<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. - )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(c)(2))
DEKALB GENETICS CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2)
or Item 22(a) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which
the filing fee is calculated and state how it was determined).
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
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<PAGE> 2
DEKALB GENETICS CORPORATION
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 13, 1997
The Annual Meeting of Stockholders of DEKALB Genetics Corporation (the
"Company") will be held at the Kishwaukee College Auditorium, 21193 Malta Road,
Malta, Illinois 60150, on Monday, January 13, 1997 at 3:00 p.m., Central
Standard Time, for the following purposes:
(1) To elect four directors.
(2) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Enclosed herewith is a Proxy Statement setting forth information with
respect to the election of directors and certain other information.
Only stockholders holding shares of Class A Common Stock of record at the
close of business on November 22, 1996 will be entitled to vote at the meeting.
Class A Stockholders, whether or not they expect to be present at the
meeting, are requested to sign and date the enclosed proxy and return it
promptly in the envelope enclosed for that purpose. Any person giving a proxy
has the power to revoke it at any time, and stockholders who are present at the
meeting may withdraw their proxies and vote in person.
By Order of the Board of Directors
John H. Witmer, Jr., Secretary
December 6, 1996
<PAGE> 3
DEKALB GENETICS CORPORATION
3100 SYCAMORE ROAD
DEKALB, ILLINOIS 60115
------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders of DEKALB Genetics
Corporation (the "Company") to be held on January 13, 1997, or at any
adjournment or adjournments thereof, at the time and place and for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
principal executive offices of the Company are located at 3100 Sycamore Road,
DeKalb, Illinois 60115.
The accompanying proxy is solicited on behalf of the Board of Directors of
the Company and is revocable at any time before it is exercised by written
notice of revocation given to the Secretary of the Company or by filing with him
a later dated proxy. All shares of the Company's Class A Common Stock, without
par value, represented by properly executed and unrevoked proxies will be voted
if such proxies are received in time for the meeting. Such proxies and this
Proxy Statement are being sent to stockholders on or about December 6, 1996.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of shares of Class A Common Stock of record at the close of
business on November 22, 1996 will be entitled to vote at the meeting. At the
record date, there were outstanding 2,410,388 shares of Class A Common Stock. In
addition, the Company had outstanding on such date 14,671,180 shares of Class B
Common Stock which are not entitled generally to vote. Each share of Class A
Common Stock is entitled to one vote upon each matter to be voted on at the
meeting. Stockholders do not have the right to cumulate votes in the election of
directors and directors will be elected by a plurality of the votes cast.
Consequently, votes that are withheld in the election of directors and broker
non-votes will not affect the outcome of the election of directors.
COST AND METHOD OF PROXY SOLICITATION
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will supply banks, brokers, dealers and other
custodian nominees and fiduciaries with proxy materials to enable them to send a
copy of such material by mail to each beneficial owner of shares of the
Company's Class A Common Stock which they hold of record and will, upon request,
reimburse them for their reasonable expenses in so doing.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND
OTHER DIRECTORS WHO WILL CONTINUE IN OFFICE
At the meeting, four directors are to be elected to hold office for a term
of three years or until his or her successor is duly elected and qualified.
Proxies submitted pursuant to this solicitation will be voted, unless specified
otherwise, for the election of the four persons named as nominees, each of whom,
except for William M. Ziegler (who has not yet served as a director), has served
continuously as a director of the
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<PAGE> 4
Company since the date indicated below. All nominees (except for Mr. Ziegler and
Dr. Fraley) were elected as directors by vote of the stockholders. In the event
any of the nominees, all of whom have expressed an intention to serve if
elected, fail to stand for election, the persons named in the enclosed form of
proxy may vote for substitute nominees in their discretion.
There are eight directors whose present terms of office will continue after
the meeting until 1998 or 1999, as indicated below. Each has served continuously
as a director of the Company since the date indicated beside his or her name.
Also set forth below is the principal occupation of each nominee and
continuing director during the past five years.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
- - ------------------------------------------------------------------- --- ----------------
<S> <C> <C>
Nominees for Director Whose Terms Will Expire in 2000:
Tod R. Hamachek.................................................... 50 June 1, 1992
Mr. Hamachek is President and Chief Executive Officer of
PENWEST, Ltd., a leading supplier of corn-based specialty
products for the paper industry, food grade starches for the
food and confectionery industries, and non-active ingredients
for the pharmaceutical industry. He is a director of PENWEST,
Ltd., Northwest Natural Gas Company and The Seattle Times Co.
Mr. Hamachek is a member of the Compensation Committee.
John T. Roberts.................................................... 38 July 1, 1993
Mr. Roberts is Chief Financial Officer and Treasurer of Quest
Environmental Resources Corporation, a distributor of
environmental safety products. Mr. Roberts is a member of the
Compensation Committee.
Richard O. Ryan.................................................... 54 June 15, 1988
Mr. Ryan is President and Chief Operating Officer of the
Company. Mr. Ryan is a member of the Executive Committee.
William M. Ziegler................................................. 39
Mr. Ziegler is Special Projects Director of Ceregen, a unit of
Monsanto Company that develops chemical, biotechnology and
seed products for agriculture. He was Business Director, Corn
and Soybeans of Ceregen until he assumed his present position
in November 1996. He was with Booz, Allen & Hamilton until
March 1993.
Directors Whose Terms Will Expire in 1998:
H. Blair White..................................................... 69 August 29, 1988
Mr. White is Of Counsel to Sidley & Austin, a law firm that
provides legal services to the Company. He is a director of
R.R. Donnelley & Sons Company. Mr. White is Chairman of the
Compensation Committee and of the Executive Committee.
Bruce P. Bickner................................................... 53 June 15, 1988
Mr. Bickner is Chairman and Chief Executive Officer of the
Company. Mr. Bickner was Chairman of the Board and Chief
Executive Officer of DEKALB Energy Company until November
1992. He is a director of Castle BancGroup, Inc. and NICOR
Inc. Mr. Bickner is a member of the Executive Committee.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
- - ------------------------------------------------------------------- --- ----------------
<S> <C> <C>
Dr. Charles J. Arntzen............................................. 55 August 1, 1990
Dr. Arntzen is President and Chief Executive Officer of the
Boyce Thompson Institute for Plant Research, Inc. He was
Manager, Plant Biotechnology Program, Institute of Biosciences
and Technology of Texas A & M University until he assumed his
present position in August 1995. He was deputy Chancellor for
Agriculture and Dean of the College of Agriculture and Life
Sciences of Texas A & M University until January 1992. He also
serves on the University of Chicago's Board of Governors for
the Argonne National Laboratory. Dr. Arntzen is Chairman of
the Audit Committee.
Virginia Roberts Holt.............................................. 41 January 16, 1996
Mrs. Holt is President of Charles A. Lowe & Associates, an
audiology practice. Mrs. Holt is a member of the Audit
Committee.
Directors Whose Terms Will Expire in 1999:
Allan Aves......................................................... 65 August 29, 1988
Mr. Aves is a farmer and is a director of the Illinois Farm
Bureau, the former President and a director of the DeKalb
County Farm Bureau and the former President and Chairman of
the Board of the American Soybean Association. He is a member
of the Audit Committee.
Douglas C. Roberts................................................. 44 August 29, 1988
Mr. Roberts is Vice President-Marketing of the Company. He
held the position of Director, U.S. Business Units of the
Company's seed division from May 1993 until February 1995 when
he was elected to his present position. He was Corn Product
Director of the Company's seed division until May 1993. Mr.
Roberts is a member of the Executive Committee.
Paul H. Hatfield................................................... 60 October 13, 1992
Mr. Hatfield is Chairman, President and Chief Executive
Officer of Petrolite Corporation, a manufacturer of specialty
chemicals. He was Chairman of Hatfield Capital Group, a
private investment company, from February 1995 until November
1995. He was Vice President of Ralston Purina Company and
President and Chief Executive Officer of Protein Technologies
International until February 1995. He is a director of
Petrolite Corporation and PENWEST, Ltd. Mr. Hatfield is a
member of the Audit Committee.
Dr. Robert T. Fraley............................................... 43 April 16, 1996
Dr. Fraley is President of Ceregen, a unit of Monsanto Company
that develops chemical, biotechnology and seed products for
agriculture. He was Group Vice President and General Manager
of the New Products Division of Monsanto Company until he
assumed his present position in January 1995. He was Vice
President of Technology with responsibility for crop chemical
and plant biotechnology research and development for The
Agricultural Group of Monsanto Company until February 1993. He
was Director of the Plant Science research group of Monsanto
Company until April 1992. He is a director of Calgene, Inc.
Dr. Fraley is a member of the Executive Committee.
</TABLE>
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<PAGE> 6
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed by or under the direction of the
Board of Directors. The Board has established several committees whose principal
functions are briefly described below. During fiscal 1996, the Board of
Directors held seven meetings. All of the directors attended at least 75 percent
of the meetings of the Board and the Committees on which they served during the
year. Directors who are not employees of the Company or nominees of Monsanto
Company are paid $14,000 annually, plus $1,000 per day for attending meetings of
the Board of Directors, meetings of the committees of the Board of Directors or
for attending other meetings at the request of the Company, plus expenses for
attending meetings. An additional fee of $1,000 per year is paid to each of the
Chairmen of the Executive, Compensation and Audit Committees.
Pursuant to the DEKALB Genetics Corporation Director Stock Option Plan (the
"Director Plan"), directors who are not officers or employees of the Company or
nominees of Monsanto Company may elect to receive options to purchase shares of
Class A Common Stock of the Company in lieu of cash compensation ("Director
Options"). The number of shares of Class A Common Stock subject to each Director
Option shall be equal to the nearest number of whole shares determined by
dividing the amount of the Annual Retainer and Meeting Fees by 25 percent of the
Fair Market Value (as defined below) of a share of Class A Common Stock on the
date of the annual meeting of stockholders of the Company. For purposes of the
Director Plan, the "Annual Retainer" is equal to the amount the director will be
entitled to receive for serving as a director in the relevant year and the
"Meeting Fees" are equal to the amounts the director will be entitled to receive
for attendance at all regularly scheduled meetings of the Board of Directors or
any committee of the Board of Directors of which he is a member in the relevant
year. If a director does not attend such a Board of Directors or committee
meeting (including non-attendance because any meeting was not held), the
director will forfeit that portion of the Director Options related to the
Meeting Fees for that meeting. The per share exercise price of the Class A
Common Stock subject to each Director Option will be 75 percent of the Fair
Market Value of a share of Class A Common Stock on the date prior to the date
such Director Option was granted. Under the Director Plan, the "Fair Market
Value" of a share of Class A Common Stock is the last price per share at which a
share of the Company's Class B Common Stock is sold in the regular way on the
Nasdaq National Market System ("Nasdaq") on the day prior to the day each
Director Option is granted, or, in the absence of any reported sales on such
day, the first preceding day on which there were such sales.
The Executive Committee is authorized to act in lieu of the Board between
meetings of the Board and recommends to the Board nominees for the Board. The
Executive Committee will consider suggestions for Board nominees by shareholders
if such suggestions are received in writing by the Secretary of the Company on
or before May 31 of each year. The Executive Committee held two meetings during
fiscal 1996.
The Audit Committee reviews periodically with independent auditors the
performance of the services for which such auditors are engaged, including
reviewing the scope of the annual audit and its results, reviewing the adequacy
of the Company's internal accounting controls with management and auditors, and
reviewing fees charged by the Company's independent auditors. The Audit
Committee held three meetings during fiscal 1996.
The Compensation Committee reviews and recommends to the Board of Directors
compensation to be paid to senior officers of the Company. During fiscal 1996,
the Compensation Committee held three meetings. Certain members of the Board of
Directors serve, along with officers of the Company, on committees administering
various employee benefit plans of the Company.
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of November 22, 1996 the beneficial
ownership of the Class A and Class B Common Stock of the Company (including
shares as to which a right to acquire ownership exists (e.g., through the
exercise of stock options) within the meaning of Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934) of each director and director nominee, each
Named Executive Officer (as defined below) and all directors and executive
officers as a group. All share and per share numbers in this Proxy Statement
have been revised to reflect the three-for-one split of the Class A and Class B
Common Stock to shareholders of record on May 10, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK OWNED
BENEFICIALLY AND PERCENTAGES OF EACH CLASS
OUTSTANDING ON NOVEMBER 22, 1996(1)(2)
--------------------------------------------
CLASS A % CLASS B %
--------- ------ ------- ----
<S> <C> <C> <C> <C>
Dr. Charles J. Arntzen(3)........................... 18,063 .744 -- --
Allan Aves(4)....................................... 41,387 1.688 -- --
Bruce P. Bickner(5)................................. 169,094 6.573 -- --
Richard T. Crowder(6)............................... 17,000 .700 -- --
Dr. Robert T. Fraley................................ -- -- -- --
Tod R. Hamachek(7).................................. 33,897 1.387 -- --
Paul H. Hatfield(8)................................. 31,011 1.270 -- --
Virginia Roberts Holt(9)(10)........................ 1,371,390 (18) 23,844 .163
Thomas R. Rauman(11)................................ 22,400 .921 546 .004
Douglas C. Roberts(10)(12).......................... 1,371,390 (18) 34,113 .233
John T. Roberts(10)(13)............................. 1,371,390 (18) 20,451 .139
Richard O. Ryan(14)................................. 87,510 3.510 12,450 .085
H. Blair White(15).................................. 62,130 2.530 -- --
John H. Witmer, Jr.(16)............................. 59,800 2.422 -- --
William M. Ziegler.................................. -- -- -- --
All of the above and all other executive officers as
a group
(19 persons)(17).................................. 1,886,318(18) 62.869(18) 92,554 .631
</TABLE>
- - ---------------
(1) Unless otherwise noted, the named individual has sole voting and investment
power with respect to the shares of Class A (voting) Common Stock and sole
investment power with respect to the shares of Class B (non-voting) Common
Stock listed.
(2) The Securities and Exchange Commission defines the beneficial owner of a
security as including any person who has sole or shared voting or
investment power with respect to such security.
(3) 18,063 shares of Class A Common Stock subject to options which may be
acquired on or prior to January 21, 1997.
(4) Includes 40,937 shares of Class A Common Stock subject to options which may
be acquired on or prior to January 21, 1997.
(5) Includes 162,200 shares of Class A Common Stock subject to options which
may be acquired on or prior to January 21, 1997.
(6) 17,000 shares of Class A Common Stock subject to options which may be
acquired on or prior to January 21, 1997.
(7) 33,897 shares of Class A Common Stock subject to options which may be
acquired on or prior to January 21, 1997.
(8) 31,011 shares of Class A Common Stock subject to options which may be
acquired on or prior to January 21, 1997.
(9) The number of shares of Class A Common Stock reported represents (i)
1,335,825 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which Virginia Roberts Holt is a Voting Trustee, plus (ii)
35,565 shares of Class A Common Stock subject to options granted to
Virginia Roberts Holt, Douglas C. Roberts or John T. Roberts which may be
acquired on or prior to January 21, 1997 (4,977 of which shares relate to
options granted to Virginia Roberts Holt). All of such shares are also
reported in this table as being beneficially owned by Douglas C. Roberts
and John T. Roberts. Of
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<PAGE> 8
the 1,335,825 shares of Class A Common Stock held pursuant to the Voting
Trust Agreement, 423,810 shares are represented by a Trust Certificate held
by Virginia Roberts Holt. Included are 52,794 shares of Class A Common
Stock which (together with 18,504 shares of Class B Common Stock) are held
in trusts for the benefit of the children of Virginia Roberts Holt of which
she or her spouse is the trustee. The provisions of such Voting Trust
Agreement and related agreements are described under "Certain Shareholder
Agreements." The shares of Class B Common Stock listed above include 3,390
shares of Class B Common Stock held by her spouse.
(10) Douglas C. Roberts, John T. Roberts and Virginia Roberts Holt are brothers
and sister.
(11) Includes 22,400 shares of Class A Common Stock subject to options which may
be acquired on or prior to January 21, 1997.
(12) The number of shares of Class A Common Stock reported represents (i)
1,335,825 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which Douglas C. Roberts is a Voting Trustee, plus (ii) 35,565
shares of Class A Common Stock subject to options granted to Virginia
Roberts Holt, Douglas C. Roberts or John T. Roberts which may be acquired
on or prior to January 21, 1997 (9,600 of which shares relate to options
granted to Douglas C. Roberts). All of such shares are also reported in
this table as being beneficially owned by Virginia Roberts Holt and John T.
Roberts. Of the 1,335,825 shares of Class A Common Stock held pursuant to
the Voting Trust Agreement, 418,161 shares are represented by a Trust
Certificate held by Douglas C. Roberts. Included are 67,854 shares of Class
A Common Stock which (together with 7,560 shares of Class B Common Stock)
are held in trusts for the benefit of the children of Douglas C. Roberts of
which he or his spouse is the trustee. The provisions of such Voting Trust
Agreement and related agreements are described under "Certain Shareholder
Agreements." The shares of Class B Common Stock listed above include 1,290
shares of Class B Common Stock held by his spouse.
(13) The number of shares of Class A Common Stock reported represents (i)
1,335,825 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which John T. Roberts is a Voting Trustee, plus (ii) 35,565
shares of Class A Common Stock subject to options granted to Virginia
Roberts Holt, Douglas C. Roberts or John T. Roberts which may be acquired
on or prior to January 21, 1997 (20,988 of which shares relate to options
granted to John T. Roberts). All of such shares are also reported in this
table as being beneficially owned by Virginia Roberts Holt and Douglas C.
Roberts. Of the 1,335,825 shares of Class A Common Stock held pursuant to
the Voting Trust Agreement, 423,339 shares are represented by a Trust
Certificate held by John T. Roberts. Included are 56,097 shares of Class A
Common Stock which (together with 13,671 shares of Class B Common Stock)
are held in trusts for the benefit of the children of John T. Roberts of
which he or his spouse is the trustee. The provisions of such Voting Trust
Agreement and related agreements are described under "Certain Shareholder
Agreements." The shares of Class B Common Stock listed above include 3,390
shares of Class B Common Stock held by his spouse.
(14) Includes 83,000 shares of Class A Common Stock subject to options which may
be acquired on or prior to January 21, 1997.
(15) Includes 45,210 shares of Class A Common Stock subject to options which may
be acquired on or prior to January 21, 1997.
(16) Includes 58,300 shares of Class A Common Stock subject to options which may
be acquired on or prior to January 21, 1997.
(17) Includes 589,984 shares of Class A Common Stock subject to options which
may be acquired on or before January 21, 1997.
(18) As shown in footnotes 9, 12 and 13 and as described under "Certain
Shareholder Agreements," Douglas C. Roberts, John T. Roberts and Virginia
Roberts Holt share voting power with respect to 1,371,390 shares of Class A
Common Stock. Accordingly, such shares (which represent 56.068% of the
outstanding shares of Class A Common Stock on November 22, 1996) are
accounted for in this table at three different places. So that the actual
impact of their ownership can be better understood, such multiple counting
has been eliminated in the total number reported as beneficially owned by
all directors and executive officers. The dispositive power and economic
benefits of each of them with respect to such shares, as a percent of the
total outstanding shares of Class A Common Stock, is Douglas C. Roberts
(17.676%), John T. Roberts (18.275%) and Virginia Roberts Holt (17.752%).
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<PAGE> 9
PRINCIPAL STOCKHOLDERS
The following table sets forth as of November 22, 1996 the beneficial
ownership of the Company's Class A Common Stock of each person known by the
Company to own beneficially more than five percent of such class of securities
and the percentage of all shares of Class A Common Stock that such number of
shares represents:
<TABLE>
<CAPTION>
PERCENTAGE
OF
OUTSTANDING
SHARES OF
SHARES OWNED CLASS A
NAME AND ADDRESS BENEFICIALLY(1) COMMON STOCK
- - ----------------------------------------------- --------------- ------------
<S> <C> <C>
John T. Roberts
Virginia Roberts Holt
Douglas C. Roberts
Charles C. Roberts
Mary R. Roberts
c/o Douglas C. Roberts....................... 1,371,390(2) 56.068%
DEKALB Genetics Corporation
3100 Sycamore Road
DeKalb, Illinois 60115
Monsanto Corporation(3)........................ 242,721 10.070%
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Bruce P. Bickner(4)............................ 169,094 6.573%
11702 Deerpath Road
Sycamore, Illinois 60178
</TABLE>
- - ---------------
(1) The Securities and Exchange Commission defines the beneficial owner of a
security as including any person who has sole or shared voting or investment
power with respect to such security.
(2) Charles C. Roberts and Mary R. Roberts are husband and wife and are the
father and mother of John T. Roberts, Virginia Roberts Holt and Douglas C.
Roberts. The shares reported represent shares held pursuant to a Voting
Trust Agreement of which each of them is a Voting Trustee, plus shares
subject to options held by them, which shares may be acquired on or prior to
January 21, 1997. See notes 9, 12 and 13 on pages 5 and 6. The provisions of
such Voting Trust Agreement and related agreements are described under
"Certain Shareholder Agreements."
(3) Monsanto has entered into a Stockholders' Agreement, the provisions of which
are described under "Certain Shareholder Agreements."
(4) See Note 5 on page 5.
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<PAGE> 10
CERTAIN SHAREHOLDER AGREEMENTS
The following describes certain provisions of (i) a Voting Trust Agreement
(the "Voting Trust Agreement") among each of Douglas C. Roberts, Virginia
Roberts Holt, John T. Roberts, Charles C. Roberts and Mary R. Roberts (the
"Voting Trustees"), individually and as trustees of trusts created for the
benefit of their spouses or children (the Voting Trustees and such trusts being
referred to as the "Shareholders"), (ii) a Roberts Family Shareholder Agreement
(the "Family Shareholder Agreement") among the Shareholders and (iii) a
Stockholders' Agreement (the "Monsanto Stockholders' Agreement") among the
Shareholders and Monsanto Company ("Monsanto"). Such description has been based
on information set forth in a Schedule 13D filed with the Securities and
Exchange Commission by the Voting Trustees.
VOTING TRUST AGREEMENT
Pursuant to the terms of the Voting Trust Agreement, the shares of Class A
Common Stock listed under "Principal Stockholders" as being beneficially owned
by the Voting Trustees were transferred to the Voting Trustees for deposit
pursuant to the Voting Trust Agreement, and the Voting Trustees issued trust
certificates ("Trust Certificates") in respect of such shares. The Voting Trust
Agreement provides that any Shareholder who subsequently acquires any shares of
Class A Common Stock of the Company will deposit such shares with the Voting
Trustees to be held pursuant to the Voting Trust Agreement (any shares deposited
with the Voting Trustees pursuant to the Voting Trust Agreement are referred to
as "Subject Shares").
The Voting Trust Agreement provides that the Voting Trustees have full
right and power to vote all Subject Shares upon all matters submitted to a vote
or consent of shareholders of the Company and that the Voting Trustees will vote
all Subject Shares as a unit in accordance with the determination of a majority
of the Voting Trustees, except that with respect to the Investment Agreement
Matters (as defined herein under "-- Monsanto Stockholders' Agreement") or
business combinations (as defined in the Monsanto Stockholders' Agreement)
involving the Company ("Company Business Combinations"), the Voting Trustees
will vote in accordance with the instructions of holders of Trust Certificates
or, if no instructions are given, in accordance with the recommendation of the
Board of Directors of the Company.
All dividends or distributions upon the Subject Shares will be paid by the
Voting Trustees to the holders of Trust Certificates ratably based on the number
of Subject Shares reflected on the Trust Certificates, except that any dividend
or distribution of voting stock of the Company will be deposited pursuant to the
Voting Trust Agreement.
The Voting Trustees have no power to sell or otherwise dispose of any
Subject Shares, except that the Voting Trustees are required to tender or
exchange Subject Shares in accordance with the terms of any tender or exchange
offer if (i) the Voting Trustees are so instructed by the holder of the Trust
Certificate for such Subject Shares and (ii) such tender or exchange offer, if
consummated, would result in the beneficial ownership by a group or person of
all of the shares of Class A and Class B Common Stock and the Company has
previously published its position or recommendation with respect to such tender
or exchange offer pursuant to applicable rules under the Securities Exchange Act
of 1934, as amended (any such tender or exchange offer described in this clause
(ii) being referred to as a "Qualifying Tender Offer").
The Voting Trust Agreement will terminate with respect to any Subject Share
on the earliest to occur of (i) the withdrawal of such Subject Share in
accordance with the provisions of the Family Shareholder Agreement, (ii) the
written agreement of all Voting Trustees and (iii) when the voting of such
Subject Share ceases to be vested in the Voting Trustees.
FAMILY SHAREHOLDER AGREEMENT
The Family Shareholder Agreement provides that no Shareholder will sell,
withdraw from the Voting Trust Agreement or otherwise dispose of any interest in
Subject Shares except as provided in the Family Shareholder Agreement. Each
Shareholder has agreed not to sell, convey, transfer, assign or otherwise
dispose of ("transfer") any interest in any Class A Common Stock or other voting
common or voting preferred stock
8
<PAGE> 11
of the Company, any option, warrant or other right to acquire Class A Common
Stock or such other voting stock or any security exchangeable for or convertible
into Class A Common Stock or such other voting stock (collectively, "Company
Voting Stock"), unless such Shareholder has withdrawn the Subject Shares from
the Voting Trust Agreement after compliance with the procedures described in the
following paragraph.
Any Shareholder desiring to withdraw Subject Shares from the Voting Trust
Agreement must give written notice to the other Shareholders, each of whom will
then have an option to purchase his or her pro rata portion of such Subject
Shares at a market price based on a thirty day average of the daily closing
prices for the Class B Common Stock on Nasdaq (or, if there is no such market
price, an appraised value for such Subject Shares). If such other Shareholders
have not elected to acquire all of such Subject Shares, then each Shareholder
who elected to acquire Subject Shares will have a further option to purchase his
or her pro rata portion of the Subject Shares which such other Shareholders have
not elected to acquire. Any Subject Shares not acquired by such other
Shareholders after such further option may be withdrawn from the Voting Trust
Agreement and will no longer be subject to the Family Shareholder Agreement.
The Family Shareholder Agreement provides that the restrictions on transfer
therein will not apply to certain permitted transfers ("Permitted Transfers")
specified therein, including (i) certain pledges of Company Voting Stock, (ii) a
transfer of Company Voting Stock to other Shareholders or their spouses,
descendants or certain other trusts or other entities, (iii) any exchange,
conversion or transfer of Company Voting Stock in connection with a Company
Business Combination, other than any agreement to transfer prior to the
Company's execution of an agreement with respect to such Company Business
Combination or (iv) any tender or exchange in accordance with the terms of a
Qualifying Tender Offer.
The Family Shareholder Agreement will terminate on January 31, 2006.
MONSANTO STOCKHOLDERS' AGREEMENT
The Monsanto Stockholders' Agreement was entered into in connection with a
series of agreements between the Company and Monsanto described under "Certain
Transactions", including an Investment Agreement between the Company and
Monsanto (the "Investment Agreement").
The Investment Agreement provides, among other things, that (i) Monsanto
was entitled to nominate one additional member to the Company's Board of
Directors (pursuant to such provision Robert T. Fraley was named to the Board)
and that Monsanto may nominate for election at the Company's 1997 annual meeting
of stockholders, an additional member (pursuant to such provision William M.
Ziegler has been nominated for election as a director, as described in this
Proxy Statement) to the Company's Board (any such nominee or nominees being
referred to as "Monsanto Nominees"), (ii) the By-Laws of the Company were
amended to (a) state that the primary business of the Company is the
research-based production, marketing, licensing and sale of agronomic seed,
including both technology related thereto and products derived therefrom, (b)
state that the use of voting securities by the Company to facilitate strategic
collaborations is in the Company's best interests (but as to any one strategic
collaboration the maximum amount of voting securities of the Company to be
issued to any individual, entity or group will not exceed 10% of the voting
securities of the Company then outstanding) and (c) prohibit the Company from
acquiring any business or assets outside of such primary business that would
constitute a substantial part (as defined in the Investment Agreement) of the
Company; provided that such By-Law amendments permit the Company to change its
primary business, issue voting securities to facilitate a strategic
collaboration or acquire any business outside of such primary business unless
three (two prior to the Company's 1997 annual meeting of stockholders) of the
members of the Board vote against the resolution relating to such change or
transaction (such By-Law provisions described in this clause (ii) being referred
to as the "By-Law Provisions") and (iii) while Monsanto beneficially owns either
5% of the Class A Common Stock or 20% of the Class B Common Stock, if the
Company proposes to issue for cash (subject to specified limitations) any shares
of Common Stock, securities convertible into such shares or options, warrants or
rights to acquire such shares ("Equity"), Monsanto will have the right to
purchase all or any portion of its pro rata share of such Equity on the terms
set forth in the Investment Agreement (the provisions described in this clause
(iii) being referred to as the "Equity Purchase Provisions" and the provisions
described in clauses (i), (ii) and (iii) being referred to as the "Investment
Agreement Matters").
9
<PAGE> 12
The Monsanto Stockholders' Agreement provides that each Shareholder will
use best efforts to attend each stockholder meeting for purposes of establishing
a quorum and will vote all of its shares of Company Voting Stock in favor of any
Monsanto Nominee recommended by the Board of Directors of the Company, provided
that such Monsanto Nominee is reasonably satisfactory to the Company. In
addition, the Monsanto Stockholders' Agreement provides that each Shareholder
will not, without the consent of Monsanto, initiate any action that would result
in the amendment of the By-Law Provisions and that each Shareholder will vote
its Company Voting Stock in favor of any proposed amendment to the Company's
certificate of incorporation to increase the Company's authorized capital stock,
which amendment is required in order for the Company to comply with the Equity
Purchase Provisions.
The Monsanto Stockholders' Agreement provides that except for Permitted
Transfers, no Shareholder may transfer any interest in its Company Voting Stock
except as provided by the Monsanto Stockholders' Agreement, and that, with
limited exceptions, no Shareholder will convert any Class A Common Stock to
Class B Common Stock until such time as such Shareholder has entered into a
binding agreement to sell or convey such Class B Common Stock to a third party.
If any Shareholder desires to transfer any interest in its Company Voting
Stock (other than a Permitted Transfer) such Shareholder will make a written
offer to Monsanto (a "Shareholder Offer") to purchase such Company Voting Stock
and Monsanto will have the option to purchase all but not less than all of such
Company Voting Stock for the price and upon the terms upon which such
Shareholder proposes to transfer such Company Voting Stock. If Monsanto rejects
the Shareholder Offer, Monsanto has the exclusive right for a period of time to
propose alternative terms for such purchase. If Monsanto does not accept the
Shareholder Offer and Monsanto and such Shareholder have not otherwise reached
an agreement regarding such purchase within such time period, then such
Shareholder may offer and sell such Company Voting Stock to any person or entity
on terms that are at least as favorable to such Shareholder as those set forth
in the Shareholder Offer or those offered by Monsanto in any counter offer.
In the event of any involuntary transfer of any Company Voting Stock (other
than a Permitted Transfer), Monsanto will have an exclusive option to purchase
all but not less than all of the Company Voting Stock subject to the involuntary
transfer in cash at a purchase price (i) based on a thirty day average of the
daily closing prices for the Class B Common Stock on Nasdaq or (ii) if the
Company Voting Stock is not Class A Common Stock or if the Class B Common Stock
is not publicly traded, based on the fair market value thereof determined by an
investment banking firm.
The Monsanto Stockholders' Agreement will be effective until the earlier of
(i) the termination of the collaboration agreement entered into between the
Company and Monsanto (except if it is terminated by reason of a material breach
thereof by the Company or by reason of a governmental decree caused by voluntary
action of the Company), (ii) Monsanto owning less than 5% of the outstanding
Class A Common Stock or less than 50% of the highest percent of the outstanding
Common Stock beneficially owned by Monsanto after completion of any purchases in
the market of Class B Common Stock by Monsanto as permitted under the Investment
Agreement during the one year period after the March 8, 1996 closing under the
Investment Agreement (the "Closing"), (iii) the termination of the Investment
Agreement or (iv) the eleventh anniversary of the Closing or any subsequent
anniversary of the Closing upon notice by Monsanto or a majority in interest of
the Company Voting Stock by persons who are then Shareholders.
10
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid by the Company and its
subsidiaries for the fiscal years indicated to the Chief Executive Officer and
to the four most highly compensated executive officers, other than the Chief
Executive Officer, serving at the end of fiscal 1996 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------
AWARDS PAYOUTS
--------- -------
ANNUAL COMPENSATION NUMBER OF
NAME AND ------------------------------------- SECURITIES
PRINCIPAL POSITION OTHER ANNUAL UNDERLYING LTIP ALL OTHER
AT AUGUST 31, 1996 YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) PAYOUTS COMPENSATION(3)
- - ---------------------- ---- -------- -------- --------------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce P. Bickner...... 1996 $294,231 $379,688 $11,140 14,100 $ 0 $52,346
Chairman and Chief 1995 285,016 225,000 20,389 11,250 0 28,277
Executive Officer 1994 269,992 55,800 14,782 0 0 17,300
Richard O. Ryan....... 1996 239,423 276,094 6,836 24,000 0 31,103
President and Chief 1995 231,369 119,250 7,952 18,000 0 16,860
Operating Officer 1994 196,969 41,850 6,765 0 0 7,631
Richard T. Crowder.... 1996 214,635 136,000 0 21,000 0 25,253
Sr. Vice President, 1995 171,514 52,400 0 15,000 0 94,893
International(4) 1994 -- -- -- -- -- --
Thomas R. Rauman...... 1996 159,615 87,000 6,498 15,000 14,000 16,664
Vice President, 1995 153,093 33,500 6,472 13,500 0 10,623
Finance and CFO 1994 116,185 20,000 17,797 6,000 0 21,451
John H. Witmer, Jr.... 1996 164,808 77,125 1,235 3,000 0 15,992
Senior Vice President 1995 164,885 43,000 331 0 0 14,135
and General Counsel 1994 144,723 39,825 1,089 0 0 6,054
</TABLE>
- - ---------------
(1) Other Annual Compensation for fiscal 1996 arose from the following sources:
Taxable income for executive car participants (Mr. Bickner - $2,448, Mr.
Ryan - $6,701, Mr. Rauman - $6,498); Personal use of company airplane (Mr.
Bickner - $6,408, Mr. Ryan - $135, Mr. Witmer - $1,235) (pursuant to
Compensation Committee guidelines); reimbursement to Mr. Bickner for income
taxes related to benefit plan of $2,284.
(2) No restricted stock or stock appreciation rights (SARs) were awarded to the
Named Executive Officers during fiscal 1994, 1995 or 1996.
(3) All Other Compensation for fiscal 1996 arose from the following sources:
Company contributions to the Company's Deferred Compensation Plan (Mr.
Bickner - $32,675, Mr. Ryan - $19,063, Mr. Crowder - $11,309, Mr. Rauman -
$4,941 and Mr. Witmer - $4,055); Company contributions to the Company's
Savings and Investment Plan (Mr. Bickner - $11,460, Mr. Ryan - $11,460, Mr.
Crowder - $11,460, Mr. Rauman - $11,460 and Mr. Witmer - $11,460); and
reimbursement for life insurance premiums (Mr. Bickner - $8,211, Mr. Ryan -
$580, Mr. Crowder - $484, Mr. Rauman - $263 and Mr. Witmer - $477); and
Company payment to Mr. Crowder of $2,000 for spouse international travel
benefit.
(4) Mr. Crowder's employment with the Company began October 26, 1994.
11
<PAGE> 14
OPTION GRANTS DURING FISCAL 1996
The following table sets forth the number of shares of Class A Common Stock
that were granted subject to options during fiscal 1996 to each Named Executive
Officer receiving such a grant:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
PERCENTAGE OF
TOTAL SHARES
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(1) IN FISCAL 1996 SHARE DATE PRESENT VALUE(2)
- - ----------------------------- -------------------- -------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Bruce P. Bickner............. 14,100 8.2% $ 16.083 01/15/06 $129,015
Richard O. Ryan.............. 24,000 14.0% $ 16.083 01/15/06 $219,600
Richard T. Crowder........... 21,000 12.2% $ 16.083 01/15/06 $192,150
Thomas R. Rauman............. 15,000 8.7% $ 16.083 01/15/06 $137,250
John H. Witmer, Jr........... 3,000 1.7% $ 16.083 01/15/06 $ 27,450
</TABLE>
- - ---------------
(1) These options to purchase Class A Common Stock of the Company were granted
under the Company's Long-Term Incentive Plan (LTIP) at an exercise price of
100 percent of fair market value on the date of grant. The options are
exercisable over a period of not more than ten years from the date of grant.
The stock option grants were made effective January 16, 1996. Vesting is
over a three-year period from the date of grant, with one-third of the
options vesting on January 16, 1997, one-third vesting on January 16, 1998,
and the final one-third vesting on January 16, 1999.
(2) Grant date present value is based on a Black-Scholes option pricing model
adapted for use in valuing executive stock options. In calculating the grant
present values set forth in the table, a factor of 40% has been assigned to
the volatility of the common stock, the annual dividend assumption is $0.28
per share, the interest rate has been fixed at 8.00% and the exercise of
options has been assumed to occur at the end of the actual option term of
ten years. There is no assurance that these assumptions will prove to be
true in the future. Consequently, the actual value, if any, an executive may
realize will depend on the common stock price on the date the option is
exercised, so that there is no assurance the value realized by an executive
will be at or near the value estimated by the Black-Scholes model.
AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND
FISCAL 1996 YEAR-END OPTION VALUES
The following table sets forth the number of shares of Class A and Class B
Common Stock that were purchased pursuant to options exercised, and the number
and value of shares subject to unexercised options at August 31, 1996, for each
of the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS AT
SHARES AUGUST 31, 1996(1) AUGUST 31, 1996(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce P. Bickner......... -0- -0- 153,750 21,600 $ 4,262,781 $ 407,730
Richard O. Ryan.......... -0- -0- 69,000 36,000 $ 1,871,418 $ 676,008
Richard T. Crowder....... -0- -0- 5,000 31,000 $ 112,915 $ 570,587
Thomas R. Rauman......... 3,000 59,125 10,900 26,000 $ 256,081 $ 504,921
John H. Witmer, Jr....... -0- -0- 57,300 3,000 $ 1,585,660 $ 49,251
</TABLE>
- - ---------------
(1) No employee of the Company holds any SARs relating to Class A or Class B
Common Stock.
(2) Market value of underlying securities at exercise or year-end, minus the
exercise price. Market value is based on the $32.50 per share closing price
on Nasdaq of the Class B Common Stock on August 31, 1996.
12
<PAGE> 15
LONG-TERM INCENTIVE PLANS -- AWARDS DURING FISCAL 1996
The following table sets forth the long-term incentive awards made during
fiscal 1996 to each Named Executive Officer receiving such an award:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE NON-STOCK PRICE BASED PLANS
PERFORMANCE UNITS PERIOD UNTIL -------------------------------
NAME AWARDED(1) MATURATION THRESHOLD TARGET MAXIMUM
- - ------------------------------------- ----------------- ------------ --------- ------- -------
<S> <C> <C> <C> <C> <C>
Bruce P. Bickner..................... 56,400 08/31/98 $28,200 $56,400 $98,700
Richard O. Ryan...................... 32,400 08/31/98 $16,200 $32,400 $56,700
Richard T. Crowder................... 21,000 08/31/98 $10,500 $21,000 $36,750
Thomas R. Rauman..................... 16,800 08/31/98 $ 8,400 $16,800 $29,400
John H. Witmer, Jr................... 14,400 08/31/98 $ 7,200 $14,400 $25,200
</TABLE>
- - ---------------
(1) The targeted value of each performance unit is $1.00 with a maximum payout
of $1.75 per unit. The performance units vest over a three-year period with
one-third vesting at the end of the first year, one-third vesting at the end
of the second year and the final third vesting at the end of the third year.
For all Named Executive Officers, the payment is based on earnings per share
for fiscal year 1998.
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE
The following table sets forth the estimated annual retirement benefits
payable upon retirement pursuant to the Company's retirement plans for the
indicated levels of remuneration and years of service for each Named Executive
Officer:
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE --------------------------------------------------------
COMPENSATION 10 15 20 25 30
- - ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000...................... $ 25,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000
150,000...................... 30,000 45,000 60,000 75,000 90,000
175,000...................... 35,000 52,500 70,000 87,500 105,000
200,000...................... 40,000 60,000 80,000 100,000 120,000
225,000...................... 45,000 67,500 90,000 112,500 135,000
250,000...................... 50,000 75,000 100,000 125,000 150,000
275,000...................... 55,000 82,500 110,000 137,500 165,000
300,000...................... 60,000 90,000 120,000 150,500 180,000
325,000...................... 65,000 97,500 130,000 162,500 195,000
350,000...................... 70,000 105,000 140,000 175,000 210,000
375,000...................... 75,000 112,500 150,000 187,500 225,000
400,000...................... 80,000 120,000 160,000 200,000 240,000
425,000...................... 85,000 127,500 170,000 212,500 255,000
450,000...................... 90,000 135,000 180,000 225,000 270,000
475,000...................... 95,000 142,500 190,000 237,500 285,000
500,000...................... 100,000 150,000 200,000 250,000 300,000
</TABLE>
The defined benefit plan for executives is based upon the average
annualized salary (consisting of salary and bonus) of the last 36 consecutive
months prior to October 1, 1993, at which time the pension plan was suspended.
Compensation earned after that date and future service shall not be included
when calculating pension benefits. At October 1, 1993, average annualized salary
for each of the Named Executive Officers who is eligible to participate is as
follows: Bruce P. Bickner -- $380,590; Richard O. Ryan -- $250,452; John H.
Witmer, Jr. -- $227,836; Thomas R. Rauman -- $128,782.
13
<PAGE> 16
The credited years of service for each of the following Named Executive
Officers is:
<TABLE>
<S> <C>
Bruce P. Bickner............................................... 18
Richard O. Ryan................................................ 14
John H. Witmer, Jr............................................. 15
Thomas R. Rauman............................................... 23
</TABLE>
The benefits are calculated by determining the average annualized earnings
of the applicable 36 months and multiplying this by the number of years of
service times two percent. These benefits will be reduced by social security
benefits, qualified pension plan benefits and benefits from a profit sharing
plan previously provided by the Company. The benefit table assumes that the
participant will retire at age 65. If not, the benefit will be reduced by three
percent for every year retirement takes place before age 65.
Mr. Crowder is not eligible for the above retirement benefit. The Company
has guaranteed that his annual retirement benefit starting at age 65 (from
Social Security, the Company's qualified retirement plans (excluding the
Company's 401(k) plan as it was in effect in September 1994) and the Company's
non-qualified retirement plans) will equal or exceed an amount equal to two
percent times his years of service times his average annual compensation during
his last thirty-six months of employment. At August 31, 1996, Mr. Crowder's
average annual compensation was $197,371 and his years of credited service was
one.
EMPLOYMENT AGREEMENTS
The Company has entered into written employment agreements with all of the
Named Executive Officers. Each employment agreement provides for a one-year term
and is subject to successive one-year extensions unless notice of termination is
given. The employment agreements provide for the following base salaries for
fiscal 1997 to be paid to the executive officers: Mr. Bickner ($330,000), Mr.
Ryan ($250,000), Mr. Crowder ($225,000), Mr. Rauman ($165,000) and Mr. Witmer
($170,000). Those executive officers will have Company performance-related bonus
opportunities which have been set for a target bonus of $260,000; $165,000;
$110,000; $80,000 and $57,000, respectively, which could be exceeded if
performance merits. Each employment agreement provides that if the executive
officer is terminated prior to the expiration of the term of the agreement such
executive officer will also be entitled to termination pay equal to 24 months'
base salary and target bonus in the case of Messrs. Bickner and Ryan, 12 months'
base salary and target bonus in the case of Mr. Crowder and 12 months' base
salary in the case of Messrs. Witmer and Rauman. Messrs. Bickner, Ryan, and
Crowder are subject to noncompetition limitations for periods of time equaling
the length of their termination pay.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
With input on competitive and recommended practices from external
independent consultants, the Compensation Committee of the Board of Directors
has overseen the development and implementation of Company compensation programs
which seek to enhance Company profitability and shareholder value. The Company's
objective is to closely align the senior managers' financial interests with
those of the Company's shareholders. The Company subscribes to a total
compensation theory in which base salary, annual bonus, benefits, perquisites
and long-term incentives as components of the compensation package are
considered individually and in total. The Company considers three factors in
determining the levels and proportions of these compensation components for
executive managers.
The most important element is the Company's past and expected financial
performance and whether bonus payments are consistent with shareholder return.
Primary factors in determining shareholder return are net earnings and the
accomplishment of specific strategic objectives that will enhance earnings and
asset return. These specific strategic objectives include goals such as market
share gains, new product development, strategic plan development and marketing
plan accomplishment.
14
<PAGE> 17
Secondly, consideration is given to the competitive practice of like-sized
companies and similar industries for paying positions with equivalent
responsibilities. The Company uses both a seed industry survey and general
industry surveys in determining external pay levels. The seed industry survey is
conducted by the American Seed Trade Association ("ASTA") and covers pay
practices of 23 competitive seed companies. The primary general industry
compensation surveys used are conducted by William M. Mercer, Inc. and Hewitt
Associates. Emphasis is placed on companies with $200-500 million in annual
sales.
The Company's compensation goal is to target its executives to be paid
competitive rates when performance expectations are met and above competitive
levels when expectations are exceeded. The Company targets its executives to be
paid between the 50th and 75th percentile of competitive rates when performance
expectations are met. As a guideline, no bonus will be awarded until 80 percent
of the related objective has been reached. At that level of performance,
approximately 50 percent of bonus target will be paid. Bonus payments will
increase until 100 percent of target is paid at 100 percent objective
accomplishment. Performance in excess of the objective will earn a bonus payment
over target. Base salaries are normally at or about the 50th percentile of
competitive practice. The portion of annual cash compensation subject to
performance bonus accomplishment is normally at or greater than the competition.
Finally, internal pay equity within the Company between executive positions
is considered. Individual performance, responsibility level and length of time
in position are all factors in determining placement within the appropriate
salary range. Major determinants of responsibility level are size of assets
managed and the ability to influence profitability.
Criteria for determining fiscal 1996 annual performance bonuses for the
Named Executive Officers included earnings, profit contribution, market share
and specific individual objectives.
The following table summarizes fiscal 1996 bonus opportunities and criteria
for the Named Executive Officers:
<TABLE>
<CAPTION>
CRITERIA AS A PERCENT OF BONUS TARGET
1996 BONUS ----------------------------------------
TARGET AS NET INDIVIDUAL
PERCENT OF TOTAL CORPORATE SEGMENT STRATEGIC
NAME CASH COMPENSATION PERFORMANCE PERFORMANCE OBJECTIVES
- - -------------------------------------------- ----------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Bruce P. Bickner............................ 43% 75% 12.5% 12.5%(1)
Richard O. Ryan............................. 39% 62.5% 37.5% --
Richard T. Crowder.......................... 28% 13% 87.0% --
Thomas R. Rauman............................ 27% 60% 20.0% 20%(2)
John H. Witmer, Jr.......................... 24% 50% -- 50%(3)
</TABLE>
- - ---------------
(1) Included an objective on a Strategic Research Plan.
(2) Included objectives on mainframe migration and executive information system.
(3) Included objectives on intellectual property rights and business review and
internal audit plans.
Certain members of the Committee, in their capacity as the DEKALB Genetics
Corporation Long-Term Incentive Plan Administrative Committee, periodically
grant key employees, including the Named Executive Officers, awards under the
Company's Long-Term Incentive Plan ("LTIP"). The LTIP provides the flexibility
to grant longer term incentives in a variety of forms including stock options,
stock appreciation rights and restricted stock. The Committee currently views
stock options and performance unit grants which the Committee also grants from
time to time (the only awards currently outstanding) as the best long term
incentive vehicles to ally the interests of management and shareholders. In
awarding stock options and performance units, the Committee reviews and approves
individual recommendations made by the Chief Executive Officer and the
President. The Committee in turn determines the awards for the CEO and the
President.
Factors used in determining individual award size are competitive practice
(awards needed to attract and retain management talent), rank within the Company
(internal equity), responsibility for asset management
15
<PAGE> 18
(size of job) and ability to affect profitability. In each individual case,
previous option and performance unit grants are considered in determining the
size of new awards.
The Committee, as it deems appropriate, seeks outside professional counsel
on the value, size, term and criteria of awards. Hewitt was last retained in
this capacity in fiscal 1992.
The foregoing Compensation Committee Report has been furnished by:
H. Blair White, Chairman
Tod R. Hamachek
John T. Roberts
COMPARISON OF CUMULATIVE FIVE-YEAR RETURNS
ASSUMES $100 INVESTED ON 9/1/91 AND DIVIDEND REINVESTMENT
LOGO
(1) There are no published industry or line of business indices that parallel
the Company's primary business endeavors, nor is there a group of
publicly-traded companies in the same business lines. Therefore, an index of
all Nasdaq traded companies with a market capitalization of $500 million to
$1 billion (excluding financial institutions) has been selected as the Peer
Group Index (198 companies). The index is weighted for relative market
capitalization.
(2) The Peer Group Index used in last year's Proxy Statement was an index of all
Nasdaq traded companies with a market capitalization of $150 to $300 million
(excluding financial institutions) (462 companies). Because the Company's
market capitalization exceeded $300 million on August 31, 1996, the table
includes the new Peer Group Index and the old Peer Group Index for
comparative purposes.
(3) The Company is not part of the S&P 500 index and is traded on Nasdaq.
Therefore, the Nasdaq Stock Index has been selected as the Broad-Based
Index.
16
<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
H. Blair White, a director of the Company, is Of Counsel to the law firm of
Sidley & Austin. Sidley & Austin provided legal services to the Company during
the past year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Directors and officers of the Company are required under Section 16 of the
Securities Exchange Act of 1934 to report to the Securities and Exchange
Commission their transactions in, and beneficial ownership of, the Company's
Class A Common Stock, Class B Common Stock and other equity securities of the
Company. Reports received by the Company during the last fiscal year indicate
that Janis M. Felver, who is an executive officer of the Company, filed one late
report relating to one transaction.
CERTAIN TRANSACTIONS
On January 31, 1996, the Company entered into a series of agreements with
Monsanto, including an agreement which provides for a long-term research and
development collaboration with Monsanto in the field of agricultural
biotechnology, particularly corn seed. The Company and Monsanto also entered
into cross-licensing agreements covering insect-resistant and herbicide-tolerant
corn products targeted to reach the market over the next three years.
During the third quarter of fiscal 1996, DEKALB completed a sale of equity
to Monsanto as part of the Investment Agreement between the Company and
Monsanto. Monsanto purchased from the Company 242,721 newly issued shares of
Class A Common Stock at a price per share of $21.67 and 1,134,000 newly issued
shares of Class B Common Stock at a price per share of $21.67. As a result of
the new stock issued to Monsanto, the total number of outstanding shares of
Common Stock of the Company rose to over 17.0 million from about 15.6 million.
Monsanto also acquired 5,178,555 shares of Class B Common Stock in a cash
tender offer at a price of $23.67 per share. Upon completion of the tender
offer, Monsanto held approximately ten percent of the outstanding shares of
Class A Common Stock and approximately 43 percent of the outstanding shares of
Class B Common Stock. See "Principal Stockholders". Additionally, the Company
received $4.0 million from Monsanto in March 1996, the first payment under the
companies' collaboration agreement, which calls for total payments of $19.5
million over the term of the agreement.
The Investment Agreement, among other things: (i) provides Monsanto with
the right, for one year after the Closing to purchase in the market additional
shares of Class B Common Stock so long as the total Common Stock owned by
Monsanto does not exceed 40% of the Common Stock outstanding at such time
(Monsanto purchased 253,800 shares of Class B Common Stock on or before August
31, 1996 which brought the total Common Stock owned by Monsanto to 39.932% of
the Common Stock outstanding on such date), (ii) restricts the ability of
Monsanto to transfer securities of the Company, (iii) provides the Company under
specified circumstances with a right of first refusal in respect of certain
proposed transfers by Monsanto of securities of the Company, (iv) limits for ten
years, subject to certain exceptions, the ability of Monsanto to acquire
additional securities of the Company, (v) requires the Company to provide notice
to Monsanto of certain transactions in order to provide Monsanto with the
opportunity to propose an alternative transaction to the Company and (vi)
prohibits Monsanto from engaging in specified activities. See "Certain
Shareholder Agreements" for a description of other provisions of the Investment
Agreement and related agreements.
During fiscal 1996 the Company incurred an expense of $150,000 owed to
Monsanto as part of a research collaboration entered into pursuant to the
Collaboration Agreement and License entered into between the companies on
January 31, 1996.
Pursuant to the Investment Agreement, in April, 1996 the Board of Directors
of the Company increased the size of the Board and named Dr. Robert T. Fraley,
President of the Ceregen unit at Monsanto, to the Board. In addition, pursuant
to the Investment Agreement, the Board has nominated for election to the Board
at the 1997 annual meeting of stockholders, William M. Ziegler, Special Projects
Director, of the Ceregen
17
<PAGE> 20
unit of Monsanto. See "Information Concerning Nominees for Directors and Other
Directors Who Will Continue in Office" and "Certain Shareholder Agreements."
The Company is obligated to support the nominations made in accordance with
the terms of the Investment Agreement. The Investment Agreement further provides
that, during any period in which Monsanto is entitled to nominate one or more
members to the Company's Board, the Company will use all reasonable efforts to
assure that there be at least three members of its Board who are independent of
the Company, Monsanto and certain large holders of Class A Common Stock.
AUDITORS
Arthur Andersen LLP performed the audit of the fiscal 1996 financial
statements of the Company. Representatives of Arthur Andersen are expected to be
present at the Annual Meeting and will be provided an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate inquiries from stockholders.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE JANUARY 1998 ANNUAL MEETING
Stockholder proposals to be included in the proxy soliciting materials for
the Annual Meeting of Stockholders of the Company following the completion of
fiscal 1996 must be received by the Company no later than August 8, 1997.
In addition, the Company's By-Laws require that there be furnished to the
Company written notice with respect to the nomination of a person for election
as a director or the submission of a proposal (other than nominations and
proposals submitted at the direction of the Board) at a meeting of stockholders.
In order for any such nomination or submission to be proper, the notice must
contain certain information concerning the nominating or proposing stockholder
and the nominee or the proposal, as the case may be, and must be furnished to
the Company generally not less than 30 days prior to the meeting. A copy of the
applicable By-Law provision may be obtained, without charge, upon written
request to the Secretary of the Company at its principal executive offices.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not now intend to bring before the Annual Meeting any
matters other than those disclosed in the Notice of Annual Meeting of
Stockholders, and it does not know of any business which persons, other than
management, intend to present at the meeting. Should any other matters requiring
a vote of the stockholders arise, the proxies in the enclosed form confer upon
the person or persons entitled to vote the shares represented by such proxies
discretionary authority to vote the same in respect of any such other matter in
accordance with their best judgment.
By Order of the Board of Directors
John H. Witmer, Jr., Secretary
DeKalb, Illinois
December 6, 1996
18
<PAGE> 21
DEKALB GENETICS CORPORATION
PROXY - ANNUAL MEETING OF STOCKHOLDERS
January 13, 1997
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated December 6, 1996. Bruce P. Bickner and
H. Blair White, each with full power of substitution, and acting alone, are
hereby constituted proxies of the undersigned and authorized to attend the
Annual Meeting of Stockholders of DEKALB Genetics Corporation, a Delaware
corporation (the "Company"), to be held at the Kishwaukee College Auditorium,
21193 Malta Road, Malta, Illinois 60150, on January 13, 1997 at 3:00 P.M.,
Central Standard Time, or any adjournment or adjournments of such meeting, and
to represent and vote all shares of Class A Common Stock of the Company which
the undersigned is entitled to vote:
(1) FOR / / election of the four (4) nominees for director named in the
accompanying Proxy Statement, namely: Tod R. Hamachek, John T. Roberts,
Richard O. Ryan and William M. Ziegler and for the terms described in the
Proxy Statement.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write each such nominee's name below.
--------------------------------------------------------------------------
WITHHOLD / / authority to vote for all of the aforementioned nominees as
director.
(2) In their discretion, upon any other business that may properly come
before the meeting or adjournment thereof.
This proxy is revocable. The undersigned hereby revokes any proxy or
proxies to vote or act with respect to such shares heretofore given by the
undersigned.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SPECIFIED
HEREIN AND, IN THE ABSENCE OF SUCH SPECIFICATIONS, WILL BE VOTED FOR PROPOSAL
(1).
PLEASE MARK, SIGN, DATE AND RETURN Date:
THIS PROXY CARD PROMPTLY USING THE ---------------------------------
ENCLOSED ENVELOPE. / / I expect to attend this meeting.
/ / I do not expect to attend this
meeting.
------------------------------------------
------------------------------------------
Please sign exactly as your stock is
registered. Joint owners should each
sign personally. Executors,
administrators, trustees, etc. should so
indicate when signing.
<PAGE> 22
[FRONT OF CARD]
INSTRUCTIONS TO CITIBANK, F.S.B.
FOR VOTING OF PARTICIPANT'S INTEREST IN THE
DEKALB GENETICS CORPORATION SAVINGS AND INVESTMENT PLAN
The undersigned, as a participant in the Company Common Stock Fund of the
DEKALB Genetics Corporation Savings and Investment Plan, acknowledges receipt
of the Notice of Annual Meeting of Stockholders and Proxy Statement dated
December 6, 1996. Furthermore, the undersigned hereby instructs Citibank,
F.S.B., as Trustee, (a) to appoint Bruce P. Bickner and H. Blair White, each
with full power of substitution, and acting alone, as proxies of the
undersigned; (b) to authorize such proxies to attend the Annual Meeting of
Stockholders of DEKALB Genetics Corporation, a Delaware corporation (the
"Company"), to be held at the Kishwaukee College Auditorium, 21193 Malta Road,
Malta, Illinois 60150, on January 13, 1997 at 3:00 P.M., Central Standard Time,
or any adjournment or adjournments of such meeting; and (c) to instruct such
proxies to represent and vote all shares of Class A Common Stock of the Company
which the undersigned is entitled to vote:
(To be Signed on Reverse Side)
- - --------------------------------------------------------------------------------
[BACK OF CARD]
(1) FOR / / election of the four (4) nominees for director named in the
accompanying Proxy Statement, namely: Tod R. Hamachek, John T. Roberts,
Richard O. Ryan and William M. Ziegler and for the terms described in the
Proxy Statement.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write each such nominee's name below.
--------------------------------------------------------------------------
WITHHOLD / / authority to vote for all of the aforementioned nominees as
director.
(2) In their discretion, upon any other business that may properly come
before the meeting or adjournment thereof.
These instructions are revocable. The undersigned hereby revokes any
instructions to vote or act with respect to such interest in the Plan
heretofore given by the undersigned.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. IF THIS CARD IS NOT COMPLETED
AND RETURNED ON OR BEFORE JANUARY 9, 1997,
THE SHARES REPRESENTING YOUR INTEREST IN THE PLAN WILL NOT BE VOTED.
Date:
---------------------------------------
/ / I expect to attend this meeting.
/ / I do not expect to attend this meeting.
--------------------------------------------
Signature
