<PAGE> 1
DEKALB GENETICS CORPORATION
3100 SYCAMORE ROAD
DEKALB, ILLINOIS 60015
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about November 17, 1998.
You are receiving this Information Statement in connection with the possible
election of persons designated by Monsanto Company ("Parent" or "Monsanto") to a
majority of the seats on the Board of Directors (the "Board of Directors" or the
"Board") of DEKALB Genetics Corporation (the "Company"). On May 8, 1998, the
Company entered into an agreement and plan of merger (the "Merger Agreement")
with Parent and Corn Acquisition Corporation, a wholly owned subsidiary of
Parent (the "Purchaser"), pursuant to which, among other things, Parent and the
Purchaser have commenced a tender offer by the Purchaser to purchase all
outstanding shares of (i) Class A Common Stock, without par value (the "Class A
Shares" or "Class A Common Stock") and (ii) Class B Common Stock, without par
value (the "Class B Shares" or "Class B Common Stock" and, collectively with the
Class A Shares, the "Shares"), of the Company, at a purchase price of $100.00
per Share, net to the seller in cash, without interest thereon (as such price
may be increased, the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 15, 1998 and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which have
been previously mailed to stockholders of the Company and are filed as Exhibits
(a)(1) and (a)(2), respectively, to the Schedule 14D-1 (as amended from time to
time, the "Schedule 14D-1") filed by Parent and the Purchaser with the
Securities and Exchange Commission (the "Commission"). The Merger Agreement
further provides that following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged (the
"Merger") with and into the Company with the Company continuing as the surviving
corporation. As of the effective time of the Merger, each issued and outstanding
Share (other than Shares owned by the Company, Parent, the Purchaser or their
respective subsidiaries, which Shares will be cancelled, and other than Shares,
if any, held by stockholders who are entitled to and who properly exercise
appraisal rights under Delaware law), will, by virtue of the Merger and without
any action by the holder thereof, be converted into the right to receive from
the surviving corporation in cash the price per Share paid in the Offer.
The Merger Agreement is more fully described in the
Solicitation/Recommendation Statement on Schedule 14D-9 related to the Offer (as
amended from time to time, the "Schedule 14D-9"), which was filed by the Company
with the Commission on May 15, 1998 and which was mailed to stockholders of the
Company with materials related to the Offer.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14f-1 promulgated thereunder. The information set forth herein
amends and supplements certain information set forth in the Schedule 14D-9.
Information set forth herein related to Parent, the Purchaser or the Parent
Designees (as defined herein) has been provided by Parent. You are urged to read
this Information Statement carefully. You are not, however, required to take any
action.
Pursuant to the Merger Agreement, Parent and the Purchaser commenced the
Offer on May 15, 1998. The Offer is currently scheduled to expire at 5:00 pm,
eastern standard time, on Monday, November 30, 1998, unless Parent extends it.
GENERAL
The Class A Shares and the Class B Shares are the only classes of equity
securities of the Company outstanding. Although the Class A Shares and the Class
B Shares generally have the same rights with respect to dividends and other
distributions by the Company, only the Class A Shares are generally entitled to
vote, including in the election of the Company's directors, and each Class A
Share is entitled to one vote. As of the
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close of business on October 30, 1998, there were outstanding (i) 4,525,324
Class A Shares, and (ii) 30,115,467 Class B Shares, of which Parent beneficially
owns 10.7% and 44.2% respectively as of the date hereof, without considering
shares beneficially owned by Parent pursuant to certain agreements with other
stockholders of the Company (see "Security Ownership of Certain Beneficial
Owners.")
The Board of Directors currently consists of twelve directors with no
vacancies and is classified into three classes of four directors each, with each
director serving a three-year term and until his or her successor is duly
elected and qualified.
RIGHTS TO DESIGNATE DIRECTORS AND PARENT DESIGNEES
The Merger Agreement provides that, promptly after the Purchaser purchases
Shares pursuant to the Offer, the Purchaser will be entitled to designate up to
such number of directors of the Company, rounded up to the next highest whole
number, as will make the percentage of the Company's directors so designated by
the Purchaser (the "Parent Designees") equal to the aggregate voting power of
the Class A Shares held by Parent or any of its Subsidiaries (as defined in the
Merger Agreement). In addition to the Parent Designees, two employees of Parent,
Dr. Robert T. Fraley and Mr. William M. Ziegler, already serve as directors of
the Company.
However, if the Parent Designees are elected to the Board of Directors,
until the Effective Time, the Board of Directors must have (i) at least three
directors who were directors on the date of the Merger Agreement or were
designated by a majority of the directors of the Company who were directors on
the date of the Merger Agreement, in each case excluding the Investor Nominees
(as defined in the Investment Agreement (as defined below)) (the "Independent
Directors") and (ii) the number of Investor Nominees required by the Investment
Agreement (which will be in addition to the Parent Designees); and in such
event, if the number of Independent Directors is reduced below three for any
reason whatsoever, the remaining Independent Directors will, to the fullest
extent permitted by law, designate a person to fill such vacancy who will be
deemed to be an Independent Director for purposes of the Merger Agreement or, if
no Independent Directors then remain, the other directors will designate three
persons to fill such vacancies who are not officers or affiliates of the Company
or any of its Subsidiaries, or officers or affiliates of Parent, of any of its
Subsidiaries or of any other entity in which Parent owns, directly or
indirectly, any material amount of capital stock or other significant ownership
interest, and such persons will be deemed to be Independent Directors for
purposes of the Merger Agreement.
Following the election or appointment of the Parent Designees as described
above, and prior to the Effective Time, any termination or amendment of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of the Purchaser or
waiver or assertion of any of the Company's rights thereunder, and any other
consent or action by the Board of Directors with respect to the Merger Agreement
(other than recommending or reconfirming the recommendation that the holders of
Class A Common Stock approve and adopt the Merger Agreement and the Merger, and
making determinations in connection therewith, which recommendations and
determinations may be made by a majority of the Board of Directors as
constituted at any time after the election or appointment of the Parent
Designees as described above), will require the concurrence of a majority of the
Independent Directors and, to the extent permitted by law, no other action by
the Company, including any action by any other director of the Company, will be
required to approve such actions. To the fullest extent permitted by applicable
law, the Company is obligated to take all actions requested by Parent which are
reasonably necessary to effect the election of any Parent Designee. In
connection with the foregoing, the Company will promptly, at the option of
Parent, to the fullest extent permitted by law, either increase the size of the
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable the Parent Designees to be elected or
appointed to the Board of Directors as provided above.
The Parent Designees will be selected by Parent from among the individuals
listed below. Each of the following individuals has consented to serve as a
director of the Company if appointed or elected. None of the Parent Designees
currently is a director of, or holds any positions with, the Company. To the
best of Parent's knowledge, except as set forth below none of the Parent
Designees or any of their affiliates beneficially owns
2
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any equity securities or rights to acquire any such securities of the Company,
nor has any such person been involved in any transaction with the Company or any
of its directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the Commission other than
with respect to transactions between Parent and the Company that have been
described in the Schedule 14D-1 or the Schedule 14D-9.
The name, age, present principal occupation or employment and five-year
employment history of each of the following individuals are set forth below.
Unless otherwise indicated, each such individual has held his or her present
position as set forth below for the past five years and each occupation refers
to employment with Parent, unless otherwise noted. Except for Hendrik A.
Verfaillie, who is a citizen of Belgium and Hugh Grant, who is a citizen of the
United Kingdom, each person is a citizen of the United States, and the business
address of each person listed below is c/o Monsanto Company, 800 N. Lindbergh
Blvd., St. Louis, Missouri 63167.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE
- ------------------------------------------------- ----
<S> <C>
Hendrik A. Verfaillie....................................... 53
President of Monsanto since 1997. Executive Vice President
and Advisory Director of Monsanto from 1995 to 1997. Vice
President and Advisory Director of Monsanto and President,
The Agricultural Group of Monsanto from 1993 to 1995.
Hugh Grant.................................................. 40
Co-President, Ag Sector of Monsanto since February 1998.
Managing Director, Asia Pacific Monsanto from 1995 to
February 1998. Director, Global Glyphosate Strategy of
Monsanto from 1992 to 1995. Mr. Grant and his wife are the
beneficial owners of 200 shares of Class B Common Stock.
Arnold W. Donald............................................ 43
Senior Vice President of Monsanto since 1998.
Co-President, Ag Sector of Monsanto from 1997 to 1998.
President, Crop Protection of Monsanto from 1995 to 1997.
Group Vice President and General Manager of Monsanto from
1994 to 1995. Group Vice President, North America Division
of Monsanto from 1993 to 1994. Mr. Donald serves as a
director of Oil-Dri Corp. of America and Strategic
Distribution, Inc.
Robert W. Reynolds.......................................... 54
Vice Chairman of Monsanto since November 1997. Vice
President, International Operations and Development of
Monsanto from 1994 to 1997. Vice President and Managing
Director, Latin America World Area of Monsanto from 1992
to 1994. Mr. Reynolds serves as a director of Babson Bros.
Co.
Amin I. Khalifa............................................. 45
Chief Financial Officer, Ag Sector of Monsanto since
October 1996. Chief Financial Officer, Aetna Inc., 151
Farmington Avenue, Hartford, Connecticut, from April 1995
to October 1996. Business Development Manager, Pepsi Cola
International, Cairo, Egypt, from 1993 to 1995.
James P. Tobin.............................................. 42
Director, Seeds Business Team, Ag Sector of Monsanto since
1997. U.S. Director of Marketing and New Business
Development, Crop Chemical Division of Monsanto during
1996. Director, Cotton Business Team of Monsanto from 1993
to 1996.
Michael A. Morgan........................................... 48
Director, Seeds Business Team, Ag Sector of Monsanto since
March 1997. Chief Financial Officer, Ceregen, a unit of
Monsanto that develops chemical, biotechnology and seed
products for agriculture, from 1995 to 1997. Director,
Acquisitions, Ag New Products Division of Monsanto, from
1994 to 1995.
</TABLE>
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<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE
- ------------------------------------------------- ----
<S> <C>
Theodore M. Crosbie......................................... 47
Director, Seeds Business Team, Ag Sector of Monsanto since
February 1997. President, Modern Muzzle Loading Inc., 234
Airport Road, Centerville, Iowa, from November 1996 to
February 1997. Director, Worldwide Hybrid Wheat Research
of Monsanto from June 1996 to November 1996. President and
Chief Executive Officer, ICI Seeds Inc., 2369 330th St.,
Slater, Iowa, from 1990 to 1995. Mr. Crosbie serves as a
director of Kemin Industries, Inc.
Thomas B. Klevorn........................................... 42
Director, Value Capture Team, Mergers & Acquisitions of
Monsanto since February 1998. Business Director, Corn, Ag
Sector of Monsanto from 1993 to February 1998.
Lincoln D. Germaine......................................... 36
Global Business Director, Corn, Ag Sector of Monsanto
since February 1997. Brand Manager Selective Chemistries
from 1996 to February 1997. Business Manager Polymer
Modifiers from 1993 to 1996.
Cheryl L. Meier............................................. 39
Acquisition/Integration Leader of Monsanto since June
1998. Global Brand Leader for Corn of Monsanto from 1996
to June 1998. Strategic Planning Manager, Corn and Soybean
Crop Biotechnology Unit of Monsanto from 1995 to 1996.
Program Manager, U.S. Department of Defense, St. Louis,
Missouri, from 1989 to 1995.
Derek K. Rapp............................................... 36
Director, Mergers & Acquisitions of Monsanto since
February 1997. Director, Commercial Partnerships &
Alliances, Ceregen, a unit of Monsanto that develops
chemical, biotechnology and seed products for agriculture,
from April 1995 to January 1997. Director, Strategic
Planning,
Ag Sector of Monsanto from 1993 to 1995.
Steve R. Stetz.............................................. 56
Vice President, Mergers & Acquisitions/Licensing of
Monsanto since October 1996. Vice President, Financial
Planning and Analysis, Mergers & Acquisitions/Business
Analysis of Monsanto from March 1996 to October 1996.
Assistant Controller, Planning & Analysis & New
Businesses -- Corporate Finance of Monsanto from April
1995 to March 1996. Senior Director, Planning &
Analysis -- Corporate Finance of Monsanto from 1992 to
1995.
Barbara L. Blackford........................................ 41
Associate General Counsel and Assistant Secretary,
Corporate Governance and Mergers & Acquisitions of
Monsanto from November 1997. Partner, Long Aldridge &
Norman,
One Peachtree Center, Suite 5300, 303 Peachtree Street,
N.E., Atlanta, Georgia, from 1993 to 1997. President,
Secretary, Treasurer and Director of the Purchaser.
</TABLE>
4
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BOARD OF DIRECTORS AND BOARD COMMITTEES
The business of the Company is managed by or under the direction of the
Board of Directors. The Board has established several committees the principal
functions of which are briefly described below. During the Company's 1998 fiscal
year, the Board of Directors held eight meetings. During that period, all of the
directors attended at least 75% of the meetings of the Board of Directors and of
the meetings of the committees of the Board of Directors on which they served
during the year. The Board of Directors has established an Executive Committee,
an Audit Committee, and a Compensation Committee.
The Executive Committee is authorized to act in lieu of the Board of
Directors between meetings of the Board of Directors and recommends to the Board
of Directors nominees for the Board. The Executive Committee considers
suggestions for Board nominees by stockholders 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 the Company's 1998 fiscal year.
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 two meetings during the Company's 1998 fiscal year.
The Compensation Committee reviews and recommends to the Board of Directors
compensation to be paid to senior officers of the Company. During the Company's
1998 fiscal year, 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.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or nominees of Parent
pursuant to the Investment Agreement, dated as of January 31, 1996, by and
between Parent and the Company (the "Investment Agreement"), are paid $14,000
annually, plus $1,000 per day for attending meetings of the Board of Directors,
meetings of committees of the Board of Directors, or other meetings at the
request of the Company, plus expenses for attending such meetings. An additional
fee of $1,000 annually is paid to each of the Chairmen of the Executive, Audit
and Compensation Committees. Parent Designees will not be compensated for
services as directors of the Company but will be entitled to reimbursement of
their expenses.
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 pursuant to the Investment Agreement 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 is 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 is 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
New York Stock Exchange on the day prior to the day each Director Option
5
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is granted, or, in the absence of any reported sales on such day, the first
preceding day on which there were such sales.
DIRECTORS AND EXECUTIVE OFFICERS
The name, age, present principal occupation or employment and five-year
employment history of the current directors and executive officers of the
Company are set forth below. Unless otherwise noted, each person is a citizen of
the United States, and the business address of each such person is c/o DEKALB
Genetics Corporation, 3100 Sycamore Road, DeKalb, Illinois 60115.
DIRECTORS
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE DIRECTOR SINCE
- ------------------------------------------------- --- --------------
<S> <C> <C>
Dr. Charles J. Arntzen...................................... 57 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 also
serves on the University of Chicago's Board of Governors
for the Argonne National Laboratory. Dr. Arntzen is
Chairman of the Audit Committee.
Allan Aves.................................................. 67 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.
Bruce P. Bickner............................................ 55 June 15, 1988
Mr. Bickner is Chairman and Chief Executive Officer of the
Company. He is a director of Castle BancGroup, Inc. and
NICOR Inc. Mr. Bickner is a member of the Executive
Committee.
Dr. Robert T. Fraley........................................ 45 April 16, 1996
Dr. Fraley is Co-President, Ag Sector of Monsanto, one of
five sectors of Monsanto specializing in Life Sciences.
Until he assumed his present position in March 1997, he
was President of Ceregen, a unit of Monsanto that develops
chemical, biotechnology and seed products for agriculture.
He was Group Vice President and General Manager of the New
Products Division of Monsanto until January 1995. Dr.
Fraley is a member of the Executive Committee.
Tod R. Hamachek............................................. 52 June 1, 1992
Mr. Hamachek is President and Chief Executive Officer of
Penwest Pharmaceuticals Co., a pharmaceutical company
specializing in the development and distribution of drug
delivery systems and inactive ingredients used to
manufacture oral dose pharmaceutical tablets He was
President and Chief Executive Officer of PENFORD
Corporation until he assumed his present position in
September 1998. He is a director of PENFORD Corporation,
Northwest Natural Gas Company and The Seattle Times
Company. Mr Hamachek is a member of the Compensation
Committee.
</TABLE>
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<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND EMPLOYMENT HISTORY AGE DIRECTOR SINCE
- ------------------------------------------------- --- --------------
<S> <C> <C>
Paul H. Hatfield............................................ 62 October 13, 1992
Mr. Hatfield is Chairman of Hatfield Capital Group, a
private investment company. He was Chairman, President and
Chief Executive Officer of Petrolite Corporation from
November 1995 until July 1997. He was Chairman of Hatfield
Capital Group 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
PENFORD Corporation and Solutia Inc. Mr. Hatfield is a
member of the Audit Committee.
Virginia Roberts Holt....................................... 43 January 16, 1996
Mrs. Holt was President of Charles A. Lowe & Associates,
an audiology practice, until May 1997.
Douglas C. Roberts.......................................... 46 August 29, 1988
Mr. Roberts is a Private Investor. He held the position of
Vice President, Strategic Projects at the Company from May
1998 until July 1998 when he retired from the Company. He
was Vice President, Marketing of the Company from February
1995 until May 1998. He held the position of Director,
U.S. Business Units of the Company's seed division until
February 1995. Mr. Roberts is a member of the Executive
Committee.
John T. Roberts............................................. 40 July 1, 1993
Mr. Roberts is a Private Investor. He was Chief Financial
Officer and Treasurer of Quest Environmental Resources
Corporation until July 1997. Mr. Roberts is a member of
the Compensation Committee.
Richard O. Ryan............................................. 56 June 15, 1988
Mr. Ryan is President and Chief Operating Officer of the
Company. Mr. Ryan is a member of the Executive Committee.
H. Blair White.............................................. 71 August 29, 1988
Mr. White is Of Counsel to Sidley & Austin, a law firm
that provides legal services to the Company. Mr. White is
Chairman of the Compensation Committee and of the
Executive Committee.
William M. Ziegler.......................................... 41 January 13, 1997
Mr. Ziegler is Special Projects Director in the Ag Sector
of Monsanto. He was Special Projects Director of Ceregen,
a unit of Monsanto that develops chemical, biotechnology
and seed products for agriculture until he assumed his
present position in March 1997. He was Business Director,
Corn and Soybeans of Ceregen until November 1996.
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AGE
---
<S> <C>
Bruce P. Bickner............................................ 55
Mr. Bickner is Chairman and Chief Executive Officer of the
Company. He is a director of Castle BancGroup, Inc. and
NICOR Inc.
Richard T. Crowder.......................................... 59
Mr. Crowder is Senior Vice President, International of the
Company. He was Executive Vice President and General
Manager, Armour Swift Eckridge from July 1992 until
October 1994 when he assumed his present position.
Janis M. Felver............................................. 51
Ms. Felver is Vice President and Chief Accounting Officer
of the Company. She was Controller and Chief Accounting
Officer until she assumed her present position in January
1997. She was Assistant Controller of the Company until
January 1995.
Catherine J. Mackey......................................... 43
Ms. Mackey is Vice President, Research of the Company. She
served as Director, Discovery Research of the Company
until September 1995.
</TABLE>
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<TABLE>
<CAPTION>
AGE
---
<S> <C>
John H. Pfund............................................... 51
Mr. Pfund is Vice President, Research of the Company. He
was Research Director of the Company until he assumed his
present position in September 1995. He was Associate
Director of Research of the Company until November 1994.
Richard O. Ryan............................................. 56
Mr. Ryan is President and Chief Operating Officer of the
Company.
John H. Witmer, Jr.......................................... 58
Mr. Witmer is Senior Vice President, General Counsel and
Secretary of the Company.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October 30, 1998 the beneficial
ownership of the Class A Common Stock and Class B Common Stock (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 Exchange Act) of
each director and each Named Executive Officer (as defined below) and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS A AND CLASS B COMMON STOCK
BENEFICIALLY OWNED AND PERCENTAGE OF EACH SUCH CLASS
OUTSTANDING AS OF OCTOBER 30, 1998(1)
----------------------------------------------------
CLASS A PERCENTAGE CLASS B PERCENTAGE
--------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Dr. Charles J. Arntzen(2)................... 38,985 0.854% -- --
Allan Aves(3)............................... 82,877 1.799 -- --
Bruce P. Bickner(4)......................... 365,088 7.486 -- --
Richard T. Crowder(5)....................... 62,533 1.363 -- --
Dr. Robert T. Fraley(17).................... -- -- -- --
Tod R. Hamachek(6).......................... 49,654 1.085 -- --
Paul H. Hatfield(7)......................... 65,018 1.416 -- --
Virginia Roberts Holt(8)(9)(17)............. 2,753,369 (16) 65,020 0.216%
Catherine J. Mackey(10)..................... 41,467 0.908 -- --
Douglas C. Roberts(9)(11)(17)............... 2,753,369 (16) 71,870 0.239
John T. Roberts(9)(12)(17).................. 2,753,369 (16) 57,446 0.191
Richard O. Ryan(13)......................... 209,386 4.431 25,100 0.083
H. Blair White.............................. 61,942 1.369 -- --
John H. Witmer, Jr.(14)..................... 123,600 2.660 -- --
William M. Ziegler(17)...................... -- -- -- --
All of the above and all other executive
officers as a group (17 persons)(15)...... 3,769,604(16) 66.566(16) 219,736 0.730
</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. Unless otherwise noted, the
named individual has sole voting and investment power with respect to the
shares of Class A Common Stock (voting) and sole investment power with
respect to the shares of Class B Common Stock (non-voting) listed.
(2) 39,258 shares of Class A Common Stock subject to options which may be
acquired on or prior to December 29, 1998.
(3) Includes 81,977 shares of Class A Common Stock subject to options which may
be acquired on or prior to December 29, 1998.
(4) Includes 351,300 shares of Class A Common Stock subject to options which
may be acquired on or prior to December 29, 1998. 79,300 of such shares
subject to options are held in a family limited partnership of which Mr.
Bickner is the general partner and 13,988 shares of Class A Common Stock
are held in the Bickner Family Foundation of which Mr. Bickner is the
President.
(5) 62,533 shares of Class A Common Stock subject to options which may be
acquired on or prior to December 29, 1998.
(6) 49,654 shares of Class A Common Stock subject to options which may be
acquired on or prior to December 29, 1998.
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<PAGE> 9
(7) 65,018 shares of Class A Common Stock subject to options which may be
acquired on or prior to December 29, 1998.
(8) The number of shares of Class A Common Stock reported represents (i)
2,671,650 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which Virginia Roberts Holt is a Voting Trustee, plus (ii)
81,719 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 December 29, 1998 (12,950 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 the 2,671,650 shares of Class A Common Stock held
pursuant to the Voting Trust Agreement, 860,216 shares are represented by a
Trust Certificate held by Virginia Roberts Holt. Included are 443,184
shares of Class A Common Stock which (together with 52,760 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.
Concurrently with the execution of the Merger Agreement, the Voting
Trustees, under the Voting Trust Agreement, entered into the 1998
Stockholders Agreement (as defined herein under "Certain Shareholder
Agreements") with Parent pursuant to which the Voting Trustees agreed,
among other things, to vote all of the shares of Class A Common Stock held
of record by the Voting Trustees pursuant to the Voting Trust in favor of
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby and to tender as soon as practicable all of such
shares pursuant to the Offer and not to withdraw such tendered shares. Also
pursuant to the 1998 Stockholders Agreement, the Voting Trustees have
granted Parent an irrevocable proxy to vote such shares in favor of the
Merger and against certain other actions or proposals. The provisions of
such Voting Trust Agreement, the 1998 Stockholders Agreement and related
agreements are described in below under "Certain Shareholder Agreements".
The shares of Class B Common Stock listed above include 7,570 shares of
Class B Common Stock held by her spouse.
(9) Douglas C. Roberts, John T. Roberts and Virginia Roberts Holt are brothers
and sister.
(10) 41,467 shares of Class A Common Stock subject to options which may be
acquired on or prior to December 29, 1998.
(11) The number of shares of Class A Common Stock reported represents (i)
2,671,650 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which Douglas C. Roberts is a Voting Trustee, plus (ii) 81,719
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 December 29, 1998 (23,933 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 2,671,650 shares of Class A Common Stock held pursuant to
the Voting Trust Agreement, 836,322 shares are represented by a Trust
Certificate held by Douglas C. Roberts. Included are 135,708 shares of
Class A Common Stock which (together with 19,902 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. Concurrently with the
execution of the Merger Agreement, the Voting Trustees, under the Voting
Trust Agreement, entered into the 1998 Stockholders Agreement (as defined
herein under "Certain Shareholder Agreements") with Parent pursuant to
which the Voting Trustees agreed, among other things, to vote all of the
shares of Class A Common Stock held of record by the Voting Trustees
pursuant to the Voting Trust in favor of the approval and adoption of the
Merger Agreement and the transactions contemplated thereby and to tender as
soon as practicable all of such shares pursuant to the Offer and not to
withdraw such tendered shares. Also pursuant to the 1998 Stockholders
Agreement, the Voting Trustees have granted Parent an irrevocable proxy to
vote such shares in favor of the Merger and against certain other actions
or proposals. The provisions of such Voting Trust Agreement, the 1998
Stockholders Agreement and related agreements are described below in
"Certain Shareholder Agreements." The shares of Class B Common Stock listed
above include 3,370 shares of Class B Common Stock held by his spouse.
(12) The number of shares of Class A Common Stock reported represents (i)
2,671,650 shares of Class A Common Stock held pursuant to a Voting Trust
Agreement of which John T. Roberts is a Voting Trustee, plus (ii) 81,719
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 December 29, 1998 (44,836 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 2,671,650 shares of Class A Common Stock held pursuant to
the Voting Trust Agreement, 846,678 shares are represented by a Trust
Certificate held by John T. Roberts. Included are 312,194 shares of Class A
Common Stock which (together with 42,306 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. Concurrently with the execution of
the Merger Agreement, the Voting Trustees, under the Voting Trust
Agreement, entered into the 1998 Stockholders Agreement (as defined herein
under "Certain Shareholder Agreements") with Parent pursuant to which the
Voting Trustees agreed, among other things, to vote all of the shares of
Class A Common Stock held of record by the Voting Trustees pursuant to the
Voting Trust in favor of the approval and adoption of the Merger Agreement
and the transactions contemplated thereby and to tender as soon as
practicable all of such shares pursuant to the Offer and not to withdraw
such tendered shares. Also pursuant to the 1998 Stockholders Agreement, the
Voting Trustees have granted Parent an irrevocable proxy to vote such
shares in favor of the Merger and against certain other actions or
proposals. The provisions of such Voting Trust Agreement, the 1998
Stockholders Agreement and related agreements are described below in
"Certain Shareholder Agreements." The shares of Class B Common Stock listed
above include 7,570 shares of Class B Common Stock held by his spouse.
(13) Includes 200,267 shares of Class A Common Stock subject to options which
may be acquired on or prior to December 29, 1998. 7,200 shares of Class B
Common Stock and 25,100 shares of Class B Common Stock are held in the S.
Orville Ryan Family Foundation of which Mr. Ryan is the President.
(14) Includes 120,600 shares of Class A Common Stock subject to options which
may be acquired on or prior to December 29, 1998.
(15) Includes 1,137,639 shares of Class A Common Stock subject to options which
may be acquired on or prior to December 29, 1998.
9
<PAGE> 10
(16) As shown in footnotes 8, 11 and 12 and as described below in "Certain
Shareholder Agreements," Douglas C. Roberts, John T. Roberts and Virginia
Roberts Holt share voting power with respect to 2,671,650 shares of Class A
Common Stock. Accordingly, such shares (which represent 59.038% of the
outstanding shares of Class A Common Stock on October 30, 1998) 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
(18.910%), John T. Roberts (19.507%) and Virginia Roberts Holt (19.240%).
(17) Messrs. Fraley and Ziegler are employees of Parent. By virtue of the 1998
Stockholders Agreement, Parent may be deemed to be the beneficial owner of
2,671,650 shares of the Class A Common Stock beneficially owned by Douglas
C. Roberts, John T. Roberts and Virginia Roberts Holt. Parent disclaims
beneficial ownership of any shares of Class A Common Stock beneficially
owned by Douglas C. Roberts, John T. Roberts and Virginia Roberts Holt
relating to options to purchase such shares. For purposes of this
Information Statement, Messrs. Fraley and Ziegler expressly disclaim
beneficial ownership of any shares of Class A Common Stock beneficially
owned by Parent.
10
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 30, 1998, 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 BENEFICIALLY CLASS A
NAME AND ADDRESS OWNED(1) COMMON STOCK
- ---------------- ------------------- -------------
<S> <C> <C>
John T. Roberts
Virginia Roberts Holt
Douglas C. Roberts
Charles C. Roberts
Mary R. Roberts............................................. 2,753,369(2) 59.764%
c/o Douglas C. Roberts
P.O. Box 218
Sycamore, Illinois 60178
Monsanto Company............................................ 3,157,092(3) 69.763%
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Bruce P. Bickner............................................ 365,088(4) 7.486%
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
December 29, 1998. See Notes 8, 11 and 12 on page 9. The provisions of such
Voting Trust Agreement and related agreements are described below in
"Certain Shareholder Agreements."
(3) By virtue of the 1998 Stockholders Agreement, Parent may be deemed to be the
beneficial owner of 2,671,650 shares of Class A Common Stock beneficially
owned by Douglas C. Roberts, John T. Roberts and Virginia Roberts Holt.
Without considering such shares, Parent beneficially owns 485,442 shares of
Class A Common Stock representing 10.727% of the shares of Class A Common
Stock outstanding as of October 30, 1998. Parent disclaims beneficial
ownership of any shares of Class A Common Stock beneficially owned by
Douglas C. Roberts, John T. Roberts and Virginia Roberts Holt relating to
options to purchase such shares. The provisions of the 1998 Stockholders
Agreement are described below in "Certain Shareholder Agreements."
(4) See Note 4 on page 8.
11
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth current and long-term compensation
information for each of the last three fiscal years of the Chief Executive
Officer and each of the other executive officers whose salary and bonus for the
fiscal year 1998 exceeded the disclosure threshold established by the Commission
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS &
PAYOUTS
------------------------------
ANNUAL COMPENSATION NUMBER OF
NAME AND ------------------------------------- SECURITIES
PRINCIPAL POSITION OTHER ANNUAL UNDERLYING PERFORMANCE UNIT ALL OTHER
AT AUGUST 31, 1998 YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) PAYOUTS COMPENSATION(3)
------------------ ---- -------- -------- --------------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce P. Bickner............. 1998 $349,231 $ 67,865 $21,170 32,000 $ -0- $43,439
Chairman and Chief 1997 328,654 341,250 17,448 30,000 93,800 65,160
Executive Officer 1996 294,231 379,688 11,140 28,200 -0- 52,346
Richard O. Ryan.............. 1998 $264,423 $ 42,750 $11,510 25,000 $ -0- $26,089
President and Chief 1997 249,616 226,875 14,547 18,800 56,000 43,101
Operating Officer 1996 239,423 276,094 6,836 48,000 -0- 31,103
Richard T. Crowder........... 1998 $249,039 $202,500 $ 9,770 18,000 $ -0- $26,545
Senior Vice President, 1997 224,615 192,500 10,120 13,600 17,500 34,869
International 1996 214,635 136,000 -0- 42,000 -0- 25,253
John H. Witmer, Jr........... 1998 $170,000 $ 20,000 $ 9,055 7,000 $ -0- $13,371
Senior Vice President & 1997 169,809 78,375 5,200 6,000 23,800 20,621
General Counsel 1996 164,080 77,125 1,235 6,000 -0- 15,992
Catherine J. Mackey.......... 1998 $158,269 $ 40,313 $10,670 12,000 $ -0- $10,819
Vice President, Research 1997 139,616 54,375 11,041 8,000 15,400 16,541
1996 129,127 65,000 -0- 18,600 -0- 12,716
</TABLE>
- ---------------
(1) Other Annual Compensation for fiscal 1998 arose from the following sources:
Taxable income for executive car participants (Mr. Bickner -- $1,671, Mr.
Ryan -- $7,562, Mr. Crowder -- $8,270 and Ms. Mackey -- $6,495); personal
use of company airplane (Mr. Bickner -- $11,931, Mr. Ryan -- $1,048, Mr.
Witmer -- $3,705); Financial Planning (Mr. Ryan -- $4,800, Mr. Ryan --
$2,900, Mr. Crowder -- $1,500, Mr. Witmer -- $5,350 and Ms.
Mackey -- $4,175); and reimbursement to Mr. Bickner for income taxes related
to benefit plan of $2,768.
(2) No restricted stock or stock appreciation rights (SARs) were awarded to the
Named Executive Officers during fiscal 1996, 1997 or 1998.
(3) All Other Compensation for fiscal 1998 arose from the following sources:
Company contributions to the Company's Deferred Compensation Plan (Mr.
Bickner -- $26,501, Mr. Ryan -- $16,565, Mr. Crowder -- $14,149, Mr.
Witmer -- $4,419 and Ms. Mackey -- $2,632); Company contributions to the
Company's Savings and Investment Plan (Mr. Bickner -- $8,000, Mr.
Ryan -- $8,000, Mr. Crowder -- $8,000, Mr. Witmer -- $8,000 and Ms.
Mackey -- $8,000); and reimbursement for life insurance premiums (Mr.
Bickner -- $8,938, Mr. Ryan -- $1,524, Mr. Crowder -- $1,396, Mr.
Witmer -- $952 and Ms. Mackey -- $187); and Company payment to Mr. Crowder
of $3,000 for spouse international travel benefit.
12
<PAGE> 13
STOCK OPTIONS DURING 1998 FISCAL YEAR
The following table sets forth the number of shares of Class A Common Stock
that were granted subject to options during fiscal year 1998 to each Named
Executive Officer receiving such a grant.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL SHARES
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL 1998 SHARE DATE PRESENT VALUE(2)(3)
- ---- ---------- ------------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Bruce P. Bickner............ 32,000 14.1% $26.69 01/20/08 $547,520
Richard O. Ryan............. 25,000 11.0% $26.69 01/20/08 $427,750
Richard T. Crowder.......... 18,000 7.9% $26.69 01/20/08 $307,980
John H. Witmer, Jr.......... 7,000 3.1% $26.69 01/20/08 $119,770
Catherine J. Mackey......... 12,000 5.3% $26.69 01/20/08 $205,320
</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 20, 1998. Vesting is
over a three-year period from the date of grant, with one-third of the
options vesting on January 20, 1999, one-third vesting on January 20, 2000,
and the final one-third vesting on January 20, 2001.
(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 $0.14
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.
(3) Upon consummation of the Offer, any options then outstanding will be
cancelled in consideration for a cash payment from the Company for each such
option equal to (i) the product of (a) the number of Shares subject or
related to such option and (b) the excess, if any, of the Offer Price over
the per Share exercise price of such option, minus (ii) all applicable
federal, state and local withholding taxes. See "Employment and Severance
Agreements with Certain Executive Officers -- Stock Options."
AGGREGATED OPTION EXERCISES DURING FISCAL 1998 AND
FISCAL 1998 YEAR-END OPTION VALUES
The following table sets forth the number of shares of Class A Common Stock
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,
1998, for each of the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE MONEY OPTIONS
SHARES AUGUST 31, 1998(1) AT AUGUST 31, 1998(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce P. Bickner.......... -0- -0- 351,294 61,406 $29,178,357 $3,780,150
Richard O. Ryan........... -0- -0- 200,364 53,436 $16,431,390 $3,451,930
Richard T. Crowder........ -0- -0- 62,628 40,972 $ 4,914,098 $2,680,752
John H. Witmer, Jr........ -0- -0- 120,600 13,000 $10,078,519 $ 801,330
Catherine J. Mackey....... -0- -0- 41,502 23,498 $ 3,286,527 $1,503,183
</TABLE>
- ---------------
(1) No employee of the Company holds any SARs relating to Class A Common Stock
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 $86.63 per share closing price
on the New York Stock Exchange of the Class B Common Stock on August 31,
1998.
13
<PAGE> 14
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>
YEARS OF SERVICE
--------------------------------------------
FINAL AVERAGE COMPENSATION 5 10 15 20
- -------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$150,000........................................ $ 22,500 $ 45,000 $ 67,500 $ 90,000
$175,000........................................ $ 26,250 $ 52,500 $ 78,750 $105,000
$200,000........................................ $ 30,000 $ 60,000 $ 90,000 $120,000
$225,000........................................ $ 33,750 $ 67,500 $101,250 $135,000
$250,000........................................ $ 37,500 $ 75,000 $112,500 $150,000
$275,000........................................ $ 41,250 $ 82,500 $123,750 $165,000
$300,000........................................ $ 45,000 $ 90,000 $135,000 $180,000
$325,000........................................ $ 48,750 $ 97,500 $146,250 $195,000
$350,000........................................ $ 52,500 $105,000 $157,500 $210,000
$375,000........................................ $ 56,250 $112,500 $168,750 $225,000
$400,000........................................ $ 60,000 $120,000 $180,000 $240,000
$425,000........................................ $ 63,750 $127,500 $191,250 $255,000
$450,000........................................ $ 67,500 $135,000 $202,500 $270,000
$475,000........................................ $ 71,250 $142,500 $213,750 $285,000
$500,000........................................ $ 75,000 $150,000 $225,000 $300,000
$525,000........................................ $ 78,750 $157,500 $236,250 $315,000
$550,000........................................ $ 82,500 $165,000 $247,500 $330,000
$575,000........................................ $ 86,250 $172,500 $258,750 $345,000
$600,000........................................ $ 90,000 $180,000 $270,000 $360,000
$625,000........................................ $ 93,750 $187,500 $281,250 $375,000
$650,000........................................ $ 97,500 $195,000 $292,500 $390,000
$675,000........................................ $101,250 $202,500 $303,750 $405,000
$700,000........................................ $105,000 $210,000 $315,000 $420,000
$725,000........................................ $108,750 $217,500 $326,250 $435,000
$750,000........................................ $112,500 $225,000 $337,500 $450,000
</TABLE>
The credited years of service for each of the following Named Executive
Officers is:
<TABLE>
<S> <C>
Bruce P. Bickner............................................ 20
Richard O. Ryan............................................. 16
John H. Witmer, Jr.......................................... 17
Catherine J. Mackey......................................... 12
</TABLE>
The benefits are calculated by determining the average annualized earnings
(i.e., salary and bonus) of the applicable 36 months and multiplying this by the
number of years of service (up to a maximum of 20 years) times three percent.
These benefits will be reduced by social security benefits, the benefit from the
regular match of the defined contribution plan (starting on the date the defined
benefit plan for executives was modified), 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 the
participant retires at an earlier age, the benefit will be reduced by five
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, 1998, Mr. Crowder's
years of credited service were three.
14
<PAGE> 15
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN
EXECUTIVE OFFICERS
The Company has entered into written employment agreements with certain
officers of the Company. 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 1999 to be paid to the executive officers: Mr. Bickner ($350,000), Mr.
Ryan ($297,000), Mr. Crowder ($275,000), Mr. Witmer ($170,000), and Ms. Mackey
($172,000). Those executive officers will have Company performance-related bonus
opportunities which have been set for a target bonus of $350,000; $233,000;
$150,000; $93,000 and $78,000, 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, Ryan and Crowder,
27 months' base salary and target bonus in the case of Ms. Mackey, and 12
months' base salary and target bonus in the case of Mr. Witmer. Each employment
agreement also specifically states that the officer will be entitled to receive
Gross-Up Payments (as defined below) in respect of Excise Taxes (as defined
below). For a description of Excise Taxes and the Company's policy with respect
to Gross-Up Payments generally, see "Parachute Payment Reimbursement Policy"
below. Messrs. Bickner, Ryan, Crowder and Ms. Mackey are subject to
noncompetition limitations for periods of time equaling the length of their
termination pay and are also subject to nonsolicitation limitations for a period
of three years following their termination.
Pursuant to the Merger Agreement, Parent has agreed to honor, or cause to
be honored by the Company and its Subsidiaries, all employment agreements with
the persons who are directors, officers and employees of the Company and its
Subsidiaries.
Severance Pay Plan. On May 5, 1998, the Board of Directors approved the
DEKALB Genetics Corporation Severance Pay Plan, which provides severance
benefits for each employee, including each executive officer, of the Company and
its subsidiaries (excluding seasonal and temporary employees and employees of
foreign subsidiaries of the Company) whose employment is terminated by the
Company without "cause" (as such term is defined in the Merger Agreement) after
the consummation of the Offer. For employees of the Company who have five or
more years of service with the Company, including all but one of its executive
officers, such benefits include a lump sum cash payment equal to two weeks of
"weekly compensation" (defined in such plan to include base salary and target
bonus) for each year of service, but not more than 52, nor less than 20, weeks
of weekly compensation (not less than 26 weeks in the case of employees with the
title of president or vice president). For employees with fewer than five years
of service, including one executive officer, such benefits include a lump sum
cash payment equal to 16 weeks of weekly compensation (26 weeks in the case of
employees with titles of president or vice president). Each of the Named
Executive Officers has a title of president or vice president. In addition to
such lump sum cash payment, each covered employee would be entitled to four
weeks notice prior to any such termination of employment and to receive
outplacement services commensurate with such employee's position. Such plan also
provides that it may not be amended for a period of 12 months following
consummation of the Offer.
Parachute Payment Reimbursement Policy. On May 5, 1998, the Board of
Directors approved the DEKALB Genetics Corporation Policy and Procedure
Regarding Reimbursement of Employees for Parachute Payment Taxes and Expenses.
Such policy and procedure provides that in the event it is determined that any
payment or distribution by, or any other amount resulting from, compensation,
benefits or any other remuneration provided by, the Company, the Surviving
Corporation or any of their subsidiaries to or for the benefit of any employee
or former employee of the Company or any of its subsidiaries (which would
include any person employed immediately before the consummation of the Offer) (a
"Payment") is or will be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties or expenses (including any attorneys fees or other professional
expenses incurred in challenging the application of any such tax) are incurred
by such person with respect to such excise tax (such excise tax, together with
any such interest and penalties and expenses, are hereinafter collectively
referred to as the "Excise Tax"), then such person shall be entitled to receive
from the Company or the Surviving Corporation, an additional payment (a
"Gross-Up Payment") in an amount such that after payment by such
15
<PAGE> 16
person of all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, such person retains an amount of the Gross-Up Payment equal to
the expenses and the Excise Tax imposed upon the Payments.
Special Contribution to Certain Retirement Plans. On May 5, 1998, the
Board of Directors approved amendments to the DEKALB Genetics Corporation
Savings and Investment Plan (the "401(k) Plan") and to the DEKALB Genetics
Corporation Deferred Compensation Plan (the "Deferred Compensation Plan"). The
effect of such amendments, among other things, is that the Company will make a
special contribution to the account of each employee of the Company, including
each of its executive officers, who is eligible to participant in the 401(k)
Plan on the date of the consummation of the Offer and on the date which is 120
days following the consummation of the Offer or whose employment is terminated
by the Company without "cause" (as defined in the Merger Agreement) during such
120-day period. Each credit will be made to the employee's 401(k) Plan account
to the extent permitted by the 401(k) Plan and applicable regulations and to the
extent not permitted thereby will, in the case of certain management and highly
compensated employees, be made to the Deferred Compensation Plan. The amount of
each credit will be equal to two percent of the employee's "compensation"
(defined in the 401(k) Plan to include, among other things, base salary and
bonus) for the plan year in which such 120-day anniversary of the consummation
of the Offer or such earlier termination occurs and, to the extent that such
employee was not employed by the Company for such entire plan year, such credit
will be equal to two percent of the compensation that the employee would have
earned had such employee been employed by the Company for such entire plan year,
subject, in the case of the 401(k) Plan, to the terms thereof and applicable
regulations.
Stock Options. The Long-Term Incentive Plan Administrative Committee of
the Board of Directors has taken action in accordance with the terms of the
DEKALB Genetics Corporation Long-Term Incentive Plan to accelerate the
exercisability of options granted thereunder which are not yet exercisable,
including options granted to executive officers of the Company, so that all such
options will be exercisable immediately prior to the consummation of the Offer.
In addition, the Board of Directors has taken action to provide that, upon
consummation of the Offer, all unexercised options granted under such plan and
all unexercised options granted to directors under the DEKALB Genetics
Corporation Director Stock Option Plan, including options granted to directors
thereunder which are unexercisable at that time, will be cancelled in
consideration for a cash payment from the Company for each such option equal to
(i) the product of (a) the number of Shares subject or related to such option
and (b) the excess of the Offer Price over the per Share exercise price of such
option, minus (ii) all applicable federal, state and local withholding taxes.
Vesting of Benefits. On May 5, 1998, the Board of Directors approved
amendments to the DEKALB Genetics Corporation Pension Plan (the "Pension Plan"),
the DEKALB Genetics Corporation Executive Retirement Plan (the "Executive
Retirement Plan"), the 401(k) Plan and the Deferred Compensation Plan which
provide, among other things, that the employees, including the executive
officers, of the Company participating in such plans will become fully vested in
their benefits thereunder. Such vesting will occur under the Pension Plan, the
Executive Retirement Plan and the Deferred Compensation Plan upon the
consummation of the Offer and under the 401(k) Plan on the first to occur of (i)
the date which is 120 days thereafter, provided that the participant is then
employed and (ii) the date the employment of such participant is terminated
without cause after the consummation of the Offer and prior to the date which is
120 days thereafter. In addition, the amendment to the Executive Retirement Plan
deleted a provision thereof requiring the forfeiture of a participant's benefits
upon the termination of such participant's employment by the Company for cause.
Retiree Health Benefits. On May 5, 1998, the Board of Directors approved
the DEKALB Genetics Corporation Retiree Health Care Plan (the "Retiree Health
Care Plan") which guarantees that medical benefits provided by the Company,
together with those provided by the health care plan operated by the Employees'
Mutual Welfare Association (the "EMWA Plan"), to former or current employees who
are, or within the 12-month period following the consummation of the Offer
become, eligible to receive such benefits under the EMWA Plan as retirees
(including those who would be eligible but for not having terminated
employment), and to certain other current and former employees of the Company,
including in each case
16
<PAGE> 17
executive officers of the Company, and the dependents of such former and current
employees, will continue to be provided at least generally at the same level of
benefits as provided by the EMWA Plan as of the date of adoption of the Retiree
Health Care Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation (including the compensation of the
chief executive officer (the "CEO")):
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' (including the CEO's)
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 (including the CEO).
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.
Secondly, consideration is given to the competitive practice of like-sized
companies and similar industries for paying positions with equivalent
responsibilities. The primary general industry compensation surveys used are
conducted by Towers Perrin and ECS. Emphasis is placed on companies comparable
in size to the Company.
The Company's compensation goal is to target its executives (including the
CEO) to be paid competitive rates when performance expectations are met and
above competitive levels when expectations are exceeded. The Company targets its
executives (including the CEO) to be paid between the 50th and 75th percentile
of competitive rates when performance expectations are met and above competitive
levels (75th percentile or higher) when performance expectations are exceeded.
As a guideline, no bonus will be awarded until a significant portion (generally
70 to 90 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. Where the circumstances warrant, the Committee
reserves the right to make special bonus awards. 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.
Based upon the Company's current level of compensation, it is not necessary
to adopt a policy at this time with respect to Section 162(m) of the Code. The
Committee will continue to monitor the Company's compensation levels and adopt
necessary policies as it deems appropriate.
Criteria for determining fiscal 1998 annual performance bonuses for the
Named Executive Officers (including the CEO) included earnings, profit
contribution, market share and specific individual objectives.
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<PAGE> 18
The following table summarizes fiscal 1998 bonus opportunities and criteria
for the Named Executive Officers:
<TABLE>
<CAPTION>
CRITERIA AS A PERCENT OF BONUS TARGET
1998 BONUS TARGET -----------------------------------------
AS PERCENT OF NET
TOTAL CASH CORPORATE SEGMENT INDIVIDUAL
NAME COMPENSATION PERFORMANCE PERFORMANCE PERFORMANCE
- ---- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bruce P. Bickner....................... 44% 75% 10% 15%(1)
Richard O. Ryan........................ 46% 80% 20% --
Richard T. Crowder..................... 35% 25% 75% --
John H. Witmer, Jr..................... 32% 75% -- 25%(2)
Catherine J. Mackey.................... 31% 45% 25% 30%(3)
</TABLE>
- ---------------
(1) Included an objective on a Strategic Research Plan, and DEKALB Swine
Breeders.
(2) Included objectives on intellectual property.
(3) Included an objective on STP hybrids.
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 (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. Towers Perrin was retained in
this capacity in fiscal 1998.
The foregoing Compensation Committee Report has been furnished by:
H. Blair White, Chairman
Tod R. Hamachek
John T. Roberts
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<PAGE> 19
COMPARISON OF CUMULATIVE FIVE-YEAR RETURNS
ASSUMES $100 INVESTED ON 9/1/93 AND DIVIDEND REINVESTMENT
COMPARISON OF 5-YEAR RETURNS CHART
<TABLE>
<CAPTION>
DEKALB PEER GROUP PEER GROUP BROAD MARKET
GENETICS B ($1-2BB)(1) ($3-4BB)(1) (NYSE)(2)
<S> <C> <C> <C> <C>
SEP-93 100 100 100 100
SEP-94 131.44 103 104.38 106.65
SEP-95 165.93 120.26 122.41 121.52
SEP-96 411.07 132.5 136.93 143.11
SEP-97 997.79 171.89 157.05 194.39
SEP-98 2206.85 130.13 123.76 202
</TABLE>
- ---------------
(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 New York Stock Exchange traded companies with a market capitalization of
$3 billion to $4 billion (excluding financial institutions) was selected as
the Peer Group Index (70 companies). The index is weighted for relative
market capitalization. The Peer Group Index used in last year's Proxy
Statement was an index of all NYSE traded companies with a market
capitalization of $1 billion to $2 billion (excluding financial
institutions) (230 companies). Because the Company's market capitalization
exceeded $2 billion on August 31, 1998, the table includes the new Peer
Group Index and the old Peer Group Index for comparative purposes.
(2) The Company's Class B Common Stock is traded on the NYSE. Therefore, the
NYSE Index is being used.
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.
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<PAGE> 20
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and officers of the Company and persons having ten percent or
more beneficial ownership of the Company's stock are required under Section 16
of the Exchange Act 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 Monsanto, an
owner of at least 10 percent of the Company's stock, filed one late report
relating to one transaction.
CERTAIN TRANSACTIONS
On May 8, 1998, the Company entered into the Merger Agreement with Parent
and the Purchaser, pursuant to which, among other things, the Purchaser
commenced the Offer to acquire all of the Class A Common Stock and all of the
Class B Common Stock of the Company for the Offer Price per Share. The Merger
Agreement further provides that following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company with the Company continuing as the surviving corporation.
As of the effective time of the Merger, each issued and outstanding Share (other
than Shares owned by the Company, Parent, the Purchaser or their respective
subsidiaries, which Shares will be cancelled, and other than Shares, if any,
held by stockholders who are entitled to and who properly exercise appraisal
rights under Delaware law), will, by virtue of the Merger and without any action
by the holder thereof, be converted into the right to receive from the surviving
corporation in cash the price per Share paid in the Offer.
On January 31, 1996, the Company entered into a series of agreements with
Parent, including an investment agreement and a collaboration agreement which
provides for a long-term research and development collaboration with Parent in
the field of agricultural biotechnology, particularly corn seed. The Company and
Parent also entered into cross-licensing agreements covering insect-resistant
and herbicide-tolerant corn products targeted to reach the market over the next
few years.
The Investment Agreement provides that if the Company issues new shares of
its Class A Common Stock or Class B Common Stock pursuant to any of the
Company's employee benefit plans, Parent may purchase from the Company a
sufficient number of shares to maintain its permitted percentage ownership of
Class A Common Stock and Class B Common Stock. During the second quarter of
fiscal 1997 and the first quarter of fiscal 1998, the Company completed two
sales of equity to Parent pursuant to such provisions. Parent purchased from the
Company 24,102 (after taking into account the two-for-one stock split that was
made to shareholders of record on July 25, 1997) and 156,024 newly issued shares
of Class B Common Stock at aggregate prices of $590,725 and $6,299,957,
respectively. As provided in the Investment Agreement, the price for the shares
was based upon a specified twenty-day average closing price on the applicable
securities exchange for the Class B Common Stock.
The collaboration agreement between the Company and Parent has an initial
term of 10 years and includes a series of cash payments from Parent to the
Company originally aggregating $19,500,000 over the initial term. In 1998, the
collaboration agreement was amended to accelerate the payments into earlier
years and to reduce the aggregate amount to $18,500,000. The amendment did not
materially change the net present value of the payments, however. During fiscal
1998, Parent paid $6,000,000 to the Company under the collaboration agreement.
As part of the cross license agreements entered into between Parent and the
Company, each party has an obligation to share with the other certain royalties
and technology fees it receives that are related to seed corn that contains the
applicable insect resistance or herbicide tolerance. The Company estimates a net
payment from Parent of approximately $3,300,000 under the licenses for sales
during fiscal 1998.
The Company sold soybean products for which the Company collected a royalty
or technology fee on behalf of Parent from the ultimate purchaser of the
products, but was not entitled to share the net proceeds with Parent. For sales
during fiscal 1998, the Company paid Parent approximately $11,000,000 for such
products, net of certain service fees the Company was permitted to retain. The
Company and subsidiaries of
20
<PAGE> 21
Parent also purchased germplasm, seed and specialty corn products from each
other. The Company paid Parent a net of approximately $1,800,000 as a result
thereof. The Company believes that the terms of each of the agreements pursuant
to which such payments were made were at least comparable to the terms Parent
and the Company provided to other seed companies, as the case may be.
Also, in an effort to increase available supplies of certain seeds to
farmers in fiscal 1998, Parent paid to the Company approximately $5,750,000 to
help cover the Company's incremental winter production costs.
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
among the Shareholders, (iii) a Stockholders' Agreement (the "Monsanto
Stockholders' Agreement") among the Shareholders and Parent and (iv) a
Stockholders Agreement (the "1998 Stockholders Agreement") among Parent and the
Shareholders entered into in connection with the pending acquisition of the
Company by Parent. The following descriptions are only a summary of certain
provisions of such agreements and are qualified in their entirety by reference
to the agreements themselves which are incorporated herein by reference and a
copy or form of which has been filed with the Commission.
VOTING TRUST AGREEMENT
Pursuant to the terms of the Voting Trust Agreement, the shares of Class A
Common Stock listed above under "Security Ownership of Management" 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 Exchange Act (any such
tender or exchange offer described in this clause (ii) being referred to as a
"Qualifying Tender Offer").
21
<PAGE> 22
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 Roberts 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.
ROBERTS FAMILY SHAREHOLDER AGREEMENT
The Roberts 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 Roberts 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 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 the New York Stock Exchange (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 Roberts Family
Shareholder Agreement.
The Roberts 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 Roberts 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 Parent described above under
"Certain Transactions," including the Investment Agreement.
The Investment Agreement provides, among other things, that (i) Parent was
entitled to nominate one member to the Company's Board of Directors (pursuant to
such provision Robert T. Fraley was appointed to the Board on April 16, 1996)
and that Parent could nominate for election at the Company's 1997 annual meeting
of stockholders, an additional member (pursuant to such provision William M.
Ziegler was elected) 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
22
<PAGE> 23
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 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 Parent 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"), Parent 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"). Pursuant to the Merger Agreement, the Company has agreed that the
By-Law Provisions will be eliminated in their entirety immediately upon the
acquisition of Shares in the Offer.
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 any voting stock of the 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 Parent, initiate
any action that would result in the amendment of the By-Law Provisions and that
each Shareholder will vote its 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 certain
permitted transfers, no Shareholder may transfer any interest in its 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 Voting Stock
(other than certain permitted transfers) such Shareholder will make a written
offer to Parent (a "Shareholder Offer") to purchase such Voting Stock and Parent
will have the option to purchase all but not less than all of such Voting Stock
for the price and upon the terms upon which such Shareholder proposes to
transfer such Voting Stock. If Parent rejects the Shareholder Offer, Parent has
the exclusive right for a period of time to propose alternative terms for such
purchase. If Parent does not accept the Shareholder Offer and Parent and such
Shareholder have not otherwise reached an agreement regarding such purchase
within such time period, then such Shareholder may offer and sell such 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
Parent in any counteroffer.
In the event of any involuntary transfer of any Voting Stock (other than
certain permitted transfers), Parent will have an exclusive option to purchase
all but not less than all of the 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 the New York Stock Exchange
or (ii) if the 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 is effective until the earlier of (i)
the termination of the collaboration agreement entered into between the Company
and Parent (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) Parent 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 Parent after completion of any purchases in the market of
Class B Common Stock by Parent 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
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<PAGE> 24
or any subsequent anniversary of such Closing upon notice by Parent or a
majority in interest of the Voting Stock by persons who are then Shareholders.
1998 STOCKHOLDERS AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement, and
as a condition to Parent's willingness to enter into the Merger Agreement,
Parent and the Shareholders entered into the 1998 Stockholders Agreement with
the Voting Trustees, individually and in his or her capacity as such Voting
Trustee under the Voting Trust Agreement, and the registered holders of trust
certificates, individually and in his or her capacity as such registered holder
(the "Registered Holders").
Voting and Tender. Contemporaneously with the execution and delivery of
the 1998 Stockholders Agreement, each Registered Holder provided certain written
instructions to the Voting Trustees (the "Voting and Tendering Instructions").
The Voting and Tendering Instructions instruct the Voting Trustees, in
accordance with the provisions of the Voting Trust Agreement, to take the
following actions on behalf of the Registered Holders: (a) at any duly noticed
meeting of the stockholders of the Company called to vote upon the Merger
Agreement and the transactions contemplated thereby or at any adjournment
thereof (or in any other circumstances under which a vote, consent or approval
with respect to the Merger Agreement and the transactions contemplated thereby
is sought), to vote all of the 2,671,650 Shares of Class A Common Stock held of
record by the Voting Trustees pursuant to the Voting Trust Agreement (the
"Voting Trust Shares") in favor of the approval and adoption of the Merger
Agreement and the transactions contemplated thereby; (b) to be present (in
person or by proxy) at any duly noticed meeting of the stockholders of the
Company or at any adjournment thereof (or in any other circumstances under which
vote, consent to approval is sought) with respect to any Business Combination
(as such term is defined in the 1998 Stockholders Agreement) other than the
Merger and to vote (or cause to be voted) all of the Voting Trust Shares against
any such Business Combination; and (c) to tender as soon as practicable (and in
any event not later than two business days prior to the first scheduled
expiration date of the Offer) all of the Voting Trust Shares pursuant to the
Offer and not to withdraw such tendered shares. The Voting and Tendering
Instructions are irrevocable.
Pursuant to the 1998 Stockholders Agreement, the Voting Trustees and
Registered Holders have agreed, among other things, that so long as the 1998
Stockholders Agreement is in effect, the Voting Trustees will cast such votes,
consents or other approvals and take or cause such actions in accordance with
the Voting and Tendering Instructions. In addition, pursuant to the 1998
Stockholders Agreement, the Voting Trustees have agreed not to take any action
inconsistent with the Voting and Tendering Instructions, and each Registered
Holder has agreed not to take any action that would amend or nullify the Voting
and Tendering Instructions or in any way restrict or limit the performance of
such Registered Holder's obligations under the 1998 Stockholders Agreement or
the consummation of the transactions contemplated by the Merger Agreement.
The 1998 Stockholders Agreement further provides for, among other things,
during the term of the 1998 Stockholders Agreement: (i) restrictions on the
transfer of any Voting Trust Shares or the taking of certain actions with
respect to such Voting Trust Shares, other than pursuant to the Offer, the
Merger or the 1998 Stockholders Agreement; (ii) the prompt deposit of Shares
acquired upon exercise of options held by certain of the Registered Holders (the
"Voting Trust Option Shares") into the trust governed by the Voting Trust
Agreement such that, thereafter, the Voting Trust Option Shares shall be deemed
Voting Trust Shares for purposes of the 1998 Stockholders Agreement; (iii) with
respect to certain other agreements governing the relationship among the Voting
Trustees and the Registered Holders (as such agreements are collectively defined
in the 1998 Stockholders Agreement, the "Family Shareholder Agreements"),
further assurances by the Voting Trustees and the Registered Holders to amend
the Family Shareholder Agreements to the extent necessary (and not to otherwise
amend such Family Shareholder Agreements) so that each Registered Holder and
Voting Trustee can fully perform its obligations under the 1998 Stockholders
Agreement; and (iv) the taking of certain actions by the Voting Trustees and
Registered Holders in order to effectuate the terms of the 1998 Stockholders
Agreement. The 1998 Stockholders Agreement also provides, among other things,
for the making of certain representations by each of the Registered Holders, the
Voting Trustees and Parent.
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<PAGE> 25
Irrevocable Proxy. The Voting Trustees have also granted to Parent an
irrevocable proxy to vote the Voting Trust Shares in favor of the adoption of
the Merger Agreement and the transactions contemplated thereby and against (i)
actions or proposals that could reasonably be expected to result in (x) any
material breach of the Merger Agreement or (y) any of the closing conditions set
forth in the Merger Agreement not being fulfilled, (ii) any Business Combination
(other than the Merger and the transactions contemplated by the Merger
Agreement) and (iii) other extraordinary corporate transactions which would
prevent or delay the Merger or the transactions contemplated by the Merger
Agreement.
No Solicitation. The Voting Trustees and the Registered Holders have
agreed in the 1998 Stockholders Agreement not to (a) solicit, initiate or
knowingly encourage the submission of any Takeover Proposal (as such term is
defined in the 1998 Stockholders Agreement) or (b) participate in any
discussions or negotiations regarding, or furnish to any person information with
respect to, or take any action that could reasonably be expected to lead to, any
Takeover Proposal.
Termination. The 1998 Stockholders Agreement will terminate at the
effective time of the Merger. In addition, the 1998 Stockholders Agreement may
be terminated: (a) by mutual written consent of Parent and a majority of the
Voting Trustees; (b) by Parent if (i) the Merger Agreement has terminated in
accordance with its terms or (ii) in the event that (x) any of the
representations and warranties of the Voting Trustees or the Registered Holders
in the 1998 Stockholders Agreement shall not be true and correct in all material
respects or (y) any of the Voting Trustees or the Registered Holders shall have
failed to perform in any material respect any material covenant to be performed
by any Voting Trustee or Registered Holder under the 1998 Stockholders Agreement
and in the case of (x) or (y) such untruth or incorrectness or such failure
cannot be or has not been cured within thirty days after notice thereof; or (c)
by a majority of the Voting Trustees, if none of the Voting Trustees or
Registered Holders are in violation of their respective obligations under the
1998 Stockholders Agreement and (i) Parent or the Purchaser shall not have
completed payment for all Shares tendered pursuant to the Offer and not
withdrawn by the Outside Date (as defined in the Merger Agreement) for the Offer
pursuant to the Merger Agreement, (ii) in the event that (x) any of the
representations and warranties of Parent in the 1998 Stockholders Agreement
shall not be true and correct in all material respects or (y) Parent shall have
failed to perform in any material respect any material covenant to be performed
by it under the 1998 Stockholders Agreement and in the case of (x) or (y) such
untruth or incorrectness or such failure cannot be or has not been cured within
thirty days after notice thereof, (iii) subject to the compliance by the Company
with its obligations under the best efforts provisions of the Merger Agreement,
any Governmental Entity (as defined in the Merger Agreement) has issued an order
enjoining or prohibiting the Offer or the consummation of the transactions
contemplated by the 1998 Stockholders Agreement or the Merger Agreement and such
order has become final and nonappealable, and (iv) the Merger Agreement has
terminated in accordance with its terms.
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