings of Conoco Class B common stock for
184.1 million shares of DuPont common stock. This results in an estimated gain
of $8,735, which is net of $95 in direct expenses and $349 representing the
elimination from accumulated other comprehensive loss of amounts pertaining to
Conoco's operations as of March 31, 1999. The accumulated other comprehensive
loss consists of cumulative translation adjustment losses of $270 and minimum
pension liability loss of $79.
(b) Reflects $4,896 received from Conoco in the second quarter of 1999 in
full repayment of its indebtedness to DuPont, net of assumed additional
borrowings of $825 required to purchase DuPont common stock under the cash
offer.
(c) The increase in treasury stock of $13,758 assumes that 195.9 million
shares of DuPont common stock are acquired under the exchange and cash offers.
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<PAGE>
PART 2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF DUPONT
The following unaudited pro forma combined financial statements of DuPont
for the year ended December 31, 1998, the three months ended March 31, 1999, and
as of March 31, 1999 were prepared by DuPont to illustrate the estimated effects
on DuPont of the proposed acquisition of the remaining approximately 80 percent
of Pioneer not presently owned by DuPont as described in this document. This
transaction and its effect on DuPont are further described in the notes to these
unaudited pro forma combined financial statements.
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<PAGE>
PRO FORMA COMBINED INCOME STATEMENT OF DUPONT
YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DUPONT RECLASSIFY 80% OF PRO FORMA
PRO FORMA DUPONT PIONEER ADJUSTMENTS DUPONT
CONSOLIDATED EQUITY ADJUSTED FOR THIS PRO FORMA
(NOTE 1) ACCOUNTING(A) HISTORICAL(B) TRANSACTION NOTES COMBINED
------------ --------------- ------------- ------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales............................... $ 24,767 $ 376 $ 1,466 $ 10 (c) $ 26,619
Other Income........................ 981 7 38 8 (c) 1,034
------------ ----- ------ ----- -----------
Total......................... 25,748 383 1,504 18 27,653
------------ ----- ------ ----- -----------
------------ ----- ------ ----- -----------
Cost of Goods Sold And Other
Operating Costs and Expenses....... 18,424 256 764 214 (d) 19,658
Selling, General and Administrative
Expenses........................... 2,115 118 430 10 (c) 2,673
Interest Expense.................... 516 3 13 195 (e) 727
Purchased In-Process Research and
Development and Other Charges...... 2,076 (f) 2,076
------------ ----- ------ ----- -----------
Total......................... 23,131 377 1,207 419 25,134
Income From Continuing Operations
Before Income Taxes And Minority
Interests.......................... 2,617 6 297 (401) 2,519
Provision for Income Taxes.......... 917 5 98 (119) (g) 901
Minority Interests in Earnings of
Consolidated Subsidiaries.......... 24 1 2 27
------------ ----- ------ ----- -----------
Income From Continuing Operations... $ 1,676 $ 0 $ 197 $ (282) $ 1,591
------------ ----- ------ ----- -----------
------------ ----- ------ ----- -----------
Earnings Per Share-Continuing
Operations:
Basic........................... $ 1.79 (h) $ 1.59
Diluted......................... $ 1.76 (h) $ 1.57
Weighted Average Number of Shares
Outstanding:
Basic........................... 933 (h) 992
Diluted......................... 948 (h) 1,009
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
71
<PAGE>
PRO FORMA COMBINED INCOME STATEMENT OF DUPONT
THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DUPONT RECLASSIFY PRO FORMA
PRO FORMA DUPONT 80% OF ADJUSTMENTS DUPONT
CONSOLIDATED EQUITY PIONEER FOR THIS PRO FORMA
(NOTE 1) ACCOUNTING (A) HISTORICAL (B) TRANSACTION NOTES COMBINED
------------- ----------------- --------------- --------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales............................... $ 6,295 $ 62 $ 240 $ 2 (c) $ 6,599
Other income........................ 18 10 3 2 (c) 33
------ --- ----- --- -----------
Total............................... 6,313 72 243 4 6,632
------ --- ----- --- -----------
------ --- ----- --- -----------
Cost of goods sold and other
operating costs and expenses...... 4,566 49 146 54 (d) 4,815
Selling general and administrative
expenses.......................... 535 24 89 2 (c) 650
Interest expense.................... 119 1 4 44 (e) 168
Purchased in process research and
development and other charges..... 40 (f) 40
------ --- ----- --- -----------
Total........................... 5,260 74 239 100 5,673
Income from continuing operations
before income taxes and minority
interests......................... 1,053 (2) 4 (96) 959
Provision for income taxes.......... 422 (2) 2 (28) (g) 394
Minority interests in earnings of
consolidated subsidiaries......... 16 16
------ --- ----- --- -----------
Income from continuing operations... $ 615 $ 0 $ 2 $ (68) $ 549
------ --- ----- --- -----------
------ --- ----- --- -----------
Earnings per share--continuing
operations:
Basic........................... $ 0.66 (h) $ 0.55
Diluted......................... $ 0.65 (h) $ 0.55
Weighted average number of shares
outstanding:
Basic........................... 931 (h) 991
Diluted......................... 942 (h) 1,002
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
72
<PAGE>
PRO FORMA COMBINED BALANCE SHEET OF DUPONT
MARCH 31, 1999
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
80% OF
DUPONT PRO PIONEER PRO FORMA
FORMA RECLASSIFY HISTORICAL ADJUSTMENTS DUPONT PRO
CONSOLIDATED DUPONT EQUITY NET ASSETS FOR THIS FORMA
NOTE 1 ACCOUNTING (A) (B) TRANSACTION NOTES COMBINED
------------ --------------- ----------- ------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ 908 $ 55 $ 218 $ 1 (c) $ 1,182
Accounts and notes receivable.......... 5,399 75 294 2 (c) 5,770
Inventories............................ 3,566 171 674 796 (d) 5,207
Deferred income taxes.................. 596 17 69 (298) (h) 384
Other current assets................... 227 16 62 305
------------ ----- ----------- ------ -----------
Total current assets................... 10,696 334 1,317 501 12,848
Property, plant and equipment-- net.... 14,817 141 495 92 (d) 15,545
Investments in affiliates.............. 1,801 (753) 1,048
Other assets........................... 5,908 703 99 4,775 (e) 11,485
------------ ----- ----------- ------ -----------
Total assets........................... $ 33,222 $ 425 $ 1,911 $ 5,368 $ 40,926
------------ ----- ----------- ------ -----------
------------ ----- ----------- ------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable....................... $ 1,900 $ 48 $ 192 $ $ 2,140
Short-term borrowings and capital
leases obligations................... 5,161 16 64 3,475 (f) 8,716
Income taxes........................... 374 374
Other accrued liabilities.............. 3,157 130 513 43 (i) 3,843
------------ ----- ----------- ------ -----------
Total current liabilities.............. 10,592 194 769 3,518 15,073
Long-term borrowings and capital lease
obligations.......................... 4,566 41 164 4,771
Other liabilities...................... 7,663 21 78 146 (g) 7,908
Deferred income taxes.................. 478 169 14 809 (h) 1,470
------------ ----- ----------- ------ -----------
Total liabilities...................... 23,299 425 1,025 4,473 29,222
------------ ----- ----------- ------ -----------
------------ ----- ----------- ------ -----------
Minority interests..................... 464 6 470
Preferred stock........................ 237 237
Common stock........................... 342 342
Additional paid-in capital............. 7,866 95 (j) 7,961
Reinvested earnings.................... 15,668 (2,500) (k) 13,168
Accumulated other comprehensive loss... (177) (177)
Common stock held in trust for unearned
employee compensation and benefits,
at market............................ (719) (719)
Treasury stock......................... (13,758) 4,180 (l) (9,578)
------------ ----- ----------- ------ -----------
Total stockholders' equity............. 9,459 1,775 11,234
------------ ----- ----------- ------ -----------
------------ ----- ----------- ------ -----------
Total liabilities and stockholders'
equity............................... $ 33,222 $ 425 $ 1,031 $ 6,248 $ 40,926
------------ ----- ----------- ------ -----------
------------ ----- ----------- ------ -----------
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
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<PAGE>
PART 2
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS OF DUPONT
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited pro forma combined income statements for the year ended
December 31, 1998 and for the three months ended March 31, 1999 and the
unaudited pro forma combined balance sheet as of March 31, 1999 have been
prepared from the historical consolidated financial statements of DuPont for the
year ended December 31, 1998, as included in DuPont's Form 10-K for the year
ended December 31, 1998, and for the three months ended March 31, 1999, as
included in DuPont's Form 10-Q for the period ended March 31, 1999, as adjusted
for the estimated pro forma effects of the Conoco exchange offer and the cash
offer completed , 1999, and the transactions directly associated
with Conoco's initial public offering and separation from DuPont, as described
and set forth in Part 1 of these unaudited pro forma combined financial
statements of DuPont. These unaudited pro forma combined financial statements
should be read in conjunction with the historical consolidated financial
statements of DuPont and Pioneer, which are incorporated by reference in this
document.
The unaudited pro forma combined income statements in this Part 2 of the
unaudited pro forma combined financial statements of DuPont are intended to
demonstrate the estimated effect of events directly attributable to the proposed
acquisition by DuPont of the remaining approximately 80 percent of Pioneer not
presently owned by DuPont as if the transaction had occurred at the beginning of
the periods presented. Estimated effects of events that are directly
attributable to the transaction but that are of a non-recurring nature are
excluded from the unaudited pro forma combined income statements. The unaudited
pro forma combined balance sheet in this Part 2 of the unaudited pro forma
combined financial statements is intended to demonstrate the estimated effects
of events directly attributable to the proposed acquisition, including the
estimated effects of events that are of a non-recurring nature, as if the
transaction had occurred on March 31, 1999.
Prior to the proposed acquisition, DuPont owned approximately 20 percent of
the outstanding common stock of Pioneer. In addition, DuPont owned 50 percent of
Optimum. DuPont accounted for these ownership interests using the equity method
of accounting. After the proposed transaction, both Pioneer and Optimum will be
wholly owned and consolidated by DuPont. Accordingly, the unaudited pro forma
combined financial statements include entries to reclassify DuPont's equity
accounting to a consolidated presentation. In conjunction with its existing
approximate 20 percent ownership of Pioneer, DuPont expects to record a
non-recurring charge, estimated at $50, at the date of acquisition. The
components of this charge are described in (k) of Note 2.
DuPont will account for the proposed acquisition using the purchase method.
The estimated purchase price for the proposed acquisition is $7,731, consisting
of:
- $3,425 representing cash payments for the purchase, at $40 per share, of
45 percent of the outstanding shares of Pioneer not presently owned by
DuPont.
- $4,180 representing 59.5 million shares of DuPont stock, with an assumed
market value of $70.25 per share, to be issued in exchange for 55 percent
of the outstanding shares of Pioneer not presently owned by DuPont.
- $76 representing 80 percent of the estimated fair value of options to
purchase DuPont common stock that are expected to be issued upon
consummation of the proposed acquisition in exchange for the outstanding
vested options to purchase Pioneer common stock under Pioneer's employee
stock option plan;
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<PAGE>
- $50 representing DuPont's estimated direct costs of acquisition.
Under the purchase method of accounting, the identifiable assets acquired
and liabilities assumed are assigned a portion of the purchase price, normally
equal to their estimated fair values at the date of acquisition. Any excess of
the purchase price over the sum of the amounts assigned to identifiable assets
acquired, less liabilities assumed, is recorded as goodwill. Because DuPont
already owns approximately 20 percent of Pioneer, the historical Pioneer
information reflects and the unaudited pro forma adjustments in the unaudited
pro forma combined balance sheet as of March 31, 1999 only relate to the
remaining approximately 80 percent of Pioneer that DuPont is proposing to
acquire.
The allocation of purchase price included in the unaudited pro forma
combined balance sheet as of March 31, 1999 and as discussed in Note 2 is based
on estimates and assumptions that DuPont believes are reasonable and factually
supportable based on the information that was available at the time these
unaudited pro forma combined financial statements were prepared. These unaudited
pro forma adjustments are preliminary and based on management's best estimates
of the value of the tangible and intangible assets acquired and liabilities
assumed. Once the acquisition is consummated, DuPont will commence a process of
identification and valuation of all assets acquired and liabilities assumed. The
actual allocation of purchase price will be made as of the date of acquisition
and will reflect the estimated fair value of all assets and liabilities that are
identified as of that date. The actual allocation of purchase price may also
reflect information that was not available at the time these unaudited pro forma
combined financial statements were prepared. As such, it is likely that the
actual allocation of purchase price may differ from the amounts included in
these unaudited pro forma combined financial statements.
The estimated fair values of assets acquired in a purchase business
combination are amortized over the estimated useful lives of the assets. The
unaudited pro forma adjustments shown in the unaudited pro forma combined income
statements and as discussed in Note 2 reflect the estimated effects of this
amortization and are based on the allocation of purchase price as discussed
above. Because DuPont already owns approximately 20 percent of Pioneer, the
historical Pioneer information in the unaudited pro forma combined income
statements relate to the remaining approximately 80 percent of Pioneer that
DuPont is proposing to acquire.
The unaudited pro forma adjustments shown in the unaudited pro forma
combined income statements also include the estimated interest expense DuPont
would have incurred on the borrowings assumed to have been used to fund the cash
portion of the purchase price and direct costs of the acquisition. Unaudited pro
forma combined basic weighted average shares outstanding reflects the effect of
the issuance of 59.5 million shares of DuPont common stock to acquire 55 percent
of the outstanding shares of Pioneer common stock. Unaudited pro forma combined
diluted weighted average shares outstanding reflects the issuance of these 59.5
million shares and the approximately 2.4 million DuPont stock options to be
issued in exchange for vested Pioneer stock options. As noted above, the
unaudited pro forma adjustments shown in the unaudited pro forma combined income
statements exclude the estimated effects of nonrecurring items including
purchased in-process research and development, the effect of recording
inventories at fair value, and the $50 charge noted above.
The unaudited pro forma adjustments shown in the unaudited pro forma
combined income statements are based on estimates and assumptions that DuPont
believes are reasonable and factually supportable based on the information that
was available at the time these unaudited pro forma combined financial
statements were prepared. As discussed above, it is likely that the actual
allocation of purchase price may differ from the amounts included in these
unaudited pro forma combined financial statements. As such, it is also likely
that the actual amortization of fair values may differ from the amounts included
in these unaudited pro forma combined financial statements. The actual interest
expense incurred by DuPont to finance the cash portions of the purchase price
will depend on the amounts borrowed and interest rates in effect at the time the
proposed acquisition is consummated and
75
<PAGE>
thus may vary from the amounts shown in the unaudited pro forma combined income
statements. Similarly, the actual number of shares of DuPont common stock issued
to effect the acquisition will be determined based on the average trading price
of DuPont common stock over the ten day trading period ending three trading days
before the date of the special meeting of Pioneer shareholders.
The unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred had the proposed
acquisition occurred on the dates assumed, nor is this information necessarily
indicative of actual future operating results or financial position that will
result after the proposed transaction is consummated. Specifically, the
unaudited pro forma combined financial statements do not include future benefits
or synergies that are expected to result from the acquisition. In addition, the
unaudited pro forma combined provision for income taxes may not represent the
amounts that would have resulted had DuPont and Pioneer filed consolidated
income tax returns during the periods presented.
On a combined basis, there were no material transactions between DuPont and
Pioneer during the periods presented. There are no material differences between
the accounting policies of DuPont and Pioneer.
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<PAGE>
2. PRO FORMA ADJUSTMENTS
UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS
(a) DuPont accounts for its approximate 20 percent interest in Pioneer and
its 50 percent interest in Optimum using the equity method. Under the equity
method, DuPont's share of the earnings of Pioneer and Optimum are reported as a
single line item, Equity in Earnings of Affiliates, included in Other Income.
After the proposed acquisition by DuPont of the remaining 80 percent of Pioneer,
both Pioneer and Optimum will be wholly owned by DuPont. These entries
reclassify DuPont's Equity in Earnings of Affiliates to reflect the consolidated
accounting for Pioneer and Optimum that will occur after the proposed
acquisition. The entries include amortization of the differences between fair
value and historical cost arising from DuPont's acquisition of approximately 20
percent of Pioneer in 1997.
(b) DuPont's fiscal year ends December 31. Pioneer's fiscal year ends
August 31. Because the two fiscal years end more than 93 days apart, it is
necessary to adjust Pioneer's historical consolidated income statement to an
annual basis that is within 93 days of DuPont's fiscal year-end. For the year
ending December 31, 1998, this was accomplished by subtracting Pioneer's
reported loss for the three month period September 1 to November 30, 1997 from
the income reported by Pioneer for its fiscal year ended August 31, 1998 and
adding Pioneer's reported loss for the three month period September 1 to
November 30, 1998 as shown below. Pioneer results have been reclassified to
conform to DuPont's reporting.
<TABLE>
<CAPTION>
SUBTRACT: ADD: EQUALS:
PIONEER INCOME PIONEER INCOME PIONEER INCOME PIONEER INCOME
FOR FISCAL FOR THE 3 MONTHS FOR THE 3 MONTHS FOR THE 12 MONTHS
YEAR ENDED ENDED ENDED ENDED
AUGUST 31, 1998 NOVEMBER 30, 1997 NOVEMBER 30, 1998 NOVEMBER 30, 1998
--------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Sales.................................. $ 1,835 $ 79 $ 76 $ 1,832
Other Income........................... 61 13 48
------ --- --- ------
Total............................ 1,896 92 76 1,880
------ --- --- ------
------ --- --- ------
Cost of Goods Sold and Other Operating
Costs and Expenses.................... 944 85 96 955
Selling, General, and Administrative
Expense............................... 532 83 89 538
Interest Expense....................... 13 2 5 16
------ --- --- ------
Total............................ 1,489 170 190 1,509
Income (Loss) Before Income Taxes and
Minority Interests.................... 407 (78) (114) 371
Provision for Income Taxes............. 134 (27) (39) 122
Minority Interests in Earnings of
Consolidated Subsidiaries............. 3 3
------ --- --- ------
Net Income (Loss)................ $ 270 $ (51) $ (75) $ 246
------ --- --- ------
------ --- --- ------
</TABLE>
Pioneer's historical consolidated income statement for the three month
period December 1, 1998 to February 28, 1999 was used for the unaudited pro
forma combined income statement for the three month period ended March 31, 1999.
Since the proposed acquisition is for the remaining approximately 80 percent of
Pioneer not presently owned by DuPont, only 80 percent of Pioneer's income
(loss) for these two periods is included as an adjustment in the unaudited pro
forma combined income statements.
(c) Pioneer accounts for its 50 percent interest in the Optimum joint
venture with DuPont using the equity method. After the proposed acquisition of
the remaining approximately 80 percent of
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<PAGE>
Pioneer, Optimum will be wholly owned by DuPont. These adjustments reclassify
Pioneer's Equity in Earnings of Affiliates to reflect the consolidated
accounting for Optimum that will occur after the proposed acquisition.
(d) DuPont will account for the proposed acquisition of the remaining
approximately 80 percent of Pioneer using the purchase method of accounting.
Under the purchase method, the assets acquired and liabilities assumed by DuPont
will be recorded at their estimated fair values and the excess of purchase price
over the estimated fair value of net assets acquired will be recorded as
goodwill. This adjustment reflects the estimated additional depreciation and
amortization that will result from the application of purchase accounting. This
adjustment also includes a benefit of $10 for the unaudited pro forma combined
income statement for the year ended December 31, 1998 and $2 for the unaudited
pro forma combined income statement for the three months ended March 31, 1999 to
eliminate the excess of cost over market paid under an unfavorable purchase
contract.
Pioneer's business is highly seasonal. Substantially all seed sales in the
Northern Hemisphere are made during the period February 1 through May 31.
Inventory levels are also seasonal, with peak inventory levels occurring near
the beginning of the Northern Hemisphere selling season. Inventories are at
their lowest levels during the period July 1 through August 31. Pioneer accounts
for inventory using the first-in, first-out (FIFO) method and DuPont intends to
continue this accounting method for Pioneer inventories. Under purchase
accounting, inventories of Pioneer at the date of acquisition will be recorded
at their estimated fair value. Under the FIFO method, a non-recurring charge
equal to the excess of fair value over Pioneer's historical cost of inventory
will be recorded for the first inventory turn, which will primarily impact the
year immediately following the acquisition, as the result of this purchase
accounting requirement. This charge has been excluded from the unaudited pro
forma combined income statements due to its non-recurring nature.
(e) This adjustment reflects the increased interest expense DuPont would
have incurred on the estimated borrowings required to finance the cash portion
of the proposed Pioneer acquisition and direct acquisition costs. Unaudited pro
forma interest calculations are based on historical interest rates paid by
DuPont on short-term commercial paper borrowings for the periods presented. For
the year ended December 31, 1998, average commercial paper rates were 5.6
percent. For the three months ended March 31, 1999, average commercial paper
rates were 5.1 percent.
(f) In accordance with SFAS 2, as interpreted by FASB Interpretation No. 4,
the estimated fair value of in-process research and development acquired in a
business combination accounted for using the purchase method must be charged to
expense in the period in which the business combination is consummated. The
unaudited pro forma combined income statements exclude the charge DuPont expects
to record in the period the proposed acquisition is consummated related to the
acquisition of in-process research and development due to the non-recurring
nature of this charge. As discussed below, DuPont estimates that a non-recurring
charge of $2,450 would have been recorded for the acquisition of in-process
research and development had the acquisition been consummated on March 31, 1999.
(g) Because DuPont will acquire the stock of Pioneer, amortization of the
excess of the estimated fair value of assets acquired and liabilities assumed
over Pioneer's historical cost will not be deductible for Federal or State
income taxes. However, in accordance with SFAS 109, deferred taxes are recorded
in purchase accounting on the difference between the assigned values for
financial reporting purposes and the tax basis of assets acquired, excluding
purchased in-process research and development and goodwill, and liabilities
assumed, excluding liabilities for expenses that are nondeductible, for stock
acquisitions accounted for using the purchase method. This pro forma adjustment
reflects the deferred tax benefit of $53 for the year ended December 31, 1998
and $13 for the three months ended March 31, 1999 related to the increased
depreciation and amortization expenses arising from purchase accounting
adjustments, excluding the amortization of goodwill, and a tax benefit of $66
for the year
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<PAGE>
ended December 31, 1998 and $15 for the three months ended March 31, 1999
related to the estimated increase in interest expense described in (e) above.
(h) The DuPont unaudited pro forma combined earnings per share have been
calculated assuming a DuPont stock price of $70.25 per share at the date of
acquisition. The following table sets forth the effect on earnings per share for
a range of DuPont stock prices:
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED EARNINGS PER
SHARE
----------------------------------------------
YEAR ENDED DECEMBER QUARTER ENDED MARCH
31, 1998 31, 1999
DUPONT STOCK ---------------------- ----------------------
PRICE PER SHARE BASIC DILUTED BASIC DILUTED
- --------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
$ 60.00 $ 1.58 $ 1.55 $ 0.55 $ 0.54
$ 65.00 $ 1.59 $ 1.56 $ 0.55 $ 0.54
$ 70.25 $ 1.59 $ 1.57 $ 0.55 $ 0.55
$ 75.00 $ 1.60 $ 1.57 $ 0.55 $ 0.55
</TABLE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) DuPont accounts for its approximate 20 percent interest in Pioneer and
its 50 percent interest in Optimum using the equity method. Under the equity
method, DuPont's share of the net assets of Pioneer and Optimum are reported as
a single line item, Investments in Affiliates. After the proposed acquisition by
DuPont of the remaining approximately 80 percent of Pioneer, both Pioneer and
Optimum will be wholly owned by DuPont. These adjustments reclassify DuPont's
Investments in Affiliates to reflect the consolidated accounting for Pioneer and
Optimum that will occur after the proposed acquisition. The adjustments include
unamortized balances arising from differences between fair value and historical
cost of Pioneer's assets and liabilities at the date of DuPont's 1997
acquisition of approximately 20 percent of Pioneer.
(b) Represents 80 percent of the assets and liabilities of Pioneer at
February 28, 1999.
(c) Pioneer accounts for its 50 percent interest in Optimum using the
equity method. After the proposed acquisition by DuPont of the remaining
approximately 80 percent of Pioneer, Optimum will be wholly owned by DuPont.
These adjustments reclassify Pioneer's Investment in Affiliates to reflect the
consolidated accounting for Optimum that will occur after the proposed
acquisition.
(d) DuPont will account for the proposed acquisition of the remaining
approximately 80 percent of Pioneer using the purchase method of accounting.
Under the purchase method, the assets acquired and liabilities assumed by DuPont
will be recorded at their estimated fair values and the excess of purchase price
over the estimated fair value of net assets acquired will be recorded as
goodwill. These adjustments reflect the estimated excess of fair value over
historical cost for the 80 percent of inventory and property, plant and
equipment to be acquired by DuPont under the proposed acquisition. The inventory
adjustment includes $2 and the the property, plant and equipment adjustments
includes $4 related to the reclassification of Optimum described in (c) above.
(e) DuPont will account for the proposed acquisition of the remaining
approximately 80 percent of Pioneer using the purchase method of accounting.
Under the purchase method, the assets acquired
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<PAGE>
and liabilities assumed by DuPont will be recorded at their estimated fair
values. This adjustment includes 80 percent of the estimated excess of fair
value over historical cost for the following items:
<TABLE>
<CAPTION>
80% ESTIMATED ANNUAL
ITEM AMOUNT USEFUL LIFE AMORTIZATION
- ------------------------------------------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Germplasm.............................................. $ 675 40 Years $ 17
Trademarks and Tradenames.............................. 134 40 Years 3
Work Force, Sales And Grower Networks.................. 104 15 Years 7
Licensed Technology.................................... 598 10-15 Years 53
Completed Technology................................... 602 10 Years 60
Other.................................................. 12 15 Years --
</TABLE>
The excess of purchase price over the estimated fair value of net assets
acquired will be recorded as goodwill. This adjustment also includes goodwill of
$2,656.
DuPont has stated its intention to maintain Pioneer as a separate
subsidiary, operating under the Pioneer brand name. DuPont has determined that
the estimated useful life of Pioneer trademarks and tradenames is likely to
exceed forty years.
Germplasm represents the pool of crop genetics owned and controlled by
Pioneer. It would not be feasible to fully explore each of the unique genetic
combinations that can be developed from this resource within a forty-year
timeframe.
Pioneer has stated its belief that the foundation of its strength remains
the Pioneer germplasm base, the broadest and deepest supply of superior crop
genetics in the world. DuPont concurs with this belief. DuPont also believes
that its ability to realize the future benefits associated with goodwill arising
from this transaction is directly linked to this key asset of Pioneer. As such,
the estimated useful life assigned to goodwill is 40 years, the same as the
estimated useful life assigned to germplasm. Annual amortization of goodwill is
$67.
(f) Represents the estimated borrowings DuPont will incur to fund the cash
portion of the acquisition ($3,425) and the estimated direct expenses ($50)
associated with the acquisition.
(g) This adjustment includes:
$54, representing 80 percent of the estimated increase in liabilities for
unfunded post-retirement benefits that will result from recording these
liabilities at fair value,
$61, representing the estimated liability for enhanced severance
benefits, including gross-up, payable upon expiration of the management
retention agreements,
$30, representing the non-current portion of 80 percent of the estimated
fair value of the liability associated with the excess of cost over
market payable under a take-or-pay unfavorable purchase contract, and
$1, related to the reclassification of Optimum described in (c) above.
Under the terms of Pioneer's severance plans, employees, other than those
covered by the management retention agreements, may also receive enhanced
severance benefits under those plans during the three-year period immediately
following consummation of the proposed acquisition. The potential liability
under these plans ranges from $0, if no employees were to receive these benefits
during the three-year period, to approximately $200, if all employees were to
receive these benefits. Insufficient information exists as of the date these
unaudited pro forma combined financial statements were prepared to make a
factually based estimate of the probable future liability, if any, under these
plans. As such, no pro forma adjustment has been made for these plans.
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<PAGE>
(h) Because DuPont will acquire the stock of Pioneer, amortization of the
excess of the estimated fair value of assets acquired and liabilities assumed
over Pioneer's historical cost will not be deductible for Federal or State
income taxes. However, in accordance with SFAS 109, deferred taxes are recorded
in purchase accounting on the difference between assigned values for financial
reporting purposes and the tax basis of assets acquired, excluding purchased
in-process research and development and goodwill, and liabilities assumed,
excluding liabilities for expenses that are non-deductible, for stock
acquisitions accounted for using the purchase method. These pro forma
adjustments represent the recording of deferred taxes on the portion of the
basis difference represented by the excess of fair value over historical cost of
the 80 percent of Pioneer to be acquired in the proposed acquisition. Current
deferred income taxes relate to current assets and liabilities (inventories and
other accrued liabilities). Non-current deferred income taxes relate to
non-current assets and liabilities.
(i) This adjustment includes:
$19, representing the accrual of 20 percent of restricted stock
compensation expense and other Pioneer costs and expenses included in the
$50 non-recurring charge described in (k) below,
$12, representing the accrual of 80 percent of the estimated gross-up
payments associated with the accelerated vesting of restricted stock,
$10, representing the current portion of the fair value of the
unfavorable contract liability described in (g), and
$2, related to the reclassification of Optimum described in (c) above
(j) Under the terms of the merger agreement, DuPont has offered holders of
options granted under Pioneer's employee stock option plan the right to choose
to receive, for each Pioneer share covered by the option, an option to buy a
fraction of a share of DuPont common stock worth forty dollars at the same
exercise price as the Pioneer option they hold as of the merger date.
Alternatively, Pioneer option holders may elect to receive in cash the spread
between forty dollars and the option exercise price, subject to a limit on the
cash paid to redeem the Pioneer options. This $95 pro forma adjustment
represents the estimated fair value of the options to buy DuPont stock that
would be issued if all holders of Pioneer options elect to receive options to
buy DuPont common stock. Under purchase accounting, $76, representing 80 percent
of the fair value of the options to buy DuPont stock, represents a portion of
the purchase price to be allocated to the assets acquired and liabilities
assumed. The remaining 20 percent, $19, represents compensation expense as
determined under APB 25 and is included in the estimated $50 non-recurring
charge described in (k) below expected to be recorded in conjunction with the
proposed acquisition.
(k) Includes $2,450, representing the estimated fair value of 80 percent of
the in-process research and development of Pioneer at February 28, 1999.
Purchased in-process research and development represents the value assigned
in a business combination accounted for under the purchase method to research
and development projects of the acquired business that were commenced, but not
yet completed, at the date of acquisition and which, if unsuccessful, have no
alternative future use in research and development activities or otherwise. In
accordance with Statement of Financial Accounting Standards No. 2, "Accounting
for Research and Development Costs," as interpreted by FASB Interpretation No.
4, amounts assigned to purchased in process research and development meeting the
above criteria must be charged to expense at the date of consummation of the
purchase business combination.
81
<PAGE>
The valuation methodology used by DuPont to estimate the fair value of the
in-process research and development of Pioneer at February 28, 1999 is as
follows:
<TABLE>
<S> <C>
Cash Flows from Successful Completion
Less: Cash Flows to Complete
Less: Return on Assets Employed
- -------------------------------------------------------------
Equals: Adjusted Cash Flows
Times: Probability of Technical and Commercial Success
- -------------------------------------------------------------
Equals: Risk Adjusted Cash Flows
Times: Present Value Factor
- -------------------------------------------------------------
Equals: Estimated Fair Value
</TABLE>
Cash Flows from Successful Completion represents the estimated future
revenues forecast to be earned over the life of the product less the costs and
expenses required to generate those revenues, assuming successful completion of
the in-process project. For purposes of this valuation, Cash Flows from
Successful Completion were derived using the financial projections and
assumptions provided by Pioneer to DuPont as described in "FINANCIAL
PROJECTIONS." Cash Flows to Complete represents the estimated future research
and development costs required to complete the project, assuming the project is
ultimately successful. Significant assumptions include the work required to
successfully complete the project and the date of completion. Return on Assets
employed represents an allocation of the estimated future profits from the
project, assuming it was successfully completed, to existing assets, including
identifiable intangible assets, thereby ensuring that all appropriate future
cash flows are attributed to existing assets for purposes of determining their
fair value.
Probability of Technical and Commercial Success represents management's
assessment of all risks associated with completing a given project. Results
achieved to-date, the complexity of the work required to complete the project,
and historical experience with similar types of research and development
projects are among the factors considered by management in making this
assessment.
For purposes of this valuation, risk adjusted cash flows were discounted to
present value using discounts ranging from 12.5 percent to 15 percent. These
discount rates include adjustments intended to compensate for the risks of
projection and market uncertainty and, as such, are higher than the discount
rates used by the financial advisors for Pioneer and DuPont in their discounted
cash flow analysis described in "SPECIAL FACTORS--Opinion of Financial Advisor
for Pioneer" and "SPECIAL FACTORS--Opinions of Financial Advisors for DuPont."
Pioneer's research and development efforts consist of new product
development for its traditional businesses and trait and technology development.
Of the $2,450 estimated fair value of purchased in-process research and
development included in these unaudited pro forma combined financial statements,
$1,200 represents the estimated fair value of research and development projects
related to new product development for traditional businesses and $1,250
represents the estimated fair value of research and development projects related
to trait and technology development.
New product development for traditional businesses consists of Pioneer's
seed research done through classical plant breeding techniques. Its principal
objectives are to develop new hybrids of corn and varieties of soybeans. Each
year, Pioneer maize researchers evaluate about 210,000 new experimental hybrids.
These hybrids enter into a four to five year testing cycle during which the
hybrids are tested in a range of soil types, stresses, and climate conditions.
As the results of these tests become
82
<PAGE>
known, fewer and fewer hybrids are designated as candidates for further testing.
The Pioneer research and development procedures classify these projects based on
their stage of completion as follows:
<TABLE>
<CAPTION>
PROBABILITY OF
APPROXIMATE NUMBER TECHNICAL AND
STAGE OF COMPLETION OF HYBRIDS COMMERCIAL SUCCESS
- ---------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Initial Testing..................................... 210,000 0.02%
R1-R2........................................... 10,000 0.50%
R3.............................................. 250 20.00%
R4.............................................. 160 30.00%
R5.............................................. 50 95.00%
</TABLE>
Each hybrid at each stage of completion is genetically unique. The
probability of technical and commercial success in this table is the probability
that an individual hybrid at a particular stage of completion will ultimately
become a commercial product. These probabilities were developed based on
Pioneer's extensive historical experience in developing new hybrids of corn.
These in-process research and development projects represent approximately 75%
of the estimated fair value of research and development projects related to new
product development for traditional businesses.
Each year, Pioneer's soybean researchers test approximately 500,000 new
experimental lines of soybeans. These experimental lines of soybeans undergo a
testing and selection process similar to the one described above for corn.
Soybean projects are classified as to stage of completion using the same
classification system shown above. Probabilities of technical and commercial
success were estimated for each stage of completion based on Pioneer's extensive
historical experience. Soybean in-process research and development projects
represent approximately 13% of the estimated fair value of research and
development projects related to new product development for traditional
businesses. In-process research and development projects for alfalfa, sorghum,
wheat, sunflowers, canola and microbial products make up the remaining
approximately 12% of the estimated fair value of research and development
projects related to new product development for traditional businesses.
Research and development projects related to trait and technology
development have as their objective the use of biotechnology techniques to
genetically improve insect, disease and herbicide resistance in crops and
develop products that increase the value of commodity grains by modifying their
protein, oil and carbohydrate components. Five in-process projects as of the
February 28, 1999 valuation date had progressed sufficiently to meet the
criteria used by DuPont to identify projects qualifying as purchased in-process
research and development. Key criteria in this identification process include
the ability to reasonably estimate the future benefits if the project is
successful, the cost to complete the project, the probable completion date, and
the project's probability of technical and commercial success. The probability
of technical and commercial success for these five projects ranged from 65% to
85%. Approximately 55% of the fair value of research and development projects
related to trait and technology development is represented by a project to
develop resistance to a broad spectrum of lepidopteran insects, including
European corn borer. This project is expected to be completed in 2002. The
risk-adjusted projections for this project were included in the financial
projections and assumptions provided by Pioneer to DuPont as described on page
XX of this document. Approximately 35% of the fair value of research and
development projects related to trait and technology development relates to two
projects, corn rootworm and molds and mycotoxins. Key assumptions for these
projects are as described on page XX of this document.
The fair value of in-process research and development at the actual date of
acquisition is likely to differ from the above estimate. Between February 28,
1999 and the date of acquisition some research and development projects may be
completed, some may be cancelled, and some new projects may be commenced. In
addition, the probability of technical and commercial success, especially for
trait and technology projects, may increase or decline as additional work on the
projects is completed. Generally,
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<PAGE>
a $100 increase/decrease in the estimated fair value of in-process research and
development will result in a $100 decrease/increase in the amount assigned to
goodwill. A $100 decrease/increase in the amount assigned to goodwill will
result in a $2.5 decrease/increase in amortization expense and a $2.5
increase/decrease in income from continuing operations.
This adjustment also includes $50, representing the estimated non-recurring
charge DuPont expects to record in conjunction with the proposed acquisition, as
follows:
$19, representing compensation expense to be recorded in accordance with
APB 25 in conjunction with the issuance of DuPont options as described in
(j) above,
$22, representing DuPont's 20 percent share of Pioneer compensation
expense for accelerated vesting of restricted stock and accruals for
change of control benefits for executive officers
$9, representing DuPont's 20 percent share of Pioneer's estimated
out-of-pocket costs and expenses associated with the proposed transaction
(l) Represents 59.5 million shares of DuPont common stock at $70.25 per
share to be issued in exchange for Pioneer shares under the stock portion of the
merger agreement.
COMPARATIVE PER SHARE UNAUDITED PRO FORMA DATA
Presented below are the earnings, dividends and book value per common share
data for Pioneer on a historical and pro forma equivalent basis and for DuPont
on an historical and a pro forma combined basis. The pro forma equivalent data
is based on an assumed exchange ratio of .569395 share of DuPont common stock
for 1 share of Pioneer common stock times the unaudited pro forma combined per
common share data. The exchange ratio was calculated using an assumed price of
$70.25 per share for DuPont common stock which is the same assumed price used to
prepare the unaudited pro forma combined financial statements of DuPont
($40/$70.25 = .569395). We combined Pioneer historical financial information and
unaudited pro forma consolidated financial information of DuPont using the
purchase method of accounting for business combinations. See "--Unaudited Pro
Forma Combined Financial Data".
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS YEAR ENDED
FEBRUARY 28, 1999 ENDED AUGUST 31, 1998
------------------------ FEBRUARY 28, 1999 ------------------------
EQUIVALENT ----------------- EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL HISTORICAL PRO FORMA
----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PIONEER--HISTORICAL AND EQUIVALENT PRO FORMA
Diluted Earnings per common share............... $ 0.01 $ 0.31 $ (0.30) $ 1.08 $ 0.89
Cash Dividends declared per common share........ $ 0.10 $ 0.20 $ 0.20 $ 0.37 $ 0.78
Book Value per common share..................... $ 4.59 $ 6.32 $ 4.59 $ 5.18 N/A
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1999 DECEMBER 31, 1998
------------------------ ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
DUPONT--HISTORICAL AND COMBINED PRO FORMA
Diluted Earnings per common share............... $ 0.55 $ 0.55 $ 1.43 $ 1.57
Cash Dividends declared per common share........ $ 0.35 $ 0.35 $ 1.365 $ 1.365
Book Value per common share..................... $ 12.33 $ 11.10 $ 12.18 N/A
</TABLE>
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<PAGE>
MARKET PRICES AND DIVIDENDS INFORMATION
Both Pioneer and DuPont list their common stock on the New York Stock
Exchange under the symbols "PHB" and "DD." The following table shows the range
of the high and low sale prices of shares of Pioneer common stock and DuPont
common stock, as reported on the New York Stock Exchange Composite Transactions
Tape for each quarterly period during the last two years. DuPont's fiscal year
is the same as the calendar year. Pioneer's fiscal year is from September 1(st)
to August 31(st). Accordingly, the prices for each of the fiscal quarters shown
below do not cover the exact same dates for DuPont and Pioneer. Pioneer has paid
a $0.10 dividend for the first three quarters for the fiscal year ending August
31, 1999 and during the fourth quarter for the fiscal year ended August 31, 1998
and has declared a $0.10 dividend payable July 9, 1999 for Pioneer's third
quarter ended May 31, 1999. Pioneer has paid a $0.08667 dividend during the
first three quarters for the fiscal year ended August 31, 1998 and during the
fourth quarter for the fiscal year ended August 31, 1997. For the first three
quarters for the fiscal year ending August 31, 1997, Pioneer paid a $0.077
dividend. The merger agreement prohibits Pioneer from paying any dividends other
than our regular quarterly dividends until the merger is completed. DuPont has
paid a $0.35 dividend during each of the four quarters of the fiscal year ended
December 31, 1998 and for each of the first two quarters of the fiscal year
ended December 31, 1999 and a $0.315 dividend during each of the last three
quarters of the fiscal year ended December 31, 1997 and a $.285 dividend during
the first quarter of such fiscal year.
All information takes into account the DuPont two-for-one stock split in
April 1997 and the Pioneer three-for-one stock split in April 1998.
<TABLE>
<CAPTION>
PIONEER COMMON STOCK
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
PIONEER
1997:
First Fiscal Quarter........................................................................... -- --
Second Fiscal Quarter.......................................................................... 24.208 20.083
Third Fiscal Quarter........................................................................... 24.500 19.250
Fourth Fiscal Quarter.......................................................................... 31.333 23.000
1998:
First Fiscal Quarter........................................................................... 34.708 28.479
Second Fiscal Quarter.......................................................................... 36.229 32.667
Third Fiscal Quarter........................................................................... 42.688 32.500
Fourth Fiscal Quarter.......................................................................... 41.750 30.688
1999:
First Fiscal Quarter........................................................................... 34.813 22.125
Second Fiscal Quarter.......................................................................... 30.385 23.063
Third Fiscal Quarter........................................................................... 38.750 20.625
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
DUPONT COMMON STOCK
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
DUPONT
1997:
First Fiscal Quarter........................................................................... 57.625 46.375
Second Fiscal Quarter.......................................................................... 62.875 49.750
Third Fiscal Quarter........................................................................... 69.750 60.688
Fourth Fiscal Quarter.......................................................................... 64.938 50.188
1998:
First Fiscal Quarter........................................................................... 70.438 52.625
Second Fiscal Quarter.......................................................................... 84.438 67.125
Third Fiscal Quarter........................................................................... 79.500 52.250
Fourth Fiscal Quarter.......................................................................... 66.500 51.688
1999:
First Fiscal Quarter........................................................................... 60.125 50.063
Second Fiscal Quarter.......................................................................... 74.875 58.250
</TABLE>
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<PAGE>
MERGER CONSIDERATION
At the closing of the merger, the holders of shares of Pioneer common stock
will receive, either (i) $40 in cash or (ii) a fraction of a share of DuPont
common stock valued at $40, for each Pioneer common share.
The merger is structured so that 45 percent of the aggregate consideration
paid by DuPont will be paid in cash and 55 percent will be paid in DuPont common
stock. The Pioneer shareholders may elect to receive shares of DuPont common
stock in exchange for their shares of Pioneer common stock.
If holders of more than 55 percent of the shares of Pioneer common stock
elect to receive DuPont shares, then:
- the Pioneer shareholders electing to receive DuPont stock will receive
DuPont stock for a prorated amount of their shares of Pioneer common stock
and cash for the remainder of their shares of Pioneer common stock; or
- DuPont may elect to increase the percentage of DuPont stock issued in the
merger so that the Pioneer shareholders electing to receive DuPont stock
will be able to receive DuPont stock in exchange for all of their shares
of Pioneer common stock.
If the number of shares held by non-electing Pioneer shareholders (plus the
number of shares held by dissenters) exceed 45 percent of the total number of
outstanding shares of Pioneer common stock, then:
- the non-electing shareholders will receive cash for a prorated amount of
their shares of Pioneer common stock and DuPont stock for the remainder of
their shares of Pioneer common stock; and
- the dissenting Pioneer shareholders will receive cash for all shares of
Pioneer common stock held by them.
MERGER FINANCING
The cash portion of the consideration paid by DuPont in connection with the
merger is anticipated to come from cash on hand and, to the extent deemed
appropriate at the time, debt financing including the sale of commercial paper;
the other portion of the consideration paid by DuPont in connection with the
merger will be DuPont common stock.
FEES AND EXPENSES
Whether or not the merger is completed, all fees and expenses incurred in
connection with the merger will be paid by the party incurring the fees and
expenses.
The following are estimates of the fees and expenses which Pioneer and
DuPont expect to incur in connection with the merger.
<TABLE>
<S> <C>
Financial Advisor Fees(1)...................................... $20,000,000
SEC Filing Fees................................................ 1,523,063
Legal Fees and Expenses........................................ 7,500,000
Accounting Fees................................................ [ ]
Printing and Mailing Expenses.................................. 400,000
Solicitation Fees.............................................. 20,000
</TABLE>
- ------------------------
(1) Financial advisor fees consist only of estimated fees and expenses payable
to Lazard, financial advisor to Pioneer, and assume the merger is
consummated. The fees of Credit Suisse First Boston and Salomon Smith Barney
are not included. For additional information, see "SPECIAL FACTORS--Opinion
of Financial Advisor for Pioneer," and with respect to the fees of Credit
Suisse First Boston Corporation and Salomon Smith Barney Inc., "--Opinions
of Financial Advisors for DuPont."
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<PAGE>
THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, a copy
of which is attached as APPENDIX A to this document. You should refer to the
full text of the merger agreement for details of the merger and the terms and
conditions of the merger agreement.
THE MERGER
When the merger occurs, Pioneer will be merged with and into Delta
Acquisition Sub, a wholly owned subsidiary of DuPont. As a result, Pioneer will
be a wholly owned subsidiary of DuPont. The merger will have the effects
specified in the Iowa Business Corporation Act.
Each Pioneer common share outstanding immediately before the merger, other
than those owned by DuPont, will be converted into either (i) a fraction of a
share of DuPont common stock with a value of $40 or (ii) $40 in cash. The value
of a share of DuPont common stock for these purposes will be based on the
average trading price of DuPont common stock over the 10 trading day period
ending three trading days prior to the date of the special meeting of Pioneer
shareholders held to approve the merger.
However, 45 percent of the aggregate consideration paid by DuPont will be in
the form of cash and the remaining 55 percent will be in the form of DuPont
common stock. If total shareholder elections for DuPont common stock or cash,
including those receiving cash by failing to elect stock exceed either of these
limits, the number of Pioneer shares to be converted into DuPont common stock or
cash that exceeded the applicable limit will be cut back proportionately.
However, DuPont may, prior to the third business day before the date of the
Pioneer shareholder meeting, elect to increase the percentage of DuPont common
stock issued in the merger so that the Pioneer shareholders electing to receive
DuPont common stock will be able to receive DuPont common stock in exchange for
all of their shares of Pioneer common stock.
All shares of Pioneer common stock will be canceled and retired. Each holder
of a certificate representing any shares of Pioneer common stock will no longer
have any rights with respect to the shares of Pioneer common stock, except for
the right to receive either (i) a fraction of a share of DuPont common stock
with a value of $40 or (ii) $40 in cash. Each Pioneer common share held in
Pioneer's treasury or held by DuPont or their subsidiaries at the time of the
merger will be canceled and retired without any payment.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when we file a certificate of merger with
the Secretary of State of the State of Iowa. However, we may agree to a later
time, and specify that time in the certificate of merger. The parties will file
the certificate of merger on the day on which the satisfaction or waiver of all
conditions in the merger agreement are satisfied. We expect to complete the
merger on or promptly after , 1999, the date scheduled for the special
shareholder's meeting to approve the merger. We cannot assure you when, or if,
all the conditions to consummation of the merger will be satisfied or waived.
See "--Conditions."
SHARE ELECTION PROCEDURES
A form of election and letter of transmittal has been attached to this proxy
statement. Pioneer shareholders who wish to receive DuPont common stock or,
regardless of whether they wish to receive stock or cash, who wish to receive
the merger consideration as soon as possible following Pioneer shareholder
approval of the merger should mail the election form indicating whether they
elect to
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receive cash or DuPont common stock, together with the letter of transmittal and
their Pioneer stock certificates to the exchange agent at the address below:
First Chicago Trust Co. of New York
a division of EquiServe
P.O. Box 2500
Jersey City, New Jersey 07303-2500
We have retained [ ] as information agent to assist you in the
merger. You may call [ ] at - - (toll free) in the United
States or Canada or at - - (collect) elsewhere to request additional
documents and to ask any questions.
If you are a participant in the Pioneer Dividend Reinvestment Plan, you
should check the applicable box in the form of election and letter of
transmittal. Participants in the Pioneer Dividend Reinvestment Plan do not need
to send their stock certificates with respect to their Pioneer Dividend
Reinvestment Plan shares. See General Instruction 13 of the form of election and
letter of transmittal.
Subject to the proration procedures described above which can apply if the
amount of cash or DuPont common stock elected by all Pioneer shareholders
exceeds 45 percent or 55 percent, respectively, of the aggregate merger
consideration, each Pioneer shareholder may elect to receive with respect to
each share of Pioneer stock (i) a fraction of a share of DuPont common stock
with a value of $40 or (ii) $40 in cash. DuPont common stock will be valued for
these purposes as described above. Pioneer shareholders who fail to timely
return or properly complete their form of election for DuPont common stock and
their letters of transmittal will be deemed to have made an election to receive
cash.
Pioneer shareholders or their brokers acting on their behalf must send in
the election form together with the letter of transmittal and their Pioneer
stock certificates to the exchange agent. To receive DuPont common stock, all
necessary documentation must be received by the exchange agent by 5:00 p.m. New
York City time on the business day immediately preceding the date of the special
meeting of Pioneer shareholders to approve the merger. After this deadline,
Pioneer shareholders may not elect to receive DuPont stock in the merger.
Pioneer shareholders may also follow the guaranteed delivery instructions
included with the election form to send in their stock certificates. Immediately
following the merger, the exchange agent will send letters of transmittal to
those shareholders who have not delivered the form of election and letter of
transmittal before the consummation of the merger. To receive the available
merger consideration, such Pioneer Shareholders will be responsible to complete
and return the letter of transmittal to the exchange agent.
For Pioneer shareholders electing to receive shares of DuPont stock, in
addition to a certificate representing DuPont common stock, the holder of a
surrendered Pioneer common share certificate will receive any dividends or other
distributions on the DuPont common stock that have a record date after the
merger, and a payment date before the holder surrenders the Pioneer common share
certificate. However, DuPont will not pay any dividends until the holder of the
Pioneer share certificate surrenders that certificate. The holder will also
receive any dividends or other distributions with a record date after the merger
but before the surrender, and a payment date after the surrender. In each case
taxes will be withheld as required.
After the merger, there will be no transfers on the transfer books of
Pioneer of shares of Pioneer common stock that were outstanding immediately
before the merger. In the event that Pioneer determines there will be an
unexpected, extended period of time after the shareholder meeting for the
closing of the merger to occur, Pioneer may cause stock certificates to be
returned to Pioneer shareholders who have elected to receive cash, but not to
shareholders who have elected to receive stock, to allow transfers of Pioneer
common stock during the period of delay.
Any DuPont common share certificates issued in the merger and any dividends
or distributions deposited by DuPont with the exchange agent that remain
unclaimed by the former Pioneer
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shareholders six months after the merger will be delivered to DuPont. Any former
Pioneer shareholders who have not complied with the exchange procedures before
the six month anniversary of the merger may look only to DuPont for payment of
DuPont common stock, and any unpaid dividends and distributions on DuPont common
stock. Neither Pioneer, DuPont, the exchange agent nor any other person will be
liable to you for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
No interest will be paid or accrued on unpaid dividends and distributions,
if any, which will be paid on surrender of the Pioneer common share
certificates.
If any of your Pioneer share certificates have been lost, stolen or
destroyed, you will be entitled to obtain for each share of Pioneer common stock
represented thereby either (a) a fraction of a share of DuPont common stock with
a value of $40 or (b) $40 in cash for each share of Pioneer common stock by
making an affidavit and, if required by DuPont, posting a bond in an amount
sufficient to protect DuPont against claims related to your lost, stolen or
destroyed Pioneer stock certificates.
No certificate representing a fraction of a share of DuPont common stock
will be issued. In lieu of any such fractional security, each holder of shares
of Pioneer common stock otherwise entitled to a fraction of a DuPont share will
be entitled to receive from the exchange agent a cash payment representing such
holder's proportionate interest in the net proceeds from the sale by the
exchange agent on behalf of all such holders of the aggregate of the fractions
of DuPont shares which would otherwise be issued. Until the net proceeds of such
sale or sales have been distributed to the holders of shares of common stock,
the exchange agent will hold such proceeds in trust for the holders of shares of
Pioneer common stock. As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of shares of Pioneer common stock
in lieu of any fractional DuPont share interest, the exchange agent shall make
available such amounts to such holders for shares of Pioneer common stock
without interest.
DUPONT CLASS B COMMON STOCK EXCHANGE
Following the signing of the merger agreement, Pioneer exchanged, on a
share-for-share basis, Pioneer common shares entitled to five votes per share
for all Pioneer Class B common shares previously owned by DuPont. DuPont has
agreed that the aggregate voting power which it may vote in its discretion will
be limited to the percentage common stock equity interest represented by such
shares. The only exception to this rule would arise if a third party (other than
the Wallace family) who owns a greater common stock equity interest is permitted
by us to have voting power greater than its economic interest. In that case,
DuPont could exercise the same degree of voting power in excess of its economic
interest. In addition, so long as the 1997 investment agreement remains in
effect, DuPont's aggregate voting power cannot exceed 20 percent. DuPont has
agreed to vote all of its shares of Pioneer common stock in favor of the merger.
STOCK OPTIONS
Outstanding options to buy shares of Pioneer common stock granted under
Pioneer's employee stock option plan will fully vest on completion of the
merger. Holders of options may choose to receive, for each Pioneer share covered
by the option, an option to buy a fraction of a share of DuPont common stock
worth $40 at an exercise price which is adjusted to take into account the
exchange ratio. Alternatively, option holders may elect to receive in cash the
spread between $40 and the option exercise price, subject to a limit on the
total cash paid to redeem the Pioneer options.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains essentially reciprocal representations and
warranties made by each of us to the other, including representations and
warranties relating to:
(1) due organization, power and standing, and other corporate matters;
(2) authorization, execution, delivery and enforceability of the merger
agreement;
(3) conflicts under organizational documents, violations of any instruments
or law, and required consents and approvals;
(4) capital structure and securities;
(5) documents filed with the SEC, including financial statements, and the
accuracy of the information in those documents;
(6) the absence of any material adverse change;
(7) litigation and liabilities;
(8) brokers' and finders' fees with respect to the merger; and
(9) compliance with applicable laws.
Pioneer also made additional representations and warranties to DuPont
relating to:
(1) subsidiaries;
(2) tax matters;
(3) retirement and other employee benefit plans;
(4) intellectual property; and
(5) receipt of fairness opinions.
COVENANTS
PIONEER. Pioneer has agreed to conduct its business in all material
respects in the ordinary and usual course before the merger. Pioneer has agreed
to use its reasonable best efforts to keep its business organization intact in
all material respects, keep available the services of its officers and employees
as a group and maintain its existing business relations and goodwill and not to
take any action or knowingly omit any action that will make its representations
and warranties false in any material respect.
In addition, Pioneer has agreed that before the merger, unless DuPont agrees
in writing or as otherwise permitted by the merger agreement, Pioneer will not:
(1) split, combine, subdivide or reclassify any of its capital stock;
(2) declare any dividend other than its regular quarterly cash;
(3) issue, deliver or sell any shares of its capital stock or any bonds,
debentures, notes or other indebtedness having the right to vote or any
securities convertible into or any rights, warrants or options to acquire
shares of Pioneer common stock other than the issuance of common stock
upon the exercise of outstanding options or in connection with benefit
plans;
(4) amend its organizational documents or any material term of any security
issued by Pioneer;
(5) acquire any business the consideration for which exceeds $100 million in
the aggregate or that would make it more difficult to obtain approval
under any regulatory law;
(6) incur any liens on or restrict the transfer of any asset except in the
ordinary course of business;
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(7) relinquish, waive or release any material right or claim, settle any
material suit or knowingly dispose of any material intellectual property
rights or knowingly disclose non-public intellectual property information
to persons outside of Pioneer;
(8) make any loans or investments except in the ordinary course of business,
in connection with a permitted acquisition, pursuant to agreements that
existed at the time of the signing of the merger agreement, or in an
amount less than $50 million;
(9) incur or amend the terms of any indebtedness for borrowed money or
guarantee indebtedness for more than $600 million in connection with the
PHI Financial Services Inc. program to customers of Pioneer or $200
million otherwise in the aggregate;
(10) enter into, adopt or amend any agreement or arrangement relating to
severance or any employee benefit plan or employment or consulting
agreement or grant any stock option or other equity awards;
(11) change its accounting policies, practices or methods except as required
by generally accepted accounting principles or the rules and regulations
of the SEC;
(12) enter into agreements which would restrict Pioneer or its subsidiaries
or which would, after the merger, restrict DuPont from engaging in a line
of business or in a geographic area which would result in a material
adverse effect on DuPont; or
(13) amend its Rights Agreement or amend or redeem the rights thereunder.
DUPONT. DuPont has agreed that it will not take any action or knowingly
omit any action that will make its representations and warranties false.
In addition, DuPont has agreed that before we complete the merger, unless
Pioneer agrees in writing or as otherwise permitted by the merger agreement,
DuPont will not:
(1) purchase or otherwise acquire any shares of its capital stock, other
than in the ordinary course for its employee benefit plans, during the 10
trading day period during which the value of DuPont common stock is being
determined or during the five trading days preceding such period or
permit the Conoco Exchange offer to be completed during the 10 trading
days before the beginning of such 10 trading day valuation period;
(2) acquire or enter into a letter of intent to acquire all or any capital
stock of certain companies, including Monsanto, which are listed on a
schedule to the merger agreement;
(3) enter into a joint venture with or acquire a division of those same
companies on the schedule if the joint venture or acquisition directly
involves seed operations or enter into a related letter of intent; or
(4) acquire or enter into any other transaction in the seed business which
would make it more difficult to obtain any material approval under
antitrust law or if a material delay would occur.
DuPont may make the acquisitions referred to in clauses (2) through (4)
above if it waives antitrust and litigation related closing conditions not then
satisfied as a result of such action that would otherwise be a basis for not
closing the merger at such time and, in the case of transactions described in
(2) and (3), if the Hart-Scott-Rodino waiting period has expired. In the event
that a transaction results in a delay in the closing of the DuPont-Pioneer
merger beyond a specified date, DuPont has agreed, in certain limited
circumstances, to increase the $40 merger consideration by an interest factor
for each subsequent day of delay.
DuPont and Pioneer have agreed: (1) to cooperate in the prompt preparation
and filing of documents under federal and state securities laws and with
applicable government authorities and (2) to use their respective reasonable
best efforts to obtain approval under the Hart-Scott-Rodino Act. In addition,
DuPont has agreed to use its reasonable best efforts (1) to obtain all material
necessary "blue sky" permits required for the merger and (2) cause the DuPont
common stock used for consideration in the merger to be listed on the NYSE.
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NO SOLICITATION OF TRANSACTIONS
Summary: Pioneer has agreed that it will not, and will use its best efforts
to cause its officers and directors, financial advisors, agents and
representatives not to:
- solicit, initiate or encourage or take any other action to facilitate any
inquiries or the making of any, offer, indication of interest or proposal
with respect to a sale of 30 percent or more of Pioneer's shares or a
merger or related transaction including Pioneer.
If Pioneer receives an unsolicited inquiry, indication of interest, proposal
or offer from a third party relating to a superior proposal, Pioneer may provide
information and discuss and negotiate with that third party if the Pioneer board
of directors believes it is its fiduciary duty to do so. In exercising its
fiduciary duties, the Pioneer board of directors will evaluate the Iowa statute
that permits the Pioneer board to consider the effect of the transaction on
constituencies other than Pioneer's shareholders, including its employees,
customers, and suppliers and the communities in which Pioneer does business.
Pioneer will inform DuPont if it is engaged in substantive discussions with
another party but is not obligated under the merger agreement to inform DuPont
of the third party's identity or the terms of the offer. After April 29, 1999,
the merger agreement requires the Pioneer board of directors inform DuPont
within five business days if we receive a superior proposal from a third party
which the board of directors believes is reasonably likely to result in a
binding agreement within 10 business days. However, unless DuPont notifies
Pioneer that DuPont wishes to have a termination right by reason of such
notification, Pioneer will not have the ability to enter into such an agreement.
BOARD RECOMMENDATION
Summary: The board of directors of Pioneer has agreed to recommend the
approval and adoption of the merger agreement and approval of the merger to the
Pioneer shareholders.
Pioneer has agreed that our board of directors will not:
- withdraw or modify its approval or recommendation of the merger agreement
and the merger, although it may, after consideration of the applicable
constituency provisions in the Iowa statutes and consultation with outside
counsel, do so if it concludes that withdrawal or modification of its
approval or recommendation of the merger agreement and the merger is
required for it to act in a manner consistent with its fiduciary duties
under applicable law.
BEST EFFORTS; ANTITRUST MATTERS
Summary: Except as described below, we have agreed that we will use our
reasonable best efforts to do all things necessary under applicable antitrust
laws and regulations to complete the merger as soon as reasonably possible.
The parties have agreed, except as described in the paragraph below, use
reasonable best efforts to take all steps necessary to eliminate every
impediment under any antitrust, competition or trade regulation law so that we
can complete the merger no later than December 1, 1999. This includes the sale,
divestiture or disposition of assets, businesses or product lines to avoid the
entry of, or to effect the dissolution of, any order that would have the effect
of preventing or delaying the merger. The parties have agreed that DuPont will
control all decisions with respect to which divestitures or related transactions
will be undertaken by the parties if required by regulators to do so. Each of
the parties has also agreed to use our reasonable best efforts to avoid the
entry of, or to have vacated or terminated, any decree, order, or judgment that
would restrain, prevent or delay the merger, including defending through
litigation on the merits any claim by any party in any court.
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Notwithstanding the above, the parties are not required to take any action
that would result in a "significant adverse impact." A "significant adverse
impact" means any change or effect that in DuPont's reasonable judgment:
- is likely to be materially adverse to DuPont's and its subsidiaries'
operations which are in the same or related lines of business as those of
Pioneer and its subsidiaries, taken together with Pioneer and its
subsidiaries as a whole.
BENEFIT PLANS
Summary: DuPont has agreed to maintain Pioneer benefits plans for at least
one year following the merger. DuPont and Pioneer have also agreed that Pioneer
may offer employment retention agreements to up to 21 Pioneer executive officers
and key employees. These agreements have been entered into.
TREATMENT OF PIONEER EMPLOYEE BENEFIT PLANS. Pioneer and DuPont have agreed
that, for at least one year following the merger, the surviving corporation and
its subsidiaries will continue to sponsor and maintain the Pioneer plans,
agreements and arrangements for the benefit of employees of Pioneer who continue
in employment after the effective time of the merger. In addition, the surviving
corporation has agreed to honor (and to cause its subsidiaries to honor)
Pioneer's obligations under the Pioneer plans, agreements and arrangements. As a
general rule, Pioneer employees who continue employment after the effective time
of the merger will receive credit for pre-merger service with Pioneer for all
purposes under plans in which they first participate following the merger.
Pre-merger service with Pioneer will not be credited for benefit accrual under
any DuPont defined benefit pension plan, or if the crediting of pre-merger
service would result in the duplication of benefits for the same period of
service. DuPont has agreed, effective as of the effective time, to guarantee
payment of all obligations of the surviving corporation under the Pioneer plans,
agreements and arrangements. DuPont has acknowledged that the merger will
constitute a change in control of Pioneer under all applicable Pioneer plans,
agreements and arrangements.
TREATMENT OF PIONEER BONUS PLANS. The merger agreement specifies the
treatment of cash and stock bonuses for Pioneer's 1999 fiscal year under the
Pioneer incentive plans. Under incentive plans that pay bonuses based on Pioneer
performance, participants will receive cash bonuses for 1999 based on either
Pioneer's actual performance or on the assumption that Pioneer had met its
financial targets, whichever results in the greater bonus. Bonuses based on
personal objectives will be paid consistent with past practices. The foregoing
bonuses will be paid in October, 1999. If the closing occurs after August 31,
1999, the merger agreement provides that the bonus plans will continue and that
pro-rated awards for Pioneer's 2000 fiscal year will be paid within 45 days
following the closing.
EMPLOYMENT RETENTION AGREEMENTS. Employment retention agreements between
the surviving corporation and the covered executives will become effective at
the effective time of the merger, will have a term of between one and three
years (four years for Mr. Johnson) and will contain the following material
terms:
- titles and duties commensurate with the covered individual's pre-merger
titles and duties;
- annual compensation during the term at least equal to the covered
individual's 1999 base salary, 1998 cash bonus and value of 1998
restricted stock bonus;
- based on goals set by DuPont, a stay bonus of at minimum one year of base
salary and at maximum one year total compensation (payable at the end of
the term);
- an option to acquire DuPont common stock, granted at fair market value and
in an amount to be established by DuPont pursuant to its Management Stock
Option Plan;
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- severance benefits upon termination of employment consisting of
principally (1) one-twelfth of annual total compensation paid each month
during the three years following termination (or, if less, until the
executive is age 65), (2) acceleration of the vesting and payment of
benefits under the Pioneer Deferred Compensation Plan and Supplemental
Executive Retirement Plan, and (3) continued health and welfare coverage
until age 65 and retiree coverage thereafter, as these coverages are in
effect on January 1, 1999 (these severance benefits are payable (1) upon
termination of employment by the surviving corporation other than for
cause, or by the covered individual for stated good reason (substantially
as defined under the Pioneer Change in Control Severance Plan for
Management Employees), (2) upon the death or disability of the covered
individual, (3) upon nonrenewal of the term by either party and (4) upon
termination on 30 days' notice by either the surviving corporation or the
covered individual during any mutually-agreed extension of the term);
- a guarantee by DuPont of the surviving corporation's performance under the
agreements;
- a gross-up payment to make the covered individual whole for excise taxes
payable under Section 4999 of the Internal Revenue Code which is provided
under existing plans; and
- execution of a standard DuPont employee agreement.
Mr. Johnson's agreement will have the same terms and conditions as the
agreements of the other covered individuals, except that Mr. Johnson's agreement
is to have a four-year term. In addition, Mr. Johnson's agreement will provide
that Mr. Johnson will be the head of Pioneer, would report directly to Mr.
Holliday and would be a part of DuPont's Office of the Chief Executive.
After DuPont and Pioneer executed the merger agreement, DuPont requested
that Pioneer pay in advance of the closing of the merger the portion of annual
compensation attributable to cash bonuses and restricted stock bonuses. These
payments will be discounted to present value (using a 4 percent discount rate)
and are subject to proportionate forfeiture if the covered individual
voluntarily terminates without stated good reason or is fired for cause during
the term. It is expected that these payments will be paid to the covered
individuals after the shareholder vote on the merger and before closing of the
merger. The retention agreements as executed reflect these arrangements.
INDEMNIFICATION AND INSURANCE
Summary: DuPont has agreed that it will provide each director and officer of
Pioneer with the following protection with respect to acts or omissions before
the merger:
- indemnity against damages and other costs incurred in connection with any
claim or investigation which are asserted within six years, and
- directors' and officers' liability insurance coverage in effect for six
years.
After the merger, DuPont has agreed to, or to cause the surviving
corporation of the merger to, indemnify each present and former director and
officer, when acting in said capacity, of Pioneer or any of its subsidiaries,
against all costs or expenses, judgments, fines, losses, claims, damages, or
liabilities in connection with any claim, action, suit, proceeding or
investigation brought within 6 years of the merger closing for acts or
omissions, existing or occurring before the merger, to the fullest extent
permitted under the Iowa Business Corporation Act or other applicable law.
For a period of six years after the merger, DuPont has agreed to maintain a
policy of directors' and officers' liability insurance for acts and omissions
occurring before the merger with coverage in amount and scope at least as
favorable as Pioneer's existing directors' and officers' liability insurance
coverage. If the existing directors' and officers' liability insurance expires
or terminates or if the annual premium is more than 200 percent of the last
annualized premium paid, DuPont must obtain directors' and officers' liability
insurance in an amount and scope as it can obtain for the remainder of that
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period for a premium not in excess, on an annualized basis, of 200 percent of
the last annualized premium paid.
CONDITIONS
Both DuPont and Pioneer are required to complete the merger only if each of
the following conditions is met:
(1) the holders of a majority of the outstanding shares of Pioneer
common stock have approved and adopted the merger agreement and approved the
merger;
(2) the waiting period applicable to the consummation of the merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expires or
terminates and approval of the European Commission is obtained;
(3) there is no judgment, injunction, order, or decree making the merger
illegal or otherwise prohibiting the completion of the merger;
(4) there is no provision of any applicable law or regulation
prohibiting the completion of the merger except as would not reasonably be
expected to have in the aggregate a material adverse effect on the
respective parties or a "significant adverse impact." This condition will be
deemed satisfied if the violations of laws or regulations results from
DuPont's breach of its obligations with respect to antitrust approvals;
(5) the registration statement on Form S-4 of which this document is a
part is effective under the Securities Act;
(6) the parties have satisfied all material state securities or "blue
sky" laws; and
(7) the DuPont common stock to be issued pursuant to the merger is duly
approved for listing on the New York Stock Exchange.
Additionally, the merger agreement obligates DuPont on the one hand, and
Pioneer, on the other hand, to complete the merger only if, before the merger,
the following additional conditions are satisfied:
(1) The other party has performed in all material respects all of its
agreements and covenants contained in the merger agreement and required to
be performed before the completion of the merger;
(2) the representations and warranties of the other party in the merger
agreement are true and correct as of the closing date, except for those
representations made as of an earlier date, with the same force and effect
as if made on and as of the closing date except to the extent that any
failures of the representations and warranties to be so true and correct,
determined without regard to materiality qualifiers or limitations contained
in the merger agreement, individually or in the aggregate, would not
reasonably be expected to have resulted in a material adverse effect on the
other party, as defined below;
(3) Such party has received an opinion of its tax counsel to the effect
that the merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
Also, DuPont is obligated to complete the merger only if:
(1) All governmental consents and filings necessary to complete the
merger (other than in connection with the Hart-Scott-Rodino Act or by the
European Commission) shall have been obtained, unless the failure to obtain
these consents or make these filings would not reasonably be expected to
have a material adverse effect on that party; and
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(2) No litigation shall have been instituted by governmental authorities
against DuPont, Pioneer or any of their respective officers or directors
having a "material adverse consequence" (meaning litigation which seeks (a)
to prevent the DuPont-Pioneer transaction, (b) material damages, (c) any
other remedy that would impair the benefits of the transaction or (d) to
impose criminal liability).
For purposes of the merger agreement, "material adverse effect" means any
change, circumstance, event or effect:
- that is materially adverse to the business, assets or results of
operations of such party and its subsidiaries taken as a whole, or
- in the case of Pioneer, that will prevent or materially impair Pioneer's
ability to perform its obligations pursuant to the merger agreement.
"material adverse effect" does not include changes or effects:
- relating to economic conditions or financial markets in general or
- in the case of Pioneer, relating to the agricultural industry in general
or
- in the case of DuPont, relating to the industries in which DuPont and its
subsidiaries operate, in general.
TERMINATION
Summary: The merger agreement provides that either of us or in certain
circumstances one of us may terminate the agreement under the circumstances
described below.
RIGHT TO TERMINATE BY EITHER OF US. The parties may together terminate the
merger agreement and abandon the merger at any time before the merger is
completed by our mutual written consent. Either party may also terminate the
merger agreement if:
(1) the merger does not occur by December 1, 1999, but that right to
terminate will not be available if the party desiring to terminate has
failed to fulfill any obligation that has been the cause of the failure of
the merger to occur on or before December 1, 1999;
(2) any governmental entity issues a final and nonappealable order
making the merger illegal or permanently prohibiting the merger, as long as
the party seeking to terminate the merger agreement has used its reasonable
best efforts to have this order lifted or vacated; or
(3) the Pioneer shareholders fail to approve the merger agreement and
the merger.
RIGHT TO TERMINATE BY DUPONT. DuPont may terminate the merger agreement if:
(1) Pioneer's board of directors, prior to the Pioneer shareholders vote
in favor of the merger, approves or recommends a proposal or a public tender
offer or exchange offer by a third party or fails to reject or recommend
against a tender or exchange offer within 10 days after its commencement;
(2) Pioneer's board of directors withdraws, modifies or materially
qualifies in a manner adverse to DuPont its recommendation to the Pioneer
shareholders or makes a statement inconsistent with its recommendation;
(3) Pioneer fails to unconditionally reject a superior proposal made to
it after April 29, 1999 within 10 business days after it has notified DuPont
of its receipt thereof, except that DuPont may not exercise this termination
right unless DuPont has given Pioneer five business days to exercise its
right to terminate the merger agreement to accept such proposal;
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(4) Pioneer redeems, amends or modifies its Rights Agreement without the
prior written consent of DuPont or a third party triggers the rights
outstanding under Pioneer's Rights Agreement; or
(5) Pioneer has breached its covenant that it would not solicit other
parties.
RIGHT TO TERMINATE BY PIONEER. Pioneer may terminate the merger agreement
if:
(1) under limited circumstances in which DuPont has given Pioneer a
termination right as described in clause (3) of "Right to terminate by
DuPont" above, if Pioneer's board of directors determines that it is their
fiduciary duty to terminate this agreement and accept a superior proposal
made by a third party; and
(2) DuPont breaches its covenant not to make an acquisition of certain
specified companies (including Monsanto) on a schedule to the agreement
during the Hart-Scott-Rodino waiting period.
TERMINATION FEES
There are no termination fees.
OTHER EXPENSES
All costs and expenses incurred in connection with the merger agreement and
the transactions contemplated by the merger agreement shall be paid by the party
incurring these expenses.
ASSIGNMENT, AMENDMENT AND WAIVER
The parties may amend the merger agreement prior to the approval of the
Pioneer shareholders, if the amendment is in writing and signed by both parties.
After the approval of the Pioneer shareholders, the merger agreement may not be
amended except as allowed under applicable law. The conditions to each party's
obligation to consummate the merger may be waived, in writing, by the other
party in whole or in part to the extent permitted by applicable law.
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DESCRIPTION OF PIONEER CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Pioneer's authorized capital stock consists of 600,000,000 common shares,
par value $1.00 per share, 120,000,000 Class B common shares without par value
and 10,000,000 preferred shares without par value.
PIONEER COMMON SHARES
The holders of shares of Pioneer common stock are entitled to five votes per
share on all matters voted on by the shareholders, unless the beneficial
ownership of the shares changed in the 36 months preceding the record date of
the vote to be held. If there was a change of beneficial ownership, then each
share is entitled to only one vote. The holders of shares of Pioneer common
stock do not have any conversion, redemption or preemptive rights. The holders
of shares of Pioneer common stock are entitled to dividends as declared by the
Pioneer board of directors. Upon liquidation, holders are entitled to equally
receive all assets of Pioneer available for distribution to the shareholders.
The rights and dividends upon liquidation are junior to the rights of holders of
any preferred stock. The board of directors may only declare dividends on the
common stock if there are sufficient funds available to do so and if the company
is current in its payments to the holders of preferred stock for accrued
dividends.
As of June 22, 1999 there are 239,470,394 shares outstanding, that are held
by approximately 36,000 holders of record. The shares are listed for trading
under the symbol PHB on the New York Stock Exchange.
PIONEER CLASS B COMMON SHARES
No shares of the Class B common shares are currently outstanding.
PIONEER PREFERRED SHARES
The Pioneer board of directors is authorized to provide for the issuance of
Pioneer preferred stock, in one or more series, and to fix for each series the
designation and number of such stock, preferences and relative, optional or
other rights and qualification, limitations or restrictions. The holders of any
series of preferred stock rank equally in priority with one another in the event
that there are insufficient resources to cover payments owed to both groups of
shareholders. Under Iowa law, holders may be afforded voting rights in certain
extraordinary situations. In addition, the board of directors may authorize
voting rights by resolution.
SERIES A CONVERTIBLE PREFERRED SHARES
No shares of the Series A Convertible Preferred Shares are currently
outstanding.
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
No shares of the Series A Junior Participating Preferred Shares are
currently outstanding.
DESCRIPTION OF DUPONT CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
DuPont's authorized capital stock consists of 1,800,000,000 shares of DuPont
common stock, par value $0.30 per share, and 23,000,000 shares of preferred
stock, without par value. The preferred stock is divided into one $4.50 series
and one $3.50 series.
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DUPONT COMMON STOCK
The holders of DuPont common stock are entitled to one vote for each share
on all matters voted on by the shareholders. The holders of DuPont common stock
do not have any conversion, redemption or preemptive rights. The holders of
DuPont common stock are entitled to dividends as declared by the DuPont board of
directors. Upon liquidation, holders are entitled to equally receive all assets
of DuPont available for distribution to the holders. The rights and dividends
upon liquidation are junior to the rights of holders of any preferred stock. The
board of directors may only declare dividends on the common stock if there are
sufficient funds available to do so and if the company is current in its
payments to the holders of preferred stock for accrued dividends.
As of March 8, 1999, there are 1,125,861,000 outstanding shares, that are
held by 144,257 holders of record. The shares are listed for trading under the
symbol DD on the New York Stock Exchange.
DUPONT PREFERRED STOCK--$4.50 SERIES AND $3.50 SERIES
The DuPont board of directors is authorized to provide for the issuance of
DuPont preferred stock, in one or more series, and to fix for each series the
designation and number of such stock, preferences and relative, optional or
other rights and qualification, limitations or restrictions. The holders of any
series of preferred stock rank equally in priority with one another in the event
that there are insufficient resources to cover payments owed to both groups of
stock holders. The holders also do not have any voting rights except as afforded
by law in certain extraordinary situations and in the event that DuPont fails to
pay the required dividends on the preferred stock and such failure to pay
continues for six months. In this case, the holders of all series of preferred
stock voting separately and as a class have the right to elect two directors to
the board of directs, or one director, if the board of directors is then only
composed of three directors.
$4.50 SERIES PREFERRED STOCK
The $4.50 Series Preferred Stock pays a $4.50 annual dividend for each share
of stock issued before April 25, 1947 for stock issued in this series after that
date, the dividend is determined by resolution of DuPont's board of directors.
If there is an involuntary liquidation, dissolution or winding up of DuPont, the
holders of $4.50 Series Preferred Stock are entitled to receive $100.00 for each
share of stock in this series. If there is a voluntary liquidation, dissolution
or winding up of DuPont, the holders of this series of stock are entitled to
receive $115.00 for each share of stock. The $4.50 series Preferred Stock is
subject to redemption by DuPont at the rate of $120.00 for each share of stock.
$3.50 SERIES PREFERRED STOCK
The $3.50 Series Preferred Stock pays a $3.50 annual dividend for each share
of stock issued before April 25, 1947 for stock issued in this series after that
date, the dividend is determined by resolution of DuPont's board of directors.
If there is an involuntary liquidation, dissolution or winding up of DuPont, the
holders of $3.50 Series Preferred Stock are entitled to receive $100.00 for each
share of stock in this series. If there is a voluntary liquidation, dissolution
or winding up of DuPont, the holders of this series of stock are entitled to
receive $107.00 for each share of stock. The $3.50 series Preferred Stock is
subject to redemption by DuPont at the rate of $102.00 for each share of stock.
COMPARATIVE RIGHTS OF SHAREHOLDERS
In the merger, 55 percent of the total consideration paid by DuPont for the
shares of Pioneer common stock will be in the form of DuPont common stock. The
rights of the holders of DuPont common stock will then be governed by the DuPont
certificate of incorporation, the DuPont by-laws and the Delaware General
Corporation Law. Presently, Pioneer shareholders' rights are governed by the
Pioneer certificate of incorporation, the Pioneer by-laws and the Iowa Business
Corporation Act. The following summary is not a complete statement of all
differences between rights of the holders of DuPont common stock and Pioneer
common shares. The summary discusses material differences
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between the relevant corporation laws of Iowa and those of Delaware. It also
discusses differences between the Pioneer articles of incorporation and the
Pioneer by-laws and the DuPont certificate of incorporation and the DuPont
by-laws. This summary is qualified by the full text of each document and the
Delaware General Corporation Law and the Iowa Business Corporation Act. For
information as to how to get those documents, see "WHERE YOU CAN FIND MORE
INFORMATION" on page 111.
SHAREHOLDERS' RIGHTS PLAN
PIONEER. On April 6, 1989 Pioneer adopted a shareholders' rights plan
providing for stock purchase rights to owners of shares of Pioneer common stock.
This plan was last amended prior to the signing of the Merger agreement on
September 18, 1997. As the plan now stands, each right, when exercisable,
entitles the holder to purchase from Pioneer one thousandth of a share of Series
A Junior Participating Preferred Stock par value $.01 per share, at $250 per one
thousandth of a share. The rights will become separately tradeable and
exercisable if, without the prior consent of the board of directors, a person or
group becomes the beneficial owner of at least 15 percent of the outstanding
common shares or 10 percent of the outstanding common shares if the owner would
be entitled to cast at least 25 percent of the votes at a fully attended meeting
of the shareholders. The rights will also become separately tradeable and
exercisable if a person or group announces a tender or exchange offer that if
successful, would ultimately entitle the owner to at least 15 percent of the
outstanding common shares or 10 percent of the outstanding common shares if the
owner would be entitled to cast at least 25 percent of the votes at a fully
attended meeting of the shareholders. At the time the merger agreement was
approved, our board of directors determined that the rights would not apply or
be exercisable with respect to the merger with DuPont. If the rights do become
separately tradeable and exercisable, then each Pioneer right not owned by the
beneficial owner who triggers the plan will entitle its holder to receive upon
exercise that number of Pioneer common shares (or in certain circumstances other
equity securities of Pioneer with at least the same economic value as Pioneer
common shares) having a market value of twice the right's then-current exercise
price. If, after the Pioneer rights become exercisable, Pioneer is involved in a
merger or other business combination transaction in which the Pioneer common
shares are exchanged or changed, or it sells 50 percent or more of its assets or
earning power, in either case with or to the beneficial owner who triggers the
plan or any other person in which the beneficial owner has an interest or any
person acting on behalf of or in concert with the beneficial owner who triggers
the plan, then each Pioneer right will entitle the holder to purchase, at the
right's then-current exercise price, common stock of the acquiring company
having a value of twice the exercise price of the right. At Pioneer's option,
the rights, before becoming exercisable, are redeemable in their entirety at a
price of $.01 per right. The rights, which have no voting rights, will expire no
later than December 31, 2006.
This summary is qualified by the full text of the most recently amended
shareholders' rights plan. A copy of this plan is filed as an exhibit to the
Form 8-A filed with the SEC on November 13, 1998, and is incorporated in this
documents by reference. For more information as to how to get this document, see
"WHERE YOU CAN FIND MORE INFORMATION" on page 111.
DUPONT. DuPont does not have a stockholders' rights plan.
CLASSIFIED BOARD OF DIRECTORS
PIONEER. The Pioneer by-laws provide that the board of directors is
classified into three classes with each class elected in staggered elections and
serving a three-year term.
Classification of directors makes it more difficult for shareholders to
change the composition of the board of directors. At least two annual meetings
of shareholders, instead of one, will generally be required to change who
represents the majority of the board of directors. If a company were confronted
by a holder attempting to force a proxy contest, a tender or exchange offer or
other extraordinary corporate transaction, this classification and time period
would allow the board sufficient
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time to review the proposal. The board would also have the opportunity to review
any available alternatives to the proposal and to act in what it believes to be
the best interests of the shareholders.
The classification provisions could also discourage a third party from
starting a proxy contest, making a tender offer or otherwise attempting to
obtain control of Pioneer. That transaction could be beneficial to Pioneer or
its shareholders.
DUPONT. The DuPont by-laws provide that the board of directors is composed
of only one class of directors. The impediments to starting a proxy contest,
making a tender offer, or otherwise attempting to obtain control of DuPont do
not exist as compared to a company with a classified board of directors.
NUMBER OF DIRECTORS
PIONEER. Pioneer's certificate of incorporation provides that the Pioneer
board of directors will consist of not less than 12 nor more than 16 directors.
The Pioneer board of directors has set the current number of directors at 14.
The number of directors is set by a majority vote of the Pioneer board of
directors.
DUPONT. DuPont's certificate of incorporation provide that the number of
directors shall not be less than ten. The DuPont board of directors currently
consists of 13 directors. The number of directors is determined by a two-thirds
affirmative vote of DuPont's entire board of directors.
REMOVAL OF DIRECTORS
PIONEER. The Pioneer Articles of Incorporation provide that shareholders
may remove any director or the entire board of directors from office only for
cause by an affirmative vote of the holders of two-thirds of the shares of
Pioneer common stock entitled to elect directors. Pioneer's Articles of
Incorporation define the term "for cause" to mean that a director has been
convicted of a felony by a court of competent jurisdiction and that the
conviction is no longer directly appealable, or that the director has been
adjudged by a court of competent jurisdiction to be liable for negligence or
misconduct in the performance of his duty to Pioneer and that the judgment is no
longer directly appealable.
DUPONT. Neither the DuPont certificate of incorporation, nor its by-laws
provides for the removal of a director. Accordingly, the removal of a director
from the board of directors is governed under section 141 of the Delaware
General Corporation Law. This section provides that any director or the entire
board of directors may be removed, with or without cause, by an affirmative vote
of the holders of a majority of the shares of common stock eligible to vote.
VACANCIES
PIONEER. Pioneer's certificate of incorporation and by-laws provide that
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, even if less than a quorum.
DUPONT. DuPont's by-laws provide that a vacancy may be filled by a vote of
the majority of the remaining directors. Any director so elected shall serve for
the remainder of the unexpired term.
SPECIAL MEETING
PIONEER. The Iowa Business Corporation Act and the Pioneer by-laws provide
that a special meeting of the shareholders can be called by the president of the
company or upon the written request of shareholders holding at least 50 percent
of all the votes entitled to be cast at such a meeting.
DUPONT. The DuPont by-laws provide that a special meeting of stockholders
may be called by the Secretary of the company at the request of the holders of
at least 25 percent of the outstanding stock entitled to vote at such meeting.
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SHAREHOLDER ACTION BY WRITTEN CONSENT
PIONEER. The Iowa Business Corporation Act and the Pioneer by-laws provide
for shareholders to act by written consent in lieu of a meeting if such a
consent is signed by the holders of at least 90 percent of the shares entitled
to be cast on such matter.
DUPONT. Neither the DuPont certificate of incorporation nor the by-laws
provide for stockholder action by written consent in lieu of a meeting of
stockholders. Section 228 of the Delaware General Corporation Law provides that
the stockholders of a company may take action by written consent in lieu of a
meeting so long as such written consent is signed by the holders of outstanding
stock representing at least the same number of votes as would be required to
authorize such actions at a meeting of stockholders at which all holders of all
the outstanding stock were present.
VOTING RIGHTS OF COMMON STOCK
PIONEER. Each shareholder is entitled to five votes for each share of
Pioneer common shares owned. However, if there has been a change in beneficial
ownership of any shares of the common shares during the 36 months preceding the
record date for any vote, then the owner of such shares of the common shares is
entitled to only one vote per share of common shares owned. Under the articles
of incorporation, a change in beneficial ownership of the common shares is
triggered by various events, including, among others, the entering into of a
contract, arrangement, understanding or relationship to transfer or share (a)
voting power, which includes the power to vote or direct the voting of such
shares, (b) investment power over such shares, (c) the right to retain proceeds
of a sale or disposition of such shares or (d) the right to receive any
distributions in respect of such shares. Except for holders of record who are
not natural persons, the burden is on any record owner of the common shares to
establish pursuant to procedures set forth by Pioneer that there has been no
change in beneficial ownership during the previous 36 months. Absent such proof
by the holder of the common shares in question, a change in beneficial ownership
shall be deemed to have occurred.
Any common shares issued, or transferred by Pioneer are deemed on the date
of the issuance or transfer to any person to have been beneficially owned by
such person for 36 months unless otherwise determined by the board of directors
at the time of such issuance or transfer.
DUPONT. Each share of DuPont common stock is entitled to one vote on
matters presented to the stockholders for approval.
CUMULATIVE VOTING
PIONEER. Under the Iowa Business Corporation Act, shareholders are only
entitled to cumulate votes in the election of directors if a provision has been
made in the articles of incorporation. The Pioneer articles of incorporation do
not provide for cumulative voting.
DUPONT. Under the Delaware General Corporation Law stockholders are only
entitled to cumulative votes in the election of directors if a provision has
been made in the articles of incorporation. The DuPont certificate of
incorporation does not provide for cumulative voting.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
PIONEER. Under the Pioneer by-laws, for shareholders to properly introduce
business to be transacted at the annual or any special meeting of shareholders,
a shareholder of record must give timely notice of any proposal in a proper
written form to Pioneer's corporate secretary. To be timely, a shareholder's
notice to the secretary must be no later than 90 days before such meeting or
within 10 days of receipt of notice of a meeting if such meeting is to occur in
less than 90 days from when notice is given.
DUPONT. The DuPont certificate of incorporation only require advance notice
of stockholder action in the case where a stockholder proposal is seeking to
alter or repeal a by-law passed by the
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board of directors. In this case, notice of the proposed amendments or
alteration must be given in the notice of the special or annual meeting.
AMENDMENTS TO THE CORPORATE CHARTER AND BY-LAWS
PIONEER. Section 490.1003 of the Iowa Business Corporation Act provides
that a company can amend its articles of incorporation upon a resolution passed
by the board of directors which is then approved by the holders of a majority of
the voting stock of the company at an annual or special meeting of the
shareholders. The Iowa law allows the articles of incorporation to require a
greater shareholder vote to pass specified proposals. The Pioneer articles of
incorporation require a two-thirds vote to amend the provisions governing the
number of directors, their removal and appointment in the case of vacancies.
Section 490.1020 of the Iowa Business Corporation Act provides that both the
shareholders and the board of directors have the power to amend the by-laws.
Section 490.1021 of the Iowa Business provides that the shareholders may, if
authorized by the articles of incorporation, alter the by-laws to increase the
voting or quorum requirements needed to enact a proposal. They have done so with
respect to the by-laws governing the introduction of shareholder proposals at
annual meetings, the filling of vacancies on the board of directors and the
nomination of director candidates. In the event that the board of directors
seeks to alter or repeal one of these by-laws provisions, the requisite vote for
adoption is two-thirds of the directors then authorized to vote.
DUPONT. Section 242 of the Delaware General Corporation law provides that a
company can amend its articles of incorporation upon a resolution passed by the
board of directors which is then approved by the holders of a majority of the
voting stock of the company at an annual or special meeting of the stockholders.
MERGERS, ACQUISITIONS AND OTHER TRANSACTIONS
PIONEER. Section 490.1103 of the Iowa Business Corporation Act requires
that the shareholders ratify plans of merger or share exchange by a majority
vote or such greater vote as specified by the board of directors. A shareholder
vote is not required where: (i) the corporation is the surviving corporation,
(ii) each shareholder will receive the same number of shares with identical
rights and preferences after the plan, and (iii) the combination involves the
issuance of less than 20 percent of what would total the aggregate number of
shares entitled to vote.
DUPONT. Section 251 of the Delaware General Corporation Law does not
require stockholder approval for majority share acquisitions or for combinations
involving the issuance of less than 20 percent of the voting power of the
corporation, except for "business combinations" subject to section 203 of the
Delaware General Corporation Law. For a description of the relevant provisions
of section 203, see "Transaction With Interested Shareholders."
DuPont's certificate of incorporation requires a two-thirds vote of
stockholders to approve the sale or other transfer of a corporation as an
entirety. The holders of a majority of the shares of stock entitled to vote also
must approve majority stock acquisitions and combinations involving issuance of
shares representing one-sixth or more of what would total the aggregate number
of shares entitled to vote other than so-called parent-subsidiary mergers.
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TRANSACTIONS WITH INTERESTED SHAREHOLDERS
Iowa and Delaware have statutes that delay or prevent unsolicited third
party takeover attempts. These statutes encourage an acquiring company to
negotiate seriously with a target company's board of directors in advance of a
takeover attempt. Section 490.1110 of the Iowa Business Corporation Act applies
to Pioneer. Section 203 of the Delaware General Corporation Law, a similar
statute, applies to DuPont.
The major differences between Section 490.1110 of the Iowa Business
Corporation Act and Section 203 of the Delaware General Corporation Law is that:
(a) the ownership threshold to become an interested stockholder is 15 percent in
Delaware and 10 percent in Iowa.
PIONEER. Section 490.1110 of the Iowa Business Corporation Act governs
business combinations and other transactions between an Iowa public company and
an "interested shareholder." An interested shareholder is a person who
beneficially owns or has the right to vote 10 percent or more of a company's
outstanding shares.
Section 490.1110 will not apply if prior to the time that the shareholder
became an interested, shareholder, the board of directors approved the
transaction in which the shareholder became interested or upon consummation of
the transaction in which the shareholder became an interested shareholder, the
shareholder acquired more than 85 percent of the voting stock of the
corporation. This section will also not apply if, after the shareholder becomes
an interested shareholder, the board of directors approved the transaction and
it is also authorized at an annual or special shareholders meeting by an
affirmative two-thirds vote of all stock not owned by the interested
shareholders.
Section 490.1110 also allows a corporation to opt out of the restructured
provisions by amending the articles of incorporation to state that the
corporation is not subject to section 490.1110. This opt out would not become
effective until 12 months after the amendment to the articles of incorporation.
Currently, Pioneer articles of incorporation do not have an opt out provision.
If Section 490.1110. applies, then for three years after a person becomes an
interested shareholder, the following transactions between the company and the
interested shareholder or persons related to that shareholder are prohibited:
- the sale or acquisition of any significant interest in assets,
- mergers and similar transactions,
- loans or guarantees,
- the issuance or transfer of shares or any rights to acquire shares in the
company or its subsidiaries,
- a transaction that increases the interested shareholder's proportionate
ownership of the company.
DUPONT. Section 203 of the Delaware General Corporation Law governs
business combinations and other transactions between a Delaware public company
and an "interested stockholder." An interested stockholder is a person who
beneficially owns or has the right to vote 15 percent or more of a company's
outstanding shares.
Section 203 will not apply if, prior to the time that the stockholder became
an interested stockholder, the board of directors approved the transaction in
which the stockholder became interested or upon consummation of the transaction
in which the stockholder became an interested stockholder, the stockholder
acquired more than 85 percent of the voting stock of the corporation. This
section will also not apply if, after the stockholder becomes an interested
stockholder, the board of
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directors ratifies the transaction with a two-thirds vote of outstanding voting
stock which is not owned by the interested stockholder.
Section 203 also only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, are quoted on an
interdealer quotation system such as Nasdaq or are held by record by more than
2,000 stockholders. However, a Delaware corporation may elect not to be governed
by Section 203 by a provision in its certificate of incorporation or the bylaws.
The authorization of this provision must be approved by a majority of the shares
entitled to vote and, in the case of a bylaw amendment, may not be further
amended by the board of directors. Currently section 203 applies to DuPont.
If Section 203 applies, then for three years after a person becomes an
interested stockholder, the following transactions between the company and the
interested stockholder or persons related to that stockholder are prohibited:
- the sale or acquisition of any interest in assets,
- mergers and similar transactions,
- loans or guarantees,
- the issuance or transfer of stock or any rights to acquire stock of the
company's outstanding stock or the stock of its subsidiaries.
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
PIONEER. Under Section 490.1302 of the Iowa Business Corporation Act, a
Pioneer shareholder is generally entitled to dissent from, and obtain the fair
value of his shares in the event of, any of the following corporate actions:
a) consummation of a merger in which the shareholder is entitled to vote on
the merger,
b) a short-form merger of a subsidiary into its parent,
c) consummation of a plan of share exchange if the shareholder is entitled
to vote on the plan,
d) consummation of a sale of all, or substantially all, of the
corporation's assets other than in the usual and regular course of its
business if the shareholder is entitled to vote on the sale, except for
certain court ordered sales or cash sales of which the proceeds will be
distributed to shareholders within one year of the sale,
e) certain amendments to the articles of incorporation which materially and
adversely affect the rights of a dissenter's shares or
f) any other action for which the articles of incorporation, the by-laws or
the board of directors permit dissenters' rights.
Neither the articles of incorporation nor the by-laws provide for any other
actions which would entitle shareholders to additional dissenters' rights.
Accordingly, if a shareholder follows the procedures outlined in the Iowa
Business Corporation Act, including, without limitation, delivering written
notice of the shareholder's intent to assert dissenters' rights before a vote on
the corporate actions described above is taken, and if a vote is required, not
voting in favor of the action at issue, that shareholder will be able to pursue
dissenters' rights in any of the situations described above as creating
dissenters' rights.
DUPONT. Since DuPont stockholders will not be voting on the merger between
Pioneer and DuPont, the DuPont stockholders will not be able to dissent from the
transaction.
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CONSIDERATION OF OTHER CONSTITUENCIES
PIONEER. Section 490.1108 of the Iowa Business Corporation Act, a director,
in determining what is in the best interest of the corporation, when considering
a tender offer or proposal of acquisition, merger, consolidation or similar
proposal, may consider the effect of such action on any or all of the following
community interest factors: (a) the corporation's employees, suppliers,
creditors and customers; (b) the communities in which the corporation operates;
and (c) the long-term, as well as short-term, interests of the corporation and
its shareholders, including the possibility that these interests may be best
served by the continued independence of the corporation. Consideration of any or
all of the community interest factors is not a violation of the business
judgment rule or any duty of the directors to the shareholders, or group of
shareholders even if the director reasonably determines that a community
interest factor or factors outweigh the financial or other benefits to the
corporation or a shareholder or group of shareholders. If, on the basis of the
community interest factors, the board of directors determines that a proposal or
offer to acquire or merge the corporation is not in the best interests of the
corporation, it may reject the proposal or offer.
DUPONT. The DuPont board of directors cannot consider other constituencies
as the Delaware General Corporation Law does not contain provisions relating to
the ability of a board of directors to consider the impact of groups or persons
other than stockholders.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
PIONEER. Section 490.832 of the Iowa Business Corporation Act permits a
corporation to eliminate or limit directors' personal liability for monetary
damages arising from breaches of their fiduciary duties as directors. The
corporation cannot limit damages for breaches of the duty of loyalty, acts not
in good faith, intentional misconduct, or where the director receives an
improper personal benefit. The Pioneer articles of incorporation eliminate the
personal liability of directors to the fullest extent permitted under Iowa law.
Section 490.851 of the Iowa Business Corporation Act provides that a
corporation is permitted to provide indemnification to directors if the
director:
a) acted in good faith
b) reasonably believed that his conduct was in the best interest of the
corporation in action involving official conduct and that his action was
not opposed to the corporation's best interest in all other cases
c) had no reasonable cause to believe that his actions were unlawful (in
the case of criminal proceedings).
d) The corporation also cannot provide indemnification to a director if in
an action brought by or in the name of the corporation, the director is
adjudged liable to the corporation or if the director is adjudged to have
received any improper personal benefit.
The by-laws of Pioneer provide that the company will indemnify any person
who is or was a party to any form of legal proceeding (criminal, civil or
otherwise) in any capacity by reason of the fact that the person to be
indemnified was a director, officer or was acting at the request of the
corporation. Subject to limitations imposed under Iowa law, the indemnification
includes all expenses including counsel fees liabilities and losses including
judgments, fines and penalties and amounts paid in settlement.
DUPONT. Delaware law permits a corporation to adopt a provision in its
certificate of incorporation eliminating or limiting the personal liability of a
director, but not an officer, to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director, except that such
provision shall not limit the liability of a director for (1) any breach of the
director's duty of
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loyalty to the corporation or its shareholders, (2) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) liability under section 174 of the Delaware General Corporation Law for
unlawful payment of dividends or stock purchases or redemption, or (4) any
transaction from which the director derived an improper personal benefit. The
DuPont certificate of incorporation provides that no director of DuPont shall be
personally liable to it or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such an exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law.
Under Delaware law, a corporation may indemnify any person made a party or
threatened to be made a party to any type of proceeding, other than action by or
in the right of the corporation, because he is or was an officer, director,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
entity, against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such proceeding: (1) if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; or (2) in the case of a
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened to
be made a party to any threatened, pending or completed action or suit brought
by or in the right of the corporation because he was an officer, director,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification will be denied if the person is found liable to the corporation
unless, in such a case, the court determine the person is entitled to
indemnification in any event. A corporation must indemnify a director, officer,
employee or agent who successfully defends himself in a proceeding to which he
was a party because he was a director, officer, employee or agent of the
corporation against expenses actually and reasonably incurred by him. Expenses
incurred by an officer or director, or any employees or agents as deemed
appropriate by the board of directors, in defending civil or criminal proceeding
may be paid by the corporation in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation. The Delaware law indemnification
and expense advancement provisions are not exclusive of any other rights which
may be granted by the DuPont bylaws, a vote of shareholders or disinterested
directors, agreement or otherwise.
Under the Delaware General Corporation Law, termination of any proceeding by
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that such person is prohibited from being
indemnified.
The DuPont bylaws provide for the indemnification to the fullest extent
permitted by law of any person made, or threatened to be made, a party to an
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or his testator or intestate is or
was a director, officer or employee of DuPont or serves or served any other
enterprise at the request of DuPont.
LOANS TO OFFICERS AND EMPLOYEES
PIONEER. The Iowa Business Corporation Act, Pioneer's certificate of
incorporation and by-laws are silent on the topic of loans to directors and
officers issued by the corporation for which they are employed. Accordingly, a
corporation will be permitted to make loans to officers and directors; however,
the decision to make such a loan and the terms under which it is granted will
have to be consistent with the director's or officer's fiduciary duties owed to
the corporation.
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DUPONT. Under Delaware law, a corporation, its officers or other employees
may make loans to, guarantee the obligations of or otherwise assist its officers
or other employees and those of its subsidiaries, including directors who are
also officers or employees, when such action, in the judgment of the directors,
may reasonably be expected to benefit the corporation, even without approval of
the stockholders.
INSPECTION OF SHAREHOLDERS' LIST
PIONEER. Section 490.720 of the Iowa Business Corporation Act entitles a
shareholder to inspect a list of shareholders entitled to vote at a meeting two
days after the notice of the meeting is given. The shareholders right to inspect
the list continues until and through the meeting for which it was prepared.
Section 1602 of the IBCA also allows a shareholder the right to inspect a
corporation's shareholder list and other corporate records if:
a. the request is made in good faith and for a proper purpose;
b. the request describes with reasonable particularity the shareholder's
purpose and the requested records; and
c. the requested records are directly connected to the shareholder's
purpose.
DUPONT. The Delaware General Corporation Law allows any stockholder to
inspect a corporation's stockholders' list for a purpose reasonably related to
such person's interest as a stockholder. The Delaware General Corporation Law
does not provide for any absolute right of inspection, and no absolute right is
granted under the restated certificate of incorporation or by-laws of DuPont.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains forward-looking statements about the merger and about
our financial condition, results of operations, plans, objectives, future
performance and business.
It also includes statements using words like "believes," "plans," "intends,"
"projects," "expects," "anticipates" or "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those predicted by the forward-looking
statements because of factors and possible events including the following:
- competition increases in our industry or markets,
- changes in costs
- changes in general economic or agricultural conditions,
- changes in commodity prices
- adverse weather,
- changes in government programs
- technological changes, including "Year 2000" data systems compliance
issues, are more difficult or expensive to implement than anticipated,
- changes in the securities and foreign currency markets,
- difficulties in obtaining regulatory approvals,
- potential loss of key personnel,
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- the risk that research and development yields intellectual property and
products that perform below expectations, and
- the risk that we incorrectly analyze these risks and forces, or that the
strategies we develop to address them could be unsuccessful.
Because these forward-looking statements involve risks and uncertainties,
actual results may differ significantly from those predicted in these
forward-looking statements. You should not place a lot of weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable to
Pioneer or DuPont or any person acting on our behalf are qualified by the
cautionary statements in this section. We will have no obligation to revise
these forward-looking statements.
LEGAL MATTERS
The validity of the issuance of DuPont common stock being offered by this
document will be passed upon for DuPont by Howard J. Rudge, Senior Vice
President and General Counsel of DuPont. Fried, Frank, Harris, Shriver &
Jacobson, New York, New York (a partnership including professional
corporations), special counsel for Pioneer, and Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York, special counsel for DuPont, will be delivering
opinions concerning federal income tax consequences of the merger. See "THE
MERGER--U.S. Federal Income Tax Consequences."
EXPERTS
The consolidated financial statements of DuPont incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Pioneer appearing in Pioneer's 1998
Annual Report on Form 10-K, dated August 31, 1998, incorporated by reference in
this document, and which are referred to and made a part of the registration
statement, have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, as stated in their report included in Pioneer's 1998 Annual
Report and incorporated in this document by reference. The financial statements
have been incorporated in this document by reference in reliance upon the
reports of KPMG Peat Marwick LLP given upon their authority as experts in
accounting and auditing.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pioneer will hold its 2000 annual meeting of Pioneer shareholders on January
25, 2000 only if the merger is not consummated. In the event, that such meeting
is held, any proposals of Pioneer shareholders intended to be presented at the
2000 annual meeting of Pioneer shareholders must be submitted in writing and
received by the Corporate Secretary of Pioneer at 800 Capital Square, 400 Locust
Street, P.O. Box 14458, Des Moines, Iowa 50306-3458, no later than August 11,
1999 in order to be considered for inclusion in the Pioneer 2000 annual meeting
proxy materials.
A Pioneer shareholder intending to present a proposal to the 2000 Annual
Meeting who does not intend to have such proposal included in the Proxy
Statement and form of Proxy, must submit such proposal in writing to the address
set forth above. Written notice of the intent to make such a proposal must be
given, either by personal delivery or United States Mail, First Class postage
prepaid to the address above by October 27, 1999. The notice also must otherwise
comply with the requirements of the Company's By-laws.
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Representatives of KPMG Peat Marwick LLP are expected to be present at the
Pioneer special meeting and their representatives will have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
DuPont has filed with the SEC a registration statement under the Securities
Act that registers the distribution to Pioneer shareholders of DuPont common
stock to be issued in the merger. The registration statement, including the
attached exhibits and schedules, contains additional relevant information about
Pioneer and DuPont. The rules and regulations of the SEC allow us to omit some
information included in the registration statement from this document.
In addition, we file reports, proxy statements and other information with
the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, including Pioneer and DuPont, who file electronically with the SEC. The
address of that site is http://www.sec.gov. You can also inspect reports, proxy
statements and other information about each of us at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition. Some of these filings have been amended
by later filings, which are also listed.
<TABLE>
<CAPTION>
PIONEER COMMISSION FILING (FILE NO.0-7908) PERIOD/AS OF DATE
- ------------------------------------------------------------------------------------------ ----------------------
<S> <C>
Annual Report on Form 10-K................................................................ August 31, 1998
Quarterly Report on Form 10-Q............................................................. February 28, 1999
<CAPTION>
DUPONT COMMISSION FILINGS (FILE NO.1-815) PERIOD/AS OF DATE
- ------------------------------------------------------------------------------------------ ----------------------
<S> <C>
Annual Report on Form 10-K................................................................ December 31, 1998
Quarterly Report on Form 10-Q............................................................. March 31, 1999
Tender Offer Statement on Schedule 13e-4.................................................. July , 1999
</TABLE>
We incorporate by reference additional documents that either company may
file with the SEC between the date of this document and the dates of the Pioneer
special meeting and the DuPont special meeting. These documents include periodic
reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, as well as proxy statements.
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You can obtain any of the documents incorporated by reference in this
document through Pioneer or DuPont, as the case may be, or from the SEC through
the SEC's web site at the address provided above. Documents incorporated by
reference are available from the companies without charge, excluding any
exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this document. You can obtain documents incorporated
by reference in this document by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<S> <C>
Pioneer Hi-Bred International, Inc. E. I. du Pont de Nemours and Company
Investor Relations Investor Relations
800 Capital Square 1007 Market Street
400 Locust Street Wilmington, Delaware 19898
Des Moines, Iowa 50309 (302) 774-1000
(515) 248-4800
</TABLE>
Please request documents by , 1999 to receive them before the
special meeting. If you request any incorporated documents from us, we will mail
them to you by first class mail, or another equally prompt means, within one
business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
document or to ask for proxies, or if you are a person to whom it is unlawful to
direct these activities, then the offer presented by this document does not
extend to you.
The information contained in this document speaks only as of its date unless
the information specifically indicates that another date applies. Information in
this document about DuPont has been supplied by DuPont, and information about
Pioneer has been supplied by Pioneer.
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APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PIONEER HI-BRED INTERNATIONAL, INC.,
E. I. DU PONT DE NEMOURS AND COMPANY
AND
DELTA ACQUISITION SUB, INC.
DATED AS OF MARCH 15TH, 1999
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger............................................................................. 2
SECTION 1.2 Effect on Common Stock................................................................. 2
SECTION 1.3 Share Election......................................................................... 3
SECTION 1.4 Proration.............................................................................. 4
SECTION 1.5 Exchange of Certificates............................................................... 5
SECTION 1.6 Transfer Taxes; Withholding............................................................ 7
SECTION 1.7 Stock Options; Other Equity Awards..................................................... 7
SECTION 1.8 Lost Certificates...................................................................... 9
SECTION 1.9 Dissenting Shares...................................................................... 9
SECTION 1.10 Merger Closing......................................................................... 9
SECTION 1.11 Class B Common Stock Exchange.......................................................... 9
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Articles of Incorporation.............................................................. 10
SECTION 2.2 By-laws................................................................................ 10
SECTION 2.3 Officers and Directors................................................................. 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power.......................................................... 10
SECTION 3.2 Corporate Authorization................................................................ 11
SECTION 3.3 Consents and Approvals; No Violations.................................................. 11
SECTION 3.4 Capitalization......................................................................... 12
SECTION 3.5 Subsidiaries........................................................................... 12
SECTION 3.6 SEC Documents.......................................................................... 13
SECTION 3.7 Financial Statements................................................................... 13
SECTION 3.8 Proxy Statement, Form S-4, etc......................................................... 14
SECTION 3.9 Absence of Material Adverse Changes, etc............................................... 14
SECTION 3.10 Taxes.................................................................................. 15
SECTION 3.11 Employee Benefit Plans................................................................. 16
SECTION 3.12 Litigation; Compliance with Laws....................................................... 17
SECTION 3.13 Intellectual Property.................................................................. 17
SECTION 3.14 Opinion of Financial Advisors.......................................................... 18
SECTION 3.15 Tax Treatment.......................................................................... 18
SECTION 3.16 Finders' Fees.......................................................................... 18
SECTION 3.17 Rights Amendment....................................................................... 18
SECTION 3.18 Board Recommendation................................................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DUPONT AND NEWCO
SECTION 4.1 Corporate Existence and Power.......................................................... 19
SECTION 4.2 Authorization.......................................................................... 19
SECTION 4.3 Consents and Approvals; No Violations.................................................. 19
SECTION 4.4 Capitalization......................................................................... 20
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SECTION 4.5 SEC Documents.......................................................................... 20
SECTION 4.6 Financial Statements................................................................... 20
SECTION 4.7 Absence of Material Adverse Changes, etc............................................... 21
SECTION 4.8 Proxy Statement, Form S-4, etc......................................................... 21
SECTION 4.9 Share Ownership........................................................................ 21
SECTION 4.10 Newco's Operations..................................................................... 21
SECTION 4.11 Tax Treatment.......................................................................... 21
SECTION 4.12 Finders' Fees.......................................................................... 21
SECTION 4.13 Acquisition for Investment............................................................. 22
SECTION 4.14 Litigation; Compliance with Laws....................................................... 22
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 Conduct of the Business of the Company................................................. 22
SECTION 5.2 Conduct of the Business of DuPont, etc................................................. 25
SECTION 5.3 Shareholders' Meeting; Proxy Material.................................................. 27
SECTION 5.4 Access to Information.................................................................. 28
SECTION 5.5 No Solicitation........................................................................ 28
SECTION 5.6 Director and Officer Liability......................................................... 29
SECTION 5.7 Reasonable Best Efforts................................................................ 30
SECTION 5.8 Certain Filings........................................................................ 30
SECTION 5.9 Public Announcements................................................................... 31
SECTION 5.10 Further Assurances..................................................................... 32
SECTION 5.11 Employee Matters....................................................................... 32
SECTION 5.12 Tax-Free Reorganization Treatment...................................................... 32
SECTION 5.13 Blue Sky Permits....................................................................... 33
SECTION 5.14 Listing................................................................................ 33
SECTION 5.15 State Takeover Laws.................................................................... 33
SECTION 5.16 Certain Notifications.................................................................. 33
SECTION 5.17 Affiliate Letters...................................................................... 33
SECTION 5.18 The Investment Agreement............................................................... 33
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Each Party's Obligations................................................. 34
SECTION 6.2 Conditions to the Company's Obligation to Consummate the Merger........................ 34
SECTION 6.3 Conditions to DuPont's and Newco's Obligations to Consummate the Merger................ 35
ARTICLE VII
TERMINATION
SECTION 7.1 Termination............................................................................ 36
SECTION 7.2 Effect of Termination.................................................................. 38
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices................................................................................ 38
SECTION 8.2 Survival of Representations and Warranties............................................. 39
SECTION 8.3 Interpretation......................................................................... 39
SECTION 8.4 Amendments, Modification and Waiver.................................................... 39
SECTION 8.5 Successors and Assigns................................................................. 40
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SECTION 8.6 Specific Performance................................................................... 40
SECTION 8.7 Governing Law.......................................................................... 40
SECTION 8.8 Severability........................................................................... 40
SECTION 8.9 Third Party Beneficiaries.............................................................. 40
SECTION 8.10 Entire Agreement....................................................................... 40
SECTION 8.11 Counterparts; Effectiveness............................................................ 40
SECTION 8.12 Petroleum Subsidiaries................................................................. 40
</TABLE>
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EXHIBITS
Exhibit A -- Rights Amendment
Exhibits B-1 and B-2 -- Form of Representation Letters
</TABLE>
A-(iv)
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INDEX OF DEFINED TERMS
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Acquisition Proposal....................................................................................... 29
Active Company Subsidiary.................................................................................. 12
Adverse Change in the Company Recommendation............................................................... 37
Affiliate Agreements....................................................................................... 33
Agreement.................................................................................................. 1
Articles of Merger......................................................................................... 2
Benefit Plans of DuPont.................................................................................... 25
Cash Electing Option....................................................................................... 7
Cash Number................................................................................................ 4
Cash Proration Factor...................................................................................... 5
Certificate of Incorporation............................................................................... 16
Certificates............................................................................................... 5
Class B Common Stock....................................................................................... 12
Closing.................................................................................................... 9
Closing Date............................................................................................... 9
Code....................................................................................................... 1
Common Stock............................................................................................... 1
Company.................................................................................................... 1
Company Disclosure Schedule................................................................................ 10
Company Group.............................................................................................. 15
Company Material Adverse Effect............................................................................ 10
Company Recommendation..................................................................................... 27
Company SEC Documents...................................................................................... 13
Company Securities......................................................................................... 12
Company Voting Debt........................................................................................ 23
Confidentiality Agreement.................................................................................. 28
Conoco..................................................................................................... 20
Conoco Exchange Offer...................................................................................... 41
Continuing Employees....................................................................................... 32
Dissenting Shares.......................................................................................... 9
DuPont..................................................................................................... 1
DuPont Disclosure Schedule................................................................................. 19
DuPont Material Adverse Effect............................................................................. 19
DuPont SEC Reports......................................................................................... 20
DuPont Stock Election...................................................................................... 2
DuPont Stock Election Shares............................................................................... 2
DuPont Shares.............................................................................................. 1
DuPont Shares Trust........................................................................................ 6
DuPont's Representatives................................................................................... 28
EC Merger Regulations...................................................................................... 31
Effective Time............................................................................................. 2
Election Date.............................................................................................. 3
ERISA...................................................................................................... 16
ERISA Affiliate............................................................................................ 16
Excess DuPont Shares....................................................................................... 6
Exchange Act............................................................................................... 12
Exchange Agent............................................................................................. 3
Exchange Fund.............................................................................................. 6
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Exchange Ratio............................................................................................. 2
Formation Agent............................................................................................ 37
Form of Election........................................................................................... 3
Form S-4................................................................................................... 14
GAAP....................................................................................................... 13
Governmental Entity........................................................................................ 11
HSR Act.................................................................................................... 11
IBCA....................................................................................................... 1
Indemnitees................................................................................................ 29
Intellectual Property...................................................................................... 18
Investment Agreement....................................................................................... 33
Licenses................................................................................................... 10
Lien....................................................................................................... 13
Liquidated Damages Termination............................................................................. 37
Listed Companies........................................................................................... 26
Material Adverse Consequence............................................................................... 35
Material Approval.......................................................................................... 26
Material Delay............................................................................................. 26
Maximum Amount............................................................................................. 29
Merger..................................................................................................... 2
Merger Consideration....................................................................................... 2
Merger Price............................................................................................... 2
Newco...................................................................................................... 1
New Termination Period..................................................................................... 36
Non-Cash Proration Factor.................................................................................. 4
Non-Electing Shares........................................................................................ 3
Non-Proration Decision..................................................................................... 5
NYSE....................................................................................................... 3
Option..................................................................................................... 7
Option Cash Limit.......................................................................................... 8
Option Proration Factor.................................................................................... 8
Other Awards............................................................................................... 8
Person..................................................................................................... 3
Plans...................................................................................................... 16
Potential Dissenting Shares................................................................................ 4
Preferred Stock............................................................................................ 12
Proxy Statement............................................................................................ 27
Regulatory Law............................................................................................. 31
Representation Letters..................................................................................... 33
Required Company Vote...................................................................................... 11
Restricted Period.......................................................................................... 25
Rights..................................................................................................... 1
Rights Agreement........................................................................................... 1
Rights Amendment........................................................................................... 1
Schedule 13E-3............................................................................................. 14
SEC........................................................................................................ 8
Second Period Event........................................................................................ 28
Secretary of State......................................................................................... 2
Securities Act............................................................................................. 12
Seed Operations............................................................................................ 27
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Significant Adverse Impact................................................................................. 31
Special Meeting............................................................................................ 27
Subsidiary................................................................................................. 13
Substitute Option.......................................................................................... 7
Superior Proposal.......................................................................................... 29
Surviving Corporation...................................................................................... 2
Tax Return................................................................................................. 15
Taxes...................................................................................................... 15
Termination Date........................................................................................... 36
Transaction................................................................................................ 26
Valuation Period........................................................................................... 2
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A-(vii)
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of March 15, 1999 (this "AGREEMENT"),
by and among Pioneer Hi-Bred International, Inc., an Iowa corporation (the
"COMPANY"), E. I. du Pont de Nemours and Company, a Delaware corporation
("DUPONT"), and Delta Acquisition Sub, Inc., an Iowa corporation and a direct
wholly-owned subsidiary of DuPont ("NEWCO").
W I T N E S S E T H
WHEREAS, in furtherance of the acquisition of the Company by DuPont, the
respective Boards of Directors of DuPont, Newco and the Company, and DuPont as
sole shareholder of Newco, have each approved this Agreement and the merger of
the Company with and into Newco, upon the terms and subject to the conditions
and limitations set forth herein, and in accordance with the Iowa Business
Corporation Act (the "IBCA"), whereby each share of the issued and outstanding
shares of common stock, par value $1.00 per share (the "COMMON STOCK") of the
Company, together with the associated share purchase rights (the "RIGHTS")
issued pursuant to the Amended and Restated Rights Agreement, dated December 13,
1996, between the Company and Bank Boston N.A. (formally known as The First
National Bank of Boston), as amended, including pursuant to the Rights Amendment
referred to below (the "RIGHTS AGREEMENT") will, upon the terms and subject to
the conditions and limitations set forth herein, either (A) at the election of
the holders thereof be converted into a fraction of a share of common stock, par
value $0.30 per share of DuPont (the "DUPONT SHARES") as determined in
accordance with Article I hereof or (B) be converted into the right to receive
the Merger Price (as hereinafter defined) in cash;
WHEREAS, for federal income tax purposes, the Merger (as defined in Section
1.1(a) hereof) is intended to qualify as a reorganization under the provisions
of Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "CODE");
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company is amending the Rights Agreement in the form attached hereto as Exhibit
A (the "RIGHTS AMENDMENT").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
A-1
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ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
(a) Upon the terms and subject to the conditions of this Agreement, and in
accordance with the IBCA, at the Effective Time, the Company shall be merged
(the "MERGER") with and into Newco, whereupon the separate existence of the
Company shall cease, and Newco shall continue as the surviving corporation
(sometimes referred to herein as the "SURVIVING CORPORATION") and shall continue
to be governed by the laws of the State of Iowa and shall continue under the
name "Pioneer Hi-Bred International, Inc."
(b) Concurrently with the Closing (as defined in Section 1.10 hereof), the
Company, DuPont and Newco shall cause articles of merger (the "ARTICLES OF
MERGER") with respect to the Merger to be executed and filed with the Secretary
of State of the State of Iowa (the "SECRETARY OF STATE") as provided in the
IBCA. The Merger shall become effective on the date and time at which the
Articles of Merger has been duly filed with the Secretary of State or at such
other date and time as is agreed between the parties and specified in the
Articles of Merger, and such date and time is hereinafter referred to as the
"EFFECTIVE TIME."
(c) From and after the Effective Time, the Surviving Corporation shall
possess all rights, privileges, immunities, powers and franchises and be subject
to all of the obligations, restrictions, disabilities, liabilities, debts and
duties of the Company and Newco.
SECTION 1.2 EFFECT ON COMMON STOCK. At the Effective Time:
(a) CANCELLATION OF SHARES OF COMMON STOCK.
(i) Each share of Common Stock held by the Company as treasury stock
immediately prior to the Effective Time shall automatically be cancelled and
retired and cease to exist, and no consideration or payment shall be
delivered therefor or in respect thereto; and
(ii) each share of Common Stock received by DuPont in exchange for Class
B Common Stock (as defined in Section 3.4 hereof) shall be converted into
DuPont Shares and such Common Stock shall automatically be cancelled and
retired and cease to exist.
(b) CONVERSION OF SHARES OF COMMON STOCK. Except as otherwise provided in
this Agreement and subject to Section 1.4 hereof, each share of Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares cancelled pursuant to Section 1.2(a) hereof (including, without
limitation, Common Stock received by DuPont in exchange for Class B Common
Stock) and Dissenting Shares (as defined in Section 1.9 hereof)) shall be
converted into the following (the "MERGER CONSIDERATION"):
(i) for each share of Common Stock with respect to which an election to
receive DuPont Shares has been effectively made and not revoked or lost,
pursuant to Section 1.3 hereof (a "DUPONT STOCK ELECTION"), a fraction of a
DuPont Share equal to the Exchange Ratio (as defined below) (collectively,
"DUPONT STOCK ELECTION SHARES"). For purposes of this Agreement, the
"EXCHANGE RATIO" shall be equal to the result obtained by dividing $40, (the
"MERGER PRICE") by the average closing sales price, rounded to four decimal
points, of DuPont Shares, as reported on the NYSE Composite Tape, for the
ten consecutive trading days (the "VALUATION PERIOD") ending on the third
full trading day prior to the date on which the Company shareholders vote
with respect to the approval of the Merger. In the event that DuPont
declares a stock split, stock dividend or other reclassification or exchange
with respect to the DuPont Shares with a record or ex-dividend date
occurring during the Valuation Period or for the period between the
termination of the Valuation Period and the Effective Time, there will be an
appropriate adjustment made to the
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closing sales prices during the Valuation Period for purposes of calculating
the Exchange Ratio; and
(ii) for each share of Common Stock other than DuPont Stock Election
Shares, the right to receive in cash an amount equal to the Merger Price
(collectively, "NON-ELECTING SHARES").
All shares of Common Stock to be converted into the Merger Consideration (as
defined in Section 1.2(b) hereof) pursuant to this Section 1.2 shall, by virtue
of the Merger and without any action on the part of the holders thereof, cease
to be outstanding, be cancelled and retired and cease to exist; and each holder
of a certificate representing prior to the Effective Time any such shares of
Common Stock and Rights shall thereafter cease to have any rights with respect
to such shares of Common Stock, except the right to receive (i) the Merger
Consideration, (ii) any dividends and other distributions in accordance with
Section 1.5(c) hereof and (iii) any cash to be paid in lieu of any fractional
DuPont Share in accordance with Section 1.5(d) hereof.
(c) Unless the context indicates otherwise, all references herein to shares
of Common Stock shall be deemed to include any accompanying Rights.
(d) CAPITAL STOCK OF NEWCO. No shares of Newco stock will be issued directly
or indirectly in the Merger. Each share of common stock of Newco issued and
outstanding immediately prior to the Effective Time shall remain outstanding
following the Effective Time.
SECTION 1.3 SHARE ELECTION.
(a) Each Person (as defined in Section 1.3(b) hereof) who, on or prior to
the Election Date referred to in subsection (c) below is a record holder of
shares of Common Stock shall have the right to submit a Form of Election (as
defined in Section 1.3(c) hereof) specifying the number of shares of Common
Stock that such Person desires to be converted into DuPont Shares pursuant to
the DuPont Stock Election.
(b) Prior to the mailing of the Proxy Statement (as defined in Section
5.3(b) hereof), First Chicago Trust Company of New York or such other bank,
trust company, Person or Persons shall be designated by DuPont and reasonably
acceptable to the Company to act as exchange agent (the "EXCHANGE AGENT") for
payment of the Merger Consideration. For purposes of this Agreement, "PERSON"
means any natural person, firm, individual, corporation, limited liability
company, partnership, association, joint venture, company, business trust, trust
or any other entity or organization, whether incorporated or unincorporated,
including a government or political subdivision or any agency or instrumentality
thereof.
(c) DuPont shall prepare and mail a form of election, which form shall be
subject to the reasonable approval of the Company (the "FORM OF ELECTION") with
the Proxy Statement to the record holders of shares of Common Stock as of the
record date for the Special Meeting (as defined in Section 5.3(a) hereof), which
Form of Election shall be used by each record holder of shares of Common Stock
who wishes to elect to receive DuPont Shares for any or all shares of Common
Stock held, subject to the provisions of Section 1.4 hereof, by such holder. The
Company shall use its reasonable best efforts to make the Form of Election and
the Proxy Statement available to all Persons who become holders of shares of
Common Stock during the period between such record date and the Election Date.
Any such holder's election to receive DuPont Shares shall have been properly
made only if the Exchange Agent shall have received at its designated office, by
5:00 p.m., New York City time on the business day (the "ELECTION DATE") next
preceding the date of the Special Meeting, a Form of Election properly completed
and signed and accompanied by certificate(s) for the share(s) of Common Stock to
which such Form of Election relates, duly endorsed in blank or otherwise in form
acceptable for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificate(s) as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or of the New York Stock Exchange ("NYSE") or a commercial bank or
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trust company having an office or correspondent in the United State, provided
such certificate(s) are in fact delivered to the Exchange Agent within five NYSE
trading days after the date of execution of such guarantee of delivery).
(d) Any Form of Election may be revoked by the holder of Common Stock
submitting it to the Exchange Agent only by written notice received by the
Exchange Agent prior to 5:00 p.m., New York City time on the Election Date. In
addition, all Forms of Election shall automatically be revoked if the Exchange
Agent is notified in writing by DuPont and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the certificate(s) (or guarantee(s)
of delivery, as appropriate) for the share(s) of Common Stock, if any, to which
such Form of Election relates shall promptly be returned to the shareholder
submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent shall be binding as to whether
or not elections have been properly made or revoked pursuant to this Section 1.3
with respect to shares of Common Stock and when elections and revocations were
received by it. If the Exchange Agent determines that any DuPont Stock Election
was not properly made with respect to such shares of Common Stock, then, subject
to Section 1.4 hereof, such shares of Common Stock shall be treated by the
Exchange Agent at the Effective Time as Non-Electing Shares, and such shares
shall be exchanged in the Merger for cash pursuant to Section 1.2(b)(ii) hereof.
The Exchange Agent shall also make all computations as to the allocation and the
proration contemplated by Section 1.4 hereof, and any such computation shall be
conclusive and binding on the holder of shares of Common Stock. The Exchange
Agent may, with the mutual agreement of DuPont and the Company, make such rules
as are consistent with this Section 1.3 for the implementation of the elections
provided for herein as shall be necessary or desirable to effect such elections
fully.
SECTION 1.4 PRORATION.
(a) Notwithstanding anything in this Agreement to the contrary, the number
of shares of Common Stock which shall be converted into cash in the Merger shall
be equal to, or in the event of a Non-Proration Decision (as defined in Section
1.4(c)(ii) hereof) shall not exceed 85,552,580 less any shares of Common Stock
("POTENTIAL DISSENTING SHARES") in respect of which the holders have taken all
steps required to be taken prior to the Effective Time, to the extent such steps
are necessary, to permit such shares to be deemed Dissenting Shares (the "CASH
NUMBER"). For purposes of calculations pursuant to Section 1.4 insofar as all
shares other than Potential Dissenting Shares are concerned Potential Dissenting
Shares shall not be taken into account.
(b) If the number of Non-Electing Shares exceeds the Cash Number, then each
Non-Electing Share shall either (x) be converted into the right to receive cash
or (y) be converted into DuPont Shares in the following manner:
(i) A proration factor (the "NON-CASH PRORATION FACTOR") shall be
determined by dividing the Cash Number by the total number of Non-Electing
Shares;
(ii) The number of Non-Electing Shares which are converted into the
right to receive cash shall be determined by multiplying the Non-Cash
Proration Factor by the total number of Non-Electing Shares; and
(iii) All Non-Electing Shares other than those shares which are
converted into the right to receive cash in accordance with Section
1.4(b)(ii) hereof, shall be converted into DuPont Shares on a consistent
basis among holders of Common Stock who failed to make the DuPont Stock
Election referred to in Section 1.2(b)(i) hereof, pro rata to the number of
shares of Common Stock as to which they failed to make such election, as if
such shares of Common Stock were DuPont Stock Election Shares in accordance
with the terms of Section 1.2(b)(i) hereof.
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(c) If the number of Non-Electing Shares is less than the Cash Number, then:
(i) All Non-Electing Shares shall be converted into cash in accordance
with the terms of Section 1.2(b)(ii) hereof;
(ii) Unless DuPont determines otherwise at least three business days
prior to the scheduled date for the Special Meeting (a "NON-PRORATION
DECISION"), additional shares of Common Stock, other than Non-Electing
Shares shall be converted into cash in accordance with the terms of Section
1.2(b) hereof in the following manner:
(A) A proration factor (the "CASH PRORATION FACTOR") shall be
determined by dividing (1) the difference between the Cash Number and the
number of Non-Electing Shares by (2) the total number of shares of Common
Stock other than Non-Electing Shares; and
(B) The number of shares of Common Stock, in addition to Non-Electing
Shares, to be converted into cash shall be determined by multiplying the
Cash Proration Factor by the total number of shares of Common Stock other
than Non-Electing Shares; and
(iii) Subject to Section 1.9 hereof, shares of Common Stock as
calculated pursuant to clause (ii) of this paragraph (c), shall be converted
into cash in accordance with Section 1.2(b)(ii) hereof (on a consistent
basis among holders of Common Stock who held shares as to which they made
the DuPont Stock Election referred to in Section 1.2(b)(i) hereof, pro rata
to the number of shares of Common Stock as to which they made such
election).
(d) DuPont Shares to be issued to DuPont in exchange for Common Stock
received by DuPont in exchange for Class B Common Stock shall be excluded from
all calculations relating to elections and prorations set forth in Sections 1.3
and 1.4 hereof.
SECTION 1.5 EXCHANGE OF CERTIFICATES.
(a) As of the Effective Time, DuPont shall deposit, or cause to be deposited
with the Exchange Agent for the benefit of holders of shares of Common Stock,
cash and certificates representing DuPont Shares, constituting the Merger
Consideration.
(b) As of or promptly following the Effective Time and the final
determination of the Non-Cash Proration Factor, the Surviving Corporation shall
cause the Exchange Agent to mail (and to make available for collection by hand)
to each holder of record of a certificate or certificates, which immediately
prior to the Effective Time represented outstanding shares of Common Stock (the
"CERTIFICATES"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and which
shall be in the form and have such other provisions as DuPont and the Company
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for (A) a certificate or certificates
representing that number of whole DuPont Shares, if any, into which the number
of shares of Common Stock previously represented by such Certificate shall have
been converted pursuant to this Agreement and (B) the amount of cash, if any,
into which all or a portion of the number of shares of Common Stock previously
represented by such Certificate shall have been converted pursuant to this
Agreement (which instructions shall provide that at the election of the
surrendering holder, Certificates may be surrendered, and the Merger
Consideration in exchange therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with a letter
of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three
business days of receipt thereof (but in no case prior to the Effective Time),
and
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the Certificate so surrendered shall be forthwith cancelled. The Exchange Agent
shall accept such Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. No interest shall be paid
or accrued for the benefit of holders of the Certificates on the Merger
Consideration (or the cash pursuant to subsections (c) and (d) below) payable
upon the surrender of the Certificates.
(c) No dividends or other distributions with respect to DuPont Shares with a
record date on or after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the DuPont Shares represented thereby
by reason of the conversion of shares of Common Stock pursuant to Sections
1.2(b), 1.3 and 1.4 hereof and no cash payment in lieu of fractional DuPont
Shares shall be paid to any such holder pursuant to Section 1.5(d) hereof until
such Certificate is surrendered in accordance with this Article I. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid, without interest, to the Person in whose name the DuPont
Shares representing such securities are registered (i) at the time of such
surrender or as promptly after the sale of the Excess DuPont Shares (as defined
in Section 1.5(d) hereof) as practicable, the amount of any cash payable in lieu
of fractional DuPont Shares to which such holder is entitled pursuant to Section
1.5(d) hereof and the proportionate amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
DuPont Shares issued upon conversion of Common Stock, and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such DuPont Shares.
(d) Notwithstanding any other provision of this Agreement, no fraction of a
DuPont Share will be issued and no dividend or other distribution, stock split
or interest with respect to DuPont Shares shall relate to any fractional DuPont
Share, and such fractional interest shall not entitle the owner thereof to vote
or to any rights as a security holder of the DuPont Shares. In lieu of any such
fractional security, each holder of shares of Common Stock otherwise entitled to
a fraction of a DuPont Share will be entitled to receive in accordance with the
provisions of this Section 1.5 from the Exchange Agent a cash payment
representing such holder's proportionate interest in the net proceeds from the
sale by the Exchange Agent on behalf of all such holders of the aggregate of the
fractions of DuPont Shares which would otherwise be issued (the "EXCESS DUPONT
SHARES"). The sale of the Excess DuPont Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. Until the net proceeds of such
sale or sales have been distributed to the holders of shares of Common Stock,
the Exchange Agent will, subject to Section 1.5(e) hereof, hold such proceeds in
trust for the holders of shares of Common Stock (the "DUPONT SHARES TRUST"). The
Company shall pay all commissions, transfer taxes (other than those transfer
taxes for which the Company's shareholders are solely liable) and other
out-of-pocket transaction costs, including the expenses and compensation, of the
Exchange Agent incurred in connection with such sale of the Excess DuPont
Shares. As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of shares of Common Stock in lieu of any fractional
DuPont Share interests, the Exchange Agent shall make available such amounts to
such holders of shares of Common Stock without interest.
(e) Any portion of the Merger Consideration deposited with the Exchange
Agent pursuant to this Section 1.5 (the "EXCHANGE FUND") which remains
undistributed to the holders of the Certificates for six months after the
Effective Time shall be delivered to DuPont, upon demand, and any holders of
shares of Common Stock prior to the Merger who have not theretofore complied
with this Article I shall thereafter look for payment of their claim, as general
creditors thereof, only to DuPont for their claim for (1) cash, if any, (2)
DuPont Shares, if any, (3) any cash without interest, to be paid, in lieu of any
fractional DuPont Shares and (4) any dividends or other distributions with
respect to DuPont Shares to which such holders may be entitled.
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(f) None of DuPont, Newco or the Company or the Exchange Agent shall be
liable to any Person in respect of any DuPont Shares or cash held in the
Exchange Fund (and any cash, dividends and other distributions payable in
respect thereof) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to one year after the Effective Time (or immediately
prior to such earlier date on which (i) any cash, (ii) any DuPont Shares, (iii)
any cash in lieu of fractional DuPont Shares or (iv) any dividends or
distributions with respect to DuPont Shares in respect of such Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.3(b) hereof)), any such DuPont Shares, cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of DuPont, free and clear of all claims or
interest of any Person previously entitled thereto.
(g) The Exchange Agent shall invest any cash included in the Exchange Fund,
as directed by DuPont on a daily basis. Any interest and other income resulting
from such investments shall be paid to the Company. Nothing contained in this
Section 1.5(g) shall relieve DuPont or the Exchange Agent from making the
payments required by this Article I to be made to the holders of shares of
Common Stock and to holders of Options (as defined in Section 1.7 hereof).
SECTION 1.6 TRANSFER TAXES; WITHHOLDING. If any certificate for a DuPont
Share is to be issued to, or cash is to be remitted to, a Person (other than the
Person in whose name the Certificate surrendered in exchange therefor is
registered), it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the Person requesting such exchange shall pay to the Exchange Agent any
transfer or other Taxes (as defined in Section 3.10(c) hereof) required by
reason of the payment of the Merger Consideration to a Person other than the
registered holder of the Certificate so surrendered, or shall establish to the
satisfaction of the Exchange Agent that such Tax either has been paid or is not
applicable. DuPont or the Exchange Agent shall be entitled to deduct and
withhold from the DuPont Shares (or cash in lieu of fractional DuPont Shares)
otherwise payable pursuant to this Agreement to any holder of shares of Common
Stock such amounts as DuPont or the Exchange Agent are required to deduct and
withhold under the Code, or any provision of state, local or foreign Tax law,
with respect to the making of such payment. To the extent that amounts are so
withheld by DuPont or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of shares
of Common Stock in respect of whom such deduction and withholding was made by
DuPont or the Exchange Agent.
SECTION 1.7 STOCK OPTIONS; OTHER EQUITY AWARDS.
(a) Each holder of an option granted to a Company employee, consultant or
director of the Company or any Subsidiary (as defined in Section 3.5(a) hereof)
of the Company to acquire shares of Common Stock (and the associated Rights),
which is outstanding immediately prior to the Effective Time (each, an
"OPTION"), shall have the opportunity, to elect either (X) to cause such Option
to become and represent an option to purchase DuPont Shares (a "SUBSTITUTE
OPTION"), in accordance with (b) below, or (Y) to cause such Option ("CASH
ELECTING OPTION") to be cancelled in exchange for a single lump sum cash payment
(less any applicable income or employment tax withholding) equal to the product
of (1) the number of shares of Common Stock subject to such Option immediately
prior to the Effective Time and (2) the excess, if any, of the Merger Price over
the exercise price per share of such Company Option; PROVIDED THAT as set forth
in subsection (c) below there shall be a limit on the number of shares subject
to Options that will be cancelled in exchange for cash. There will be no limit
on the number of shares subject to Options that become Substitute Options. Any
election to receive cash must be made prior to the Effective Time to be
effective; failure to timely make such an election shall result in an Option
being treated as a Substitute Option. DuPont and the Company shall cooperate to
distribute and collect option forms necessary to give effect to this Section
1.7(a).
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(b) Each Substitute Option shall be an option to purchase a number of DuPont
Shares (rounded to the nearest whole share), determined by multiplying (i) the
number of shares of Common Stock subject to such Option immediately prior to the
Effective Time by (ii) the Exchange Ratio, at an exercise price per DuPont Share
(increased to the nearest whole cent) equal to the exercise price per share of
Common Stock immediately prior to the Effective Time divided by the Exchange
Ratio. After the Effective Time, each Substitute Option shall be exercisable
upon the same terms and conditions as were applicable to the related Option
prior to the Effective Time, but giving effect to the Merger.
(c) Notwithstanding anything in this agreement to the contrary, Cash
Electing Options with respect to no more than a number of shares equal to the
product of (x) the quotient obtained by dividing the Cash Number by the number
of shares of Common Stock outstanding immediately prior to the Effective Time
(other than any shares owned by DuPont) and (y) the total number of shares of
Common Stock subject to Options outstanding immediately prior to the Effective
Time shall be cancelled in exchange for cash payment described in Section
1.7(a)(Y) hereof (the "OPTION CASH LIMIT"). If the number of shares subject to
Cash Electing Options exceeds the Option Cash Limit, then with respect to each
optionee's Cash Electing Options, the optionee shall either receive Substitute
Options with respect to such Cash Electing Options in accordance with Section
1.7(a)(X) hereof, or shall receive a cash payment with respect to such Cash
Electing Options in accordance with Section 1.7(a)(Y) hereof in the following
manner:
(i) A proration factor (the "OPTION PRORATION FACTOR") shall be
determined by dividing the Option Cash Limit by the total number of shares
of Common Stock subject to Cash Electing Options.
(ii) The number of shares subject to each optionee's Cash Electing
Options, which Options are to be converted into the right to receive cash,
shall be determined by multiplying the Option Proration Factor by the total
number of shares of Common Stock subject to such optionee's Cash Electing
Options.
(iii) All shares subject to Cash Electing Options, other than those
converted into the right to receive cash in accordance with the terms of
Section 1.7(c)(ii) hereof shall be treated as if subject to Options which
were not Cash Electing Options.
If the number of shares of Common Stock subject to Cash Electing Options is less
than the Option Cash Limit, then:
(i) All Cash Electing Options shall be converted into cash in accordance
with the terms of Section 1.7(a)(Y) hereof; and
(ii) All shares subject to Options other than Cash Electing Options
shall be converted into Substitute Options in accordance with the terms of
Section 1.7(a)(X) hereof.
(d) Each other outstanding award made pursuant to the compensation plans of
the Company which provide for grants of equity-based awards in respect of Common
Stock (the "OTHER AWARDS") shall be amended or converted into a similar
equity-based award solely in respect of DuPont Shares, with such appropriate
adjustments to the terms of such Other Awards to preserve the value inherent
therein with no detrimental effects on the holders thereof.
(e) DuPont shall take such corporate action as may be necessary or
appropriate to, at or prior to the Effective Time, file with the Securities and
Exchange Commission (the "SEC") a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the DuPont Shares subject
to any Substitute Options or Other Awards to the extent such registration is
required under applicable law in order for such DuPont Shares to be sold without
restriction in the United States, and DuPont shall maintain the effectiveness of
such registration statement for so long as such Substitute Options or Other
Awards remain outstanding.
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SECTION 1.8 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
past practice of the Company), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the DuPont Shares to
which the holder thereof is entitled pursuant to this Article I.
SECTION 1.9 DISSENTING SHARES. Notwithstanding Section 1.2 hereof, shares of
Common Stock issued and outstanding immediately prior to the Effective Time and
held by a holder who has properly exercised and perfected his or her demand for
appraisal rights under Section 1302 of the IBCA (the "DISSENTING SHARES"), shall
not be converted into the right to receive the Merger Consideration, but the
holders of Dissenting Shares shall be entitled to receive from the Company such
consideration as shall be determined pursuant to Section 1302 of the IBCA;
PROVIDED, HOWEVER, that if any such holder shall have failed to perfect or shall
effectively withdraw or lose his or her right to appraisal and payment under the
IBCA, such holder's shares of Common Stock shall thereupon be deemed to have
been converted as of the Effective Time into the right to receive the Merger
Consideration, without any interest thereon, and such shares shall not be deemed
to be Dissenting Shares. Subject to applicable law, DuPont shall have the right
to treat such shares as Non-Electing Shares.
SECTION 1.10 MERGER CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article VI hereof, the closing of the Merger (the
"CLOSING") will take place at 10:00 a.m., New York City time, on a date to be
specified by the parties hereto, but no later than the second business day after
(i) the satisfaction or waiver of the conditions set forth in Sections 6.1(a)
and (b) hereof and (ii) subject to it not causing the Closing to be later than
the Termination Date, the consummation of the Conoco Exchange Offer (as defined
in Section 8.12 hereof) (PROVIDED THAT clause (ii) shall not apply from and
after such time as DuPont delivers notice to the Company in writing that it will
not effect such Conoco Exchange Offer), at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York, unless another time,
date or place is agreed to in writing by the parties hereto (such date, the
"CLOSING DATE").
SECTION 1.11 CLASS B COMMON STOCK EXCHANGE. Concurrently with the execution
and delivery of this Agreement, the Company will exchange on a one share for one
share basis shares of Common Stock entitled to five votes per share for all
shares of Class B Common Stock owned by DuPont and its Subsidiaries. DuPont
hereby agrees (a) to vote, or to cause its Subsidiaries to vote, at any time,
pro rata with the holders of shares of Common Stock such number of such shares
of Common Stock so that the number of such shares of Common Stock that DuPont
and its Subsidiaries are entitled to vote in their sole discretion (and not pro
rata) does not exceed the percentage of shares of the outstanding Common Stock
that is represented by such shares, to the extent still owned by DuPont and its
Subsidiaries at any such time and (b) that, so long as the Company is in
compliance with the provisions of Section 5.1(b)(iii) hereof, the maximum number
of votes in respect of the shares of Common Stock owned by DuPont and its
Subsidiaries that DuPont and its Subsidiaries will be entitled to cast in
DuPont's sole discretion will be equal to 20 percent of all of the votes which
may be cast by holders of Common Stock. The parties agree that the provisions
set forth in clauses (a) and (b) of the preceding sentence will survive the
termination of this Agreement and, in the case of clause (b), will remain in
full force and effect so long as the Investment Agreement remains in full force
and effect, and, in the case of clause (a), will remain in effect indefinitely,
provided that the Company will not permit, through issuance of shares of capital
stock or the amendment or waiver of its Rights Agreement or otherwise any Person
(other than a Grandfathered Person as defined in the Investment Agreement on the
date hereof) who beneficially owns a greater number of shares of Common Stock
than DuPont and its Subsidiaries to exercise voting power in excess of the
percentage of outstanding Common Stock beneficially owned by such Person unless
and to the extent that the Company shall permit DuPont to
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exercise the same proportionate voting power in excess of the percentage of
outstanding Common Stock beneficially owned by DuPont and its Subsidiaries. The
shares of Common Stock issued to DuPont pursuant to the foregoing have been
approved for listing on the NYSE. The preceding clauses (a) and (b) will
terminate immediately following the Effective Time.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 ARTICLES OF INCORPORATION. The articles of incorporation of
Newco shall be the articles of incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
SECTION 2.2 BY-LAWS. The by-laws of Newco in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter amended in
accordance with applicable law, the articles of incorporation of such entity and
the by-laws of such entity.
SECTION 2.3 OFFICERS AND DIRECTORS.
(a) From and after the Effective Time, the officers of the Company at the
Effective Time shall be the officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified in accordance
with applicable law.
(b) The Board of Directors of the Company effective as of, and immediately
following, the Effective Time shall consist of the directors of Newco
immediately prior to the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to DuPont and Newco as follows:
SECTION 3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Iowa, and except as set forth in Schedule 3.1 of the disclosure schedule
delivered by the Company to DuPont concurrently with the execution and delivery
by the Company of this Agreement and attached hereto (the "COMPANY DISCLOSURE
SCHEDULE"), has all corporate powers and all governmental licenses, permits,
authorizations, consents and approvals (collectively, "LICENSES") required to
carry on its business as now conducted, and all such Licenses are in full force
and effect, except for failures to have any such License which would not, in the
aggregate, have a Company Material Adverse Effect (as defined hereafter). The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned, leased
or operated by it or the nature of its activities makes such qualification
necessary, except in such jurisdictions where failures to be so qualified or in
good standing would not reasonably be expected to, in the aggregate, have a
Company Material Adverse Effect. As used herein, the term "COMPANY MATERIAL
ADVERSE EFFECT" means (i) a material adverse effect on the condition (financial
or otherwise), business, assets or results of operations of the Company and its
Subsidiaries, taken as a whole, or (ii) a material adverse effect on the ability
of the Company to timely perform its obligations hereunder; PROVIDED, HOWEVER,
that a Company Material Adverse Effect shall not include any change in or effect
upon the business, assets or results of operations of the Company and any of its
Subsidiaries directly or indirectly arising out of or attributable to (i)
conditions, events or circumstances generally affecting the economy as a whole
or the agricultural industry, in general, or (ii) any action permitted to be
taken or required to be taken pursuant to Section 5.8 hereof. The Company has
heretofore made available to DuPont true and complete copies of the Articles of
Incorporation and the by-laws of the Company as currently in effect.
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SECTION 3.2 CORPORATE AUTHORIZATION.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval of the holders of Common
Stock, as set forth in Section 3.2(b) hereof and as contemplated by Section 5.3
hereof, to perform its obligations hereunder. The execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly and
validly authorized, and this Agreement has been approved, by the Board of
Directors of the Company and no other corporate proceedings, other than the
approval of this Agreement by the holders of Common Stock, on the part of the
Company are necessary to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes, assuming due authorization, execution and delivery of
this Agreement by DuPont and Newco, as applicable, a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) Under applicable law and the Articles of Incorporation, the affirmative
vote of the holders entitled to exercise a majority of the votes attributable to
Common Stock outstanding on the record date, established by the Board of
Directors of the Company in accordance with the by-laws of the Company,
applicable law and this Agreement, is the only vote required to approve this
Agreement (the "REQUIRED COMPANY VOTE").
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except as set forth in Schedule 3.3(a) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder nor the consummation of
the transactions contemplated hereby will conflict with or result in any breach
of any provision of the Articles of Incorporation or the by-laws of the Company
or any Subsidiary thereof; result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration or obligation to
repurchase, repay, redeem or acquire or any similar right or obligation) under
any of the terms, conditions or provisions of any note, mortgage, letter of
credit, other evidence of indebtedness, guarantee, license, lease or agreement
or similar instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their assets may be
bound or assuming that the filings, registrations, notifications,
authorizations, consents and approvals referred to in subsection (b) below have
been obtained or made, as the case may be, violate any order, injunction,
decree, statute, rule or regulation of any Governmental Entity to which the
Company or any of its Subsidiaries is subject, excluding from the foregoing
clauses (ii) and (iii) such requirements, defaults, breaches, rights or
violations (other than of orders, injunctions and decrees) (A) that would not,
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect or (B) that become applicable as a result of the business or activities
in which DuPont or Newco or any of their respective affiliates is or proposes to
be engaged or any acts or omissions by, or facts specifically pertaining to,
DuPont or Newco.
(b) Except as set forth in Schedule 3.3(b) of the Company Disclosure
Schedule, no filing or registration with, notification to, or authorization,
consent or approval of, any government or any agency, court, tribunal,
commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational (including, but not limited to,
the European Community), provincial, municipal, domestic or foreign (each, a
"GOVERNMENTAL ENTITY") is required in connection with the execution and delivery
of this Agreement by the Company or the performance by the Company of its
obligations hereunder, except (i) the filing of the Articles of Merger in
accordance with the IBCA and filings to maintain the good standing of the
Surviving Corporation; (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), the EC Merger Regulations (as
defined in Section
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5.8(e) hereof) or any other foreign laws regulating competition, antitrust,
investment or exchange controls; (iii) compliance with any applicable
requirements of the Securities Act of 1933 and the rules and regulations
thereunder (the "SECURITIES ACT") and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "EXCHANGE ACT"); (iv)
compliance with any applicable requirements of state blue sky, securities or
takeover laws and (v) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings (A) the failure of which
to be obtained or made would not, in the aggregate, reasonably be expected to
have a Company Material Adverse Effect or (B) that become applicable as a result
of the business or activities in which DuPont or Newco or any of their
respective affiliates is or proposes to be engaged or any acts or omissions by,
or facts specifically pertaining to, DuPont or Newco.
SECTION 3.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 600,000,000 shares of Common Stock, 120,000,000 shares of class B
common stock, no par value per share, of the Company (the "CLASS B COMMON
STOCK") and 10,000,000 shares of serial preferred stock, no par value per share,
of the Company (the "PREFERRED STOCK"), of which 600,000 were designated as
Series A Junior Participating Preferred Stock. As of August 31, 1998 and
December 29, 1998, there were (i) 190,993,634 and 190,116,845 shares,
respectively, of Common Stock issued and outstanding, (ii) 49,333,758 and
49,333,758 shares, respectively, of Class B Common Stock issued and outstanding
and (iii) no shares of Preferred Stock issued and outstanding. All shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive rights. As of August 31, 1998, there were outstanding (i) 1,257,162
shares of restricted Common Stock that were granted under the Amended and
Restated Restricted Stock Plan-- Performance Based, (ii) 42,918 shares of
restricted Common Stock that were granted under the Amended and Restated
Directors' Restricted Stock Plan and (iii) 1,227,825 shares of restricted Common
Stock that were granted under the predecessor restricted stock plan. As of
August 31, 1998, there were outstanding Options in respect of 3,198,000 shares
of Common Stock at option prices ranging from $14 to $35 per share of Common
Stock, which Options were granted under the Amended and Restated Pioneer Hi-Bred
International, Inc. Stock Option Plan. Except as set forth in this Section 3.4
or Schedule 3.4 of the Company Disclosure Schedule, there are outstanding (i) no
shares of capital stock or other voting securities of the Company (except for
options covering approximately 1.1 million shares of Common Stock and for
500,000 shares of restricted stock granted or issued in the ordinary course of
business since August 31, 1998, as are otherwise permitted to be issued after
the date of this Agreement pursuant to this Agreement or were issued upon the
exercise of options outstanding on August 31, 1998), (ii) no securities of the
Company or any Subsidiary of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company and (iii) no options
or other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "COMPANY
SECURITIES"). Except as set forth in Schedule 3.4 of the Company Disclosure
Schedule, there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
No Subsidiary of the Company owns any capital stock or other voting securities
of the Company.
SECTION 3.5 SUBSIDIARIES.
(a) Each Subsidiary of the Company that is actively engaged in any business
or owns any assets or has any non DE MINIMIS liabilities (contingent or
otherwise) (each, an "ACTIVE COMPANY SUBSIDIARY") (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all Licenses required to carry on its
business as now conducted and all such Licenses are in full force and effect and
(iii) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for failures of this
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representation and warranty to be true which would not, in the aggregate, have a
Company Material Adverse Effect. For purposes of this Agreement, "SUBSIDIARY"
means with respect to any Person, any corporation or other legal entity of which
such Person owns, directly or indirectly, more than 50 percent of the
outstanding stock or other equity interests, the holders of which are entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity. All Active Company Subsidiaries and
their respective jurisdictions of incorporation are identified in Schedule 3.5
of the Company Disclosure Schedule.
(b) Except as set forth in Schedule 3.5(b) of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each Subsidiary of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and such shares are owned by the Company or by a Subsidiary of the Company free
and clear of any Liens (as defined hereafter) (other than Liens that would not
be reasonably expected to have a Company Material Adverse Effect) or limitation
on voting rights. Except as set forth in Schedule 3.5(b) of the Company
Disclosure Schedule, there are no material subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character relating to the issuance, transfer, sale, delivery, voting or
redemption (including any rights of conversion or exchange under any outstanding
security or other instrument) for any material amount of the capital stock or
other equity interests of any of such Subsidiaries. For purposes of this
Agreement, "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
(c) Schedule 3.5(c) of the Company Disclosure Schedule sets forth all
Persons in which the Company or a Subsidiary of the Company owns 10 percent or
more of the outstanding voting or equity interest.
SECTION 3.6 SEC DOCUMENTS. The Company has filed all reports, proxy
statements, registration statements, forms and other documents required to be
filed by it with the SEC since January 1, 1996 (collectively, including all
exhibits thereto, the "COMPANY SEC DOCUMENTS"). No Subsidiary of the Company is
required to file any report, proxy statement, registration statement, form and
other document with the SEC. None of the Company SEC Documents (other than the
financial statements contained therein, as to which representations are made in
Section 3.7 hereof), as of their respective dates (and, if amended or superseded
by a filing prior to the date of this Agreement or the Closing Date, then on the
date of such filing), contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All of such Company
SEC Documents, as of their respective dates (and as of the date of any amendment
to the respective Company SEC Document), complied as to form in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
SECTION 3.7 FINANCIAL STATEMENTS. The financial statements of the Company
(including, in each case, any notes and schedules thereto) included in the
Company SEC Documents (a) were prepared from the books and records of the
Company and its Subsidiaries, (b) comply as to form in all material respects
with all applicable accounting requirements and the rules and regulations of the
SEC with respect thereto, (c) are in conformity with United States generally
accepted accounting principles ("GAAP"), applied on a consistent basis (except
as may be indicated therein or in the notes thereto and, in the case of
unaudited statements, as permitted by the rules and regulations of the SEC)
during the periods involved and (d) fairly present, in all material respects,
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
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SECTION 3.8 PROXY STATEMENT, FORM S-4, ETC.
(a) None of the information contained in the Proxy Statement, and any
amendments thereof and supplements thereto, will at the time of the mailing of
the Proxy Statement to the holders of Common Stock and at the time of the
Special Meeting, and none of the information contained in the Schedule 13E-3
Transaction Statement to be filed by DuPont and the Company under the Exchange
Act (the "SCHEDULE 13E-3") and any amendments thereof and supplements thereto,
will, at the time of its filing with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to statements made or omitted
in the Proxy Statement or the Schedule 13E-3, or any amendment or supplement
thereto, relating to DuPont or Newco based on information supplied by DuPont for
inclusion or incorporated by reference therein. The Proxy Statement and the
Schedule 13E-3, and any amendments thereof and supplements thereto, will comply
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations promulgated thereunder, except that no representation
is made by the Company with respect to the statements made or omitted in the
Proxy Statement or the Schedule 13E-3, as the case may be, or any amendments
thereof or supplements thereto, relating to DuPont or Newco based on information
supplied by DuPont for inclusion or incorporated by reference therein.
(b) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in the registration statement on Form
S-4 (and/or such other form as may be applicable and used) to be filed with the
SEC in connection with the issuance of DuPont Shares and, if applicable, the
deemed issuance, if any, of shares of Common Stock by reason of the transactions
contemplated by this Agreement (such registration statement, as it may be
amended or supplemented, is herein referred to as the "FORM S-4") will, with
respect to information relating to the Company, at the time the Form S-4 is
filed with the SEC, and at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 3.9 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC. Except as set forth in
the Company SEC Documents filed prior to the date of this Agreement or as
disclosed to all members of the Board of Directors of the Company in writing or
as specified in Schedule 3.9 of the Company Disclosure Schedule, since August
31, 1998 and until the date of this Agreement and, in the case of clause (i)
below, until the Effective Time, the Company and its Subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practices, and there has not been:
(i) any event or state of fact that, individually or in the aggregate,
has had or is reasonably likely to have a Company Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock (other than regular quarterly
cash dividends consistent with recent past practice) or any repurchase,
redemption or any other acquisition by the Company or its Subsidiaries of
any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or its Subsidiaries except for
acquisitions of capital stock prior to the date of this Agreement in
connection with the Company's previously announced Common Stock repurchase
program;
(iii) any material change in accounting principles, practices or
methods;
(iv) any (A) grant of any severance or termination pay to any director
or officer of the Company or any Subsidiary of the Company, or, any employee
of the Company or any Subsidiary
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of the Company in an aggregate cost not to exceed $1,000,000.00, (B)
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into, (C)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (D) increase in compensation, bonus or
other benefits payable to directors, officers or employees of the Company or
any Subsidiary of the Company other than, in the case of employees (other
than directors and officers), in the ordinary course of business; or
(v) entry by the Company into any material joint venture, partnership or
similar agreement with any Person other than a wholly-owned Subsidiary of
the Company.
SECTION 3.10 TAXES.
(a) Except as set forth in Schedule 3.10 of the Company Disclosure Schedule,
(1) all Tax Returns required to be filed by or on behalf of the Company, each of
its Subsidiaries, and each affiliated, combined, consolidated or unitary group
of which the Company or any of its Subsidiaries is or has been a member (a
"COMPANY GROUP") have been timely filed in the manner prescribed by law, and all
such Tax returns are true, complete and accurate except to the extent any
failures to file or failures to be true, correct or accurate would not in the
aggregate reasonably be expected to have a Company Material Adverse Effect; (2)
all Taxes due and owing by the Company, any Subsidiary of the Company or any
Company Group have been timely paid, or adequately reserved for in accordance
with GAAP, except to the extent any failure to pay or reserve would not in the
aggregate reasonably be expected to have a Company Material Adverse Effect; (3)
there are no claims or assessments presently pending against the Company, any
Subsidiary of the Company or any Company Group, for any alleged Tax deficiency,
and the Company does not know of any threatened claims or assessments against
the Company, any Subsidiary of the Company or any Company Group for any alleged
Tax deficiency, which in either case if upheld would reasonably be expected in
the aggregate to have a Company Material Adverse Effect; (4) there are no Liens
for Taxes on any asset of the Company or any Subsidiary of the Company, except
for Liens for Taxes not yet due and payable and Liens for Taxes that would not
in the aggregate reasonably be expected to have a Company Material Adverse
Effect; and (5) the Company and each of its Subsidiaries has complied in all
respects with all rules and regulations relating to the withholding of Taxes
(including, without limitation, employee-related Taxes), except for failures to
comply that would not in the aggregate reasonably be expected to have a Company
Material Adverse Effect.
(b) The statutes of limitations for the federal income Tax Returns of the
Company and the Subsidiaries of the Company (including, without limitation, any
Company Group) have expired or otherwise have been closed for all taxable
periods ending on or before August 31, 1986.
(c) For purposes of this Agreement, (i) "TAXES" means all taxes, levies or
other like assessments, charges or fees (including estimated taxes, charges and
fees), including, without limitation, income, corporation, advance corporation,
gross receipts, transfer, excise, property, sales, use, value-added, license,
payroll, withholding, social security and franchise or other governmental taxes
or charges, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof, any liability for taxes, levies or
other like assessments, charges or fees of another Person pursuant to Treasury
Regulation Section 1.1502-6 or any similar or analogous provision of applicable
law or otherwise (including, without limitation, by agreement) and such term
shall include any interest, penalties or additions to tax attributable to such
taxes, levies or other like assessments, charges or fees and (ii) "TAX RETURN"
means any report, return, statement, declaration or other written information
required to be supplied to a taxing or other governmental authority in
connection with Taxes.
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SECTION 3.11 EMPLOYEE BENEFIT PLANS.
(a) Except for any plan, fund, program, agreement or arrangement that is
subject to the laws of any jurisdiction outside the United States, Schedule
3.11(a) of the Company Disclosure Schedule and the Company SEC Documents filed
prior to the date of this Agreement contain a true and complete list of each
material deferred compensation, incentive compensation, and equity compensation
plan; material "welfare" plan, fund or program (within the meaning of section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); material "pension" plan, fund or program (within the meaning of
section 3(2) of ERISA); each material employment, termination or severance
agreement or arrangement; and each other material employee benefit plan, fund,
program, agreement or arrangement, in each case, that is in writing and
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (each, an
"ERISA AFFILIATE"), that together with the Company would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA, or to which the
Company or an ERISA Affiliate is party, whether written or oral, for the benefit
of any employee, consultant, director or former employee, consultant or director
of the Company or any Subsidiary of the Company. The plans, funds, programs,
agreements and arrangements listed in Schedule 3.11(a) of the Company Disclosure
Schedule and set forth in the Company SEC Documents filed prior to the date of
this Agreement are referred to herein collectively as the "PLANS". The Company
has heretofore made available to DuPont true and complete copies of the Plans
and any amendments thereto (or if a Plan is not a written Plan, a description
thereof, and excluding any Plan set forth in the Company SEC Documents filed
prior to the date of this Agreement), any related trust or other funding
vehicle, the most recent reports or summaries required under ERISA or the Code
and the most recent determination letter received from the Internal Revenue
Service with respect to each Plan intended to qualify under section 401 of the
Code.
(b) No liability under Title IV or section 302 of ERISA that would
reasonably be expected, in the aggregate, to have a Company Material Adverse
Effect has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and, to the knowledge of the Company, no condition exists
that presents a material risk to the Company or any ERISA Affiliate of incurring
any such liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation (which premiums have been paid when due).
(c) No Plan is a "multiemployer plan," as defined in section 3(37) of ERISA,
nor is any Plan a plan described in section 4063(a) of ERISA.
(d) Except as set forth in Schedule 3.11(d) of the Company Disclosure
Schedule, each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including, but not limited to,
ERISA and the Code, excluding, however, noncompliance with the terms of a Plan
or with applicable law that would not reasonably be expected, in the aggregate,
to have a Company Material Adverse Effect.
(e) Schedule 3.11(e) of the Company Disclosure Schedule contains a true and
complete summary or list of all material employment contracts and other employee
benefit arrangements, in each case that contain "change in control"
arrangements, which are not contained in Schedule 3.11(a) of the Company
Disclosure Schedule or the Company SEC Documents filed prior to the date of this
Agreement or have not been previously delivered to DuPont.
(f) There are no pending, or to the knowledge of the Company, threatened or
anticipated, claims that would reasonably be expected to have, in the aggregate,
a Company Material Adverse Effect by or on behalf of any Plan, by any employee
or beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
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(g) With respect to each Plan that provides for the funding of a rabbi trust
upon the occurrence of a Potential Change in Control (as defined in such Plans),
the Company has amended such Plans to provide that (i) no event has taken place
that (x) constituted a Potential Change in Control under such Plans or (y)
requires the funding of any such rabbi trust and (ii) neither the signing of
this Agreement nor the consummation of any transaction contemplated hereby shall
constitute a Potential Change in Control under such Plans or shall require the
funding of any such rabbi trust.
(h) To the knowledge of the Company, all employee benefit plans that are
subject to the laws of any jurisdiction outside the United States are in
material compliance with such applicable laws, including relevant Tax laws, and
the requirements of any trust deed under which they were established, except for
such exceptions to the foregoing which, in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 3.12 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth in either the Company SEC Documents filed prior to
the date of this Agreement or in Schedule 3.12(a) of the Company Disclosure
Schedule or otherwise fully covered by insurance, there is no action, suit or
proceeding pending against, or to the knowledge of the officers of the Company,
through the receipt of actual (as opposed to constructive) notice, threatened
against, the Company or any Subsidiary of the Company or any of their respective
properties, or any of their officers, employees or directors in their capacity
as such, before any court or arbitrator or any Governmental Entity except for
those that would not, in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(b) Except as set forth in Schedule 3.12(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries are (and have since January 1, 1996
been) in compliance with all applicable laws, ordinances, rules and regulations
of any federal, state, local or foreign governmental authority applicable to
their respective businesses and operations, except for such violations, if any,
which, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any Subsidiary
thereof has received notification from any Governmental Entity of any intent to
revoke or terminate, or of any proceedings therefor, any of their material
Licenses, where such revocation, termination or proceeding would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.13 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries own or have the right to use all
Intellectual Property (as defined in Section 3.13(d) hereof) used in or
reasonably necessary for the Company and its Subsidiaries to conduct their
business as it is currently conducted, except where such failure to own or have
such rights would reasonably be expected to have a Company Material Adverse
Effect.
(b) Except as set forth in Schedule 3.13 of the Company Disclosure Schedule,
to the knowledge of the Company: (i) all of the registrations relating to
material Intellectual Property owned by the Company and its Subsidiaries are,
except as would not reasonably be expected to result in a Company Material
Adverse Effect, subsisting and unexpired, free of all Liens, and have not been
abandoned; (ii) the Company does not infringe the intellectual property rights
of any third party in any respect that would reasonably be expected to have, in
the aggregate, a Company Material Adverse Effect; (iii) no judgment, decree,
injunction, rule or order has been rendered by Governmental Entity which would
limit, cancel or question the validity of, or the Company's or its Subsidiaries'
rights in and to, any Intellectual Property owned by the Company in any respect
except for those that would not, in the aggregate, reasonably be expected to
have a Company Material Adverse Effect; and (iv) the Company has not received
notice of any pending or threatened suit, action or adversarial proceeding that
seeks to limit, cancel or question the validity of, or the Company's or its
Subsidiaries' rights in and to, any
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Intellectual Property, except for those that would not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(c) Each of the Company and its Subsidiaries owns or possesses the rights to
use the germplasm (including, but not limited to, lines, varieties, inbreds and
hybrids) that is used or required by it in the conduct of its business, as
conducted over the prior year, (except for such failures to own or possess the
right to use such germplasm which would not in the aggregate reasonably be
expected to have a Company Material Adverse Effect). Neither the Company nor any
of its Subsidiaries has received any written notice of, and they have no
knowledge of, any challenge to the ownership by the Company and its Subsidiaries
of the germplasm used by the Company or any of its Subsidiaries or any claim
against the use by the Company or any of its Subsidiaries of the germplasm
owned, purported to be owned or used by it.
(d) For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall mean all
rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (x) (1)
proprietary inventions, discoveries, processes, formulae, designs, methods,
techniques, procedures, concepts, developments, technology, new and useful
improvements thereof and proprietary know-how relating thereto, whether or not
patented or eligible for patent protection; (2) copyrights and copyrightable
works, including computer applications, programs, software, databases and
related items; (3) trademarks, service marks, trade names, and trade dress, the
goodwill of any business symbolized thereby, and all common-law rights relating
thereto; (4) trade secrets and other confidential information; (y) all
registrations, applications and recordings for any of the foregoing and (z)
licenses or other similar agreements granting to the Company or any of its
Subsidiaries the rights to use any of the foregoing.
SECTION 3.14 OPINION OF FINANCIAL ADVISORS. The Company has received the
opinion or advice of Lazard Freres & Co. LLC to the effect that, as of such
date, the consideration to be received by the Company's shareholders in the
Merger is fair to the shareholders of the Company from a financial point of
view.
SECTION 3.15 TAX TREATMENT. None of the Company, its affiliates or its
Subsidiaries has taken any action or knows of any fact, arrangement, agreement,
plan or other circumstance that would be reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 3.16 FINDERS' FEES. Except for Lazard Freres & Co. LLC, whose fees
will be paid by the Company, there is no investment banker, broker, finder or
other intermediary which has been retained by, or is authorized to act on behalf
of, the Company or any Subsidiary of the Company that would be entitled to any
fee or commission from the Company, any Subsidiary of the Company, DuPont or any
of DuPont's affiliates upon consummation of the transactions contemplated by
this Agreement.
SECTION 3.17 RIGHTS AMENDMENT. The Rights Amendment has been duly
authorized, executed and delivered by the Company and is valid and enforceable
in accordance with its terms. The most recent amendment to the Rights Agreement
prior to the Rights Amendment was Amendment No. 2 dated March 10, 1998.
SECTION 3.18 BOARD RECOMMENDATION. At the date of this Agreement, the Board
of Directors of the Company, at a meeting duly called and held, has approved
this Agreement and (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together are fair to and in the
best interests of the stockholders of the Company; (ii) taken all actions
necessary on the part of the Company to render the restrictions on business
combinations contained in Section 1110 of the IBCA inapplicable to this
Agreement and the Merger, and, following the Effective Time, DuPont and its
Subsidiaries; and (iii) resolved to recommend that the stockholders of the
Company adopt this Agreement and approve the Merger.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DUPONT AND NEWCO
DuPont and Newco, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Each of DuPont and Newco is a
corporation duly incorporated (or other entity duly organized), validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, has all corporate or other power, as the case may be, and all
Licenses required to carry on its business as now conducted, and all Licenses
are in full force and effect except for failures to have any such License which
would not, in the aggregate, have a DuPont Material Adverse Effect (as defined
hereafter). Each of DuPont and Newco is duly qualified to do business and is in
good standing in each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failures to be so
qualified or in good standing would not reasonably be expected to, in the
aggregate, have a DuPont Material Adverse Effect. As used herein, the term
"DUPONT MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
DuPont and its Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that a DuPont
Material Adverse Effect shall not include any change in or effect upon the
business, assets or results of operations of DuPont and its Subsidiaries,
directly or indirectly, arising out of or attributable to (i) conditions, events
or circumstances generally affecting the economy as a whole or in the industries
in which DuPont and its Subsidiaries operate, in general, or (ii) any action
permitted to be taken or required to be taken pursuant to Section 5.8 hereof.
DuPont has heretofore delivered or made available to the Company true and
complete copies of the governing documents or other organizational documents of
like import, as currently in effect, of each of DuPont and Newco.
SECTION 4.2 AUTHORIZATION. Each of DuPont and Newco has the requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly and validly authorized
by the Boards of Directors of DuPont and Newco and approved by DuPont as the
sole stockholder of Newco, this Agreement has been adopted by the Board of
Directors of Newco, and no other proceedings on the part of DuPont or Newco are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by each of DuPont
and Newco and constitutes, assuming due authorization, execution and delivery of
this Agreement by the Company, a valid and binding obligation of each of DuPont
and Newco, enforceable against each of them in accordance with its terms.
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except as set forth in Schedule 4.3(a) of the disclosure schedule
delivered by DuPont to the Company concurrently with the execution and delivery
by DuPont of this Agreement and attached hereto (the "DUPONT DISCLOSURE
SCHEDULE"), neither the execution and delivery of this Agreement nor the
performance by each of DuPont and Newco of its obligations hereunder will
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws (or other governing or organizational documents) of
DuPont or Newco, as the case may be, or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or
obligation to repurchase, repay, redeem or acquire or any similar right or
obligation) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee, license,
lease or agreement or similar instrument or obligation to which any of DuPont or
Newco is a party or by which any of them or any of the respective assets used or
held for use by any of them may be bound or assuming that the filings,
registrations, notifications, authorizations, consents and approvals referred to
in subsection (b) below have been obtained or made, as the case may be, violate
any order, injunction, decree,
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statute, rule or regulation of any Governmental Entity to which either DuPont or
Newco is subject, excluding from the foregoing clauses (ii) and (iii) such
requirements, defaults, breaches, rights or violations (A) that would not, in
the aggregate, reasonably be expected to have a DuPont Material Adverse Effect
or (B) that become applicable as a result of any acts or omissions by, or facts
specifically pertaining to, the Company.
(b) Except as set forth in Schedule 4.3(b) of the DuPont Disclosure
Schedule, no filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution and delivery of this Agreement by each of DuPont and Newco or the
performance by either of them of their respective obligations hereunder, except
(i) the filing of the Articles of Merger in accordance with the IBCA and filings
to maintain the good standing of the Surviving Corporation; (ii) compliance with
any applicable requirements of the HSR Act, or the EC Merger Regulations or any
other foreign laws regulating competition, antitrust, investment or exchange
controls; (iii) compliance with any applicable requirements of the Securities
Act and the Exchange Act; (iv) compliance with any applicable requirements of
state blue sky or takeover laws and (v) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings (A) the
failure of which to be obtained or made would not, in the aggregate, reasonably
be expected to have a DuPont Material Adverse Effect and would not have a
material adverse effect on the ability of either DuPont or Newco to perform
their respective obligations hereunder or (B) that become applicable as a result
of any acts or omissions by, or facts specifically pertaining to, the Company.
SECTION 4.4 CAPITALIZATION. The authorized capital stock of DuPont consists
of (i) 1,800,000,000 shares of DuPont Common Stock, par value $0.30 per share,
of which, as of December 31, 1998, 1,140,354,154 shares of DuPont Common Stock
were issued and outstanding (including shares held by the DuPont Flexitrust) and
no shares of DuPont Common Stock were issued and held in the treasury of DuPont;
and (ii) 23,000,000 shares of DuPont preferred stock, no par value per share, of
which as of December 31, 1998, 1,672,594 shares of the $4.50 series were issued
and outstanding and 700,000 shares of the $3.50 series were issued and
outstanding. All the issued and outstanding shares of DuPont's capital stock
are, and all DuPont Shares to be issued pursuant to this Agreement will be, when
issued in accordance with the terms hereof, duly authorized, validly issued,
fully paid and nonassessable and not issued in violation of statutory or
contractual preemptive or similar rights.
SECTION 4.5 SEC DOCUMENTS. DuPont has filed all reports, proxy statements,
registration statements, forms and other documents required to be filed by it
with the SEC since January 1, 1997 (collectively, including all exhibits
thereto, the "DUPONT SEC REPORTS"). Except for Conoco Inc. ("CONOCO") and DuPont
Photomask, no Subsidiary of DuPont is required to file any report, proxy
statement, registration statement, form and other document with the SEC. None of
the DuPont SEC Reports (other than the financial statements contained therein,
as to which representations are made in Section 4.6 hereof), as of their
respective dates (and, if amended or superseded by a filing prior to the date of
this Agreement or the Closing Date, then on the date of such filing), contained
or will contain any untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All of such DuPont SEC Reports, as of their respective dates
(and as of the date of any amendment to the respective DuPont SEC Report),
complied as to form in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 4.6 FINANCIAL STATEMENTS. The financial statements of DuPont
(including, in each case, any notes and schedules thereto) included in the
DuPont SEC Documents (a) were prepared from the books and records of DuPont and
its Subsidiaries, (b) comply as to form in all material respects with all
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto
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and (c) are in conformity with GAAP, applied on a consistent basis (except (i)
as may be indicated therein or in the notes thereto, (ii) in the case of
unaudited statements, as permitted by the rules and regulations of the SEC and
(iii) for restatements of certain prior periods regarding discontinued
operations per APB 30) during the periods involved and (d) fairly present, in
all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments.
SECTION 4.7 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC. Since December 31,
1998, there has not been any event or state of fact that, individually or in the
aggregate, has had or is reasonably likely to have a DuPont Material Adverse
Effect.
SECTION 4.8 PROXY STATEMENT, FORM S-4, ETC.
(a) None of the information supplied or to be supplied by DuPont or Newco,
as the case may be, in writing for inclusion in the Proxy Statement (and any
amendments thereof and supplements thereto) will at the time of the mailing of
the Proxy Statement to the shareholders of the Company and at the time of the
Special Meeting, and none of the information supplied or to be supplied by
DuPont or Newco in writing for inclusion in the Schedule 13E-3, and any
amendments thereof and supplements thereto, will, at the time of its filing with
the SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) None of the information contained in the Form S-4 will at the time the
Form S-4 is filed with the SEC, and at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by DuPont or Newco with respect to statements made or
omitted in the Form S-4 relating to the Company based on information supplied by
the Company for inclusion or incorporated by reference in the Form S-4. The Form
S-4 and the Schedule 13E-3, and any amendments and supplements thereto, will
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act, except that no representation is made by
DuPont or Newco with respect to the statements made or omitted in the Form S-4
or the Schedule 13E-3, or any amendments or supplements thereto, as the case may
be, relating to the Company based on information supplied by the Company for
inclusion therein.
SECTION 4.9 SHARE OWNERSHIP. Except by reason of DuPont's ownership of Class
B Common Stock and shares of Common Stock issued in exchange therefor, neither
DuPont nor Newco as of the date of this Agreement beneficially owns shares of
Common Stock.
SECTION 4.10 NEWCO'S OPERATIONS. Newco was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not (i) engaged in any
business activities, (ii) conducted any operations other than in connection with
the transactions contemplated hereby, (iii) incurred any liabilities other than
in connection with the transactions contemplated hereby or (iv) owned any assets
or property.
SECTION 4.11 TAX TREATMENT. None of DuPont, its affiliates or its
Subsidiaries has taken any action or knows of any fact, arrangement, agreement,
plan or other circumstance that would be reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 4.12 FINDERS' FEES. Except for Salomon Smith Barney Inc. and Credit
Suisse First Boston Corporation, whose fees will be paid by DuPont, there is no
investment banker, broker, finder or other
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intermediary that might be entitled to any fee or commission in connection with
or upon consummation of the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of DuPont or Newco.
SECTION 4.13 ACQUISITION FOR INVESTMENT. DuPont is acquiring the shares of
Common Stock solely for its own account and not with a view to any distribution
or other disposition of such shares of Common Stock in violation of the
Securities Act.
SECTION 4.14 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth in either the DuPont SEC Reports filed prior to the
date of this Agreement or in Schedule 4.14(a) of the DuPont Disclosure Schedule
or otherwise fully covered by insurance, there is no action, suit or proceeding
pending against, or to the knowledge of the officers of DuPont, through the
receipt of actual (as opposed to constructive) notice, threatened against,
DuPont or any Subsidiary of DuPont or any of their respective properties, or any
of their officers, employees or directors in their capacity as such, before any
court or arbitrator or any Governmental Entity except for those that would not,
in the aggregate, reasonably be expected to have a DuPont Material Adverse
Effect.
(b) Except as set forth in Schedule 4.14(b) of the DuPont Disclosure
Schedule, DuPont and its Subsidiaries are (and have since January 1, 1996 been)
in compliance with all applicable laws, ordinances, rules and regulations of any
federal, state, local or foreign governmental authority applicable to their
respective businesses and operations, except for such violations, if any, which,
individually or in the aggregate, would not reasonably be expected to have a
DuPont Material Adverse Effect. Neither DuPont nor any Subsidiary thereof has
received notification from any Governmental Entity of any intent to revoke or
terminate, or of any proceedings therefor, any of their material Licenses, where
such revocation, termination or proceeding would reasonably be expected to have
a DuPont Material Adverse Effect.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 CONDUCT OF THE BUSINESS OF THE COMPANY. During the period from
the date of this Agreement and continuing until the Effective Time, the Company
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement or as set forth in the Company Disclosure
Schedule or as required by a Governmental Entity of competent jurisdiction or to
the extent that DuPont shall otherwise consent in writing or to the extent that
any DuPont nominee on the Board of Directors of the Company shall have
approved):
(a) ORDINARY COURSE.
(i) The Company and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course and shall use their
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve intact their relationships
with customers, suppliers and others having business dealings with them and
keep available the services of their present officers and employees, in each
case to the end that their ongoing businesses shall not be impaired in a
manner which would reasonably be expected to have a Company Material Adverse
Effect at the Effective Time.
(ii) The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any new material line of business.
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(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall not, and shall
not permit any of its Subsidiaries to, (i) declare, set aside or pay any
dividend or other distribution with respect to any of its capital stock (except
(A) the declaration and payment of regular quarterly cash dividends not in
excess of $0.10 per share of Common Stock and Class B Common Stock, with usual
record and payment dates for such dividends in accordance with past dividend
practice and (B) for dividends by wholly-owned Subsidiaries of the Company),
(ii) split, combine or reclassify any of its capital stock or issue any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly-owned Subsidiary of
the Company which remains a wholly-owned Subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock (except for the purchase from time to time by the Company
of Common Stock in the ordinary course of business consistent with past practice
in connection with the Plans at prices not in excess of the market price of
Common Stock).
(c) ISSUANCE OF SECURITIES. Subject to Section 5.1(s) hereof, the Company
shall not, and shall not permit any of its Subsidiaries to, issue, deliver or
sell any shares of its capital stock of any class, any bonds, debentures, notes
or other indebtedness of the Company having the right to vote on any matters on
which shareholders may vote ("COMPANY VOTING DEBT") or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares of capital stock or Company Voting Debt, other than (i)
the issuance of Common Stock upon the exercise of Options outstanding on the
date of this Agreement or in connection with the Plans, in each case in
accordance with their terms as of the date of this Agreement, (ii) the issuance
of Options or restricted Common Stock pursuant to Plans in effect as of the date
of this Agreement and in the ordinary course of business consistent with past
practice (which in the case of Options shall include having an exercise price
equal to market at the time of grant) but in no event more than 1.2 million
shares of Common Stock in the case of Options and 250,000 shares of Common Stock
in the case of restricted Common Stock, (iii) issuances by a wholly-owned
Subsidiary of the Company of capital stock to such Subsidiary's parent or
another wholly-owned Subsidiary of the Company, or (iv) issuances in accordance
with the Rights Agreement.
(d) GOVERNING DOCUMENTS; SECURITIES. The Company shall not, and shall not
permit any of its Subsidiaries to, amend (i) their respective certificates of
incorporation, by-laws or other governing documents or (ii) any material term of
any outstanding security issued by the Company or any Subsidiary of the Company.
(e) NO ACQUISITIONS. The Company shall not, and shall not permit any of its
Subsidiaries to, acquire (or agree to acquire or take any steps to facilitate
the acquisition of) by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or agree to
acquire any assets, stock or operations of another company, other than any
acquisition by the Company for cash (i) in an aggregate amount not to exceed
$100 million and (ii) which do not make it more difficult to obtain and is not
likely to cause any delay in obtaining, any approval or authorization required
in connection with the Merger under any Regulatory Law (as defined in Section
5.8(e) hereof).
(f) [Intentionally deleted.]
(g) NO LIENS. The Company shall not, and shall not permit any of its
Subsidiaries to, create, assume or otherwise incur any Lien or restriction on
transfer of any nature whatsoever on any asset other than Liens which, in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
(h) NO RELINQUISHMENT OF RIGHTS. The Company shall not, and shall not permit
any of its Subsidiaries to, (i) relinquish, waive or release any material
contractual or other right or claim,
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(ii) settle any material action, suit, claim, investigation or other proceeding
or (iii) knowingly dispose of or permit to lapse any rights in any material
Intellectual Property or knowingly disclose to any Person not an employee of the
Company or any Subsidiary of the Company or otherwise knowingly dispose of any
trade secret, process or knowhow not a matter of public knowledge prior to the
date of this Agreement, except pursuant to judicial order or process.
(i) INVESTMENTS. The Company shall not, and shall not permit any of its
Subsidiaries to make any loans, advances or capital contributions to, or
investments in, any other Person (other than (u) acquisitions permitted under
clause 5.1(e), (v) loans made in the ordinary course of business consistent with
current practice by PHI Financial Services, Inc. to customers of the Company and
its Subsidiaries, (w) in connection with actions permitted by Section 5.1(e)
hereof, (x) by the Company or a Subsidiary of the Company to or in the Company
or any wholly-owned Subsidiary of the Company, (y) pursuant to any contract or
other legal obligation of the Company or any of its Subsidiaries existing at the
date of this Agreement which are set forth in Schedule 5.1(i) of the Company
Disclosure Schedule or (z) in the ordinary course of business consistent with
past practice in an aggregate amount not in excess of $50 million).
(j) INDEBTEDNESS. The Company shall not, and shall not permit any of its
Subsidiaries to, create, incur or assume any indebtedness for borrowed money,
issuances of debt securities, guarantees, loans or advances, except (i) for
intercompany loans and (ii) in the ordinary course of business consistent with
past practice not to either (1) exceed, at any one time outstanding, $600
million in connection with the PHI Financial Services loan program referred to
in subsection (i) above and $200 million not in connection therewith or (2)
contain any prohibitions (except any such prohibitions which exist on the date
of this Agreement) on prepayment.
(k) COMPENSATION; SEVERANCE. Other than as set forth in Schedules 5.1(c),
5.1(k), 5.1(s) or 5.11(b) of the Company Disclosure Schedule, the Company shall
not, and shall not permit any of its Subsidiaries to (A) pay or commit to pay
any severance or termination pay to any director, officer or employee of the
Company or any Subsidiary of the Company (other than severance or termination
pay (i) required pursuant to the terms of an employee benefit plan, program or
arrangement or applicable law or (ii) in accordance with past practice of the
Company or an applicable Subsidiary), (B) enter into any employment, deferred
compensation, consulting, severance or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company or any Subsidiary of the Company, (C) increase or commit to increase any
employee benefits payable to any director, officer or employee of the Company or
any Subsidiary of the Company, including wages, salaries, compensation, pension,
severance, termination pay or other benefits or payments (except in the case of
employees other than officers and directors in the ordinary course of business
consistent with past practice or as required by an existing Plan), (D) adopt or
make any commitment to adopt any additional employee benefit plan, or (E) make
any contribution (other than (i) regularly scheduled contributions and (ii)
contributions required pursuant to the terms thereof) to any Plan.
(l) ACCOUNTING METHODS; INCOME TAX ELECTIONS. The Company shall not, and
shall not permit any of its Subsidiaries to, (i) change its methods of
accounting or accounting practice as in effect at December 31, 1998, except for
any such change as required by reason of a change in GAAP, (ii) make or rescind
any material Tax election, or (iii) make any material change to its method of
reporting income, deductions or other Tax items for Tax purposes; PROVIDED THAT,
in the case of matters described in clauses (ii) and (iii) above, DuPont shall
not unreasonably withhold its consent.
(m) CERTAIN AGREEMENTS. The Company shall not, and shall not permit any of
its Subsidiaries to, enter into any agreements or arrangements that limit or
otherwise restrict the Company or any of its Subsidiaries or any of their
respective affiliates or successors, or that could, after the Effective Time,
limit or restrict DuPont or any of its affiliates (including the Surviving
Corporation) or successors, from engaging or competing in any line of business
or in any geographic area which agreement or
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arrangement would, in the aggregate, reasonably be expected to have a DuPont
Material Adverse Effect, after giving effect to the Merger.
(n) RIGHTS AGREEMENT. Without the consent of DuPont, the Company shall not
prior to the termination of this Agreement (a) redeem the Rights, or amend or
modify or terminate the Rights Agreement, or to render it inapplicable to (or
otherwise exempt from the application of the Rights Agreement) any Person or
action, other than to delay the Distribution Date (as defined therein) or to
render the Rights inapplicable to the execution, delivery and performance of
this Agreement and the Merger or (b) permit the Rights to become non-redeemable
at the redemption price currently in effect. Notwithstanding the foregoing,
immediately prior to the Closing, the Company shall redeem the Rights.
(o) CORPORATE STRUCTURE. The Company shall not, and shall not permit any of
its Subsidiaries to, alter (through merger, liquidation, reorganization,
restructuring or any other fashion) the corporate structure or ownership of the
Company or any Subsidiary, except for changes in the corporate structure or
ownership of the Company's Subsidiaries which do not adversely affect the
Company and its Subsidiaries taken as a whole.
(p) The Company shall not, and shall not permit any of its Subsidiaries to,
agree, propose, authorize or enter into any commitment to take any action
described in the foregoing subsections (a)-(o) of this Section 5.1, except as
otherwise permitted by this Agreement.
(q) The Company shall, to the extent possible, provide to DuPont any
required certifications in accordance with Section 1445 of the Code and the
Treasury Regulations promulgated thereunder regarding its status as a U.S. real
property holding corporation within the meaning of Section 897(c) of the Code
and the Treasury Regulations promulgated thereunder.
(r) From the date of this Agreement until the Effective Time, the Company
will not (and will not permit any of its Subsidiaries to) take any action or
knowingly omit to take any action that would make any of its representations and
warranties contained herein false in any material respect at or prior to the
Closing Date.
(s) Notwithstanding any provision to the contrary in this Agreement, the
Company shall be entitled to enter into employee retention agreements
substantially upon the terms and conditions specified in Schedule 5.1(s)
attached hereto. DuPont and Newco hereby acknowledge and agree that the Company
intends to offer employee retention agreements to approximately 21 employees of
the Company; PROVIDED, HOWEVER, that the Company makes no representations or
warranties with respect to which employees, if any, will enter into such
employee retention agreements. The Company shall give notice to DuPont from time
to time advising DuPont as to which employees have entered into such employee
retention agreements.
SECTION 5.2 CONDUCT OF THE BUSINESS OF DUPONT, ETC.
(a) From the date of this Agreement until the Effective Time, DuPont will
not (and will not permit any of its Subsidiaries to) take any action or
knowingly omit to take any action that would make any of its representations and
warranties contained herein false in any material respect at or prior to the
Closing Date.
(b) Neither DuPont nor any of its Subsidiaries shall purchase or otherwise
acquire any shares of DuPont Common Stock during the Valuation Period and the
immediately preceding five trading days (collectively, the "RESTRICTED PERIOD");
PROVIDED THAT the foregoing shall not prohibit any purchases made by any
employee benefit plans of DuPont (the "BENEFIT PLANS OF DUPONT") or trusts for
the benefit of employees of DuPont or its employees, in each case, in the
ordinary course of business consistent with past practice. DuPont shall cause
the closing or termination of the Conoco Exchange Offer (if commenced) to occur
prior to (and shall not make any public announcements concerning its ownership
of Conoco for the twenty trading days commencing on the fifth trading day
preceding the
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commencement of the Restricted Period) five trading days prior to the
commencement of the Restricted Period and, if the Conoco Exchange Offer had not
been commenced prior to the commencement of the Restricted Period, then DuPont
agrees that it will not be commenced nor will a record date be established for
any distribution of shares of Conoco common stock until at least 10 days after
the Effective Time.
(c) DuPont shall not, and shall not permit any of its Subsidiaries to (or
agree to) (i) acquire or effect a merger, consolidation or business combination
with, or acquire all or any portion of the capital stock of, any of the
companies set forth in Schedule 5.2 of the Company Disclosure Schedule including
without limitation the Subsidiaries listed on such Schedule 5.2 (including such
listed Subsidiaries, the "LISTED COMPANIES"), (ii) enter into any joint venture
with, or acquire any division, Subsidiary or business of, any Listed Company if
such transaction directly involves Seed Operations (as defined in Section 5.2(g)
hereof) of such Listed Company or (iii) enter into any written or binding (A)
agreement, (B) commitment or (C) letter of intent to effect any transaction
prohibited or referred to in clauses (i) or (ii) of this subsection (c);
PROVIDED THAT the foregoing shall be subject to Section 5.2(e) hereof.
(d) Without limiting the provisions of Section 5.2(c) hereof, DuPont shall
not, and shall not permit any of its Subsidiaries to, acquire any business, or
any corporation, partnership, association or other business organization or
division thereof involved in or involving Seed Operations or any stock or
partnership or similar ownership interest therein or enter into any joint
venture relating to Seed Operations or enter into any written or binding (A)
agreement, (B) commitment or (C) letter of intent, to effect the foregoing
(collectively, a "TRANSACTION") which would be reasonably likely to (i) make it
more difficult in any material respect to obtain any material approval or
authorization required in connection with the Merger under any Regulatory Law (a
"MATERIAL APPROVAL") or (ii) result in any Material Delay (as defined hereafter)
in the expiration of the HSR Act or in obtaining any Material Approval. As used
in this Agreement, a "MATERIAL DELAY" shall mean a delay in the expiration or
termination of the HSR waiting period or in obtaining any Material Approval
until after the later of (x) the 120th day following the date of the execution
and delivery of this Agreement in the case of HSR (or 120 days following the
date of this Agreement, subject to extension on a day-by-day basis if and to the
extent the Company fails to promptly respond to reasonable requests by DuPont
with respect to filings and information required in connection with the Merger
pursuant to Section 5.8) and (y) the satisfaction or waiver of all conditions
set forth in Article VI hereof other than those set forth in Section 6.2(a) and
(b) and those that are not satisfied by reason of the failure of the HSR waiting
period to have expired or of any Material Approval to have been obtained.
(e) Notwithstanding Section 5.7 or subsection (c) and (d) above, (i) DuPont
may take any actions (including agreeing to and consummating any transactions)
otherwise prohibited by subsection (d)(i) above or, following the expiration or
termination of the waiting period applicable to the Merger under the HSR Act,
subsection (c) above if (I) DuPont notifies the Company in writing that,
effective immediately prior to the Termination Date, it has irrevocably waived
and will not assert the non-fulfillment of the conditions set forth in Section
6.1(b), Section 6.1(c), 6.3(d) or 6.3(f) hereof as a basis for failing to close
the Merger by reason of, but only by reason of, such action or transaction and
(II) DuPont complies with its obligations under Sections 5.8(c) and (ii) without
limiting DuPont's obligations under clause (e)(i) above if the provisions
thereof apply, DuPont may take any action otherwise prohibited by (d)(ii) above,
provided that upon the commencement of a Material Delay, DuPont shall increase
the Merger Price by an interest rate per annum, calculated on a daily basis,
using the one-month dealer priced commercial paper rate, for the period from the
day of commencement of the Material Delay until the earlier of (A) the end of
such Material Delay, and (B) the date that the HSR waiting period has expired or
terminated and all other Material Approvals that resulted in such Material Delay
have been obtained and (C) the date that any other condition to closing the
Merger other than those set forth in Sections 6.2(a) and (b) remains not
satisfied or waived, provided that no increase in the Merger Price as provided
in this clause (e)(ii) shall occur if and for so long as an
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authorized representative of the applicable Governmental Entity responsible for
administering the HSR or the law or regulation under which such Material
Approval is required has advised DuPont in writing (and such advice has not been
withdrawn) that it is not reasonably likely that there will be a Material Delay
in the timing of the expiration or termination of the HSR Act or the obtaining
of any Material Approval.
(f) As used in this Agreement, the term "SEED OPERATIONS" shall mean the
business of seed and seed operations; downstream distribution systems;
technology materially related to the seed business; and other businesses
materially related to the seed business (exclusive of crop protection chemicals,
herbals and nutritional supplements, food ingredients, and fermentation derived
products).
(g) DuPont shall, and shall cause its Subsidiaries to, vote the shares of
Common Stock owned by each of them in favor of approval and adoption of this
Agreement and the Merger.
SECTION 5.3 SHAREHOLDERS' MEETING; PROXY MATERIAL.
(a) Subject to the last sentence of this Section 5.3(a), the Company shall,
in accordance with applicable law and the Articles of Incorporation and the
by-laws of the Company duly call, give notice of, convene and hold a special
meeting of its shareholders (the "SPECIAL MEETING") as promptly as practicable
after the date hereof for the purpose of considering and taking action upon this
Agreement and the Merger. The Board of Directors of the Company shall recommend
approval and adoption of this Agreement and the Merger by the Company's
shareholders (the "COMPANY RECOMMENDATION"); PROVIDED THAT the Board of
Directors of the Company may withdraw, modify or change such recommendation if
but only if (i) it believes in good faith, based on such matters as it deems
relevant, including the advice of the Company's financial advisors, that a
Superior Proposal (as defined in Section 5.5(b) hereof) has been made and (ii)
it has determined in good faith, based on the advice of outside counsel and
after taking into account the provisions of IBCA Section490.1108, that the
failure to withdraw, modify or change such recommendation is reasonably likely
to result in a breach of the fiduciary duties of the Board of Directors of the
Company under applicable law. The Company may, if it receives an unsolicited
Acquisition Proposal (as defined in Section 5.5(b) hereof) delay the mailing of
the Proxy Statement or the holding of the Special Meeting, in each case for such
reasonable period as would provide a reasonable opportunity for the Company's
Board of Directors to consider such Acquisition Proposal and to determine the
effect, if any, on its recommendation in favor of the Merger.
(b) Promptly following the date of this Agreement, the Company shall prepare
a proxy statement relating to the adoption of this Agreement and the approval of
the Merger by the Company's shareholders (the "PROXY STATEMENT"), and DuPont
shall prepare and file with the SEC, following resolution of any comments the
SEC may have with respect to the Proxy Statement, the Form S-4, in which the
Proxy Statement will be included. DuPont and the Company shall cooperate with
each other in connection with the preparation of the foregoing documents. DuPont
and the Company shall each use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act.
Notwithstanding the foregoing, the Company shall not mail the Proxy Statement
and the Form S-4 shall not have been declared effective prior to the closing of
the Conoco Exchange Offer or at any time that such mailing would violate
Regulation M under the Exchange Act. DuPont agrees that if and when it becomes
reasonably apparent that DuPont will not be able to close the Conoco Exchange
Offer in a timely manner in order to permit the Effective Time to occur prior to
the Termination Date (after giving effect to the provisions of the immediately
preceding sentence), DuPont will promptly terminate (or will not commence) the
Conoco Exchange Offer.
(c) The Company shall as promptly as practicable notify DuPont of the
receipt of any comments from the SEC relating to the Proxy Statement. Each of
DuPont and the Company shall as promptly as
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practicable notify the other of (i) the effectiveness of the Form S-4, (ii) the
receipt of any comments from the SEC relating to the Form S-4 and (iii) any
request by the SEC for any amendment to the Form S-4 or for additional
information. All filings by DuPont and the Company with the SEC in connection
with the transactions contemplated hereby, including the Proxy Statement, the
Form S-4 and any amendment or supplement thereto, shall be subject to the prior
review of the other, and all mailings to the Company's shareholders in
connection with the transactions contemplated by this Agreement shall be subject
to the prior review of DuPont.
SECTION 5.4 ACCESS TO INFORMATION. Upon reasonable advance notice, between
the date of this Agreement and the Closing Date, the Company shall (i) give
DuPont, its respective counsel, financial advisors, auditors and other
authorized representatives (collectively, "DUPONT'S REPRESENTATIVES") reasonable
access during normal business hours to the offices, properties, books and
records (including, without limitation, all Tax Returns and other Tax-related
information) of the Company and its Subsidiaries, (ii) furnish to DuPont's
Representatives such financial and operating data and other information
(including, without limitation, all Tax Returns and other Tax-related
information) relating to the Company, its Subsidiaries and their respective
operations as such Persons may reasonably request and (iii) instruct the
Company's employees, counsel and financial advisors to cooperate with DuPont in
its investigation of the business of the Company and its Subsidiaries; PROVIDED
THAT any information and documents received by DuPont or DuPont's
Representatives (whether furnished before or after the date of this Agreement)
shall be held in strict confidence in accordance with the Confidentiality
Agreement dated March 13, 1997 between the Company and DuPont (the
"CONFIDENTIALITY AGREEMENT"), which shall remain in full force and effect
pursuant to the terms thereof as though the Confidentiality Agreement had been
entered into by the parties on the date of this Agreement, notwithstanding the
execution and delivery of this Agreement or the termination hereof; PROVIDED
THAT the parties shall be able to disclose information to the extent required by
law.
SECTION 5.5 NO SOLICITATION.
(a) From the date of this Agreement until the Effective Time or, if earlier,
the termination of this Agreement, the Company shall not (whether directly or
indirectly through advisors, agents or other intermediaries), and the Company
shall cause its respective officers, directors, advisors, representatives or
other agents of the Company not to, directly or indirectly, (a) solicit,
initiate or encourage any Acquisition Proposal or (b) except with respect to an
unsolicited Acquisition Proposal relating to a Superior Proposal to the extent
required by the fiduciary obligations of the Board of Directors of the Company,
as determined in good faith by the Board of Directors of the Company based on
the advice of outside counsel and after taking into account the provisions of
IBCA Section490.1108, engage in discussions or negotiations with, or disclose
any non-public information relating to the Company or its Subsidiaries or afford
access to the properties, books or records of the Company or its Subsidiaries
to, any Person that has made an Acquisition Proposal or to any Person in
contemplation of an Acquisition Proposal or (c) enter into any agreement or
agreement in principle providing for or relating to an Acquisition Proposal;
PROVIDED, HOWEVER, that the Company may enter into any agreement conditional
upon the concurrent exercise by the Company, and concurrently with the
effectiveness of any such agreement, the Company does exercise, the termination
right set forth in Section 7.1(i) hereof; PROVIDED THAT the exception in clause
(b) with respect to a Superior Proposal shall not apply following the approval
of the Merger by the Company shareholders pursuant to the Required Company Vote.
Without limiting the provisions of the Investment Agreement then in effect, (x)
the Company will promptly inform DuPont when, in connection with an Acquisition
Proposal made by any third party, the Company is engaging in substantive
discussions or negotiations with such party or has provided such party or
representative of such party with or access to any material non-public
information properties, books or records of the Company or its material
Subsidiaries, and (y) at any time following the 45th day after the date of this
Agreement, the Company will inform DuPont within 5 business days of its receipt
thereof, of its receipt (a "SECOND PERIOD EVENT") from a third party of a public
or private
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written Acquisition Proposal which, in the judgment of the Board in the exercise
of its fiduciary obligations, as determined (and the timing of which
determination is also determined) in good faith based on the advice of outside
counsel and taking into account the provisions of IBCA Section490.1108, is
reasonably likely to constitute a Superior Proposal and which is reasonably
likely to result in a binding agreement within a period of 10 business days or
less; provided that nothing in clauses (x) or (y) above shall obligate the
Company to disclose the identity of any third party or the terms of any such
Acquisition Proposal. Nothing contained in this Section 5.5 shall prohibit the
Company or the Company's Board of Directors from taking and disclosing to the
Company's shareholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making any disclosure required by applicable law.
(b) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall have the
meaning assigned to the term "Proposal" in the Investment Agreement (as defined
in Section 5.18(a) hereof) as in effect on the date hereof. For purposes of this
Agreement, "SUPERIOR PROPOSAL" means a "Proposal" (as such term is defined in
the Investment Agreement as in effect on the date hereof) relating to a "Change
in Control Transaction" (as such term is defined in the Investment Agreement as
in effect on the date hereof) which is made prior to the approval of this
Agreement by the shareholders of the Company, which is on terms which the Board
of Directors of the Company in good faith concludes (after consultation with its
financial advisors and outside counsel and after taking into account, among
other things, all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal), would, if consummated, result in a
transaction that provides a higher price to its shareholders (in their
capacities as shareholders), from a financial point of view, than the
transactions contemplated by this Agreement.
SECTION 5.6 DIRECTOR AND OFFICER LIABILITY.
(a) DuPont and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any Indemnitee (as defined
hereafter) as provided in the Articles of Incorporation or by-laws of the
Company or an agreement between an Indemnitee and the Company or a Subsidiary of
the Company as in effect as of the date hereof shall survive the Merger and
continue in full force and effect in accordance with its terms.
(b) For six years after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless the individuals who on or prior to the Effective
Time were officers or directors of the Company and any of its Subsidiaries (the
"INDEMNITEES") to the same extent as set forth in subsection (a) above. In the
event any claim in respect of which indemnification is available pursuant to the
foregoing provisions is asserted or made within such six-year period, all rights
to indemnification shall continue until such claim is disposed of or all
judgments, orders, decrees or other rulings in connection with such claim are
fully satisfied.
(c) For six years after the Effective Time, the Surviving Corporation shall
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and amount no less favorable than those
of such policy in effect on the date hereof; PROVIDED, HOWEVER, that in no event
shall the Surviving Corporation be required to expend more than an amount per
year equal to 200 percent of current annual premiums paid by the Company for
such insurance (the "MAXIMUM AMOUNT") to maintain or procure insurance coverage
pursuant hereto; PROVIDED, FURTHER, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, the Surviving Corporation shall maintain or procure, for such six-year
period, the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount.
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(d) The obligations of the Surviving Corporation under this Section 5.6
shall not be terminated or modified in such a manner as to adversely affect any
Indemnitee to whom this Section 5.6 applies without the consent of such affected
Indemnitee (it being expressly agreed that the Indemnitees to whom this Section
5.6 applies shall be third party beneficiaries of this Section 5.6).
SECTION 5.7 REASONABLE BEST EFFORTS. Upon the terms and subject to the
conditions of this Agreement, each party hereto shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement;
PROVIDED THAT the foregoing shall be subject to Section 5.8 hereof.
SECTION 5.8 CERTAIN FILINGS.
(a) The Company and DuPont shall cooperate with one another (i) in
connection with the preparation of the Proxy Statement, the Schedule 13E-3 and
the Form S-4 Registration Statement and any amendments or supplements to the
foregoing, (ii) in determining whether any action by or in respect of, or filing
with, any Governmental Entity is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Proxy Statement, the Schedule 13E-3 and the Form S-4
Registration Statement and seeking timely to obtain any such actions, consents,
approvals or waivers. Without limiting the provisions of this Section 5.8, each
party hereto shall file with the Department of Justice and the Federal Trade
Commission a Pre-Merger Notification and Report Form pursuant to the HSR Act in
respect of the transactions contemplated hereby within ten (10) days of the date
of this Agreement, and, subject to Section 5.8(c) hereof, each party will use
its reasonable best efforts to take or cause to be taken all actions necessary,
including to promptly and fully comply with any requests for information from
regulatory Governmental Entities (including, in the case of DuPont, to request,
if any question or objection shall be raised by the applicable Governmental
Entity with respect thereto, that such Governmental Entity should defer its
consideration of any transaction of the type referred to in Section 5.2(c) or
(d) until after (i) any clearance, waiver, approval or authorization relating to
the HSR Act that is necessary to enable the parties to consummate the
transactions contemplated by this Agreement and (ii) other Material Approvals
have been obtained), to obtain any clearance (including affirmatively seeking
early termination), waiver, approval or authorization relating to the HSR Act
that is necessary to enable the parties to consummate the transactions
contemplated by this Agreement. Without limiting the provisions of this Section
5.8, each party hereto shall use its reasonable best efforts to promptly make
the filings required to be made by it with all foreign Governmental Entities in
any jurisdiction in which the parties believe it is necessary or advisable.
(b) Subject to Section 5.8(c) hereof, (i) the Company and DuPont shall each
use its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the Merger or any other transaction contemplated by
this Agreement under any Regulatory Law and (ii) if any administrative, judicial
or legislative action or proceeding, including any proceeding by a private
party, is instituted (or threatened to be instituted) challenging the Merger or
any other transaction contemplated by this Agreement as violative of any
Regulatory Law, the Company and DuPont shall each cooperate in all respects and
use its respective reasonable best efforts to contest and resist any such action
or proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Merger or any other transaction contemplated by this
Agreement, including, without limitation, by pursuing all reasonable avenues of
administrative and judicial appeal.
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(c) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of DuPont and the
Company shall use its reasonable best efforts to take and, in the case of
actions required by reason of Section 5.2(c), (d) and (e), shall take
(including, without limitation, agreeing to hold separate or divest, or enter
into a consent decree or licensing or other arrangement with respect to, any of
the businesses, operations or assets of DuPont or the Company or any of their
Subsidiaries, in each case, subject to the consummation of the Merger) such
action as may be required in order to resolve any such objections or challenge
as such Governmental Entity or private party may have to such transactions under
such Regulatory Law so as to permit consummation of the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that notwithstanding anything
to the contrary set forth in this Agreement, neither DuPont nor the Company nor
any of their respective Subsidiaries shall be required to sell, hold separate,
otherwise dispose of or license or conduct their business in a specified manner,
or agree to sell, hold separate, otherwise dispose of or license or conduct
their business in a specified manner, or permit the sale, holding separate,
other disposition or licensing of, any assets of DuPont, the Company or their
respective Subsidiaries or the conduct of their business in a specified manner
(whether as a condition to obtaining any approval from a Governmental Entity or
any other Person or for any other reason) if such sale, holding separate, other
disposition or licensing or the conduct of their business in a specified manner
would have, unless DuPont determined otherwise, in the aggregate, a "Significant
Adverse Impact" (as defined below) (it being understood that this proviso is not
applicable insofar as DuPont is required by this Section 5.8(c) to take any such
action by reason of Section 5.2(c), (d) and (e) hereof); and PROVIDED FURTHER,
HOWEVER that, DuPont shall control all decisions (without limiting its
obligations therewith) with respect to this Section 5.8(c) and, in particular,
the Company and its Subsidiaries shall not, without the prior written consent of
DuPont, agree, but shall, if so directed by DuPont, agree, subject to the
consummation of the Merger, to hold separate or divest any of its businesses or
operations or assets used therein or enter into a consent decree or licensing or
other arrangement with respect to any such businesses or operations or assets
used therein. For purposes of this Agreement, a "SIGNIFICANT ADVERSE IMPACT"
shall mean any change or effect that in DuPont's reasonable judgment is likely
to have a material adverse effect on DuPont's and its Subsidiaries' operations
which are in the same or related lines of business as those of the Company and
its Subsidiaries, taken together with the Company and its Subsidiaries as a
whole.
(d) Each of the Company and DuPont shall promptly inform the other party of
any material communication received by such party from the Federal Trade
Commission, the Antitrust Division of the Department of Justice, the Commission
of the European Community or any other governmental or regulatory authority
regarding any of the transactions contemplated hereby.
(e) "REGULATORY LAW" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, Counsel
regulation (EEC) No. 4064/89 of December 21, 1989 on the Control of
Concentrations Between Undertakings, OJ (1989) L 395/1 and the regulations and
decisions of the Councilor Commission of the European Community or other organs
of the European Union or the European Community implementing such regulations
(the "EC MERGER REGULATIONS") and all other federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate (i) foreign investment, (ii) foreign exchange or currency controls or
(iii) actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition.
SECTION 5.9 PUBLIC ANNOUNCEMENTS. Neither the Company, DuPont nor any of
their respective affiliates shall issue or cause the publication of any press
release or other public announcement with respect to the Merger, this Agreement
or the other transactions contemplated hereby without the prior consultation
with the other party, except as may be required by law or by any listing
agreement with, or the policies of, a national securities exchange.
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SECTION 5.10 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Newco, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Newco, any other actions to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation, as a result
of, or in connection with, the Merger.
SECTION 5.11 EMPLOYEE MATTERS.
(a) The Surviving Corporation shall, and shall cause its Subsidiaries to,
honor in accordance with their terms all agreements, contracts and arrangements
listed in Schedule 5.11 of the Company Disclosure Schedule.
(b) DuPont agrees that, for at least one year following the Effective Time,
subject to applicable law, the Surviving Corporation and its Subsidiaries shall
continue to sponsor and maintain the Plans for the benefit of the individuals
who are, as of the Effective Time, employees of the Company or any of its
Subsidiaries (the "CONTINUING EMPLOYEES"). The parties have agreed to the
matters set forth in Schedule 5.11(b).
(c) PRE-EXISTING LIMITATIONS; DEDUCTIBLES; SERVICE CREDIT. With respect to
any Benefit Plans of DuPont in which any Continuing Employees first become
eligible to participate, on or after the Effective Time, DuPont shall: (i) waive
all pre-existing conditions exclusions and waiting periods with respect to
participation and coverage requirements and activity-at-work exclusions
applicable to the Continuing Employees; (ii) provide each Continuing Employee
with credit for any co-payments and deductibles paid prior to the Effective Time
(to the same extent such credit was given under the analogous Plan prior to the
Effective Time) in satisfying any applicable deductible or out-of-pocket
requirements and (iii) recognize all service of the Continuing Employees with
the Company, any of its present and former Subsidiaries, any affiliates of the
Company and their respective predecessors for all purposes (including, without
limitation, purposes of eligibility to participate, vesting credit, entitlement
to benefits, and benefit accrual), to the extent service is taken into account
under the applicable plan for employees other than the Continuing Employees;
PROVIDED THAT the foregoing shall not apply to the extent it would result in
duplication of benefits for the same period of service, nor shall it apply with
respect to benefit accrual under any Benefit Plan of DuPont that is a defined
benefit pension plan.
(d) DuPont and the Company hereby acknowledge that the consummation of the
Merger shall constitute a Change in Control of the Company under the Plans, and
neither the DuPont nor the Company shall take any action inconsistent with such
acknowledgment.
(e) DuPont hereby agrees, effective as of the Effective Time, to guarantee
payment of all obligations of the Surviving Corporation under the Plans
described in Section 3.11(g) hereof.
SECTION 5.12 TAX-FREE REORGANIZATION TREATMENT.
(a) The parties intend the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code and shall use their reasonable best
efforts (and shall cause their respective Subsidiaries to use their reasonable
best efforts) to cause the Merger to so qualify. Neither the Company, DuPont, or
any of their respective Subsidiaries shall take any action, or fail to take any
action, that would or would be reasonably likely to adversely affect the
treatment of the Merger as a reorganization within the meaning of Section 368(a)
of the Code.
(b) The Company and DuPont shall cooperate and use their reasonable best
efforts in obtaining the opinions of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company, and Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
DuPont, described in Sections 6.2(d) and 6.3(e) hereof, respectively, of this
Agreement. In connection therewith, both DuPont (together with Newco) and the
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Company shall deliver to Fried, Frank, Harris, Shriver & Jacobson and Skadden,
Arps, Slate, Meagher & Flom LLP representation letters, dated and executed as of
the Closing Date (and as of such other date or dates as reasonably requested by
Fried, Frank, Harris, Shriver & Jacobson or Skadden, Arps, Slate, Meagher & Flom
LLP), in form and substance substantially identical to those attached hereto as
Exhibits B-1 and B-2, respectively (allowing for such amendments to the
representation letters as counsel deems necessary) (together, the
"REPRESENTATION LETTERS").
SECTION 5.13 BLUE SKY PERMITS. DuPont shall use its reasonable best efforts
to obtain, prior to the effective date of the Form S-4 Registration Statement,
all material necessary state securities laws or "blue sky" permits and approvals
required to carry out the transactions contemplated by this Agreement and the
Merger, and will pay all expenses incident thereto.
SECTION 5.14 LISTING. DuPont shall use its reasonable best efforts to cause
the DuPont Shares to be issued in the Merger or upon exercise of Substitute
Options to be listed on the NYSE, subject to notice of official issuance
thereof, prior to the Closing Date.
SECTION 5.15 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the Merger, the Company and DuPont
shall each take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any such statute or regulation on the Merger.
SECTION 5.16 CERTAIN NOTIFICATIONS. Between the date hereof and the
Effective Time, each party shall promptly notify the other party hereto in
writing after becoming aware of the occurrence of any event which will, or is
reasonably likely to, result in the failure to satisfy any of the conditions
specified in Article VI hereof.
SECTION 5.17 AFFILIATE LETTERS. The Company shall, at least 15 days prior to
the scheduled date of the Special Meeting, deliver to DuPont a list reasonably
satisfactory to DuPont setting forth the names and addresses of all Persons who
at the time of the Special Meeting are, in the Company's reasonable judgment,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall furnish such information and documents as DuPont may
reasonably request for the purpose of reviewing such list. The Company shall use
its reasonable best efforts to cause each Person who is identified as an
affiliate on such list to execute a written agreement at least 10 days prior to
the scheduled date of the Special Meeting in customary form (collectively, the
"AFFILIATE AGREEMENTS").
SECTION 5.18 THE INVESTMENT AGREEMENT.
(a) The Company hereby expressly waives any breach of Section 6.1 of the
Investment Agreement (the "INVESTMENT AGREEMENT"), dated as of August 6, 1997,
between DuPont and the Company that is caused by the execution, delivery and/or
performance of this Agreement or the events leading to the execution and
delivery of this Agreement.
(b) The Company and DuPont agree that the Investment Agreement is hereby
amended to eliminate Section 6.7(c) thereof.
(c) To the extent anything contained in this Agreement is inconsistent or
constitutes a breach of the Investment Agreement, this Agreement shall control
and any such breach is hereby waived.
(d) The Investment Agreement shall terminate in its entirety upon the
earlier of (x) the termination of this Agreement (A) in circumstances where
DuPont terminated this Agreement pursuant to Section 7.1(e), (f), (g) or (h)
hereof or (B) pursuant to Section 7.1(i) hereof; PROVIDED THAT, notwithstanding
the foregoing, under no circumstances shall Section 8.2(c) of the Investment
Agreement terminate, and such Section 8.2(c) shall survive until the date that
the Investment Agreement would have otherwise survived had the Investment
Agreement not terminated pursuant to this Section 5.18(d).
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of the Company, DuPont and Newco to consummate the Merger are
subject to the satisfaction or, to the extent permitted by applicable law, the
waiver on or prior to the Effective Time of each of the following conditions:
(a) The Required Company Vote shall have been obtained;
(b) Any applicable waiting periods (including any extensions thereof) under
the HSR Act shall have expired or been terminated. Approval of the Merger by the
European Commission shall have been obtained pursuant to the EC Merger
Regulations;
(c) No judgment, injunction, order or decree and except as would not
reasonably be expected to have in the aggregate a Company Material Adverse
Effect, a DuPont Material Adverse Effect or a Significant Adverse Impact, no
provision of any applicable law or regulation shall prohibit the consummation of
the Merger or the other transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that this condition shall be deemed satisfied insofar as violations of
laws and regulations are concerned if its failure to in fact be satisfied is the
result of DuPont having breached in any material respect its obligations under
Section 5.8 hereof.
(d) The Form S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order,
and any material "blue sky" and other state securities laws applicable to the
registration and qualification of the Common Stock following the Closing shall
have been complied with; and
(e) The DuPont Shares issuable in accordance with the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO CONSUMMATE THE
MERGER. The obligation of the Company to consummate the Merger shall be further
subject to the satisfaction or, to the extent permitted by applicable law, the
waiver on or prior to the Effective Time of each of the following conditions:
(a) DuPont and Newco shall each have performed in all material respects its
respective agreements and covenants contained in or contemplated by this
Agreement that are required to be performed by it at or prior to the Effective
Time pursuant to the terms hereof;
(b) The representations and warranties of DuPont and Newco contained in
Article III hereof, without giving effect to any materiality qualifications or
limitations therein or any references therein to any DuPont Material Adverse
Effect, shall be true and correct in all respects as of the Effective Time (or,
to the extent such representations and warranties speak as of an earlier date,
they shall be true in all respects as of such earlier date), except (i) as
otherwise contemplated by this Agreement and (ii) for such failures to be true
and correct which in the aggregate would not reasonably be expected to have a
DuPont Material Adverse Effect;
(c) The Company shall have received certificates signed by any senior vice
president of DuPont, dated the Closing Date, to the effect that, to such
officer's knowledge, the conditions set forth in Sections 6.2(a) and 6.2(b)
hereof have been satisfied or waived; and
(d) The Company shall have received an opinion of Fried, Frank, Harris,
Shriver & Jacobson, its counsel, in form and substance reasonably satisfactory
to it, dated as of the Closing Date, to the effect that the Merger will qualify
for federal income tax purposes as a reorganization within the meaning of
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<PAGE>
Section 368(a) of the Code and, in rendering such opinion, Fried, Frank, Harris,
Shriver & Jacobson, shall be entitled to rely upon the Representations Letters.
SECTION 6.3 CONDITIONS TO DUPONT'S AND NEWCO'S OBLIGATIONS TO CONSUMMATE THE
MERGER. The obligations of DuPont and Newco to effect the Merger shall be
further subject to the satisfaction, or to the extent permitted by applicable
law, the waiver on or prior to the Effective Time of each of the following
conditions:
(a) The Company shall have performed in all material respects each of its
agreements and covenants contained in or contemplated by this Agreement that are
required to be performed by it at or prior to the Effective Time pursuant to the
terms hereof;
(b) The representations and warranties of the Company contained in Article
IV hereof, without giving effect to any materiality qualifications or
limitations therein or any references therein to any Company Material Adverse
Effect, shall be true and correct in all respects as of the Effective Time (or,
to the extent such representations and warranties speak as of an earlier date,
they shall be true in all respects as of such earlier date), except (i) as
otherwise contemplated by this Agreement and (ii) for such failures to be true
and correct which in the aggregate would not reasonably be expected to have a
Company Material Adverse Effect;
(c) DuPont shall have received a certificate signed by the chief executive
officer of the Company, dated the Closing Date, to the effect that, to such
officer's knowledge, the conditions set forth in Sections 6.3(a) and 6.3(b)
hereof have been satisfied or waived;
(d) All foreign laws regulating competition, antitrust, investment or
exchange control shall have been complied with, and all consents, approvals and
actions of, filings with, and notices to, all Governmental Entities required of
DuPont, the Company or any of their Subsidiaries in connection with the Merger
shall have been made, obtained or effected, as the case may be, except for
those, the failure of which to be made, obtained or effected, would not in the
aggregate reasonably be expected to have a Company Material Adverse Effect, a
DuPont Material Adverse Effect or a Significant Adverse Impact; PROVIDED,
HOWEVER, that this condition shall be deemed satisfied if its failure to in fact
be satisfied is the result of DuPont having breached in any material respect its
obligations under Section 5.8 hereof.
(e) DuPont shall have received an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, its counsel, in form and substance reasonable satisfactory to it,
dated as of the Closing Date, to the effect that the Merger will qualify for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and, in rendering such opinion, Skadden, Arps, Slate,
Meagher & Flom LLP shall be entitled to rely upon the Representation Letters;
and
(f) No suit, action, proceeding or investigation by any Governmental Entity,
including the European Commission or any organ of the European Union, shall have
been commenced (and be pending) against DuPont, the Company or Newco or any of
their respective affiliates, partners, associates, officers or directors, or any
officers or directors of such partners, seeking (i) to prevent or delay the
transactions contemplated hereby, (ii) material damages in connection therewith,
(iii) any other remedy which would materially impair the intended benefits to
DuPont of the Merger or otherwise have a Company Material Adverse Effect, a
DuPont Material Adverse Effect or a Significant Adverse Impact or (iv) to impose
criminal liability on any of the foregoing Persons in connection with the Merger
(each of clauses (i)-(iv), a "MATERIAL ADVERSE CONSEQUENCE") and in each case,
other than (iv), which is reasonably likely to result in a Material Adverse
Consequence; PROVIDED, HOWEVER, that this condition shall be deemed satisfied if
its failure to in fact be satisfied is the result of DuPont having breached in
any material respect its obligations under Section 5.8 hereof.
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ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the board of directors
of the terminating party or parties, and except as provided below, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of the Company:
(a) By mutual written consent of DuPont and the Company;
(b) By either the Company or DuPont if the Effective Time shall not have
occurred on or before December 1, 1999 (as the same may be extended by the
second proviso below, the "TERMINATION DATE"); PROVIDED, HOWEVER, that the right
to terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement
(including without limitation such party's obligations set forth in Section 5.8
hereof) has been the cause of, or resulted in, the failure of the Effective Time
to occur on or before the Termination Date; PROVIDED, FURTHER that either party
can extend the Termination Date for up to 60 days to the extent necessary to
permit the S-4 Registration Statement to become effective, the Proxy Statement
to be mailed to Company shareholders and the Special Meeting to be held, but
only if all conditions other than those set forth in Sections 6.1(a) and (d)
hereof are satisfied prior to such extension.
(c) By either the Company or DuPont if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
parties shall have used their reasonable best efforts to resist, resolve or
lift, as applicable, in accordance with Section 5.8 hereof) permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their reasonable best efforts to obtain, in
accordance with Section 5.8 hereof), in the case of each of clause (i) and (ii)
which is necessary to fulfill the conditions set forth in subsections 6.1(b) and
(c) hereof and 6.3(d) hereof, as applicable, and such denial of a request to
issue such order, decree, ruling or take such other action shall have become
final and nonappealable; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party whose
failure to comply with Section 5.8 hereof has been the cause of such action or
inaction;
(d) By either the Company or DuPont if the approval by the shareholders of
the Company required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the Required Company Vote upon the
taking of such vote at a duly held meeting of shareholders of the Company or at
any adjournment thereof;
(e) By DuPont, if the Board of Directors of the Company, prior to obtaining
the Company Required Vote, shall have (i) approved or recommended an Acquisition
Proposal or resolved to take, or announced an intention to take, any such
action, (ii) within ten business days after the receipt by DuPont of notice of a
Second Period Event, failed to unconditionally reject and, if applicable,
recommend against, the Acquisition Proposal referred to in such notice (unless
such Acquisition Proposal is a tender or exchange offer covered by clause (iii)
below), provided that DuPont shall not have the right to exercise the
termination right set forth in this clause (ii) unless, within five business
days of receipt of such notice, DuPont gives the Company notice of its election
to treat the balance of such ten business day period (such remaining period a
"NEW TERMINATION PERIOD") as a period giving the Company an additional
termination right under Section 7.1(i), or (iii) recommended acceptance of (or
indicated or announced that it is unable to take a position, will remain neutral
or express no opinion with respect to), or, within ten business days after the
commencement thereof, failed to recommend
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<PAGE>
against or reject, a tender or exchange offer for 20 percent of more of the
outstanding shares of the Company or resolved to take, or announced an intention
to take, any such action;
(f) By DuPont, if the Board of Directors of the Company shall have effected
a withdrawal, modification or material qualification in any manner adverse to
DuPont of the Company Recommendation or take any action or make any statement in
connection with the Special Meeting materially inconsistent with the Company
Recommendation (collectively, an "ADVERSE CHANGE IN THE COMPANY RECOMMENDATION")
(or resolved to take such action), whether or not any such action is in
violation of this Agreement;
(g) By DuPont, (i) if a Share Acquisition Date shall have occurred pursuant
to the Rights Agreement (as in effect on the date of this Agreement)or (ii) if
the actions or events described in Section 5.1(n) hereof shall occur without the
prior written consent of DuPont, whether or not such consent was required;
(h) By DuPont, if the Company shall have willfully and intentionally
breached any of its obligations under Section 5.5 hereof;
(i) By the Company, at any time prior to the approval of this Agreement by
the shareholders of the Company, in connection with and for the purpose of
accepting a particular Superior Proposal, if the Board of Directors determines,
after consultation with outside counsel and after taking into account the
provisions of IBCA Section490.1108, that failure to terminate this Agreement
would be inconsistent with the Board's fiduciary duties to shareholders;
PROVIDED HOWEVER that the Company shall not be entitled to terminate this
Agreement pursuant to this Section 7.1(i) after the forty-fifth (45th) day after
the date of this Agreement except during any New Termination Period arising
thereafter; or
(j) By the Company, if DuPont breaches the provisions of Section 5.2(c)
hereof and such breach continues for 30 days prior to all applicable waiting
periods (including any extensions thereof) under the HSR Act applicable to the
consummation of the transactions contemplated by this Agreement having expired
or been terminated, for a period of 10 business days after the Company learns of
such breach; PROVIDED, HOWEVER, that if the applicable waiting periods
(including any extensions thereof) expire or terminate prior to a termination by
the Company pursuant to this subsection (j), the right of the Company to so
terminate this Agreement pursuant to this subsection (j) with respect to such
breach shall terminate. The parties recognize that in the event the Company
terminates this Agreement pursuant to this subsection (j) by reason of DuPont
having acquired or effected (or having entered into a written agreement or a
written letter of intent executed by DuPont (or a subsidiary thereof) and a
company listed on Schedule 7.1(j) to acquire or effect) a transaction prohibited
by Section 5.2(c),(such a termination being referred to herein as a "LIQUIDATED
DAMAGES TERMINATION"), the Company will suffer substantial harm that would be
difficult to measure and that could be subject to the risks and costs of
protracted litigation. Accordingly, the parties have agreed that to avoid any
such risks, it is preferable to provide for liquidated damages in the event of
such Liquidated Damages Termination. Therefore, in the event of a Liquidated
Damages Termination pursuant to this Section 7.1(j), (i) the Company shall be
entitled by giving notice to DuPont to purchase all of the capital stock of the
Company owned directly or indirectly by DuPont or its Subsidiaries for a per
share purchase price equal to 25 percent of the closing price of the Common
Stock on March 12, 1999 and (ii) there shall be deemed to have occurred a
Voluntary Default (as defined in the Formation Agreement) by DuPont pursuant to
Section 9.3(b) of the Formation Agreement between DuPont and the Company, dated
August 6, 1997 (the "FORMATION AGREEMENT"). The parties specifically agree that
these damages are intended to compensate the Company for its losses and are not
intended to be a penalty, and, except as otherwise provided in Section 8.6
hereof, shall be the sole remedy of the Company and its affiliates for any such
breach.
The party desiring to terminate this Agreement shall give written notice of
such termination to the other party.
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<PAGE>
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or DuPont as provided in Section 7.1 hereof,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of DuPont or the Company or their respective officers or
directors with respect to this Agreement or any provision thereof except with
respect to the second and third sentences of Section 1.11 to the extent
specified in such Section, Section 3.16, Section 4.12, Section 5.18 and Article
VII hereof, which provisions shall survive such termination in accordance with
their terms, and except that, notwithstanding anything to the contrary contained
in this Agreement (other than as provided in Section 7.1(j) hereof), neither
DuPont nor the Company shall be relieved or released from any liabilities or
damages arising out of its willful material breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon personal delivery,
transmitter's confirmation of a receipt of a facsimile transmission, confirmed
delivery by a standard overnight carrier or when delivered by hand or when
mailed in the United States by certified or registered mail, postage prepaid,
addressed at the following addresses (or at such other address for a party as
shall be specified by notice given hereunder):
If to the Company, to:
Pioneer Hi-Bred International, Inc.
700 Capital Square
Des Moines, Iowa 50309
Attention: General Counsel
Telephone: (515) 248-4800
Facsimile: (515) 248-4844
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, P.C.
F. William Reindel
Telephone: (212) 859-8000
Facsimile: (212) 859-4000
If to DuPont or Newco, to:
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Attention: Roger W. Arrington, Esq.
Telephone: (302) 774-8571
Facsimile: (302) 773-5176
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<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
Attention: Lou R. Kling, Esq.
Eileen Nugent Simon, Esq.
Telephone: 212-735-3000
Facsimile: 212-735-2000
SECTION 8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein and in any certificate or other writing
delivered pursuant hereto shall not survive the Effective Time. All other
covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or which prohibit actions, subsequent to the
Effective Time, shall survive the Merger in accordance with their terms.
SECTION 8.3 INTERPRETATION. References in this Agreement to "reasonable best
efforts" shall not require a Person obligated to use its reasonable best efforts
to obtain any consent of a third party to incur out-of-pocket expenses or
indebtedness or, except as expressly provided herein, to institute litigation.
References herein to the "knowledge of the Company" shall mean the actual
knowledge of the executive officers (as such term is defined in Rule 3b-2
promulgated under the Exchange Act) of the Company. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation." The phrase "made
available" when used in this Agreement shall mean that the information referred
to has been made available if requested by the party to whom such information is
to be made available. As used in this Agreement, the term "affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated under the Exchange Act. Any
information disclosed in one schedule of the Company Disclosure Schedule (other
than Schedules 5.2) and 7.1(j) or the DuPont Disclosure Schedule shall be deemed
disclosed for the purposes of any other schedule of the Company Disclosure
Schedule (other than Schedules 5.2) and 7.1(j) or the DuPont Disclosure
Schedule, as the case may be. For purposes of this Agreement, DuPont shall be
deemed to own any shares of Common Stock that are owned by any wholly-owned
Subsidiary thereof.
The article and section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties hereto
and shall not in any way affect the meaning or interpretation of this Agreement.
Any matter disclosed pursuant to any Schedule of the Company Disclosure Schedule
or the DuPont Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
SECTION 8.4 AMENDMENTS, MODIFICATION AND WAIVER.
(a) Except as may otherwise be provided herein, any provision of this
Agreement may be amended, modified or waived by the parties hereto, by action
taken by or authorized by their respective Board of Directors, prior to the
Closing Date if, and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by the Company and DuPont or, in the case of a
waiver, by the party against whom the waiver is to be effective; PROVIDED THAT
after the approval of this Agreement by the shareholders of the Company, no such
amendment shall be made except as allowed under applicable law.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 8.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED THAT neither the Company nor DuPont
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other parties hereto.
Notwithstanding anything to the contrary herein, DuPont and Newco may assign any
of their rights hereunder to any wholly-owned Subsidiary of DuPont; PROVIDED
THAT DuPont shall be liable for the failure of any such Subsidiary to perform
its obligations hereunder.
SECTION 8.6 SPECIFIC PERFORMANCE. The parties acknowledge and agree that any
breach of the terms of this Agreement, including Sections 5.2(c), (d) and (e)
and 5.8 hereof, would give rise to irreparable harm for which money damages
would not be an adequate remedy and accordingly the parties agree that, in
addition to any other remedies, each shall be entitled to enforce the terms of
this Agreement by a decree of specific performance without the necessity of
proving the inadequacy of money damages as a remedy.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof) as to all matters, including, but not limited to, matters of validity,
construction, effect, performance and remedies, except that the Merger shall be
subject to, and in accordance with, the laws of the State of Iowa.
SECTION 8.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein are not affected in any manner materially
adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner.
SECTION 8.9 THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns, with respect to
the obligations of DuPont and Newco under this Agreement, and for the benefit of
DuPont and Newco, and their respective successors and permitted assigns, with
respect to the obligations of the Company under this Agreement, and this
Agreement shall not, except to the extent necessary to enforce the provisions of
Article I and Sections 5.6 and 5.11(e) hereof, be deemed to confer upon or give
to any other third party any remedy, claim, liability, reimbursement, cause of
action or other right.
SECTION 8.10 ENTIRE AGREEMENT. Subject to the provisions of Section 5.18
hereof, this Agreement, including any exhibits or schedules hereto constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements or understandings, both written
and oral, between the parties or any of them with respect to the subject matter
hereof.
SECTION 8.11 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 8.12 PETROLEUM SUBSIDIARIES. The Company acknowledges that DuPont
has announced its intention to dispose of the remaining shares of capital stock
of Conoco held directly or indirectly by DuPont. Neither Conoco nor any
Subsidiary of Conoco shall be deemed to be a Subsidiary of DuPont for purposes
of this Agreement. No action taken by Conoco or any of its Subsidiaries, or
DuPont or any of its Subsidiaries in connection with Conoco, prior to or
following the date hereof, including a spin-off, a split-off (any transaction in
which Conoco stock is distributed by DuPont in exchange for
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DuPont Common Stock is referred to herein as a "CONOCO EXCHANGE OFFER"), sale or
other disposition in one or more transactions of the remaining shares of Conoco
owned directly or indirectly by DuPont, and any matter related to any such
action, shall be limited by any of the provisions hereof or taken into account
for purposes of determining whether there is a breach of any representation or
warranty, covenant or other obligation or agreement of DuPont in or under this
Agreement. The Company shall cooperate with DuPont to the extent reasonably
requested by DuPont in connection with any such action or transaction described
in this Section 8.12.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
<TABLE>
<S> <C> <C>
PIONEER HI-BRED INTERNATIONAL, INC.
By: /s/ CHARLES JOHNSON
-----------------------------------------
Name:
Title:
E. I. DU PONT DE NEMOURS AND COMPANY
By: /s/ CHARLES O. HOLLIDAY, JR.
-----------------------------------------
Name:
Title:
DELTA ACQUISITION SUB, INC.
By: /s/ GARY M. PFEIFFER
-----------------------------------------
Name:
Title:
</TABLE>
<PAGE>
APPENDIX B
LAZARD FRERES OPINION
March 14, 1999
The Board of Directors
Pioneer Hi-Bred International, Inc.
800 Capital Square
400 Locust Street
P.O. Box 14456
Des Moines, Iowa 50306-3456
Dear Members of the Board:
We understand that Pioneer Hi-Bred International, Inc. (the "Company"), E.
I. du Pont de Nemours and Company (the "Acquiror") and Pioneer Acquisition Inc.
("Merger Sub"), a newly-formed wholly-owned subsidiary of the Acquiror, propose
to enter into an Agreement and Plan of Merger (the "Agreement"), pursuant to
which the Company will merge with Pioneer Acquisition Inc. (the "Merger"). In
the Merger, among other things, each share of the outstanding shares of the
common stock, $1.00 par value, of the Company (the "Company Common Stock") other
than shares held by the Acquiror or its affiliates will be converted into the
right to receive, at the election of the holders thereof, subject to proration
and other adjustments pursuant to the Agreement, either (i) $40 in cash or (ii)
a number of shares of common stock, $0.30 par value, of the Acquiror (the
"Acquiror Common Stock") equal to $40 divided by the average of the closing
prices of the Acquiror Common Stock for a period of ten trading days ending on
the third trading day prior to the effective time of the Merger (the
"Consideration").
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Company Common Stock other than the Acquiror
and its affiliates, of the Consideration. In connection with this opinion, we
have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information relating
to the Company and the Acquiror;
(iii) Reviewed various financial forecasts and other data provided to us by
the Company with respect to the business and prospects of the Company;
(iv) Reviewed various publicly available financial forecasts and other data
with respect to the business and prospects of the Acquiror;
(v) Participated in discussions with members of the senior managements of
the Company and the Acquiror with respect to the businesses and
prospects of the Company and the Acquiror, respectively, the strategic
objectives of each, and possible financial benefits which might be
realized following the Merger;
(vi) Reviewed public information with respect to certain other companies in
lines of business we believe to be generally comparable to the
businesses of the Company and the Acquiror;
(vii) Reviewed the financial terms of certain comparable business
combinations involving companies in lines of business we believe to be
generally comparable to the business of the Company, and in other
industries generally;
(viii) Reviewed the historical stock prices and trading volumes of shares of
the Company Common Stock and the Acquiror Common Stock; and
(ix) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
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Board of Directors
Pioneer Hi-Bred International, Inc.
March 15, 1999
Page 2
We have relied upon the accuracy and completeness of the financial and other
information provided by the Company and the Acquiror and reviewed by us for
purposes of this opinion, and have not assumed any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or the Acquiror or
any issues relating to solvency. With respect to financial forecasts of the
Company, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
the Company as to the future financial performance of the Company. With respect
to the publicly available financial forecasts regarding the Acquiror, at
management of the Acquiror's direction we have assumed that they are consistent
with the views of the management of the Acquiror as to the future financial
performance of the Acquiror. We assume no responsibility for and express no view
as to such forecasts and projections or the assumptions on which they are based.
You have informed us and we have assumed that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax purposes.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on the
Company or the Acquiror.
Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Merger and will receive fees for its services, a substantial
portion of which are contingent upon the closing of the Merger. Also, as you are
aware, we have from time to time provided investment banking and financial
advisory services to the Company for which we previously have received fees.
You have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of all
or part of the Company. Further, our opinion is limited to the fairness, from a
financial point of view, to the holders of the Company Common Stock other than
the Acquiror and its affiliates of the Consideration and does not address the
Company's underlying business decision to undertake the Merger. In addition, our
opinion does not address the future trading value of the Acquiror Common Stock
or the Company Common Stock. Moreover, this letter, and the opinion expressed
herein, is directed to the Board of Directors of the Company and does not
constitute a recommendation to any stockholder as to how such shareholder should
vote with respect to the Merger.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors, and are not intended to confer rights or remedies
upon the Acquiror, any stockholders of the Company or any other person. It is
understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
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Board of Directors
Pioneer Hi-Bred International, Inc.
March 15, 1999
Page 3
Based on and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Consideration is fair to the holders of the Company Common
Stock, other than the Acquiror and its affiliates, from a financial point of
view.
<TABLE>
<S> <C> <C>
Very truly yours,
Lazard Freres & Co. LLC
By
-----------------------------------------
Ali E. Wambold
MANAGING DIRECTOR
</TABLE>
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APPENDIX C
CREDIT SUISSE FIRST BOSTON CORPORATION OPINION
March 15, 1999
Board of Directors
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Members of the Board:
You have asked us to advise you with respect to the fairness to E. I. du
Pont de Nemours and Company ("DuPont") from a financial point of view of the
consideration to be paid by DuPont pursuant to the terms of the Agreement and
Plan of Merger, dated as of March 15, 1999 (the "Merger Agreement"), by and
among Pioneer Hi-Bred International, Inc. ("Pioneer"), DuPont and Delta
Acquisition Sub, Inc., a wholly owned subsidiary of DuPont ("Newco"). The Merger
Agreement provides for, among other things, the merger of Pioneer with and into
Newco (the "Merger") pursuant to which each outstanding share of the common
stock, par value $1.00 per share, of Pioneer will be converted, at the election
of the holder thereof and subject to certain proration procedures (as to which
we express no opinion) specified in the Merger Agreement, into the right to
receive (i) that fraction of a share of the common stock, par value $0.30 per
share, of DuPont (the "DuPont Common Stock") equal to the result obtained by
dividing $40.00 by the average closing sales price of DuPont Common Stock, as
reported on The New York Stock Exchange Composite Tape, for the 10 consecutive
trading days ending on the third full trading day prior to the date on which the
Pioneer stockholders vote with respect to the Merger (the "Stock Consideration")
or (ii) $40.00 in cash (the "Cash Consideration" and, together with the Stock
Consideration, the "Consideration"). The Merger Agreement further provides that
the number of shares of Pioneer Common Stock which will be converted into cash
in the Merger will not exceed 85,552,580.
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to DuPont
and Pioneer. We have also reviewed certain other information relating to DuPont
and Pioneer, including financial forecasts, provided to or discussed with us by
DuPont and Pioneer, and have met with the managements of DuPont and Pioneer to
discuss the businesses and prospects of DuPont and Pioneer. We have also
considered certain financial and stock market data of DuPont and Pioneer and
similar data for other publicly held companies in businesses similar to DuPont
and Pioneer, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been proposed or effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have been advised, and have assumed, that such forecasts
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of DuPont and Pioneer as to the
future financial performance of DuPont and Pioneer and as to the cost savings,
strategic benefits and other potential synergies (including the amount, timing
and achievability thereof) anticipated to result from the Merger. We also have
assumed, with your consent, that the Merger will be treated as a tax-free
reorganization for federal income tax purposes. We have not been requested to
make, and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of DuPont or Pioneer, nor have we been
furnished with any such evaluations or appraisals. Our opinion is necessarily
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Board of Directors
E. I. du Pont de Nemours and Company
March 15, 1999
Page 2
based upon information available to us, and financial, economic, market and
other conditions as they exist and can be evaluated, on the date hereof. We are
not expressing any opinion as to what the value of the DuPont Common Stock
actually will be when issued pursuant to the Merger or the prices at which the
DuPont Common Stock will trade subsequent to the Merger.
We have acted as financial advisor to DuPont in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We have in the past provided and
are currently providing financial services to DuPont unrelated to the proposed
Merger, for which services we have received and may receive compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of DuPont and Pioneer for their
own accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of DuPont in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on any matter relating to the Merger, and is not to be quoted or referred
to, in whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or sale
of securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be paid by DuPont in the Merger is fair to
DuPont from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
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APPENDIX D
SALOMON SMITH BARNEY INC. OPINION
MARCH 15, 1999
Board of Directors
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to E. I. du Pont de Nemours and Company ("Parent"), of the consideration
to be paid by Parent in connection with the proposed merger (the "Merger") of
Pioneer Hi- Bred International, Inc. (the "Company") with and into Delta
Acquisition Sub, Inc., a wholly owned subsidiary of Parent ("Sub"), pursuant to
an Agreement and Plan of Merger, dated as of March 15, 1999 (the "Merger
Agreement"), among Parent, Sub and the Company. As more specifically set forth
in the Merger Agreement, upon the effectiveness of the Merger, each issued and
outstanding share of common stock, par value $1.00 per share ("Company Common
Stock") of the Company (other than shares of Company Common Stock (a) held by
the Company as treasury shares, which will be canceled and retired, and other
than shares of Company Common Stock received by Parent in exchange for class B
common stock, no par value per share, of the Company, which shall be converted
into shares of common stock, par value $.30 per share, of Parent and which shall
be canceled and retired, or (b) held by stockholders who duly exercise appraisal
rights) will be converted into the right to receive at each stockholder's
election either (i) a fraction of a share of Parent Common Stock that is equal
to the result obtained by dividing $40 (the "Merger Price") by the average
closing sales price, rounded to four decimal points, of each share of Parent
Common Stock, for the ten consecutive trading days ending on the third full
trading day prior to the date on which the Company stockholders vote with
respect to the approval of the Merger or (ii) an amount in cash equal to the
Merger Price. Notwithstanding the foregoing, the Merger Agreement provides that
the number of shares of Company Common Stock which shall be converted into cash
in the Merger shall be equal to, or in certain circumstances shall not exceed,
85,552,580 less any shares of Company Common Stock held by stockholders who have
taken all steps to duly exercise appraisal rights.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning Parent and the Company and certain other
financial information concerning Parent and the Company, including financial
forecasts (including synergies, costs savings and strategic benefits), that were
provided to us by Parent and the Company, respectively. We have discussed the
past and current business operations, financial condition and prospects of
Parent and the Company with certain officers and employees of Parent and the
Company, respectively. We have also considered such other information, financial
studies, analyses, investigations and financial, economic and market criteria
that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion, and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of Parent and the Company, we have been advised by the respective
managements of Parent and the Company that such forecasts (including estimates
of synergies, cost savings and strategic benefits and the amount, timing and
achievability thereof) have been reasonably prepared on bases reflecting their
best currently available estimates and judgments, and we express no opinion with
respect to such forecasts (including such estimates of synergies, cost savings
and strategic
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benefits and the amount, timing and achievability thereof) or the assumptions on
which they are based. We have not assumed any responsibility for any independent
evaluation or appraisal of any of the assets (including properties and
facilities) or liabilities of Parent or the Company.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Parent Common Stock following the
consummation of the Merger, which may vary depending upon, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
Our opinion does not address Parent's underlying business decision to effect the
Merger, nor does it address Parent's decisions as to financing the Merger. We
also express no view on whether Parent should or should not make the
"Non-Proration Decision" (as defined in the merger Agreement).
We have acted as financial advisor to the Board of Directors of Parent in
connection with the Merger and will receive a fee for our services, which is
contingent upon consummation of the Merger. In the ordinary course of business,
we and our affiliates may actively trade the securities of Parent and the
Company for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities. In addition,
we and our affiliates have previously rendered certain investment banking and
financial advisory services to Parent for which we have received customary
compensation. We and our affiliates (including Citigroup Inc.) may have other
business relationships with Parent or the Company in the ordinary course of
their businesses.
This opinion is intended solely for the benefit and use of the Board of
Directors of Parent in considering the Merger and may not be used for any other
purpose or relied on by any other person.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the merger Price is fair to Parent from a financial point of view.
Very truly yours,
SALOMON SMITH BARNEY
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APPENDIX E
PROCEDURES FOR DETERMINING CHANGES IN
BENEFICIAL OWNERSHIP OF COMMON STOCK
Effective November 14, 1985, the Articles of Incorporation of Pioneer
Hi-Bred International, Inc. (the "Pioneer" or "Company") were amended (the
"Voting Amendment") to provide that, subject to the provisions below, every
share of the Company's Common Stock is entitled to five (5) votes per share if
it has been beneficially owned continuously by the same holder for a period of
36 consecutive months preceding the record date for the shareholders' meeting.
All other shares carry one (1) vote.
In general, the Voting Amendment provides that a change in beneficial
ownership of a share of Common Stock occurs whenever any change occurs in the
person or group who has, or shares, voting power, investment power, the right to
receive sale proceeds, or the right to receive dividends or other distributions
with respect to such share.
In the absence of proof to the contrary provided in accordance with the
procedures referred to below, 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 person.
In the case of a share of Common Stock held of record in the name of a
corporation, partnership, voting trustee, bank, trust company, broker, nominee
or clearing agency, or in any other name except that of a natural person, if it
has not been established pursuant to such procedures that there has been no
change in the person or persons who direct the exercise of the powers or rights
referred to above with respect to such share of Common Stock during the period
of 36 months immediately preceding the date on which a determination is made of
the shareholders who are entitled to take any action, then a change in
beneficial ownership shall be deemed to have occurred during such period.
There are several exceptions and qualifications to the terms of the Voting
Amendment described above. For a copy of the complete Voting Amendment, please
contact the Company at the address listed below.
Shareholders who hold their shares in "street name" or through any other
method specified above are required to submit proof of continued beneficial
ownership to the Company in order to be entitled to five (5) votes per share.
Such proof must consist of a written certification by the record owner that
there has been no change in beneficial ownership (as defined in the Voting
Amendment) during the relevant period. The required form for this certification
is attached. The Company reserves the right, however, to require evidence in
addition to the certification in situations where it reasonably believes an
unreported change may have occurred. Proof (including certifications) will be
accepted only if it is received by the Tabulating Agent at least five (5) days
before the date for the shareholders' meeting.
The Company will notify shareholders of record who are natural persons, in
advance of a shareholders' meeting, of the Company's determination as to the
number of shares for which they are entitled to five (5) votes per share and the
number of shares for which they are entitled to one (1) vote. This determination
will be shown on the Proxy cards for such shareholders. Shareholders of record
who disagree with such determination may certify that no change in beneficial
ownership has occurred during the relevant period by following the same
procedure set out in the previous paragraph for other shareholders.
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For further information concerning the Voting Amendment in general, or its
applicability to a shareholder's particular circumstances, please contact
Pioneer at:
Pioneer Hi-Bred International, Inc.
800 Capital Square, 400 Locust Street
P.O. Box 14458
Des Moines, IA 50306-3458
Telephone number: (515) 248-4800 or (800) 247-5258
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APPENDIX F
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS UNDER IOWA LAW
Section 490.1302 of the Iowa Business Corporation Act entitled
"Shareholders' Right to Dissent" reads as follows:
1. A shareholder is entitled to dissent from, and obtain payment of the fair
value of the shareholder's shares in the event of, any of the following
corporate actions:
a. Consummation of a plan of merger to which the corporation is a party
if either of the following apply:
(1) Shareholder approval is required for the merger by section
490.1103 or the articles of incorporation and the shareholder is entitled
to vote on the merger.
(2) The corporation is a subsidiary that is merged with its parent
under section 490.1104.
b. Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan.
c. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale.
d. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it does
any or all of the following:
(1) Alters or abolishes a preferential right of the shares.
(2) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(3) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(4) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights.
(5) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under section 490.604.
(6) Extends, for the first time after being governed by this chapter,
the period of duration of a corporation organized under chapter 491 or
496A and existing for a period of years on the day preceding the date the
corporation is first governed by this chapter.
e. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
2. A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter is not entitled to challenge the
corporate action creating the shareholder's entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the corporation.
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