SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended August 31, 1994 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act 1934 (No fee required)
For the transition period from to
Commission file number: 0-17005
DEKALB Genetics Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-3586793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sycamore Road, DeKalb, Illinois 60115
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 815-758-3461
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Class A Common Stock, no par value
Class B Common Stock, no par value
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d)of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of September 30, 1994, 789,332 shares of the registrant's Class A Common
Stock and 4,358,226 shares of the registrants' Class B Common Stock were
outstanding and the aggregate market value of all Common Stock held by
non-affiliates was $132,021,253 based upon the closing price on the NASDAQ
Over-the-Counter markets on such date. (The officers and directors of the
registrant are considered affiliates for purposes of this calculation.)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement pertaining to the annual shareholders' meeting
are incorporated herein by reference into Part III.
Exhibit index is located on page 42.
Total number of pages is 153.<PAGE>
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PART I
ITEM 1. BUSINESS
(a) DEKALB Genetics Corporation ("Genetics" or the "Company") is engaged in
the development of products of major importance to three segments of
modern agriculture--seed (primarily corn, soybeans, sorghum and
sunflower), hybrid swine breeding stock, and egg-laying poultry breeding
stock. Genetics operates three business segments, one through the seed
division of the Company ("DEKALB Seed") and two through its wholly-owned
subsidiaries, DEKALB Swine Breeders, Inc. ("DEKALB Swine") and DEKALB
Poultry Research, Inc. ("DEKALB Poultry").
Genetics conducts major research and development programs on those
genetically determined traits which are of primary importance to the
profitability of a farmer's production. The Company develops primary or
inbred lines through a process of observation, evaluation and selection
for further breeding only of those plants or animals which exhibit
superior performance in certain traits. These primary or inbred lines,
when mated or crossed to other primary or inbred lines, will pass on to
their progeny the superior performance in those traits for which the
primary or inbred lines were selected. Additionally, a fundamental
genetic principle--called heterosis, or hybrid vigor--is generally
utilized. Heterosis occurs when the progeny of genetically dissimilar
parents have certain performance characteristics which are superior to
those of either parent.
Genetics uses these principles of genetic selection and heterosis to
provide products for the modern day agricultural industry. The Company
also develops production and management techniques to complement the
performance potential which resides in the genetic composition of its
products.
Genetics is a Delaware corporation which was organized on June 15, 1988.
It succeeded to the genetics businesses of DEKALB Corporation which was
originally founded in 1917.
(b) Industry and Geographic Segment Information is included in Part II,
Item 8, Footnotes S and O of the financial statements.
(c) The following narrative describes the businesses of each segment and other
general matters of the Company.
SEED
DEKALB Seed, headquartered in DeKalb, Illinois, engages in the research and
development of hybrid corn, varietal soybean, hybrid sorghum, hybrid
sorghum-sudangrass and hybrid sunflower seed. The Company contracts with
growers to produce the seeds of such plants, and markets them under the DEKALB
brand. It also markets varietal alfalfa and other forage mixtures.
Research and Development. Crop producers are very conscious of product
performance and respond to new, improved products. As a research based
company, Genetics commits significant resources (approximately 15% of DEKALB
Seed consolidated worldwide revenues) to the research and development of
improved products. Total worldwide research and development expenditures by
DEKALB Seed were $33.6 million, $34.7 million and $33.0 million for fiscal
years ended 1994, 1993 and 1992, respectively.
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DEKALB Seed operates an integrated, worldwide research and development effort,
conducted at 56 research locations and 533 testing sites around the world,
with 36 research locations and 299 test sites in the United States and Canada.
Worldwide, it has 35 corn breeding programs, seven sorghum breeding programs,
three soybean breeding programs, and four sunflower breeding programs.
Throughout the world new hybrids and varieties are evaluated annually, and in
the United States and Canada, there are over 918,000 performance test plots.
DEKALB Seed has a biotechnology research facility in Mystic, Connecticut,
which includes a laboratory, greenhouse and general office.
Products. In 1994, sales of hybrid corn seed represented approximately 65
percent of DEKALB Seed worldwide revenues. Corn is a primary feed grain grown
in the United States and worldwide. Corn is planted under a wide variety of
conditions which affect its growth and yield, including the length of the
growing season (which is primarily determined by latitude and altitude), water
availability, soil, climate and insect and disease challenges. To respond to
this variety of conditions, DEKALB Seed has developed high yielding corn
plants with different relative characteristics in terms of maturity (time from
planting to harvest), dry down (time it takes for the corn to dry to harvest
standards), grain quality, standability (strength of roots and stalks), insect
and disease resistance, plant and ear height and tolerance to drought and
other stresses.
Soybean acreage in the United States is third behind corn and wheat acreage,
and in fiscal year 1994, the worldwide sale of soybean seeds represented
approximately 19 percent of DEKALB Seed total revenues. DEKALB Seed has
developed high-yielding soybean varieties, with characteristics differing on
the basis of maturity, tolerance to disease, seedling emergence, standability
of the plant, and resistance to shattering (the premature opening of the bean
pod).
DEKALB Seed produces both grain and forage types of hybrid sorghum seed. In
fiscal year 1994, sales of hybrid sorghum seed represented approximately six
percent of total DEKALB Seed revenues. The grain sorghum product line is
planted by farmers to produce a high-quality feed grain, approaching the value
of corn. The DEKALB research effort continues to focus on developing hybrids
which possess consistently high yields, resistance to lodging and greenbug
attacks and drought tolerance, since more than 80% of the crop is grown under
semi-arid rainfall conditions.
DEKALB Seed is able to serve the requirements of several sunflower seed
markets through development of a range of hybrids. These hybrids exhibit high
grain yields, high oil content, a range of maturities, standability and
disease resistance. Currently, sunflower seeds are primarily marketed in
Argentina, France, and Italy. Sunflower seed sales represented four percent
of total DEKALB Seed revenues in 1994.
Virtually all corn and sorghum seed planted in the United States and
practically all sunflower seed planted world-wide are hybrids. Because the
seeds (grain) produced by a hybrid do not have the same genetic composition as
the seed planted, farmers purchase nearly all of their corn and sorghum seed
each year so as not to lose the full benefits of genetic selection and
heterosis. That is, if they hold back corn, sorghum or most sunflower seed
from their crop and plant it during the next year, yield and other positive
attributes will be dramatically reduced.
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Soybeans, on the other hand, are not hybrids. Farmers frequently retain and
use a part of their crop as seed in the year following harvest. Thus, there
is a reduced market as well as lower profit margin potential for commercial
soybean seed. A recent change in the Plant Variety Protection Act, a law
governing the use of proprietary soybean varieties, limits the quantity of
seed a grower may retain and should improve prospects for capturing the
benefits of soybean research investment.
DEKALB Seed also produces and sells SUDAX (registered trademark) brand
sorghum-sudangrass and sells alfalfa. SUDAX (registered trademark) brand is a
hybrid cross of sorghum and sudangrass, producing a plant suitable for
pasturing animals or multiple cuttings for forage or hay. Alfalfa is used as
animal feed, primarily for dairy and feeder cattle. Alfalfa is a perennial,
as it will re-emerge for many seasons without additional seeding.
Production of hybrid seed involves various environmental risks. The parental
inbred lines which are used in production are more sensitive to adverse
conditions than are commercial hybrids grown by farmers. Weather is the
biggest variable. Wet weather at planting time, lack of moisture during the
growing season, hot weather at pollination time and frost before the crop is
mature can all adversely affect DEKALB Seed's supply and unit costs. For
these reasons, DEKALB Seed has its production facilities spread geographically
and frequently utilizes irrigation to minimize these risks.
Marketing. In North America, DEKALB Seed markets seed from coast to coast,
through a large network of about 7,000 independent farmer-dealers,
distributors and farm stores who resell to approximately 117,000 farmers.
There are over 300 companies engaged in the production and marketing of
agricultural seed, resulting in intense competition. DEKALB Seed estimates
that the top two--Pioneer Hi-Bred International, Inc. of Des Moines, Iowa and
DEKALB Seed -- accounted for approximately 53 percent of 1994 United States
seed corn sales. DEKALB Seed is the second largest seller of corn seed and
one of the largest sellers of soybean and sorghum seed in the United States.
Competition for sales of seed to farmers involves factors such as relative
product performance, price, marketing and promotional programs, customer
relationships and the technical knowledge and sales ability of the sales
force.
International Operations. The international seed business has similar risks
and competition as the United States seed business, plus the added risks of
different political environments and currency fluctuations. From its initial
activities in 1959, the international seed business unit of DEKALB Seed has
expanded to most areas of the world where corn, sorghum, soybean, alfalfa and
sunflower are grown.
DEKALB Seed, directly or indirectly, operates wholly-owned subsidiaries in
Argentina, Italy, Honduras, and Austria and has a 51% owned subsidiary in
Columbia and a 49% owned affiliate in Mexico. During fiscal 1993, DEKALB
ceased its company-owned operations in Australia and Spain and currently does
business in Australia through a licensee and in Spain through a distributor.
In addition, foreign-based companies in major agricultural markets have been
licensed to produce and market seed. Thus, local production and marketing is
carried out in more than 20 countries
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worldwide. The agreements with these foreign affiliates provide for the
development, production and sale of hybrids and varieties adapted to meet
local market preferences. International revenues through consolidated
subsidiaries totaled over $67 million in 1994. In addition, it is estimated
that DEKALB brand seed sales through non-consolidated foreign affiliates and
licensees totaled approximately $135 million.
Seasonality. Production, sale and distribution of seed follows a seasonal
pattern. In North America, DEKALB Seed's normally grows its seed supply in
the summer, and it is harvested, conditioned, and bagged in the months of
September through January. The dealers' sales effort takes place in the fall,
and generally, about three-fourths of farmers' seed orders are placed by
December 1st. Deliveries of seed corn occur principally in the late winter
and spring, during the Company's second and third fiscal quarters. Sales
revenue is recognized upon shipment of seed. Returns of unsold seed occur, in
most cases, during the fourth fiscal quarter. At the time sales are recorded,
DEKALB Seed provides for estimated returns based upon historical experience
and current weather conditions. During the past three years, approximately
65% and 35% of North American seed revenues were recorded in the second and
third fiscal quarters, respectively. Cash collections also follow a seasonal
pattern, as the majority of dealers remit cash in advance of their first due
date in June in order to earn discounts for early payment. Approximately
two-thirds of DEKALB Seed's cash outflow in North America occurs in the months
of December through April and includes payments to independent farmers who
have contracted to produce DEKALB Seed products.
The demand for seed reflects the demand for the crop's end use including
animal feed, industrial use and food consumption. The cyclical nature of the
business creates uncertainty from year to year concerning the size of the
market for seed. An inaccurate estimate of seed needs can result in an
undersupply of seed products or an oversupply of seed (which may create the
need to write off inventories).
Patents and Applications. Patents, trademarks, United States Plant Variety
Protection Act Certificates, foreign plant registrations and licenses to use
genetic material and/or intellectual property are important, generally, to the
industry and to the business of DEKALB Seed. No single patent is of material
importance to the Company's seed business.
DEKALB Seed's policy is to fully protect its inventions, discoveries and
intellectual property. DEKALB Seed has obtained numerous U.S. patents, Plant
Variety Protection Act Certificates, and foreign registrations.
SWINE
DEKALB Swine, headquartered in DeKalb, Illinois, engages in the research and
development of hybrid swine breeding stock and markets such hybrid breeding
swine and related management services to hog producers in both domestic and
international markets.
Research and Development. Through genetic research and development, male and
female lines of swine have been developed which are unique to DEKALB Swine.
These DEKALB Swine lines undergo continual genetic improvement through
research which includes an ongoing process of observation, testing,
statistical analysis and selection for further breeding of only those swine
exhibiting superiority in economically important traits.
DEKALB Swine's research and development expenditures were $6.4 million, $5.7
million and $5.0 million in fiscal 1994, 1993 and 1992, respectively.<PAGE>
<PAGE>
Products and Programs. Domestically, DEKALB Swine generates breeding stock
sales revenues, license fees, or royalty revenues from four principal programs
(Specific Cross (registered trademark), hybrid boar rotation, Custom Genetics
(registered trademark) and crossing farms) through which it markets hybrid
breeding swine.
Internationally, DEKALB Swine licenses or sells primary lines to third parties
for the production of breeding stock in the foreign country under trademark
licenses and technical agreements. DEKALB Swine also directly sells hybrid
boars and gilts to foreign customers.
DEKALB Swine's secondary product is market hogs, which are a by-product of the
production of breeding animals. Because DEKALB Swine produces a consistent
and high quality product, this market hog by-product is generally sold by
DEKALB Swine at a premium to major market averages.
Marketing. In the United States, DEKALB Swine sells breeding stock to
approximately 2,000 customers who fall into two broad categories. First,
larger hog producers (producers who maintain over 200 sows) represent a major
market for DEKALB Swine's products. As the number of hog producers has
declined by 50% over the past ten years to approximately 236,000 hog farms,
these larger producers represent a growing share of hog production, and an
increasing percentage of DEKALB Swine's breeding stock sales. Larger
producers purchase boars or boar semen and either purchase gilts, or in many
cases, operate a "crossing farm" and pay DEKALB Swine fees by licensing DEKALB
lines to produce their own gilts. Second, DEKALB Swine's smaller customers
(producers who maintain less than 200 sows) primarily purchase DEKALB Swine
boars and generally retain gilts from their own herds.
Internationally, DEKALB Swine currently licenses or sells swine breeding stock
to distributors in nine foreign countries. Those distributors sell offspring
to several hundred local customers.
Competition. In the United States, DEKALB Swine competes with seven national
and several regional producers of hybrid swine breeding stock and thousands of
producers of purebred stock. DEKALB Swine believes that it is one of the
largest producers of hybrid breeding stock in the United States.
The demand for swine breeding stock depends upon the supply of hogs to be
produced, which is determined by the profitability of hog production, which,
in turn, depends upon the supply and demand for pork and pork products, as
well as the cost of production. The demand for DEKALB Swine breeding stock
depends upon customer acceptance and the ability to offer products and
services which are superior to the competition.
Breeding stock prices are influenced by the quality of the breeding stock, by
competition from other major hybrid producers and purebred dealers and by
slaughter market prices. On average, hybrid breeding stock sells at a higher
price than purebred swine.<PAGE>
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In addition to price, competition for sales to hog producers involves factors
such as reproductive performance of the parent hybrid boars and gilts,
performance and quality of their market hog offspring, technical knowledge and
competence of the sales force, service programs and post-sale support. DEKALB
Swine management believes it competes favorably with respect to all these
factors.
The swine industry is a cyclical business that is heavily influenced by
producer profitability. Historically, hog production has followed a three to
five year expansion phase followed by a similar contraction phase. At the
peak of the expansion phase, market hog prices are generally at a low and
unprofitable level. As hog production decreases, prices normally begin to
rise until expansion again begins to occur.
POULTRY
DEKALB Poultry, headquartered in DeKalb, Illinois, is one of the largest
producers of egg-laying breeding stock in the world, with an estimated 22% of
the North American market. It conducts genetic research and development
programs to improve the performance of egg-laying hens.
Research and Development. DEKALB Poultry research produces specific lines
which, when mated in specific combinations, produce breeding stock. Research
emphasis is directed toward the continued improvement of current product lines
as well as the evaluation of experimental combinations that may lead to new
product introductions.
Research and development expenditures were $4.2 million in fiscal 1994, $4.3
million in fiscal 1993 and $4.4 million in fiscal 1992. DEKALB Poultry
believes that this level of research commitment is necessary for continued
product improvement, and the resulting product performance is a major factor
for maintaining DEKALB Poultry's domestic market position and for expanding
into international markets. Research activities generate by-product egg
revenues equal to 30-40 percent of these expenditures.
Products, Marketing and Competition. DEKALB Poultry's principal product for
sale to customers is a breeder which is purchased by (1) hatchery customers
for production and distribution of day-old female commercial chicks to egg
producers and (2) integrated egg producers who produce their own laying hens.
In addition, DEKALB Poultry sells day old commercial chicks directly to egg
producers through three company-operated hatcheries. Internationally, DEKALB
Poultry sells breeding stock in more than 30 countries outside North America,
with a strong market position in the Far East and Latin America, a growing
position in the Middle East and a comparatively small share in Europe where
several major competitors are headquartered.
DEKALB Poultry and its three primary breeding stock competitors have an
estimated 85 percent of the world market. The two largest competitors are a
combination of six former individual companies that were merged during the
period from 1980 through 1988; however, they continue to market products using
their original varieties or breeds. All of DEKALB Poultry's competitors are
foreign owned.<PAGE>
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Given the relatively stable demand for eggs in the short run and the highly
variable egg supply as a result of the short life cycle of the laying hen, as
well as occasional outbreaks of disease, the price of eggs and the
profitability of egg production are highly variable. This, together with
relatively flat total egg consumption (due to declining per capita
consumption) in the United States and most developed countries, has caused the
egg production industry in such markets to become highly concentrated.
However, world demand for eggs is growing primarily as a result of increasing
egg consumption in developing countries.
Demand for poultry breeding stock and layer hens generally depends upon the
aggregate number of layer hens in use, which is determined by the
profitability of egg production, which, in turn, depends upon the demand for
and price of eggs and the cost of egg production, including bird costs, feed,
labor, energy and housing.
GENERAL
On August 31, 1994, Genetics had approximately 2,100 employees.
Working capital requirements in the seed business arise out of the need to
carry newly produced inventories of seed (principally corn), and payables to
growers associated with growing that hybrid seed, until receipts from the
selling season are collected several months later. DEKALB Seed, therefore,
has significant working capital requirements from January 1 to July 1 of each
year because approximately two-thirds of DEKALB Seed's cash flow for expenses
occurs in the months of December through April, although final receipts are
not received until June. It is anticipated that such requirements will be met
through cash generated from operations and lines of credit for general
corporate purposes.
Genetics has available various credit facilities which include a revolving
line of credit. The revolving credit agreement provides for a $50 million
line of credit for general corporate purposes, and has a required step-down to
$20 million for one day during each year.
DEKALB Swine and DEKALB Poultry's production and sales patterns are such that
working capital needs are relatively stable.
The operations of Genetics are subject to various state and federal
environmental and safety laws, rules and regulations. Certain of the
facilities of Genetics are also subject to state and federal environmental
protection laws, rules and regulations. Management of Genetics believes that
the Company is in compliance, in all material respects, with applicable
environmental and safety laws, rules and regulations and that such compliance
has not had any material adverse effect on its operations or financial
condition.
ITEM 2. PROPERTIES
In each of its seed, swine and poultry businesses, Genetics' property consists
primarily of foundation genetic material and the property, buildings and
related equipment for research, production, distribution and marketing.
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DEKALB Seed headquarters personnel occupy a 73,000 square foot office building
located in DeKalb, Illinois, which is owned by Genetics. DEKALB Swine
headquarters personnel occupy a 15,000 square foot office building and DEKALB
Poultry personnel occupy an 11,000 square foot office building. These
facilities are located in DeKalb, Illinois and are owned by Genetics.
Genetics also owns several facilities in DeKalb, Illinois that are used for
veterinary services personnel of DEKALB Swine and DEKALB Poultry and for seed
research.
DEKALB Seed owns or leases 36 facilities in the United States and 20 outside
of the United States at which research functions are performed, 25 seed
production and foundation locations in the United States and seven outside the
United States, and two seed warehouses in the United States. DEKALB Seed owns
or leases 13 sales offices, all in the United States. DEKALB Seed also has a
biotechnology research facility in Mystic, Connecticut.
DEKALB Swine owns 18 research, foundation and production farms and 12 genetic
evaluation stations. Thirteen of the farms, as well as an office and modern
feed mill, are located in Seward and Meade Counties, Kansas and nearby Beaver
and Texas Counties, Oklahoma. Three farms are located near the corporate
headquarters in DeKalb, Illinois with two additional farms near Lubbock,
Texas.
DEKALB Poultry owns a research facility in Clarion, Iowa, and a research and
foundation facility in Illiopolis, Illinois. DEKALB Poultry also owns or
leases three hatcheries and five breeder or pullet growing farms.
Genetics believes its facilities are adequate to serve its needs and that if
additional facilities are required as the business expands, Genetics will be
able to acquire or lease such facilities on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Management is of the opinion there are no pending legal proceedings that would
result in a material adverse effect on the consolidated operations or
financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of security holders during the fourth
quarter of 1994.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, and positions of the executive officers of the Company,
with their business experience during the past five years, are shown below.
Corporate officers are elected annually by the Board of Directors.
Age
Bruce P. Bickner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Chairman of the Board, Chief Executive Officer and Director of the Company
Mr. Bickner served as Chairman of the Board, President, Chief Executive
Officer and Director of Genetics until January, 1990, when he relinquished the
title of President. He continued in the other positions. He was Chairman of
the Board and Chief Executive Officer of DEKALB Energy Company until January,
1992, when he was elected to the additional position of President. He
relinquished the titles of President and Chief Executive Officer in November,
1992. He continues to hold the position of Chairman of the Board.
Richard O. Ryan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
President, Chief Operating Officer and Director of the Company
Mr. Ryan served as Executive Vice President, Chief Financial Officer and
Director of Genetics until he relinquished the titles of Executive Vice
President and Chief Financial Officer and was elected President and Chief
Operating Officer in January, 1990.
John H. Witmer, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Senior Vice President, General Counsel and Secretary of the Company
Mr. Witmer has served as Senior Vice President, General Counsel and Secretary
of Genetics during the past five years. He served as Senior Vice President of
DEKALB Energy Company until he relinquished the title of Senior Vice President
and was elected Vice President in November, 1992. He has served as General
Counsel and Secretary of DEKALB Energy Company during the past five years.
Thomas R. Rauman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Vice President, Finance and Chief Financial Officer of the Company
Mr. Rauman was Vice President, Administration of DEKALB Energy Company until
May, 1990, when he was appointed Controller. He held that position until
January, 1992, when he was elected Vice President, Finance, Chief Financial
Officer and Treasurer. He left DEKALB Energy Company and was elected Vice
President, Finance, Chief Financial Officer and Treasurer of the Company in
January, 1993. He relinquished the position of Treasurer in July, 1993.
Jerry L. Armstrong . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Vice President, Controller and Chief Accounting Officer of the Company
Mr. Armstrong was Vice President, Finance and Chief Financial Officer of
DEKALB Plant Genetics until May 1, 1990, at which time he was elected Senior
Vice President and Chief Financial Officer of DEKALB Plant Genetics. He
relinquished those titles on July 6, 1993, at which he was elected to his
present positions.
Thomas B. Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Senior Vice President, Research of the Company
Mr. Rice served as Executive Vice President of DEKALB Plant Genetics until
April, 1990 when he was elected to the position of President. He relinquished
that title on July 6, 1993, at which time he was elected to his present
position.<PAGE>
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Roy L. Poage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
President, DEKALB Swine Breeders, Inc.
Mr. Poage has served as President of DEKALB Swine Breeders during the past
five years.
Gary L. Waters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
President, DEKALB Poultry Research, Inc.
Mr. Waters served as Vice President, Marketing of DEKALB Poultry until he was
elected to the position of President in July, 1991.
Each officer of DEKALB Genetics Corporation has been elected to serve as
such until the next annual election of officers of Genetics (expected to occur
on January 18, 1995) or until his successor is elected.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. As of September 30, 1994 there were approximately 850 record holders
of Class A Common Stock and 2,100 record holders of Class B Common Stock.
Class B shares are currently being traded on the NASDAQ/NMS over-the-counter
market under the trading symbol SEEDB. There is no established public trading
market for Class A shares.
B. Common Stock Data 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994
Dividends per share $.20 $.20 $.20 $.20
Market price range - Low $ 24.75 $28.50 $30.50 $27.50
- High $ 31.75 $35.00 $36.00 $33.50
1993
Dividends per share $.20 $.20 $.20 $.20
Market price range - Low $26.50 $25.50 $27.75 $22.75
- High $30.50 $32.00 $33.00 $29.75
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ITEM 6 - SELECTED FIVE-YEAR FINANCIAL DATA Years Ended August 31 --
(Dollars in millions, except per share amounts)
1994 1993 1992 1991 1990
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OPERATIONS DATA
Revenues:
Seed $247.5 $232.3 $241.4 $214.0 $220.1
Swine 52.7 45.1 44.5 47.0 37.2
Poultry 19.8 21.9 21.9 23.1 24.0
Total Operating Revenues $320.0 $299.3 $307.8 $284.1 $281.3
Pre-Tax Earnings (Loss):
Seed $19.5 $7.0 $20.0 $24.8 $27.0
Swine 5.7 3.0 4.6 9.3 4.5
Poultry (0.3) 1.0 0.9 2.5 4.2
Interest, corporate and other (10.0) (12.6) (10.7) (10.4) (11.6)
Earnings before income taxes 14.9 (1.6) 14.8 26.2 24.1
Income tax provision (benefit) 4.3 (3.3) 4.5 9.1 9.3
Net earnings $10.6 $1.7 $10.3 $17.1 $14.8
PER SHARE DATA
Primary earnings per share (1) $2.02 $0.33 $1.99 $3.09 $2.63
Fully diluted earnings per share (2) - - - $2.91 $2.53
Dividends per share $0.80 $0.80 $0.80 $0.80 $0.70
FINANCIAL DATA
Return on equity 9.0% 1.5% 9.1% 15.1% 13.2%
Current ratio 1.73 1.67 2.18 2.59 2.18
Working capital $68.9 $67.6 $86.0 $78.9 $56.3
Net property, plant and equipment $100.6 $93.3 $89.7 $77.3 $70.7
Total assets $319.0 $317.4 $305.8 $266.6 $238.9
Long-term debt $85.0 $85.2 $90.1 $84.1 $56.4
Total debt to capitalization 51.8% 55.0% 49.7% 48.0% 38.0%
Shareholders' equity (3) $121.3 $114.8 $117.9 $109.0 $117.0
Book value per common share $23.56 $22.31 $23.01 $21.34 $20.97
GENERAL
Avg. shares outstanding for primary earnings per share (4) 5,221 5,194 5,172 5,532 5,649
Avg. shares outstanding for fully diluted earnings per share (4) - - 6,363 6,723 6,444
Number of employees 2,131 2,239 2,329 2,361 2,403
<FN>
(1) Primary earnings per common share for fiscal 1990 - 1994 are calculated by dividing net earnings by the average number of
common and common equivalents (stock options) shares outstanding during those fiscal years.
(2) Fully diluted earnings per share in 1990 - 1992 assume conversion of a convertible subordinated zero coupon note which is
convertible into shares of Class B Common Stock. In 1992, the calculation was antidilutive and in 1993 and 1994, the
calcuation was not applicable.
(3) Gains and losses resulting from translation (except in foreign countries experiencing hyperinflation) are reflected as an
adjustment to shareholders' equity.
(4) Average shares outstanding are in thousands.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY
Fiscal 1994 net earnings of $10.6 million ($2.02 per share) were $8.9 million
more than the prior year when earnings were $1.7 million ($.33 per share).
Operating results for each segment except poultry increased from the prior
year. North American seed earnings improved largely due to higher corn and
soybean sales volumes and swine segment earnings also improved due to volume
increases. While Argentine earnings were lower in fiscal 1994 due to
unfavorable planting conditions, the international seed segment experienced
improved results over fiscal 1993 when significant losses were incurred in
Spain and Australia. Poultry's loss of $0.3 million represented a $1.3
million decline from prior year while corporate and interest expenses were
$2.6 million less than in fiscal 1993.
Earnings for fiscal 1994 included a $2.3 million ($.45 per share) after-tax
benefit related to the suspension of the defined benefit portion of the
Company's retirement program. The after-tax earnings effects (in millions),
by segment were $1.7 for North American seed and $0.2 each for swine, poultry
and corporate. In the first quarter of fiscal 1994, the Company adopted
financial accounting standard No.109 (SFAS), "Accounting for Income Taxes".
The adoption of SFAS No. 109 resulted in the recognition of $0.4 million, or
$.09 per share, of deferred tax expense.
Also, in order to achieve a better matching of inventory costs with revenues,
the Company changed from the last-in, first-out (LIFO) to the average cost
inventory method. The appropriate restatements of all periods have been made.
Compared with 1992, North American seed profitability was higher due to lower
operating expenses partially offset by lower total margins. International
earnings were lower, largely due to the decline in earnings from DEKALB
Argentina. Swine earnings were higher than in fiscal 1992 resulting from
increases in breeding stock and market animal sales volumes. Profit
contribution from the poultry segment was lower as the result of declines in
export sales and U.S. commercial chicks earnings.
Compared with fiscal 1993, operating revenues increased seven percent in
fiscal 1994 following a four percent decrease from 1992 to 1993. Consolidated
revenues of $320.0 million in 1994 included a 13 percent increase in North
American seed, an eight percent decline in international seed, a 17 percent
increase in swine and a 10 percent reduction in poultry revenues.
FOURTH QUARTER
Fourth quarter net earnings of $1.2 million compared favorably with the
fourth quarter loss of $2.8 million in 1993. North American seed experienced
a loss in the fourth quarter of fiscal 1993 when product returns were higher
than expected because of continual rains in key corn and soybean producing
states. In the fourth quarter of fiscal 1994 the North American seed segment
earned $0.6 million due to a higher average corn price, higher soybean volume
and lower operating expenses. International seed earnings improved by $1.8
million over the prior year because of the absence of fourth quarter losses in
Spain and Australia. Swine results were $0.5 million lower than the prior
year due to lower market hog prices and higher feed costs. Poultry results
were $0.6 million less than last year because of lower export sales.
<PAGE>
<PAGE>
INDUSTRY SEGMENT REVENUES AND PRE-TAX EARNINGS
(In Millions)
Years Ended August 31
Revenues 1994 1993 1992
Seed $247.5 $232.3 $241.4
Swine 52.7 45.1 44.5
Poultry 19.8 21.9 21.9
$320.0 $299.3 $307.8
Pre-Tax Earnings
Seed $ 19.5 $ 7.0 $ 20.0
Swine 5.7 3.0 4.6
Poultry (0.3) 1.0 0.9
General Corporate Expenses (2.5) (4.4) (3.4)
Interest Expense, Net (7.5) (8.2) (7.3)
$ 14.9 $ (1.6) $ 14.8
SEED
Combined North American and international seed segment earnings were $12.5
million above fiscal 1993. In North America, sales volume increased for corn,
soybeans, sunflowers and sorghum and market share increased for all but
sorghum, whose share remained flat with the prior year. Internationally, the
absence of losses in Spain and Australia were the principal contributors to
the improvement. These were partially offset by a decline in Argentine
profitability.
North American seed segment earnings were approximately $0.2 million below
those of fiscal 1992, largely because of higher unit costs in corn and
sorghum. International earnings were $3.5 million lower compared with fiscal
1992 due largely to lower earnings from DEKALB Argentina.
North American Seed
North American seed earnings increased $8.5 million in fiscal 1994 due to
higher sales volumes and lower operating expenses. Gross margin in the
North American seed segment was $3.7 million higher in fiscal 1994.
Revenues were $21.0 million above those in fiscal 1993 driven by increased
sales volumes in four product lines. Partially offsetting those revenue
increases were higher corn unit costs. North American operating expenses
were $1.7 million lower than in 1993, due to the suspension of the defined
benefit portion of the Company's retirement program.
Corn revenues were $13.1 million greater when compared with 1993. Corn
volume was 14 percent higher, but this was partially offset by a one
percent decline in average selling prices which was the result of a higher
portion of small-sized seed in the product mix sold at lower prices. Corn
unit costs were seven percent higher due to a smaller and below-target crop
in 1993.
Compared with fiscal 1992, corn unit gross margin decreased. Higher
average selling prices were more than offset by higher unit costs.
Profitability in fiscal 1994 was only slightly lower than in fiscal 1992
because of lower operating expenses in 1994.<PAGE>
<PAGE>
Soybean sales volume and gross margin were 13 percent higher than in fiscal
1993. Compared with fiscal 1992, soybean volume was 13 percent higher and
unit margin was four percent lower resulting in a gross margin increase of
eight percent.
Sorghum unit volume was two percent above 1993, but average selling prices
were three percent below the prior year due to a shift in the sales mix to
lower-priced products. Although unit costs were one percent below the
prior year, sorghum margin was four percent lower. Compared with 1992,
sorghum volume and margin are lower because of a 23 percent reduction in
planted acreage.
Other products contributed $1.9 million to 1994 earnings, a $1.4 million
increase over the prior year.
International Seed
International seed results in 1994 increased by $4.0 million over the prior
year, mainly due to the absence of the large losses in Spain and Australia.
Revenues were eight percent below the prior year largely due to lower sales
volumes in Argentina.
Results from Europe were $7.9 million above 1993 when large losses from
Spain were recognized. In 1994, earnings from France were $1.0 million
above 1993 due to increased royalty income partially offset by higher
research expenditures. Italian results also improved by $1.0 million when
compared to the prior year. Other European results were below the prior
year due to lower export income.
In Latin America, earnings were 43 percent below 1993. Argentine earnings
were 63 percent lower due to a reduction in planted acres resulting, in
part, from adverse weather conditions. Higher unit costs and lower average
selling prices also contributed to the decline in earnings. Nevertheless,
DEKALB Argentina maintained its dominant corn market share position.
Mexican earnings were 18 percent below the prior year, while royalty and
export income from other Latin American countries was improved.
Results from other international activity were $2.3 million above the prior
year due to increased export and royalty income and the absence of losses
in Australia.
Fiscal 1994 international seed segment results were 29 percent below fiscal
1992. Latin American earnings were below the record levels of 1992 while
earnings in Europe were higher.
Seed segment earnings will continue to be affected by many different forces in
the domestic and international markets. In the United States, future results
will be impacted by the Company's competitive positions, government export
policies, weather conditions, commodity prices and Department of Agriculture
programs. International seed earnings will depend on a broad array of
governmental policies as well as weather and competition.
<PAGE>
<PAGE>
DEKALB SWINE
Swine segment earnings for 1994 were $5.7 million, 90 percent above the 1993
level of $3.0 million. Revenues were 17 percent higher than in 1993 while
costs increased 16 percent. Breeding stock volume was 18 percent higher than
the prior year due to increased availability resulting from the expansion of
swine production facilities. The average price per head on breeding stock
increased by five percent. Revenues increased 35 percent, 23 percent and 10
percent on boars, gilts and royalty animals, respectively.
Market animal volumes were four percent above the previous year, but lower
fourth quarter prices resulted in only a small increase in market animal
revenues.
Swine segment cost of sales was 16 percent higher than during 1993 largely due
to a 10 percent increase in animal numbers. The additional costs were
associated with new facilities and higher feed costs per head. Operating
expenses were seven percent higher than in fiscal 1993.
Swine segment earnings for 1994 were 24 percent above those of 1992. Breeding
stock volumes and prices and market animal volumes were higher, partially
offset by higher production.
Three new production farms which were under construction during 1993 have
largely been completed, will reach full production capacity late in fiscal
1995.
Swine earnings will continue to be influenced by demand for its breeding
stock, market prices, feed costs, production efficiency and production
capacity.
DEKALB POULTRY
The poultry segment loss of $0.3 million reflects a $1.3 million decline from
the prior year. A depressed U.S. egg market, the lack of hard currency in
China and an embargo on U.S.-sourced chickens in Venezuela were all
contributors to the decline. The result was lower domestic parent, export
parent and grandparent revenue combined with increased cost of sales due to
higher feed costs. Compared with 1992, poultry earnings were $1.2 million
lower for the same reasons.
Poultry segment earnings will continue to fluctuate from year to year based on
egg prices and demand for its breeding stock. Changing feed costs and
production efficiency will also have an impact. Internationally, the Company
faces the risk of embargoes and the uncertainty of foreign currency
fluctuations.
GENERAL
Corporate expenses in fiscal 1994 were $1.9 million below the prior year due
to restructuring savings and the suspension of the defined benefit portion of
the Company's benefit program. Compared with fiscal 1992, corporate expenses
were $0.9 million lower because of restructuring savings.
<PAGE>
<PAGE>
Net interest expense was $0.7 million below 1993, but $0.2 million above 1992.
The larger seed crop produced for fiscal 1993 required higher levels of
borrowing.
In April and July of 1993, the Company prepaid the $50.0 million outstanding
principal balance and $13.1 million of amortized interest on zero coupon notes
held by Pfizer, Inc. The financing for the prepayment was provided by a
consortium of lending institutions. By substituting other financing for the
convertible notes, DEKALB lowered the effective interest rate and eliminated
the shareholder dilution that would have resulted from conversion of the
notes.
Income taxes increased from a $3.3 million benefit in fiscal 1993 to a $4.3
million expense in fiscal 1994. In 1993, there was a large benefit associated
with international seed losses realized in prior years, and utilized in 1993.
In 1994, tax expense reflected additional benefits from these international
seed losses but they were partially offset by the effects of adopting SFAS No.
109.
Statement of Financial Accounting Standards No. 112 (SFAS No. 112) "Employers
Accounting for Post Employment Benefits" is not required to be adopted until
fiscal 1995. The Company does not believe that adoption will have any impact
on its financial statements.
FINANCIAL POSITION
Management believes its operating cash flow and existing credit facilities are
sufficient to cover normal and expected working capital needs, dividends,
capital expenditures and debt maturities.
CASH FLOW
In fiscal 1994, the net cash flow from operations of $33.2 million compared
favorably with the $20.4 million of cash outflow in the prior year. Fiscal
1993 included $13.1 million of cash interest related to the prepayment of the
zero coupon notes. In addition, significant cash was required to build seed
inventory levels in the United States and Argentina. Fiscal 1994 cash flow
benefited from increased earnings resulting from higher sales volumes.
Cash requirements for investing activities were slightly higher in fiscal 1994
due to increased capital expenditures related to upgrading seed plants.
Net cash outflow from financial activities included $10.1 million of debt
repayment; whereas, the prior year required additional borrowings to finance
increased inventory levels.
CREDIT FACILITIES
Genetics has various credit facilities and available lines of credit with
several commercial banks, both domestic and foreign. Committed credit lines
include a $50 million revolving credit facility available through December 31,
1996 and a $15 million facility available through November 29, 1994.
<PAGE>
<PAGE>
The revolving credit agreement provides credit for general corporate purposes
and is committed through December 31, 1996, but may be extended annually for
successive one year periods with the consent of the lending banks. The line
of credit requires a step-down to $20.0 million for any one day during each
year. The agreement contains various restrictions on the activities of the
Company as to maintenance of working capital and tangible net worth, amount
and type of indebtedness, and the acquisition or disposition of capital shares
or assets of the Company and its subsidiaries. At August 31, 1994, tangible
net worth was approximately $15 million in excess of the required minimum
under the most restrictive of these covenants.
Genetics also has numerous uncommitted short term credit facilities available
and draws upon them periodically, including during twelve months ended August
31, 1994.
CAPITAL EXPENDITURES
Capital expenditures in 1994 were $2.3 million higher than the prior year and
were financed with cash generated from operations and short term financing.
Capital spending in 1994 included seed plant expansions in Argentina and the
United States and additional swine production facilities. Fiscal 1993
expenditures were related to new swine production farms and machinery and
equipment replacements in the seed business.
<PAGE>
<PAGE>
<AUDIT-REPORT>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of DEKALB Genetics Corporation:
We have audited the accompanying consolidated balance sheets of DEKALB
Genetics Corporation as of August 31, 1994 and 1993, and the related
consolidated statements of operations and cash flows for the years ended
August 31, 1994, 1993 and 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of DEKALB Genetics
Corporation as of August 31, 1994 and 1993, and the consolidated results of
its operations and its cash flows for the years ended August 31, 1994, 1993
and 1992, in conformity with generally accepted accounting principles.
As discussed in Note M, effective September 1, 1993, the Company adopted the
liability method of accounting for income tax. As discussed in Note A, the
Company changed the accounting method of valuing its commercial seed
inventories and retroactively restated all years presented.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
October 12, 1994
</AUDIT-REPORT>
<TABLE>
DEKALB Genetics Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
for the years ended August 31--
in millions except per share amounts Note 1994 1993 1992
<S> <S> <C> <C> <C>
Revenues $320.0 $299.3 $307.8
Cost of revenues 175.9 152.4 157.6
Gross Margin 144.1 146.9 150.2
Selling expense 60.9 61.7 60.5
Research and development cost 44.2 44.7 42.4
General and administrative expense 18.0 29.1 25.9
123.1 135.5 128.8
Operating Earnings 21.0 11.4 21.4
Interest expense, net B (7.5) (8.2) (7.3)
Other income, net B 1.4 (4.8) 0.7
Earnings before income taxes and cumulative
effect of accounting change 14.9 (1.6) 14.8
Income tax provision (benefit) A & M 3.9 (3.3) 4.5
Earnings before cumulative effect of accounting
change 11.0 1.7 10.3
Cumulative effect of accounting change 0.4 - -
NET EARNINGS $10.6 $1.7 $10.3
Earnings per share before cumualtive
effect of accounting change $2.11 $0.33 $1.99
Accounting change (0.09) - -
NET EARNINGS PER SHARE $2.02 $0.33 $1.99
DIVIDENDS PER SHARE $0.80 $0.80 $0.80
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
at August 31--in millions Note 1994 1993
<S> <S> <S> <C> <C>
Assets Current assets:
Cash and cash equivalents A $6.2 $3.5
Receivables, net D 47.5 36.8
Inventories E 100.8 118.2
Deferred income taxes A & M 4.7 5.8
Other current assets 4.8 3.4
Total current assets 164.0 167.7
Investments and advances Q 8.9 9.1
Intangible assets, net A 41.3 42.6
Other assets 4.2 4.8
Property, plant and equipment, net A & F 100.6 93.3
Total Assets $319.0 $317.5
Liabilities and Current liabilities:
Shareholders' Notes payable $45.1 $55.1
Equity Accounts payable, trade 7.0 6.8
Other accounts payable 13.4 5.5
Other current liabilities H 29.6 32.6
Total current liabilities 95.1 100.0
Deferred compensation and other credits 5.4 5.8
Deferred income taxes A & M 12.2 11.7
Long-term debt I 85.0 85.2
Total long-term liabilities 102.6 102.7
Commitments and contingent liabilities L
Shareholders' equity: K
Capital stock:
Common, Class A; no par value,
authorized 5,000,000 shares,
issued 787,639 and 840,623
for 1994 and 1993, respectively 0.1 0.1
Common, Class B; no par value,
non-voting, authorized 15,000,000
shares issued 4,431,387 and 4,371,073
for 1994 and 1993, respectively 0.4 0.4
Capital in excess of stated value 80.1 79.9
Retained earnings 45.8 39.3
Currency translation adjustments (2.7) (2.5)
123.7 117.2
Less treasury stock, at cost: 73,201 shares of
Class B in 1994 and 1993. (2.4) (2.4)
Total shareholders' equity 121.3 114.8
Total Liabilities and Shareholders' Equity $319.0 $317.5
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended
August 31--in millions
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $10.6 $1.7 $10.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11.5 11.2 10.4
Interest on zero coupon note - 3.1 4.0
Gain on sale of fixed assets (1.3) - (0.8)
Provision for losses on accounts receivable 0.9 1.1 0.6
Provision for deferred income taxes 0.9 (6.6) 2.4
Provision for inventory valuation 10.1 9.7 4.5
Loss on divestiture of foreign subsidiaires - 6.1 -
Equity earnings, net of dividends (0.1) (0.4) (1.8)
Cumulative effect of accounting change 0.4 - -
Other - - (0.3)
Changes in assets and liabilities:
Receivables (11.6) (5.1) (6.1)
Other current assets - 2.1 2.9
Inventories 7.2 (28.1) (13.6)
Accounts payable 8.1 (4.7) 8.6
Accrued expenses (2.1) 2.2 (0.2)
Current taxes payable (0.1) 1.8 (0.2)
Deferred income taxes (1.6) 0.5 (1.3)
Other assets and liabilities 0.3 (1.9) (0.8)
Interest associated with prepayment of zero coupon notes - (13.1) -
Net cash flow from operating activities 33.2 (20.4) 18.6
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (18.2) (15.9) (21.3)
Proceeds from sale of property, plant and equipment 1.8 0.9 2.3
Acquisitions and investments - - (1.9)
Proceeds from security investments - - 0.7
Net cash flow from investing activities (16.4) (15.0) (20.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuing debt - 84.5 11.8
Principal payments made on debt (10.1) - -
Prepayment of zero coupon notes - (50.0) -
Dividends paid (4.1) (4.1) (4.1)
Other capital transactions 0.3 0.4 0.5
Net cash flow from financing activities (13.9) 30.8 8.2
Net effect of exchange rates on cash (0.2) (1.3) 1.5
Net increase/(decrease) in cash and cash equivalents 2.7 (5.9) 8.1
Cash and cash equivalents, at the beginning of the year 3.5 9.4 1.3
Cash and cash equivalents, at the end of the year $6.2 $3.5 $9.4
Note: Cash paid during the year for:
Income taxes $3.3 $1.3 $2.2
Interest (a) $8.1 $18.1 $3.8
<FN>
(a) In fiscal 1993, included $13.1 million of interest amortization as part
of the prepayment of the zero coupon notes.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Accounting Policies
The principal accounting policies of the consolidated companies of DEKALB
Genetics Corporation (the "Company" or "Genetics") are as follows:
(1) Principles of Consolidation
The consolidated financial statements include the accounts of the seed
division ("DEKALB Seed"), and two wholly-owned subsidiaries, DEKALB Swine
Breeders, Inc. ("DEKALB Swine"), and DEKALB Poultry Research, Inc. ("DEKALB
Poultry"). The accounts of certain non-U.S. subsidiaries are included on the
basis of their May 31 fiscal year, which more properly reflect the growing
season in those countries. Transactions between these dates and the Company's
fiscal year-end are not considered material.
The Company's investments in related companies (owned 50% or less),
primarily in Mexico, are carried at cost plus equity in undistributed net
earnings and losses since dates of acquisition. Carrying values approximate
the Company's interest in the net assets of these related companies.
(2) Accounting Change
During the third quarter of fiscal 1994, the Company changed the
accounting method of valuing its commercial seed inventories, previously
valued using the last-in, first-out (LIFO) method, to average cost. The
Company's planning, production and sales activities include the utilization of
commercial seed inventories from more than one crop year. However, the use of
the LIFO method, in effect, caused the matching of the most recent crop year's
cost with current revenues. This caused significant commercial seed earnings
volatility given year-to-year uncertainties such as crop size, yield and
market prices. Therefore, the Company believes the average cost method of
inventory valuation achieves a better matching of blended inventory costs with
revenues and better reflects the utilization of commercial seed inventory
units. The change in accounting method had been applied retroactively and
financial information for all periods presented has been restated. In fiscal
1994, net earnings were $1.3 million ($.24 per share) higher as a result of
the change. Net earnings for fiscal 1993 decreased $1.4 million ($.27 per
share) and earnings in fiscal 1992 increased $0.3 million ($.05 per share).
(3) Intangible Assets
Intangible assets consist primarily of the cost of purchased businesses
in excess of market value of net assets acquired (goodwill). Genetics
amortizes goodwill on a straight-line method over 40 years.
<PAGE>
<PAGE> DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(4) Property, Plant and Equipment
It is the policy of Genetics to capitalize expenditures for major
renewals and betterments and to charge to operating expenses the cost of
current maintenance and repairs. Provisions for depreciation have been
computed principally on the straight-line method, based on expected lives, for
buildings and equipment. Rates used for depreciation are determined
separately for individual plants and locations and are based principally on
the following expected lives: buildings - 12.5 to 33.5 years; equipment - 4
to 12.5 years; other - 3 to 20 years; and leasehold improvements - term of
lease.
The cost and accumulated allowances for depreciation and amortization
relating to assets retired or otherwise disposed of are eliminated from the
respective accounts at the time of disposition. The resultant gain or loss is
included in current operating results.
(5) Derivative Financial Instruments
Genetics has contractual commitments with seed growers for payments based
on local market corn and soybean futures prices. To mitigate the impact of
fluctuation in these futures prices on inventory costs, the Company hedges
these payments by using Chicago Board of Trade corn and soybean futures and/or
options contracts. Growers not priced at the end of August are normally
priced by March, at which time the related futures and/or option contracts are
sold. The Company estimates the timing of grower payment pricing to determine
the futures and option maturities. Gains or losses on these hedge positions
are included as a component of the applicable crop year's inventory. At August
31, 1994 and 1993, the Company had corn and soybean futures contracts
outstanding with market values of $11.3 million and $1.7 million,
respectively. Hedge gains deferred at August, 1994 and 1993 were $0.9 million
and $0.2 million, respectively. Margin deposits for open futures and/or
option contracts are recorded as other current assets. Future feed
requirements of DEKALB Swine and DEKALB Poultry and future market hog sales
of DEKALB Swine may also be forward contracted on the cash market and/or
hedged in the futures market periodically.
The Company reviews potential foreign currency risks on an on-going basis
and is party to forward contracts in the management of its foreign currency
exposure related to royalty income. In order to reduce its exposure to
foreign currency exchange fluctuation related to royalty payments from its
French licensee and export receipts from its Italian subsidiary, the Company
utilizes foreign currency forward contracts with maturities that mirror the
anticipated receipts and payments in October and November. At August 31, 1994
and 1993, the Company had French franc forward contracts outstanding with an
aggregate market value of $4.6 million and $2.6 million, respectively, and
Italian lira forward contracts outstanding with an aggregate market value of
$1.6 million and $2.6 million, respectively. Other foreign currency
transactions occur in the Argentine peso and the Canadian dollar.
See Footnote I for a discussion of interest rate swaps.
<PAGE>
<PAGE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(6) Income Taxes
Effective September 1, 1993, the Company adopted the liability method of
accounting for income taxes under Statement of Financial Accounting Standards
(SFAS) No. 109. Prior to fiscal year 1994, income tax was calculated in
accordance with Accounting Principle Board Opinion No. 11. The adoption of
SFAS 109 resulted in a one time provision adjustment of $0.4 million which was
recorded in the first quarter of fiscal 1994.
Deferred taxes arise principally from temporary differences between
financial and tax reporting. The most significant of these differences are
set forth in Note M. At August 31, 1994, United States income taxes were
provided on all unremitted earnings of non-U.S. subsidiaries.
(7) Foreign Currency Translation
Foreign assets and liabilities, except for operations in economies
historically experiencing hyperinflation, are translated into U.S. dollar
equivalents based on rates of exchange prevailing at the end of the respective
period. Translation adjustments resulting from translating foreign currency
financial statements into U.S. dollar equivalents are reported separately and
accumulated in a separate component of equity. Aggregate exchange gains and
losses arising from the translation of foreign currency transactions in other
than the functional currency of the particular entity are included in other
income. Translation gains or losses in hyperinflationary economies are also
included in other income.
(8) Statement of Cash Flows
Genetics classifies highly liquid investments with original maturities of
three months or less as cash and cash equivalents.
(9) Concentration of Credit Risk
The Company's business activity is primarily with farmers, located in the
United States and certain foreign countries. When the Company grants credit,
it is primarily to customers whose ability to pay is dependent upon the
agribusiness economics prevailing in that specific area of the world. No
significant concentration of credit risk exists.
(10) Revenue Recognition
The Company recognizes revenues upon shipment of goods, with discounts
and returned goods offsetting this amount.
(11) Reclassifications
Certain prior year disclosures have been reclassified to conform with the
current year presentation. The reclassifications did not affect net results.
The Company restated the 1993 consolidated statement of cash flows to
reflect interest amortization on prepayment of zero coupon notes as an
adjustment to net income in the cash flow from operating activities.<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
B. Statement of
Operations Data
<CAPTION>
for the years ended August 31--in millions 1994 1993 1992
<S> <S> <C> <C> <C>
(1) Interest Expense,
Net
Interest expense ($8.2) ($8.7) ($8.0)
Interest income 0.7 0.5 0.7
Interest expense, net ($7.5) ($8.2) ($7.3)
for the years ended August 31--in millions 1994 1993 1992
(2) Other Income,
Net
Equity in net earnings of related companies $1.5 $1.8 $2.3
Foreign exchange gain/losses
--principally translation 0.1 - 0.3
Amortization of goodwill (1.4) (1.4) (1.3)
Loss on dissolution of international operations - (3.9) -
All others, net 1.2 (1.3) (0.6)
Other income, net $1.4 ($4.8) $0.7
for the years ended August 31--in millions 1994 1993 1992
(3) Research and
Development Costs
DEKALB Seed $33.6 $34.7 $33.0
DEKALB Swine 6.4 5.7 5.0
DEKALB Poultry 4.2 4.3 4.4
Research and development costs $44.2 $44.7 $42.4
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
C. Earnings
per Share
Primary earnings per share of common stock are calculated by dividing net earnings by
the weighted average of common and common equivalent (stock options) shares outstanding
during each fiscal year: 5,221,038, 5,193,803, and 5,171,736 in 1994, 1993, and
1992, respectively. Fully diluted earnings per share are based upon 6,363,350 shares
in 1992 and assume conversion of the zero coupon note issued in January, 1990.
The zero coupon notes were prepaid in April and July of 1993. Net earnings in fiscal
1992 are adjusted to add back the after tax effect of interest expense on that same
note when calculating fully diluting earnings per share.
<CAPTION>
D. Receivables at August 31--in millions 1994 1993
<S> <S> <C> <C>
Trade accounts and notes $44.8 $35.0
Employees 1.9 0.9
Related companies 1.2 0.7
Other 2.0 1.8
49.9 38.4
Less allowance for doubtful accounts 2.4 1.6
Receivables, net $47.5 $36.8
<CAPTION>
E. Inventories at August 31--in millions 1994 1993
<S> <S> <C> <C>
At lower of cost or market:
Commercial seed--average cost $88.1 $106.4
Commercial poultry and swine--actual cost 8.9 7.7
Supplies and other--principally first-in, first-out 3.8 4.1
Inventories $100.8 $118.2
<FN>
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<CAPTION>
F. Property, Plant and
Equipment, Net
(at cost)
at August 31--in millions 1994 1993
<S> <S> <C> <C>
Land $9.7 $9.1
Buildings 82.8 79.4
Equipment 130.7 127.9
Other 11.1 10.5
Construction in progress 11.7 5.2
246.0 232.1
Less accumulated depreciation and amortization 145.4 138.8
Property, plant and equipment, net $100.6 $93.3
G. Short-Term
Borrowings
Short-term notes payable represent borrowings against lines of credit with various banks.
The weighted average interest rate on short-term borrowings for fiscal 1994 was approximately 4.0%.
At August 31, 1994, committed lines credit available to Genetics included a $50 million revolving credit
agreement and a $15 million credit facility for a 364 day period.
The revolving credit agreement provides credit for general corporate purposes and is committed through
December 31, 1996, but may be extended annually for successive one year periods with the consent of the
lending banks. The line of credit requires a step-down to $20.0 million for any one day during each year.
The agreement contains various restrictions on the activities of the Company as to maintenance of working
capital and tangible net worth, amount and type of indebtedness, and the acquisition or disposition of capital
shares or assets of the Company and its subsidiaries. At August 31, 1994, tangible net worth was
approximately $15 million in excess of the required minimum under the most restrictive of these covenants.
The Company pays a commitment fee of 3/16 of 1% for the $50 million line of credit. The available line of
credit at August 31, 1994 was entirely unused.
The $15 million credit facility carries a 3/16 of 1% fee on the unused portion of the commitment. No fees
were required to be paid as the line was fully utilized in Fiscal 1994.
Market value of short-term borrowings approximates carrying value at August 31, 1994.
<CAPTION>
H. Other Current
Liabilities
at August 31--in millions 1994 1993
<S> <S> <C> <C>
Current income taxes $1.3 $2.2
Payroll 7.1 6.5
Vacation 2.7 2.7
Pensions and other credits 0.9 4.5
Insurance 1.9 1.0
Taxes, other than income 5.1 4.6
Production costs 1.5 2.4
Other 9.1 8.7
Other current liabilities $29.6 $32.6
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<CAPTION>
I. Long-Term at August 31--in millions 1994 1993
Debt
<S> <S> <C> <C>
Term loans, variable rates, due from 1996-1999 $65.0 $65.0
Term loans, 7.15% fixed rate, due 2003 20.0 20.0
Other - 0.2
85.0 85.2
Less current maturities - -
Net long-term debt $85.0 $85.2
Market value of long-term debt $82.6 $87.0
<FN>
The variable rate term loan agreements allow the Company to borrow at rates based on the
London Interbank Offer Rate on Eurodollar deposits (LIBOR). At August 31, 1994, interest on the
variable rate term loans was at a rate of approximately 5.5%.
The Company has entered into interest rate swap agreements with third parties to manage interest rate
movements on the majority of its variable rate term debt. At August 31, 1994, the Company had swap
agreements with an aggregate notional principal amount of $60 million and an average interest rate
of 5.8%, maturing in fiscal 1997 and fiscal 1998. Any interest rate differential on these swap agreements is
recognized in interest expense, net over the terms of the agreements. The Company is exposed to credit
loss in the event of nonperformance by the other parties to these agreements. However, the Company
does not anticipate nonperformance by any of the counterparties.
All of the term loans originated in fiscal 1993 from seven lending institutions and contain similar
restrictive covenants. The most restrictive of these covenants requires the maintenance of tangible net
worth. At August 31, 1994, tangible net worth was approximately $15 million in excess of the required
minimum under this covenant.
Aggregate maturities for the years ending August 31, 1996 through 1999 are less than $50,000 each
year, except for fiscal 1996 and 1998 when $5.0 million and $60.0 million mature, respectively.
Current maturities of long-term debt (less than $0.1 million) are included with notes payable in the
consolidated balance sheets.
The Company estimated the market value of its long-term debt by utilizing a discounted cash
flow methodology.
J. Thrift Plan Full and part-time Genetics' employees can participate in a voluntary thrift plan. The plan
provides for Genetics to contribute a minimum of $.50 for every dollar contributed by employees,
to the extent employees contribute up to 6% of their salaries. Additional discretionary amounts may
also be contributed when warranted by results of operations. Genetics' contributions charged to
expense under this plan were $1.3 million for the year ended August 31, 1994 and $1.4 million in
each of the fiscal years 1993 and 1992.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<CAPTION>
K. Shareholders'
Equity
at August 31--in millions except 1994 1993 1992
shares in thousands Dollars Shares Dollars Shares Dollars Shares
<S> <S> <C> <C> <C> <C> <C> <C>
Class A Common Stock
Balance, beginning of year $0.1 841 $0.1 862 $0.1 1,324
Exchange Class A for Class B - (60) - (37) - (35)
Stock options exercised - 1 - 6 - 2
Employee stock plan - 6 - 10 - 5
Retirement of treasury shares - - - - - (434)
Balance, end of year $0.1 788 $0.1 841 $0.1 862
Class B Common Stock
Balance, beginning of year $0.4 4,371 $0.4 4,334 $0.4 4,299
Exchange Class A for Class B - 60 - 37 - 35
Balance, end of year $0.4 4,431 $0.4 4,371 $0.4 4,334
Capital in Excess of Stated Value
Balance, beginning of year $79.9 $79.4 $96.3
Stock options exercised - 0.1 0.1
Employee stock plan 0.1 0.3 0.2
Phantom Stock conversion - - 0.7
Retirement of treasury shares - - (17.9)
Director Stock Option Plan 0.1 0.1 -
Balance, end of year $80.1 $79.9 $79.4
Retained Earnings
Balance, beginning of year $39.3 $41.7 $35.5
Net Income 10.6 1.7 10.3
Cash dividends $.80 per share (4.1) (4.1) (4.1)
Balance, end of year $45.8 $39.3 $41.7
Currency Translation Adjustment
Balance, beginning of year ($2.5) ($1.2) ($2.7)
Translation gain/(loss) (0.2) (1.3) 1.5
Balance, end of year ($2.7) ($2.5) ($1.2)
Treasury Stock
Balance, beginning of year ($2.4) (73) ($2.4) (73) ($20.6) (516)
Purchase of Class B Common Sto - - - - - -
Purchase of Class A Common Sto - - - - - -
Stock options exercised - - - - 0.1 2
Employee stock plan - - - - 0.2 7
Retirement of treasury shares - - - - 17.9 434
Balance, end of year ($2.4) (73) ($2.4) (73) ($2.4) (73)
Total Shareholders' Equity $121.3 $114.8 $118.0
<FN>
In 1992, Genetics retired 433,880 shares of Class A treasury stock. The reduction of capital was reflected as a non-cash
transaction in shareholders' equity.
The holders of Class A Common Stock and Class B Common Stock have the same rights in all respects, including rights
with respect to dividends and other distributions, except that (i) the holders of Class B Common Stock have no voting
rights other than as required by the Delaware General Corporation Law, (ii) the holders of Class A Common Stock may
exchange, at their election, any of their shares for an equal number of shares of Class B Common Stock on a continuing
basis and (iii) the Board of Directors of Genetics may distribute (A) voting stock of subsidiaries of Genetics
to the holders of Class A Common Stock of Genetics and (B) non-voting stock of subsidiaries of Genetics
to the holders of Class B Common Stock of Genetics.
The Company also has 500,000 shares of $1 par value preferred stock authorized and unissued.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
L. Commitments and Genetics is a defendant in various legal actions arising in the course of its business activities. In the
Contingent opinion of the management, these actions will not result in a material adverse effect on Genetics'
Liabilities consolidated operations or financial position.
Genetics is self-insured against property losses on the majority of its operating facilities.
Genetics' total rental expense for 1994, 1993 and 1992 was $4.8 million, $5.3 million and $5.7 million,
respectively.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
M. Income Tax
Provision
Effective September 1, 1993, the Company adopted the liability method of accounting for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Prior to fiscal year 1994, income tax was
calculated in accordance with Accounting Principle Board Opinion No. 11. The adoption of SFAS 109 resulted in a one time
provision adjustment of $0.4 million or $.09 per share which was recorded in the first quarter of fiscal year 1994. This
amount is included as a charge to net income as the cumulative effect of change in accounting principle. As permitted
by SFAS 109, the Company elected not to restate the financial statements of prior years.
<CAPTION>
for the years ended August 31--in millions 1994 1993 1992
<S> <S> <C> <C> <C>
Current provision:
Federal $1.0 $0.9 $0.6
State 0.5 0.3 0.4
Foreign 1.5 2.1 1.2
$3.0 $3.3 $2.2
Deferred provision:
Federal $0.9 ($5.2) $2.2
State 0.1 (0.9) 0.2
Foreign (0.1) (0.5) (0.1)
0.9 (6.6) 2.3
Total income tax provision (benefit) $3.9 ($3.3) $4.5
The significant components of the company's deferred tax assets and deferred tax liabilities as of August 31, 1994 are
presented below (in millions):
<CAPTION>
1994
<S> <S> <C>
Deferred tax assets:
Research Expenditures 7.9
Benefit Plans 2.3
Inventory 3.8
Other 4.3
Total Gross Deferred Tax Assets 18.3
Valuation Allowance (0.8)
Gross Deferred Tax Assets 17.5
Deferred Tax Liabilities:
Purchase Price Allocations (9.3)
Undistributed Foreign Earnings (6.4)
Depreciation (6.5)
Other (2.8)
Gross Deferred Tax Liabilities (25.0)
Net Deferred Tax Liability (7.5)
The net deferred tax liability disclosed above equals the net deferred tax presentation on the balance sheet. The footnote
disclosure classifies the components as assets or liabilities while the balance sheet discloses the current and long-term
portion of those two classifications.
Deferred taxes for 1993 and 1992 were prepared under A.P.B. Opinion No. 11 and timing differences in the recognition of
revenue and expenses for tax and financial statement purposes resulted primarily from depreciation, research expenditures,
and taxes provided on unremitted earnings.
Total tax provisions (benefits) resulted in amounts differing from those based on the statutory federal income tax rates.
The reasons for these differences are:
<CAPTION>
for the years ended August 31--in millions 1994 1993 1992
<S> <S> <C> <C> <C>
U.S. statutory rate $5.2 ($0.5) $5.0
State and local taxes 0.5 (0.5) 0.4
International operations (1.8) (1.5) (0.4)
Qualified export activity (0.1) (0.4) (0.3)
Research credits (0.4) (0.6) (0.4)
Goodwill - - 0.1
Other 0.5 0.2 0.1
Income tax provision (benefit) $3.9 ($3.3) $4.5
The domestic and foreign components of earnings before taxes of consolidated companies were as follows:
<CAPTION>
for the years ended August 31--in millions 1994 1993 1992
<S> <S> <C> <C> <C>
U.S. $9.7 ($2.4) $13.4
Argentina 0.7 6.2 4.4
Other Non-U.S. 4.5 (5.4) (3.0)
Total earnings before taxes $14.9 ($1.6) $14.8
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
N. Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations for the
years ended August 31, 1994 and 1993. Genetics' United States seed operations comprise a
significant portion of its business. Genetics generally delivers only a minor portion
of United States seed in the first quarter, delivers more than half in the second quarter,
and substantially all the seed is delivered by the end of the third quarter.
The Company defers first quarter expenses and anticipates fourth quarter expenses
and matches these expenses against second and third quarter revenues.
Third quarter results also reflect estimates of seed product returns.
Consequently, fourth quarter earnings include adjustments for those earlier estimates.
In the third quarter of 1993, the Company recognized a loss on the write-off of its
investment in Spain and in the fourth quarter of that same year, significant
seed returned goods in the United States unfavorably affected the net earnings.
The total of four quarters' earnings per share might not equal the earnings per share
for the year due to the application of the treasury stock method and market price changes.
<CAPTION>
in millions except per share amounts--
three months ended the last day of August May February November
<S> <C> <C> <C> <C>
1994
Operating revenues $28.9 $107.3 $143.0 $40.8
Operating costs 15.4 58.9 80.1 21.5
Net earnings 1.2 2.2 6.4 0.8
Earnings per share 0.22 0.42 1.23 0.15
1993
Operating revenues $24.1 $95.9 $131.4 $47.9
Operating costs 15.3 49.7 63.6 23.8
Net earnings (2.8) (2.7) 6.4 0.8
Earnings per share (0.54) (0.51) 1.23 0.15
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
O. Operations by
Geographic
Area
Information on Genetics operations by geographic area for 1994, 1993 and 1992 is shown below. Operating
earnings (loss) are equal to total sales and revenues less operating expenses of the geographic areas,
excluding interest and general corporate expenses. Transfers of products between geographic areas are at
prices approximating those charged to unaffiliated customers and are not material to any geographic area.
<CAPTION>
August 31--in millions 1994 1993 1992
<S> <C> <C> <C>
Revenues
United States $252.6 $226.3 $238.0
Argentina 37.4 43.4 36.2
Other Non-U.S. 30.0 29.6 33.6
$320.0 $299.3 $307.8
Operating Earnings (Loss)
United States $19.3 $10.5 $17.6
Argentina 3.0 8.2 6.7
Other Non-U.S. 1.1 (9.5) (1.1)
$23.4 $9.2 $23.2
Equity in Earnings
Other Non-U.S. $1.5 $1.8 $2.3
Identifiable Assets
United States $229.3 $230.1 $216.4
Argentina 54.5 45.6 36.3
Other Non-U.S. 35.2 41.8 53.1
$319.0 $317.5 $305.8
<FN>
Consolidated net assets include approximately $37.9 million at August 31, 1994 and $37.4 million at
August 31, 1993, located in countries other than the United States. Consolidated net earnings include
approximate earnings of $4.8 million in 1994 and an approximate loss of $1.1 million in 1993 from
these countries.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
P. Pension Plans
Prior to fiscal 1994, the Company provided employees a noncontributory pension
plan covering substantially all domestic employees in its seed, swine and poultry
businesses, as well as in corporate administration, who met age and service
requirements. Benefits provided under this pension plan are based primarily on
each employee's career earnings up until the suspension of the plan on October 1,
1993. Plan assets consist primarily of stocks and U.S. government securities.
At the time of suspension, the Company recognized a curtailment benefit of $3.7
million.
In addition, Genetics has a supplemental noncontributory pension plan covering
certain management employees, which is not funded. Benefits are based mainly on
each participant's year of service, final average compensation, and estimated
benefits received from certain other benefits plans. This plan was also suspended
on October 1, 1993 and the Company recognized a benefit of $0.5 million related to
to the suspension.
Total pension expense for the funded plan for the years ended August 31, 1993
and 1992 was $1.7 million and $1.0 million, respectively. Pension expense for the
supplemental pension plan was $0.2 million for the years ended August 31, 1993
and 1992.
<CAPTION>
The components of total estimated pension (income)/expense for the two plans are
as follows --
$ in millions:
1994 1993 1992
<S> <C> <C> <C>
Service Cost -- benefits earned during the year $0.2 $2.0 $1.5
Interest cost on projected benefit obligations 1.0 1.2 1.0
Actual return on plan assets (0.4) (1.0) (1.2)
Net amortization and deferral (0.9) (0.3) (0.1)
Income from plan curtailment (4.2) - -
Net Pension (Income)/Expense ($4.3) $1.9 $1.2
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<CAPTION>
P. Pension Plans
(Continued)
Actuarial assumptions for 8/31/94 and 8/31/93 are as follows:
8/31/94 8/31/93
<S> <C> <C>
Discount rate 6.5-7.0% 6.5%
Average salary growth rate 5.5% 5.5%
Return on plan assets 8.5% 8.5%
<FN>
A reconciliation of the funded status to accrued pension expense is as follows--
$ in millions
<CAPTION>
Funded Plan Unfunded Plan
8/31/94 8/31/93 8/31/94 8/31/93
<S> <C> <C> <C> <C>
Actuarial present value of benefits
based on service to date and present
pay levels:
Vested $10.7 $11.9 $0.6 $1.1
Nonvested 0.4 2.0 - -
Accumulated benefit obligation 11.1 13.9 0.6 1.1
Additional amounts related to projected
pay increases - 6.8 - 1.4
Projected benefit obligation 11.1 20.7 0.6 2.5
Plan assets at fair market value 10.7 13.3 - -
Plan assets greater than (less than)
projected benefit obligation (0.4) (7.4) (0.6) (2.5)
Unrecognized (gain) or loss
from experience 2.8 6.1 - 0.7
Unrecognized prior service cost - 0.2 - 0.5
Unrecognized net transition asset (3.1) (3.4) (0.1) (0.1)
Accrued pension expense included
in the Consolidated Balance Sheet ($0.7) ($4.5) ($0.7) ($1.4)
<FN>
The Company has obligations under termination indemnification plans in several foreign countries,
but does not have any foreign defined benefit pension plans as defined in Financial Accounting
Standard No. 87.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
<CAPTION>
Q. Information on
Related
Companies
The following is summarized financial information for Genetics'
50 percent or less owned operations:
Balance Sheets
<CAPTION>
at August 31--in millions 1994 1993
<S> <C> <C> <C>
ASSETS
Current assets $21.3 $16.7
Non-current assets 4.0 4.7
Total Assets $25.3 $21.4
LIABILITIES
Current liabilities $6.6 $2.8
Non-current liabilities 1.5 1.6
Total Liabilities $8.1 $4.4
Summary of Earnings
<CAPTION>
for the years ended August 31--in millions 1994 1993 1992
<S> <C> <C> <C>
Revenues $24.6 $21.2 $26.5
Gross Profit $3.6 $4.3 $6.2
Net Earnings $3.3 $3.5 $4.9
Genetics' Equity in Net Earnings 1.5 1.8 2.3
<FN>
Genetics' investments in related companies are carried at cost plus equity in undistributed net earnings
and losses since dates of acquisition. Carrying values approximate Genetics' interest in the net assets
of these related companies. Investments and advances include advances to related parties of
$0.2 million in 1994 and 1993 and $0.1 million in 1992. Dividends received from related companies
were $1.5 million in 1994 and 1993. No dividends were received in 1992.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
R. Incentive Plans
In August, 1988, the Company adopted a Long-Term Incentive Plan which provides for the awarding
of stock appreciation rights (SARs), stock indemnification rights (SIRs) and restricted stock and
the granting of incentive and nonqualified options to purchase Class A or Class B Common Stock of
the Company. The Company's Stock Option Committee may make awards of SARs, SIRs, restricted stock
stock or stock options to certain officers and key employees of the Company. All stock options may
be granted at no less than fair market value of the Company's stock at the date of grant and are
exercisable within periods specified by the Stock Option Committee. In 1991, the shareholders also
approved a Director Stock Option Plan which gives outside directors the option of receiving stock
options in lieu of the annual retainer and meeting fees. Such stock options are granted at less than
fair market value at the date of grant.
<CAPTION>
1994 1993
Average Average
Class A Price Class A Price
<S> <C> <C> <C> <C>
Shares under option
at beginning of year 242,188 $21.82 186,551 $20.08
Activity:
Granted 61,266 25.90 63,639 25.97
Exercised (2,605) 25.29 (6,102) 8.79
Cancelled (8,259) 29.17 (1,900) 31.63
Shares under option and exercisable 292,590 $22.43 242,188 $21.82
at end of year
Shares available for future grants 103,365 156,372
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
S. Industry Segment
The following industry segment information summarizes Genetics' operations as of and for the
years ended August 31, 1994, 1993, and 1992.
Operating earnings are total sales and revenues less operating expenses of the segments,
excluding interest, and general corporate allocations. Corporate assets primarily consist of deferred
income taxes and certain property, plant and equipment.
No customer accounted for 10 percent or more of total operating revenues.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
S. Industry Segment
in millions
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating Revenues
Seed (1) $247.5 $232.3 $241.4
Swine 52.7 45.1 44.5
Poultry 19.8 21.9 21.9
$320.0 $299.3 $307.8
Earnings (Loss) Before Income Taxes
Seed:
Operating earnings $18.0 $5.2 $17.7
Equity in net earnings of related
companies 1.5 1.8 2.3
19.5 7.0 20.0
Swine 5.7 3.0 4.6
Poultry (0.3) 1.0 0.9
Total Operations 24.9 11.0 25.5
General corporate expenses (2.5) (4.4) (3.4)
Net interest expense (7.5) (8.2) (7.3)
$14.9 ($1.6) $14.8
Identifiable Assets
Seed $267.2 $268.5 $258.6
Swine 34.0 30.3 30.7
Poultry 17.8 18.7 16.5
$319.0 $317.5 $305.8
Depreciation and Amortization Expense
Seed $8.4 $8.3 $7.7
Swine 2.4 2.1 1.8
Poultry 0.7 0.8 0.9
$11.5 $11.2 $10.4
Property Additions
Seed $13.1 $10.2 $15.4
Swine 5.0 5.3 5.5
Poultry 0.1 0.4 0.4
$18.2 $15.9 $21.3
<FN>
(1) Consolidated revenues do not include approximately $135 million in 1994 and $120 million in 1993 of DEKALB seed
sold under royalty agreements with non-consolidated affiliates and licensees or recognized by equity companies.
(Footnote Q).
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement not later than 120 days after the close of its
fiscal year ended August 31, 1994. The information required by this Item is
incorporated by reference from the Proxy Statement.
Information about Executive Officers is shown on page 10 of this filing.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from
the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from
the Proxy Statement.
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of DEKALB Genetics Corporation are
included in Part II, Item 8:
Page
Report of Independent Accountants 19
Consolidated Statements of Operations for the years ended
August 31, 1994, 1993 and 1992 20
Consolidated Balance Sheets at August 31, 1994 and 1993 21
Consolidated Statements of Cash Flows for the years ended
August 31, 1994, 1993 and 1992 22
Notes to Consolidated Financial Statements 23-40
(a)(2) Financial Statement Schedules
Page
Report of Independent Accountants 47
Schedule V -Property, Plant and Equipment 48
Schedule VI -Accumulated Depreciation and Amortization of
Property,Plant and Equipment 49
Schedule VIII -Valuation and Qualifying Account 50
Schedule IX -Short-Term Borrowings 51
Schedule X -Supplementary Income Statement Information 52
Financial statements and schedules other than those listed are omitted for
the reason that they are not required, are not applicable, or that equivalent
information has been included in the financial statements or notes thereto.
<PAGE>
<PAGE>
Part IV
(a)(3) Exhibits Page
3A Restated Certificate of Incorporation *
of DEKALB Genetics Corporation [Attached
as Exhibit A to Information Statement
contained in Form 8 Amendment (Amendment
No. 3) dated August 18, 1988, amending
Form 10 Registration Statement of the
Company dated June 17, 1988
(File No. 0-17005)]
3B By-Laws of DEKALB Genetics Corporation *
[Attached as Exhibit B to Information Statement
contained in Form 8 Amendment (Amendment
No. 3) dated August 18, 1988, amending
Form 10 Registration Statement of the
Company dated June 17, 1988
(File No. 0-17005)]
4A Form of Class A Common Stock Certificate *
[Incorporated by reference to Exhibit 4A
to Form 8 Amendment (Amendment No. 1)
dated August 3, 1988, amending Form 10
Registration Statement of the Company
dated June 17, 1988 (File No. 0-17005)]
4B Form of Class B Common Stock Certificate *
[Incorporated by reference to Exhibit 4B
to Form 8 Amendment (Amendment No. 1)
dated August 3, 1988, amending Form 10
Registration Statement of the Company
dated June 17, 1988 (File No. 0-17005)]
4C Revolving Credit Agreement between DEKALB 53-96
Genetics Corporation and the banks listed
therein.
Other instruments with respect to long-term debt of
the Registrant are not filed because the total
amount of securities authorized under each such
instrument does not exceed 10% of the total assets
of the Registrant and its subsidiaries on a
consolidated basis and the Company agrees to
provide a copy to the Commission upon request.
<PAGE>
<PAGE>
(a)(3) Exhibits Page
(continued)
10A DEKALB Genetics Corporation Long- *
Term Incentive Plan [Incorporated
by reference to Exhibit 4A to Form S-8
Registration Statement No. 33-24875]**
10B Form of Indemnification Agreements *
[Attached as Exhibit D to Information Statement
contained in Form 8 Amendment (Amendment
No. 3) dated August 18, 1988, amending
Form 10 Registration Statement of the
Company dated June 17, 1988
(File No. 0-17005)]**
10C DEKALB Genetics Corporation Savings and *
Investment Plan [Incorporated by reference
to Exhibit 4.3 to Form S-8 (File No. 33-33305)
dated February 1, 1990]**
10D DEKALB Genetics Corporation Pension Plan** 97-150
10E Form of Long-Term Incentive Plan Agreement *
[Incorporated by reference to Exhibit 4B to
Form S-8 Registration Statement
(Registration No. 33-24875)]**
10F Director Stock Option Plan *
[Incorporated by reference to Exhibit 4.3 to
Form S-8 Registration Statement (Registration
No. 33-39986)]**
10G Employment Agreement between DEKALB Genetics *
Corporation and Bruce P. Bickner
[Dated September 1, 1993]**
10H Employment Agreement between DEKALB *
Genetics Corporation and Richard O. Ryan
[Dated September 1, 1993]**
10I Employment Agreement between DEKALB Genetics *
Corporation and Thomas B. Rice
[Dated September 1, 1993]**
<PAGE>
<PAGE>
(a)(3) Exhibits Page
(continued)
10J Employment Agreement between DEKALB Genetics *
Corporation and Byron D. Ford***
[Dated September 1, 1993]**
10K Employment Agreement between DEKALB Genetics *
Corporation and Roy L. Poage
[Dated September 1, 1993]**
11 Computation of Earnings Per Share 151
22 Subsidiaries of DEKALB Genetics Corporation 152
24 Consent 153
27 Financial Data Schedule _
* Document has heretofore been filed with the
Commission and is incorporated by reference.
** Document is a management contract or compensating
plan or arrangement.
*** Employment terminated on September 30, 1994.
(b) Reports on Form 8-K
No Form 8-K was filed during the three months ended August 31, 1994.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DEKALB GENETICS CORPORATION
Date: October 12, 1994 By: Bruce P. Bickner
Bruce P. Bickner
Chairman, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on this 12th day of October, 1994.
Signature Title
Richard O. Ryan President, Chief Operating Officer
Richard O. Ryan and Director
Thomas R. Rauman Vice President - Finance and
Thomas R. Rauman Chief Financial Officer
DIRECTORS
Charles J. Arntzen Allan Aves
Charles J. Arntzen Allan Aves
Paul F. Cornelson Tod R. Hamachek
Paul F. Cornelson Tod R. Hamachek
Paul H. Hatfield Charles C. Roberts
Paul H. Hatfield Charles C. Roberts
Douglas C. Roberts John T. Roberts
Douglas C. Roberts John T. Roberts
H. Blair White
H. Blair White
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of DEKALB Genetics Corporation:
Our report on the consolidated financial statements of DEKALB Genetics
Corporation is included elsewhere in this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedules listed in Item 14(a)(2) of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
October 12, 1994
<TABLE>
DEKALB Genetics Corporation
SCHEDULE V - PROPERTY, PLANT and EQUIPMENT
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes Balance at
Beginning Additions End of
Classification of Period at Cost Retirements Additions Deductions Period
<S> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Land.................... $9,054 $10 $93 $714 $5 $9,680
Buildings............... 79,396 2,379 128 1,240 57 82,830
Equipment............... 127,939 4,808 3,497 1,786 300 130,736
Other................... 10,478 310 8 365 37 11,108
Construction in progress 5,222 10,701 0 0 4,239 11,684
$232,089 $18,208 $3,726 $4,105 (a) $4,638 (a) $246,038
Year ended August 31, 1993:
Land.................... $7,120 $2,041 $25 $16 $98 $9,054
Buildings............... 69,095 2,577 451 10,090 1,915 79,396
Equipment............... 123,289 6,561 5,046 5,999 2,864 127,939
Other................... 9,788 545 219 807 443 10,478
Construction in progress 16,218 4,222 - - 15,218 5,222
$225,510 $15,946 $5,741 $16,912 (a) $20,538 (a,b,c) $232,089
Year ended August 31, 1992:
Land.................... $6,586 $159 $1,027 $1,402 - $7,120
Buildings............... 64,168 2,252 328 3,202 199 69,095
Equipment............... 116,334 7,265 4,494 6,593 2,409 123,289
Other................... 10,116 256 13 251 822 9,788
Construction in progress 9,376 11,405 - 4 4,567 16,218
$206,580 $21,337 $5,862 $11,452 (a,b,d) $7,997 (a) $225,510
Notes:
(a) Includes transfers between property classes.
(b) Includes $120, $2,021, and $676, resulting from translation of foreign assets for the years ended August 31, 1994, 1993,
and 1992, respectively.
(c) Includes $1,351 and $1,032 for the effect of the termination of direct operations in Spain and Australia, respectively.
(d) Includes $3,557 for the effect of consolidating Italian operations.
(e) Depreciation and amortization methods can be found under the captions "Property, Plant and Equipment", Note A of the
"Notes to Consolidated Financial Statements".
</TABLE>
<TABLE>
DEKALB Genetics Corporation
SCHEDULE VI - ACCUMULATED DEPRECIATION and
AMORTIZATION of PROPERTY, PLANT and EQUIPMENT
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes Balance at
Beginning End of
Classification of Period Additions Retirements Additions Deductions Period
<S> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Buildings............... $41,108 $2,565 $87 ($241) $40 $43,305
Equipment............... 90,902 7,153 3,085 73 149 94,894
Other................... 6,825 431 6 (28) 7 7,215
$138,835 $10,149 $3,178 ($196)(a) $196 (a,b) $145,414
Year ended August 31, 1993:
Buildings............... $39,392 $2,276 $232 $947 $1,275 $41,108
Equipment............... 89,561 7,267 4,455 561 2,032 90,902
Other................... 6,862 396 148 40 325 6,825
$135,815 $9,939 $4,835 $1,548 (a) $3,632 (a,b,c) $138,835
Year ended August 31, 1992:
Buildings............... $36,934 $1,976 $165 $676 $29 $39,392
Equipment............... 85,591 6,757 4,206 2,498 1,079 89,561
Other................... 6,742 362 9 306 539 6,862
$129,267 $9,095 $4,380 $3,480 (a,b,d) $1,647 (a) $135,815
<FN>
Notes:
(a) Includes transfers between property classes.
(b) Includes $76, $1,469, and $368 resulting from translation of foreign assets for the years ended August 31, 1994, 1993,
and 1992, respectively.
(c) Includes $536 and $711 for the effect of the termination of direct operations in Spain and Australia, respectively.
(d) Includes $2,125 for the effect of consolidating Italian operations.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
SCHEDULE VIII - VALUATION and QUALIFYING ACCOUNT
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Deducted in the balance sheet
from the assets to which they
apply:
Allowance for doubtful accounts
and notes receivabl $1,660 $906 ($111)(a) $2,455
Year ended August 31, 1993:
Deducted in the balance sheet
from the assets to which they
apply:
Allowance for doubtful accounts
and notes receivabl $1,464 $949 $62 $815 (a)(b) $1,660
Year ended August 31, 1992:
Deducted in the balance sheet
from the assets to which they
apply:
Allowance for doubtful accounts
and notes receivabl $792 $648 - ($24)(a)(c) $1,464
<FN>
Notes:
(a) Uncollectible items written off, less recoveries of items previously written off.
(b) Includes $426 for the effect of the divestiture of Spain.
(c) Includes $74 for the effect of consolidating Italian operations in 1992.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
SCHEDULE IX - SHORT-TERM BORROWINGS
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance at Average Outstanding Outstanding Interest
Category of Aggregate End Interest During During Rate During
Short-Term Borrowings of Period Rates The Period The Period (d) The Period (e)
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994:
Bank Borrowings............ $42,610 4.0% $68,260 (b) $53,164 4.0 %
Non-U.S. Debt.............. 2,493 - (a) 10,801 6,664 - (a)
Year ended August 31, 1993:
Bank Borrowings............ $53,029 3.6% $70,079 (b) $54,183 (c) 3.6 %
Non-U.S. Debt.............. 2,068 - (a) 5,114 3,009 - (a)
Year ended August 31, 1992:
Bank Borrowings............ $25,450 3.9 % $40,102 (b) $29,712 (c) 5.3 %
Non-U.S. Debt.............. 674 - (a) 5,486 2,558 - (a)
<FN>
Notes:
(a) Non-U.S. debt is principally operating loans from banks from various time periods up to one year. These loans bear interest
generally at the various countries' equivalent of a bank prime rate.
(b) Bank borrowing is stated prior to reclassification of the short-term portion of long-term debt in accordance with refinancing
agreements.
(c) The average amount of bank borrowings is stated prior to reclassification of the short-term portion of long-term debt.
(d) The average amount of borrowings outstanding was based on a simple average of month end balances outstanding.
(e) The weighted average interest rate was computed by dividing actual interest expense by the average borrowings outstanding.
</TABLE>
<TABLE>
DEKALB Genetics Corporation
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Column A Column B
Charged to Costs
Description and Expenses
1994 1993 1992
<S> <S> <C> <C> <C>
1. Maintenance and repairs $3,871 $4,636 $3,768
5. Advertising costs $8,526 $7,754 $7,761
<FN>
Note
Items 2, 3 and 4 have been omitted as the amount did not exceed one percent of total sales and
</TABLE>
$50,000,000
CREDIT AGREEMENT
AMONG
DEKALB GENETICS CORPORATION
AND
HARRIS TRUST AND SAVINGS BANK
as Agent
AND
HARRIS TRUST AND SAVINGS BANK
CONTINENTAL BANK N.A.
NBD BANK, N.A.
as Lenders
Dated as of January 15, 1992
(As Amended)<PAGE>
TABLE OF CONTENTS
DEKALB GENETICS CORPORATION
CREDIT AGREEMENT
Section Page
1. THE REVOLVING CREDIT.......................................
1.1. Amount and Term.....................................
1.2. Revolving Credit Notes..............................
1.3. Applicable Interest Rates...........................
1.4. Bankers Acceptances.................................
1.5. Letters of Credit...................................
1.6. Reimbursement Obligation............................
1.7. Manner of Borrowing.................................
1.8. Maturity and Reborrowing of Loans...................
1.9. Participation in B/A's and L/C's....................
2. THE COMPETITIVE BID FACILITY...............................
2.1. Amount and Term....................................
2.2. Competitive Bid Requests...........................
2.3. Submission of Competitive Bids.....................
2.4. Notice of Bids.....................................
2.5. Acceptance or Rejection of Bids....................
2.6. Notice of Acceptance or Rejection of Bid...........
2.7. Restrictions on Competitive Advances...............
2.8. Minimum Amount.....................................
2.9. The Competitive Bid Notes..........................
2.10. Term of and Interest on Competitive Advances.......
2.11. Manner of Borrowing................................
2.12. Reliance on Telephonic Notices; Indemnity..........
2.13. Telephone Notices..................................
3. FEES, PREPAYMENTS, REDUCTIONS, AND TERMINATIONS............
3.1. Facility Fee.......................................
3.2. Agent's Fee........................................
3.3. Optional Prepayments...............................
3.4. Termination By Company.............................
3.5. Mandatory Prepayment-Commitment Reduction..........
4. PLACE AND APPLICATION OF PAYMENTS..........................
5. DEFINITIONS................................................
6. REPRESENTATIONS AND WARRANTIES.............................
6.1. Organization and Qualification.....................
6.2. Subsidiaries ......................................
6.3. Financial Reports..................................
6.4. Litigation; Tax Returns; Approvals.................
6.5. Regulation U.......................................
6.6. No Default.........................................
6.7. ERISA..............................................
6.8. Liens..............................................
7. CONDITIONS PRECEDENT.......................................
7.1. General............................................
7.2. Conditions to Initial Loan.........................
7.3. Conditions to Each Loan............................
7.4. Execution and Delivery.............................
7.5. Legal Documents....................................
7.6. Regulation U....................................... <PAGE>
<PAGE>
8. COVENANTS..................................................
8.1. Maintenance of Property............................
8.2. Taxes..............................................
8.3. Maintenance of Insurance...........................
8.4. Financial Reports..................................
8.5. Inspection.........................................
8.6. Consolidation and Merger...........................
8.7. Transactions with Affiliates.......................
8.8. Consolidated Net Working Capital...................
8.9. Consolidated Tangible Net Worth....................
8.10. Consolidated Funded Debt to Consolidated
Total Capital Ratio..............................
8.11. Consolidated Current Ratio.........................
8.12. Seasonal Clean-Up..................................
8.13. Negative Pledge....................................
8.14. Additional Indebtedness............................
8.15. Investments, Loans, Advances and Acquisitions......
8.16. Sale of Property...................................
8.17. Notice of Suit or Adverse Change in Business.......
8.18. ERISA..............................................
8.19. Use of Proceeds....................................
8.20. Conduct of Business and Maintenance of Existence...
8.21. Domestic Consolidated Subsidiaries to Guaranty Debt
9. EVENTS OF DEFAULT AND REMEDIES.............................
9.1. Definitions........................................
9.2. Remedies for Non-Bankruptcy Defaults...............
9.3. Remedies for Bankruptcy Defaults...................
9.4. L/C's and B/A's....................................
9.5. Expenses...........................................
10. CHANGE IN CIRCUMSTANCES REGARDING EURODOLLAR LOANS;
CAPITAL ADEQUACY........................................
10.1. Change of Law.....................................
10.2. Unavailability of Deposits or Inability to
Ascertain the Adjusted Eurodollar Rate............
10.3. Taxes and Increased Costs.........................
10.4. Funding Indemnity.................................
10.5. Lending Branch....................................
10.6. Discretion of Bank as to Manner of Funding........
10.7. Capital Adequacy..................................
11. THE AGENT.................................................
11.1. Appointment and Powers............................
11.2. Powers............................................
11.3. General Immunity..................................
11.4. No Responsibility for Loans, Recitals, etc........
11.5. Right to Indemnity................................
11.6. Action on Instructions of Banks...................
11.7. Employment of Agents and Counsel..................
11.8. Reliance on Documents; Counsel....................
11.9. May Treat Payee as Owner..........................
11.10. Agent's Reimbursement.............................
11.11. Rights as a Lender................................
11.12. Bank Credit Decision..............................
11.13. Resignation of Agent..............................
11.14. Duration of Agency................................ <PAGE>
<PAGE>
12. MISCELLANEOUS.............................................
12.1. Amendments and Waivers............................
12.2. Waiver of Rights..................................
12.3. Several Obligations...............................
12.4. Non-Business Day..................................
12.5. Documentary Taxes.................................
12.6. Representations...................................
12.7. Notices...........................................
12.8. Legal Fees........................................
12.9. Counterparts......................................
12.10. Successors and Assigns............................
12.11. Participations....................................
12.12. No Joint Venture..................................
12.13. Table of Contents and Headings....................
12.14. Confidentiality...................................
12.15. August 30, 1988 Credit Agreement.................. <PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
Continental Bank N.A.
Chicago, Illinois
NBD Bank, N.A.
Detroit, Michigan
Gentlemen:
The undersigned, DEKALB GENETICS CORPORATION, a Delaware corporation
(the "Company"), applies to you for your commitments, subject to all the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to make a revolving credit (the
"Revolving Credit") and a competitive bid facility (the "Competitive Bid
Facility") available to the Company, all as more fully hereinafter set
forth. Each of you is hereinafter referred to individually as "Bank" and
collectively as "Banks." Harris Trust and Savings Bank in its individual
capacity is sometimes referred to herein as "Harris," and in its capacity
as Agent for the Banks is hereinafter in such capacity called the "Agent."
1. THE REVOLVING CREDIT.
1.1. Amount and Term. (a) The maximum aggregate principal amount
of all loans under the Revolving Credit at any one time outstanding plus
the amount available for drawing under the B/A's, L/C's and Competitive
Advances (each as hereinafter defined) shall not exceed the Banks'
Commitments (as hereinafter defined) in effect from time to time during
the term of this Agreement and shall be available to the Company, may be
availed of by the Company from time to time, be repaid (subject to the
restrictions on prepayment set forth herein) and used again, during the
period from the date hereof to and including December 31, 1995 (such date,
as extended from time to time pursuant to Section 1.1(d) of this Agreement
is hereinafter sometimes referred to as the "Termination Date"). The
Revolving Credit shall consist of a base revolving credit (the "Base
Credit") in an aggregate principal amount at any one time outstanding of
up to $20,000,000, which shall be available to the Company at all times,
and an excess revolving credit (the "Excess Credit") in an aggregate
principal amount at any one time outstanding of up to $30,000,000, which
shall be available to the Company during each Excess Commitment Period
designated pursuant to Section 1.1(e) of this Agreement.
(b) The respective maximum aggregate principal amounts of the Base
Credit at any one time outstanding which each Bank by its acceptance
hereof severally agrees to make available to the Company are as follows
(collectively, the "Banks' Base Commitments" and individually, a "Bank's
Base Commitment"):
Harris Trust and Savings Bank $10,000,000 50%
Continental Bank N.A. $ 6,000,000 30%
NBD Bank, N.A. $ 4,000,000 20%<PAGE>
<PAGE>
The respective maximum aggregate principal amounts of the Excess
Credit at any one time outstanding which each Bank by its acceptance
hereof severally agrees to make available to the Company during each
Excess Commitment Period are as follows (collectively, the "Banks' Excess
Commitments" and individually a "Bank's Excess Commitment"):
Harris Trust and Savings Bank $15,000,000 50%
Continental Bank N.A. $ 9,000,000 30%
NBD Bank, N.A. $ 6,000,000 20%
The Bank's Base Commitment and Bank's Excess Commitment for each
Bank are hereinafter referred to collectively as the "Bank's Commitment"
for each Bank, and the Banks' Base Commitments and Banks' Excess
Commitments for all Banks are hereinafter collectively referred to as the
"Banks' Commitments".
(c) All loans made under the Revolving Credit shall be made under
the Base Credit until the aggregate principal amount of all loans
outstanding equals or exceeds the Banks' Base Commitments, and all loans
which, together with the principal amount of all other loans outstanding
hereunder exceed the Banks' Base Commitments, shall be made under the
Excess Credit. All loans under the Base Credit shall be made from each
Bank in proportion to its respective Base Commitment as above set forth
and all loans under the Excess Credit shall be made from each Bank in
proportion to its respective Excess Commitment as above set forth. The
Company may elect that each loan made hereunder be made available by
either a Base Rate Loan or Eurodollar Loan, it being understood that one
or more of such loans may be outstanding at the same time. Each Base Rate
Loan shall be in an amount not less than $2,000,000 or such greater amount
which is an integral multiple of $200,000. Each Eurodollar Loan shall be
in an amount not less than $5,000,000 or such greater amount which is an
integral multiple of $1,000,000.
(d) The Company may on or before the close of business on the last
Business Day of November, 1992, request the Banks to extend the
Termination Date to December 31, 1995. Not later than the close of
business on the last Business Day in December, 1992 (such date and the
last Business Day in December of the second calendar year before the
Termination Date from time to time in effect are referred to herein as the
"Extension Response Date"), the Banks shall give written notice to the
Company, with a copy to the Agent, of their willingness or unwillingness
to extend the Termination Date then in effect, and the Banks' failure to
respond to any such request by the applicable Extension Response Date
shall be deemed to indicate the Banks' unwillingness to extend the
Termination Date then in effect. The Company acknowledges and agrees that
nothing contained herein obligates any Bank to extend the Termination Date
and that each Bank in its sole discretion may refuse to do so. The
Termination Date may be further extended from time to time in the same
manner, each request for an extension to be given by the Company no later
than the last Business Day in November of the second calendar year before
the Termination Date then in effect and each response due from the Banks
by the close of business on the next succeeding Extension Response Date.
Each such extension of the Termination Date shall be for a one-year period
from the Termination Date in effect on the date the Company requested an
extension thereof.<PAGE>
<PAGE>
(e) The Company may, during each calendar year during the term
hereof and upon 3 Business Days prior written notice to the Agent,
designate a period during which the Banks' Excess Commitments shall be in
effect. Each such period (an "Excess Commitment Period") shall commence
on October 31, November 30 or December 31, as specified in the notice
given by the Company to the Agent pursuant to this Section 1.1(e), and
shall end on the last day of the sixth month following the month in which
such Excess Commitment Period began. In the event that the Company fails
to designate any Excess Commitment Period by November 30 of any year,
there shall automatically be an Excess Commitment Period commencing on the
following December 31 and ending on the following June 30.
1.2. Revolving Credit Notes. All loans under the Revolving Credit
(whether made under the Base Credit or the Excess Credit) made by each
Bank hereunder shall be evidenced by a single Revolving Credit Note of the
Company substantially in the form of Exhibit A hereto (individually, a
"Revolving Credit Note" and together, the "Revolving Credit Notes")
payable to the order of each Bank in the principal amount of such Bank's
maximum commitment, but the aggregate principal amount of indebtedness
evidenced by such Revolving Credit Note at any time shall be, and the same
is to be determined by, the aggregate principal amount of all loans made
by such Bank to the Company pursuant hereto on or prior to the date of
determination less the aggregate amount of principal repayments received
by or on behalf of such Bank on or prior to such date of determination.
Each Revolving Credit Note shall be dated as of the execution date of this
Agreement, shall be delivered concurrently herewith, and shall be
expressed to mature as provided in Section 1.8 and to bear interest as
provided in Section 1.3 hereof. Each Bank shall record on its books or
records or on a schedule to its Revolving Credit Note the amount of each
loan made by it hereunder, whether the loan is a Base Rate Loan or
Eurodollar Loan, all payments of principal and interest and the principal
balance from time to time outstanding, whether the loan is outstanding
under the Base Credit or the Excess Credit, and, in respect of any
Eurodollar Loan, the interest rate and the Interest Period applicable
thereto, provided that prior to transfer of such Revolving Credit Note all
such amounts shall be recorded on the schedule to such Revolving Credit
Note. The record thereof, whether shown on such books or records or on
the schedule to the Revolving Credit Note, shall be prima facie evidence
as to all such amounts; provided, however, that the failure of any Bank to
record any of the foregoing shall not limit or otherwise affect the
obligation of the Company to repay all loans made hereunder together with
accrued interest thereon. Upon the request of any Bank, the Company will
furnish a new Revolving Credit Note to such Bank to replace its
outstanding Revolving Credit Note and at such time the first notation
appearing on the schedule on the reverse side of, or attached to, such
Revolving Credit Note shall set forth the aggregate unpaid principal
amount of Base Rate Loans and Eurodollar Loans, as the case may be, then
outstanding. Such Bank will cancel the outstanding Revolving Credit Note
upon receipt of the new Revolving Credit Note.
1.3. Applicable Interest Rates. (a) All Base Rate Loans hereunder
shall bear interest (computed on the basis of a year of 360 days and
actual days elapsed) on the unpaid principal amount thereof from the date
such loan is made until maturity (whether by acceleration or otherwise) at
a rate per annum equal to the Base Rate from time to time in effect,
payable quarterly in arrears on the last Business Day of March, June,
September and December in each year, commencing on the first of such dates
occurring after the date hereof, and at maturity (whether by acceleration
or otherwise), provided that if a request made pursuant to Section 12.11
hereof is in effect, all Base Rate Loans shall bear interest at a rate per
<PAGE>
<PAGE>
annum equal to the sum of the Base Rate plus .25%. If any payment of
principal or interest on any Base Rate Loans hereunder is not made when
due (including any payment due upon acceleration), the unpaid principal
balance of all Base Rate Loans hereunder shall bear interest (computed on
the basis of a year of 360 days and actual days elapsed) from the date
such payment was due until paid in full, payable on demand, at a rate per
annum equal to the sum of 2% plus the Base Rate from time to time in
effect.
"Base Rate" means a fluctuating interest rate per annum at all times
equal to: the rate of interest announced by Harris Trust and Savings Bank
from time to time as its prime commercial rate with any change in such
rate resulting from a change in said prime commercial rate to be effective
as of the date of the relevant change in said prime commercial rate (the
"Harris Prime Rate"), provided, that if the rate per annum determined by
adding 1/2 of 1% to the rate at which Harris would offer to sell federal
funds in the interbank market on or about 10:00 A.M. (Chicago time) on any
day (the "Adjusted Fed Funds Rate") shall be higher than the Harris Prime
Rate on such day, then the Base Rate for such day and for any succeeding
day which is not a Business Day shall be such Adjusted Fed Funds Rate.
The determination of the Adjusted Fed Funds Rate by Harris shall be final
and conclusive provided it has acted in good faith in connection
therewith.
The term "Base Rate Interest Period" shall mean with respect to Base
Rate Loans, the period commencing on the date the relevant Base Rate Loan
is made and concluding on the date 90 days thereafter; provided, however,
that (i) no Interest Period for any Base Rate Loan made under the
Revolving Credit may extend beyond the Termination Date and (ii) the
Company shall, to the extent necessary to comply with Section 3.5 hereof
in connection with the reduction of the Banks' Commitments on the last day
of each Excess Commitment Period, select an Interest Period for a portion
of the Base Rate Loan requested by it such that the sum of the Base Rate
Loans outstanding on the day after the last day of each Excess Commitment
Period plus the aggregate principal amount of all B/A's, L/C's and
Eurodollar Loans outstanding, if any, with Interest Periods ending on or
prior to such date is equal to the reduction in the Banks' Commitments
that shall take place on such date.
(b) Each Eurodollar Loan shall bear interest (computed on the
basis of a year of 360 days and actual days elapsed) on the unpaid
principal amount thereof from the date such Loan is made until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the
sum of the Eurodollar Margin plus the Adjusted Eurodollar Rate, payable on
the last day of each Euro-Interest Period and at maturity (whether by
acceleration or otherwise) and, with respect to any Euro-Interest Period
in excess of three months, on the date occurring every three months after
the date such Loan is made. If any payment of principal or interest on
any Eurodollar Loan is not made when due, such Loan shall bear interest
(computed on the basis of a year of 360 days and actual days elapsed) from
the date such payment was due until paid in full, payable on demand, at a
rate per annum equal to the sum of 2% plus the rate of interest in effect
thereon at the time of such default until the end of the Interest Period
then applicable thereto, and, thereafter, at a rate per annum equal to the
sum of 2% plus the Base Rate from time to time in effect.<PAGE>
<PAGE>
"Adjusted Eurodollar Rate" means a rate per annum determined
pursuant to the following formula:
Eurodollar Rate
Adjusted Eurodollar Rate = 100% - Reserve Percentage
"Euro-Interest Period" means with respect to the Eurodollar Loans,
the period used for the computation of interest commencing on the date the
relevant Eurodollar Loan is made and concluding on the date one, two,
three or six months thereafter, at the Company's option, with any
subsequent Euro-Interest Period commencing on the last day of the
immediately preceding Euro-Interest Period and concluding one, two, three
or six months thereafter, at the Company's option; provided, however, that
no Euro-Interest Period for any Eurodollar Loan made under the Revolving
Credit may extend beyond the Termination Date. Notwithstanding the
foregoing, if in order to comply with Section 3.5 below in connection with
the reduction of the Banks' Commitments on the last day of each Excess
Commitment Period, the portion of the requested Eurodollar Loan which is
required to have an Interest Period ending on the date of such reduction
would be less than $5,000,000, or in the event none of the available
Euro-Interest Periods would end on such date, then such portion of the
requested Eurodollar Loan shall, to the extent necessary to comply with
Section 3.5 on such date, be made available to the Company as a Base Rate
Loan with an appropriate Interest Period to comply with such provisions
(unless the Required Banks shall, in their sole discretion, agree to a
lesser minimum amount for such portion or to an Interest Period maturing
on such date, as the case may be). For purposes of determining a
Euro-Interest Period, a month means a period starting on one day in a
calendar month and ending on a numerically corresponding day in the next
calendar month, provided, however, that if there is no numerically
corresponding day in the month in which a Euro-Interest Period is to end
or if a Euro-Interest Period begins on the last day of a calendar month,
then such Euro-Interest Period shall end on the last Banking Day of the
calendar month in which such Euro-Interest Period is to end.
"Eurodollar Margin" means (i) one-half of one percent (0.5%) per
annum for any period during which no request made by the Company pursuant
to Section 12.11 is in effect, and (ii) three-quarters of one percent
(0.75%) per annum for any period during which a request made by the
Company pursuant to Section 12.11 is in effect.
"Eurodollar Rate" means for each Euro-Interest Period the rate of
interest per annum as determined by the Agent (rounded upwards, if
necessary, to the nearest whole multiple of 1/8 of 1%) at which deposits
of United States dollars in immediately available and freely transferable
funds would be offered at 9:00 A.M. Chicago time two Banking Days' prior
to the commencement of such Euro-Interest Period by the principal Nassau
office of Harris to major banks in the interbank market upon request by
such major banks for delivery on the first day of, and for a period equal
to, such Euro-Interest Period and in an amount equal to the principal
amount of the Eurodollar Loan scheduled to be outstanding during such
Euro-Interest Period. Each determination of the Eurodollar Rate made by
the Agent in accordance with this paragraph shall be prima facie evidence
thereof.
"Reserve Percentage" means the daily arithmetic average maximum rate
at which reserves (including, without limitation, any supplemental,
marginal and emergency reserves) are imposed on member banks of the
Federal Reserve System during the applicable Euro-Interest Period by the
Board of Governors of the Federal Reserve System (or any successor) under<PAGE>
<PAGE>
Regulation D on "eurocurrency liabilities" (as such term is defined in
Regulation D), subject to any amendments of such reserve requirement by
such Board or its successor, taking into account any transitional
adjustments thereto. For purposes of this definition, the Eurodollar
Loans shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit or credit for any prorations, exemptions or
offsets under Regulation D.
(c) If any payment of any amount, other than any principal of or
interest on any Loan, payable by the Company hereunder is not paid when
due, such amount shall bear interest from the day such amount was due
until it is paid in full at the post-default rate set forth in Section
1.3(a) with respect to Base Rate Loans.
1.4. Bankers Acceptances. Subject to all the terms and conditions
hereof, satisfaction of all conditions precedent to borrowing under this
Agreement and so long as no Potential Default or Event of Default is in
existence, Harris in its discretion may create acceptances in an amount of
at least $1,000,000 or such greater amounts which are integral multiples
of $500,000 (a "B/A" and collectively the "B/A's") for the Company within
the limits of, and subject to availability under the Revolving Credit, and
the Banks hereby agree to participate therein as more fully described in
Section 1.9 hereof. Each B/A shall be created pursuant to the General
Acceptance Agreement (the "B/A Agreement") in the form of Exhibit B hereto
and an Acceptance Request in Harris' standard form at the time such B/A is
requested with respect to such draft presented to Harris for acceptance
hereunder. To provide the Company with immediate cash for the B/A's
created hereunder, Harris agrees to discount such B/A's at the then
current bankers acceptance rate for B/A's on which Harris is the acceptor
and to credit the proceeds of such discounting to the Company's account at
Harris. The face amount of each B/A created and outstanding pursuant
hereto shall be deducted from the credit which may be otherwise available
under the Revolving Credit. In consideration of the creation of B/A's,
the Company agrees to pay Harris standard fees and charges as in effect
from time to time (the "B/A Issuance Fees") plus an acceptance commission
for each B/A computed at the rate of one-half of one percent (0.5%) per
annum (computed on the basis of a 360 day year and actual days elapsed)
multiplied by the face amount of the B/A (the "B/A Commission"). Each B/A
shall have a term of 30, 60 or 90 days (but ending not later than the
Termination Date), and shall be an acceptance eligible for discount with
Federal Reserve Banks in accordance with paragraph 7A of Section 13 of the
Federal Reserve Act and regulations and interpretations applicable
thereto. The Company shall present to Harris evidence of such eligibility
satisfactory to Harris, and Harris may in its sole discretion determine
that any B/A is not acceptable to Harris for any reason. The Agent shall
notify the other Banks of any B/A issued hereunder as soon as possible
thereafter.
1.5. Letters of Credit. Subject to all the terms and conditions
hereof, satisfaction of all conditions precedent to borrowing under this
Agreement and so long as no Potential Default or Event of Default is in
existence, Harris shall issue letters of credit (an "L/C" and collectively
the "L/C's") for the account of the Company subject to availability under
the Revolving Credit, and the Banks hereby agree to participate therein as
more fully described in Section 1.9. Each L/C shall be issued pursuant to
an Application for Letter of Credit (the "L/C Agreement") in the form of
Exhibit C hereto. The L/C's shall consist of standby letters of credit
and documentary trade letters of credit in an aggregate face amount not to
exceed $15,000,000. Each L/C shall have an expiry date not more than one
year from the date of issuance thereof (but in no event later than the
Termination Date). The amount available under each L/C issued pursuant
hereto, shall be deducted from the credit otherwise available under the<PAGE>
<PAGE>
Revolving Credit. In consideration of the issuance of L/C's the Company
agrees to pay Harris a fee in the amount of one-half of one percent (0.5%)
per annum (computed on the basis of a 360 day year and actual days
elapsed) of the face amount for any documentary trade letter of credit and
in the amount of one-half of one percent (0.5%) per annum (computed on the
basis of a 360 day year and actual days elapsed) of the face amount of any
standby L/C, all such fees to be payable on the date of issuance of an L/C
hereunder and on the date of each extension, if any, of the expiry date of
each L/C. In addition, the Company shall pay to Harris, for Harris' own
account, Harris' scheduled fees and charges in connection with the
issuance of each L/C. The Agent shall notify the other Banks of any L/C
issued hereunder as soon as possible thereafter.
1.6. Reimbursement Obligation. The Company is obligated, and
hereby unconditionally agrees, to pay in immediately available funds to
the Agent for the account of Harris the face amount of (i) each B/A
created by Harris hereunder not later than 11:00 A.M. (Chicago Time) on
the maturity date of such B/A, and (ii) each draft drawn and presented
under an L/C issued by Harris hereunder (the obligation of the Company
under this Section 1.6 with respect to any B/A or L/C is a "Reimbursement
Obligation"). If at any time the Company fails to pay any Reimbursement
Obligation when due, the Company shall be deemed to have requested a Base
Rate Loan from the Banks hereunder, as of the maturity date of such
Reimbursement Obligation, the proceeds of which loans shall be used to
repay such Reimbursement Obligation. Such loan shall only be made if no
Potential Default or Event of Default shall exist and shall be subject to
availability under the Revolving Credit. If such loan is not made by the
Banks for any reason, the unpaid amount of such Reimbursement Obligation
shall be due and payable to Harris upon demand and shall bear interest at
the default rate of interest specified in Section 1.3(a) hereof.
1.7. Manner of Borrowing. (a) The Company shall give telephonic,
telex or telegraphic notice to the Agent (which notice shall be
irrevocable once given and shall be promptly confirmed in writing) by no
later than 10:00 A.M. (Chicago time) on the date at least two (2) Banking
Days prior to the date of each Eurodollar Loan which the Banks are
requested to make or relend. The Company shall give telephonic, telex or
telegraphic notice to the Agent (which notice shall be promptly confirmed
in writing) no later than 10:00 A.M. (Chicago time) on the date the Banks
are requested to make a Base Rate Loan. Each such notice shall specify
the date of the Loan requested (which shall be a Banking Day in the case
of any Eurodollar Loan and a Business Day in the case of any Base Rate
Loan), the amount of such Loan or the amount to be reborrowed, as the case
may be, whether the Loan is to be made available by means of a Base Rate
Loan or Eurodollar Loan and the Interest Period applicable thereto. The
Company agrees that the Agent may rely on any such telephonic, telex or
telegraphic notice given by any person it reasonably believes is one of
the persons specified by the Company in writing to the Agent as a person
authorized to give such notice without the necessity of independent
investigation and in the event any notice by such means conflicts with the
written confirmation, such notice shall govern if any Bank has acted in
reliance thereon. The Agent shall give prompt telephonic, telex or
telegraphic (if telephonic, to be confirmed in writing within two Business
Days) notice of the receipt of notice from the Company hereunder to each
of the Banks and, if such notice requests the Banks to make any Eurodollar
Loans the Agent shall confirm to the Company by telephonic, telex or
telegraphic means, which confirmation shall be conclusive and binding on
the Company in the absence of manifest error, the interest rate applicable
to each Eurodollar Loan promptly after such rate is determined by the
Agent.<PAGE>
<PAGE>
(b) Subject to the provisions of Section 7 hereof, the proceeds of
each Loan shall be made available to the Company at the principal office
of the Agent in Chicago, Illinois, in immediately available funds, except
to the extent such Loan represents the reborrowing of a Loan previously
made to the Company, in which case each Bank shall record such reborrowing
on the schedule to the Note held by it, or in lieu thereof, on its books
and records, and shall effect such reborrowing on behalf of the Company in
accordance with the provisions of Section 1.8(a) hereof. Not later than
12:00 Noon Chicago time (or in the case of any Loans for which same day
notification is permitted, by 3:00 P.M. Chicago time), on the date
specified for any Loan to be made hereunder, each Bank shall make its
portion of such Loan available to the Company in immediately available
funds at the principal office of the Agent, except as otherwise provided
above with respect to repaying any outstanding Loans through a
reborrowing.
(c) Unless the Agent shall have been notified by a Bank prior to
the date of a Loan to be made by such Bank (which notice shall be
effective upon receipt) that such Bank does not intend to make the
proceeds of such Loan available to the Agent, the Agent may assume that
such Bank has made such proceeds available to the Agent on such date and
the Agent may in reliance upon such assumption (but shall not be required
to) make available to the Company a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such
Bank, the Agent shall be entitled to receive such amount on demand from
such Bank (or, if such Bank fails to pay such amount forthwith upon such
demand, to recover such amount from the Company) together with interest
thereon in respect of each day during the period commencing on the date
such amount was made available to the Company and ending on the date the
Agent recovers such amount, at a rate per annum equal to the effective
rate charged to the Agent for overnight Federal funds transactions with
member banks of the Federal Reserve System for each day, as determined by
the Agent (or, in the case of a day which is not a Business Day, then for
the preceding Business Day). Nothing in this Section 1.7(c) shall be
deemed to permit any Bank to breach its obligations to make Loans under
the Revolving Credit, or to limit the Company's claims against any Bank
for such breach.
1.8. Maturity and Reborrowing of Loans. (a) Each Loan shall mature
and become due and payable on the last day of the Interest Period
applicable thereto. Provided that the conditions set forth in Section 7.3
hereof have been met, the Company shall have the right, subject to the
other terms and conditions of this Agreement, to reborrow in whole or in
part (but, if in part, in the minimum amount specified for the type of
Loan in Section 1.1 hereof) through a new Loan the principal amount of any
maturing Loan (subject to the minimum borrowing amounts set forth in
Section 1.1(c) hereof) on the last day of the Interest Period and thereby
repay the principal amount of the outstanding Loan. Any such reborrowing
shall be effected by the Banks on behalf of the Company by making payment
of the principal amount of the maturing Loan from the proceeds of the
reborrowing Loan.
(b) In the event that the Company fails to give notice pursuant to
Section 1.7 hereof of the reborrowing of the principal amount of any
maturing Loan or, in the case of a Eurodollar Loan, fails to specify the
Interest Period applicable thereto then the principal amount of such Loan
shall be automatically reborrowed (and the Company shall be deemed to have
given notice requesting) a Base Rate Loan, subject to Section 7.3 and all
of the terms and conditions of this Agreement and the restrictions on the
applicable Interest Period contained in the definition of Base Rate
Interest Period, unless paid in full on the last day of the then
applicable Interest Period.<PAGE>
<PAGE>
1.9. Participation in B/A's and L/C's. Each of the Banks will
acquire a risk participation in each B/A upon the creation thereof and in
each L/C upon the issuance thereof. In the event any Reimbursement
Obligation is not immediately paid by the Company pursuant to Section 1.6
hereof, each Bank will put Harris in funds in an amount equal to such
Bank's ratable share of the unpaid amount of such Reimbursement Obligation
(based upon its proportionate share relative to its percentage of the
Revolving Credit (as set forth in Section 1.1 hereof)). At the election
of the Required Banks, such funding by the Banks of the unpaid
Reimbursement Obligations shall be treated as additional Base Rate Loans
to the Company hereunder rather than a purchase of participations by the
Banks in the related B/A's held by Harris. The obligation of the Banks to
Harris under this Section 1.9 shall be absolute and unconditional and
shall not be affected or impaired by any Event of Default or Potential
Default which may then be continuing hereunder. Harris shall notify each
Bank by telephone of its proportionate share relative to its participation
percentage of such unpaid Reimbursement Obligation. If such notice has
been given to each Bank by 12:00 Noon, Chicago time, each Bank agrees to
put Harris in immediately available and freely transferable funds on the
same Business Day. Funds shall be so made available at the account
designated by Harris in such notice to the Banks. Upon the election by
the Required Banks to treat such funding as additional Loans hereunder and
payment by each Bank, such amounts shall be deemed to be Base Rate Loans
by the Banks hereunder, and such Loans shall bear interest in accordance
with Section 1.3 hereof. Harris shall share with each Bank on a pro rata
basis relative to its percentage of the Revolving Credit (as set forth in
Section 1.1) a portion of any B/A Commission (other than the B/A Issuance
Fees) and any L/C commission fee payable by the Company. Any such fee
shall be promptly remitted to the Banks when and as received by Harris
from the Company.
2. THE COMPETITIVE BID FACILITY.
2.1. Amount and Term. The Company may from time to time before the
Termination Date request Competitive Bids from the Banks and the Banks may
make, at their sole discretion, Competitive Advances to the Company on the
terms and conditions set forth in this Agreement. Notwithstanding any
provision to the contrary contained in this Agreement, the aggregate
principal amount of all Competitive Advances outstanding hereunder at any
time together with the aggregate principal amount of all loans outstanding
under the Revolving Credit at such time plus the face amount of all B/A's
created and all L/C's issued hereunder shall not exceed the Banks'
Commitments from time to time in effect. The Company may request
Competitive Bids and the Banks may, in their discretion make such
Competitive Bids on the terms and conditions set forth in this Section 2.
2.2. Competitive Bid Requests. In order to request Competitive
Bids, the Company shall give telephonic notice to be received by the Agent
no later than 11:00 A.M., Chicago time, one Business Day before the day
(which must be a Business Day) on which a proposed Competitive Advance is
to be made (the "Borrowing Date"), followed on the same day by a duly
completed Competitive Bid Request Confirmation in the form of Exhibit F
hereto to be received by the Agent not later than 11:30 A.M., Chicago
time. Competitive Bid Request Confirmations that do not conform
substantially to the format of Exhibit F shall be rejected and the Agent
shall give telephonic notice to the Company of such rejection promptly
after it determines (which determination shall be conclusive) that a
Competitive Bid Request Confirmation does not substantially conform to the
format of Exhibit F. Competitive Bid Requests shall in each case refer to
this Agreement and specify (x) the proposed Borrowing Date (which shall be
a Business Day), (y) the aggregate principal amount thereof (which shall<PAGE>
<PAGE>
not be less than $1,000,000 and shall be an integral multiple of
$1,000,000), and (z) up to three Competitive Bid Interest Periods (which
must be of no less than 7 and no more than 180 days duration and which may
not end after the Termination Date) with respect to the entire amount
specified in such Competitive Bid Request. Upon receipt by the Agent of
a Competitive Bid Request Confirmation which conforms substantially to the
format of Exhibit F attached hereto, the Agent shall invite, by telephone
promptly confirmed in writing in the form of Exhibit G attached hereto,
the Banks to bid, on the terms and conditions of this Agreement, to make
Competitive Advances pursuant to the Competitive Bid Request.
2.3. Submission of Competitive Bids. Each Bank may, in its sole
discretion, make one or more Competitive Bids to the Company responsive
to each Competitive Bid Request. Each Competitive Bid by a Bank must be
received by the Agent by telephone not later than 8:45 A.M., Chicago time,
on the Borrowing Date, promptly confirmed in writing by a duly completed
Confirmation of Competitive Bid substantially in the form of Exhibit H
attached hereto to be received by the Agent no later than 9:00 A.M.,
Chicago time; provided, however, that any Competitive Bid made by Harris
must be made by telephone to the Company no later than 8:30 A.M., Chicago
time, and confirmed by telecopier to the Company no later than 8:45 A.M.,
Chicago time, on the proposed Borrowing Date. Competitive Bids which do
not conform precisely to the terms of this Section 2.3. may be rejected by
the Agent and the Agent shall notify the Bank submitting such Competitive
Bid of such rejection by telephone as soon as practicable after
determining that the Competitive Bid does not conform precisely to the
terms of this Section 2.3. Each Competitive Bid shall refer to this
Agreement and specify (x) the maximum principal amount (which shall not be
less than $1,000,000 and shall be an integral multiple of $1,000,000) of
the Competitive Advance that the Bank is willing to make to the Company,
(y) the Yield (which shall be computed on the basis of a 360-day year and
actual days elapsed and for a period equal to the Competitive Bid Interest
Period applicable thereto) at which the Bank is prepared to make the
Competitive Advance and (z) the Competitive Bid Interest Period applicable
thereto. The Agent shall reject any Competitive Bid if such Competitive
Bid (i) does not specify all of the information specified in the
immediately preceding sentence, (ii) contains any qualifying, conditional,
or similar language, (iii) proposes terms other than or in addition to
those set forth in the Competitive Bid Request to which it responds, or
(iv) is received by the Agent later than 8:45 A.M., Chicago time. Any
Competitive Bid submitted by a Bank pursuant to this Section 2.3 shall be
irrevocable and shall be promptly confirmed in writing in the form of
Exhibit H attached hereto; provided that in all events the telephonic
Competitive Bid received by the Agent shall be binding on the relevant
Bank and shall not be altered, modified, or in any manner affected by any
inconsistent terms contained in, or missing from, the Bank's Confirmation
of Competitive Bid.
2.4. Notice of Bids. The Agent shall give telephonic notice to the
Company not later than 9:15 A.M., Chicago time, on the proposed Borrowing
Date of the number of Competitive Bids made, the Yield with respect to
each proposed Competitive Advance, the Competitive Bid Interest Period
applicable thereto and the maximum principal amount of each Competitive
Advance in respect of which a Competitive Bid was made and the identity of
the Bank making each bid. The Agent shall send a summary of all
Competitive Bids received by the Agent to the Company as soon as
practicable after receipt of a Competitive Bid from each Bank that has
made a Competitive Bid.<PAGE>
<PAGE>
2.5. Acceptance or Rejection of Bids. The Company may in its sole
and absolute discretion, subject only to the provisions of this Section,
irrevocably accept or reject, in whole or in part, any Competitive Bid
referred to in Section 2.4 above. No later than 9:45 A.M., Chicago time,
on the proposed Borrowing Date, the Company shall give telephonic notice
to the Agent of whether and to what extent it has decided to accept or
reject any or all the Competitive Bids referred to in Section 2.4 above,
which notice shall be promptly confirmed in writing to be received by the
Agent on the proposed Borrowing Date; provided, however, that (x) no
Competitive Bid shall be accepted for a Competitive Advance in a minimum
principal amount of less than $1,000,000, (y) the Company shall accept
bids solely on the basis of ascending Yields, (z) if the Company declines
to borrow, or it is restricted by other conditions hereof from borrowing,
the maximum principal amount of Competitive Advances in respect of which
bids at such Yield have been made, then the Company shall accept a pro
rata portion of each bid made at the same Yield, based as nearly as
possible on the ratio of the maximum aggregate principal amounts of
Competitive Advances for which each such bid was made (provided that if
the available principal amount of Competitive Advances to be so allocated
is not sufficient to enable Competitive Advances to be so allocated to
each such Bank in a minimum principal amount of $1,000,000 and integral
multiples of $1,000,000, the Company shall select which banks will be
allocated such Competitive Advances and will round allocations up or down
to the next higher or lower multiple of $1,000,000 as it shall deem
appropriate), and (w) the aggregate principal amount of all Competitive
Bids accepted by the Company shall not exceed the amount contained in the
related Confirmation of Competitive Bid Request. A telephonic notice
given by the Company pursuant to this Section 2.5 shall be irrevocable and
shall not be altered, modified or in any other manner affected by any
inconsistent terms contained in, or terms missing from, any written
confirmation of such notice.
2.6. Notice of Acceptance or Rejection of Bid. The Agent shall
promptly give telephonic notice to the Banks whether or not their
Competitive Bids have been accepted (and if so, in what amount and at what
Yield) on the proposed Borrowing Date, and each successful bidder will
thereupon become bound, subject to Section 7 and the other applicable
conditions hereof, to make the Competitive Advance in respect of which its
bid has been accepted. Each Bank so bound shall notify the Agent upon
making the Competitive Advance. As soon as practicable on each Borrowing
Date, the Agent shall notify each Bank of the Aggregate principal amount
of all Competitive Advances made pursuant to a Competitive Bid Request on
such Borrowing Date, the Competitive Bid Interest Period(s) applicable
thereto and the highest and lowest Yields at which such Competitive
Advances were made for each Competitive Bid Interest Period.
2.7. Restrictions on Competitive Advances. A Competitive Advance
shall not be made if an Event of Default or Potential Default shall have
occurred and be continuing on the date on which such Competitive Advance
is to be made, and no more than 6 Competitive Bids may be requested during
any calendar month and the Company may not request Competitive Bids within
three Business Days of any other request for Competitive Bids.
2.8. Minimum Amount. Each Competitive Advance made to the Company
on any date shall be in an integral multiple of $1,000,000 and in a
minimum aggregate principal amount of $1,000,000. Competitive Advances
shall be made in the amounts accepted by the Company in accordance with
Section 2.5.<PAGE>
<PAGE>
2.9. The Competitive Bid Notes. The Competitive Advances made by
each Bank to the Company shall be evidenced by a Competitive Note, duly
executed on behalf of the Company, dated the date of this Agreement and in
substantially the form attached hereto as Exhibit I with the blanks
appropriately filled, payable to the order of such Bank in a principal
amount of $50,000,000. The outstanding principal balance of each
Competitive Advance, as evidenced by a Competitive Note, shall be payable
at the end of every Competitive Bid Interest Period applicable to such
Competitive Advance. Each Competitive Note shall bear interest from the
date of the first Competitive Advance evidenced by such Competitive Note
on the outstanding principal balance thereof as set forth in Section 2.10
below. Each Bank shall record on its books or records or on a schedule to
its Competitive Note the amount of each Competitive Advance made by it
hereunder, all payments of principal and interest and the principal
balance from time to time outstanding, and the interest rate and the
Competitive Bid Interest Period applicable thereto, provided that prior to
transfer of such Competitive Note all such amounts shall be recorded on
the schedule to such Competitive Note. The record thereof, whether shown
on such books or records or on the schedule to the Competitive Note, shall
be prima facie evidence as to all such amounts; provided, however, that
the failure of any Bank to record any of the foregoing shall not limit or
otherwise affect the obligation of the Company to repay all Competitive
Advances made hereunder together with accrued interest thereon.
2.10. Term of and Interest on Competitive Advances. Each
Competitive Advance shall bear interest during the Competitive Bid
Interest Period applicable thereto at a rate per annum equal to the rate
of interest offered in the Competitive Bid therefor submitted by the Bank
making such Competitive Advance and accepted by the Company pursuant to
Section 2.5. above. The principal amount of each Competitive Advance,
together with all accrued interest thereon, shall be due and payable on
the last day of the Competitive Bid Interest Period applicable thereto.
If any payment of principal or interest on any Competitive Advance is not
made when due, such Competitive Advance shall bear interest (computed on
the basis of a year of 360 days and actual days elapsed) from the date
such payment was due until paid in full, payable on demand, at a rate per
annum equal to the sum of 2% plus the rate of interest in effect thereon
at the time of such default until the end of the Competitive Bid Interest
Period then applicable thereto, and, thereafter, at a rate per annum equal
to the sum of 2% plus the Base Rate from time to time in effect.
2.11. Disbursement of Competitive Advances.
(a) Subject to the provisions of Section 7 hereof, the proceeds of
each Competitive Advance shall be made available to the Company at the
principal office of the Agent in Chicago, Illinois, in immediately
available funds. Not later than 12:00 Noon, Chicago time, on the date
specified for any Competitive Advance to be made hereunder, each Bank
which is bound to make such Competitive Advance pursuant to Section 2.6
hereof shall make its portion of such Competitive Advance available to the
Company in immediately available funds at the principal office of the
Agent in Chicago, Illinois.
(b) Unless the Agent shall have been notified by a Bank no later
than Noon, Chicago time, on the proposed Borrowing Date and receipt of
such notice has been acknowledged by the Agent (which notice shall be
effective upon receipt) that such Bank does not intend to make the
proceeds of such Competitive Advance available to the Agent, the Agent may
assume that such Bank has made such proceeds available to the Agent on
such date and the Agent may in reliance upon such assumption (but shall
not be required to) make available to the Company a corresponding amount.
If such corresponding amount is not in fact made available to the Agent by
<PAGE>
<PAGE>
such Bank, the Agent shall be entitled to receive such amount on demand
from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand, to recover such amount from the Company) together with
interest thereon in respect of each day during the period commencing on
the date such amount was made available to the Company and ending on the
date the Agent recovers such amount, at a rate per annum equal to the
effective rate charged to the Agent for overnight Federal funds
transactions with member banks of the Federal Reserve System for each day,
as determined by the Agent (or, in the case of a day which is not a
Business Day, then for the preceding Business Day). Nothing in this
Section 2.11(b) shall be deemed to permit any Bank to breach its
obligations to make Competitive Advances hereunder, or to limit the
Company's claims against any Bank for such breach.
2.12. Reliance on Telephonic Notices; Indemnity. (a) The Company
agrees that the Agent may rely on any telephonic notice referred to in
this Section 2 and given by any person the Agent reasonably believes is
authorized to give such notice without the necessity of independent
investigation, and in the event any such telephonic notice conflicts with
any written confirmation thereof, or in the event written confirmation of
any such notice is not received by the Agent, such telephonic notice shall
govern if the Agent or any Bank has acted in reliance thereon. The
Agent's books and records shall be prima facie evidence of all of the
matters set forth in Sections 2.2, 2.3, 2.4., 2.5 and 2.6 hereof.
(b) The Company hereby agrees to indemnify and hold the Agent
harmless from and against any and all claims, damages, losses, liabilities
or expenses, including court costs and legal expenses, paid or incurred by
the Agent in connection with any action the Agent may take, or fail to
take, in reliance upon and in accordance with any telephonic or telecopied
notice received by the Agent as described in this Section 2.
(c) The Banks hereby agree to indemnify and hold the Agent
harmless from and against any and all claims, damages, losses, liabilities
and expenses, including court costs and legal expenses, paid or incurred
by the Agent in connection with any action the Agent may take, or fail to
take, in reliance upon and in accordance with any telephonic notice
received by the Agent as described in this Section 2, to the extent the
Agent is not promptly reimbursed therefor by the Company.
2.13. Telephonic Notice. Each Bank's telephonic notice to the
Agent of its Competitive Bid pursuant to Section 2.3, and the Company's
telephonic acceptance of any offer contained in a Competitive Bid pursuant
to Section 2.5, shall be irrevocable and binding on such Bank and the
Company, as applicable, and shall not be altered, modified, or in any
other manner affected by any inconsistent terms contained in, or missing
from, any written confirmation of such telephonic notice. It is
understood and agreed by the parties hereto that the Agent shall be
entitled to act, or to fail to act, hereunder in reliance on its records
of any telephonic notices provided for herein and that the Agent shall not
incur any liability to any Person in so doing if its records conflict with
any written confirmation of a telephone notice or otherwise, provided that
the Agent has acted, or failed to act, in good faith. It is further
understood and agreed by the parties hereto that the times of day as set
forth in this Section 2 are for the convenience of all the parties for
providing notices and that no party shall incur any liability or other
responsibility for any failure to provide such notices within the
specified times; provided, however, that the Agent shall have no
obligation to notify the Company of any Competitive Bid received by it
later than 8:45 A.M., Chicago time, on any proposed Borrowing Date, and no
acceptance by the Company of any offer contained in a Competitive Bid
shall be effective to bind any Bank to make a Competitive Advance, nor
shall the Agent be under any obligation to notify any Person of an<PAGE>
<PAGE>
acceptance, if notice of such acceptance is received by the Agent later
than 9:45 A.M., Chicago time, on the proposed Borrowing Date.
3. FEES, PREPAYMENTS, REDUCTIONS, AND TERMINATIONS.
3.1. Facility Fee. (a) For the period from the date hereof to and
including the Termination Date or such earlier date on which the Revolving
Credit is terminated in whole pursuant to Section 3.4 hereof, the Company
shall pay to the Agent for the pro rata account of the Banks a facility
fee at the rate of 3/16 of 1% per annum (computed on the basis of a year
of 360 days and actual days elapsed) on the Banks' Base Commitments
hereunder for all Banks, such fee to be payable quarterly in arrears on
the last Business Day of each March, June, September and December
commencing with the first such date occurring after the date hereof unless
the Revolving Credit is terminated in whole by the Banks or the Company on
an earlier date, in which event the facility fee for the final period
shall be paid on the date of such earlier termination in whole.
(b) For the period from the date hereof to and including the
Termination Date or such earlier date on which the Revolving Credit is
terminated in whole pursuant to Section 3.4 hereof, the Company shall pay
to the Agent for the pro rata account of the Banks a facility fee at the
rate of (i) 3/16 of 1% per annum (computed on the basis of a year of 360
days and actual days elapsed) on the Banks' Excess Commitment hereunder
for all Banks during each Excess Commitment Period occurring during the
term hereof and (ii) 1/8% per annum (computed on the basis of a year of
360 days and actual days elapsed) at all times other than during any such
Excess Commitment Period, of the Banks' Excess Commitments for all Banks,
such fee to be payable quarterly in arrears on the last Business Day of
each March, June, September and December commencing with the first such
date occurring after the date hereof unless the Revolving Credit is
terminated in whole by the Banks or the Company on an earlier date, in
which event the facility fee for the final period shall be paid on the
date of such earlier termination in whole.
3.2. Agent's Fee. The Company shall pay to and for the sole
account of the Agent fees in the amounts and at the times agreed upon by
the Company and the Agent. Such fee payments shall be in addition to any
fees and charges the Agent may be entitled to receive under Section 11
hereof or under the other Loan Documents.
3.3. Optional Prepayments. (a) The Company shall have the
privilege of prepaying any Base Rate Loan without premium or penalty and
in whole or in part (but if in part, then in a principal amount of
$2,000,000 or an integral multiple of $200,000 in excess thereof) at any
time upon prior telex or telephonic notice prior to 10:00 A.M. Chicago
time to the Agent.
(b) The Company may prepay any Eurodollar Loan, upon two Business
Days prior notice, but only on the last day of the Interest Period
applicable thereto; provided however, that any such prepayment shall be in
a principal amount of no less than $5,000,000 or such greater amount which
is an integral multiple of $1,000,000 and after giving effect to any such
prepayment the outstanding principal amount of any such Eurodollar Loan
prepaid in part shall not be less than $5,000,000 or such greater amount
which is an integral multiple of $1,000,000. Any such prepayment shall be
effected by payment of the principal amount to be prepaid and accrued
interest thereon to the end of the Interest Period applicable to such
Loan, plus any amount payable under Section 10.4 hereof.<PAGE>
<PAGE>
(c) The Company may not prepay any Competitive Advance.
(d) Any prepayments of loans under the Revolving Credit made
pursuant to this Section shall be applied first to prepay loans
outstanding under the Excess Credit and then to loans outstanding under
the Base Credit.
3.4. Termination By Company. The Company shall have the option at
any time to terminate the Revolving Credit in whole or in part (but if in
part in a minimum amount of $5,000,000 or such greater amount as is an
integral multiple of $1,000,000) upon 30 days written notice to the Agent.
Any such termination in part shall also proportionately reduce each Bank's
Base Commitment and each Bank's Excess Commitment under this Agreement.
Upon such termination, Loans and Reimbursement Obligations outstanding
hereunder in an aggregate principal amount equal to the amount by which
all Loans and Reimbursement Obligations then outstanding exceed the
Revolving Credit in effect after such termination will become due and
payable on the effective date of such termination without notice to the
Company, notwithstanding anything to the contrary contained herein or in
the Notes.
3.5. Mandatory Prepayment-Commitment Reduction. In the event that
the aggregate principal amount of all loans and Competitive Advances plus
the amount then available to be drawn under all L/C's outstanding plus the
amount of all B/A's outstanding hereunder at any time during the term of
this Agreement exceeds the amount of the Banks' Commitments then in
effect, the Company will make such payments on any outstanding loans and
pledge and deliver to the Agent for the benefit of the Banks cash
collateral in an amount equal to the aggregate amount of all outstanding
Competitive Advances and Reimbursement Obligations to the extent necessary
to eliminate such excess within 3 days after the occurrence thereof.
4. PLACE AND APPLICATION OF PAYMENTS.
All payments of principal, interest and fees made by the Company in
respect of the Notes shall be made to the Agent at its office at 111 West
Monroe Street, Chicago, Illinois 60690, and in funds there current, for
the ratable benefit of the Banks and any other holder of the Notes no
later than 11:00 A.M. Chicago time on the date such payment is due or as
the Banks may otherwise direct. Any payments received after 11:00 A.M.
Chicago time (or after the time the Banks may otherwise direct) shall be
deemed received upon the following Business Day. The Agent shall remit to
each Bank its proportionate share of each payment of principal, interest
and fees received by the Agent by 3:00 P.M. Chicago time on the same day
of its receipt and its proportionate share of each such payment received
by the Agent after 11:00 A.M. on the Business Day following its receipt by
the Agent. The Company hereby authorizes Harris to automatically debit
its account with Harris for any principal, interest and fees when due
under the Notes or this Agreement and to transfer the amount so debited
from such account to the Agent for application as herein provided. All
proceeds of Collateral shall be applied in the manner specified in the
applicable Pledge Agreement.
5. DEFINITIONS.
The terms hereinafter set forth when used herein shall have the
following meanings:
5.1. The term "Affiliate" shall mean any person, firm or
corporation which, directly or indirectly controls, or is controlled by,
or is under common control with, the Company. As used in this Section 5.1
<PAGE>
<PAGE>
the term "controls" (including the terms "controlled by" and "under common
control with") shall have the meaning given in Section 5.17.
5.2. The term "Adjusted Eurodollar Rate" has the meaning specified
in Section 1.3(b) hereof.
5.3. The term "B/A Agreement" has the meaning specified in Section
1.4 hereof.
5.4. The terms "Banks' Commitment" and "Bank's Commitment" shall
have the meanings set forth in Section 1.1 hereof.
5.5. The term "Banking Day" shall mean a day on which banks are
open for business in London, England and Chicago, Illinois and other than
a Saturday or Sunday and dealing in United States Dollar deposits in
London, England and Nassau, Bahamas.
5.6. The terms "Base Rate Loan" and "Base Rate Loans" shall mean an
advance or advances made hereunder bearing interest as provided in Section
1.3(a) hereof.
5.7. The term "Business Day" shall mean any day, except Saturday or
Sunday, on which banks are generally open for business in Chicago,
Illinois and Detroit, Michigan.
5.8. The term "Collateral" shall mean all collateral security
provided to the Agent for the benefit of the Banks pursuant to all Pledge
Agreements.
5.9. The term "Competitive Advance" shall mean an advance from a
Bank to the Company pursuant to the binding procedures described in
Section 2 hereof.
5.10. The term "Competitive Bid" shall mean an offer by a Bank to
make a Competitive Advance pursuant to Section 2 hereof.
5.11. The term "Competitive Bid Interest Period" shall mean as to
any Competitive Advance the period commencing on the day on which a
Competitive Advance is made and ending on the date on which such
Competitive Advance is scheduled to mature.
5.12. The term "Competitive Bid Request" shall mean a request made
by the Company pursuant to Section 2.2 hereof.
5.13. The term "Competitive Note" shall mean a promissory note of
the Company delivered to a Bank pursuant to Section 2.9, and the term
"Competitive Notes" shall mean all such promissory Notes collectively.
5.14. The term "Consolidated Net Working Capital" shall mean the
excess for all Qualified Affiliates, the Company and its Consolidated
Subsidiaries of its Current Assets over its Current Liabilities (including
without limitation amounts borrowed and outstanding hereunder), all as
determined and computed in accordance with generally accepted accounting
principles consistently applied.
5.15. The term "Consolidated Tangible Net Worth" shall mean the
amount of capital stock accounts (less the amount of any treasury stock)
plus (or minus in the case of a deficit) the amount of surplus and
retained earnings accounts, appropriately adjusted (without duplication)
to reflect reserves maintained under FASB Number 52, of all Qualified
Affiliates, the Company and its Consolidated Subsidiaries, and minus the
total amount of all intangible assets of all Qualified Affiliates, the<PAGE>
<PAGE>
Company and its Consolidated Subsidiaries (including, without limitation,
unamortized debt discount and expense, trade names, trademarks, patents,
copyrights, deferred charges and goodwill) and minus all minority
interests in any Consolidated Subsidiaries without duplication of
deductions if already deducted in arriving at retained earnings and
surplus, all as determined in accordance with generally accepted
accounting principles consistently applied.
5.16. The term "Consolidated Total Capital" shall mean the sum of
Consolidated Tangible Net Worth plus Funded Debt plus all items which in
accordance with generally accepted accounting principles consistently
applied may be properly classified as deferred income taxes of all
Qualified Affiliates, the Company and its Consolidated Subsidiaries.
5.17. The term "Control" or "Controlled By" or "Under Common
Control" shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through
ownership of voting securities, by contract or otherwise); provided that,
in any event any Person which beneficially owns, directly or indirectly,
10% or more (in number of votes) of the securities having ordinary voting
power for the election of directors of a corporation shall be conclusively
presumed to control such corporation.
5.18. The term "Current Assets" of any Person shall mean the
aggregate amount of assets of such Person which in accordance with
generally accepted accounting principles may be properly classified as
current assets after deducting adequate reserves where proper.
5.19. The term "Current Liabilities" of any Person shall mean (i)
all Debt (and, with respect to the Company, including without limitation
the Company's indebtedness under this Agreement and the Notes and all Debt
of its Consolidated Subsidiaries, all Qualified Affiliates) of such Person
due on demand or within one year from the date of determination thereof;
and (ii) all other items (including taxes accrued as estimated) which, in
accordance with generally accepted accounting principles, may be properly
classified as current liabilities.
5.20. The term "Debt" of any Person shall mean as of any time the
same is to be determined, the aggregate of (i) all liabilities, reserves
and any other items which would be classified as a liability on a balance
sheet in accordance with generally accepted accounting principles, (ii)
all Guaranties, endorsements (other than any liability arising out of the
endorsement of items for deposit or collection in the ordinary course of
business) and other contingent obligations in respect of, or any
obligations to purchase or otherwise acquire, indebtedness of others, and
the aggregate amount of rentals or other consideration payable under all
leases and other agreements for the use, acquisition or retention of real
or personal property of a nature such that payments due thereunder may
under generally accepted accounting principles in effect on the date
hereof be included in a balance sheet of the lessee and must be
capitalized, (iii) all indebtedness and liabilities secured by any lien or
any security interest on any Property or assets of such Person, whether or
not the same would be classified as a liability on a balance sheet, but
excluding all general contingency reserves and reserves for deferred
income taxes and investment credit, and with respect to Debt of the
Company, all computed and determined on a consolidated basis for all
Qualified Affiliates, the Company and its Subsidiaries after the
elimination of intercompany items in accordance with generally accepted
accounting principles consistently applied.<PAGE>
<PAGE>
5.21. The term "Domestic Consolidated Subsidiary" shall mean any
Domestic Subsidiary whose accounts are consolidated with those of the
Company in accordance with generally accepted accounting principles.
5.22. The term "Domestic Subsidiary" shall mean any Subsidiary
organized and existing under the laws of any state of the United States or
the District of Columbia.
5.23. The term "Euro-Interest Period" has the meaning specified in
Section 1.3(b) hereof.
5.24. The term "Eurodollar Loan" or "Eurodollar Loans" shall mean
an advance or advances made hereunder bearing interest as specified in
Section 1.3(b) hereof.
5.25. The term "Eurodollar Margin" has the meaning specified in
Section 1.3(b) hereof.
5.26. The term "Eurodollar Rate" has the meaning specified in
Section 1.3(b) hereof.
5.27. The term "Event of Default" shall mean any event or condition
identified as such in Section 9.l hereof, and the term "Potential Default"
shall mean any event or condition which, with the lapse of time, or giving
of notice, or both, would constitute such an Event of Default.
5.28. The term "Excess Commitment Period" is defined in Section
1.1(e) hereof.
5.29. The term "Funded Debt," with respect to any Person shall mean
all Debt of such Person and with respect to the Company shall mean the sum
of the amount of the Base Credit in effect from time to time (whether or
not any Loans, B/As or L/Cs are outstanding hereunder) plus all Debt,
other than the Company's indebtedness under this Agreement and the Notes,
of all Qualified Affiliates, the Company and its Consolidated
Subsidiaries, in each case maturing by its terms more than one year after,
or which is renewable or extendable at the option of such Person for a
period ending one year or more after the date of determination, and shall
include Debt of such maturity created, assumed or guaranteed by such
Person either directly or indirectly, including obligations of such
maturity secured by liens upon Property of such Person and upon which such
entity customarily pays the interest, and all rental payments under
capitalized leases of such maturity, except the Subordinated Debt (as
defined in Section 8.14(k) of this Agreement).
5.30. The term "Guarantor Subsidiary" shall mean any Domestic
Consolidated Subsidiary that has executed and delivered to the Banks a
Subsidiary Guaranty.
5.31. The term "Guaranty" shall mean all endorsements, guaranties,
and all other obligations, contingent or otherwise, which in effect
guaranty any indebtedness, dividend or other obligation of any other
Person in any manner, whether by agreement to purchase the indebtedness of
any other Person or through the purchase of goods, supplies or services,
or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advances or
loans, but excluding endorsements and guaranties in the ordinary course of
business of negotiable instruments for deposit and collection.
5.32. The term "Interest Period" shall mean any of the Base Rate
Interest Period or the Euro-Interest Period, unless the context in which
such term is used otherwise requires.<PAGE>
<PAGE>
5.33. The term "Inventory" shall mean all raw materials, work in
process, finished goods, and goods held for sale or lease or furnished or
to be furnished under contracts of service in which the Company now has or
hereafter acquires any right.
5.34. The term "L/C Agreement" has the meaning specified in Section
1.5 hereof.
5.35. The terms "Loan" or "Loans" shall mean Base Rate Loans and
Eurodollar Loans, unless the context in which such term is used otherwise
requires, and the term "type" of Loan shall mean each of the foregoing
Loans.
5.36. The term "Loan Documents" shall mean this Agreement, the
Notes, the B/A Agreement, the Pledge Agreements, the Subsidiary Guaranties
and the L/C Agreements.
5.37. The terms "Note" and "Notes" shall mean any Revolving Credit
Note or Revolving Credit Notes and any Competitive Note or Competitive
Notes.
5.38. The term "Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, cooperative association,
institution, entity, party or government (whether national, federal,
state, provincial, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or
department thereof).
5.39. The term "Pledge Agreement" shall mean any Pledge Agreement
substantially in the form of Exhibit E attached hereto executed and
delivered by the Company to the Banks and the term "Pledge Agreements"
shall mean all such Pledge Agreements.
5.40. The term "Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible.
5.41. The term "Qualified Affiliate" shall mean any partnership in
which the Company is a general partner or any other joint venture in which
the Company has an equity interest and which satisfies all of the
following requirements:
(a) it is organized and existing under the laws of any state of the
United States or the District of Columbia;
(b) it is controlled by the Company;
(c) its accounts are consolidated with those of the Company in
accordance with generally accepted accounting principles;
(d) it is a party to a Qualified Credit Agreement with the Company
and has issued its Qualified Promissory Note to the Company thereunder;
and
(e) its Qualified Promissory Note and Qualified Credit Agreement
shall be assigned and pledged to the Agent for the benefit of the Banks
pursuant to a Pledge Agreement executed and delivered by the Company and
with respect to which the Agent shall have received a legal opinion of
counsel to the Company acceptable in form and substance to the Agent.<PAGE>
<PAGE>
5.42. The term "Qualified Credit Agreement" shall mean any written
agreement between the Company and any partnership in which the Company is
a partner or other joint venture in which the Company has an equity
interest and which provides for loans and advances to be made by the
Company to such partnership or joint venture and for the repayment of such
loans and advances to the Company upon demand or on such other terms and
conditions as shall be acceptable to the Required Banks, but in no event
later than the Termination Date.
5.43. The term "Qualified Promissory Note" shall mean a promissory
note of a partnership in which the Company is a general partner or other
joint venture in which the Company has an equity interest issued pursuant
to a Qualified Credit Agreement to evidence such partnership's or joint
venture's indebtedness to the Company thereunder and which is payable to
the order of the Company, expressed to be payable on demand or on such
other terms as shall be acceptable to the Required Banks, but in no event
later than the Termination Date, which expressly states that it may be
pledged to the Agent for the benefit of the Banks as collateral security
for the Notes of the Company issued under this Agreement and that it may
be declared immediately due and payable by the Agent upon realizing
thereon, and which is otherwise acceptable in form and substance to the
Required Banks.
5.44. The term "Reimbursement Obligation" shall have the meaning
specified in Section 1.6 hereof.
5.45. The term "Required Banks" shall mean, with respect to this
Agreement, any Bank or Banks which in the aggregate hold at least 66-2/3%
of the aggregate unpaid principal balance of the Revolving Credit Notes
or, if no Loans are outstanding under the Revolving Credit Notes, any Bank
or Banks in the aggregate having at least 65% of the Banks' Commitments.
5.46. The term "Reserve Percentage" has the meaning specified in
Section 1.3(b) hereof.
5.47. The terms "Revolving Credit Note" and "Revolving Credit
Notes" have the meanings specified in Section 1.2 hereof.
5.48. The term "Subsidiary" shall mean collectively any corporation
or other entity at least a majority of the outstanding voting shares of
which is at the time owned directly or indirectly by any Qualified
Affiliate, the Company and/or its Subsidiaries. The term "Consolidated
Subsidiary" shall mean any Subsidiary whose accounts are consolidated with
those of the Company in accordance with generally accepted accounting
principles.
5.49. The term "Subsidiary Guaranty" shall mean any Guaranty
Agreement substantially in the form attached hereto as Exhibit D executed
and delivered by a Subsidiary to the Banks and the term "Subsidiary
Guaranties" shall mean all such Guaranty Agreements.
5.50. The term "Termination Date" has the meaning specified in
Section 1.1(a) hereof.
5.51. The term "Yield" shall mean the effective rate of interest to
the Company specified in a Competitive Bid with regard to a proposed
Competitive Advance.
5.52. Any accounting term or the character or amount of any asset
or liability or item of income or expense or any consolidation or other
accounting computation required to be determined under this Agreement,<PAGE>
<PAGE>
shall be determined or made in accordance with generally accepted
accounting principles at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of
this Agreement. If there should be any material change in generally
accepted accounting principles after the date hereof which materially
affects the financial covenants in this Agreement, the Parties hereto
shall negotiate in good faith to revise such covenants.
6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Banks as follows:
6.1. Organization and Qualification. The Company is a corporation
duly organized and existing under the laws of the state of Delaware, has
full and adequate corporate power to carry on its business as now
conducted, is duly licensed or qualified in all jurisdictions wherein the
nature of its activities requires such licensing or qualifying, has full
right and authority to enter into this Agreement and the other Loan
Documents, to make the borrowings herein provided for, to issue the Notes
in evidence thereof, and to perform each and all of the matters and things
herein and therein provided for; and this Agreement does not, nor does the
performance or observance by the Company or its Subsidiaries of any of the
matters or things provided for in the Loan Documents, contravene any
provision of law or any charter or by-law provision or any covenant,
indenture or agreement of or affecting the Company or its Subsidiaries or
any of their respective properties.
6.2. Subsidiaries. Each Domestic Subsidiary is wholly-owned by the
Company (except for directors' qualifying shares), is duly organized and
existing under the laws of the jurisdiction of its incorporation, has full
and adequate corporate power to carry on its business as now conducted and
is duly licensed or qualified in all jurisdictions wherein the nature of
its business requires such licensing or qualification. As of the date
hereof, the Company's only Domestic Subsidiaries are DEKALB Poultry
Research, Inc., a Delaware corporation, DEKALB Poultry Enterprises, Inc.,
a Delaware corporation, DEKALB Swine Breeders, Inc., a Delaware
corporation, Algona Swine Genetics, Inc., a Delaware corporation, DEKALB
Holdings, Inc., a Delaware corporation, and DEKALB Foreign Sales
Corporation, a Virgin Island Corporation.
6.3. Financial Reports. The Company has heretofore delivered to
the Banks a copy of the Audit Report as of August 31, 1991, of the Company
and the Subsidiaries and the audited consolidated and consolidating
financial statements (including a balance sheet and profit and loss
statement) of the Company and its Subsidiaries as of, and for the period
ending August 31, 1991. Such financial statements have been prepared in
accordance with generally accepted accounting principles on a basis
consistent, except as otherwise noted therein, with that of the previous
fiscal year or period and fairly reflect the financial position of the
Company and its Consolidated Subsidiaries as of the dates thereof, and the
results of their operations for the periods covered thereby. The Company
and the Subsidiaries have no material known contingent liabilities other
than as indicated on said financial statements and since said date of
August 31, 1991, there has been no material adverse change in the
condition, financial or otherwise, of the Company or its Subsidiaries nor
any changes, except those occurring in the ordinary course of business or
disclosed to the Bank, prior to the date of this Agreement. The Company
has disclosed to the Banks in writing any and all facts known to the
Company and which the Company believes materially and adversely affect the
<PAGE>
<PAGE>
business, operations and condition, financial and otherwise, of the
Company and its Subsidiaries and the Company's and its Subsidiaries'
ability to perform their respective obligations under the Loan Documents.
6.4. Litigation; Tax Returns; Approvals. There is no litigation or
governmental proceeding pending, nor to the knowledge of the Company
threatened, against the Company, or any Subsidiary for which there is a
reasonable possibility of an adverse determination, which such adverse
determination would result in any material adverse change in the
properties, business or operations of the Company or any Subsidiary. All
United States federal income tax returns for the Company and its
Subsidiaries required to be filed have been filed on a timely basis, and
all amounts required to be paid as shown by said returns have been paid.
There are no pending or threatened objections to or controversies in
respect of the United States federal income tax returns of the Company and
its Subsidiaries for any fiscal year, for which there is a reasonable
possibility of an adverse determination, which such adverse determination
would result in any material adverse change in the properties, business or
operations of the Company of any Subsidiary. No authorization, consent,
license, exemption or filing or registration with any court or
governmental department, agency or instrumentality, is or will be
necessary to the valid execution, delivery or performance by the Company
and the Subsidiaries of the Loan Documents.
6.5. Regulation U. The Company will use the proceeds of each loan
and other extension of credit by the Banks hereunder only for general
corporate purposes. The Company and its Subsidiaries are not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System) and no part of the proceeds of any loan
hereunder will be used to purchase or carry any margin stock or to extend
credit to others for such a purpose.
6.6. No Default. As of the date of this Agreement, the Company is
in full compliance with all of the terms and conditions of this Agreement,
and no Potential Default or Event of Default is existing under this
Agreement.
6.7. ERISA. The Company and each Subsidiary are in compliance in
all material respects with the Employee Retirement Income Security Act of
1974 to the extent applicable to them and have received no notice to the
contrary from the Pension Benefit Guaranty Corporation or any other
governmental entity or agency.
6.8. Liens. There are no security interests, liens or encumbrances
on any of the Property of the Company, or any Domestic Subsidiary except
such as are permitted by Section 8.13 hereof.
7. CONDITIONS PRECEDENT.
The obligation of the Banks to make any loan under the Revolving
Credit, Harris' obligation to create any B/A or issue any L/C pursuant
hereto and each Bank's obligation to make any Competitive Advance pursuant
to Section 2.6 hereof shall be subject to the following conditions
precedent:
7.1. General. With respect to any loan, Competitive Advance, L/C
or B/A, the Agent shall have received the notice and the Notes hereinabove
provided for.
7.2. Conditions to Initial Loan. Prior to the initial loan
hereunder, the creation of the initial B/A hereunder, the issuance of the<PAGE>
<PAGE>
initial L/C hereunder, or the initial Competitive Advance hereunder the
Company shall have delivered to the Agent in sufficient counterparts for
distribution to the Banks:
(a) an executed B/A Agreement substantially in the form of Exhibit
B attached hereto;
(b) an executed Guaranty Agreement substantially in the form of
Exhibit D attached hereto from each Domestic Consolidated Subsidiary.
7.3. Conditions to Each Loan. As of the time of the making or
reborrowing of each loan and Competitive Advance hereunder, the creation
of each B/A and the issuance of each L/C (including the initial loan,
Competitive Advance, B/A and L/C):
(a) each of the representations and warranties set forth in Section
6 hereof shall be and remain true and correct as of said time, except that
the representations and warranties made under Section 6.3 shall be deemed
to refer to the most recent financial statements furnished to the Agent
pursuant to Section 8.4 hereof; and
(b) the Company shall be in full compliance with all of the terms
and conditions hereof, and no Potential Default or Event of Default shall
have occurred and be continuing;
and the notice by the Company that any loan be made or relent (including
the notice deemed automatically given under Section 1.8(b)), as the case
may be, any B/A be created or any L/C be issued pursuant hereto and the
request by the Company for Competitive Bids pursuant to Section 2.2 hereof
shall be and constitute a warranty to the foregoing effects.
7.4. Execution and Delivery. Legal matters incident to the
execution and delivery of the Loan Documents shall be satisfactory to the
Banks and their legal counsel; and prior to the initial loan, Competitive
Advance, B/A or L/C hereunder, the Agent shall have received the favorable
written opinion of counsel for the Company, in the form of Exhibit J and
in substance satisfactory to the Banks and their legal counsel.
7.5. Legal Documents. The Agent shall have received copies
(executed or certified, as may be appropriate) of all legal documents or
proceedings taken in connection with the execution and delivery of the
Loan Documents to the extent the Banks or their legal counsel may
reasonably request.
7.6. Regulation U. After applying the proceeds of each Loan,
Competitive Advance, B/A or L/C requested by the Company hereunder, not
more than 25% of the value of the Company's assets subject to the
restrictions set forth in Sections 8.13 and 8.16 hereof constitute "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System.
8. COVENANTS.
It is understood and agreed that so long as credit is in use or
available under this Agreement or any amount remains unpaid on any Note,
Competitive Advance or Reimbursement Obligation, except to the extent
compliance in any case or cases is waived in writing by the Required
Banks:<PAGE>
<PAGE>
8.1. Maintenance of Property. The Company will, and will cause
each Qualified Affiliate and each Subsidiary to, keep and maintain all of
its Properties necessary or useful in its business in good condition, and
make all necessary renewals, replacements, additions, betterments and
improvements thereto; provided, however, that nothing in this Section
shall prevent the Company, any Qualified Affiliate or any Subsidiary from
discontinuing the operation and maintenance of any of its Properties if
such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business and not disadvantageous in any material respect to
the Banks as holders of the Notes.
8.2. Taxes. The Company will, and will cause each Qualified
Affiliate and each Subsidiary to, duly pay and discharge all taxes,
governmental assessments, governmental fees and governmental charges upon
or against the Company, such Qualified Affiliate or such Subsidiaries or
against its properties in each case before the same becomes delinquent and
before penalties accrue thereon unless and to the extent that the same is
being contested in good faith and by appropriate proceedings.
8.3. Maintenance of Insurance. The Company will, and will cause
each Qualified Affiliate and each Subsidiary to, self-insure (so long as
such self-insurance is administered in accordance with sound business
practices) or keep insured by financially sound and reputable insurers all
property of a character usually insured by corporations engaged in the
same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations
and carry such other insurance as is usually carried by corporations
engaged in the same or a similar business similarly situated, and, upon
request of the Agent, promptly supply a description in reasonable detail
of the risks against which such self-insurance is maintained, the amounts
thereof and such other information as the Agent shall request.
8.4. Financial Reports. The Company will furnish with reasonable
promptness to the Banks and their duly authorized representatives such
information respecting the business and financial condition of the
Company, its Subsidiaries, its Qualified Affiliates and as may be
reasonably requested and, without any request, will furnish to each Bank:
(a) as soon as available, and in any event within 45 days after the
close of each monthly fiscal period of the Company (except that the report
for the last monthly fiscal period in each fiscal year of the Company
shall be submitted at the same time as the Company's form 10-K is
submitted pursuant to 8.4(b)), three copies of the consolidated balance
sheet, profit and loss statement, statement of earnings, shareholders'
equity and changes in financial position for such monthly period and the
year to date of the Company, each Qualified Affiliate and each
Consolidated Subsidiary, and for the corresponding periods of the
preceding fiscal year setting forth in each case in comparative form the
corresponding figures for the comparable period in the preceding fiscal
year, all in reasonable detail, prepared by the Company and certified to
by the Company's chief financial officer, together with the consolidated
financial report of the Company, the Consolidated Subsidiaries, the
Qualified Affiliates and that is currently prepared as document 9P/CE of
the Company (together with any similar substitute or replacement document
if and when document 9P/CE is no longer prepared by the Company, herein
called the "9P/CE Report");
(b) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Company shall have filed with the Securities and Exchange Commission or
any governmental agency substituted therefor, or any national securities
exchange, including copies of the Company's form 10-K annual report,<PAGE>
<PAGE>
including financial statements prepared and certified by Coopers & Lybrand
or other independent public accountants of nationally recognized standing
selected by the Company and satisfactory to the Required Banks, and its
form 10-Q quarterly report to the Securities and Exchange Commission;
(c) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(d) from time to time such other information regarding the business
affairs and financial condition of the Company, the Qualified Affiliates
and the Subsidiaries and each other firm or company in which the Company
has a material investment (directly or indirectly) as any Bank (through
the Agent) may reasonably request for purposes of this Agreement; and
(e) each of the financial statements furnished to the Banks
pursuant to paragraphs (a) and (b) above shall be accompanied by a written
statement of the Company signed by its chief financial officer: (i) to
the effect that the signer thereof has re-examined the terms and
provisions of the Loan Documents and that to the best of his knowledge and
belief no Potential Default or Event of Default has occurred during the
period covered by such statements or, if any such Potential Default or
Event of Default has occurred during such period, setting forth the
description of such Potential Default or Event of Default and specifying
the action, if any, taken by the Company to remedy the same; and (ii)
setting forth the information and computations (in sufficient detail)
required to establish whether the Company was in compliance with the
requirements of Sections 8.8, 8.9, 8.10, 8.11, 8.12 and 8.22 during the
period covered by the financial statements then being furnished.
8.5. Inspection. The Company shall permit the Agent, by its
representatives and agents, to inspect any of the Properties, corporate
books and financial records of the Company, each Qualified Affiliate and
each Subsidiary, to examine and make copies of the books of accounts and
other financial records of the Company, each Qualified Affiliate and each
Subsidiary, and to discuss the affairs, finances and accounts of the
Company, and each Subsidiary with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals as the
Agent may designate.
8.6. Consolidation and Merger. The Company will not, and will not
permit any Qualified Affiliate or any Subsidiary to, consolidate with or
merge into any Person, or permit any other Person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the Property of the
other Person, or acquire substantially as an entirety the business of any
other Person, without the prior written consent of the Required Banks;
provided, however, that the foregoing shall not prevent the Company, any
Qualified Affiliate or any Subsidiary from being a party to any
consolidation or merger if after giving effect thereto:
a. either:
(1) The assets of the Company, Qualified Affiliate or
Subsidiary which is merged or consolidated are less than
5% of the Property of the Company, the Qualified
Affiliates and the Domestic Subsidiaries taken as a
whole, or<PAGE>
<PAGE>
(2) (a) the Company, a Qualified Affiliate or a Subsidiary,
as the case may be, is the surviving entity;
(b) in the case of a merger or consolidation to which
any Qualified Affiliate or any Subsidiary is a party,
the surviving entity's accounts are consolidated with
those of the Company in accordance with generally
accepted accounting principles; and
b. no Event of Default or Potential Default shall have occurred and
be continuing.
8.7. Transactions with Affiliates. The Company will not, and it
will not permit any Qualified Affiliate or any Subsidiary to, enter into
any transaction, including without limitation, the purchase, sale, lease
or exchange of any Property, or the rendering of any service, with any
Affiliate of the Company except in the ordinary course of and pursuant to
the reasonable requirements of the Company's (and Qualified Affiliates'
and Subsidiaries') business and upon fair and reasonable terms no less
favorable to the Company than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of the Company.
8.8. Consolidated Net Working Capital. The Company will maintain
Consolidated Net Working Capital in an amount not less than $45,000,000.
8.9. Consolidated Tangible Net Worth. The Company will maintain
Consolidated Tangible Net Worth in an amount not less than $60,000,000
through December 31, 1992, $65,000,000 through August 31, 1994,
$75,000,000 through August 3, 1995, and $80,000,000 at all times
thereafter.
8.10. Consolidated Funded Debt to Consolidated Total Capital Ratio.
The Company will not permit the ratio of Funded Debt of the Qualified
Affiliates, the Company and its Consolidated Subsidiaries to Consolidated
Total Capital to exceed 0.60 to 1 at any time.
8.11. Consolidated Current Ratio. The Company will maintain the
ratio of the Current Assets of the Qualified Affiliates, the Company and
its Consolidated Subsidiaries to the Current Liabilities of the Company
and its Consolidated Subsidiaries (the "Current Ratio") at not less than
1.25 to 1.0 at all times during each Excess Commitment Period during the
term hereof and 1.40 to 1 at all other times during the term hereof;
provided, however, that notwithstanding the foregoing, the Company will
maintain a Current Ratio of not less than 1.15 to 1.0 at all times from
September 1 through November 30 of each year.
8.12. Seasonal Clean-Up. For a period, to be designated by the
Company, of thirty consecutive days between June 1 and September 30 in
each calendar year during the term of this Agreement, the Company shall
not permit the aggregate principal amount of all Loans, Competitive
Advances, the face amount of all B/As and the undrawn available amounts of
all L/Cs outstanding hereunder to exceed the amount of the Base Credit.
8.13. Negative Pledge. The Company will not, and it will not
permit any Qualified Affiliate or any Domestic Subsidiary to, pledge,
mortgage or otherwise encumber or subject to or permit to exist upon or be
subjected to any lien, charge or security interest of any kind (including
any conditional sale or other title retention agreement and any lease in<PAGE>
<PAGE>
the nature thereof), on any of its Properties of any kind or character at
any time owned by the Company, any Qualified Affiliate or any Domestic
Subsidiary other than:
(a) liens, pledges or deposits for workmen's compensation,
unemployment insurance, old age benefits or social security obligations,
taxes, assessments, statutory obligations or other similar charges, good
faith deposits made in connection with tenders, contracts or leases to
which the Company, any Qualified Affiliate or any Domestic Subsidiary is
a party or other deposits required to be made in the ordinary course of
business, provided in each case the obligation secured is not overdue or,
if overdue, is being contested in good faith by appropriate proceedings
and adequate reserves have been provided therefor in accordance with
generally accepted accounting principles and that the obligation is not
for borrowed money, customer advances, trade payables or obligations to
agricultural producers;
(b) the pledge of Property for the purpose of securing an appeal or
stay or discharge in the course of any legal proceedings, provided that
the aggregate amount of liabilities of the Qualified Affiliates, the
Company and its Domestic Subsidiaries so secured by a pledge of Property
permitted under this subsection (b) including interest and penalties
thereon, if any, shall not be in excess of $1,000,000 (to be increased
incrementally by $1,000,000 on January 15, 1994, and each January 15
thereafter, provided, however, that the Required Banks' consent is
required to all additional liens once the aggregate of outstanding liens
exceeds $5,000,000) at any one time outstanding;
(c) liens, pledges, mortgages, security interests or other charges
existing on land, equipment and/or buildings to the extent they secure
Funded Debt incurred to finance the purchase of such property;
(d) liens on land, buildings and/or equipment existing at the time
of their acquisition or liens to secure the payment of all or any part of
the purchase price of such land, buildings and/or equipment or to secure
any Funded Debt incurred prior to, at the time of, or within 180 days
after the acquisition of such property for the purpose of financing all or
any part of the purchase price thereof, provided that any such liens shall
not encumber any other Property of the Company, any Qualified Affiliate or
any Domestic Subsidiary;
(e) liens on land, buildings and/or equipment of a corporation
existing at the time such corporation is purchased by, merged into or
consolidated with the Company or at the time of a sale, lease or other
disposition of the land, buildings and/or equipment of a corporation or
firm as an entirety or substantially as an entirety to the Company, or a
Domestic Subsidiary, provided that any such liens secure only Funded Debt
and shall not encumber any other Property of the Company, any Qualified
Affiliate or any Domestic Subsidiary;
(f) any lien created or incurred in connection with leases,
mortgages, conditional sales contracts, security interests or arrangements
for the retention of title entered into by the Company or any Domestic
Subsidiary to secure "industrial development bonds" as defined in Section
103(b)(2) of the Internal Revenue Code of 1986, as amended, and treated as
obligations described in legislation similar to the provisions of said
Sections of said Code enacted in any State of the United Stated or in
Puerto Rico, which are issued to finance property useful and intended to
be used in carrying on the business of the Company, provided that upon the
creation of any such lien the Company shall incur the Funded Debt secured
thereby in conformity with the provisions of Section 8.10;<PAGE>
<PAGE>
(g) liens on goods financed by a trade letter of credit having a
term of less than two years issued by any bank for the Company's account
to secure the Company's obligation to reimburse such bank for all amounts
drawn under the letter of credit issued to finance such goods, provided
that the undrawn amount of all such letters of credit outstanding at any
time shall not exceed $10,000,000;
(h) liens described in subsections (d) and (e) of this Section 8.13
which secure indebtedness for borrowed money which is not Funded Debt;
provided that the aggregate principal amount outstanding of such
indebtedness shall not exceed $2,000,000 at any time;
(i) liens on Property of the Company, any Domestic Subsidiary, any
Qualified Affiliate which secure the Notes;
(j) liens on Property of any Qualified Affiliate to secure its
Qualified Promissory Note;
(k) agister's liens on Property of any Domestic Subsidary, any
Qualified Affiliate.
8.14. Additional Indebtedness. The Company will not, nor will it
permit any Qualified Affiliate or any Domestic Subsidiary to, issue,
incur, assume, create or have outstanding any indebtedness for borrowed
money (including as such all indebtedness representing the deferred
purchase price of property and all contingent liabilities with respect to
letters of credit and banker's acceptances) or customer advances, other
than:
(a) indebtedness of the Company on the Notes;
(b) the liability of the Company, any Qualified Affiliate or any
Domestic Subsidiary arising out of the endorsement for deposit or
collection of commercial paper received in the ordinary course of
business;
(c) indebtedness (i) of the Company to any Guarantor Subsidiary or
(ii) of any Guarantor Subsidiary to the Company or another Guarantor
Subsidiary;
(d) indebtedness of the Qualified Affiliates, the Company and its
Domestic Subsidiaries existing on the date hereof and disclosed to the
Banks in the financial statements referred to in Section 6.3 hereof;
(e) Funded Debt;
(f) indebtedness for borrowed money of the Company, provided that
such indebtedness is unsecured, and is owed to a bank;
(g) trade payables of the Company, any Qualified Affiliates or any
Domestic Subsidiary incurred in the ordinary course of their respective
business;
(h) indebtedness secured by liens and security interests permitted
by Section 8.13 hereof;
(i) The Company's indebtedness to any bank representing the
Company's obligation to reimburse such bank for amounts drawn under any
letters of credit having a term of less than two years issued by such bank
for the Company's account, provided that the undrawn amount of all such
letters of credit outstanding at any time shall not exceed $10,000,000;
and<PAGE>
<PAGE>
(j) indebtedness of the Company evidenced by the Company's
commercial paper in an aggregate outstanding principal amount which,
together with the principal amount of all Loans outstanding hereunder, the
face amount of all B/As outstanding hereunder, and the amount available to
be drawn under all L/Cs outstanding hereunder shall not exceed the maximum
amount of the Banks' Commitments hereunder.
8.15. Investments, Loans, Advances and Acquisitions. The Company
will not, and it will not permit any Qualified Affiliates or any Domestic
Subsidiary to, make or retain any investment (whether through the purchase
of stock, obligations or otherwise) in or make any loan or advance to, any
other Person, other than:
(a) investments in certificates of deposit having a maturity of one
year or less issued by any United States commercial bank having capital
and surplus of not less than $100,000,000, including without limitation
investments in Eurodollar deposits with branches or offices located
outside the United States of any such bank;
(b) investments made to acquire legal and beneficial ownership of
an equity interest in any entity which shall become a Subsidiary or other
Affiliate of the Company which is principally engaged in the agricultural
industry or in industries which are related to the agricultural industry;
(c) investments made prior to the date of this Agreement in equity
interests in any Subsidiary or other Affiliate of the Company which is
principally engaged in the agricultural industry or in industries which
are related to the agricultural industry;
(d) investments in an aggregate amount of up to $10,000,000 made to
acquire an equity interest in any entity which is principally engaged in
the agricultural industry or in industries which are related to the
agricultural industry;
(e) investments in commercial paper rated A-2 or better by Standard
& Poor's Corporation ("S&P") or P-2 or better by Moody's Investor
Services, Inc. ("Moody's") maturing within 270 days of the date of
issuance thereof;
(f) marketable obligations of the United States provided that such
obligations have a final maturity of no more than one year from the date
acquired by the Company;
(g) marketable obligations guaranteed by or insured by the United
States, or those for which the full faith and credit of the United States
is pledged for the repayment of principal and interest thereof; provided
that such obligations have a final maturity of no more than one year from
the date acquired by the Company;
(h) participations in loans made by any bank or trust company
organized under the laws of the United States of America or any state
thereof and having combined capital and surplus of at least $100,000,000
to any corporation organized under the laws of the United States of
America or any state thereof having a commercial paper rating of at least
A-2 by S&P or P-2 by Moody's, maturing not more than 120 days from the
date of acquisition thereof;
(i) marketable general obligations of a state, a territory or a
possession of the United States, or any political subdivision of any of
the foregoing, or the District of Columbia, unconditionally secured by the
full faith and credit of such state, territory, possession, political<PAGE>
<PAGE>
subdivision or district provided that such state, territory, possession,
political subdivision or district has general taxing authority and the
power to levy such taxes as may be required for the payment of principal
and interest thereof; provided that such obligations are rated in either
of the two top rating categories established by the national rating
agencies for such obligations;
(j) marketable corporate debt securities having an A credit rating
by Standard & Poor's Corporation or Moody's Investors Service;
(k) loans and advances from (i) the Company to any Guarantor
Subsidiary, or any Qualified Affiliate pursuant to a Qualified Credit
Agreement or (ii) any Guarantor Subsidiary to the Company or any other
Guarantor Subsidiary;
(l) loans and advances from the Company to Domestic Subsidiaries
which are not Domestic Consolidated Subsidiaries in an aggregate principal
amount outstanding at any time not to exceed $2,000,000;
(m) loans and advances from the Company and to Subsidiaries which
are not Domestic Subsidiaries in an aggregate principal amount outstanding
at any time not to exceed $25,000,000;
(n) loans from the Partnership to the Company (or its affiliates),
provided that the unpaid principal amount of the Partnership Note shall be
zero;
(o) investments in banker's acceptances having a maturity of one
year or less and accepted by any of the Banks or by any United States
commercial bank or any branch or agency located within the United States
of any foreign commercial bank in each case having a short-term debt
rating by S&P of A-2 or better or P-2 or better by Moody's or long-term
debt ratings of A or better by S&P or A or better by Moody's;
(p) investments in bonds or notes having a short-term debt rating
of A-2 or better by S&P or P-2 or better by Moody's or a long-term debt
rating of A or better by Moody's or A or better by S&P issued by a
corporation organized under the laws of any State or by a State or
political subdivision thereof if such bonds or notes allow the holder
thereof to require that they be repurchased upon no more than 30 days
notice by the holder thereof at a price of no less than the unpaid
principal balance thereof plus accrued interest thereon to the purchase
date;
(q) mutual funds which invest solely in investments described in
subsections (a), (e), (f), (g), (h), (i), (o), (p) and (t) of this Section
8.15;
(r) investments in Harris' Corporate Asset Management Program,
Continental Bank's Short Term Asset Management program, and a comparable
NBD Bank program, and any comparable successor programs;
(s) investments not otherwise permitted by this Section 8.15 in
debt instruments having a short-term debt rating of A-2 or better by
Moody's or P-2 or better by S&P or a long-term debt rating of A or better
by Moody's or A or better by S&P and which mature no more than 150 days
from the date of the Company's investment therein, provided that the
aggregate principal amount of all such investments shall not exceed
$5,000,000 at any time;<PAGE>
<PAGE>
(t) repurchase, reverse repurchase agreements and security lending
agreements collateralized by marketable obligations of the United States,
provided that the Company or Subsidiary, as the case may be, which is a
party to such arrangement shall hold (individually or through an agent)
all securities relating thereto during the entire term of each such
arrangement; and
(u) investments in auction rate and money market preferred stock on
which the dividend rate is reset not less frequently than once every 49
days, and in remarketable preferred stock on which the dividend rate is
reset not less frequently than once every 49 days and which has a 7-day
roll-over option following the initial 49-day period, in each case issued
by a corporation organized under the laws of any of the states and having
a long-term debt rating of A or better by Moody's or A or better by S&P or
a short-term debt rating of A-2 or better by Moody's or P-2 or better by
S&P.
8.16. Sale of Property. The Company will not, and it will not
permit any Qualified Affiliate or any Subsidiaries to, sell, lease,
assign, transfer or otherwise dispose of (whether in one transaction or in
a series of transactions) all or a material part of its Property to any
other Person, without the consent of the Required Banks; provided,
however, that so long as no Event of Default or Potential Default has
occurred and is continuing, this Section shall not prohibit:
(a) sales of Inventory by the Company, any Qualified Affiliate or
any Subsidiary in the ordinary course of business; and
(b) sales or leases by the Company, any Qualified Affiliate or any
Subsidiary of its surplus, obsolete or worn-out machinery and equipment.
For purposes of this Section, "material part" shall mean 5% or more
of the lesser of the book or fair market value of the Property of the
Company, the Qualified Affiliates and the Domestic Subsidiaries taken as
a whole.
8.17. Notice of Suit, Adverse Change in Business or Defaults. The
Company shall, as soon as possible, and in any event within five (5) days
after the Company learns of the following, give written notice to the
Banks of (i) any material proceeding(s) being instituted or threatened to
be instituted by or against the Company, any Qualified Affiliate or any
Subsidiary in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign),
(ii) any material adverse change in the business, Property or condition,
financial or otherwise, of the Company, any Qualified Affiliate or any
Subsidiary, and (iii) the occurrence of any Potential Default or Event of
Default.
8.18. ERISA. The Company will, and will cause the each Qualified
Affiliate and each Subsidiary to, promptly pay and discharge all
obligations and liabilities arising under the Employee Retirement Income
Security Act of 1974 ("ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
Property and will promptly notify the Banks of (i) the occurrence of any
reportable event (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation ("PBGC") of any
employee benefit plan covering any officers or employees of the Company,
any Qualified Affiliate or any Subsidiary, any benefits of which are, or
are required to be, guaranteed by PBGC ("Plan"), (ii) receipt of any
notice from PBGC of its intention to seek termination of any such Plan or
appointment of a trustee therefor, and (iii) its intention to terminate or
withdraw from any Plan. The Company will not, and will not permit any
Qualified Affiliate or any Subsidiary to, terminate any such Plan or<PAGE>
<PAGE>
withdraw therefrom unless it shall be in compliance with all of the terms
and conditions of this Agreement after giving effect to any liability to
PBGC resulting from such termination or withdrawal.
8.19. Use of Proceeds. The Company will use the proceeds of all
Loans, Competitive Advances and B/A's made or created hereunder, and will
request that L/C's be issued hereunder, solely to finance its general
corporate requirements and, with regard to proceeds of Loans, to pay
principal amount of commercial paper of the Company on its scheduled
maturity date, and the Company shall not use any proceeds of the foregoing
to make a loan, advance, contribution or otherwise transfer to, or make
any investment in, any Subsidiary which is not a Guarantor Subsidiary or
any Affiliate which is not a Qualified Affiliate except as provided in
Section 8.15 hereof.
8.20. Conduct of Business and Maintenance of Existence. The
Company, the Qualified Affiliates and the Subsidiaries, taken as a whole,
will continue to engage in business of the same general type as now
conducted by them, and the Company will preserve, renew and keep in full
force and effect, and will cause each Qualified Affiliate and each
Subsidiary to preserve, renew and keep in full force and effect their
respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business,
provided, however, that this Section shall not prohibit any transaction
(e.g., sale of stock or sale of assets) which, disposes of less than 5% of
the lesser of the book or fair market value of the Property of the
Company, the Qualified Affiliates and the Domestic Subsidiaries taken as
a whole.
8.21. Domestic Consolidated Subsidiaries to Guaranty Debt. The
Company shall cause each Domestic Subsidiary (except for DEKALB Foreign
Sales Corporation) which becomes a Domestic Consolidated Subsidiary to
execute and deliver to the Agent a Subsidiary Guaranty no later than the
time such Domestic Subsidiary becomes a Domestic Consolidated Subsidiary,
provided, however, in the event a Subsidiary which accordingly delivers a
Subsidiary Guaranty under the terms of this Section shall subsequently be
transferred to non-Affiliate ownership in compliance with all terms and
conditions of this Agreement, the Subsidiary shall no longer be subject to
liability under the Subsidiary Guaranty while all other entities
constituting the Borrower or otherwise subject to Subsidiary Guaranty
shall remain fully liable under the Loan.
9. EVENTS OF DEFAULT AND REMEDIES.
9.1. Definitions. Any one or more of the following shall
constitute an Event of Default:
(a) Default in the payment when due of any principal of or interest
on any Note, or in the payment when due of any costs, expenses or fees
under this Agreement, whether on demand or at the stated due date thereof
or at any other time provided in this Agreement;
(b) Default in the observance or performance of any covenant,
condition, agreement or provision contained in Sections 8.6, 8.12, 8.13,
8.14, 8.15, 8.16, 8.19, 8.20, 8.24, 8.25 or 8.21 of this Agreement;
(c) Default in the observance or performance of any covenant,
condition, agreement or provision in this Agreement or in any of the other
Loan Documents and such default shall continue for 30 days after written
notice thereof to the Company by any Bank;<PAGE>
<PAGE>
(d) Default shall occur under any evidence of indebtedness issued
or assumed or guaranteed by the Company, any Qualified Affiliate or any
Subsidiary or under any mortgage, agreement or other similar instrument
under which the same may be issued and such default shall continue for a
period of time sufficient to permit the acceleration of maturity of any
indebtedness evidenced thereby or outstanding thereunder without the
Company securing a waiver of any such default;
(e) Any representation or warranty made by the Company, any
Qualified Affiliate or any Subsidiary in the Loan Documents or in any
statement or certificate furnished by it pursuant thereto proves untrue in
any material respect as of the date of the issuance or making thereof;
(f) Any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,000,000 shall be entered or filed against
the Company, any Qualified Affiliate or any Subsidiary or against any of
its property or assets and remains unpaid, unvacated, unbonded or unstayed
for a period of 30 days from the date of its entry;
(g) The Company, any Qualified Affiliate or any Subsidiary
(excluding non-Domestic Subsidiaries with the exception of those operating
in Argentina) shall (i) have entered involuntarily against it an order for
relief under the Bankruptcy Code of 1978, as amended, (ii) not pay, or
admit in writing its inability to pay, its debts generally as they become
due or suspend payment of its obligations, (iii) make an assignment for
the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce
in, the appointment or a receiver, custodian, trustee, conservator,
liquidator or similar official for it or any substantial part of its
property, (v) institute any proceeding seeking to have entered against it
an order for relief under the Bankruptcy Code of 1978, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, marshalling of assets, adjustment or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such
proceeding filed against it, (vi) fail to contest in good faith any
appointment or proceeding described in Section 9.1(h) hereof, or (vii)
take any corporate action in furtherance of any of the foregoing purposes;
or
(h) A custodian, receiver, trustee, conservator, liquidator or
similar official shall be appointed for the Company, any Qualified
Affiliate or any Subsidiary (excluding non-Domestic Subsidiaries with the
exception of those operating in Argentina) or any substantial part of its
property, or a proceeding described in Section 9.1(g)(v) shall be
instituted against the Company, any Qualified Affiliate or any Subsidiary
and such appointment continues undischarged or any such proceeding
continues undismissed or unstayed for a period of 60 days.
9.2. Remedies for Non-Bankruptcy Defaults. When any Event of
Default, other than an Event of Default described in subsection (g) and
(h) of Section 9.1 hereof, has occurred and is continuing, the Required
Banks may, by notice to the Company, take any or all of the following
actions: (i) terminate the commitments of the Banks hereunder on the date
(which may be the date thereof) stated in such notice, (ii) declare the
principal of and the accrued interest on all Notes then outstanding to be
forthwith due and payable and there upon said Notes including both
principal and interest, shall be and become immediately due and payable
together with all other amounts payable under this Agreement without
further demand, presentment, protest or notice of any kind, and (iii)
proceed to foreclose against any Collateral under any of the Pledge<PAGE>
<PAGE>
Agreements, take any action or exercise any remedy under any of the Pledge
Agreements or exercise any other right, action, power or remedy permitted
by law.
9.3. Remedies for Bankruptcy Defaults. When any Event of Default
described in subsections (g) or (h) of Section 9.1 hereof has occurred and
is continuing, then the principal of and accrued interest on all Notes
then outstanding shall immediately become due and payable together with
all other amounts payable under this Agreement without presentment,
demand, protest or notice of any kind, and the obligation of the Banks to
extend further credit pursuant to any of the terms of this Agreement shall
immediately terminate.
9.4. L/C's and B/A's. Promptly following the acceleration of the
maturity of the Notes pursuant to Section 9.2 or 9.3 hereof, the Company
shall immediately pay to the Agent the full aggregate amount of all
outstanding B/A's and L/C's. The Agent shall invest such sum, as may be
agreed upon by the Agent and the Company from time to time, and shall hold
all such funds, investments and proceeds thereof as collateral security
for the obligations of the Company to Harris under this Agreement. The
amount paid under any of the B/A's and L/C's for which the Company has not
reimbursed Harris shall bear interest from the date of such payment at the
default rate of interest applicable from time to time to the Base Rate
Loans.
9.5. Expenses. The Company agrees to pay to the Agent, the Banks
and any other holder of any Note or Notes all expenses incurred by the
Agent, the Banks or any such holder, including reasonable attorneys' fees
(including reasonable allocated staff counsel costs) and court costs, in
connection with the enforcement of the terms of this Agreement, the Pledge
Agreements or the Subsidiary Guaranties, or the collection of any
principal of or interest on any Note or Notes, or in re-taking, holding,
preparing for sale, selling, collecting or otherwise realizing upon the
Collateral, including any of the foregoing actions taken or done in any
proceeding for relief of debtors under the Bankruptcy Code.
10. CHANGE IN CIRCUMSTANCES REGARDING EURODOLLAR LOANS; CAPITAL
ADEQUACY.
10.1. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof with respect
to Eurodollar Loans and after any Bank submits a Competitive Bid with
respect to Competitive Advances, any Bank shall determine in good faith
that any change in applicable law or regulation or in the interpretation
thereof makes it unlawful for such Bank to make or continue to maintain
any Eurodollar Loan or Competitive Advance or to give effect to its
obligations as contemplated hereby, such Bank shall promptly give notice
thereof to the Company to such effect, and the Banks' obligation to make
or maintain any such affected Eurodollar Loan or Competitive Advance under
this Agreement shall terminate until it is no longer unlawful for such
Bank to make or maintain such affected Eurodollar Loan or Competitive
Advances. The Company shall prepay on demand the outstanding principal
amount of any such affected Eurodollar Loan or Competitive Advances made
to it, together with all interest accrued thereon and all other amounts
due and payable to the Banks under this Agreement; provided, however, the
Company may then elect to borrow the principal amount of such affected
Eurodollar Loan or Competitive Advances by means of another type of Loan
available hereunder, subject to all of the terms and conditions of this
Agreement.<PAGE>
<PAGE>
10.2. Unavailability of Deposits or Inability to Ascertain the
Adjusted Eurodollar Rate. Notwithstanding any other provision of this
Agreement or any Note to the contrary, if prior to the commencement of any
Interest Period the Agent shall determine (i) that deposits in the amount
of any Eurodollar Loan scheduled to be outstanding are not available to
any Bank in the relevant market or (ii) by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Adjusted Eurodollar Rate then the Agent shall
promptly give telephonic or telex notice thereof to the Company and the
Banks (such notice to be confirmed in writing), and the obligation of the
Banks to make any such Eurodollar Loan in such amount and for such
Interest Period shall terminate until deposits in such amount and for the
Interest Period selected by the Company shall again be readily available
in the relevant market and adequate and reasonable means exist for
ascertaining the Adjusted Eurodollar Rate. Upon the giving of such
notice, the Company may elect to either (i) pay or prepay, as the case may
be, such affected Loan or (ii) reborrow such affected Loan as another type
of Loan available hereunder, subject to all terms and conditions of this
Agreement.
10.3. Taxes and Increased Costs. With respect to the Eurodollar
Loans, if any Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority
charged with the administration thereof or any central bank or other
fiscal, monetary or other authority having jurisdiction over such Bank or
its lending branch or the Eurodollar Loans contemplated by this Agreement
(whether or not having the force of law) ("Change in Law") shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirements against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or
disbursements by, such Bank (other than reserves included in the
determination of the Adjusted Eurodollar Rate);
(ii) subject such Bank, any Eurodollar Loan or any Note to any tax
(including, without limitation, any United States interest equalization
tax or similar tax however named applicable to the acquisition or holding
of debt obligations and any interest or penalties with respect thereto),
duty, charge, stamp tax, fee deduction or withholding in respect of this
Agreement, any Eurodollar Loan or any Note except such taxes as may be
measured by the overall net income of such Bank or its lending branch and
imposed by the jurisdiction, or any political subdivision or taxing
authority thereof, in which such Bank's principal executive office or its
lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Bank hereunder or under any Note
(other than by a change in taxation of the overall net income of such
Bank); or
(iv) impose on such Bank any penalty with respect to the foregoing
or any other condition regarding this Agreement, its disbursement, any
Eurodollar Loan or any Note; and such Bank shall determine that the result
of any of the foregoing is to increase the cost (whether by incurring a
cost or adding to a cost) to such Bank of making or maintaining any
Eurodollar Loan hereunder or to reduce the amount of principal or interest
received by such Bank, then the Company shall pay to such Bank from time
to time as specified by such Bank such additional amounts as such Bank
shall determine are sufficient to compensate and indemnify it for such<PAGE>
<PAGE>
increased cost or reduced amount. If any Bank makes such a claim for
compensation, it shall provide to the Company a certificate setting forth
such increased cost or reduced amount as a result of any event mentioned
herein specifying such Change in Law, and such certificate shall be
conclusive and binding on the Company as to the amount thereof except in
the case of manifest error. Upon the imposition of any such cost, the
Company may prepay any affected Loan, subject to the provisions of
Sections 3.3 and 10.4 hereof, except the provisions of Section 3.3
limiting prepayment of any Eurodollar Loan to the last day of the
applicable Interest Period.
10.4. Funding Indemnity. (a) In the event any Bank shall incur any
loss, cost, expense or premium (including, without limitation, any loss of
profit and any loss, cost, expense or premium incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by such
Bank to fund or maintain any Eurodollar Loan or Competitive Advance or the
relending or reinvesting of such deposits or amounts paid or prepaid to
such Bank) as a result of:
(i) any payment or prepayment of a Eurodollar Loan or Competitive
Advance on a date other than the last day of the then applicable Interest
Period or Competitive Bid Interest Period, as the case may be;
(ii) any failure by the Company to borrow any Eurodollar Loan on
the date specified in the notice given pursuant to Section 1.7 hereof or
a Competitive Advance on the date specified in the notice given pursuant
to Section 2.5 hereof;
(iii) any failure by the Company to prepay any Eurodollar Loan on
the date specified in the notice given pursuant to Section 3.3 hereof; or
(iv) the occurrence of any Event of Default;
then, upon the demand of such Bank, the Company shall pay to such Bank
such amount as will reimburse such Bank for such loss, cost or expense.
(b) If any Bank makes a claim for compensation under this Section
10.4, it shall provide to the Company a certificate setting forth the
amount of such loss, cost or expense in reasonable detail and such
certificate shall be conclusive and binding on the Company as to the
amount thereof except in the case of manifest error.
10.5. Lending Branch. Each Bank may, at its option, elect to make,
fund or maintain its Loans hereunder at the branch or office specified in
Section 12.7 hereof or such other of its branches or offices as such Bank
may from time to time elect, subject to the provisions of Section 1.7(b)
hereof.
10.6. Discretion of Bank as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans
in any manner it sees fit, it being understood however, that for the
purposes of this Agreement all determinations hereunder shall be made as
if the Banks had actually funded and maintained each Eurodollar Loan
during each Interest Period for such Loan through the purchase of deposits
in the relevant interbank market having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Adjusted
Eurodollar Rate for such Interest Period.
10.7. Capital Adequacy. If after the date hereof, any Bank shall
have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any<PAGE>
<PAGE>
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank (or
any of its branches) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder or for the credit which is the subject matter hereof
to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's
policies with respect to liquidity and capital adequacy) by an amount
deemed by such Bank to be material, from time to time, within 15 days
after demand by the Bank, the Company shall pay to such Bank such
additional amount or amounts reasonably determined by such Bank as will
compensate such Bank for such reduction.
11. THE AGENT.
11.1. Appointment and Powers. Harris Trust and Savings Bank is
hereby appointed by the Banks as Agent under the Loan Documents, and each
of the Banks irrevocably authorizes the Agent to act as the Agent of such
Bank. The Agent agrees to act as such upon the express conditions
contained in this Agreement.
11.2. Powers. The Agent shall have and may exercise such powers
hereunder as are specifically delegated to the Agent by the terms of the
Loan Documents, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Banks, nor any
obligation to the Banks to take any action under the Loan Documents except
any action specifically provided by the Loan Documents to be taken by the
Agent.
11.3. General Immunity. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Banks or
any Bank for any action taken or omitted to be taken by it or them under
the Loan Documents or in connection therewith except for its or their own
gross negligence or willful misconduct.
11.4. No Responsibility for Loans, Recitals, etc. The Agent shall
not (i) be responsible to the Banks for any recitals, reports, statements,
warranties or representations contained in the Loan Documents or furnished
pursuant thereto, (ii) be responsible for any loans hereunder, (iii) be
bound to ascertain or inquire as to the performance or observance of any
of the terms of the Loan Documents, or (iv) determine the value of any
Collateral. In addition, neither the Agent nor its counsel shall be
responsible to the Banks for the enforceability or validity of any of the
Loan Documents.
11.5. Right to Indemnity. The Banks hereby indemnify the Agent for
any actions taken in accordance with this Section 11, and the Agent shall
be fully justified in failing or refusing to take any action hereunder,
unless it shall first be indemnified to its reasonable satisfaction by the
Banks pro rata against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action,
other than any liability which may arise out of Agent's gross negligence
or willful misconduct.
11.6. Action on Instructions of Banks. The Agent agrees, upon the
written request of the Required Banks, to take any action of the type
specified in the Loan Documents as being within the Agent's rights, powers
or discretion. The Agent shall in all cases be fully protected in acting,
<PAGE>
<PAGE>
or in refraining from acting, hereunder in accordance with written
instructions signed by the Required Banks, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of
the Banks and on all holders of the Notes. In the absence of a request by
the Required Banks, the Agent shall have authority, in its sole
discretion, to take or not to take any action, unless the Loan Documents
specifically require the consent of the Required Banks or all of the
Banks.
11.7. Employment of Agents and Counsel. The Agent may execute any
of its duties as Agent hereunder by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, except as to
money or securities received by it or its authorized agents, for the
default or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. The Agent shall be entitled to advice and
opinion of legal counsel concerning all matters pertaining to the duties
of the agency hereby created.
11.8. Reliance on Documents; Counsel. The Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of legal counsel
selected by the Agent.
11.9. May Treat Payee as Owner. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have
been filed with the Agent. Any request, authority or consent of any
person, firm or corporation who at the time of making such request or
giving such authority or consent is the holder of any such Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of
such Note or of any Note issued in exchange therefore.
11.10. Agent's Reimbursement. Each Bank agrees to reimburse the
Agent in the amount of such Bank's pro rata share of the Banks'
Commitments for any expenses (including fees and charges for field audits)
not reimbursed by the Company (a) for which the Agent is entitled to
reimbursement by the Company under the Loan Documents (excluding any
unpaid portion of the Agent's fee payable under Section 3.2 hereof) and
(b) for any other expenses incurred by the Agent on behalf of the Banks,
in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents.
11.11. Rights as a Lender. With respect to its commitment, loans
made by it and the Note issued to it, the Agent shall have the same rights
and powers hereunder as any Bank and may exercise the same as though it
were not the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
The Agent may accept deposits from, lend money to, and generally engage in
any kind of banking or trust business with the Company as if it were not
the Agent.
11.12. Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and
based on the financial statements referred to in Section 8.4 and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into the Loan Documents. Each Bank
also acknowledges that it will, independently and without reliance upon
the Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.<PAGE>
<PAGE>
11.13. Resignation of Agent. Subject to the appointment of a
successor Agent, the Agent may resign as Agent for the Banks under this
Agreement or the Security Agreement at any time by thirty days' notice in
writing to the Banks. Such resignation shall take effect upon appointment
of such successor. The Required Banks shall have the right to appoint a
successor Agent who shall be entitled to all of the rights of, and vested
with the same powers as, the original Agent under the Loan Documents. In
the event a successor Agent shall not have been appointed within the
thirty day period following the giving of notice by the Agent, the Agent
may appoint its own successor. Resignation by the Agent shall not affect
or impair the rights of the Agent under Sections 11.5 and 11.10 hereof
with respect to all matters preceding such resignation. Any successor
Agent must be a national banking association or a bank chartered in any
State of the United States.
11.14. Duration of Agency. The agency established by Section 11.1
hereof shall continue, and Sections 11.1 through and including this
Section 11.14 shall remain in full force and effect, until the Notes and
all other amounts due hereunder and thereunder, including without
limitation all Reimbursement Obligations, shall have been paid in full and
the Banks' commitments to extend credit to or for the benefit of the
Company shall have terminated or expired.
12. MISCELLANEOUS.
12.1. Amendments and Waivers. Any term, covenant, agreement or
condition of this Agreement may be amended only with the consent of the
Company and the Required Banks, or compliance therewith only may be waived
(either generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the consent in writing
of the Required Banks, provided, however, that without the consent in
writing of the holders of all outstanding Notes, and the creator of any
B/A and the issuer of any L/C or all Banks if no Notes, L/C's or B/A's are
outstanding, no such amendment or waiver shall (i) change the amount or
postpone the date of payment of any scheduled payment or required
prepayment of principal of the Notes or reduce the rate or extend the time
of payment of interest on the Notes, or reduce the amount of principal
thereof, or modify any of the provisions of the Notes with respect to the
payment or prepayment thereof, (ii) give to any Note any preference over
any other Notes, (iii) amend the definition of Required Banks, (iv) alter,
modify or amend the provisions of this Section 12.1, (v) change the amount
or term of any of the Banks' Commitments, the fees required under
Sections 3.1 or 3.2 hereof or (vi) release any Collateral unless such
release is permitted or contemplated by the Loan Documents. Any such
amendment or waiver shall apply equally to all Banks and the holders of
the Notes and shall be binding upon them, upon each future holder of any
Note and upon the Company, whether or not such Note shall have been marked
to indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived.
12.2. Waiver of Rights. No delay or failure on the part of the
Agent or any Bank or on the part of the holder or holders of any Note in
the exercise of any power or right shall operate as a waiver thereof, nor
as an acquiescence in any Potential Default or Event of Default, nor shall
any single or partial exercise of any power or right preclude any other or
further exercise thereof, or the exercise of any other power or right, and
the rights and remedies hereunder of the Agent, the Banks and of the
holder or holders of any Notes are cumulative to, and not exclusive of,
any rights or remedies which any of them would otherwise have.<PAGE>
<PAGE>
12.3. Several Obligations. The commitments of each of the Banks
hereunder shall be the several obligations of each Bank and the failure on
the part of any one or more of the Banks to perform hereunder shall not
affect the obligation of the other Banks hereunder, provided that nothing
herein contained shall relieve any Bank from any liability for its failure
to so perform. In the event that any one or more of the Banks shall fail
to perform its commitment hereunder, all payments thereafter received by
the Agent on the principal of loans hereunder, whether from any
collateral, guaranty or otherwise, shall be distributed by the Agent to
the Banks making such additional loans ratably as among them in accordance
with the principal amount of additional loans made by them until such
additional loans shall have been fully paid and satisfied. All payments
on account of interest shall be applied as among all the Banks ratably in
accordance with the amount of interest owing to each of the Banks as of
the date of the receipt of such interest payment.
12.4. Non-Business Day. (a) If any payment of principal or
interest on any Base Rate Loan shall fall due on a day which is not a
Business Day, interest at the rate such Loan bears for the period prior to
maturity shall continue to accrue on such principal from the stated due
date thereof to and including the next succeeding Business Day on which
the same is payable.
(b) Any payment of principal or interest on any Eurodollar Loan
shall fall due on a day which is not a Banking Day, the payment date
thereof shall be extended to the next date which is a Banking Day and the
Interest Period for such Loan shall be accordingly extended, unless as a
result thereof any payment date would fall in the next calendar month, in
which case such payment date shall be the next preceding Banking Day and
the relevant Interest Period shall be correspondingly abbreviated. In
either case the next Interest Period shall be measured from the payment
date so adjusted.
12.5. Documentary Taxes. Although the Company is of the opinion,
and has been so advised by its counsel, that no documentary or similar
taxes are payable in respect to this Agreement or the Notes, the Company
agrees that it will pay such taxes, including interest and penalties, in
the event any such taxes are assessed irrespective of when such assessment
is made and whether or not any credit is then in use or available here-
under.
12.6. Representations. All representations and warranties made
herein or in certificates given pursuant hereto shall survive the
execution and delivery of this Agreement and of the Notes, and shall
continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
12.7. Notices. Unless otherwise expressly provided herein, all
communications provided for herein shall be in writing or by facsimile and
shall be deemed to have been given or made when served personally, when
receipt is contemporaneously and orally confirmed by telephone
conversation with an individual of requisite authority for the receiving
party in the case of notice by facsimile or 2 days after the date when
deposited in the United States mail (registered, if to the Company)
addressed if to the Company to 3100 Sycamore Road, DeKalb, Illinois 60115,
Attention: Thomas R. Rauman: if to the Agent or Harris at 111 West Monroe
Street, Chicago, Illinois 60690, Attention: Agribusiness Division; and if
to any of the Banks, at the address for each Bank set forth under its<PAGE>
<PAGE>
signature hereon; or at such other address as shall be designated by any
party hereto in a written notice to each other party pursuant to this
Section 12.7.
12.8. Legal Fees. The Company agrees to pay the reasonable fees
and disbursements of counsel to the Agent (or to any successor Agent) in
connection with the supervision of legal matters in connection with this
Agreement and the other Loan Documents, (up to a maximum of $3,000 for the
initial review of this Agreement and the Loan Doucments). The fees and
disbursements of the Banks other than the Agent shall be for the account
of the other Banks.
12.9. Counterparts. This Agreement may be executed in any number
of counterparts and all such counterparts taken together shall be deemed
to constitute one and the same instrument. One or more of the Banks may
execute a separate counterpart of this Agreement which has also been
executed by the Company, and this Agreement shall become effective as and
when all of the Banks have executed this Agreement or a counterpart
thereof and lodged the same with the Agent. Upon this Agreement becoming
effective as aforesaid, the Agent will notify the Company and all of the
Banks of that fact.
12.10. Successors and Assigns. This Agreement shall be binding
upon each of the Company and the Banks and their respective successors and
assigns, and shall inure to the benefit of the Company and each of the
Banks and the benefit of their respective successors and assigns,
including any subsequent holder of any Note. This Agreement and the
rights and duties of the parties hereto, shall be construed and determined
in accordance with the laws of the State of Illinois. This Agreement
constitutes the entire understanding of the parties with respect to the
subject matter hereof and any prior agreements, whether written or oral,
with respect thereto are superseded hereby. The Company may not assign
any of its rights or obligations hereunder without the written consent of
the Banks.
12.11. Participations. Any Bank may grant participations in all or
any part of any Loan, Competitive Advance and/or any Note. No such
participant shall have any rights under this Agreement (the participant's
rights against a Bank in respect of such participation to be those set
forth in the agreement executed by such Bank in favor of the participant
relating thereto) and all amounts payable by the Company hereunder shall
be determined as if such Bank had not sold such participation. Each Bank
may disclose to any participant or prospective participant in any Loan or
Competitive Advance hereunder any information which is not subject to the
restrictions of Section 12.14 of this Agreement. Except with respect to
interest rate, principal amount of the Loan or Competitive Advance,
scheduled dates for payment of principal or interest (except as
contemplated by this Agreement), and the terms of Section 10, no Bank
shall in any such participation agreement restrict its ability to make any
modification, amendment or waiver to this Agreement. Notwithstanding the
foregoing, the Company may request, at the same time and in the same
manner it requests a loan pursuant to Section 1.7(a) of this Agreement or
a Competitive Advance pursuant to Section 2.2 of this Agreement, that the
Banks not grant any participations in any loans and Competitive Advances
made hereunder and the Banks shall not grant any participations in any
loans or Competitive Advances made during the period commencing on the
date such request is received by the Agent and ending on the date the
Company notifies the Agent that the Banks may resume the sale of
participations hereunder; provided that any Bank or Banks may at any time
without the consent of the Company sell or assign or grant participations
in any of the Notes, loans, Competitive Advances, or any of its respective
rights to payment of principal and interest with respect thereto to any
Federal Reserve Bank. The Agent shall give prompt telephonic, telex or<PAGE>
<PAGE>
telegraphic (if telephonic, to be confirmed in writing within two Business
Days) notice of the receipt of any such notice from the Company to each of
the Banks, which notice shall be conclusive and binding upon the Company
and the Banks.
12.12. No Joint Venture. Nothing contained in this Agreement shall
be deemed to create a partnership or joint venture among the parties
hereto.
12.13. Table of Contents and Headings. The Table of Contents and
section headings in this Agreement are for reference only and shall not
affect the construction of any provision hereof.
12.14. Confidentiality. Each Bank will use its best efforts to
keep confidential any non-public information concerning the Company, or
any Subsidiary furnished by the Company hereunder (which is designated by
the Company as confidential at the time such information is furnished to
such Bank) except that such Bank may disclose such information (i) to
regulatory authorities having jurisdiction, (ii) pursuant to subpoena or
other legal process, (iii) to other Banks or the Agent in connection with
matters concerning this Agreement, (iv) to such Bank's counsel and
auditors in connection with matters concerning this Agreement, and (v) in
connection with litigation concerning this Agreement or any Note. In the
situations described above (except where the Company is a party), the Bank
shall notify the Company as promptly as practicable of the receipt of a
request for such disclosure and furnish it with a copy of such subpoena or
other legal process (to the extent such Bank is legally permitted to do
so).
12.15. August 30, 1988 Credit Agreement. Upon: (i) execution of
this Agreement and (ii) execution of an agreement with Bank of America
terminating that certain Credit Agreement of August 30, 1988, between the
Company and Harris Trust and Savings Bank, individually and as Agent, and
Continental Bank N.A. and Bank of America (the "August 30, 1988 Credit
Agreement"), the August 30, 1988, Credit Agreement shall terminate and no
party shall have any rights or obligations thereunder. The Company
warrants that all obligations of the Company to the Banks under the August
30, 1988, Credit Agreement have been satisfied.
Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall be a contract between us for the purposes hereinabove
set forth.
Dated as of January 15, 1992.
DEKALB GENETICS CORPORATION
(CORPORATE SEAL) By
Alan D. Skouby
Vice President of Finance,
Treasurer, Chief Financial
Officer
ATTEST:
Its
<PAGE>
DEKALB GENETICS CORPORATION
PENSION PLAN
EFFECTIVE SEPTEMBER 1, 1989
<PAGE>
<PAGE>
CONTENTS
Section Page
PREAMBLE. . . . . . . . . . . . . . (v)
ARTICLE I DEFINITIONS . . . . . . . . . . . . . 1
1.01 Accrued Benefit . . . . . . . . . . . 1
1.02 Actuarial Equivalent. . . . . . . . . 1
1.03 Alternate Payee . . . . . . . . . . . 1
1.04 Annuity Starting Date . . . . . . . . 1
1.05 Beneficiary . . . . . . . . . . . . . 1
1.06 Board . . . . . . . . . . . . . . . . 2
1.07 Break in Service. . . . . . . . . . . 2
1.08 Career Earnings . . . . . . . . . . . 2
1.09 Code. . . . . . . . . . . . . . . . . 2
1.10 Committee . . . . . . . . . . . . . . 2
1.11 Company . . . . . . . . . . . . . . . 2
1.12 Compensation. . . . . . . . . . . . . 3
1.13 Domestic Relations Order. . . . . . . 4
1.14 Effective Date. . . . . . . . . . . . 4
1.15 Employee. . . . . . . . . . . . . . . 4
1.16 Employer. . . . . . . . . . . . . . . 4
1.17 Employment Commencement Date. . . . . 4
1.18 Entry Date. . . . . . . . . . . . . . 4
1.19 ERISA . . . . . . . . . . . . . . . . 4
1.20 Hour of Service . . . . . . . . . . . 4
1.21 Joint and Survivor Annuity. . . . . . 6
1.22 Leased Employee . . . . . . . . . . . 6
1.23 Life Annuity. . . . . . . . . . . . . 6
1.24 Limitation Year . . . . . . . . . . . 6
1.25 Normal Retirement Benefit . . . . . . 6
1.26 Normal Retirement Date. . . . . . . . 6
1.27 Participant . . . . . . . . . . . . . 6
1.28 Plan. . . . . . . . . . . . . . . . . 6
1.29 Plan Administrator. . . . . . . . . . 6
1.30 Plan Year . . . . . . . . . . . . . . 6
1.31 Prior Plan. . . . . . . . . . . . . . 6
1.32 Prior Plan Accrued Benefit. . . . . . 6
1.33 Qualified Domestic Relations Order. . 8
1.34 Related Employer. . . . . . . . . . . 8
1.35 Retirement Date . . . . . . . . . . . 8
1.36 Seasonal Employee . . . . . . . . . . 8
1.37 Temporary Employee. . . . . . . . . . 8
1.38 Total and Permanent Disability. . . . 8
1.39 Trust Agreement and Trust . . . . . . 8
1.40 Trust Fund. . . . . . . . . . . . . . 8
1.41 Trustee . . . . . . . . . . . . . . . 9
1.42 Year of Service . . . . . . . . . . . 9
1.43 Year of Service for Vesting . . . . . 9
<PAGE>
<PAGE>
Section Page
ARTICLE II ELIGIBILITY AND PARTICIPATION . . . .10
2.01 Participation . . . . . . . . . . . .10
2.02 Reemployment of Participant . . . . .10
ARTICLE III CONTRIBUTIONS . . . . . . . . . . . .11
3.01 Trustee and Trust Agreement . . . . .11
3.02 Employer Contributions. . . . . . . .11
3.03 Forfeitures . . . . . . . . . . . . .11
3.04 Reversion of Employer
Contributions . . . . . . . . . . .11
ARTICLE IV BENEFITS. . . . . . . . . . . . . . .13
4.01 Normal Retirement Benefit . . . . . .13
4.02 Postponed Retirement Benefit. . . . .14
4.03 Early Retirement Benefit. . . . . . .14
4.04 Termination of Vested Participant . .14
4.05 Disability Leave Status . . . . . . .15
4.06 Death Benefit for Surviving Spouse. .16
4.07 Maximum Benefits. . . . . . . . . . .16
4.08 Combined Maximum Limitations. . . . .19
4.09 Definition of Compensation for
Purposes of Sections 4.07 and
4.08. . . . . . . . . . . . . . . .20
4.10 Reemployment After Receipt of
Benefits. . . . . . . . . . . . . .21
4.11 Pfizer Transferees. . . . . . . . . .22
ARTICLE V FORM AND PAYMENT OF BENEFITS. . . . .23
5.01 Life Annuity. . . . . . . . . . . . .23
5.02 Joint and Survivor Annuity. . . . . .23
5.03 Election Not to Receive Life
Annuity . . . . . . . . . . . . . .23
5.04 Election Not to Receive Joint and
Survivor Annuity. . . . . . . . . .24
5.05 Payment in Optional Form on
Retirement. . . . . . . . . . . . .24
5.06 Administrative Powers Relating to
Payments. . . . . . . . . . . . . .27
5.07 No Guaranty of Benefits . . . . . . .27
5.08 Death Distribution Requirements . . .27
5.09 Time of Payment . . . . . . . . . . .28
5.10 Distributions to Alternate Payees . .28
5.11 Direct Rollovers. . . . . . . . . . .29
<PAGE>
<PAGE>
Section Page
ARTICLE VI PLAN ADMINISTRATION . . . . . . . . .31
6.01 Administrative Committee. . . . . . .31
6.02 Powers and Duties of the Committee. .31
6.03 Exercise of the Committee's Duties. .32
6.04 Organization and Operation of the
Committee . . . . . . . . . . . . .32
6.05 Records and Reports of the
Committee . . . . . . . . . . . . .33
6.06 Compensation and Expenses of the
Committee . . . . . . . . . . . . .33
6.07 Indemnity of the Committee Members. .33
ARTICLE VII CLAIMS PROCEDURES . . . . . . . . . .34
7.01 Informal Review . . . . . . . . . . .34
7.02 Formal Review . . . . . . . . . . . .34
ARTICLE VIII TEMPORARY RESTRICTIONS ON BENEFITS
IN CASE OF EARLY TERMINATION. . . . .36
8.01 Temporary Restrictions on Benefits
in Case of Early Termination. . . .36
8.02 Restriction of Benefits . . . . . . .36
ARTICLE IX AMENDMENT AND TERMINATION . . . . . .38
9.01 Right to Amend or Terminate . . . . .38
9.02 Termination . . . . . . . . . . . . .39
9.03 Partial Termination . . . . . . . . .40
9.04 Method of Payment . . . . . . . . . .40
9.05 Notice of Amendment, Termination or
Partial Termination . . . . . . . .40
ARTICLE X MISCELLANEOUS . . . . . . . . . . . .41
10.01 No Contract of Employment . . . . . .41
10.02 Merger or Consolidation of Plan,
Transfer of Assets. . . . . . . . .41
10.03 Data. . . . . . . . . . . . . . . . .41
10.04 Restrictions Upon Assignments and
Creditors' Claims . . . . . . . . .41
10.05 Restriction of Claims Against Trust
Fund. . . . . . . . . . . . . . . .42
10.06 Benefits Payable by Trust Fund. . . .42
10.07 Successor to Employer . . . . . . . .42
10.08 Applicable Law. . . . . . . . . . . .42
10.09 Internal Revenue Service Approval . .42
<PAGE>
<PAGE>
Section Page
ARTICLE XI TOP-HEAVY PROVISIONS. . . . . . . . .43
11.01 Effective Date. . . . . . . . . . . .43
11.02 Definitions . . . . . . . . . . . . .43
11.03 Maximum Annual Compensation . . . . .46
11.04 Minimum Accrued Benefit . . . . . . .46
11.05 Minimum Vesting Requirements. . . . .47
11.06 Special Code Section 415
Limitations . . . . . . . . . . . .48
<PAGE>
<PAGE>
DEKALB GENETICS CORPORATION
PENSION PLAN
PREAMBLE
DEKALB-PFIZER GENETICS, an Illinois partnership that was 70% owned
by DEKALB Corporation, maintained the DEKALB-PFIZER GENETICS Pension Plan
(hereinafter referred to as the "Prior Plan"), effective September 1,
1982, and amended it from time to time.
In conjunction with the reorganization of DEKALB Corporation, DEKALB
Genetics Corporation was established as a Delaware corporation which,
effective September 1, 1988, adopted the Prior Plan and became the
"Company," as such term was defined in the Prior Plan. At that same time
the Prior Plan was renamed the DEKALB Genetics Corporation Savings and
Investment Plan. DEKALB Genetics Corporation (hereinafter referred to as
the "Company") has maintained the Prior Plan, as so renamed. Pursuant to
the authority reserved to the Company, the Prior Plan is herein amended
and restated in its entirety, effective September 1, 1989, except as
otherwise stated.
The amendment and restatement of the Prior Plan shall not in any way
adversely affect the rights of Employees who participated in the Prior
Plan in accordance with its provisions. All matters relating to the
benefits, if any, payable to such Employees (or their Beneficiaries) based
upon events occurring prior to the Effective Date shall, except as
otherwise expressly provided herein, be determined in accordance with the
applicable provisions of the Prior Plan.
<PAGE>
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used herein with the initial letter capitalized, words and
phrases shall have the meanings stated below unless a different meaning is
plainly required by the context. All masculine terms shall include the
feminine and all singular terms shall include the plural in all cases in
which they could thus be applied, unless the context clearly indicates the
gender or the number.
1.01 ACCRUED BENEFIT means the amount of the retirement income
payable, commencing at his Normal Retirement Date, to a Participant whose
termination of service occurs prior to his Normal Retirement Date, as
computed under the formula set forth in Section 4.01 of the Plan,
considering the Participant's Career Earnings and Years of Service at his
termination of employment.
1.02 ACTUARIAL EQUIVALENT means a benefit of equal value to
another benefit as determined by computations based upon the interest rate
and mortality table adopted by the Company.
(a) For purposes of this Plan, the mortality table means the
UP-1984 Table.
(b) Further, the interest rate or rates used for any Plan
Year in conjunction with the mortality table to determine the
Actuarial Equivalent of any benefit payable under the Plan shall be
equal to the interest rate published by the Pension Benefit Guaranty
Corporation pursuant to Section 4062 of ERISA used in calculating
immediate or deferred annuities in effect on the first day of such
Plan Year.
1.03 ALTERNATE PAYEE means any spouse, former spouse, child or
other dependent of a Participant who is recognized by a Domestic Relations
Order as having a right to receive all or a portion of a Participant's
benefits payable under the Plan.
1.04 ANNUITY STARTING DATE means the first day of the first period
for which an amount is payable as an annuity or in any other form.
1.05 BENEFICIARY means the person or persons designated by a
Participant to receive any benefits under the Plan which may be due upon
the Participant's death after his Annuity Starting Date. Notwithstanding
anything to the contrary, if a Participant is married on the date of his
death, the Beneficiary of such Participant shall be his spouse unless the
Participant's spouse consents in writing not to be said Beneficiary and
such written consent is witnessed by a notary public. The spouse's
consent willapply with respect to a specific alternate Beneficiary only,
and a change of Beneficiary will require a new spousal consent.<PAGE>
<PAGE>
1.06 BOARD means the board of directors of the Company.
1.07 BREAK IN SERVICE means a Plan Year in which an Employee
completes five hundred (500) or fewer Hours of Service. If an Employee
shall incur any number of consecutive one (1) year Breaks in Service and
the Breaks in Service shall thereafter terminate (whether before or after
the Employee shall have received benefits under the Plan), his Years of
Service for Vesting prior to the date such Breaks in Service commenced
shall be added to the Years of Service for Vesting following the Breaks in
Service in determining Years of Service for Vesting hereunder, but only if
one (1) of the following conditions is met:
(a) Following the termination of the Breaks in Service, the
Employee works a Plan Year in which he completes at least one
thousand (1,000) Hours of Service; or
(b) At the date such Breaks in Service commenced, the
Employee had any vested interest in his Accrued Benefit.
1.08 CAREER EARNINGS means:
(a) A Participant's total Compensation from an Employer
during his Years of Service as a Participant (or as an Employee
during the pre-participation period described in Section 2.01(b))
beginning September 1, 1982, including a Participant's bonuses
earned during a Year of Service, even if paid in a year that is not
a Year of Service; plus
(b) For the period prior to September 1, 1982, a
Participant's Compensation, if any, as taken into account under the
Pfizer Inc. Retirement Annuity Plan prior to July 15, 1982 plus
Compensation paid to the Employee by DEKALB-PFIZER GENETICS from
July 15, 1982 to August 31, 1982, provided the Participant was an
Employee of DEKALB-PFIZER GENETICS on July 15, 1982 and an Employee
of Pfizer Inc. or a subsidiary of Pfizer Inc. prior to that date.
Notwithstanding the above, if the Participant has completed more
than thirty-five (35) Years of Service, only his Compensation during
his last thirty-five (35) Years of Service shall be included.
1.09 CODE means the Internal Revenue Code of 1986, as amended from
time to time.
1.10 COMMITTEE means the Administrative Committee established in
Article VI.
1.11 COMPANY means DEKALB Genetics Corporation, a Delaware
corporation, with its principal place of business in DeKalb, Illinois.
<PAGE>
<PAGE>
1.12 COMPENSATION, for all purposes of the Plan and Trust except
for Sections 4.07, 4.08 and 11.04, means the aggregate of all payments by
the Employer to a Participant in a Plan Year for services, including base
pay, bonuses, overtime pay, vacation pay, commissions, disability pay with
respect to the first six (6) months of any single absence from work and
amounts, if any, deferred under a cash or deferred arrangement which
qualifies under Section 401(k) or Section 125 of the Code, but excluding
other amounts of deferred compensation, stock options and phantom stock
benefits, severance pay, relocation and moving reimbursements, payments
made from the DEKALB-PFIZER GENETICS Management Incentive Plan, other
payments or distributions which receive special tax benefits and any
benefits paid after January 31, 1983 under the DEKALB AgResearch, Inc. Key
Employee Profit Sharing Plan (or any payments made in lieu of such benefit
payments). Notwithstanding anything to the contrary, Compensation in
excess of two hundred thousand dollars ($200,000) (or such other amount as
may be established by the Secretary of the Treasury) shall be disregarded.
Additionally, notwithstanding anything herein to the contrary, for Plan
Years beginning on or after September 1, 1994, the annual Compensation of
each Participant taken into account under the Plan shall not exceed the
OBRA '93 annual compensation limit. The OBRA '93 annual compensation
limit is $150,000, adjusted by the Commissioner for increases in the cost
of living in accordance with Section 401(a)(17)(B) of the Code. The cost-
of-living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12. For Plan Years beginning on or after
September 1, 1994, any reference in this Plan to the limitation under
Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation
limit set forth in this provision. If Compensation for any prior
determination period is taken into account in determining a Participant's
benefits accruing in the current Plan Year, the Compensation for that
prior determination period is subject to the OBRA '93 annual Compensation
limit in effect for that prior determination period. For this purpose,
for determination periods beginning before the first day of the first Plan
Year beginning on or after September 1, 1994, the OBRA '93 annual
compensation limit is $150,000. In determining the Compensation of the
Participant for purposes of this limitation, the rules of Section
414(q)(6) of the Code relating to the treatment of certain family members
shall apply, except that, in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age nineteen (19) before the close
of the applicable Plan Year.
<PAGE>
<PAGE>
1.13 DOMESTIC RELATIONS ORDER means any judgment, decree or order
(including approval of a property settlement agreement) that relates to
the provision of child support, alimony payments or marital property
rights to an Alternate Payee and is made pursuant to a state domestic
relations law, including a community property law.
1.14 EFFECTIVE DATE means September 1, 1989, except as otherwise
specifically provided.
1.15 EMPLOYEE means any person actively employed by an Employer
who is not employed as a Temporary Employee, Seasonal Employee or a Leased
Employee.
1.16 EMPLOYER means the Company or any Related Employer which,
with the approval of the Board, shall adopt this Plan for the benefit of
its Employees, according to an appropriate written resolution of the board
of directors of such Related Employer. Such a Related Employer shall
execute such documents as may be necessary.
1.17 EMPLOYMENT COMMENCEMENT DATE means the date on which an
Employee completes his first Hour of Service for the Company or for a
Related Employer, or the date on which an Employee completes his first
Hour of Service for the Company or a Related Employer following a Break in
Service.
1.18 ENTRY DATE means the first day of the Plan Year and the first
day of the seventh month of the Plan Year.
1.19 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.20 HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid or entitled to
payment for the performance of duties for the Company or for a
Related Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are performed;
and
(b) Each hour for which an Employee is paid or entitled to
payment by the Company or a Related Employer on account of a period
of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury
duty, military duty or other approved leave of absence. No more
than five hundred one (501) Hours of Service shall be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours<PAGE>
<PAGE>
under this paragraph shall be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor regulations, which
are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Company or a
Related Employer. The same Hours of Service shall not be credited
under both paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours shall be credited to the
Employee for the computation period or periods to which the award or
agreement pertains rather than the computation period in which the
award, judgment or payment is made; and
(d) Effective for Plan Years commencing on or after September
1, 1985, solely for purposes of determining whether a Break in
Service, as defined in Section 1.07, for participation and vesting
purposes has occurred in a computation period, an Employee who is
absent from work for maternity or paternity reasons shall receive
credit for the Hours of Service which would otherwise have been
credited to such Employee but for such absence or, in any case in
which such hours cannot be determined, eight (8) Hours of Service
per day of such absence. For purposes of this paragraph (d), an
absence from work for maternity or paternity reasons means an
absence:
(1) By reason of the pregnancy of the Employee;
(2) By reason of a birth of a child of the Employee;
(3) By reason of the placement of a child with the Employee
in connection with the adoption of such child by the Employee;
or
(4) For purposes of caring for such child for a period
beginning immediately following such birth or placement.
Any hour under this paragraph (d) which is considered an Hour
of Service under paragraph (b) shall not be considered under this
paragraph (d). The Hours of Service credited under this paragraph
(d) shall be credited in the computation period in which the absence
begins if the crediting is necessary to prevent a Break in Service
in that period or, in all other cases, in the following computation
period. Notwithstanding the foregoing, no credit shall be given for
Hours of Service under this paragraph (d) unless the Employee
furnishes the Committee with such timely information as the
Committee may reasonably require to establish that the absence from
work is because of maternity or paternity leave and the number of
days for which there was such an absence.
<PAGE>
<PAGE>
1.21 JOINT AND SURVIVOR ANNUITY means an annuity which is payable
monthly to the Participant for his life with a survivor annuity payable to
his spouse for the life of such spouse in an amount equal to one-half
(1/2) of the monthly amount payable during the life of the Participant and
which is the Actuarial Equivalent of the Life Annuity in the amount
determined pursuant to the applicable provisions of Article IV of the
Plan.
1.22 LEASED EMPLOYEE means any employee of an Employer who is a
leased employee as defined in Section 414(n) of the Code.
1.23 LIFE ANNUITY means an annuity which is payable monthly to the
Participant for his life, with the last payment made on the first day of
the month in which the Participant's death occurs.
1.24 LIMITATION YEAR means the Plan Year.
1.25 NORMAL RETIREMENT BENEFIT means the amount of retirement
income computed under Section 4.01 of the Plan that would be payable in
the normal form under the conditions described in Section 5.01 of the Plan
to a Participant for his life, commencing upon the first day of the month
coincident with or next following his Normal Retirement Date, if he is
then entitled to receive a retirement income under the terms of the Plan.
1.26 NORMAL RETIREMENT DATE means a Participant's sixty-fifth
birthday (without regard to his Years of Service for Vesting at that
time).
1.27 PARTICIPANT means an Employee who meets the requirements of
participation in the Plan as provided in Article II.
1.28 PLAN means the DEKALB Genetics Corporation Pension Plan.
1.29 PLAN ADMINISTRATOR means the Administrative Committee
established in Article VI.
1.30 PLAN YEAR means the year which begins on September 1 and ends
on August 31.
1.31 PRIOR PLAN means the Plan as it existed on August 31, 1989
prior to this amendment and restatement.
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<PAGE>
1.32 PRIOR PLAN ACCRUED BENEFIT means a Participant's benefit
accrued as of August 31, 1989 using the following formula:
(a) 1.75% of Career Earnings as of August 31, 1989
MINUS
(b) 1.50% of Primary Social Security Benefit times Years of
Service, to a maximum of thirty-five (35) years.
For purposes of this formula, a Participant's "Primary Social
Security Benefit" shall be the unreduced annual benefit expected to
become payable to the Participant (without any regard to any Social
Security benefits payable to or on account of the Participant's
spouse or dependents) at age sixty-five (65), based on the
provisions of the Social Security Act as in effect on August 31,
1989. The Social Security benefit expected to begin at age
sixty-five (65) will be based upon the assumption that he will
continue to receive, until age sixty-five (65), earnings equal to
the Compensation he received during his last Year of Service ending
on or before August 31, 1989 which would be treated as wages for
purposes of the Social Security Act. Notwithstanding the foregoing,
for a Participant who retires pursuant to Section 4.03 of the Plan,
the Social Security benefit expected to begin at age sixty-five (65)
will be based on the assumption that he will not receive any
earnings after termination of employment which would be treated as
wages for purposes of the Social Security Act. In all cases, the
predetermination compensation history, including preemployment
compensation history, shall be estimated by applying the actual
change in the national average wage from year to year as determined
by the Social Security Administration to the Participant's
Compensation during the most recent full Plan Year immediately
preceding the Participant's termination date, projected backward to
the earlier of the year in which the Participant attained age
twenty-two (22) or 1951. However, a Participant shall have a right
to have his Primary Social Security Benefit computed on the basis of
his actual salary history instead of the estimated compensation.
Each Participant shall be furnished with a written notice of his
right to supply actual salary history, of the financial consequences
of failing to supply such history and that such history can be
obtained from the Social Security Administration. The Primary
Social Security Benefit determined above will be adjusted to the
amount based upon actual complete Compensation history if the
Participant supplies documentation of that history within one (1)
year (or such other period of time as established by the Committee)
following the later of his termination date or the date the
Participant is notified of the benefit to which he is entitled. No
benefit shall be reduced because of any increase<PAGE>
<PAGE>
in the benefit level or wage base under Title II of the Social
Security Act except where a reduction is permitted by regulations
prescribed by the Secretary or his delegate under Section 401(a)(15)
or other applicable provision of the Code. The fact that a
Participant does not actually receive a Primary Social Security
Benefit because of failure to apply or continuance of work, or for
any other reason, shall be disregarded.
1.33 QUALIFIED DOMESTIC RELATIONS ORDER means any Domestic
Relations Order that creates, recognizes or assigns to an Alternate Payee
the right to receive all or a portion of a Participant's benefits payable
hereunder and that meets the requirements of Section 414(p) of the Code.
1.34 RELATED EMPLOYER means any corporation or other business
entity which is included in a controlled group of corporations within
which the Company is also included, as provided in Section 414(b) of the
Code (as modified, for purposes of Sections 4.07 and 4.08 of the Plan, by
Section 415(h) of the Code), or which is a trade or business under common
control with the Company, as provided in Section 414(c) of the Code (as
modified, for purposes of Sections 4.07 and 4.08 of the Plan, by Section
415(h) of the Code), or which constitutes a member of an affiliated
service group within which the Company is also included, as provided in
Section 414(m) of the Code, or which is required to be aggregated with the
Company pursuant to regulations issued under Section 414(o) of the Code.
For purposes of this section, a partnership in which the Company owns a
capital interest or profit interest of seventy percent (70%) or more is a
trade or business under common control with the Company.
1.35 RETIREMENT DATE means a Participant's "Postponed Retirement
Date" or "Early Retirement Date" or the first day of the month coincident
with or next following his "Normal Retirement Date," as defined in
Sections 4.02, 4.03 and 1.26 of the Plan, respectively.
1.36 SEASONAL EMPLOYEE means any person hired to fill a specific
need for a limited period of time who is placed on the seasonal payroll.
1.37 TEMPORARY EMPLOYEE means any person who is scheduled to work
for a limited time and is not classified as a full-time or part-time
employee on the regular payroll.
1.38 TOTAL AND PERMANENT DISABILITY means a Participant's
inability for the foreseeable future to perform his normal work for an
Employer or any other work for which he is qualified by reason of
education, training or experience, as determined by a competent physician
chosen by the Committee. Uniform standards shall apply to Participants in
similar conditions.
<PAGE>
<PAGE>
1.39 TRUST AGREEMENT and TRUST mean, respectively, the
agreement between the Company and the Trustee governing the administration
of the Trust, as it may be amended from time to time, and the Trust
established thereunder.
1.40 TRUST FUND means all money, securities and other property
held under the Trust Agreement for the purposes of the Plan, together with
the income therefrom.
1.41 TRUSTEE means the person, persons, entity or entities
appointed by the Company as provided in Section 3.01 of the Plan to act as
Trustee of the Trust.
1.42 YEAR OF SERVICE means:
(a) For the period beginning September 1, 1982, a Plan Year in
which an Employee completes one thousand (1,000) or more Hours of
Service; and
(b) For the period prior to September 1, 1982, a Participant's
Years of Service accrued under the Pfizer Inc. Retirement Annuity
Plan if the Participant was an Employee of DEKALB-PFIZER GENETICS on
July 15, 1982 and an Employee of Pfizer Inc. or a subsidiary of
Pfizer Inc. prior to that date.
1.43 YEAR OF SERVICE FOR VESTING means a Plan Year in which an
employee completes one thousand (1,000) or more Hours of Service,
including years prior to the Effective Date of the Plan and including
years of service for any Related Employer (including, for this purpose,
DEKALB Corporation); provided, however, that in the case of an Employee
who is, on or after September 1, 1988, simultaneously employed by both the
Company and DEKALB Energy Company, a "Year of Service for Vesting" shall
not include any Plan Year commencing prior to September 1, 1988.
<PAGE>
<PAGE>
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION
(a) Every Employee who was a Participant in the Prior Plan on
the day prior to the Effective Date shall continue to participate in
the Plan on the Effective Date if still employed by the Employer.
(b) Each other Employee shall become a Participant on the
Entry Date immediately following the date on which he has attained
age twenty-one (21) and has completed one thousand (1,000) Hours of
Service in the twelve (12) month period beginning with his
Employment Commencement Date or in any Plan Year thereafter. If the
Employee does not complete one thousand (1,000) Hours of Service in
the twelve (12) month period following his Employment Commencement
Date, the first Plan Year to be considered shall be the Plan Year
which begins prior to the first anniversary of the Employee's
Employment Commencement Date.
(c) Notwithstanding anything to the contrary, Leased
Employees shall be excluded from participation in this Plan.
2.02 REEMPLOYMENT OF PARTICIPANT
If a Participant shall incur a Break in Service and shall thereafter
be reemployed by an Employer, he shall again become a Participant in the
Plan on the date of his reemployment.
<PAGE>
<PAGE>
ARTICLE III
CONTRIBUTIONS
3.01 TRUSTEE AND TRUST AGREEMENT
A Trustee shall be appointed by the Company to administer the Trust
Fund. The Trustee shall serve at the pleasure of the Company and shall
have the rights, powers and duties set forth in the Trust Agreement, under
which agreement the Trustee shall receive contributions from the Employer
to the Trust Fund.
3.02 EMPLOYER CONTRIBUTIONS
During the continuance of the Plan, the Employer intends from time
to time to pay to the Trustee, to be held or applied under the Trust
Agreement, such sums of money which, together with earnings of the Trust
Fund, will be sufficient to provide the benefits specified by the Plan.
No contributions shall be made by Participants.
3.03 FORFEITURES
Any forfeiture under the Plan shall be applied to reduce Employer
contributions and not to increase the benefits any Participant would
otherwise receive under the Plan.
3.04 REVERSION OF EMPLOYER CONTRIBUTIONS
(a) At no time shall any part of the corpus or income of the
Trust Fund be used for or diverted to purposes other than for the
exclusive benefit of Participants and their Beneficiaries and to pay
the reasonable expenses of administration of the Plan and Trust, to
the extent that such expenses are not paid by the Employers, and no
part of the Trust Fund shall ever revert or be repaid to the Company
or any other Employer, either directly or indirectly, except for
such part of the Trust Fund, if any, which remains under the Trust
after the satisfaction of all liabilities to persons entitled to
benefits under the Plan.
(b) Notwithstanding the above, in the case of a contribution
which is made by an Employer by a mistake of fact, such contribution
shall be returned to the Employer within one (1) year after the
payment of the contribution to the Trust Fund. If a contribution is
conditioned on initial qualification of the Plan under Section 401
of the Code, and if the Plan does not qualify, then such
contribution shall be returned to the Employer within one (1) year
after the date of <PAGE>
<PAGE>
denial of initial qualification of the Plan. If a contribution is
conditioned upon the deductibility of the contribution under Section
404 of the Code, then, to the extent the deduction is disallowed,
such a contribution shall be returned to the Employer within one (1)
year after the disallowance of the deduction.
<PAGE>
<PAGE>
ARTICLE IV
BENEFITS
4.01 NORMAL RETIREMENT BENEFIT
(a) A Participant who retires on his Normal Retirement Date
shall be entitled to a monthly retirement income for life payable as
provided in Article V of the Plan, commencing upon the first day of
the month coincident with or next following his Normal Retirement
Date, in an amount equal to one-twelfth (1/12) of the greater of (1)
or (2) below:
(1) 1.4% of Career Earnings; or
(2) His Pre-Effective Date Benefit plus 1.4% of Career
Earnings on and after the Effective Date.
(b) Notwithstanding the provisions of paragraph (a) above, a
Participant's Normal Retirement Benefit shall not be less than his
Prior Plan Accrued Benefit.
(c) For purposes of this Section 4.01:
(1) A Participant's Pre-Effective Date Benefit is equal
to his benefit accrued as of August 31, 1989 using the
following formula:
(A) 1.75% of Career Earnings in his Years of
Service, if any, prior to the Effective Date which are
included in his last thirty-five (35) Years of Service.
(B) 1.50% of Primary Social Security Benefit
times Years of Service, if any, prior to the Effective
Date which are included in his last thirty-five (35)
Years of Service.
(2) In determining a Participant's Career Earnings on
and after the Effective Date, if the Participant has completed
more than thirty-five (35) Years of Service, only his
Compensation during his last thirty-five (35) Years of
Service, less Years of Service, if any, prior to the Effective
Date which are included in his last thirty-five (35) Years of
Service, shall be included.
(d) Effective October 1, 1993, benefits under this Plan have
been frozen.
<PAGE>
<PAGE>
4.02 POSTPONED RETIREMENT BENEFIT
A Participant who remains in employ of an Employer after his Normal
Retirement Date shall be notified by the Committee, in writing by personal
delivery or first-class mail, during the calendar month during which his
Normal Retirement Date occurs, that he will not be entitled to receive any
benefit for any calendar month of employment during which he is scheduled
to work forty (40) or more Hours of Service (determined under Department
of Labor Regulation Section 2530.200b-2(a)). The benefit of such
Participant shall be actuarially increased to reflect the benefit payable
to such Participant for any calendar month during which he does not
complete forty (40) Hours of Service. If such Participant dies before the
commencement of his benefit, as so increased, a single sum equal to the
aggregate benefit payable to the Participant for each month after his
Normal Retirement Date during which he did not complete at lease forty
(40) Hours of Service shall be paid to his surviving spouse, and if none,
to his estate.
4.03 EARLY RETIREMENT BENEFIT
A Participant who has reached age fifty (50), has completed at least
ten (10) Years of Service for Vesting and whose age plus Years of Service
for Vesting equals or exceeds sixty-five (65) may retire at any time prior
to his sixty-fifth birthday. In such event, his Early Retirement Date
shall be the first day of the month coincident with or next following the
date on which he retires from employment with an Employer. A Participant
who retires on an Early Retirement Date shall be entitled to a retirement
income for life, commencing upon the first day of the month coincident
with or next following his Normal Retirement Date, in an amount equal to
his Accrued Benefit. However, the Participant may elect, by giving at
least one hundred twenty (120) days' prior written notice to the
Committee, to have his retirement income begin on the first day of any
month on or after his Early Retirement Date, in which event he shall be
entitled to receive a retirement income for life in an amount equal to his
Accrued Benefit reduced by one-third of one percent (1/3%) per month for
each month between his Normal Retirement Date and the date of commencement
of his retirement income payments to reflect the longer period over which
payments will be received; provided that, if a Participant's age plus
Years of Service for Vesting equal or exceed ninety (90), his Accrued
Benefit will not be reduced if his Early Retirement Date is on or after
his sixtieth birthday and will be reduced by one-third of one percent
(1/3%) per month only for each month between his sixtieth birthday and his
Early Retirement Date, if such date precedes his sixtieth birthday.
4.04 TERMINATION OF VESTED PARTICIPANT
A Participant who has completed at least five (5) Years of Service
for Vesting and who terminates employment before he becomes eligible to
retire on an Early Retirement Date shall be entitled to receive a
retirement income for life commencing upon the first day<PAGE>
<PAGE>
of the month coincident with or next following his Normal Retirement Date
in an amount equal to his Accrued Benefit. However, the Participant may
elect, by giving prior written notice to the Committee, to have his
retirement income commence earlier in accordance with (a) or (b) below:
(a) On the first day of any month on or after his fiftieth
birthday, if the sum of his age plus his Years of Service for
Vesting equals or exceeds sixty-five (65), in which event he shall
be entitled to receive a retirement income for life in an amount
equal to his Accrued Benefit reduced by one-third of one percent
(1/3%) per month for each month between his Normal Retirement Date
and the date of commencement of his retirement income; or
(b) On the first day of any month on or after his termination
of employment. In this event he shall be entitled to receive a
retirement income for life in an amount equal to his Accrued Benefit
reduced by one-third of one percent (1/3%) per month for each month
between his Normal Retirement Date and the first day of the month on
or after his fiftieth birthday (if he had worked to such age) on
which the sum of his age plus Years of Service for Vesting would
have equalled or exceeded sixty-five (65), and actuarially reduced
prior to such date to the date of commencement of his initial
receipt of retirement income.
Subject to the provisions of Section 1.07 and Article XI, a
Participant who terminates employment before he completes five (5) Years
of Service for Vesting and before his sixty-fifth birthday shall not be
entitled to any benefits under the Plan, except as provided in Article IX.
4.05 DISABILITY LEAVE STATUS
A Participant whose employment terminates due to Total and Permanent
Disability shall be entitled to disability leave status if the Participant
has completed at least ten (10) Years of Service prior to the onset of the
disability or the disability is a result of an injury suffered in
connection with his employment by an Employer. While on disability leave
status, the Participant shall be credited with Years of Service and with
Compensation at the same rate as in effect for the Plan Year immediately
preceding the Plan Year in which the Participant became Totally and
Permanently Disabled until the earlier of the Participant's attainment of
age sixty-five (65) or the termination of his disability leave status.
The Participant's disability leave status shall be terminated if, at any
time prior to his attainment of age sixty-five (65), he engages in
regular, full-time employment (other than employment determined by the
Committee to be for purposes of rehabilitation); fails or refuses to
undergo any medical examination ordered by the Committee, provided that
the Committee shall not require the Participant to undergo more than one
(1) physical examination in<PAGE>
<PAGE>
any Plan Year; or is determined by the Committee, based on any medical
examination ordered by the Committee, to have recovered sufficiently to
engage in regular, full-time employment. If a Participant is on
disability leave status at the time he attains age sixty-five (65), he
shall be entitled to retire and receive a Normal Retirement Benefit
determined in accordance with Section 4.01 of the Plan. If the disability
leave status of a Participant terminates before he attains age sixty-five
(65) and he returns to work for an Employer, he shall be entitled, upon
his later termination of employment, to the benefits described in Section
4.01, 4.02, 4.03 or 4.04, whichever is applicable. If the disability
leave status of a Participant terminates before he attains age sixty-five
(65) and he does not return to work for an Employer, he shall then be
considered to have terminated employment and shall be entitled to receive
the benefits described in Section 4.03 or 4.04, whichever is applicable.
4.06 DEATH BENEFIT FOR SURVIVING SPOUSE
If a Participant who has any vested interest in his Accrued Benefit
dies either while employed or after termination of employment but prior to
an Annuity Starting Date, his surviving spouse to whom he was married
throughout the one (1) year period prior to the date of his death shall be
entitled to retirement income for life. The amount of the benefit shall
be equal to the amount the surviving spouse would have been entitled to
receive if the Participant had elected to begin receiving benefits on the
day preceding his death and was entitled to receive benefits in the form
of a Joint and Survivor Annuity. In the case of a Participant who dies
while employed, such a Participant shall be deemed to have terminated
employment on the day preceding his death.
4.07 MAXIMUM BENEFITS
Effective September 1, 1987, for purposes of compliance with Section
415 of the Code (or any successor to said Section), the following
limitations on Plan benefits are hereby imposed:
(a) The retirement benefits payable to a Participant in any
Limitation Year shall not exceed an annual sum equal to the least
of:
(1) Ninety thousand dollars ($90,000) (or such other
amount as may be determined by Treasury regulations issued
pursuant to Section 415 of the Code).
(2) The Participant's average annual compensation (as
defined in Section 4.9) over the three (3) consecutive
calendar years during which his compensation (as defined in
Section 4.9) from an Employer was the highest.
<PAGE>
<PAGE>
(3) If the Participant has less than ten (10) years of
participation in the Plan, the amount determined under Section
4.07(a)(1) multiplied by a fraction, the numerator of which is
the number (not less than one (1)) of years (or parts thereof)
of participation in the Plan and the denominator of which is
ten (10).
However, for purposes of Section 4.08(c), the numerator
in the fraction above shall be the number (not less than one
(1)) of Years of Service for Vesting.
(4) If the Participant has less than ten (10) Years of
Service for Vesting, the amount determined under Section
4.07(a)(2) multiplied by a fraction, the numerator of which is
the Participant's number (not less than one (1)) of Years of
Service for Vesting and the denominator of which is ten (10).
Notwithstanding the foregoing, in the event that a Participant
has never participated in any defined contribution plan maintained
by the Employer or a Related Employer, the annual pension payable to
such Participant shall not be deemed to exceed the limitations of
this section if it does not exceed ten thousand dollars ($10,000)
multiplied by a fraction, the numerator of which is the number (not
less than one (1)) of the Participant's Years of Service for Vesting
and the denominator of which is ten (10).
Subparagraphs 4.07(a)(3) and (4) shall be applied separately
with respect to each change in the benefit structure of the Plan.
Pensions payable in a form other than a single life annuity
shall be adjusted to an actuarially equivalent straight life annuity
before applying the limitations of this Section 4.07. The interest
rate assumption used to determine actuarial equivalence for this
purpose shall be the greater of the interest rate specified in
Section 1.02 of the Plan or five percent (5%). No actuarial
adjustment to the benefit is required for the value of a Joint and
Survivor Annuity form.
(b) If payments begin prior to a Participant's Social
Security Retirement Age, the limitation in subparagraph (a)(1) shall
be adjusted to the Actuarial Equivalent of such limitation as
follows. For benefit payments commencing on or after age sixty-two
(62), this adjustment will be made in such manner as the Secretary
of the Treasury may prescribe which is consistent with the reduction
for old age insurance benefits commencing before the Social Security
Retirement Age under the Social Security Act. For benefit payments
commencing prior to age sixty-two (62), such limitation shall be
adjusted so that it is the Actuarial Equivalent of the limitation
for benefits commencing at age sixty-two (62). The interest rate<PAGE>
<PAGE>
assumption used to determine actuarial equivalence for this purpose
shall be the greater of the interest rate determined under Section
1.02 of the Plan or five percent (5%). If benefit payments begin
after a Participant's Social Security Retirement Age, the limitation
in subparagraph (a)(1) shall be equal to the Actuarial Equivalent of
an annual benefit of ninety thousand dollars ($90,000) commencing at
the Social Security Retirement Age multiplied by the Adjustment
Factor. To determine actuarial equivalence for purposes of the
preceding sentence, the interest rate assumption shall be the lesser
of the rate specified at Section 1.02 of the Plan or five percent
(5%).
(c) For purposes of Section 4.07(b) of this Plan:
(1) "Adjustment Factor" shall mean the cost-of-living
adjustment factor prescribed by the Secretary of the Treasury
under Section 415(d) of the Code for years beginning on or
after September 1, 1987 applied to such items and in such
manner as the Secretary shall prescribe.
(2) "Social Security Retirement Age" shall mean the age
used as the retirement age for the Participant under Section
216(l) of the Social Security Act, except that such section
shall be applied without regard to the age increase factor and
as if the early retirement age under Section 216(l)(2) of such
Act were sixty-two (62).
(d) If the Current Accrued Benefit of an individual who is a
Participant as of August 31, 1987 exceeds the benefit limitations
under Section 415(b) of the Code, as modified by the foregoing
provisions of this Section 4.07, then, for purposes of Sections
415(b) and (e) of the Code, the limitation set forth in Section
415(b)(1) of the Code with respect to such individual shall be equal
to such Current Accrued Benefit.
(e) For purposes of Section 4.07(d), "Current Accrued
Benefit" shall mean a Participant's Accrued Benefit under the Plan,
determined as if the Participant had separated from service as of
August 31, 1987, when expressed as an annual benefit within the
meaning of Section 415(b)(2) of the Code. In determining the amount
of a Participant's Current Accrued Benefit, the following shall be
disregarded:
(1) Any change in the terms and conditions of the Plan
after May 5, 1986; and
(2) Any cost-of-living adjustment occurring after May
5, 1986.<PAGE>
<PAGE>
4.08 COMBINED MAXIMUM LIMITATIONS
(a) If any Participant has also participated in any qualified
defined contribution plan maintained by the Company or a Related
Employer during the Plan Year, and if the sum of the defined benefit
plan fraction and the defined contribution plan fraction would, but
for this Section 4.08, exceed 1.0 in any year for a Participant in
this Plan, the numerator of the defined benefit plan fraction shall
be adjusted so that the sum of the defined benefit plan fraction and
the defined contribution plan fraction for any Plan Year does not
exceed 1.0.
(b) The "defined contribution plan fraction" for any Plan
Year is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Accounts as of the close of the Plan
Year under this Plan and any other defined contribution plan
maintained by the Company or a Related Employer and the denominator
of which is the sum of the lesser of the following amounts
determined for such Plan Year and each prior year of service with
the Company or a Related Employer:
(1) The product of 1.25 multiplied by the dollar
limitation in effect under Section 415(c)(1)(A) of the Code
for such Plan Year; or
(2) The product of 1.4 multiplied by the amount which
may be taken into account under Section 415(c)(1)(B) of the
Code for such Plan Year.
The annual additions for any Plan Year beginning before
September 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(c) The "defined benefit plan fraction" for any Plan Year is
a fraction, the numerator of which is the projected annual benefit
of the Participant under such plan (determined as of the close of
its limitation year) and the denominator of which is the lesser of:
(1) The product of 1.25 multiplied by the maximum
dollar limitation in effect under Section 415(b)(1)(A) of the
Code for such Plan Year; or
(2) The product of 1.4 multiplied by the amount which may be
taken into account under Section 415(b)(1)(B) of the Code for such
Plan Year.
(d) If the Plan satisfied the applicable requirements of
Section 415 of the Code as in effect for all Limitation Years
beginning before September 1, 1987, an amount shall be subtracted
from the numerator of the Defined Contribution Plan
<PAGE>
Fraction (not exceeding such numerator), as prescribed by the
Secretary of the Treasury, so that the sum of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction computed
under Section 415(e)(1) of the Code does not exceed one (1).
4.09 DEFINITION OF COMPENSATION FOR PURPOSES OF
SECTIONS 4.07 AND 4.08
(a) Inclusions. Solely for the purpose of applying the
limitations of Sections 4.07 and 4.08, the compensation of a
Participant includes:
(1) A Participant's wages, salaries, fees for
professional services, and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the Employer to the extent that the amounts
are includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, reimbursements, and
expense allowances);
(2) In the case of a Participant who is an employee
within the meaning of Section 401(c)(1) of the Code and the
regulations thereunder, the Participant's earned income (as
described in Section 401(c)(2) of the Code and the regulations
thereunder);
(3) Amounts described in Sections 104(a)(3), 105(a),
and 105(h) of the Code, but only to the extent these amounts
are includable in the gross income of the Employee;
(4) Amounts paid or reimbursed by the Employer for
moving expenses incurred by an Employee, but only to the
extent that these amounts are not deductible by the Employee
under Section 217 of the Code;
(5) The value of a nonqualified stock option granted to
an Employee by the Employer, but only to the extent that the
value of the option is includable in the gross income of the
Employee for the taxable year in which granted; and
(6) The amount includable in the gross income of an
Employee upon making the election described in Section 83(b)
of the Code.
<PAGE>
<PAGE>
(b) Exclusions From Compensation. Solely for the purpose of
applying the limitations of Sections 4.07 and 4.08, the compensation
of a Participant excludes:
(1) Employer contributions to a plan of deferred
compensation which are not included in the Participant's gross
income for the taxable year in which contributed, Employer
contributions under a simplified employee pension plan to the
extent such contributions are excluded from the Participant's
gross income, or any distributions from a plan of deferred
compensation;
(2) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or
property) held by the Participant either becomes freely
transferable or is no longer subject to substantial risk of
forfeiture;
(3) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option;
and
(4) Other amounts which received special tax benefits,
or contributions made by the Employer (whether or not under a
salary reduction agreement) toward the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts
are actually excludable from the gross income of the
Employee).
4.10 REEMPLOYMENT AFTER RECEIPT OF BENEFITS
(a) A vested Participant who terminates employment and is
rehired without having received retirement benefits and who once
again becomes a Participant in the Plan may later retire and receive
benefits based upon his total Years of Service and Career Earnings
both before and after such termination and reemployment.
(b) A Participant who retires and is rehired prior to his
Normal Retirement Date after receiving retirement benefits shall
have such payments suspended.
In the event that a reemployed, retired Participant accrues
further Years of Service, he may later retire again, to receive
benefits based upon his total Years of Service and Career Earnings
both before and after such termination and reemployment. However,
the subsequent retirement benefits shall be reduced by the Actuarial
Equivalent of the benefits he previously received prior to his
reemployment.
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<PAGE>
(c) A Participant who retires and is rehired after his Normal
Retirement Date and after receiving retirement benefits shall have
such payments suspended. No payment shall be suspended unless the
Administrative Committee gives written notice to the Employee by
personal delivery or first-class mail, during the month in which his
reemployment occurs that he will not receive any benefit for any
calendar month of employment during which he works forty (40) or
more Hours of Service. The benefit of such Participant shall be
actuarily increased to reflect the benefit payable to such
Participant for any calendar month during which he does not complete
forty (40) Hours of Service. If such Participant dies before the
commencement of his benefit, as so increased, a single sum equal to
the aggregate benefit payable to the Participant for each month
after his Normal Retirement Date during which he did not complete at
least forty (40) Hours of Service shall be paid to his surviving
spouse, and if none, to his estate. Hours of Service in this
subsection are hours as defined under Department of Labor Regulation
Section 2530.200b-2(a).
In the event that a reemployed, retired Participant accrues
further Years of Service, he may later retire again, to receive
benefits based upon his total Years of Service and Career Earnings
both before and after such termination and reemployment. However,
the subsequent retirement benefits shall be reduced by the Actuarial
Equivalent of the benefits he previously received prior to his
Normal Retirement Date.
4.11 PFIZER TRANSFEREES
Any provision in this Plan to the contrary notwithstanding,
any employee of Pfizer Inc. who elected to transfer his/her
employment from Pfizer Inc. to DEKALB-PFIZER GENETICS effective
January 1, 1990, shall, for all purposes under this Plan, receive
credit for his/her years of service and earnings with Pfizer Inc.
<PAGE>
<PAGE>
ARTICLE V
FORM AND PAYMENT OF BENEFITS
5.01 LIFE ANNUITY
If a Participant is unmarried as of his Annuity Starting Date, the
benefit payments determined under Article IV shall be in the form of a
Life Annuity, unless the Participant elects an optional form of payment
provided in the Plan in accordance with the procedures of Section 5.03.
The Life Annuity form of benefit described in this Section 5.01 is
sometimes referred to herein as the "normal form" of benefit.
5.02 JOINT AND SURVIVOR ANNUITY
If a Participant is married as of his Annuity Starting Date, benefit
payments determined under Article IV shall be in the form of a Joint and
Survivor Annuity, unless the Participant, with the consent of the
Participant's spouse, elects either the Life Annuity or an optional form
of payment provided in the Plan in accordance with the procedures of
Section 5.04.
5.03 ELECTION NOT TO RECEIVE LIFE ANNUITY
An unmarried Participant may elect in writing, during the ninety
(90) day period ending on his Annuity Starting Date, to waive the
automatic Life Annuity form of benefit described in Section 5.01 and to
make a qualified election of an optional form of payment permitted under
the Plan. Not less than thirty (30) days and not more than ninety (90)
days prior to the Participant's Annuity Starting Date and consistent with
such regulations as the Secretary of the Treasury may prescribe, the
Committee shall provide the Participant with a written explanation of:
(a) The terms and conditions of the Life Annuity;
(b) The Participant's right to make and the effect of an
election to waive the Life Annuity;
(c) The right of the Participant to revoke each such election
and the effect of such revocation; and
(d) The terms, conditions and relative values of the various
optional forms of benefit available under the Plan.
<PAGE>
<PAGE>
5.04 ELECTION NOT TO RECEIVE JOINT AND SURVIVOR
ANNUITY
A Participant may, with his spouse's written consent, elect in
writing, during the ninety (90) day period ending on his Annuity Starting
Date, to waive the automatic Joint and Survivor Annuity form of payment
described in Section 5.02 and to make a qualified election of either the
Life Annuity or an optional form of payment permitted under the Plan. The
spouse's consent must acknowledge the effect of such election and be
witnessed by a notary public. The spouse must also consent to the
specific optional form of benefit chosen. Not less than thirty (30) days
and not more than ninety (90) days prior to the Participant's Annuity
Starting Date and consistent with such regulations as the Secretary may
prescribe, the Committee shall provide the Participant with a written
explanation of:
(a) The terms and conditions of the Joint and Survivor
Annuity;
(b) The Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity;
(c) The right of the Participant's spouse to consent to any
election to waive the Joint and Survivor Annuity;
(d) The right of the Participant to revoke such election and
the effect of such revocation; and
(e) The terms, conditions and relative values of the various
optional forms of benefit available under the Plan.
5.05 PAYMENT IN OPTIONAL FORM ON RETIREMENT
(a) Except as otherwise provided in subsections (b) and (c)
below, the following optional forms of payment shall be available,
all of which shall be the Actuarial Equivalent of the retirement
income payable to the Participant in the normal form:
(1) Ten Year Certain and Life. A reduced retirement
benefit payable monthly to the Participant for a period
certain of ten (10) years and during his lifetime thereafter,
with payments to continue to a Beneficiary designated by the
Participant for the balance of the ten (10) year period if he
should die within such period; or
(2) Fifty Percent (50%) Joint and Contingent Benefit.
A reduced retirement benefit payable monthly to the
Participant during his lifetime, with payments in one-half
(1/2) of such amount to continue after his death<PAGE>
<PAGE>
to a Beneficiary designated by the Participant for the
lifetime of the Beneficiary; or
(3) Single Sum Cash Payment. A retirement benefit
payable to the Participant in one (1) sum.
Distribution, if not made in a lump sum, may be made over only
one (1) of the following periods (or a combination thereof):
(i) The life of the Participant;
(ii) The life of the Participant and a designated
Beneficiary;
(iii) A period certain not extending beyond the life
expectancy of the Participant; or
(iv) A period certain not extending beyond the joint
and last survivor expectancy of the Participant and a
designated Beneficiary.
A Participant's life expectancy may be recalculated no more
frequently than annually. However, the life expectancy of a
nonspouse Beneficiary may not be recalculated. If a Participant's
spouse is not the designated Beneficiary, the method of distribution
selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid
within the life expectancy of the Participant.
(b) Pursuant to the provisions of Sections 5.03 and 5.04, a
Participant who retires on a Retirement Date shall have the right to
receive the Actuarial Equivalent of his Accrued Benefit as of August
31, 1989 in the form of a one hundred percent (100%) joint and
contingent beneficiary annuity. This form of annuity is a reduced
retirement benefit payable to the Participant during his lifetime,
with payments in the same amount to continue after his death for the
lifetime of a Beneficiary designated by such Participant.
(c) If a Participant entitled to receive benefits pursuant to
Section 4.04 elects to receive benefits on termination of employment
but, pursuant to Section 5.03 or 5.04, elects not to receive the
applicable Life Annuity or Joint and Survivor Annuity form of
payment, then such Participant's optional form of benefit payment
shall be a single sum cash payment.
(d) If the single sum Actuarial Equivalent of a Participant's
benefit is greater than three thousand five hundred dollars ($3,500)
and the Annuity Starting Date precedes his Normal Retirement Date,
then such Participant
<PAGE>
must consent in writing to the early commencement of benefits. Such
Participant's spouse, if any, must also consent to an early
commencement of benefits if payments are not made in the form of a
Joint and Survivor Annuity.
(e) A married Participant who elects an optional form of
payment on retirement or termination of employment must have his
spouse's written consent to the specific optional form of payment
selected.
(f) If a Participant who has elected an optional form of
benefit dies prior to his Annuity Starting Date, retirement income
payments shall be made in accordance with the provisions of the Plan
as if no optional form of retirement income had been elected. If a
Participant who has elected an optional form of benefit dies either
on or after his Annuity Starting Date, retirement income payments
shall be made in accordance with the optional form elected.
Notwithstanding the foregoing, if, in accordance with the provision
of this subsection (f), a married participant has elected to receive
his August 31, 1989 Accrued Benefit in a one hundred percent (100%)
joint and contingent beneficiary annuity, with his spouse as
contingent annuitant, and he dies before his Annuity Starting Date,
the elected form is treated as the Joint and Survivor Annuity with
respect to the August 31, 1989 Accrued Benefit and the pre-
retirement death benefit provided in Section 4.06 must be based on
such form.
(g) If the single sum Actuarial Equivalent value of any
benefit is three thousand five hundred dollars ($3,500) or less, the
Committee shall direct the Trustee to pay such benefit as soon as
practicable (whether or not the Participant has reached a Retirement
Date) in a single sum cash payment which shall be the Actuarial
Equivalent of the retirement income otherwise payable. For purposes
of this Section, if the vested portion of the Participant's benefit
is zero (0), the Participant shall be deemed to have received a
distribution of such benefit as of his date of termination of
employment.
(h) If an approved optional form of benefit is elected
pursuant to Section 5.05(a)(1) or (2) and if no named original or
successive Beneficiary survives the Participant, any payments
remaining during a period certain shall be continued:
(1) To the Participant's surviving spouse;
(2) If there is no surviving spouse, to the
Participant's descendants (including legally adopted children
and their descendants) per stirpes; or
<PAGE>
<PAGE>
(3) If there is neither a surviving spouse nor
surviving descendants, to the executor or other personal
representative of the Participant to be distributed in
accordance with the Participant's will or applicable law.
5.06 ADMINISTRATIVE POWERS RELATING TO PAYMENTS
In the event that a Participant or Beneficiary is declared
incompetent for any reason and a conservator or other person legally
charged with the care of his person or of his estate is appointed, the
Committee shall direct the Trustee to make such payments directly to such
conservator or to such other person.
Any payment made pursuant to this Section 5.06 shall be in complete
discharge of the obligation for such payment under the Plan.
5.07 NO GUARANTY OF BENEFITS
The benefits provided under the Plan shall be paid solely from the
assets of the Trust Fund. Except to the extent provided by ERISA, nothing
contained in the Plan or the Trust Agreement shall constitute a guaranty
by an Employer or the Trustee that the assets of the Trust Fund will be
sufficient to pay any benefit to any person.
5.08 DEATH DISTRIBUTION REQUIREMENTS
In addition to any other requirements specified in the Plan, if the
Participant dies after his Annuity Starting Date, the remaining portion of
his retirement income will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the Participant's
death. If a Participant dies prior to his Annuity Starting Date and the
single sum Actuarial Equivalent of the pre-retirement death benefit
payable to his spouse under Section 4.06 exceeds, or at the time of any
prior distribution exceeded, three thousand five hundred dollars ($3,500)
(or such other sum as may be established by the Secretary of the
Treasury), the pre-retirement death benefit payable to his spouse will
become payable commencing upon the first day of the month coincident with
or next following the month in which the Participant would have attained
age 65, unless the spouse consents in writing to an earlier distribution.
The surviving spouse may elect to commence such pre-retirement death
benefits within a reasonable period after the Participant's death.
Benefits commencing after the date on which payment could reasonably have
been paid, will be the Actuarial Equivalent of the benefit to which the
surviving spouse would have been entitled if benefits had commenced at the
earliest payment date.
<PAGE>
<PAGE>
If the single sum Actuarial Equivalent of the pre-retirement death
benefit payable under Section 4.06 does not exceed and at the time of any
prior distribution did not exceed three thousand five hundred dollars
($3,500) (or such other sum as may be established by the Secretary of the
Treasury), then the Committee shall direct the Trustee to pay such benefit
to the spouse in a single sum cash payment which shall be the single sum
Actuarial Equivalent of the retirement income otherwise payable, as soon
as practicable following the Participant's date of death.
5.09 TIME OF PAYMENT
Unless the Participant elects otherwise, payment shall be made or
shall commence not later than the sixtieth day after the latest of the
close of the Plan Year in which:
(a) The Participant attains age sixty-five (65);
(b) The tenth anniversary of the year in which the
Participant commenced participation in the Plan occurs; or
(c) The Participant terminates his employment with the
Employer.
Payment of retirement income to any Plan Participant shall in any
event be made or commence no later than the April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70 1/2), whether or not such Participant has retired. The
preceding sentence shall not apply to a Participant who:
(a) Has made a written election to receive his benefits under
the Plan at a later date in accordance with Section 242(b) of the
Tax Equity and Fiscal Responsibility Act of 1982; or
(b) Has attained age seventy and one-half (70 1/2) before
January 1, 1988 and was not a five percent (5%) owner of the Company
or a Related Employer at any time during the Plan Year ending with
or within the calendar year in which such individual attained age
sixty-six and one-half (66 1/2) or any subsequent Plan Year.
All distributions under the Plan must meet the minimum distribution
incidental benefit requirements in Section 401(a)(9) of the Code and
regulations thereunder.
5.10 DISTRIBUTIONS TO ALTERNATE PAYEES
Anything in this Plan to the contrary notwithstanding, the Committee
shall pay the actuarial equivalent of Accrued Benefits established for an
Alternate Payee to such Alternate Payee at the time stipulated in a
Qualified Domestic Relations Order, or as soon<PAGE>
<PAGE>
thereafter as the amount can be ascertained, without regard to the
continued employment of the Participant.
5.11 DIRECT ROLLOVERS
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a direct rollover.
Notwithstanding the above, an Eligible Rollover Distribution of less
than two hundred dollars ($200) is not eligible for a Direct
Rollover. Further, if the Distributee elects to have only a portion
of the Eligible Rollover Distribution paid to an Eligible Retirement
Plan in the form of a Direct Rollover, that portion must be equal to
at least five hundred dollars ($500).
(b) Definitions: For purposes of this Section 5.11, the
following definitions apply:
(1) ELIGIBLE ROLLOVER DISTRIBUTION means any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include any distribution that is one (1)
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten (10)
years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code;
and the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
(2) ELIGIBLE RETIREMENT PLAN means an individual
retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of
the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement
Plan is an individual retirement account or individual
retirement annuity.<PAGE>
<PAGE>
(3) DISTRIBUTEE includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
(4) DIRECT ROLLOVER means a payment by the plan to the
Eligible Retirement Plan specified by the Distributee.
<PAGE>
<PAGE>
ARTICLE VI
PLAN ADMINISTRATION
6.01 ADMINISTRATIVE COMMITTEE
(a) The Board shall appoint an Administrative Committee, to
be known as the "Committee," as the Plan Administrator, to
administer the Plan, to keep records and to notify each Participant,
former Participant or Beneficiary of his benefit. The members of
the Committee shall serve at the pleasure of the Board; they may be
officers, directors or Employees of an Employer or any other
individuals. Any member may resign by delivering his written
resignation to the Board. Vacancies arising by resignation, death,
removal or otherwise shall be filled by the Board. The Company
shall advise the Trustee in writing of the names of the members of
the Committee and of any changes in membership. The Committee shall
consist of three (3) or more persons.
(b) The Company shall be the "Named Fiduciary" for purposes
of ERISA and shall be subject to service of process on behalf of the
Plan.
6.02 POWERS AND DUTIES OF THE COMMITTEE
The Committee shall administer the Plan in accordance with its terms
and shall have all powers necessary to carry out the provisions of the
Plan. The Committee shall direct the Trustee in writing concerning all
payments which shall be made out of the Trust Fund pursuant to the Plan.
Such written order to the Trustee shall specify the name of the person,
his address and the amount and frequency of payments. The Committee shall
make recommendations to the Board with respect to the appointment and
dismissal of investment managers under the Trust and will review the
performance of the investment managers from time to time. The Committee
shall interpret the Plan and shall determine all questions arising in the
administration, interpretation and application of the Plan, including but
not limited to questions of eligibility and the status and rights of
Participants, former Participants, Alternate Payees, Beneficiaries and
other persons. The Committee shall establish reasonable procedures to
determine whether a Domestic Relations Order is a Qualified Domestic
Relations Order. Such procedures must be in writing, must provide for the
prompt notification of each person specified in the order as being
entitled to payment of benefits under the Plan and must permit an
Alternate Payee to designate a representative for receipt of copies of
notices that are sent to the Alternate Payee with respect to a Domestic
Relations Order.
<PAGE>
<PAGE>
Any such determination by the Committee shall be conclusive and
binding on all persons. The regularly kept records of the Company or
Related Employers shall be conclusive and binding upon all persons with
respect to an Employee's Hours of Service, date and length of employment,
amount of Compensation, type and length of any absence from work and all
other matters contained therein relating to Employees. All rules and
determinations of the Committee shall be applied uniformly and
consistently to all persons in similar circumstances.
6.03 EXERCISE OF THE COMMITTEE'S DUTIES
The Committee shall discharge its duties:
(a) For the exclusive purpose of providing benefits to Plan
Participants, former Participants and Beneficiaries; and
(b) With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims.
6.04 ORGANIZATION AND OPERATION OF THE COMMITTEE
(a) The Committee shall act by a majority vote of its members
at the time in office, and such action may be taken either by a vote
at a meeting or in writing without a meeting. The signature of any
one (1) of the members will be sufficient to authorize Committee
action. A Committee member shall not participate in discussions of
or vote upon matters pertaining to his own participation in the
Plan, except to the extent such matters affect Participants
generally.
(b) The Committee may authorize any one (1) of its members or
any other person to execute any document or documents on behalf of
the Committee, in which event the Committee shall notify the Trustee
in writing of such action and the name or names of such member or
person. The Trustee thereafter shall accept and rely upon any
document executed by such members or persons as representing action
by the Committee until the Committee shall file with the Trustee a
written revocation of such designation.
(c) The Committee may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs and, with the consent
of the Company, may appoint such accountants, counsel, actuaries and
other persons as it deems necessary or desirable in connection with
the administration of this Plan. The Committee shall be entitled to
rely conclusively upon, and shall be fully protected in any action
taken by it in good<PAGE>
<PAGE>
faith in relying upon, any opinions or reports which shall be
furnished to it by any such accountant, counsel, actuary or other
specialist.
6.05 RECORDS AND REPORTS OF THE COMMITTEE
The Committee shall keep a record of all its proceedings and acts
and shall keep all such books of account, records and other data as may be
necessary for proper administration of the Plan. The Committee shall
notify the Trustee and the Company of any action taken by the Committee
and, when required, shall notify any other interested person or persons.
6.06 COMPENSATION AND EXPENSES OF THE COMMITTEE
The members of the Committee shall serve without compensation for
service as such, but all proper expenses incurred by the Committee
incident to the functioning of the Plan shall be paid by the Employers.
6.07 INDEMNITY OF THE COMMITTEE MEMBERS
The Employers shall indemnify and defend each member of the
Committee against any and all claims, losses, damages, expenses (including
reasonable attorneys' fees) and liability arising from any action or
failure to act in connection with the administration of the Plan, except
when the same is judicially determined to be due to the gross negligence
or willful misconduct of such member.
<PAGE>
<PAGE> ARTICLE VII
CLAIMS PROCEDURES
7.01 INFORMAL REVIEW
Any Participant, former Participant, Alternate Payee or Beneficiary
who wishes to request an informal review of a claim for benefits or who
wishes an explanation of a benefit or its denial may direct to the
Committee a written request for an informal review. The Committee shall
respond to the request by issuing a notice to the claimant as soon as
possible, but in no event later than sixty (60) days from the date of the
request. This notice furnished by the Committee shall be written in a
manner calculated to be understood by the claimant and shall include the
following:
(a) The specific reason or reasons for any denial of
benefits;
(b) The specific Plan provisions on which any denial is
based;
(c) A description of any further material or information
which is necessary for the claimant to perfect his claim and an
explanation of why the material or information is needed; and
(d) An explanation of the Plan's formal claim review
procedure.
If the claimant does not respond to the notice, posted by first
class mail to the address of record of the claimant, within one hundred
twenty (120) days from the posting of the notice, the claimant shall be
considered satisfied in all respects. If the Committee fails to respond
to the claimant's written request for an informal review, the claimant
shall be entitled to proceed to the formal claim review procedure
described in Section 7.02.
7.02 FORMAL REVIEW
In the event that the notice concerning the informal review is
insufficient to satisfy the claimant, the claimant or his duly authorized
representative shall submit to the Committee, within one hundred twenty
(120) days of the posting of the notice, a written notification of appeal
of the claim denial. The notification of appeal of the claim denial shall
permit the claimant or his duly authorized representative to utilize the
following formal claim review procedures:
(a) To review pertinent documents; and
<PAGE>
<PAGE>
(b) To submit issues and comments in writing to which the
Committee shall respond.
The Committee shall furnish a written decision on formal review not
later than sixty (60) days after receipt of the notification of appeal,
unless special circumstances require an extension of the time for
processing the appeal. In no event, however, shall the Committee respond
later than one hundred twenty (120) days after a request for a formal
review. The decision on formal review shall be in writing and shall
include specific reasons for the decision, and shall be written in a
manner calculated to be understood by the claimant and shall contain
specific reference to the pertinent Plan provisions on which the decision
is based.
<PAGE>
<PAGE>
ARTICLE VIII
TEMPORARY RESTRICTIONS ON BENEFITS
IN CASE OF EARLY TERMINATION
8.01 TEMPORARY RESTRICTIONS ON BENEFITS IN CASE OF
EARLY TERMINATION
(a) The annual payments to a restricted Participant shall be
limited to an amount equal to the payments that would be made on
behalf of such restricted Participant under a single life annuity
that is the Actuarial Equivalent of the sum of the restricted
Participant's Accrued Benefit and other benefits under the Plan.
Notwithstanding the foregoing, the restriction set forth in
this Section 8.01 shall not apply in the event that either of the
following requirements is met:
(1) The value of the Plan assets equals or exceeds one
hundred ten percent (110%) of the value of the Plan's current
liabilities, as defined under Section 412(1)(7) of the Code,
after payment to a restricted Participant of his "Benefits" as
described in paragraph (b) below; or
(2) The value of "Benefits," as described in paragraph
(b) below, of a restricted Participant is less than one
percent (1%) of the value of the Plan's current liabilities,
as defined in Section 412(1)(7) of the Code.
For purposes of this Section 8.01, "restricted Participant"
means a Participant or former Participant who is among the twenty-
five (25) highest paid highly compensated employees.
(b) "Benefits," for purposes of this Section 8.01, shall
include loans in excess of the amounts set forth in Section
72(p)(2)(A) of the Code, any periodic income, the value of any
withdrawals made by the Participant, in the event the Participant is
still living, and any death benefits not provided for by insurance
on the Participant's life.
8.02 RESTRICTION OF BENEFITS
In the event of Plan termination, the benefit of any Participant or
former Employee who is a highly compensated employee shall be limited to
a benefit that is nondiscriminatory under Section 401(a)(4) of the Code.
For purposes of this Section 8.02, "highly compensated employee"
shall mean highly compensated employee as defined under Section 414(q) of
the Code.<PAGE>
<PAGE> ARTICLE IX
AMENDMENT AND TERMINATION
9.01 RIGHT TO AMEND OR TERMINATE
The Company reserves to itself the right to alter, amend, modify,
revoke or terminate in whole or in part this Plan or any Trust that may be
established by it to effect the implementation of this Plan, or both, and
each Employer, in adopting this Plan, consents to any such alteration,
amendment, modification, revocation or termination. The Company, by
resolution of the Board, may terminate the Plan with respect to any or all
Employers. Each Employer, by a resolution of its Board of Directors, may
terminate its participation in the Plan. If the Plan is terminated by
fewer than all Employers, it shall continue in effect for Participants
employed by the remaining Employers. Subject to the provisions of ERISA,
and without limiting the general applicability of the preceding provisions
of this section, the Company specifically reserves the right to amend the
Plan to change:
(a) The requirements of or the dates upon which early or
normal retirement may occur;
(b) The factors and methods used to calculate early
retirement benefits; or
(c) The factors and methods used to calculate benefit
options;
in all three (3) cases, to reflect changes in common or customary practice
or in the requirements for receipt of Social Security benefits; provided,
however, that no amendment:
(a) Shall have the effect of vesting in the Employer or any
Related Employer any interest in or control of any funds, securities
or other property subject to the terms of the Trust;
(b) Shall authorize or permit at any time any part of the
corpus or income of the Trust Fund to be used for or diverted to
purposes other than for the exclusive benefit of Participants,
former Participants and their Beneficiaries, except as provided in
Section 3.04;
(c) Shall have any retroactive effect as to deprive any
Participant, former Participant or Beneficiary of any benefit
already accrued, save only that no amendment made in conformance
with the provisions of the Code or any other statute relating to
employees' trusts, or of any official regulation or rulings issued
pursuant thereto, shall be considered prejudicial to the rights of
any Participant or Beneficiary; and
<PAGE>
<PAGE>
(d) Shall eliminate an optional form of benefit or decrease
an Accrued Benefit.
9.02 TERMINATION
(a) It is the expectation of each Employer that it will
continue this Plan and the payment of contributions hereunder
indefinitely, but the continuation of the Plan is not assumed as a
contractual obligation of an Employer, and the right is reserved by
each Employer at any time to discontinue permanently its
contributions hereunder. In the event that the Plan is terminated
in whole or in part or if contributions by the Employers are
discontinued completely, the benefits then accrued for all affected
Participants shall be fully vested and nonforfeitable.
Notwithstanding the previous sentence, a person shall have recourse
in seeking satisfaction of his benefits against only the Trust Fund
and the Pension Benefit Guaranty Corporation. No Participant,
former Participant, Alternate Payee or Beneficiary shall have a
claim against any Employer, the Trust or any Plan fiduciary for any
benefit in excess of the amount funded on the date of the Plan
termination. A complete discontinuance of contributions shall not
include any suspension of contributions if the benefits to be paid
under the Plan are not affected at any time by the suspension and if
the unfunded past service cost at any time does not exceed the
unfunded past service cost as of the effective date of the Plan
(plus any additional past service or supplemental costs added by
amendment).
(b) This Plan may be terminated by the Board at any time, but
the Company must notify the Pension Benefit Guaranty Corporation of
its intention to terminate the Plan. Such termination shall become
effective upon the date agreed to by the Pension Benefit Guaranty
Corporation and the Company.
(c) The funds are to be allocated in such manner as:
(1) To continue benefits which began to be paid three
(3) years before the termination date under the provisions of
the Plan in effect during the five (5) years prior to
termination which would provide the smallest benefit.
Benefits which would be in this category if the Participant
eligible for benefits had elected to begin receipt of such
benefit payments at least three (3) years prior to the
termination shall also be provided;
(2) Then to provide all other insured benefits
guaranteed by the Pension Benefit Guaranty Corporation,
including benefits for a substantial owner who owns directly
or indirectly more than ten percent (10%) of the Company's
voting stock;
<PAGE>
<PAGE>
(3) Then to provide all other nonforfeitable benefits;
(4) Then to provide all other benefits under the Plan;
and
(5) Then to provide a return to the Company of any
balance due to actuarial error if any assets remain after all
liabilities with respect to Participants, former Participants
and Beneficiaries have been satisfied.
This allocation is intended to fulfill the requirements
of ERISA, and assets shall be allocated on the basis of ERISA
should the above provisions and ERISA differ.
9.03 PARTIAL TERMINATION
In the event the Plan is partially terminated, the Participants
affected shall have a nonforfeitable right to the benefits accrued to the
date of the partial termination. The Trustee may purchase annuity
contracts, make single sum settlements or retain the assets for such
Participants within the Trust Fund as directed by the Employer. If the
assets are retained within the Trust Fund, the benefits for those
Participants shall be paid when due by the Trustee in the same manner as
for all other Participants.
9.04 METHOD OF PAYMENT
Provided no discrimination in value results, the Company shall
direct that the amount allocated to any or all persons under the foregoing
provisions of this Article IX be paid either in a single sum payment or
through the purchase of annuity contracts.
9.05 NOTICE OF AMENDMENT, TERMINATION OR PARTIAL
TERMINATION
Affected Participants will be notified of an amendment, termination
or partial termination of the Plan as required by the applicable
provisions of ERISA.
<PAGE>
<PAGE> ARTICLE X
MISCELLANEOUS
10.01 NO CONTRACT OF EMPLOYMENT
Nothing herein contained shall be construed to constitute a contract
of employment between any Employer and any Employee. The employment
records of the Employers and the Trustee's records shall be final and
binding upon all Employees as to eligibility and participation.
10.02 MERGER OR CONSOLIDATION OF PLAN, TRANSFER OF
ASSETS
Any merger or consolidation of the Plan with another plan or
transfer of Plan assets or liabilities to any other plan shall be
effected, in accordance with such regulations, if any, as may be issued
pursuant to Section 208 of ERISA, in such a manner that each Participant
in the Plan would receive, if the merged, consolidated or transferred plan
were terminated immediately following such event, a benefit which is equal
to or greater than the benefit he would have been entitled to receive if
the Plan had terminated immediately before such event.
10.03 DATA
It shall be a condition precedent to the payment of all benefits
under the Plan that each Participant, former Participant, Alternate Payee
and Beneficiary must furnish to the Company such documents, evidence or
information as the Company considers necessary or desirable for the
purpose of administering the Plan, or to protect the Company or the
Trustee.
10.04 RESTRICTIONS UPON ASSIGNMENTS AND CREDITORS'
CLAIMS
Except as otherwise provided in the Plan, no Participant, former
Participant or any Beneficiary, or the estate of any such person, shall
have the power to assign, pledge, encumber or transfer any interest in the
Trust Fund while the same shall be in possession of the Trustee. Any such
attempt at alienation shall be void. No such interest shall be subject to
attachment, garnishment, execution, levy or any other legal or equitable
proceeding or process, and any attempt to so subject such interest shall
be void. The preceding shall apply also to the creation, assignment or
recognition of any right to any benefit payable with respect to a
Participant pursuant to a Domestic Relations Order, unless such order is
determined to be a Qualified Domestic Relations Order. A Domestic
Relations Order entered before January 1, 1985 will be treated as a
Qualified Domestic Relations Order if payment of benefits pursuant to the
order has commenced as of such<PAGE>
<PAGE>
date and may be treated as a Qualified Domestic Relations Order if payment
of benefits has not commenced as of such date, even though the order does
not satisfy the requirements of Section 414(p) of the Code.
10.05 RESTRICTION OF CLAIMS AGAINST TRUST FUND
The Trust Fund under this Plan and Trust Agreement from its
inception shall be a separate entity aside and apart from each Employer
and its assets. The Trust and the corpus and income thereof shall in no
event and in no manner whatsoever be subject to the rights or claims of
any creditor of any Employer. Neither the establishment of the Trust
Fund, the modification thereof, the creation of any fund or account nor
the payment of any benefits shall be construed as giving any Participant
or any other person whomsoever any legal or equitable rights against an
Employer or the Trustee unless the same shall be specifically provided for
in this Plan.
10.06 BENEFITS PAYABLE BY TRUST FUND
All benefits payable under the Plan shall be paid or provided for
solely from the Trust Fund, and the Employers assume no liability or
responsibility therefor.
10.07 SUCCESSOR TO EMPLOYER
In the event that any successor to an Employer, by merger,
consolidation, purchase or otherwise, shall elect to adopt the Plan, such
successor shall be substituted hereunder for that Employer upon filing in
writing with the Trustee its election to do so.
10.08 APPLICABLE LAW
The Plan shall be construed and administered in accordance with
ERISA and with the laws of Illinois, to the extent that such laws are not
preempted by ERISA.
10.09 INTERNAL REVENUE SERVICE APPROVAL
This Plan, as amended and restated, shall be effective as of
September 1, 1989, provided that the Company shall obtain a favorable
determination letter from the Internal Revenue Service that this Plan and
the related Trust Agreement qualify under Sections 401(a) and 501(a) of
the Code, as amended. Any modification or amendment of this Plan may be
made retroactive as necessary or appropriate in order to secure or
maintain such qualification.
<PAGE>
<PAGE>
ARTICLE XI
TOP-HEAVY PROVISIONS
11.01 EFFECTIVE DATE
Notwithstanding any other provision of the Plan to the contrary, the
following provisions shall apply with respect to any Plan Year beginning
on or after September 1, 1989 in which the Plan is deemed to be Top-heavy.
11.02 DEFINITIONS
For purposes of applying the provisions of this Article XI to the
terms of the Plan, the words listed below shall have the following
meanings:
DETERMINATION DATE means, with respect to any Plan Year, the last
day of the immediately preceding Plan Year or, in the case of the first
Plan Year, the last calendar day of the first Plan Year.
KEY EMPLOYEE means any Employee or former Employee (or any
Beneficiary of such Employee) who, at any time during the Plan Year or any
of the four (4) immediately preceding Plan Years (or, if fewer, the total
number of Plan Years during which the Plan has been in effect) is or was:
(a) An officer of an Employer or a Related Employer whose
annual Compensation exceeds fifty percent (50%) of the dollar
limitation under Section 415(b)(1)(A) of the Code for any such Plan
Year;
(b) An owner (or considered an owner under Section 318 of the
Code) of one (1) of the ten (10) largest interests in an Employer or
a Related Employer if such individual's Compensation exceeds the
dollar limitation under Section 415(c)(1)(A) of the Code;
(c) A five percent (5%) owner of an Employer; or
(d) A one percent (1%) owner of an Employer whose annual
Compensation from the Employer and Related Employers exceeds one
hundred fifty thousand dollars ($150,000).
An officer is defined as an actual officer of an Employer or
a Related Employer, provided that not more than the greater of three
(3) Employees or ten percent (10%) of the Employees (but in no event
more than fifty (50) Employees) shall be considered as officers in
determining whether a plan is Top-heavy.<PAGE>
<PAGE>
NON-KEY EMPLOYEE means any Employee who is not a Key Employee.
PERMISSIVE AGGREGATION GROUP means the Required Aggregation Group of
plans plus any other plan or plans of an Employer or a Related Employer
which, when considered as a group with the Required Aggregation Group,
would continue to satisfy the requirements of Sections 401(a)(4) and 410
of the Code.
PRESENT VALUE means that present value determined in accordance with
the interest rate and mortality tables specified in Section 1.02 of the
Plan.
REQUIRED AGGREGATION GROUP means the group of:
(a) Each qualified plan of an Employer or a Related Employer
in which at least one (1) Key Employee participates; and
(b) Any other qualified plan of an Employer or a Related
Employer which enables a plan described in (a) to meet the
requirements of Section 401(a)(4) or 410 of the Code.
TOP-HEAVY. This Plan shall be deemed Top-heavy for any Plan Year
if, as of the Determination Date for such Plan Year, any of the following
conditions exist:
(a) If the Top-heavy Ratio for this Plan exceeds sixty
percent (60%) and this Plan is not part of a Required Aggregation
Group of plans or Permissive Aggregation Group of plans;
(b) If this Plan is part of a Required Aggregation Group of
plans (but is not part of a Permissive Aggregation Group of plans)
and the Top-heavy Ratio for the group of plans exceeds sixty percent
(60%); or
(c) If this Plan is part of a Required Aggregation Group of
plans and part of a Permissive Aggregation Group of plans and the
Top-heavy Ratio for the Permissive Aggregation Group of plans
exceeds sixty percent (60%).
TOP-HEAVY RATIO means:
(a) If an Employer or a Related Employer maintains one (1) or
more defined benefit plans and an Employer has never maintained any
defined contribution plans (including any simplified employee
pension plan) which, during the five (5) Plan Year period ending on
the Determination Date, has covered or could have covered a
Participant in the Plan, the Top-heavy Ratio for this Plan alone or
for the Required Aggregation Group or the Permissive Aggregation
Group, as appropriate, shall be a fraction, the numerator of which
is the sum of the Present Value of Accrued Benefits of all Key
Employees under<PAGE>
<PAGE>
the aggregated defined benefit plans as of the Determination Date
(including any part of any accrued benefit distributed in the five
(5) Plan Year period ending on the Determination Date), and the
denominator of which is the sum of the Present Value of all Accrued
Benefits (including any part of any accrued benefit distributed in
the five (5) Plan Year period ending on the Determination Date) of
all Participants as of the Determination Date, both computed in
accordance with Section 416 of the Code. The numerator and
denominator of the Top-heavy Ratio shall be adjusted to reflect any
contribution not actually made as of the Determination Date, but
which is required to be taken into account on that date under
Section 416 of the Code.
(b) If an Employer or a Related Employer maintains or has
maintained one (1) or more defined benefit plans and an Employer or
a Related Employer maintains or has maintained one (1) or more
defined contribution plans (including any simplified employee
pension plan) which, during the five (5) Plan Year period ending on
the Determination Date, has or has had any account balances, the
Top-heavy Ratio for the Required Aggregation Group or the Permissive
Aggregation Group, as appropriate, shall be a fraction, the
numerator of which is the sum of the account balances of all Key
Employees under the aggregated defined contribution plans and the
Present Value of the Accrued Benefits of all Key Employees under the
aggregated defined benefit plans as of the Determination Date, and
the denominator of which is the sum of the account balances of all
Participants under the aggregated defined contribution plans, and
the Present Value of the Accrued Benefits of all Participants under
the aggregated defined benefit plans as of the Determination Date,
determined in accordance with Section 416 of the Code. The
numerator and denominator of the Top-heavy Ratio shall be adjusted
for any distribution of an account balance or Accrued Benefit made
in the five (5) Plan Year period ending on the Determination Date
and any contributions due but unpaid as of the Determination Date.
(c) For purposes of paragraphs (a) and (b) above, the value
of account balances and the Present Value of Accrued Benefits shall
be determined as of the most recent Valuation Date occurring within
the twelve (12) month period ending on the Determination Date,
except as provided in Section 416 of the Code for the first and
second Plan Years of a defined benefit plan. The Accrued Benefits
of Non-Key Employees shall be determined under the method which is
used for accrual purposes for all plans of the Employer or a Related
Employer or, if there is no such method, then as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional accrual rate of Code Section 411(b)(1)(C). The
account balances and Accrued Benefits of a Participant who is not a
Key Employee but who was a Key Employee in a prior Plan Year or,
effective for Plan Years<PAGE>
<PAGE>
beginning on or after September 1, 1985, who has not performed any
services for an Employer or a Related Employer at any time during
the five (5) Plan Year period ending on the Determination Date,
shall be disregarded. The calculation of the Top-heavy Ratio and
the extent to which distributions, rollovers and direct transfers
are taken into account will be made in accordance with Section 416
of the Code. When aggregating plans, the value of account balances
and the Present Value of Accrued Benefits shall be calculated with
reference to the Determination Dates that fall within the same
calendar year.
VALUATION DATE means the same valuation date used for computing Plan
costs for minimum funding, regardless of whether an actuarial valuation is
performed that year.
11.03 MAXIMUM ANNUAL COMPENSATION
In any Plan Year that the Plan is Top-heavy, the maximum annual
Compensation which shall be taken into account shall be limited to two
hundred thousand dollars ($200,000), as specified in Section 1.12, and for
Plan Years beginning on or after September 1, 1994, the maximum annual
Compensation which shall be taken into account shall be limited to one
hundred fifty thousand dollars ($150,000), as specified in Section 1.12,
or such other amount as may be provided from time to time under the cost
of living or other adjustments issued by the Secretary of the Treasury
pursuant to Section 416 of the Code.
11.04 MINIMUM ACCRUED BENEFIT
(a) Notwithstanding any other provision in this Plan except
subparagraphs (c) and (e) below, for any Plan Year in which this
Plan is Top-heavy, each Participant who is not a Key Employee and
who has completed one thousand (1,000) Hours of Service will accrue
a benefit (to be provided solely by Employer contributions and
expressed as a Life Annuity commencing at Normal Retirement Date) of
not less than two percent (2%) of his highest average compensation
for the five (5) consecutive years for which the Participant had the
highest compensation. The minimum accrual is determined without
regard to any Social Security contribution. The minimum accrual
applies even though under other Plan provisions the Participant
would not otherwise be entitled to receive an accrual, or would have
received a lesser accrual for the year because the Non-Key
Employee's Compensation is less than a stated amount, the Non-Key
Employee is not employed on the last day of the accrual computation
period or the Plan is integrated with Social Security.
<PAGE>
<PAGE>
(b) For purposes of computing the minimum accrued benefit,
compensation will mean compensation as defined in Section 4.09 of
the Plan.
(c) No additional benefit accruals shall be provided pursuant
to (a) above to the extent that the total accruals on behalf of the
Participant attributable to Employer contributions will provide a
benefit expressed as a Life Annuity commencing at Normal Retirement
Date that equals or exceeds twenty percent (20%) of the
Participant's highest average compensation for the five (5)
consecutive years for which the Participant had the highest
Compensation.
(d) If the form of benefit is other than a Life Annuity, the
Employee must receive an amount that is the Actuarial Equivalent of
the minimum Life Annuity benefit. If the benefit commences at a
date other than at Normal Retirement Date, the Employee must receive
at least an amount that is the Actuarial Equivalent of the minimum
Life Annuity benefit commencing at Normal Retirement Date.
(e) The provisions in (a) above shall not apply to any
Participant to the extent that the Participant is covered under any
other plan or plans of the Employer and the Employer has provided
that the minimum benefit requirement applicable to this Top-heavy
Plan will be met in the other plan or plans.
(f) The minimum accrued benefit required (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may
not be forfeited or suspended under Section 411(a)(3)(B) or Section
411(a)(3)(D) of the Code.
11.05 MINIMUM VESTING REQUIREMENTS
With respect to any Plan Year that the Plan is a Top-heavy plan, the
Plan shall have the following vesting schedule:
Years of Service
for Vesting Vested Percentage
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 100%
The minimum vesting schedule applies to all benefits within the meaning of
Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the Plan became
Top-heavy. Further, no reduction in vested benefits may occur in the
event the Plan's status as Top-heavy changes for any Plan Year. However,
this Section does not apply to<PAGE>
<PAGE>
the Accrued Benefits of any Employee who does not have an Hour of Service
after the Plan has initially become Top-heavy, and such Employee's Accrued
Benefits attributable to Employer contributions will be determined without
regard to this section.
11.06 SPECIAL CODE SECTION 415 LIMITATIONS
For purposes of Section 4.08, in any Plan Year in which the Plan is
deemed to be a Top-heavy plan and in which the Employer also maintains a
defined contribution plan which is deemed to be Top-heavy, the number 1.25
shall be replaced by the number 1.0 to the extent required under Code
Section 416(h); provided, however, that such adjustment will not occur if
the Top-Heavy Ratio does not exceed ninety percent (90%) and additional
benefits are provided for Non-key Employees in accordance with the
provisions of Section 416(h)(2)(A) and Section 416(h)(2)(B) of the Code.
In such case, the minimum accrued benefit provided in Section 11.04(a)
shall be increased to three percent (3%) of the Participant's average
Compensation for the five (5) consecutive years for which the Participant
had the highest Compensation and the maximum accrual provided in Section
11.04(c) shall be increased to thirty percent (30%).
IN WITNESS WHEREOF, DEKALB Genetics Corporation has caused its duly
authorized officers to execute this Plan this 27th day of June, 1994.
DEKALB Genetics Corporation
By:
Gregory L. Olson
Vice President - Administration
ATTEST:
Doris J. Riippi
Assistant Secretary
<TABLE>
EXHIBIT 11
DEKALB Genetics Corporation
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
years ended August 31, 1994, 1993 and 1992
(Dollars in thousands except per share amounts)
<CAPTION>
Primary Earnings Per Share:
1994 1993 1992
<S> <S> <C> <C> <C>
1. Average shares outstanding....................................... 5,141,422 5,130,940 5,116,084
2. Net additional shares outstanding assuming dilutive stock options exercised
and proceeds used to purchase treasury stock at average market pric 79,616 62,863 55,652
3. Average number of common and common equivalent shares outstanding..... 5,221,038 5,193,803 5,171,736
4. Net earnings for primary earnings per share computation............... $10,564 $1,715 $10,280
5. Primary earnings per share............................................ $2.02 $0.33 $1.99
Fully Diluted Earnings Per Share: (a)
1. Average shares outstanding.............................................................................. 5,116,084
2. Net additional shares outstanding assuming dilutive stock options exercised
and proceeds used to purchase treasury stock at greater of closing or
average market price................................................................................. 56,081
3. Weighted average shares assuming conversion of zero-coupon notes............................. 1,191,185
4. Average number of common and common equivalent shares outstanding for
fully diluted computation............................................................................ 6,363,350
5. Net earnings............................................................................................ $10,280
6. Add interest on zero-coupon note, net of taxes.......................................................... 2,768
7. Net earnings for fully diluted earnings per share computation........................................... $13,048
8. Fully diluted earnings per share (b).................................................................... $2.05
<FN>
(a) Fully diluted earnings per share calculation was not required for fiscal 1994 or 1993.
(b) Fully diluted earnings per share was antiduilutive in fiscal 1992.
</TABLE>
<PAGE>
EXHIBIT 22
Subsidiaries of DEKALB Genetics Corporation
The following table sets forth principal subsidiaries of the registrant and
indicates as to each such subsidiary the state or other jurisdiction under the
laws of which it was organized and the percentage of voting securities thereof
owned by the registrant.
Percentage of
Jurisdiction Voting Securities
of Owned by the
Incorporation Registrant
DEKALB Swine Breeders, Inc. Delaware 100%
DEKALB Poultry Research, Inc. Delaware 100%
DEKALB Argentina S.A. Argentina 100%
DEKALB Canada Inc. Ontario 100%
DEKALB Italia S.p.A. Italy 100%
The foregoing list does not name certain subsidiaries of subsidiaries and
certain companies reported on the equity basis as in the aggregate they are
not considered significant.
No financial statements are filed for companies in which the registrant
recognizes equity in undistributed earnings because all such companies in the
aggregate are not considered significant.
<PAGE>
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
No. 33-24875, No. 33-33305 and No. 33-39986 on Form S-8 of our reports dated
October 12, 1994 accompanying the consolidated financial statements and
financial statement schedules of DEKALB Genetics Corporation as of August 31,
1994 and 1993 and for the years ended August 31, 1994, 1993 and 1992 included
in this annual report on Form 10-K of DEKALB Genetics Corporation.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
October 12, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and the Consolidated Balance Sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-END> AUG-31-1994
<CASH> 6200
<SECURITIES> 0
<RECEIVABLES> 47500
<ALLOWANCES> 2400
<INVENTORY> 100800
<CURRENT-ASSETS> 164000
<PP&E> 246000
<DEPRECIATION> 145400
<TOTAL-ASSETS> 319000
<CURRENT-LIABILITIES> 95100
<BONDS> 0
<COMMON> 500
0
0
<OTHER-SE> 120800
<TOTAL-LIABILITY-AND-EQUITY> 319000
<SALES> 309500
<TOTAL-REVENUES> 320000
<CGS> 175900
<TOTAL-COSTS> 60900
<OTHER-EXPENSES> 62200
<LOSS-PROVISION> 900
<INTEREST-EXPENSE> 7500
<INCOME-PRETAX> 14900
<INCOME-TAX> 3900
<INCOME-CONTINUING> 11000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (400)
<NET-INCOME> 10600
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 0
</TABLE>
