-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GjSIU44jjhDYZlPpAE1O0ok8nM+rk/yj7/S8vSl0Ulicw6ee8V8qOdpn+Tx1T5oU 3EmmuEazaI1XNUs787V/+A== 0000912057-97-031696.txt : 19970926 0000912057-97-031696.hdr.sgml : 19970926 ACCESSION NUMBER: 0000912057-97-031696 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19970925 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER HI BRED INTERNATIONAL INC CENTRAL INDEX KEY: 0000078716 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 420470520 STATE OF INCORPORATION: IA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: SEC FILE NUMBER: 005-16177 FILM NUMBER: 97685371 BUSINESS ADDRESS: STREET 1: 700 CAPITAL SQ STREET 2: 400 LOCUST ST CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152453500 MAIL ADDRESS: STREET 1: 6800 PIONEER PKWY STREET 2: PO BOX 316 CITY: JOHNSTON STATE: IA ZIP: 50131 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER HI BRED INTERNATIONAL INC CENTRAL INDEX KEY: 0000078716 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 420470520 STATE OF INCORPORATION: IA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 700 CAPITAL SQ STREET 2: 400 LOCUST ST CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152453500 MAIL ADDRESS: STREET 1: 6800 PIONEER PKWY STREET 2: PO BOX 316 CITY: JOHNSTON STATE: IA ZIP: 50131 SC 13E4 1 13E-4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-4 Issuer Tender Offer Statement (Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934) PIONEER HI-BRED INTERNATIONAL, INC. (Name of Issuer) PIONEER HI-BRED INTERNATIONAL, INC. (Name of Person(s) Filing Statement) COMMON STOCK, $1.00 PAR VALUE PER SHARE (Title of Class of Securities) ________723680-10-1________ (CUSIP Number of Class of Securities) WILLIAM DEMEULENAERE Corporate Counsel Pioneer Hi-Bred International, Inc. 400 Locust Street 700 Capital Square Des Moines, IA 50309 (515) 248-4800 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) COPIES TO: F. WILLIAM REINDEL Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 (212) 859-8189 ---------------------------- September 25, 1997 (Date Tender Offer First Published, Sent or Given to Security Holders) ------------------------ CALCULATION OF FILING FEE
TRANSACTION VALUATION*: AMOUNT OF FILING FEE: $1,710,236,944 $342,047
* Calculated solely for purposes of determining the filing fee, based upon the purchase of 16,444,586 shares at the maximum tender offer price per share of $104. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed N/A
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER. (a) The issuer of the securities to which this Schedule 13E-4 relates is Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), and the address of its principal executive office is 400 Locust Street, 700 Capital Square, Des Moines, Iowa 50309. (b) This Schedule 13E-4 relates to the offer by the Company to purchase up to 16,444,586 shares (or such lesser number of shares as are validly tendered and not withdrawn) of its Common Stock, $1.00 par value per share (including the associated Preferred Stock Purchase Rights, the "Shares"), at prices not greater than $104 nor less than $88 per Share net to the Seller in cash, specified by the tendering stockholders, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and (a)(2), respectively, and incorporated herein by reference. As of September 25, 1997, 82,225,435 Shares were issued and outstanding. As more fully discussed in Section 8, "Background and Purpose of the Offer," of the Offer to Purchase, the Company is making the Offer pursuant to the terms of the Investment Agreement (as defined in the Offer to Purchase) between the Company and E. I. du Pont de Nemours and Company ("DuPont"), which requires that the Company commence the Offer within five business days of closing of the DuPont equity investment transaction. (c) The information set forth in "Introduction" and Section 7, "Price Range of Shares; Dividends," of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. This statement is being filed by the Issuer. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 10, "Source and Amount of Funds," of the Offer to Purchase is incorporated herein by reference. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a)-(j) The information set forth in "Introduction," Section 8, "Background and Purpose of the Offer," Section 9, "Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares," Section 10, "Source and Amount of Funds," Section 12, "Effects of the Offer on the Market for Shares; Registration under the Exchange Act," and Section 14, "Certain U.S. Federal Income Tax Consequences," of the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth in "Introduction," Section 8, "Background and Purpose of the Offer," and Section 9, "Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares," of the Offer to Purchase is incorporated herein by reference. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth in "Introduction," Section 8, "Background and Purpose of the Offer," Section 9, "Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares," Section 10, "Source and Amount of Funds," Section 14, "Certain U.S. Federal Income Tax Consequences," and Section 16, "Fees and Expenses," of the Offer to Purchase is incorporated herein by reference. 2 ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED. The information set forth in "Introduction" and Section 16, "Fees and Expenses," of the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a)-(b) The information set forth in Section 11, "Certain Information About the Company," of the Offer to Purchase and the financial statements and notes related thereto contained in the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996, and its Quarterly Report on Form 10-Q for the quarter ended May 31, 1997, copies of which are attached hereto as Exhibits (g)(1) and (g)(2), respectively, are incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. (a) The information set forth in "Introduction" of the Offer to Purchase is incorporated herein by reference. (b)-(e) Not Applicable. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Form of Offer to Purchase dated September 25, 1997. (2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Substitute Form W-9). (3) -- Form of Notice of Guaranteed Delivery. (4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (7) -- Form of Letter to Stockholders of the Company, dated September 25, 1997 from Charles S. Johnson, President and Chief Executive Officer of the Company. (8) -- Form of Notice of Offer to Purchase for Cash. (9) -- Press Release (b) -- Not Applicable. (c)(1) -- Formation Agreement, dated as of August 6, 1997, between the Company and DuPont. (2) -- Research Alliance Agreement, dated as of August 6, 1997, between the Company and DuPont. (3) -- Investment Agreement, dated as of August 6, 1997, between the Company and DuPont. (4) -- Preferred Seed Support Agreement, dated as of August 6, 1997, between the Company and DuPont. (d) -- Not Applicable. (e) -- Not Applicable. (f) -- Not Applicable. (g)(1) -- The Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996. (2) -- The Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997.
3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. PIONEER HI-BRED INTERNATIONAL, INC. By: /s/ JERRY CHICOINE ----------------------------------------- Jerry Chicoine EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER
Dated: September 25, 1997 4 EXHIBIT INDEX
EXHIBIT DESCRIPTION - --------- --------------------------------------------------------------------------------------------------- (a)(1) -- Form of Offer to Purchase dated September 25, 1997. (2) -- Form of Letter of Transmittal (including Certification of Taxpayer Identification Number on Substitute Form W-9). (3) -- Form of Notice of Guaranteed Delivery. (4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (5) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (7) -- Form of Letter to Stockholders of the Company, dated September 25, 1997 from Charles S. Johnson, President and Chief Executive Officer of the Company. (8) -- Form of Notice of Offer to Purchase for Cash. (9) -- Press Release (b) -- Not Applicable. (c)(1) -- Formation Agreement, dated as of August 6, 1997, between the Company and DuPont. (2) -- Research Alliance Agreement, dated as of August 6, 1997, between the Company and DuPont. (3) -- Investment Agreement, dated as of August 6, 1997, between the Company and DuPont. (4) -- Preferred Seed Support Agreement, dated as of August 6, 1997, between the Company and DuPont. (d) -- Not Applicable. (e) -- Not Applicable. (f) -- Not Applicable. (g)(1) -- The Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996. (2) -- The Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997.
5 EX-99.(A)1 2 OFFER TO PURCHASE PIONEER HI-BRED INTERNATIONAL, INC. OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED. Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company" or "Pioneer"), invites its stockholders to tender shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), to the Company at prices not greater than $104 nor less than $88 per Share in cash, specified by tendering stockholders, upon the terms and subject to the conditions set forth in this Offer to Purchase and the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $104 nor less than $88 per Share), net to the seller in cash (the "Purchase Price"), that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (the "Requisite Number") (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the proration terms hereof. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. The Offer is being made pursuant to an Investment Agreement, dated as of August 6, 1997 (the "Investment Agreement"), between the Company and E. I. du Pont de Nemours and Company ("DuPont"). Concurrently with the execution of the Investment Agreement, the Company entered into a Research Alliance Agreement and a Joint Venture Formation Agreement with DuPont (collectively, all such agreements and the agreements ancillary thereto, the "Agreements"). Pursuant to the Agreements, Pioneer and DuPont agreed to three integrated transactions involving a research alliance and collaboration between the two companies (the "Research Alliance"), the formation of a joint venture (the "Joint Venture") to exploit business opportunities in quality grain traits and an equity investment by DuPont in Pioneer which will ultimately give DuPont, after giving effect to the consummation of the Offer assuming the Requisite Number of Shares are purchased by the Company, a 20% equity interest in Pioneer (the transactions contemplated by the Agreements, the "Transactions"). The Shares are listed and principally traded on the New York Stock Exchange, Inc. (the "NYSE") under the symbol "PHB." On September 24, 1997, the last full trading day on the NYSE prior to the announcement by the Company of the price range of the Offer, the closing per Share sales price as reported on the NYSE Composite Tape was $93 1/16. On August 6, 1997, the last full trading day on the NYSE prior to the announcement of the Transactions by the Company, the closing per Share sales price as reported on the NYSE Composite Tape was $76 9/16. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS, INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. ------------------------ The Dealer Manager for the Offer is: LAZARD FRERES & CO. LLC The date of this Offer to Purchase is September 25, 1997. IMPORTANT Any stockholders desiring to tender all or any portion of their Shares should either (i) complete and sign the Letter of Transmittal (or, for Eligible Institutions (as defined in Section 3) only, a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver the Letter of Transmittal with any required signature guarantee, or transmit an Agent's Message (as defined in Section 3) in connection with a book-entry transfer, together in each case with any other required documents, to BankBoston, N.A. (the "Depositary"), and either mail or deliver the stock certificates for such Shares to the Depositary (with all such other documents) or follow the procedure for book-entry delivery set forth in Section 3, or (ii) request a broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. Stockholders who desire to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply with the procedure for book-entry transfer on a timely basis or whose other required documentation cannot be delivered to the Depositary, in any case, by the expiration of the Offer should tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. TO EFFECT A VALID TENDER OF SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER OF TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT WHICH THEY ARE TENDERING SHARES. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. 2 SUMMARY THIS GENERAL SUMMARY IS PROVIDED FOR THE CONVENIENCE OF THE COMPANY'S STOCKHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT AND MORE SPECIFIC DETAILS OF THIS OFFER TO PURCHASE. UNLESS OTHERWISE DEFINED, CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS OFFER TO PURCHASE. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ CAREFULLY THIS OFFER TO PURCHASE AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, IN THEIR ENTIRETY. THE OFFER Number of Shares to be Purchased.................. 16,444,586 Shares (or such lesser number of Shares as are validly tendered). Purchase Price.................. The Company will determine a single per Share net cash price, not greater than $104 nor less than $88 per Share, that it will pay for Shares validly tendered. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered. All Shares acquired in the Offer will be acquired at the Purchase Price even if tendered below the Purchase Price. Each stockholder desiring to tender Shares must specify in the Letter of Transmittal the minimum price (not greater than $104 nor less than $88 per Share) at which such stockholder is willing to have Shares purchased by the Company. Stockholders wishing to maximize the possibility that their Shares will be purchased at the Purchase Price may check the box in the Letter of Transmittal marked "Shares Tendered at Price Determined by Dutch Auction." Checking this box may result in a Purchase Price of the Shares so tendered at the minimum price of $88 per Share. Market Price of Shares.......... On September 24, 1997, the last reported sale price of the Shares on the NYSE Composite Tape was $93 1/16 per Share. On August 6, 1997, the last full trading day on the NYSE prior to the announcement of the Transactions by the Company, the closing per Share sales price as reported on the NYSE Composite Tape was $76 9/16. See Section 7 for recent trading prices of and cash dividends paid on the Shares. How to Tender Shares............ See Section 3. Call the Information Agent at its address and telephone number set forth on the back cover page of this Offer to Purchase, or consult your broker for assistance. Brokerage Commissions........... None. Stock Transfer Tax.............. None, if payment is made to the registered holder. Expiration and Proration Dates......................... October 23, 1997, at 12:00 Midnight, New York City time, unless extended by the Company. Payment Date.................... As soon as practicable after the Expiration Date. Position of the Company and its Directors..................... Neither the Company nor its Board of Directors makes any
3 recommendation to any stockholder as to whether to tender or refrain from tendering Shares. Withdrawal Rights............... Tendered Shares may be withdrawn at any time until 12:00 Midnight, New York City time, on October 23, 1997, unless the Offer is extended by the Company. See Section 4. Odd Lots........................ There will be no proration of Shares tendered by any stockholder owning beneficially or of record fewer than 100 Shares in the aggregate (including Shares held in the Dividend Reinvestment Plan) as of the Expiration Date, who tenders all such Shares at or below the Purchase Price prior to the Expiration Date and who checks the "Odd Lots" box in the Letter of Transmittal. Further Developments Regarding the Offer..................... Call the Information Agent at its address and telephone number set forth on the back cover page of this Offer to Purchase, or consult your broker. THE TRANSACTIONS Transactions.................... On August 6, 1997, the Company entered into a Research Alliance Agreement, Joint Venture Formation Agreement and Investment Agreement (collectively, together with the ancillary agreements thereto, the "Agreements") with DuPont. Pursuant to the terms of the Agreements, Pioneer and DuPont agreed to three integrated transactions involving a research alliance and collaboration between the two companies, the formation of a Joint Venture to exploit business opportunities in quality grain traits and an equity investment by DuPont in Pioneer which will ultimately give DuPont, after giving effect to the Offer assuming the Requisite Number of Shares are purchased, a 20% equity interest in Pioneer. The Offer is being made pursuant to the terms of the Investment Agreement. Research Alliance Agreement..... Pursuant to the Research Alliance Agreement, Pioneer and DuPont have agreed to a research alliance and collaboration to take advantage of their respective expertise in technology and know-how concerning quality grain traits, agronomic traits, industrial use traits, genomics and enabling technologies for developing seed, grain, grain products, plant materials and other crop improvement products. Quality traits are genetic characteristics which result in a modification of seed, plant or grain composition or attributes that have value to end users of grain, grain products or plant materials and which command value in the market that is capable of being captured. Agronomic traits are genetic improvements which improve the plant's defensive characteristics and its ability to produce a high grain yield. Joint Venture Formation Agreement..................... Pursuant to the Joint Venture Formation Agreement, Pioneer and DuPont have agreed to form a commercial joint venture (the "Joint Venture"), in which each party will own a 50% interest, which will seek to create, maximize and capture value for quality traits in
4 seeds, grain, grain products and plant material delivered through corn, soybean and other selected oilseeds. The interest of each of Pioneer and DuPont in the Joint Venture may be purchased by the other party in certain circumstances. Investment Agreement............ The equity investment component of the transaction involves DuPont's purchase directly from Pioneer of 164,445.86 shares of a new series of Preferred Stock of the Company denominated as Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"), which shares represented a common equivalent economic ownership interest in Pioneer equal to 19.99% of Pioneer's outstanding Shares before giving effect to the equity investment transaction, which was completed on September 18, 1997 (the "Equity Investment Closing Date"), and approximately 16.67% after giving effect thereto. The price paid by DuPont, on a common share equivalent basis, was $104 per Share in cash and $1.71 billion in aggregate for all shares of Preferred Stock purchased by DuPont. The Investment Agreement, which has a term of 16 years and is thereafter extended unless terminated upon one year's prior notice given by either party, includes a standstill which prohibits DuPont from acquiring any additional Shares, except for certain top-up rights to enable it to obtain and maintain a 20% equity interest, or from taking certain other actions to seek control of or influence the management, the Board or the policies of the Company (including by proposing or seeking to effect any merger or other business combination transaction involving the Company, engaging in any consent or proxy solicitation as to the election of directors or otherwise, or forming a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with third parties with respect to any of the Company's voting securities). DuPont is entitled under the Investment Agreement to nominate two (and in certain circumstances three) directors to Pioneer's board of directors (the "Board") of 13 members (exclusive of the DuPont nominees), provided that DuPont maintains an equity ownership of at least 10%. At the Equity Investment Closing Date, Charles O. Holliday, Jr., Executive Vice President and a director of DuPont, and William F. Kirk, Vice President and General Manager of DuPont Agricultural Products, joined Pioneer's Board as DuPont's initial designees. The Investment Agreement requires Pioneer to use the proceeds of the DuPont equity investment to repurchase its Shares by commencing the Offer shortly after the Equity Investment Closing Date, and thereafter, if necessary, by making open market repurchases, in each case, with Pioneer seeking to repurchase sufficient shares to increase DuPont's equity ownership to 20%. Pioneer is not required to repurchase any shares in excess of the $104 per Share common equivalent issue price unless DuPont agrees to pay the weighted average cost in excess of $104 per Share.
5 After completion of the Company buy-back program, if DuPont's ownership has not been increased to 20%, DuPont is permitted for one year to increase its economic ownership through open market purchases to up to 20%. DuPont is required to exchange all Shares acquired by it in any such transaction for additional shares of Preferred Stock (on the basis of 100 Shares for each share of Preferred Stock). The Preferred Stock is a common stock economic equivalent and participates equally, on the basis of the number of Shares into which the Preferred Stock is convertible, whether or not such conversion has occurred, in all dividends and distributions when declared by the Company on or with respect to the Shares. Shares of Preferred Stock are convertible (on the basis of 100 Shares for each share of Preferred Stock) automatically upon the transfer of beneficial ownership of such shares of Preferred Stock to a person not a member of a DuPont Group (defined generally under the Investment Agreement as including DuPont and its affiliates) and under certain other limited circumstances described in this Offer to Purchase. The Preferred Stock will vote together as a class with the holders of Shares on all matters, including the election of directors, on which the holders of Shares are entitled to vote with voting power at all times (and regardless of the number of votes that may be cast at any meeting based on the Company's existing time-phased five vote per Share voting rights structure) equal to its percentage common equivalent economic ownership interest in the Company. The Investment Agreement obligates DuPont to vote its shares of Preferred Stock in favor of the slate of directors (including any DuPont nominees) proposed by the Board and certain other limited matters, and otherwise permits DuPont to exercise its voting power in its discretion. The Investment Agreement contains provisions that impose certain restrictions upon DuPont's ability to transfer its shares of Preferred Stock (or the Shares into which such shares are convertible), including provisions that prohibit any transfer (other than by means of a dividend by DuPont to its shareholders) for three years after the Equity Investment Closing Date and restrict thereafter the manner in which any such transfer may be made, the size of the block of shares that any transferee may acquire and, in certain cases, the terms upon which any transferee may acquire Shares as a result of any such transfer. The Investment Agreement further obligates DuPont, in the event that its common equivalent economic ownership should exceed by more than one percentage point, as a result of stock repurchases by the Company or otherwise, 20% (or such lower percentage as is equal to DuPont's Ownership Cap (as defined in the Investment Agreement) in effect at such time), to sell its Preferred Stock at the request of the Company so that its economic ownership is equal to 20% (or the lower Ownership Cap, if applicable), subject to certain indemnification obligations of the Company if any such sale requires DuPont to incur a loss as a result of the mandatory sale of
6 such shares based on the price at which DuPont purchased such shares. In addition, under the Investment Agreement, as long as DuPont's Ownership Cap is 18% or more, (i) DuPont is entitled to 30 days' prior notice of, and the right to participate in any auction leading up to, the sale of the Company or other business combination constituting a Change in Control (as defined in the Investment Agreement) of Pioneer, and (ii) the Company is prohibited from consummating or entering into a binding agreement for a Competing Investment (defined in the Investment Agreement as certain equity investments in the Company exceeding a specified size by one of the eight competitors designated by DuPont on an annual basis) for a period of four years after the date of the Investment Agreement. DuPont is also accorded certain rights in the event that a Competing Investment is proposed or consummated by the Company after the end of such four-year period, including the right to be provided 30 days' prior notice thereof, subject to the loss by DuPont of certain of its other rights as a stockholder under the Investment Agreement. In addition, certain of DuPont's rights as a stockholder under the Investment Agreement are eliminated or modified in the event that either the Joint Venture or the Research Alliance is terminated.
7 THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY THE COMPANY. TABLE OF CONTENTS
SECTION PAGE - ---------------------------------------------------------------------------------------------------------- ----------- SUMMARY................................................................................................... 3 INTRODUCTION.............................................................................................. 9 THE OFFER................................................................................................. 11 1. Number of Shares; Proration........................................................................... 11 2. Tenders by Owners of Fewer than 100 Shares............................................................ 13 3. Procedure for Tendering Shares........................................................................ 14 4. Withdrawal Rights..................................................................................... 17 5. Purchase of Shares and Payment of Purchase Price...................................................... 18 6. Certain Conditions of the Offer....................................................................... 19 7. Price Range of Shares; Dividends...................................................................... 20 8. Background and Purpose of the Offer; Certain Effects of the Offer..................................... 21 9. Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares............................................................................................. 27 10. Source and Amount of Funds............................................................................ 27 11. Certain Information About the Company................................................................. 27 12. Effects of the Offer on the Market for Shares; Registration Under the Exchange Act.................... 33 13. Certain Legal Matters; Regulatory Approvals........................................................... 33 14. Certain U.S. Federal Income Tax Consequences.......................................................... 33 15. Extension of the Offer; Termination; Amendments....................................................... 36 16. Fees and Expenses..................................................................................... 36 17. Miscellaneous......................................................................................... 37
8 TO THE HOLDERS OF SHARES OF COMMON STOCK OF PIONEER HI-BRED INTERNATIONAL, INC.: INTRODUCTION Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), invites its stockholders to tender shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), to the Company at prices not greater than $104 nor less than $88 per Share in cash, specified by tendering stockholders, upon the terms and subject to the conditions set forth in this Offer to Purchase and the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $104 nor less than $88 per Share), net to the seller in cash (the "Purchase Price"), that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (the "Requisite Number") (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. The Company will pay the Purchase Price for all Shares validly tendered prior to the Expiration Date (as defined in Section 1) at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the proration terms described below. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. If, before the Expiration Date, more than 16,444,586 Shares are validly tendered at or below the Purchase Price and not withdrawn, the Company will, upon the terms and subject to the conditions of the Offer, purchase Shares first from all Odd Lot Owners (as defined in Section 2) who validly tender all their Shares at or below the Purchase Price and then on a pro rata basis from all other stockholders who validly tender Shares at prices at or below the Purchase Price (and do not withdraw them prior to the Expiration Date). The Company will return at its own expense all Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and not withdrawn and Shares not purchased because of proration. The Purchase Price will be paid net to the tendering stockholder in cash for all Shares purchased. Tendering stockholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant to the Offer. HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY (AS DEFINED BELOW) THE SUBSTITUTE FORM W-9 THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. In addition, the Company will pay all fees and expenses of Lazard Freres & Co. LLC ("Lazard" or the "Dealer Manager"), D.F. King & Co., Inc. (the "Information Agent") and BankBoston, N.A. (the "Depositary") in connection with the Offer. See Section 16. The Offer is being made pursuant to an Investment Agreement, dated as of August 6, 1997 (the "Investment Agreement"), between the Company and E. I. du Pont de Nemours and Company ("DuPont"). Concurrently with the execution of the Investment Agreement, the Company entered into a Research Alliance Agreement and a Joint Venture Formation Agreement with DuPont (collectively, together with the agreements ancillary thereto, the "Agreements"). Pursuant to the terms of the Agreements, Pioneer and DuPont agreed to three integrated transactions involving a research alliance and collaboration between the two companies (the "Research Alliance"), the formation of the Joint Venture to exploit business opportunities in quality grain traits and an equity investment by DuPont in Pioneer which will ultimately give DuPont, after giving effect to the consummation of the Offer assuming the Requisite 9 Number of Shares are purchased by the Company, a 20% equity interest in Pioneer (the transactions contemplated by the Agreements, the "Transactions"). The Offer provides stockholders who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not greater than $104 nor less than $88 per Share) at which they are willing to sell their Shares and, if any such Shares are purchased pursuant to the Offer, to sell those Shares for cash without the usual transaction costs associated with open-market sales. In addition, the Offer may give stockholders the opportunity to sell Shares at prices greater than market prices prevailing prior to the announcement of the Offer or prior to the announcement of the Transactions on August 7, 1997. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS, INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. SEE SECTION 9 FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING SHARES PURSUANT TO THE OFFER. If the Company, pursuant to the Offer, purchases fewer than the Requisite Number of Shares, the Company is further required under the Investment Agreement, and the Board of Directors of Pioneer ("the Board") has authorized the Company, to use commercially reasonable efforts during the remainder of the one-year period (the "Company Buy-Back Period") commencing with the Equity Investment Closing Date to repurchase Shares from the stockholders of the Company other than DuPont or any member of the DuPont Group in open market purchases or pursuant to additional self-tender offers by the Company to the extent necessary so that DuPont's common stock equivalent ownership percentage shall equal 20%. Any such open market or other purchases may be made on the same terms or on terms more favorable or less favorable to the stockholders than the terms of the Offer. Under the terms of the Investment Agreement, the Company is not obligated to pay greater than $104 per Share in any such repurchase (unless DuPont pays the average weighted cost per Share in excess of $104), the aggregate amount paid by the Company in all such purchases (including pursuant to the Offer) need not exceed the aggregate purchase price paid by DuPont for the shares of Preferred Stock purchased by it, and the Company is not required to repurchase in excess of the Requisite Number of Shares. Accordingly, no assurance can be given that the Company will purchase additional Shares after the consummation or expiration of the Offer. In any event, the Company will not make (and is restricted from doing so under Rule 13e-4(f) adopted by the Securities and Exchange Commission (the "Commission") under the Exchange Act) any such purchase until the expiration of at least ten business days after termination of the Offer. Stockholders who are participants in the Company's Dividend Reinvestment Plan (the "Dividend Reinvestment Plan") may instruct BankBoston, N.A., as administrator of the Dividend Reinvestment Plan (in such capacity, the "Plan Administrator"), to tender all or part of the Shares credited to a participant's account in the Dividend Reinvestment Plan by following the instructions set forth in "Procedure for Tendering Shares--Dividend Reinvestment Plan" in Section 3. As of September 25, 1997, there were 82,222,935 Shares outstanding, 16,444,586 Shares issuable upon conversion of all outstanding Preferred Stock owned by DuPont and no Shares issuable upon exercise of vested stock options under the Company's stock option plans or agreements relating thereto. The 16,444,586 Shares that the Company is offering to purchase represent approximately 16.67% of the outstanding Shares including, for this purpose, the Shares into which the Preferred Stock owned by DuPont is convertible. In addition to the foregoing, 997,000 Shares are issuable upon exercise of outstanding unvested options under the Company's stock option plans or agreements relating thereto, which options are eligible for vesting at various times through 2002. 10 The Shares are listed and principally traded on the New York Stock Exchange, Inc. ("NYSE") under the symbol "PHB." On September 24, 1997, the last full trading day on the NYSE prior to the announcement by the Company of the price range of the Offer, the closing per Share sales price as reported on the NYSE Composite Tape was $93 1/16. On August 6, 1997, the last full trading day on the NYSE prior to the announcement of the Transactions by the Company, the closing per Share sale price as reported on the NYSE Composite Tape was $76 9/16. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES. THE OFFER 1. NUMBER OF SHARES; PRORATION Upon the terms and subject to the conditions of the Offer, the Company will accept for payment (and thereby purchase) 16,444,586 Shares or such lesser number of Shares as are validly tendered before the Expiration Date (and not withdrawn in accordance with Section 4) at a net cash price (determined in the manner set forth below) not greater than $104 nor less than $88 per Share. The term "Expiration Date" means 12:00 Midnight, New York City time, on October 23, 1997, unless and until the Company in its sole discretion shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. See Section 15 for a description of the Company's right to extend the time during which the Offer is open and to delay, terminate or amend the Offer. Subject to Section 2, if the Offer is oversubscribed, Shares tendered at or below the Purchase Price before the Expiration Date will be eligible for proration. The proration period also expires on the Expiration Date. The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share Purchase Price that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (or such lesser number as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. As required under the Rules adopted by the Commission, if (i) the Company increases or decreases the price to be paid for Shares, the Company increases or decreases the Dealer Manager's soliciting fee, the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in Section 15, the Offer will be extended until the expiration of such period of ten business days. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. In accordance with Instruction 5 of the Letter of Transmittal, each stockholder desiring to tender Shares must specify the price (not greater than $104 nor less than $88 per Share) at which such stockholder is willing to have the Company purchase Shares. As promptly as practicable following the Expiration Date, the Company will, in its sole discretion, determine the Purchase Price (not greater than $104 nor less than $88 per Share) that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. The Company will pay the Purchase Price, even if such Shares were tendered below the Purchase Price, for all Shares validly tendered prior to the Expiration Date at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to 11 the conditions of the Offer. All Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration, will be returned to the tendering stockholders at the Company's expense as promptly as practicable following the Expiration Date. If the number of Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date is less than or equal to 16,444,586 Shares, the Company will, upon the terms and subject to the conditions of the Offer, purchase at the Purchase Price all Shares so tendered. PRIORITY. Upon the terms and subject to the conditions of the Offer, in the event that prior to the Expiration Date more than 16,444,586 Shares are validly tendered at or below the Purchase Price and not withdrawn, the Company will purchase such validly tendered Shares in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any Odd Lot Owner (as defined in Section 2) who: (a) tenders all Shares beneficially owned by such Odd Lot owner at or below the Purchase Price (partial tenders will not qualify for this preference); and (b) completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing Shares, all other Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date on a pro rata basis. PRORATION. In the event that proration of tendered Shares is required, the Company will determine the final proration factor as promptly as practicable after the Expiration Date. Proration for each stockholder tendering Shares (other than Odd Lot Owners) shall be based on the ratio of the number of Shares tendered by such stockholder at or below the Purchase Price to the total number of Shares tendered by all stockholders (other than Odd Lot Owners) at or below the Purchase Price. This ratio will be applied to stockholders tendering Shares (other than Odd Lot Owners) to determine the number of Shares that will be purchased from each such stockholder pursuant to the Offer. Although the Company does not expect to be able to announce the final results of such proration until approximately seven business days after the Expiration Date, it will announce preliminary results of proration by press release as promptly as practicable after the Expiration Date. Stockholders can obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. On April 6, 1989, the Board of Directors declared a dividend distribution of one Right for each Share outstanding on April 6, 1989 (the "Record Date"). Each Share issued subsequent to the Record Date had a Right attached to it. The Rights expire on December 13, 2006 unless earlier redeemed by the Company. The terms of the Rights have been amended on December 13, 1994, December 13, 1996 and August 6, 1997, to, among other things, (i) modify the Rights so that each Right represents the right to purchase one one-thousandth of a share of Series A Participating Preferred Stock of the Company at an exercise price of $250, subject to adjustment and (ii) grant holders of shares of Preferred Stock, in respect of each Share into which the Preferred Stock is convertible, whether or not such conversion has occurred, the same Rights as holders of Shares. The Rights generally become exercisable upon the earlier to occur of (i) the ownership by a person of 15% or more of the outstanding Shares or (ii) the ownership by a person of 10% or more of the outstanding Shares, but only if and when such ownership, at any time, represents more than one-fourth of the combined voting power of the Shares then outstanding (the "Trigger Amount") and treating all Shares into which the Preferred Stock is convertible as outstanding for purposes of these provisions. The Rights are not currently exercisable and trade together with the Shares associated therewith. Absent circumstances causing the Rights to become exercisable or separately tradable prior to the Expiration Date, the tender of any Shares pursuant to the Offer will also constitute a tender of the associated Rights. No separate consideration will be paid for such Rights. Upon the purchase of Shares by the Company pursuant to the Offer, the sellers of the Shares so purchased will no longer have an interest in the Rights associated with such Shares. The Rights Agreement further permits, without triggering the Rights, the ownership of Shares by certain members of the Wallace family and other Grandfathered 12 Persons as set forth in the Rights Agreement and the ownership by DuPont or certain of its wholly-owned subsidiaries of the shares of Preferred Stock to the extent such ownership is permitted under the Investment Agreement. It is not expected that the completion of the Offer, by itself, will result in the Rights becoming exercisable or separately tradable or any single stockholder or group of stockholders owning an excess of the Trigger Amount. As described in Section 14, the number of Shares that the Company will purchase from a stockholder may affect the United States federal income tax consequences to the stockholder of such purchase and therefore may be relevant to a stockholder's decision whether, and in what amounts, to tender Shares. In addition, the order in which Shares are purchased may affect the United States federal income tax consequences to a stockholder, including because, as indicated in Section 14, the United States federal income tax consequences to a stockholder may vary depending on the extent to which the stockholder's voting interest in the Company is reduced and on the particular block of Shares purchased from the stockholder. The Letter of Transmittal affords each tendering stockholder tendering shares in certificate form the opportunity to designate the order of priority in which Shares tendered are to be purchased in the event of proration for tax purposes and so as to otherwise enable stockholders who own both Shares entitled to five votes per Share and Shares entitled to one vote per Share to designate which Shares are to be tendered. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares on or about September 25, 1997 and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES The Company, upon the terms and subject to the conditions of the Offer, will accept for purchase, without proration, all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by or on behalf of stockholders who own, beneficially or of record, as of the Expiration Date an aggregate of fewer than 100 Shares, including Shares held in the Dividend Reinvestment Plan ("Odd Lot Owners"). To avoid proration, however, an Odd Lot Owner must validly tender at or below the Purchase Price all such Shares that such Odd Lot Owner owns, beneficially or of record; partial tenders will not qualify for this preference. This preference is not available to partial tenders or to owners of 100 or more Shares in the aggregate (including Shares held in the Dividend Reinvestment Plan), even if such owners have separate stock certificates for fewer than 100 such Shares. Any Odd Lot Owner wishing to tender all such Shares owned beneficially or of record by such stockholder pursuant to this Offer must complete the box captioned "Odd Lots" in the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery and must properly indicate in the section entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" in the Letter of Transmittal the price at which such Shares are being tendered, except that an Odd Lot Owner may check the box in the section entitled "Odd Lots" indicating that the stockholder is tendering all of such stockholder's Shares (including Shares held in the Dividend Reinvestment Plan) at the Purchase Price. See Section 3. Stockholders owning an aggregate of less than 100 Shares whose Shares are purchased pursuant to the Offer will avoid both the payment of brokerage commissions and any applicable odd lot discounts payable on a sale of their Shares in transactions on a stock exchange. The Company also reserves the right, but will not be obligated, to purchase all Shares duly tendered by any stockholder who tendered any Shares owned, beneficially or of record, at or below the Purchase Price and who, as a result of proration, would then own, beneficially or of record, an aggregate of fewer than 100 Shares. If the Company exercises this right, it will increase the number of Shares that it is offering to purchase in the Offer by the number of Shares purchased through the exercise of such right. 13 3. PROCEDURE FOR TENDERING SHARES PROPER TENDER OF SHARES. For Shares to be validly tendered pursuant to the Offer: (i) the certificates for such Shares (or confirmation of receipt of such Shares pursuant to the procedures for book-entry transfer set forth below), together with a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a manually signed facsimile thereof) with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, together in each case with any other documents required by the Letter of Transmittal, must be received prior to 12:00 Midnight, New York City time, on the Expiration Date by the Depositary at its address set forth on the back cover of this Offer to Purchase; or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. AS SPECIFIED IN INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH STOCKHOLDER DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" IN THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $.25) AT WHICH SUCH STOCKHOLDER'S SHARES ARE BEING TENDERED, EXCEPT THAT AN ODD LOT OWNER MAY CHECK THE BOX IN THE SECTION OF THE LETTER OF TRANSMITTAL ENTITLED "ODD LOTS" INDICATING THAT THE STOCKHOLDER IS TENDERING ALL OF SUCH STOCKHOLDER'S SHARES AT THE PURCHASE PRICE. Stockholders desiring to tender Shares at more than one price must complete separate Letters of Transmittal for each price at which Shares are being tendered, except that the same Shares cannot be tendered (unless properly withdrawn previously in accordance with the terms of the Offer) at more than one price. IN ORDER TO VALIDLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL. Stockholders wishing to maximize the possibility that their Shares will be purchased at the Purchase Price may check the box on the Letter of Transmittal marked "Shares Tendered at Price Determined by Dutch Auction." Checking this box may result in a purchase of the Shares so tendered at the minimum price of $88 per Share. In addition, Odd Lot Owners who tender all Shares must complete the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, in order to qualify for the preferential treatment available to Odd Lot Owners as set forth in Section 2. SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this Section, includes any participant in The Depository Trust Company or Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities") whose name appears on a security position listing as the holder of the Shares) tendered therewith and payment and delivery are to be made directly to such registered holder, or (ii) if Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or savings and loan association) having an office, branch or agency in the United States (each such entity being hereinafter referred to as an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signer of a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued, to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name of the registered holder appears on the certificate, with the signature on the certificate or stock power guaranteed by an Eligible Institution. In this regard see Section 5 for information with respect to applicable stock transfer taxes. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities as described above), a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a manually signed facsimile thereof), or an Agent's Message in connection with a book-entry transfer, together in each case with any other documents required by the Letter of Transmittal. 14 THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect to the Shares at each of the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in a Book-Entry Transfer Facility's system may make book-entry delivery of the Shares by causing such facility to transfer such Shares into the Depositary's account in accordance with such facility's procedure for such transfer. Even though delivery of Shares may be effected through book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities, a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a manually signed facsimile thereof), with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, together in each case with any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message from a Book-Entry Transfer Facility transmitted to, and received by, the Depositary forming a part of a timely confirmation of a book-entry transfer of Shares (a "Book-Entry Confirmation") which states that (a) such a Book-Entry Transfer Facility has received from the participant in such Book-Entry Transfer Facility an express acknowledgment of such participant's tender of the Shares that are the subject of the Book-Entry Confirmation, (b) the participant in such Book-Entry Transfer Facility has received and agrees to be bound by the terms of the Letter of Transmittal, and (c) the Company may enforce such agreement against the participant in such Book-Entry Transfer Facility. Delivery of documents to a Book-Entry Transfer Facility in accordance with such Facility's procedures does not constitute delivery to the Depositary. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share certificates cannot be delivered to the Depositary prior to the Expiration Date (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary before the Expiration Date, such Shares may nevertheless be tendered provided that all of the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) the Depositary receives (by hand, mail, overnight courier, telegram or facsimile transmission), on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form the Company has provided with this Offer to Purchase (indicating the price at which the Shares are being tendered), including (where required) a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery; and (iii) the certificates for all tendered Shares in proper form for transfer (or confirmation of book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), together with a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a manually signed facsimile thereof), or an Agent's Message in connection with a book-entry transfer, together in each case with any required signature guarantees or other documents required by the Letter of Transmittal, are received by the Depositary within three NYSE trading days after the date the Depositary receives such Notice of Guaranteed Delivery. If any tendered Shares are not purchased, or if less than all Shares evidenced by a stockholder's certificates are tendered, certificates for unpurchased Shares will be returned as promptly as practicable after the expiration or termination of the Offer or, in the case of Shares tendered by book-entry transfer at a Book-Entry Transfer Facility, such Shares will be credited to the appropriate account maintained by the tendering stockholder at the appropriate Book-Entry Transfer Facility, in each case without expense to such stockholder. 15 FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax withholding equal to 31% of the gross payments payable pursuant to the Offer, each stockholder who does not otherwise establish an exemption from backup withholding must notify the Depositary of such stockholder's correct taxpayer identification number (or certify that such taxpayer is awaiting a taxpayer identification number) and provide certain other information by completing, under penalties of perjury, the Substitute Form W-9 included in the Letter of Transmittal. Noncorporate foreign stockholders should generally complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. As more fully described below, in the case of a foreign stockholder, even if such stockholder has provided the required certification to avoid backup withholding, the Depositary will withhold 30% of the gross payments made pursuant to the Offer unless a reduced rate of withholding or an exemption from withholding is applicable. The Depositary will withhold United States federal income taxes equal to 30% of the gross payments payable to a foreign stockholder unless the Company and the Depositary determine that (i) a reduced rate of withholding is available pursuant to a tax treaty or (ii) an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business within the United States. For this purpose, a foreign stockholder is any stockholder that is not (a) a citizen or resident of the United States, (b) a corporation, partnership, or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof (other than any partnership treated as foreign under United State Treasury regulations), or (c) an estate or trust, the income of which is subject to United States federal income taxation regardless of the source of such income. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign stockholder must deliver to the Depositary before any payment a properly completed and executed IRS Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign stockholder must deliver to the Depositary before any payment a properly completed and executed IRS Form 4224. The Company and the Depositary will determine a stockholder's status as a foreign stockholder and eligibility for a reduced rate of, or exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate that such reliance thereon is not warranted. A foreign stockholder may be eligible to obtain a refund of all or a portion of any tax withheld if such stockholder meets the "complete redemption", "substantially disproportionate" or "not essentially equivalent to a dividend" tests described in Section 14 or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or a treaty-reduced rate of withholding. For a discussion of certain United States federal income tax consequences generally applicable to tendering stockholders, see Section 14. DIVIDEND REINVESTMENT PLAN. Shares credited to participants' accounts under the Dividend Reinvestment Plan will be tendered by BankBoston, N.A., as Plan Administrator, according to instructions provided to the Plan Administrator from participants in the Dividend Reinvestment Plan. Shares for which the Plan Administrator has not received timely instructions from participants will not be tendered. The Plan Administrator will make available to the participants whose accounts are credited with Shares under the Dividend Reinvestment Plan all documents furnished to stockholders generally in connection with the Offer. BECAUSE THE DEPOSITARY FOR THE OFFER ALSO ACTS AS PLAN ADMINISTRATOR OF THE DIVIDEND REINVESTMENT PLAN, PARTICIPANTS IN THE DIVIDEND REINVESTMENT PLAN MAY USE THE LETTER OF TRANSMITTAL TO INSTRUCT THE PLAN ADMINISTRATOR REGARDING THE OFFER BY COMPLETING THE BOX ENTITLED "DIVIDEND REINVESTMENT PLAN SHARES." Each participant may direct that all, some or none of the Shares credited to the participant's account under the Dividend Reinvestment Plan be tendered and the price at 16 which such participant's Shares are to be tendered. Participants in the Dividend Reinvestment Plan are urged to read the Letter of Transmittal and related materials carefully. TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 promulgated under the Exchange Act for a person acting alone or in concert with others, directly or indirectly, to tender Shares for such person's own account unless at the time of tender and at the Expiration Date such person has a "net long position" equal to or greater than the amount tendered in (i) the Shares and will deliver or cause to be delivered such Shares for the purpose of tender to the Company within the period specified in the Offer, or (ii) other securities immediately convertible into, exercisable for or exchangeable into Shares ("Equivalent Securities") and, upon the acceptance of such tender, will acquire such Shares by conversion, exchange or exercise of such Equivalent Securities to the extent required by the terms of the Offer and will deliver or cause to be delivered such Shares so acquired for the purpose of tender to the Company within the period specified in the Offer. Rule 14e-4 also provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. A tender of Shares made pursuant to any method of delivery set forth herein will constitute the tendering stockholder's representation and warranty to the Company that (i) such stockholder has a "net long position" in Shares or Equivalent Securities being tendered within the meaning of Rule 14e-4, and (ii) such tender of Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Company upon the terms and subject to the conditions of the Offer. DETERMINATIONS OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares to be accepted, the price to be paid therefor and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders it determines not to be in proper form or the acceptance of or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Share or any particular stockholder. No tender of Shares will be deemed to be properly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders, and none of them will incur any liability for failure to give any such notice. CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT BE DEEMED TO BE VALIDLY TENDERED. 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares, pursuant to the Offer, are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time before the Expiration Date and, unless accepted for payment by the Company as provided in this Offer to Purchase, may also be withdrawn after 12:00 Midnight, New York City time, on November 21, 1997. For a withdrawal to be effective, the Depositary must receive (at its address set forth on the back cover of this Offer to Purchase) a notice of withdrawal in written, telegraphic or facsimile transmission form on a timely basis. Such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares tendered, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the certificates have been delivered or otherwise identified to the Depositary, then, prior to the release of such 17 certificates, the tendering stockholder must also submit the serial numbers shown on the particular certificates evidencing the Shares and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. All questions as to the form and validity, including time of receipt, of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give any notice of any defects or irregularities in any notice of withdrawal, and none of them will incur any liability for failure to give any such notice. Withdrawals may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not tendered for purposes of the Offer. However, withdrawn Shares may be retendered before the Expiration Date by again following any of the procedures described in Section 3. If the Company extends the Offer, is delayed in its purchase of Shares or is unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain on behalf of the Company all tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in this Section 4. 5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE The Company will, upon the terms and subject to the conditions of the Offer, determine a single per Share Purchase Price that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders, and will accept for payment and pay for (and thereby purchase) Shares validly tendered at or below the Purchase Price and not withdrawn as soon as practicable after the Expiration Date. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. For purposes of the Offer, the Company will be deemed to have accepted for payment (and therefore purchased), subject to proration, Shares that are validly tendered at or below the Purchase Price and not withdrawn when, as and if it gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, the Company will purchase and pay a single per Share Purchase Price for all of the Shares accepted for payment pursuant to the Offer as soon as practicable after the Expiration Date. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration) but only after timely receipt by the Depositary of certificates for Shares (or of a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a manually signed facsimile thereof), or an Agent's Message in connection with a book-entry transfer, in each case with any other required documents. Payment for Shares purchased pursuant to the Offer will be made by depositing the aggregate Purchase Price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Company and transmitting payment to the tendering stockholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date. However, the Company does not expect to be able to announce the final results of any such proration until approximately seven business days after the Expiration Date. Under no circumstances will the Company pay interest on the Purchase Price including, without limitation, by reason of any delay in making payment. Certificates for all 18 Shares not purchased, including all Shares tendered at prices greater than the Purchase Price and Shares not purchased due to proration, will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to the account maintained with one of the Book-Entry Transfer Facilities by the participant who so delivered such Shares) as promptly as practicable following the Expiration Date or termination of the Offer without expense to the tendering stockholder. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 6. The Company will pay all stock transfer taxes, if any, payable on the transfer to it of Shares purchased pursuant to the Offer; provided, however, that if payment of the Purchase Price is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Shares are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of all stock transfer taxes, if any (whether imposed on the registered holder or such other person), payable on account of the transfer to such person will be deducted from the Purchase Price unless evidence satisfactory to the Company of the payment of such taxes or exemption therefrom is submitted. See Instruction 7 of the Letter of Transmittal. ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING FEDERAL INCOME TAX CONSEQUENCES FOR FOREIGN STOCKHOLDERS. 6. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for, Shares tendered, subject to Rule 13e-4(f) promulgated under the Exchange Act, if at any time on or after September 25, 1997, and prior to the time of payment for any such Shares (whether any Shares have theretofore been accepted for payment, purchased or paid for pursuant to the Offer) any of the following events shall have occurred (or shall have been determined by the Company to have occurred) that, in the Company's judgment in any such case and regardless of the circumstances giving rise thereto (including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment: (a) there shall have been threatened, instituted or pending before any court, agency, authority or other tribunal any action, suit or proceeding by any government or governmental, regulatory or administrative agency or authority or by any other person, domestic or foreign, or any judgment, order or injunction entered, enforced or deemed applicable by any such court, authority, agency or tribunal, which (i) challenges or seeks to make illegal, or to delay or otherwise directly or indirectly to restrain, prohibit or otherwise affect the making of the Offer, the acquisition of Shares pursuant to the Offer or is otherwise related in any manner to, or otherwise affects, the Offer; or (ii) could, in the sole judgment of the Company, materially affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company and its subsidiaries, taken as a whole; or (b) there shall have been any action threatened or taken, or any approval withheld, or any statute, rule or regulation invoked, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or the Company or any of its subsidiaries, by any government or governmental, regulatory or administrative authority or agency or tribunal, domestic or 19 foreign, which, in the sole judgment of the Company, would or might directly or indirectly result in any of the consequences referred to in clause (i) or (ii) of paragraph (a) above; or (c) there shall have occurred (i) the declaration of any banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory); (ii) any general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange or in the over-the-counter market; (iii) the commencement of a war, armed hostilities or any other national or international crisis directly or indirectly involving the United States; (iv) any limitation (whether or not mandatory) by any governmental, regulatory or administrative agency or authority on, or any event which, in the sole judgment of the Company, might materially affect, the extension of credit by banks or other lending institutions in the United States; (v) any significant decrease in the market price of the Shares or in the market prices of equity securities generally in the United States or any change in the general political, market, economic or financial conditions or in the commercial paper markets in the United States or abroad that could have in the sole judgment of the Company a material adverse effect on the business, condition (financial or otherwise), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or on the trading in the Shares; (vi) in the case of any of the foregoing existing at the time of the announcement of the Offer, a material acceleration or worsening thereof; or (vii) any decline in either the Dow Jones Industrial Average or the S&P 500 Composite Index by an amount in excess of 10% measured from the close of business on September 24, 1997; or (d) any change shall occur or be threatened in the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, which in the sole judgment of the Company is or may be material to the Company and its subsidiaries taken as a whole; or (e) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger or acquisition proposal for the Company, shall have been proposed, announced or made by another person or shall have been publicly disclosed, or the Company shall have learned that any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding Shares, or any new group shall have been formed that beneficially owns more than 5% of the outstanding Shares; or (f) any person or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to acquire the Company or any of its Shares. The foregoing conditions are for the Company's sole benefit and may be asserted by the Company regardless of the circumstances giving rise to any such condition (including any action or inaction by the Company) or may be waived by the Company in whole or in part. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by the Company concerning the events described above and any related judgment or decision by the Company regarding the inadvisability of proceeding with the purchase of or payment for any Shares tendered will be final and binding on all parties. 7. PRICE RANGE OF SHARES; DIVIDENDS The Shares are listed and principally traded on the NYSE. The Company's stock began trading on the NYSE on November 7, 1995. Prior to that date, the Company's stock was traded in the National Association of Securities Dealers National Market System ("NSM"). The high and low closing sales prices per Share on the NYSE Composite Tape (or, if applicable, as reported on the NSM) as compiled from 20 published financial sources and the quarterly cash dividends paid per Share for the periods indicated are listed below:
HIGH LOW DIVIDENDS --------- --------- ------------- FISCAL 1996 1st Quarter................................................... $57 3/8 $43 $ .20 2nd Quarter................................................... 58 1/4 49 3/4 .20 3rd Quarter................................................... 56 5/8 51 3/4 .20 4th Quarter................................................... 57 1/4 51 .23 FISCAL 1997 1st Quarter................................................... 73 1/8 55 1/8 .23 2nd Quarter................................................... 72 1/8 65 3/8 .23 3rd Quarter................................................... 73 58 3/4 .23 4th Quarter................................................... 90 69 5/8 .26 FISCAL 1998 1st Quarter (through September 24, 1997)...................... 93 1/16 86 7/16 .26*
- ------------------------ * Declared but not paid. The closing per Share sales price as reported on the NYSE Composite Tape on September 24, 1997, the last full trading day before the announcement by the Company of the price range of and the number of Shares sought in the Offer, was $93 1/16. On August 6, 1997, the last full trading day on the NYSE prior to the announcement of the Transactions by the Company, the closing per Share sales price as reported on the NYSE Composite Tape was $76 9/16. On September 16, 1997, the Board declared the regular quarterly cash dividend of $.26 per Share on all outstanding Shares. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES. 8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER BACKGROUND AND PURPOSE OF THE OFFER. The Company is making the Offer pursuant to the terms of the Investment Agreement which requires that the Company commence the Offer within five business days of the Equity Investment Closing Date and further requires, if the Offer does not result in the purchase by the Company of the Requisite Number of Shares, that the Company use commercially reasonable efforts to repurchase additional Shares through additional tender offers or open market purchases. The Investment Agreement, together with the Research Alliance Agreement and the Joint Venture Formation Agreement (collectively, together with the agreements ancillary thereto, the "Agreements") were entered into on August 6, 1997 between Pioneer and DuPont. The Transactions effected pursuant to the Agreements consist of (i) the creation of a Research Alliance between Pioneer and DuPont to develop and improve upon the companies' respective expertise, technology and know-how concerning quality grain traits, agronomic traits, industrial use traits and enabling technologies for seed, grain, grain products, plant materials and other crop improvement products, (ii) the formation of a jointly owned (with each party owning 50%) commercial Joint Venture to create and capture value from quality traits, and (iii) the acquisition by DuPont of an equity investment in Pioneer which, assuming the purchase by the Company of the Requisite Number of Shares pursuant to the Offer, would give DuPont a 20% interest in Pioneer's common equity. Quality grain traits involve the creation of genetic characteristics which modify seed, plant or grain composition or attributes in a manner that has value to end-users of grain, grain products or plant materials and which command value in the market that is capable of being captured. Agronomic traits are genetic improvements which improve the plant's defensive characteristics and its ability to produce a high grain yield. The Company believes that the Research Alliance with DuPont, together with the commercial Joint Venture in quality grain traits, will be beneficial over the long term to the Company and its stockholders by strengthening the Company's access to technology that is believed to be vital to the future 21 of the Company's business and will expand the opportunities of the Company to exploit the commercial possibilities of quality grain traits. The Company believes DuPont is a well-suited partner for it in these efforts because of the scope and extent of DuPont's capabilities in life science and agricultural products research and development and the common vision shared by both companies in emerging technologies in the agricultural marketplace. The Company entered into the Investment Agreement as part of the Transactions in order to cement the relationships established under the Research Alliance and Joint Venture between the two companies by providing DuPont a stake in the future value of the Company. The Investment Agreement satisfies Pioneer's objectives in proceeding with a DuPont equity investment, including that the structure and terms of the equity investment be made on terms believed to be fair to Pioneer and its stockholders, that the equity investment not enable DuPont, as a result of the Company's time phased five vote per Share voting rights structure to exercise voting power in excess of its percentage economic ownership in the Company and that DuPont agree to a standstill agreement with respect to its equity investment in the Company to ensure that Pioneer maintain its status as an independent public company and that DuPont would not seek to acquire control of Pioneer. The structure of the DuPont equity investment involved the direct purchase from the Company of a new series of Preferred Stock that was effectively a common stock economic equivalent and the subsequent repurchase of an equal number of Shares by the Company from stockholders, other than DuPont, through one or more self-tender offers or open-market purchases. The Offer provides stockholders who are considering a sale of all or a portion of their Shares the opportunity to determine the price or prices (not greater than $104 nor less than $88 per Share) at which they are willing to sell their Shares and, if any such Shares are purchased pursuant to the Offer, to sell those Shares for cash without the usual transaction costs associated with open market sales. In addition, the Offer may give stockholders the opportunity to sell Shares at prices greater than market prices prevailing prior to announcement of the Offer, or prior to the announcement of the Transactions on August 7, 1997. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS, INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES AND NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. Shares acquired by the Company pursuant to the Offer will be retained as treasury stock by the Company (unless and until the Company determines to retire such Shares) and will be available for the Company to issue without further stockholder action (except as required by applicable law or, if retired, the rules of any securities exchange on which Shares are listed) for any corporate purpose, including, the issuance of Shares upon the conversion of the Preferred Stock acquired by DuPont, the acquisition of other businesses, the raising of additional capital for use in the Company's business and the satisfaction of obligations under existing or future employee benefit plans and employment agreements. The Company has no current plans for issuance of the Shares repurchased pursuant to the Offer. DESCRIPTION OF AGREEMENTS. THE FOLLOWING SUMMARIES OF THE RESEARCH ALLIANCE AGREEMENT, THE JOINT VENTURE FORMATION AGREEMENT AND THE INVESTMENT AGREEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE AGREEMENTS, WHICH ARE ATTACHED AS EXHIBITS TO THE SCHEDULE 13E-4 TO WHICH THIS OFFER TO PURCHASE RELATES. CERTAIN DEFINED TERMS USED IN THE DESCRIPTION OF THE AGREEMENTS BELOW WHICH ARE NOT OTHERWISE DEFINED IN THIS OFFER TO PURCHASE AND WHICH ARE DEFINED IN THE AGREEMENTS SHALL HAVE THE RESPECTIVE MEANINGS SET FORTH THEREIN. 22 RESEARCH ALLIANCE AGREEMENT. Pursuant to the Research Alliance Agreement, Pioneer and DuPont have agreed to a Research Alliance to take advantage of the respective expertise of each in technology and know-how concerning quality grain traits, agronomic traits, industrial use traits, genomics and enabling technologies for developing seed, grain, grain products, plant materials and other crop improvement products within the field of corn, soybean and other selected oilseed crops. The Research Alliance has two components, namely collaborative efforts by both parties to develop new technologies, and the grant by each party to the other of licenses to certain technology. The focus of the research collaboration efforts is to benefit primarily the Joint Venture and secondarily the respective businesses of Pioneer and DuPont. The research collaboration is managed by a seven-member research committee with three representatives from each of Pioneer and DuPont and one representative from the Joint Venture. Each party will fund its own efforts under the research collaboration; however, the research committee will seek to balance the resources and funding provided by each party so that each party will make approximately equal contributions on an annual basis. The parties have agreed that their current level of research spending and efforts for Joint Venture product quality traits will be maintained or increased. The parties will jointly own (including through the Joint Venture) technology developed through the collaborative efforts of the parties. In addition to the collaborative efforts, the Research Alliance provides for grants of licenses. Each party has a nonexclusive, nontransferable royalty-free license to the technology of the other party for research purposes. Technology related to quality traits is licensed to the Joint Venture. The Joint Venture, in turn, is required to license such technology to Pioneer on a royalty basis in order for Pioneer to fulfill its role as the preferred seed supplier to the Joint Venture under the Preferred Seed Support Agreement described below. DuPont is not entitled to convey Pioneer sourced germplasm (that is, the proprietary seed of the Company from which hybrid seed products are developed) or commingled germplasm to any third party without Pioneer's consent. In the event of termination of the Research Alliance, DuPont must meet a 95% minimum distance requirements for commingled germplasm. In addition, each party will have the right to use, on an exclusive royalty bearing basis, all technology developed by the other party to make, use or sell products within the first party's principal business field, which in the case of Pioneer means the production of seeds that embody traits that impact crop yield potential and in the case of DuPont means technology related to the interaction of chemicals with genes to protect or regulate crop growth or development or technology that has application in non-agricultural markets. Each party has a right of first refusal to technology for products in the field of corn, soybeans and other selected oilseeds that fall outside products otherwise covered by the Research Alliance. The Research Alliance Agreement may be terminated by either party upon three years' prior written notice delivered no earlier than 13 years after the date of the Research Alliance Agreement. JOINT VENTURE FORMATION AGREEMENT. Pursuant to the Joint Venture Formation Agreement, Pioneer and DuPont have established a commercial joint venture (the "Joint Venture") in the form of a limited liability company in which each party has a 50% interest, to create, maximize and capture value from quality grain traits. Each party has agreed to contribute its respective existing quality trait assets and businesses to the Joint Venture. Pioneer has not contributed any of its germplasm to the Joint Venture. The Joint Venture will be managed by a members committee composed of three representatives designated by each party. The term of the Joint Venture is perpetual, subject to earlier termination in certain events including (i) the bankruptcy of either DuPont or Pioneer, (ii) a "substantial disagreement" between the parties at any time after the tenth anniversary of the date of the Agreements that is not resolved in accordance with the dispute resolution procedures established under the Joint Venture, and (iii) a change of control (as defined in the Investment Agreement) of either DuPont or Pioneer or certain sales by DuPont of its Agricultural Products Division or the consummation of a Competing Investment by Pioneer. Under the Joint Venture Formation Agreement, the party not initiating or the subject of the event which triggers the termination under clause (i) or (iii) above will have the right either, depending upon the type of event and when it occurs, (a) to purchase the joint venture interest owned by the other party at a price determined through a fair market valuation conducted by investment banking firms selected by the parties under the Joint Venture Formation Agreement or (b) to trigger an auction process by which the joint venture interest of either party will be sold to the highest bidder as between the two parties. In the case of 23 a substantial disagreement after the tenth anniversary of the date of the Agreements, an auction process is triggered. A voluntary default by either party under the Joint Venture Formation Agreement permits the non-defaulting party to buy the Joint Venture interest of the defaulting party at a nominal cost if the default occurs during the first 10 years after the date of the Agreements and at fair market value if the default occurs thereafter. Certain long-term post termination rights and obligations apply after any termination which permit an orderly wind-up of the Joint Venture and ensure that Pioneer will have access to the Joint Venture's technology to sell quality trait seed. A key component of the Joint Venture is the Preferred Seed Support Agreement between the Joint Venture and Pioneer. The Joint Venture is not in the seed business and will look to Pioneer to be the Joint Venture's preferred worldwide provider and preferred marketer of quality trait seed pursuant to the Preferred Seed Support Agreement, subject to certain existing supply contracts with third-party seed companies that will continue. In addition, there may be needs for other third-party suppliers in the future if Pioneer's capacity cannot meet demand or when the Joint Venture is not able to provide Pioneer the freedom to operate technology. In general, the Joint Venture will be entitled to premiums or royalties captured from the quality trait aspects of seed sold by Pioneer, as determined by the parties in accordance with the Joint Venture Formation Agreement and Pioneer will be entitled to revenues from the entire genetic package of traits and services in the buying of seed except for the quality trait aspect. INVESTMENT AGREEMENT. The equity investment component of the transaction involved DuPont's purchase directly from Pioneer of 164,445.86 shares of a new series of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"), which represent a common equivalent economic ownership interest in Pioneer equal to 16,444,586 Shares, or 19.99% of Pioneer's outstanding Shares before giving effect to the equity investment transaction, and approximately 16.67% after giving effect thereto. The purchase was completed on September 18, 1997 (the "Equity Investment Closing Date"). The price paid by DuPont, on a common share equivalent basis, is $104 per Share in cash, for an aggregate purchase price of approximately $1.71 billion (the "Preferred Stock Purchase Price"). STANDSTILL; BOARD SEATS. The Investment Agreement, which has a term of 16 years after the date of the Agreements, and continues thereafter unless and until either party gives one year's prior written notice, includes a standstill which prohibits DuPont from acquiring any additional Shares except for certain top-up rights to enable it to obtain and maintain a 20% equity interest, or from taking certain other actions to seek control of or influence the management, the Board or the policies of the Company (including proposing or seeking to effect any merger or other business combination transaction involving the Company, engaging in any consent or proxy solicitation as to the election of directors or any other matter or forming a 13D Group with respect to any of the Company's voting securities with third parties). DuPont is entitled under the Investment Agreement to nominate two (and in certain circumstances three) directors to Pioneer's Board of 13 members (exclusive of the DuPont nominees), provided that DuPont maintains an equity ownership of at least 10%. Effective at the Equity Investment Closing Date, Charles O. Holliday, Jr., Executive Vice President and a director of DuPont, and William F. Kirk, Vice President and General Manager of DuPont Agriculture Products, joined the Board as DuPont's initial designees. USE OF PROCEEDS. The Investment Agreement requires that Pioneer use the proceeds of the DuPont equity investment to repurchase its Shares by commencing the Offer, shortly after the Equity Investment Closing Date, and thereafter, if necessary, through open market repurchases, in each case, with Pioneer seeking to repurchase sufficient Shares to increase DuPont's equity ownership up to 20%. Pioneer is not required to repurchase any Shares in excess of the $104 issue price unless DuPont agrees to pay the weighted average cost in excess of the $104 per Share issue price. In addition, the aggregate amount paid by Pioneer in all such repurchases (including pursuant to the Offer) need not exceed the aggregate Preferred Stock Purchase Price and the aggregate number of Shares acquired by Pioneer in all such repurchases need not exceed the Requisite Number. After completion of the Company buy-back program (the period such program is required to be in effect, the "Company Buy-Back Period"), if DuPont's ownership has not been increased to 20%, DuPont is permitted for one year thereafter (such period being subject to extension in certain cases) to increase its economic ownership through open market purchases to 24 up to 20%. DuPont is required to exchange all Shares acquired by it in any such transaction for additional shares of Preferred Stock on the basis of 100 Shares for each additional share of Preferred Stock. TERMS FOR PREFERRED STOCK; EXCHANGE FOR CLASS B COMMON STOCK. The Preferred Stock is a common stock economic equivalent and participates equally, on the basis of the number of Shares into which the Preferred Stock is convertible, whether or not such conversion has occurred, in all dividends and distributions when declared by the Company on or with respect to the Shares. Shares of Preferred Stock are convertible (on the basis of 100 Shares for each share of Preferred Stock) automatically upon the transfer of beneficial ownership of such shares of Preferred Stock to a person not a member of a DuPont Group and under certain other limited circumstances described below. The Preferred Stock will vote together as a class with the holders of Shares on all matters, including the election of directors, on which the holders of Shares are entitled to vote with voting power at all times (regardless of the number of votes that may be cast at any meeting based on the Company's existing time-phased voting structure pursuant to which every Share is generally entitled to five votes if it has been continuously beneficially owned by the same holder for three consecutive years and to one vote per share otherwise) equal to its percentage common equivalent economic ownership interest in the Company. In no event will DuPont's aggregate voting power exceed 20%. The Preferred Stock is also convertible into Shares (a) in the event that all outstanding Shares are changed through a charter amendment or other reclassification to have the same vote per share, without any time phased voting and (b) at the option of DuPont in the event that after the fifth annual meeting following the end of the Company Buy-Back Period, the Company's stockholders have not approved an amendment to the Company's charter to reclassify the Preferred Stock held by DuPont into Class B Common Stock having identical terms and thereafter both DuPont's independent public accountants and the staff of the Commission shall not have permitted DuPont to account for its investment in the Company using the full equity accounting method. If DuPont exercises its conversion rights specified under clause (b) above, DuPont has agreed to vote any voting power it would otherwise have in excess of its economic ownership pro rata in proportion to how the Shares owned by all stockholders of the Company other than DuPont are voted. The Company presently intends to propose the reclassification amendment described above to the Company's stockholders in connection with the next annual meeting of the Company's stockholders in January 1998. VOTING AGREEMENT; TRANSFER RESTRICTIONS. The Investment Agreement obligates DuPont to vote its shares of Preferred Stock in favor of the slate of directors (including any DuPont nominees) proposed by the Board and certain other limited matters, and otherwise permits DuPont to exercise its voting power in its discretion. The Investment Agreement contains provisions imposing certain restrictions upon DuPont's ability to transfer its shares of Preferred Stock (or the Shares into which such shares are convertible), including provisions that prohibit any transfer (other than by means of a dividend by DuPont to its shareholders) for three years after the Equity Investment Closing Date and restrict thereafter the manner in which such transfer may be made, the size of the block of Shares that any transferee may acquire, and, in certain cases, the terms upon which any transferee may acquire Shares as a result of any such transfer. Generally, pursuant to such provisions, no transfer may be made unless one or more of the following conditions have been satisfied: (i) the transferee would not own, after giving effect to the transfer, in excess of 5% of the total voting power or ownership of the equity securities of Pioneer, (ii) the transferee has signed a standstill agreement incorporating certain provisions of the Investment Agreement and/or (iii) prior to such transfer, Pioneer has been accorded a right of first refusal or a right of first offer to purchase the shares proposed to be transferred. DuPont is also entitled, after the third anniversary of the Equity Investment Closing Date, to exercise certain demand and "piggyback" registration rights with respect to the Shares into which the Preferred Stock is convertible on customary terms. MANDATORY SELL-DOWN. The Investment Agreement obligates DuPont, in the event its common equivalent economic ownership should exceed by one percentage point, as a result of stock repurchases by the Company or otherwise, 20% (or such lower percentage as is equal to DuPont's Ownership Cap in effect at such time), to sell its Preferred Stock at the request of the Company so that its economic ownership is equal to 20% (or the lower Ownership Cap, if applicable), provided that the Company 25 indemnifies DuPont for any loss incurred by it (based on its $104 per Share effective purchase price) as a result of such forced sale. The DuPont Ownership Cap is initially 20% and is subject to reduction (x) automatically, in the event that DuPont transfers any of its shares to a third party not a member of the DuPont Group (other than in certain limited circumstances) and (y) after the expiration of specified time periods, if DuPont fails to purchase Shares in open-market transactions sufficient to bring its ownership level to that permitted under the Investment Agreement. RIGHTS OF DUPONT UPON CHANGE OF CONTROL; COMPETING INVESTMENT. Under the Investment Agreement, as long as DuPont's Ownership Cap is 18% or more, (i) DuPont is entitled to 30 days' prior notice of, and a full and fair opportunity to participate in any auction leading up to, the sale of the Company or other business combination constituting a Change in Control of Pioneer (which is defined to include the acquisition by any person or group of Shares representing a common stock economic equivalent percentage ownership in Pioneer of 30% (or, in certain cases, up to 40%) or more and a merger or other business combination transaction in which the Company's stockholders own less than 50% of the total voting power or common equity of the surviving entity) and (ii) the Company is prohibited from consummating or entering into a binding agreement for a Competing Investment (defined as an equity investment in the Company exceeding a specified size by one of the eight competitors designated by DuPont on an annual basis) for a period of four years after the date of the Agreements and thereafter DuPont is accorded certain rights in the event a Competing Investment is proposed or consummated. The size of equity investment in Pioneer treated as a Competing Investment ranges from 10% or more if certain conditions (such as if competitor has the right to designate a Board member) to 15% or more under other circumstances. In any event, a transaction constituting a Change in Control will be governed exclusively by the provisions described above applicable to a Change in Control of Pioneer and not the provisions for Competing Investment. See "Joint Venture Formation Agreement" under Section 8, "Background and Purpose of the Offer; Certain Effects of the Offer," above. If the Company consummates a Competing Investment after the fourth anniversary of the date of the Agreements, DuPont is entitled to 30 days' prior written notice of the proposed Competing Investment and to declare a Release Event (as defined in the Investment Agreement) to have occurred, in which event DuPont will have the right, if such Release Event occurs, within the first three years after the end of the initial four year period, to purchase Pioneer's joint venture interest for fair market value as described above and thereafter, to trigger an auction process in which the highest bidder as between DuPont and Pioneer will have the right to purchase the joint venture interest of the other. In addition, upon the occurrence of any Release Event, the termination of the Formation Agreement or the Research Alliance Agreement other than as a result of willful and substantial breach of material terms by Pioneer, and the sale, except under certain defined conditions, by DuPont of its Agricultural Products division, DuPont will lose its right to nominate its designees to the Pioneer Board and shall cause its nominees to resign. In addition, DuPont will thereafter be required to vote all shares in favor of the Board slate and in proportion to all other votes of the other stockholders of the Company on all other matters. DuPont will also lose certain other rights as a stockholder under the Investment Agreement, including its rights with respect to change in control of Pioneer and with respect to Competing Investments. DuPont will also thereafter be subject to certain standstill restrictions in perpetuity. In addition, certain provisions of the Investment Agreement will survive a transaction constituting a change in control of Pioneer if DuPont has a significant equity stake in (and no other person or group owns more than 50% of) the surviving company. CERTAIN EFFECTS OF THE OFFER. Consummation of the Offer will have the effect of increasing the proportionate economic interest and, depending upon whether, and the extent to which, Shares tendered into the Offer and Shares that remain outstanding after the Offer have five votes or one vote per share under the Company's time phased five for one voting rights structure, the relative voting interest of stockholders who do not tender Shares into the Offer. The Company has not been advised and has not inquired whether or not the members of the Wallace family (other than H. Scott Wallace who is a director 26 of the Company and who has advised the Company that he is undecided as to whether or not to tender the Shares owned by him) intend to tender any Shares pursuant to the Offer. 9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES As of September 25, 1997, there were 82,222,935 Shares outstanding, 16,444,586 Shares issuable upon conversion of all outstanding Preferred Stock owned by DuPont, and no Shares issuable upon exercise of vested stock options under the Company's stock option plans or agreements related thereto. As of September 24, 1997, the Company's directors and executive officers as a group (35 persons) beneficially owned 2,278,103 Shares which constituted 2.31% of the outstanding Shares at such time (including for this purpose, the Shares into which the Preferred Stock owned by DuPont is convertible). The Company has been advised that, other than with respect to two of its directors (one of whom, Dr. Owen J. Newlin, has advised the Company of his intention to tender 180,000 Shares owned by such director pursuant to the Offer and the other of whom, H. Scott Wallace, has advised the Company that he is undecided as to whether to tender up to 50,000 Shares owned by him), none of its directors or executive officers intends to tender any Shares pursuant to the Offer. If the Company purchases 16,444,586 Shares pursuant to the Offer (approximately 16.67% of the outstanding Shares as of September 25, 1997 including, for this purpose, the Shares into which the Preferred Stock owned by DuPont is convertible), and if no director or executive officer (other than the one director referred to above who intends to tender Shares) tenders Shares pursuant to the Offer, then, after the purchase of Shares pursuant to the Offer, the Company's directors and executive officers as a group would beneficially own approximately 2.55% of the outstanding Shares (including, for this purpose, the Shares into which the Preferred Stock owned by DuPont is convertible). In addition to the foregoing, 997,000 Shares are issuable to the Company's directors and officers as a group upon exercise of outstanding unvested options under the Company's stock option plans or agreements relating thereto, which options are eligible for vesting at various times through 2002. Except as set forth in Schedule I hereto, based upon the Company's records and upon information provided to the Company by its directors, executive officers, associates and subsidiaries, neither the Company nor any of its associates or subsidiaries or persons controlling the Company nor, to the best of the Company's knowledge, any of the directors or executive officers of the Company or any of its subsidiaries, nor any associates or subsidiaries of any of the foregoing, has effected any transactions in the Shares during the 40 business days prior to the date hereof. Except as set forth in this Offer to Purchase, neither the Company or any person controlling the Company nor, to the Company's knowledge, any of its directors or executive officers, is a party to any contract, arrangement, understanding or relationship with any other person relating, directly or indirectly, to the Offer with respect to any securities of the Company (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations). 10. SOURCE AND AMOUNT OF FUNDS Assuming that the Company purchases 16,444,586 Shares pursuant to the Offer at a purchase price of $104 per Share, the Company expects the maximum aggregate cost of the Offer itself to be approximately $1.71 billion. The funds necessary to purchase Shares pursuant to the Offer will come from the proceeds previously received by the Company from the sale of Preferred Stock to DuPont, the funds necessary to pay all related fees and expenses of the Offer and the Transactions will come from the Company's working capital. 11. CERTAIN INFORMATION ABOUT THE COMPANY Pioneer's business is the broad application of the science of genetics to develop, produce and market hybrids of corn, sorghum and sunflowers and varieties of soybeans, alfalfa, wheat and canola. Pioneer also produces microbial products including inoculants for high-moisture corn silage, hay and other forages. Pioneer's principal executive offices are located at 700 Capital Square, 400 Locust Street, Des Moines, Iowa 50309, and Pioneer's telephone number is (515) 248-4800. 27 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION The following table presents summary historical consolidated financial data for the periods indicated. The historical financial data (other than the book value per share and the ratio of earnings to fixed charges) for the years ended August 31, 1996 and 1995 were derived from the audited consolidated financial statements contained in the Company's Annual Report to Shareholders for the year ended August 31, 1996 and for the nine months ended May 31, 1997 were derived from the unaudited consolidated condensed financial statements contained in the Company's Quarterly Report to Shareholders for the nine months ended May 31, 1997. The following summary financial information should be read in conjunction with, and is qualified in its entirety by reference to, the audited and unaudited financial statements and related notes, and other information pertaining to the Company, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in the Annual Report to Shareholders for the year ended August 31, 1996 and the Quarterly Report to Shareholders for the nine months ended May 31, 1997 referred to above. Copies of these reports may be obtained from the Commission in the manner specified in "Additional Information" below. 28 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (IN MILLIONS, EXCEPT PER SHARE INFORMATION)
MAY 31, AUGUST 31, AUGUST 31, 1997 1996 1995 ------------- ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents................................................. $ 183 $ 99 $ 84 Accounts and notes receivable, net........................................ 489 243 209 Inventories: Finished seed........................................................... 288 209 280 Unfinished seed......................................................... 94 163 140 Other................................................................... 7 10 6 Deferred income taxes..................................................... 59 58 49 Prepaid expenses and other current assets................................. 11 2 2 ------ ----------- ----------- Total current assets.................................................... $ 1,131 $ 784 $ 770 LONG-TERM ASSETS............................................................ $ 87 $ 81 $ 41 PROPERTY AND EQUIPMENT, net of accumulated depreciation and allowances May 31, 1997 - $499 August 31, 1996 - $475 August 31, 1995 - $438.................................................... $ 542 $ 510 $ 472 INTANGIBLES................................................................. $ 66 $ 47 $ 10 ------ ----------- ----------- $ 1,826 $ 1,422 $ 1,293 ------ ----------- ----------- ------ ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings....................................................... $ 28 $ 13 $ 58 Current maturities of long-term debt........................................ 5 12 53 Accounts payable, trade..................................................... 167 89 58 Accrued compensation........................................................ 52 65 45 Income taxes payable........................................................ 181 63 23 Other accruals.............................................................. 49 46 43 ------ ----------- ----------- Total current liabilities............................................... $ 482 $ 288 $ 280 ------ ----------- ----------- LONG-TERM DEBT.............................................................. $ 32 $ 25 $ 18 ------ ----------- ----------- DEFERRED ITEMS Postretirement benefits..................................................... $ 42 $ 40 $ 37 Other....................................................................... 46 44 38 ------ ----------- ----------- $ 88 $ 84 $ 75 ------ ----------- ----------- MINORITY INTEREST IN SUBSIDIARIES........................................... $ 7 $ 7 $ 7 ------ ----------- ----------- SHAREHOLDERS' EQUITY Preferred stock, no par value............................................... $ -- $ -- $ -- Common stock, $1 par value.................................................. 93 93 93 Additional paid-in capital.................................................. 41 23 18 Retained earnings........................................................... 1,499 1,272 1,118 Unrealized gain on available-for-sale securities, net....................... 17 11 -- Cumulative translation adjustment........................................... (13) (3) 1 ------ ----------- ----------- $ 1,637 $ 1,396 $ 1,230 Less: Cost of common shares acquired for the treasury....................... (393) (364) (303) Unearned compensation....................................................... (27) (14) (14) ------ ----------- ----------- $ 1,217 $ 1,018 $ 913 ------ ----------- ----------- $ 1,826 $ 1,422 $ 1,293 ------ ----------- ----------- ------ ----------- ----------- Book Value per share of common stock outstanding at balance sheet date...... $ 14.81 $ 12.35 $ 10.93
29 PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE AND RATIO INFORMATION)
FOR THE YEAR ENDED ------------------------ AUGUST 31, AUGUST 31, 1996 1995 NINE MONTHS ----------- ----------- ENDED MAY 31, 1997 ------------- (UNAUDITED) Net sales.................................................................. $ 1,642 $ 1,721 $ 1,532 ------ ----------- ----------- Operating costs and expenses: Cost of goods sold....................................................... $ 700 $ 727 $ 642 Research and product development......................................... 103 136 130 Selling.................................................................. 305 382 354 General and administrative............................................... 96 129 126 ------ ----------- ----------- $ 1,204 $ 1,374 $ 1,252 ------ ----------- ----------- Operating income......................................................... $ 438 $ 347 $ 280 Investment income.......................................................... 16 22 23 Interest expense........................................................... (6) (11) (13) Net exchange and other gains (losses)...................................... -- (4) 1 ------ ----------- ----------- Income before items shown below.......................................... $ 448 $ 354 $ 291 Provision for income taxes................................................. (161) (127) (106) Minority interest and other................................................ (2) (4) (2) ------ ----------- ----------- Net income............................................................... $ 285 $ 223 $ 183 ------ ----------- ----------- ------ ----------- ----------- Income per common share.................................................... $ 3.46 $ 2.68 $ 2.16 Dividends per common share................................................. $ .69 $ .83 $ .71 Weighted average number of common shares outstanding....................... 82.3 83.2 84.5 Ratio of earnings to fixed charges(1)...................................... 65.5 30.1 21.3
- -------------------------- (1) For purposes of determining the ratio of earnings to fixed charges, earnings consist of income before provision for income taxes plus fixed charges. Fixed charges consist of interest expense (including amortization of deferred financing costs) and that portion of rent expense estimated to be representative of the interest factor. 30 PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following table presents summary unaudited pro forma consolidated financial data for the periods indicated. The unaudited pro forma financial data (other than the book value per share and the ratio of earnings to fixed charges) for the year ended August 31, 1996 was derived from the audited consolidated financial statements contained in the Company's Annual Report to Shareholders for the year ended August 31, 1996. The unaudited pro forma financial data for the nine months ended May 31, 1997 was derived from the unaudited consolidated financial statements for the nine months ended May 31, 1997. The following summary financial information should be read in conjunction with, and is qualified in its entirety by reference to, the audited and unaudited financial statements and related notes, and other information pertaining to the Company, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained in the Annual Report to Shareholders for the year ended August 31, 1996 and the Quarterly Report to Shareholders for the nine months ended May 31, 1997 referred to above. Copies of these reports may be obtained from the Commission in the manner specified in "Additional Information" below. The unaudited pro forma information does not purport to represent what the results of operation or financial position of the Company would actually have been if these transactions had in fact occurred on such date or to project the Company's financial position or results of operation for any future period. On a pro forma basis, assuming (a) the acquisition by DuPont of 164,445.86 shares of Preferred Stock (which represents a common stock equivalent of 16,444,586 Shares) on the Share equivalent basis of $104 per Share and (b) assuming the maximum number of Shares of 16,444,586 shares at the maximum price of $104 per Share are repurchased pursuant to the Offer and that both these transactions took place on either August 31, 1996 or May 31, 1997, the effect on the consolidated balance sheets and the book value per Share of the Company as of August 31, 1996 and May 31, 1997 would not be material. Assuming that transaction (a) took place at the beginning of the respective periods, and transaction (b) took place 30 days later, the effect on the consolidated statements of income for the nine months ended May 31, 1997 and the year ended August 31, 1996, including the effect on the ratio of earnings to fixed changes for the respective periods would not be material. On a pro forma basis, assuming (a) the acquisition by DuPont of 164,445.86 shares of Preferred Stock (which represents a common stock equivalent of 16,444,586 Shares) on the Share equivalent basis of $104 per Share and (b) assuming the maximum number of Shares of 16,444,586 shares at the minimum price of $88 per share are repurchased pursuant to the Offer and that both of these transactions took place on either May 31, 1997 or August 31, 1996, the effect on the consolidated balance sheets at May 31, 1997 and August 31, 1997 would be to increase the items set forth below by approximately $252 million, the difference between the funds received from DuPont and the cost of the Shares repurchased. Additionally, book value per Share would increase as set forth below. Assuming that transaction (a) took place at the beginning of the respective period and transaction (b) took place 30 days later, the effect on the consolidated statements of income for the nine-month period ended May 31, 1997 and the year ended August 31, 1996 would be to increase the items set forth below for the earnings from the investment of the excess funds resulting from these two transactions. The ratio of earnings to fixed charges would increase as set forth below. 31 PRO FORMA FINANCIAL INFORMATION (CONTINUED) (UNAUDITED) CONSOLIDATED BALANCE SHEET ITEMS
MAY 31, 1997 AUGUST 31, 1996 ------------------------ ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA (IN MILLIONS, EXCEPT PER SHARE INFORMATION) Cash and cash equivalents.......................................... $ 183 $ 435 $ 99 $ 351 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Current assets..................................................... $ 1,131 $ 1,383 $ 784 $ 1,036 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total assets....................................................... $ 1,826 $ 2,078 $ 1,422 $ 1,674 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shareholders' equity............................................... $ 1,217 $ 1,469 $ 1,018 $ 1,270 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Book Value per share of common stock and common stock equivalents outstanding at balance sheet date................................ $ 14.81 $ 17.87 $ 12.35 $ 15.41
CONSOLIDATED STATEMENTS OF INCOME ITEMS
NINE MONTHS ENDED YEAR ENDED MAY 31, 1997 AUGUST 31, 1996 ------------------------ ------------------------ HISTORICAL PRO FORMA HISTORICAL PRO FORMA (IN MILLIONS, EXCEPT PER SHARE AND RATIO INFORMATION) Investment income.................................................. $ 16 $ 33 $ 22 $ 43 ----- ----- ----- ----- ----- ----- ----- ----- Provision for income taxes......................................... $ (161) $ (167) $ (127) $ (135) ----- ----- ----- ----- ----- ----- ----- ----- Net income......................................................... $ 285 $ 296 $ 223 $ 236 ----- ----- ----- ----- ----- ----- ----- ----- Net income per share of common stock and common stock equivalents...................................................... $ 3.46 $ 3.51 $ 2.68 $ 2.79 Weighted average number of shares of common stock and common stock equivalents outstanding.......................................... 82.3 84.1 83.2 84.5 Ratio of earnings to fixed charges................................. 65.5 68.0 30.1 31.8
ADDITIONAL INFORMATION. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 2120, Washington D.C. 20549; at its regional offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, New York, New York 10048. Copies of such material may also be obtained by mail, upon payment of the Commission's customary charges, from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission also maintains a Web site on the World Wide Web at http: / /www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such reports, proxy statements and other information concerning the Company also can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005, on which the Shares are listed. 32 12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT The Company's purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and is likely to reduce the number of stockholders. Nonetheless, there will still be a sufficient number of Shares outstanding and publicly traded following the Offer to ensure a continued trading market in the Shares. Based on the published guidelines of the NYSE, the Company does not believe that its purchase of Shares pursuant to the Offer will cause its remaining Shares to be delisted from such exchange. The Shares are currently "margin securities" under the rules of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. The Company believes that, following the purchase of Shares pursuant to the Offer, the Shares will continue to be "margin securities" for purposes of the Federal Reserve Board's margin regulations. The Shares are registered under the Exchange Act, which requires, among other things, that the Company furnish certain information to its stockholders and to the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's stockholders. The Company believes that its purchase of Shares pursuant to the Offer will not result in the Shares becoming eligible for deregistration under the Exchange Act. 13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS The Company is not aware of any license or regulatory permit that appears to be material to its business that might be adversely affected by its acquisition of Shares as contemplated in the Offer or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the Company's acquisition or ownership of Shares as contemplated by the Offer. Should any such approval or other action be required, the Company currently contemplates that it will seek such approval or other action. The Company cannot predict whether it may determine that it is required to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. The Company's obligations under the Offer to accept for payment and pay for Shares are subject to certain conditions. See Section 6. 14. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES The following summary describes certain United States federal income tax consequences relevant to the Offer. The discussion contained in this summary is based upon the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and proposed United States Treasury regulations promulgated thereunder, rulings, administrative pronouncements and judicial decisions, changes to any of which could materially affect the tax consequences described herein and could be made on a retroactive basis. As discussed below, depending upon a stockholder's particular circumstances, the Company's purchase of such stockholder's Shares pursuant to the Offer may be treated either as a sale or a dividend for United States federal income tax purposes. Accordingly, such a purchase generally will be referred to in this section of the Offer to Purchase as an exchange of Shares for cash. This summary does not apply to Shares acquired as compensation (including Shares acquired upon the exercise of options or which were or are subject to forfeiture restrictions). The summary also does not address the state, local or foreign tax consequences of participating in the Offer. The summary discusses only Shares held as capital assets, within the meaning of Section 1221 of the Code, and does not address all of the tax consequences that may be relevant to particular stockholders in light of their personal circumstances, or to certain types of stockholders (such as certain financial institutions, foreign holders, 33 dealers in securities or commodities, insurance companies, tax-exempt organizations or persons who hold Shares as a position in a "straddle" or as a part of a "hedging" or "conversion" transaction for United States federal income tax purposes). In particular, the discussion of the consequences of an exchange of Shares for cash pursuant to the Offer applies only to a United States Holder. For purposes of this summary, a "United States Holder" is a beneficial owner of Shares that is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof (other than any partnership treated as foreign under United States Treasury regulations), or (iii) an estate or trust, the income of which is subject to United States federal income taxation regardless of its source. EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF PARTICIPATION IN THE OFFER. UNITED STATES HOLDERS WHO RECEIVE CASH PURSUANT TO THE OFFER. An exchange of Shares for cash pursuant to the Offer by a United States Holder will be a taxable transaction for United States federal income tax purposes. As a consequence of the exchange, a United States Holder, depending on such holder's particular circumstances will be treated either as having sold such holder's Shares or as having received a dividend distribution from the Company, with the tax consequences described below. Under Section 302 of the Code, a United States Holder whose Shares are exchanged pursuant to the Offer will be treated as having sold such Shares, and thus will recognize gain or loss, if the exchange (i) is "not essentially equivalent to a dividend" with respect to the holder, (ii) is "substantially disproportionate" with respect to such holder or (iii) results in "complete termination" of such holder's equity interest in the Company, each as discussed below. In applying these tests, a United States Holder will be treated as owning Shares actually or constructively owned by certain related individuals and entities. Further, for purposes of applying the tests described in clauses (i) and (ii), the Company believes it would be proper to treat the Preferred Stock as having been issued simultaneously with the Offer, and thus believes it would be proper for a United States Holder to disregard the Preferred Stock in determining its interest in the Company immediately prior to the Offer, but to take into account the Preferred Stock in determining its interest in the Company immediately after the Offer. If a United States Holder sells Shares to persons other than the Company at or about the time such holder also sells Shares to the Company pursuant to the Offer, and the various sales effected by the holder are part of an overall plan to reduce or terminate such holder's proportionate interest in the Company, then the sales to persons other than the Company may, for United States federal income tax purposes, be integrated with the holder's exchange of Shares pursuant to the Offer and, if integrated, should be taken into account in determining whether the holder satisfies any of the three tests described below. A United States Holder will satisfy the "not essentially equivalent to a dividend" test if the reduction in such holder's proportionate interest in the Company constitutes a "meaningful reduction" given such holder's particular facts and circumstances. The IRS has indicated in published rulings that any reduction in the proportionate interest of a stockholder whose relative stock interest in a publicly-held corporation is minimal and who exercises no control over corporate affairs should constitute such a "meaningful reduction." The IRS has further indicated that in determining whether the proportionate interest of a United States Holder is reduced for this purpose, consideration will be given to changes in both the holder's equity and voting interests in the Company. An exchange of Shares will generally be "substantially disproportionate" with respect to a United States Holder if (a) the ratio which the Shares owned actually and constructively by the holder immediately after the redemption bears to all of the voting stock of the Company at such time is less than 80% of the ratio which the Shares owned actually and constructively by the holder immediately before the redemption bears to all of the voting stock of the Company at such time and (b) the United States Holder's actual and constructive ownership of the aggregate common stock of the Company (including, for this purpose, the Preferred Stock) on a fair market value basis also satisfies the 80% requirement described in clause (a). 34 A United States Holder that exchanges all Shares actually or constructively owned by such holder for cash pursuant to the Offer will be treated as having completely terminated such holder's equity interest in the Company. If a United States Holder could meet the complete termination of interest test but for attribution from family members, such attribution can be waived if a number of requirements are met, including the timely filing of an agreement with the Internal Revenue Service. If a United States Holder is treated as having sold such holder's Shares under any of the tests described above, such holder will recognize gain or loss equal to the difference between the amount of cash received and such holder's tax basis in the Shares exchanged therefor. Any such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the holding period of the Shares exceeds one year as of the date of the exchange. Calculation of gain or loss must be made separately for each block of Shares exchanged by a United States Holder. A United States Holder may be able to designate which blocks and the order of such blocks of Shares to be tendered pursuant to the Offer. In the case of a non-corporate holder of Shares, long-term capital gains will be subject to tax at a reduced rate, and will be treated as long-term capital gain eligible for a further reduced rate if the Shares are held for more than eighteen months. If a United States Holder who exchanges Shares pursuant to the Offer is not treated under Section 302 as having sold such holder's Shares, the entire amount of cash received by such holder will be treated as a dividend to the extent of the Company's current and accumulated earnings and profits, which the Company anticipates will be sufficient to cover the amount of any such dividend and will be includible in the holder's gross income as ordinary income in its entirety, without reduction for the tax basis of the Shares exchanged. No loss will be recognized. The United States Holder's tax basis in the Shares exchanged generally will be added to such holder's tax basis in such holder's remaining Shares. To the extent that cash received in exchange for Shares is treated as a dividend to a corporate United States Holder, such holder will be, (i) eligible for a dividends received deduction (subject to applicable limitations) and (ii) subject to the "extraordinary dividend" provisions of the Code (in which case the nontaxed portion of the dividend would reduce a corporate holder's adjusted tax basis in the Shares exchanged, but not below zero, and would thereafter be taxable as capital gain from the sale or exchange of the exchanged Shares). To the extent, if any, that the cash received by a United States Holder is not a dividend because the Company does not have sufficient current and accumulated earnings and profits, it will be treated first as a tax-free return of such holder's tax basis in the Shares and thereafter as capital gain. The Company cannot predict whether or to what extent the Offer will be oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant to the Offer will cause the Company to accept fewer Shares than are tendered. Therefore, a Holder can be given no assurance that a sufficient number of such Holder's Shares will be exchanged pursuant to the Offer to ensure that such exchange will be treated as a sale, rather than as a dividend, for United States federal income tax purposes pursuant to the rules discussed above. STOCKHOLDERS WHO DO NOT RECEIVE CASH PURSUANT TO THE OFFER. Stockholders, none of whose Shares are exchanged pursuant to the Offer, will not incur any tax liability as a result of the consummation of the Offer. See Section 3 with respect to the application of United States federal income tax withholding to payments made to foreign stockholders and backup withholding. THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS. 35 15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS The Company expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 6 shall have occurred or shall be deemed by the Company to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any Shares by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. The Company also expressly reserves the right, in its sole discretion, to terminate the Offer and not accept for payment or pay for any Shares not theretofore accepted for payment or paid for or, subject to applicable law, to postpone payment for Shares upon the occurrence of any of the conditions specified in Section 6 hereof by giving oral or written notice of such termination or postponement to the Depositary and making a public announcement thereof. The Company's reservation of the right to delay payment for Shares which it has accepted for payment is limited by Rules 13e-4(f)(2) and 13e-4(f)(5) promulgated under the Exchange Act, which require that the Company must pay the consideration offered or return the Shares tendered promptly after termination or withdrawal of a tender offer. Subject to compliance with applicable law, the Company further reserves the right, in its sole discretion, and regardless of whether any of the events set forth in Section 6 shall have occurred or shall be deemed by the Company to have occurred, to amend the Offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the Offer to holders of Shares or by decreasing or increasing the number of Shares being sought in the Offer). Amendments to the Offer may be made at any time and from time to time by public announcement thereof, such announcement, in the case of an extension, to be issued no later than 9:00 a.m., New York City time, on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to stockholders in a manner reasonably designated to inform stockholders of such change. Without limiting the manner in which the Company may choose to make any public announcement, except as provided by applicable law (including Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act), the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Company makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer (including by exercising its sole discretion under Section 6 to conclude that a condition set forth in Section 6 has not occurred under circumstances in which a reasonable person could conclude that such condition had in fact occurred), the Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which require the minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price or a change in percentage of securities sought) will depend upon the facts and circumstances, including the relative materiality of such terms or information. If (i) the Company increases or decreases the price to be paid for Shares, the Company increases or decreases the Dealer Manager's soliciting fee, the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares, or the Company decreases the number of Shares being sought, and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given, the Offer will be extended until the expiration of such period of ten business days. 16. FEES AND EXPENSES The Company has retained Lazard Freres & Co. LLC ("Lazard") to act as the dealer manager in connection with the Offer. Lazard will receive a fee for its services as dealer manager pursuant to the Offer of $800,000 if any Shares are purchased by the Company pursuant to the Offer. The Company has agreed to reimburse Lazard for certain expenses incurred in connection with the Offer, including out-of-pocket expenses and the reasonable fees and disbursements of their counsel and to indemnify Lazard against 36 certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. Lazard has rendered various investment banking and other advisory services to the Company in the past, including, by acting as financial advisor to the Company in connection with the Transactions, for which Lazard received an aggregate fee of $7,000,000, and may render similar services to the Company in the future. The Company has retained D.F. King & Co., Inc. as Information Agent and BankBoston, N.A. as Depositary in connection with the Offer. The Information Agent and the Depositary will receive reasonable and customary compensation for their services. The Company will also reimburse the Information Agent and the Depositary for out-of-pocket expenses, including reasonable attorneys' fees, and has agreed to indemnify the Information Agent and the Depositary against certain liabilities in connection with the Offer, including certain liabilities under the federal securities laws. The Dealer Manager and Information Agent may contact stockholders by mail, telephone, telex, telegraph and personal interviews, and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners. Neither the Information Agent nor the Depositary has been retained to make solicitations or recommendations in connection with the Offer. The Company will not pay fees or commissions to any broker, dealer, commercial bank, trust company or other person (other than the Dealer Manager) for soliciting any Shares pursuant to the Offer. The Company will, however, on request, reimburse such persons for customary handling and mailing expenses incurred in forwarding materials in respect of the Offer to the beneficial owners for which they act as nominees. No such broker, dealer, commercial bank or trust company has been authorized to act as the Company's agent for purposes of the Offer. The Company will pay (or cause to be paid) any stock transfer taxes on its purchase of Shares, except as otherwise provided in Instruction 7 of the Letter of Transmittal. 17. MISCELLANEOUS The Company is not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If the Company becomes aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction the securities or blue sky laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on the Company's behalf by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4 (the "Schedule 13E-4") which contains additional information with respect to the Offer. The Schedule 13E-4, including the exhibits and any amendments thereto, may be examined, and copies may be obtained, at the same places and in the same manner as is set forth in Section 11 with respect to information concerning the Company. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE COMPANY OR THE DEALER MANAGER IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER MANAGER. PIONEER HI-BRED INTERNATIONAL, INC. September 25, 1997 37 SCHEDULE I CERTAIN TRANSACTIONS INVOLVING SHARES Based upon the Company's records and upon information provided to the Company by its directors, executive officers, associates and subsidiaries, except as described below, neither the Company nor any of its associates, subsidiaries or persons controlling the Company nor, to the best of the Company's knowledge, any of the directors or executive officers of the Company or any of its subsidiaries, nor any associates or subsidiary of any of the foregoing, has effected any transactions in the Shares during the 40 business days prior to September 25, 1997. There was a sale of 900 Shares in open market transactions on August 26, 1997 at an average sales price of $87.222 per share by Paul E. Schickler, a vice president of the Company. Pursuant to the Company's Stock Purchase Plan, as of September 4, 1997, each of Herman H.F. Wijffels, a director of the Company, Jerry L. Chicoine, Executive Vice President and Chief Operating Officer of the Company, and Dr. James E. Miller, a vice president of the Company, purchased 11.5030, 5.7313 and 1.1503 Shares, respectively, at a purchase price of $86.9375 per Share. Leon R. Shearer, a vice president of the Company, was granted an option on August 17, 1997 covering an aggregate of 12,000 Shares, exercisable at $85.1875 per Share in equal installments in each of the third, fourth and fifth years following the grant. 38 Facsimile copies of the Letter of Transmittal will be accepted from Eligible Institutions only. The Letter of Transmittal (or an Agent's Message in lieu thereof) and certificates for the Shares and any other required documents should be sent or delivered by each stockholder or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at its address set forth below: THE DEPOSITARY FOR THE OFFER IS: BANKBOSTON, N.A. BY MAIL VIA RETURN ENVELOPE: BankBoston, N.A. Corporate Reorganization P.O. Box 8029 Boston, MA 02266-8029 BY HAND: Securities Transfer and Reporting Services, Inc. c/o Boston EquiServe L.P. Corporate Reorganization 1 Exchange Plaza/55 Broadway 3rd Floor New York, NY 10006 BY OVERNIGHT OR EXPRESS MAIL: BankBoston, N.A. Corporate Reorganization Mail Stop 45-01-40 150 Royall Street Canton, MA 02021 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (617) 575-2232/2233 CONFIRM FACSIMILE TRANSMISSIONS BY TELEPHONE: (800) 730-4001 Any questions or requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent, at the telephone number and address below. Stockholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer. To confirm delivery of Shares, stockholders are directed to contact the Depositary. THE INFORMATION AGENT FOR THE OFFER IS: D.F. KING & CO., INC. 77 Water Street New York, NY 10005 Banks and Brokers, call collect: (212) 269-5550 All others, call toll-free: (800) 290-6429 THE DEALER MANAGER FOR THE OFFER IS: LAZARD FRERES & CO. LLC 30 Rockefeller Plaza New York, New York 10020 (212) 632-6717 EX-99.(A)2 3 LOT LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF PIONEER HI-BRED INTERNATIONAL, INC. PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 25, 1997 - -------------------------------------------------------------------------------- THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- THE DEPOSITARY FOR THE OFFER IS: BANKBOSTON, N.A. BY MAIL VIA RETURN ENVELOPE: BY HAND: BY OVERNIGHT OR BankBoston, N.A. Securities Transfer and EXPRESS MAIL: Corporate Reorganization Reporting Services, Inc. BankBoston, N.A. P.O. Box 8029 c/o Boston EquiServe L.P. Corporate Reorganization Boston, MA 02266-8029 1 Exchange Plaza/ Mail Stop 45-01-40 55 Broadway, 3rd Floor 150 Royall Street New York, NY 10006 Canton, MA 02021 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (617) 575-2232/2233 CONFIRM FACSIMILE TRANSMISSION BY TELEPHONE: (800) 730-4001
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. / / IF ANY OF THE CERTIFICATES FOR THE SHARES THAT YOU OWN HAVE BEEN LOST OR DESTROYED, CHECK THIS BOX AND SEE INSTRUCTION 16. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX
---------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) ---------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S) TENDERED** ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- TOTAL SHARES - ------------------------------------------------------------------------------------------------------ Indicate in this box the order (by certificate number) in which Shares are to be purchased in the event of proration.*** (Attach an additional signed list if necessary.) See Instruction 15. 1st 2nd 3rd 4th 5th - ---------------------------------------------------------------------------------------------------- * Need not be completed by stockholders tendering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by each Share certificate delivered to the Depositary are being tendered hereby. See Instruction 4. *** If you do not designate an order, then in the event less than all Shares tendered are purchased due to proration, Shares will be selected for purchase by the Depositary. - ----------------------------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERY TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY. This Letter of Transmittal is to be used only if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). THIS LETTER OF TRANSMITTAL MAY BE USED FOR SHARES CREDITED TO ACCOUNTS IN THE COMPANY'S DIVIDEND REINVESTMENT PLAN (THE "DIVIDEND REINVESTMENT PLAN") (SEE BOX ENTITLED "DIVIDEND REINVESTMENT PLAN SHARES"). Stockholders who cannot deliver their Share certificates and any other documents required to the Depositary by the Expiration Date (as defined in the Offer to Purchase) (or who are unable to comply with the procedures for book- entry transfer on a timely basis) must tender their Shares using the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. Ladies and Gentlemen: The undersigned hereby tenders to Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), the above-described shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at the price per Share indicated in this Letter of Transmittal, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). Absent circumstances causing the Rights to become exercisable or separately tradeable prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. Unless the context requires otherwise, all references herein to Shares include the associated Rights. Subject to, and effective upon, acceptance for payment of, and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to all the Shares that are being tendered hereby or orders the registration of such Shares tendered by book-entry transfer that are purchased pursuant to the Offer to or upon the order of the Company and hereby irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to: (i) deliver certificates for such Shares, or transfer ownership of such Shares on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Company upon receipt by the Depositary, as the undersigned's agent, of the Purchase Price (as defined below) with respect to such Shares; (ii) present certificates for such Shares for cancellation and transfer on the books of the Company; and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants to the Company that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that, when and to the extent the same are accepted for payment by the Company, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. The undersigned represents and warrants to the Company that the undersigned has read and agrees to all of the terms of the Offer. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions will constitute the undersigned's representation and warranty to the Company that (i) the undersigned has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, and (ii) the tender of such Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates and the number of Shares that the undersigned wishes to tender should be indicated in the appropriate boxes on this Letter of Transmittal. The undersigned understands that the Company will determine a single per Share price (not greater than $104 nor less than $88 per Share), net to the Seller in cash (the "Purchase Price"), that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The undersigned understands that the Company will select the lowest Purchase Price that will allow it to purchase 16,444,586 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) validly tendered and not withdrawn pursuant to the Offer. The undersigned understands that all Shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, net to the seller in cash, upon the terms and subject to the conditions of the Offer, including its proration provisions, and that the Company will return all other Shares, including Shares tendered at prices greater than the Purchase Price and not withdrawn and Shares not purchased because of proration. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for Shares tendered or may not be required to purchase any of the Shares tendered hereby or may accept for payment fewer than all of the Shares tendered hereby. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld), and/or return any Shares not tendered or not purchased, in the name(s) of the undersigned (or, in the case of Shares tendered by book-entry transfer, by credit to the account at the applicable Book-Entry Transfer Facility). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld), and/or any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate), to the undersigned at the address shown below the undersigned's signature. In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld), and/or return any Shares not tendered or not purchased, in the name(s) of, and mail such check and/or any certificates to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof or to order the registration or transfer of such Shares tendered by book-entry transfer if the Company does not accept for payment any of the Shares so tendered. If the Special Payment Instructions are completed, all signatures on this Letter of Transmittal must be guaranteed by a firm that is an Eligible Institution (as defined in the Offer to Purchase). The undersigned understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED ------------------------ IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED MUST BE USED. (SEE INSTRUCTION 5) ------------------------ CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. ------------------------ SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / The undersigned wants to maximize the chance of having the Company purchase all the Shares the undersigned is tendering (subject to the possibility of proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing to accept, the Purchase Price resulting from the Dutch auction tender process. This action could result in receiving a price per Share as low as $88 or as high as $104. ***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW*** ------------------------ SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER / / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101 / / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 1/4 / / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2 / / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4 / / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102 / / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4 / / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2 / / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4 / / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103 / / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4 / / 90 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2 / / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4 / / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
ODD LOTS (SEE INSTRUCTION 9) This section is to be completed ONLY if Shares are being tendered by or on behalf of a person who is the beneficial or record owner of an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan). The undersigned either (check one box): / / owns beneficially or of record at the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan), all of which are being tendered; or / / is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owner thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by such beneficial owner, that such beneficial owner owns beneficially at the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan) and is tendering all of his or her Shares. If you do not wish to specify a Purchase Price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal). / / DIVIDEND REINVESTMENT PLAN SHARES (SEE INSTRUCTION 14) This section is to be completed ONLY if Shares held in the Dividend Reinvestment Plan are to be tendered. / / By checking this box, the undersigned represents that the undersigned is a participant in the Dividend Reinvestment Plan and hereby instructs the Plan Administrator to tender on behalf of the undersigned the following number of Shares credited to the Dividend Reinvestment Plan account of the undersigned at the Purchase Price per Share indicated in the box entitled "Price (In Dollars) Per Share At Which Shares Are Being Transferred" in this Letter of Transmittal: ______ Shares* * The undersigned understands and agrees that all Shares held in the Dividend Reinvestment Plan account(s) of the undersigned will be tendered if the above box is checked and the space above is left blank. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the check for the aggregate Purchase Price of Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) and/or certificates for Shares not tendered or not purchased, are to be issued in the name of someone other than the undersigned. If these Special Payment Instructions are completed, all signatures on this Letter of Transmittal must be guaranteed by a firm that is an Eligible Institution (as defined in the Offer to Purchase). Issue check and/or certificates to: Name (Please Print) Address (INCLUDE ZIP CODE) (TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 8) To be completed ONLY if the check for the Purchase Price of Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) and/or certificates for Shares not tendered or not purchased, are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signatures). If these Special Delivery Instruments are completed, all signatures on this Letter of Transmittal must be guaranteed by a firm that is an Eligible Institution (as defined in the Offer of Purchase). Mail check and/or certificates to: (PLEASE PRINT) Address (INCLUDE ZIP CODE)
- -------------------------------------------------------------------------------- PLEASE SIGN HERE (To be completed by all stockholders) ________________________________________________________________________________ ________________________________________________________________________________ SIGNATURE(S) OF OWNER(S) Dated __________________________________________________________________ , 1997 Name(s) ________________________________________________________________________ ________________________________________________________________________ (PLEASE PRINT) Capacity (full title) __________________________________________________________ Address ________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. __________________________________________________________________ (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 6.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 6) Name of Firm ___________________________________________________________________ Authorized Signature ___________________________________________________________ Name ___________________________________________________________________________ ___________________________________________________________________________ (PLEASE PRINT) Title __________________________________________________________________________ Address ________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone No. __________________________________________________________________ Dated __________________________________________________________________ , 1997 - -------------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm that is an Eligible Institution (as defined in the Offer to Purchase), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal, or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 6. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be used either if Share certificates are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, a facsimile thereof) or an Agent's Message in connection with a book-entry transfer, together in each case with any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal prior to the Expiration Date. If certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Stockholders whose Share certificates are not immediately available, who cannot deliver their Share certificates and all other required documents to the Depositary or who cannot complete the procedure for delivery by book-entry transfer prior to the Expiration Date may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) must be received by the Depositary prior to the Expiration Date, and (iii) the certificates for all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, in each case together with a properly completed and duly executed Letter of Transmittal (or, for Eligible Institutions only, facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal) and any other documents required by this Letter of Transmittal, must be received by the Depositary no later than Midnight, New York City time, on the third business day after the date of the execution of the Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The term "Agent's Message" means a message from a Book-Entry Transfer Facility transmitted to, and received by, the Depositary forming a part of a timely confirmation of a book-entry transfer of Shares (a "Book-Entry Confirmation") which states that (a) such Book-Entry Transfer Facility has received from the participant in such Book-Entry Transfer Facility an express acknowledgement of such participant's tender of the Shares that are the subject of the Book-Entry Confirmation and specifying the price at which such Shares are to be tendered, (b) the participant in such Book-Entry Transfer Facility has received and agrees to be bound by the terms of the Letter of Transmittal, and (c) the Company may enforce such agreement against the participant in such Book-Entry Transfer Facility. Delivery of documents to a Book-Entry Transfer Facility in accordance with such Facility's procedures does not constitute delivery to the Depositary. The Notice of Guaranteed Delivery may be delivered by hand or by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution on the form set forth in such notice. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative or contingent tenders will be accepted. By executing this Letter of Transmittal (or, for Eligible Institutions only, a facsimile thereof), the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the Shares not purchased by the Company in the Offer will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the "Special Payment Instructions" or "Special Delivery Instructions" boxes on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be validly tendered, the stockholder must check the box indicating the price per Share at which such stockholder is tendering Shares under "Price (In Dollars) Per Share At Which Shares Are Being Tendered" in this Letter of Transmittal, except that Odd Lot Owners (as defined in Section 2 of the Offer to Purchase) may check the box above in the section entitled "Odd Lots" indicating that such stockholder is tendering all Shares at the Purchase Price determined by the Company. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR (OTHER THAN AS DESCRIBED ABOVE FOR ODD LOT OWNERS) IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. A stockholder wishing to tender portions of such stockholder's Share holdings at different prices must complete a separate Letter of Transmittal for each price at which such stockholder wishes to tender each such portion of such stockholder's Shares. The same Shares cannot be tendered (unless previously validly withdrawn as provided in Section 4 of the Offer to Purchase) at more than one price. Stockholders wishing to maximize the possibility that their Shares will be purchased at the relevant Purchase Price may check the box on the Letter of Transmittal marked "Shares Tendered at Purchase Price Determined by Dutch Auction." Checking this box may result in a Purchase Price of the Shares so tendered at the minimum price of $88. 6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signatures(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby is held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or, for Eligible Institutions only, facsimiles thereof) as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the Purchase Price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), in which case the certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such certificates. Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on such certificate(s). Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted. 7. STOCK TRANSFER TAXES. Except as provided in this Instruction, the Company will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the aggregate Purchase Price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Shares are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the Purchase Price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Section 5 of the Offer to Purchase. Except as provided in this Instruction 7, it will not be necessary to affix transfer tax stamps to the certificates representing Shares tendered hereby. 8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the Purchase Price of any Shares tendered hereby is to be issued in the name of, and/or any Shares not tendered or not purchased are to be returned to, a person other than the person(s) signing this Letter of Transmittal, or if the check and/or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to an address other than that shown above in the box captioned "Description of Shares Tendered," then the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such stockholder at the Book-Entry Transfer Facility from which such transfer was made. 9. ODD LOTS. As described in Section 1 of the Offer to Purchase, if fewer than all Shares validly tendered and not withdrawn prior to the Expiration Date are to be purchased, the Shares purchased first will consist of all Shares validly tendered and not withdrawn by any stockholder who owns beneficially or of record at the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan), and who validly tenders all such Shares (partial tenders of Shares will not qualify for this preference) and completed the box captioned "Odd Lots" in this Letter of Transmittal, and, if applicable, the Notice of Guaranteed Delivery. 10. SUBSTITUTE FORM W-9 AND FORM W-8. To prevent backup federal income tax withholding equal to 31% of the gross payments payable pursuant to the Offer, each stockholder who does not otherwise establish an exemption from backup withholding must notify the Depositary of such stockholder's correct taxpayer identification number (or certify that such taxpayer is awaiting a taxpayer identification number) and provide certain other information by completing, under penalties of perjury, the Substitute Form W-9 included in the Letter of Transmittal. Noncorporate foreign stockholders should generally complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. As more fully described below, in the case of a foreign stockholder, even if such stockholder has provided the required certification to avoid backup withholding, the Depositary will withhold 30% of the gross payments made pursuant to the Offer unless a reduced rate of withholding or an exemption from withholding is applicable. 11. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold United States federal income taxes equal to 30% of the gross payments payable to a foreign stockholder unless the Company and the Depositary determine that (i) a reduced rate of withholding is available pursuant to a tax treaty or (ii) an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business within the United States. For this purpose, a foreign stockholder is any stockholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership, or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof (other than any partnership treated as foreign under United States Treasury regulations) or (iii) an estate or trust, the income of which is subject to United States federal income taxation regardless of the source of such income. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign stockholder must deliver to the Depositary before the payment a properly completed and executed IRS Form 1001. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign stockholder must deliver to the Depositary a properly completed and executed IRS Form 4224. The Company and the Depositary will determine a stockholder's status as a foreign stockholder and eligibility for a reduced rate of, or exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (E.G., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate that such reliance thereon is not warranted. A foreign stockholder may be eligible to obtain a refund of all or a portion of any tax withheld if such stockholder meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" tests described in Section 14 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or a treaty-reduced rate of withholding. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance may be directed to the Information Agent at its telephone number and address listed below. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal or other tender offer materials may likewise be directed to the Information Agent, and such copies will be furnished promptly at the Company's expense. Stockholders may also contact their local broker, dealer, commercial bank or trust company for documents relating to, or assistance concerning, the Offer. 13. IRREGULARITIES. All questions as to the number of Shares to be accepted, the price to paid therefor and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders it determines not be in proper form or the acceptance of or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares or any particular stockholder. No tender of Shares will be deemed to be validly made until all defects or irregularities have been cured or waived. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person is or will be obligated to give notice of any defects or irregularities in tenders, and none of them will incur any liability for failure to give any such notice. 14. DIVIDEND REINVESTMENT PLAN. If a tendering stockholder desires to have tendered pursuant to the Offer Shares credited to the stockholder's account under the Dividend Reinvestment Plan, the box captioned "Dividend Reinvestment Plan Shares" should be completed. A participant in the Dividend Reinvestment Plan wishing to tender portions of such participant's Share holdings in the Dividend Reinvestment Plan at different prices must complete a separate Letter of Transmittal for each price at which such participant wishes to tender each such portion of such participant's Shares. If a stockholder authorizes a tender of Shares held in the Dividend Reinvestment Plan, all such Shares credited to such stockholder's account(s), including fractional Shares, will be tendered, unless otherwise specified in the appropriate space in the box captioned "Dividend Reinvestment Plan Shares." In the event that the box captioned "Dividend Reinvestment Plan Shares" is not completed, no Shares held in the tendering stockholder's account will be tendered. 15. ORDER OF PURCHASE IN EVENT OF PRORATION. The order in which Shares are purchased may affect the United States federal income tax consequences to a stockholder, including because, as indicated in Section 14 of the Offer to Purchase, the United States federal income tax consequences to a stockholder may vary depending on the extent to which the stockholder's voting interest in the Company is reduced and on the particular block of Shares purchased from the stockholder. The Letter of Transmittal affords each stockholder tendering shares in certificate form the opportunity to designate the order of priority in which Shares tendered are to be purchased in the event of proration for tax purposes and so as to otherwise enable stockholders who own both Shares entitled to five votes per Share and Shares entitled to one vote per Share to designate which Shares are to be tendered. See Sections 1 and 14 of the Offer to Purchase. 16. MULTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose certificates for Shares have been mutilated, lost, stolen or destroyed should contact the Depositary at the address indicated above for further instructions as soon as possible. In the event of a mutilated, lost, stolen or destroyed certificate, certain procedures will be required to be completed before this Letter of Transmittal can be processed. Because these procedures may take a substantial amount of time to complete, notice of any mutilated, lost, stolen or destroyed certificate should be provided to the Depositary as soon as possible. IMPORTANT: THIS LETTER OF TRANSMITTAL, TOGETHER WITH SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL. - ------------------------------------------------------------------------------- SUBSTITUTE Part 1 -- PLEASE PROVIDE Social security number FORM W-9 YOUR TIN IN THE BOX AT ------------------------ Department of the Treasury RIGHT AND CERTIFY BY OR ------------------------ Internal Revenue Service SIGNING AND DATING BELOW Employer identification number --------------------------------------------- Part 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) (1) The number shown on this form is my correct Taxpayer Identification Number (or I am awaiting for a number to be issued to me) and (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am not subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. --------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross Part 3 out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGNATURE ------------------------- DATE Awaiting TIN / / ------------- - -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. --------------------------------- --------------------------------- Signature Date
The Information Agent for the Offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 or All Others Can Call Toll-Free: (800) 290-6429 EX-99.(A)3 4 NOGD PIONEER HI-BRED INTERNATIONAL, INC. NOTICE OF GUARANTEED DELIVERY OF SHARES OF COMMON STOCK This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates for the shares of common stock of Pioneer Hi-Bred International, Inc. are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all other documents required by the Letter of Transmittal to be delivered to the Depositary (as defined below) prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase defined below). Such form may be delivered by hand or transmitted by mail or overnight courier, or by facsimile transmission, to the Depositary. See Section 3 of the Offer to Purchase. THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION. THE DEPOSITARY FOR THE OFFER IS: BANKBOSTON, N.A. BY MAIL VIA RETURN ENVELOPE: BY HAND: BY OVERNIGHT OR EXPRESS MAIL: BankBoston, N.A. Securities Transfer and BankBoston, N.A. Corporate Reorganization Reporting Services, Inc. Corporate Reorganization P.O. Box 8029 c/o Boston EquiServe L.P. Mail Stop 45-01-40 Boston, MA 02266-8029 1 Exchange Plaza/ 150 Royall Street 55 Broadway, 3rd Floor Canton, MA 02021 New York, NY 10006 BY FACSIMILE TRANSMISSION: (617) 575-2232/2233 CONFIRM FACSIMILE TRANSMISSION BY TELEPHONE: (800) 730-4001
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), of the Company listed below, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Unless the Rights become exercisable or separately tradeable prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. Unless the context requires otherwise, all references herein to Shares include the associated Rights. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED ------------------------ IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR EACH PRICE SPECIFIED MUST BE USED. ------------------------ CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. - -------------------------------------------------------------------------------- SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / The undersigned wants to maximize the chance of having the Company purchase all the Shares the undersigned is tendering (subject to the possibility of proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing to accept, the Purchase Price resulting from the Dutch auction tender process. This action could result in receiving a price per Share as low as $88 or as high as $104. ***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW*** - -------------------------------------------------------------------------------- SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER / / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101 / / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 1/4 / / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2 / / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4 / / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102 / / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4 / / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2 / / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4 / / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103 / / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4 / / 93 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2 / / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4 / / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
2 ODD LOTS This section is to be completed ONLY if Shares are being tendered by or on behalf of a person who owns beneficially or of record, as of the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan (as defined in the Offer to Purchase)). The undersigned either (check one box): / / owned beneficially or of record, as of the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment Plan), all of which are being tendered, or / / is a broker, dealer, commercial bank, trust company or other nominee who (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owns beneficially, as of the Expiration Date, an aggregate of fewer that 100 Shares (including Shares held in the Dividend Reinvestment Plan) and is tendering all of such Shares. If you do not wish to specify a purchase price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" above). / / Number of Shares -------------------------------------------- Certificate No.(s) (If Available) Name(s) (Please Print) - -------------------------------------------- -------------------------------------------- - -------------------------------------------- -------------------------------------------- If Shares will be tendered by -------------------------------------------- book-entry transfer: (Address) Name of Transferring Institution: - -------------------------------------------- -------------------------------------------- Account No. at (check one) Area Code and Telephone Number / / The Depository Trust Company -------------------------------------------- / / Philadelphia Depository Trust Company Signature(s)
3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or savings and loan association) having an office, branch or agency in the United States hereby guarantees (i) that the above-named person(s) has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, (ii) that such tender of Shares complies with Rule 14e-4, and (iii) to deliver to the Depositary at one of its addresses set forth above certificates for the Shares tendered hereby, in proper form for transfer, or a confirmation of the book-entry transfer of the Shares tendered hereby into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company in each case together with a properly completed and duly executed Letter(s) of Transmittal (or, for Eligible Institutions only, facsimiles thereof), or an Agent's Message in connection with a book-entry transfer, together in each case with any required signature guarantees and any other required documents, all within three New York Stock Exchange, Inc. trading days after the date hereof. - -------------------------------------------- -------------------------------------------- NAME OF FIRM AUTHORIZED SIGNATURE - -------------------------------------------- Name ADDRESS PLEASE TYPE OR PRINT - -------------------------------------------- Title CITY, STATE, ZIP CODE Area Code and Tel. No. Date, 199
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. YOUR SHARE CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL. 4 EX-99.(A)4 5 BROKER LETTER PIONEER HI-BRED INTERNATIONAL, INC. OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED. September 25, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: In our capacity as Dealer Manager, we are enclosing the material listed below relating to the offer of Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), to purchase up to 16,444,586 shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $104 nor less than $88 per Share, net to the seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). Unless the Rights become exercisable or separately tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. Unless the context otherwise requires, all references herein to Shares include the associated Rights. Also enclosed is certain other material related to the Offer. The Company will determine a single price (not greater than $104 nor less than $88 per Share), net to the seller in cash, that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to purchase 16,444,586 Shares (or such lesser number of Shares as is validly tendered at prices not greater than $104 nor less than $88 per Share) and not withdrawn pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions relating to proration described in the Offer to Purchase. See Section 1 of the Offer to Purchase. The Purchase Price will be paid in cash, net to the seller, with respect to all Shares purchased. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration will be returned. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO PURCHASE. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. The Company will, upon request, reimburse you for reasonable and necessary handling and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The Offer to Purchase. 2. The Letter of Transmittal for your use and for the information of your clients. 3. A letter to stockholders of the Company from Charles S. Johnson, President and Chief Executive Officer of the Company. 4. The Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the Expiration Date (each as defined in the Offer to Purchase). 5. A letter that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space for obtaining such clients, instructions with regard to the Offer. 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding. 7. A return envelope addressed to BankBoston, N.A., the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED. The Company will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager). The Company will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary handling and mailing expenses incurred by them in forwarding materials relating to the Offer to their customers. The Company will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 7 of the Letter of Transmittal. As described in the Offer to Purchase, if more than 16,444,586 Shares have been validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase, the Company will accept Shares for purchase in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any stockholder who owned beneficially or of record, as of the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Company's Dividend Reinvestment Plan) and who validly tenders all of such Shares (partial tenders will not qualify for this preference) and complete the box captioned "Odd Lots" in the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing Shares, all other Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date on a pro rata basis. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE TRANSACTIONS (AS DEFINED IN THE OFFER TO PURCHASE), INCLUDING THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN 2 FROM TENDERING SHARES. SEE SECTION 9 OF THE OFFER TO PURCHASE FOR INFORMATION REGARDING THE INTENTION OF THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS WITH RESPECT TO TENDERING PURSUANT TO THE OFFER. Any questions or requests for assistance or additional copies of the enclosed materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, Lazard Freres & Co. LLC Enclosures NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON, THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)5 6 CLIENT LETTER LETTER TO CLIENTS PIONEER HI-BRED INTERNATIONAL, INC. OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated September 25, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") setting forth an offer by Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), to purchase up to 16,444,586 shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $104 nor less than $88 per Share, net to the seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions of the Offer. Unless the Rights become exercisable or separately tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. Unless the context otherwise requires, all references herein to Shares include the associated Rights. Also enclosed herewith is certain other material related to the Offer, including a letter to stockholders from Charles S. Johnson, President and Chief Executive Officer of the Company. The Company will determine a single per Share price (not greater than $104 nor less than $88 per Share) (the "Purchase Price") that it will pay for the Shares validly tendered pursuant to the Offer and not withdrawn, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the lowest Purchase Price that will allow it to purchase 16,444,586 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $104 nor less than $88 per Share) and not withdrawn pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions thereof relating to proration. See Section 1 of the Offer to Purchase. WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. Your attention is directed to the following: 1. You may tender Shares at prices (in multiples of $.25), which cannot be greater than $104 nor less than $88 per Share, as indicated in the attached Instruction Form, net to you in cash. 2. The Offer is extended for up to 16,444,586 Shares. The Offer is not conditioned on any minimum number of Shares being tendered. The Offer is, however, subject to certain other conditions set forth in the Offer to Purchase. 3. The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on October 23, 1997, unless the Offer is extended. Your instructions to us should be forwarded to us in ample time to permit us to submit a tender on your behalf. 4. As described in the Offer to Purchase, if more than 16,444,586 Shares have been validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase, the Company will purchase Shares in the following order of priority: (i) first, all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any stockholder who as of the Expiration Date owns beneficially or of record an aggregate of fewer than 100 Shares (including Shares held in the Company's Dividend Reinvestment Plan) all of which are being tendered (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the Letter of Transmittal, the Notice of Guaranteed Delivery and the Instruction Form, as applicable; and (ii) then, after purchase of all the foregoing Shares, all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date on a pro rata basis. See Section 1 of the Offer to Purchase for a discussion of proration. Thus, if you owned beneficially or of record, as of the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Company's Dividend Reinvestment Plan), and you instruct us to tender on your behalf all such Shares prior to the Expiration Date and check the box captioned "Odd Lots" in the Instruction Form (and on the Instruction Form), all such Shares will be accepted for purchase before proration, if any, of the other tendered Shares. 5. Tendering stockholders will not be obligated to pay any brokerage commissions or solicitation fees on the Company's purchase of Shares in the Offer. Any stock transfer taxes applicable to the purchase of Shares by the Company pursuant to the Offer will be paid by the Company, except as otherwise provided in Instruction 7 of the Letter of Transmittal. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY, NOR ANY OF ITS DIRECTORS OR OFFICERS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER SHOULD MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. SEE SECTIONS 8, 10 AND 14 OF THE OFFER TO PURCHASE. If you wish to have us tender any or all of your Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer to Purchase, please so instruct us by completing, executing and returning to us the attached Instruction Form. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the Instruction Form. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION OF THE OFFER. The Offer is being made solely by the Offer to Purchase, dated September 25, 1997 and the related Letter of Transmittal. The Offer is not being made to, nor will tenders be accepted from or on behalf of holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would violate the laws of such jurisdiction. In any jurisdiction the securities laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on the Company's behalf by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTION FORM WITH RESPECT TO OFFER TO PURCHASE FOR CASH UP TO 16,444,586 SHARES OF COMMON STOCK OF PIONEER HI-BRED INTERNATIONAL, INC. AT A PURCHASE PRICE NOT GREATER THAN $104 NOR LESS THAN $88 PER SHARE The undersigned acknowledges receipt of your letter and the enclosed Offer to Purchase, dated September 25, 1997, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Pioneer Hi-Bred International, Inc. (the "Company") to purchase up to 16,444,586 shares of its common stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $104 nor less than $88 per Share, net to the seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions of the Offer. Unless the Rights become exercisable or separately tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender of Shares will also constitute a tender of the associated Rights. Unless the context otherwise requires, all references herein to Shares include the associated Rights. This will instruct you to tender to the Company the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, at the price per Share indicated below, upon the terms and subject to the conditions of the Offer. SHARES TENDERED / / By checking this box, all Shares held by us for your account, excluding fractional Shares, will be tendered. If fewer than all Shares held by us for your account are to be tendered, please check the box and indicate below the aggregate number of Shares to be tendered by us. ______ Shares Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED ------------------------ IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED MUST BE USED. (SEE INSTRUCTION 5) ------------------------ CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED IN THE ODD LOTS BOX AND INSTRUCTIONS BELOW), THERE IS NO VALID TENDER OF SHARES. ------------------------ SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / THE UNDERSIGNED WANTS TO MAXIMIZE THE CHANCE OF HAVING THE COMPANY PURCHASE ALL THE SHARES THE UNDERSIGNED IS TENDERING (SUBJECT TO THE POSSIBILITY OF PRORATION). ACCORDINGLY, BY CHECKING THIS ONE BOX INSTEAD OF ONE OF THE PRICE BOXES BELOW, THE UNDERSIGNED HEREBY TENDERS SHARES AT, AND IS WILLING TO ACCEPT, THE PURCHASE PRICE RESULTING FROM THE DUTCH AUCTION TENDER PROCESS. THIS ACTION COULD RESULT IN RECEIVING A PRICE PER SHARE AS LOW AS $88 OR AS HIGH AS $104. 3 ***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW*** ------------------------ SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER / / $88 / / $91 1/4 / / $94 1/2 / / $97 3/4 / / $101 / / 88 1/4 / / 91 1/2 / / 94 3/4 / / 98 / / 101 3/4 / / 88 1/2 / / 91 3/4 / / 95 / / 98 1/4 / / 101 1/2 / / 88 3/4 / / 92 / / 95 1/4 / / 98 1/2 / / 101 3/4 / / 89 / / 92 1/4 / / 95 1/2 / / 98 3/4 / / 102 / / 89 1/4 / / 92 1/2 / / 95 3/4 / / 99 / / 102 1/4 / / 89 1/2 / / 92 3/4 / / 96 / / 99 1/4 / / 102 1/2 / / 89 3/4 / / 93 / / 96 1/4 / / 99 1/2 / / 102 3/4 / / 90 / / 93 1/4 / / 96 1/2 / / 99 3/4 / / 103 / / 90 1/4 / / 93 1/2 / / 96 3/4 / / 100 / / 103 1/4 / / 90 1/2 / / 93 3/4 / / 97 / / 100 1/4 / / 103 1/2 / / 90 3/4 / / 94 / / 97 1/4 / / 100 1/2 / / 103 3/4 / / 91 / / 94 1/4 / / 97 1/2 / / 100 3/4 / / 104
ODD LOTS / / By checking this box, the undersigned represents that the undersigned owns beneficially or of record as of the Expiration Date, an aggregate of fewer than 100 Shares (including Shares held in the Company's Dividend Reinvestment Plan) and is tendering all of such Shares. If you do not wish to specify a purchase price, check the following box, in which case you will be deemed to have tendered at the Purchase Price determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share in the box entitled "Price (In Dollars) Per Share At Which Shares Are Being Tendered" above. [ ] THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDERS. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. SIGN HERE -------------------------------------- Signature(s) Dated: , 1997 Name -------------------------------------- Address -------------------------------------- -------------------------------------- -------------------------------------- Social Security or Taxpayer ID No. 4 EX-99.(A)6 7 W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. - --------------------------------------------
GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person(3) for a designated ward, minor, or incompetent person 7. a) The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee); b) So-called trust The actual owner(1) account that is not a legal or valid trust under State law
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GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- ------------------------------------------------------- 8. Sole proprietorship The owner(4) account 9. A valid trust, estate, The legal entity (Do not or pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable or The organization educational organization account 12. Partnership account held The partnership in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments.
____________________________________________ _________________________________ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter business or "doing business as" name. You may use either your SSN or EIN (if you have one). (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING For purposes of the Offer, payees exempted from backup withholding include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends not generally subject to withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE OBTAINING A NUMBER. 2 EX-99.(A)7 8 STOCKHOLDER LETTER September 25, 1997 Dear Stockholder: Pioneer Hi-Bred International, Inc. is offering to purchase up to 16,444,586 shares of its common stock (including associated Preferred Stock Purchase Rights) at a price not greater than $104 nor less than $88 per share. The Company is conducting the Offer through a procedure commonly referred to as a "Dutch auction." This procedure allows you to select the price within the specified price range at which you are willing to sell all or a portion of your shares to the Company without incurring brokerage commissions. The Offer is being made pursuant to an Investment Agreement entered into between the Company and E. I. du Pont de Nemours and Company ("DuPont"). Concurrently with the consummation of the Investment Agreement, the Company entered into a Research Alliance Agreement and a Joint Venture Formation Agreement with DuPont. Pursuant to the terms of the Agreements, Pioneer and DuPont agreed to three integrated transactions involving a research alliance and collaboration between the two companies, the formation of a joint venture to exploit business opportunities in quality grain traits and an equity investment by DuPont. The Offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. If you wish to tender your shares, instructions on how to tender shares are provided in the enclosed materials. I encourage you to read these materials carefully before making any decision with respect to the Offer. Neither the Company nor its Board of Directors makes any recommendation to any stockholder whether to tender any or all shares. Please note that the Offer is scheduled to expire at 12:00 Midnight, New York City time, on October 23, 1997, unless extended by the Company. Questions regarding the Offer should not be directed to the Company but should instead be directed to D.F. King & Co., Inc., the Information Agent, at (800) 290-6429. Sincerely, [LOGO] Charles S. Johnson, PRESIDENT AND CHIEF EXECUTIVE OFFICER EX-99.(A)8 9 SUMMARY ADVERTISEMENT This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal dated September 25, 1997. While the Offer is being made to all stockholders of the Company, tenders will not be accepted from or on behalf of stockholders in any jurisdiction in which the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Company is not aware of any jurisdiction in which the making of the Offer or the tender of Shares would not be in compliance with the laws of such jurisdiction. In those jurisdictions whose laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Lazard Freres & Co. LLC or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH BY PIONEER HI-BRED INTERNATIONAL, INC. UP TO 16,444,586 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $104.00 NOR LESS THAN $88.00 PER SHARE Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), invites its stockholders to tender up to 16,444,586 shares of its Common Stock, par value $1.00 per share (including the associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $104.00 nor less than $88.00 per Share net to seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Unless the Rights become exercisable or separately tradeable prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. Unless the context otherwise requires, all references herein to Shares include the associated Rights. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 23, 1997, UNLESS THE OFFER IS EXTENDED. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN OTHER CONDITIONS AS SET FORTH IN THE OFFER TO PURCHASE. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, STOCKHOLDERS SHOULD MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. As promptly as practicable following the Expiration Date, the Company will purchase up to 16,444,586 Shares or such lesser number of Shares as are properly tendered (and not withdrawn in accordance with Section 4 of the Offer to Purchase) prior to the Expiration Date at prices not greater than $104.00 nor less than $88.00 per Share in cash. The term "Expiration Date" means 12:00 Midnight, New York City time, on October 23, 1997, unless and until the Company, in its sole discretion, shall have extended the period of time during which the Offer will remain open, and thereby delay acceptance for payment of, and payment for, any Shares by giving oral or written notice of such extension to BankBoston, N.A. (the "Depositary") and making a public announcement thereof. The Company will, upon terms and subject to the conditions of the Offer, determine a single per Share price (not greater than $104.00 nor less than $88.00 per Share) net to the seller in cash (the "Purchase Price") that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by the tendering stockholders. The Company will select the lowest Purchase Price that will allow it to buy 16,444,586 Shares (or such lesser number as are validly tendered at prices not greater than $104.00 nor less than $88.00 per Share). All Shares validly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, subject to the terms and the conditions of the Offer, including the proration terms thereof. The Company is making the Offer pursuant to an Investment Agreement, dated as of August 6, 1997 (the "Investment Agreement"), between the Company and E. I. du Pont de Nemours and Company ("DuPont"), pursuant to which DuPont has completed, as of September 18, 1997, an equity investment in preferred stock of the Company representing, on a common equivalent basis, 16,444,586 Shares, and the Company is required, subject to the terms of the Investment Agreement, to seek to repurchase an equal number of Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, if more than 16,444,586 Shares have been validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, the Company will purchase validly tendered Shares in the following order of priority: (i) all Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date by any stockholder who owns beneficially or of record as of the Expiration Date an aggregate of fewer than 100 Shares (including Shares held in the Company's Dividend Reinvestment Plan) and who validly tenders all of such Shares (partial tenders will not qualify for this preference); and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (ii) after purchase of all of the foregoing Shares, all other Shares validly tendered at or below the Purchase Price and not withdrawn prior to the Expiration Date, on a pro rata basis. The Company also reserves the right, but will not be obligated, to purchase all Shares duly tendered by any stockholder who tendered any Shares owned beneficially or of record, at or below the Purchase Price and who, as a result of proration, would then own beneficially or of record, an aggregate of fewer than 100 Shares. If the Company exercises this right, it will increase the number of Shares that it is offering to purchase by the number of Shares purchased through the exercise of this right. The Company expressly reserves the right, in its sole discretion, at any time and from time to time, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any Shares by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. The Company's reservation of the rights to delay payment for Shares it has accepted is limited by Rules 13e-4(f)(2) and 13c-4(f)(5) promulgated under the Securities Exchange Act of 1934, as amended, which requires that the Company must pay the consideration offered or return the Shares tendered promptly after termination or withdrawal of the tender offer. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company pursuant to the Offer, may also be withdrawn at any time after 12:00 Midnight, New York City time, on November 21, 1997. For a withdrawal to be effective, a notice of withdrawal must be in written, telegraphic or facsimile transmission form and must be received in a timely manner by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Such notice of withdrawal must specify the name of the tendering stockholder, the name of the registered holder, if different from that of the person who tendered such Shares, the number of Shares tendered and the number of Shares to be withdrawn. If the certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering stockholder must also submit the serial numbers shown on the particular certificates for Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry tender set forth in Section 3 of the Offer to Purchase, the notice of withdrawal also must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY TENDERS ARE MADE. The information required to be disclosed by Rule 13e-4(d)(1) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal are being mailed to record holders of Shares and are being furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. Additional copies of the Offer to Purchase and the Letter of Transmittal may be obtained from the Depositary, the Information Agent or the Dealer Manager and will be furnished promptly at the Company's expense. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 290-6429 The Dealer Manager for the Offer is: LAZARD FRERES & CO. LLC 30 Rockefeller Plaza New York, New York 10020 (212) 632-6717 September 25, 1997 EX-99.(A)9 10 EXHIBIT A(9) Exhibit a(9) Dirck Steimel (515) 248-4893 PIONEER ANNOUNCES DUTCH AUCTION SELF TENDER DES MOINES, IOWA -- September 25, 1997 -- Pioneer Hi-Bred International, Inc. announced today that it has launched a Dutch auction self tender for approximately 20 percent of its outstanding shares of common stock, or approximately 16.4 million shares, as part of its previously announced alliance with DuPont. All Pioneer shareholders are invited to tender shares within a price range of $88 per share to $104 per share. Tendering shareholders will be required to specify the price within that range they would be willing to accept. Shareholders will have until midnight New York City time, October 23, 1997 to respond to the Company's Dutch auction self tender offer. The Company will select the lowest purchase price per share that will enable it to buy the shares pursuant to the offer. All inquiries on procedures for the Dutch auction self tender offer should be directed to D.F. King & Co., Inc., the information agent for the offer. The address for D.F. King is 77 Water Street, New York, NY 10005. Bankers and brokers should call the information agent collect at (212) 269-5550. All others should call toll-free at (800) 290-6429. The dealer manager for the offer is Lazard Freres & Co. LLC. Pioneer and DuPont recently completed a broad research alliance and the formation of a separate joint venture company designed to speed the discovery, development, and delivery of new crops that benefit farmers, livestock producers, and consumers worldwide. In addition, DuPont has invested $1.7 billion in Pioneer by purchasing preferred voting shares at $104 per share. Pioneer will use the proceeds from the DuPont investment to finance the Dutch auction. Pioneer Hi-Bred International, Inc. (NYSE: PHB) is a leading supplier of agricultural genetics and is a leading integrator of agricultural technology. Headquartered in Des Moines, Iowa, Pioneer develops, produces, and markets a full line of seeds, microbial products, and services to farmers, grain processors, and other customers worldwide. Based in Wilmington, Delaware, DuPont (NYSE:DD), is a global chemical, energy and life sciences company. In addition to its biotechnology-based business, the DuPont Agricultural Products unit is a leading world supplier of crop protection products, which are not included in this alliance. EX-99.(C)1 11 FORMATION AGREEMENT Exhibit (C)1 FORMATION AGREEMENT This Formation Agreement is made and entered into as of this 6th day of August, 1997, between Pioneer Hi-Bred International, Inc., a corporation organized and existing under the laws of the State of Iowa ("Pioneer") and E. I. du Pont de Nemours and Company, a corporation organized and existing under the laws of the State of Delaware ("DuPont"). WHEREAS, Pioneer has engaged in substantial research and development to discover new genetic hybrids which enhance the agronomics and the quality of corn, soybeans and selected oilseed grains, primarily through its own proprietary genetic breeding research and techniques; WHEREAS, DuPont has no corn, soybean or other selected oilseed germplasm of its own, but has discovered and is developing several enhanced quality traits for these grains through its own proprietary genetic engineering research and techniques; WHEREAS, by combining Pioneer's and DuPont's research, development, and marketing of enhanced agronomics and enhanced quality corn, soybean and selected oilseed grains, including promising new developments achieved by each company through entirely different biological mechanisms, the parties will be able to take advantage of substantial synergies such as "stacking" complementary enhanced grain traits to produce additive affects, and to speed the discovery and development of entirely new, qualitative combinations, that neither party could achieve on its own; WHEREAS, the effect of this synergistic combination will be to speed the discovery, development and marketing of new quality enhanced corn, soybean and selected oilseed grains; WHEREAS, Pioneer and DuPont desire to form a profitable, jointly owned Venture (as defined below) to create and capture value for Quality Trait (as defined below) seed, grain, grain products and plant material delivered through corn, soybean and selected oilseeds to enable the Parties to maximize their opportunity to participate in the transformation of the agribusiness system; WHEREAS, the Venture contemplates that DuPont and Pioneer will contribute certain technology, patents, trademarks and trade secrets which when combined with Pioneer germplasm will produce Quality Trait Seed for the Venture; WHEREAS, it is contemplated that Pioneer will be the preferred producer and marketer of the Quality Trait Seed for the Venture as more fully reflected in the Preferred Seed Support Agreement (as defined below) between the parties; WHEREAS, Pioneer and DuPont, have organized Optimum Quality Grains L.L.C., a limited liability company organized under the laws of the State of Delaware and in accordance with the Delaware Limited Liability Company Act ("L.L.C."), as the vehicle for establishing the Venture; WHEREAS, Pioneer and DuPont desire to transfer certain tangible and intangible assets currently used by Pioneer and DuPont and their respective Affiliates (as defined below) to the Venture for the creation and capturing of value for Quality Trait (as defined below) seed, grain, grain products and plant materials subject to the assumption by the Venture of certain liabilities arising out of the operation of the business, as more fully described below; and, WHEREAS, Pioneer and DuPont desire to commit to provide certain administrative services and support for the business of the Venture. NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants contained in this Agreement, Pioneer and DuPont agree as follows: ARTICLE I - DEFINITIONS AND RULES OF CONSTRUCTION - ------------------------------------------------- 1.1. Definitions. ----------- The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein): 1.1.1. "Affiliate", when used with respect to any Entity, shall mean any other Entity directly or indirectly controlling, controlled, or under common control with, that Entity. For purposes of this Agreement, "control" means (a) the direct or indirect ownership of more 2 than fifty percent (50%) of the total voting rights or other evidences of ownership interest of the Entity, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Entity; 1.1.2. "Agreement" shall mean this Formation Agreement between Pioneer and DuPont and any Schedules or Exhibits thereto, as amended from time to time; 1.1.3. "Ancillary Agreements" shall mean any and all agreements, leases and licenses referenced in this Agreement or necessary or reasonably requested by a party to complete the transactions contemplated in this Agreement, as the same may be amended from time to time, but excluding the Research Alliance Agreement and the Preferred Seed Support Agreement; 1.1.4. "Bona Fide Third Party" shall mean an Entity less than five percent (5%) of the stock or other ownership interest of which is owned, directly or indirectly, by either Pioneer or DuPont or their respective Affiliates, which has equal or better financial stability as the Venture, and which has experience in conducting a business of a nature comparable to that operated by the Venture; 1.1.5. "Business Purpose" shall have the meaning ascribed to that term in Section 2.1 of this Agreement; 1.1.6. "Change of Control" shall mean, with respect to DuPont, any of the following: (i) the sale, lease, conveyance or other disposition of eighty percent (80%) or more of the assets of DuPont as an entirety or substantially as an entirety to any other Entity or "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as the same has or may be amended or modified from time to time, or any successor legislation (the "Exchange Act") in one or a series of transactions, provided that a transaction where the holders of all classes of stock, voting securities or other indicia of ownership of the transferor immediately prior to such transaction own, directly or indirectly, more than fifty percent (50%) of the aggregate voting power of all classes of such stock, voting securities or other indicia of ownership of the transferee immediately after such transaction shall not be a Change of Control; (ii) any transaction or series of transactions (as a result of a tender offer, merger, consolidation or otherwise) that results in, or that is in connection with, any Entity, including a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) that includes such Entity, acquiring "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of fifty percent (50%) or more of the aggregate voting power of all classes of stock, voting securities or other indicia of ownership of DuPont, or (iii) the consummation by DuPont or any of its subsidiaries of a merger, consolidation or other business combination that requires the approval of DuPont's shareholders, whether for such transaction or the issuance of securities in such transaction, if immediately after giving effect to such transaction, the persons who beneficially owned common securities of DuPont immediately prior to such transaction beneficially own in the aggregate common securities representing common equity ownership on a fully diluted basis of less than 50% immediately after giving effect to such transaction. 1.1.7. "Claim" shall mean any action, claim, demanded, interference, obligation, suit, arbitration or other proceeding brought or asserted by or against a party to this Agreement (including the Venture) or their respective Affiliates; 1.1.8. "Closing" shall mean the consummation of the transactions contemplated in this Agreement, which shall occur on the Closing Date; 1.1.9. "Closing Date" shall mean August 31, 1997, or thirty (30) days after receipt of the approval of a Hart-Scott-Rodino application or such earlier or later date as the parties mutually may agree; 1.1.10. "Code" shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding Federal revenue laws; 3 1.1.11. "Combined Assets" shall mean the Pioneer Assets and the DuPont Assets, collectively, and any other tangible and intangible assets that the Venture may develop, design, manufacture, construct, have constructed, or acquire, as the same may exist from time to time; 1.1.12. "Combined Business" shall mean the Combined Assets and other assets as operated by the Venture to create and capture value for Quality Trait (as defined below) seed, grain, grain products and plant materials on a worldwide basis, subject to the exclusions specifically identified and agreed to by the parties; 1.1.13. "Damages" shall mean all costs, liabilities, obligations, damages, fines, penalties, deficiencies, losses and judgments, including incidental and consequential damages and reasonable attorneys' fees, in each case after the application of any amounts recoverable under insurance contracts or similar arrangements and from third parties by the Entity claiming indemnity; 1.1.14. "Deadlock" shall mean the inability of Pioneer and DuPont to resolve a Substantial Disagreement in accordance with the provisions of Section 10.4 of this Agreement; 1.1.15. "Delaware Limited Liability Company Act" shall mean the Delaware Limited Liability Company Act, Delaware Code, Title 6, Sections 18101, et seq; 1.1.16. "DuPont Assets" shall have the meaning ascribed to that term in Section 2.3.2 of this Agreement; 1.1.17. "DuPont End-Use Business" shall mean the DuPont Assets and any other assets, personnel, technology, development, marketing capabilities, intellectual properties, supply and sales contracts, and any other items and properties necessary or required in carrying on the existing operations of DuPont and its Affiliates responsible for the creation and capturing of value for Quality Trait (as defined below) seed, grain, grain products and plant materials on a global basis; 1.1.18. "DuPont Defined Benefit Plan" shall mean a DuPont Plan that is a defined benefit plan within the meaning of Section 3(35) of ERISA or Section 4l4(j) of the Code; 1.1.19. "DuPont Plans" shall mean all pension, profit sharing, retirement, deferred compensation, stock purchase, stock option, incentive, bonus, vacation, severance, disability, hospitalization, medical insurance, life insurance or any other type of employee benefit plan, program, or arrangement within the meaning of Section 3(3) or ERISA or any equivalent plans governed by applicable foreign law on behalf of any of the current or former Quality Grains Employee of DuPont or their beneficiaries, whether on an active or frozen basis; 1.1.20. "DuPont End-Use Products" shall mean those products transferred to the Venture as part of the DuPont Assets as listed on Schedule 2.3.2; 4 1.1.21. "DuPont Technology" shall mean the total of the technologies and intellectual properties licensed or assigned to the Venture pursuant to the terms of the DuPont Technology License Agreement for the Business Purpose; 1.1.22. "DuPont Technology License Agreement" shall mean the agreement between DuPont and the Venture dated as of the Closing Date for the license by DuPont to the Venture of DuPont Technology in the form attached as Exhibit 1.1.22; 1.1.23. "Entity" shall mean any individual or person; or general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust or foreign business organization, or government or government organization; and the heirs, executors, administrators, legal representatives, successors, and assigns of the Entity when the context so permits; 1.1.24. "Environmental Liabilities" shall mean conditions arising out of the pollution or contamination of the environment, whether or not they give rise to Claims and Damages. Such conditions may include, without limitation: (a) Containment, removal, remediation, response to, clean-up, or abatement of any release, or threat of release, emission, spill, discharge, leaching, disposition, transportation, recycling, storage, disposal, treatment, use or application, of any chemical substance or other contamination of soil surface water, ground water, or river, lake or ocean sediment (whether onsite or off-site and whether accidental or deliberate, or in the ordinary course of business) of any material (whether raw material, waste material, manufactured intermediate or manufactured products) in any way associated with any business (including the Pioneer End-Use Business and the DuPont End-Use Business) including, without limitation, the design, development, manufacture, generation, formulation, processing, reprocessing, disposal, distribution, storage, transportation or handling of products (including Pioneer End-Use Products and DuPont End-Use Products); and (b) Personal injury, Damages (including property damage and damage to natural resources) asserted or prosecuted by or on behalf of any party (whether based on negligent acts or omissions, statutory or strict liability or otherwise, and whether occurring onsite or off-site), including, but not limited to, any governmental entity, employee, former employee or their respective legal representatives, or any private party, association or other Entity; arising or alleged to arise under any Federal, state or local statute, law or regulation for the protection of the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the Resource Conservation and Recovery Act of 1976, as amended, or any common law theory or theory based on tort, negligence, statutory or strict liability or otherwise. Environmental Liabilities shall not include Occupational Liabilities; 1.1.25. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, to the date in question; 1.1.26. "Fair Market Value" shall mean the price that a willing buyer will pay and a willing seller will accept for Transferred Property; 1.1.27. "Indemnified Party" shall have the meaning ascribed to that term in Section 5.5, of this Agreement; 1.1.28. "Indemnifying Party" shall have the meaning ascribed to that term in Section 5.5 of this Agreement; 1.1.29. "Investment Agreement" shall mean the Investment Agreement dated as of August 6, 1997 between DuPont and Pioneer. 1.1.30. "Judgment" shall have the meaning ascribed to that term in Section 5.2 of this Agreement; 1.1.31. "Limited Liability Company Agreement" shall mean the agreement executed between Pioneer and DuPont for the organization, operation and management of the Venture; 1.1.32. "Members Committee" shall mean the governing body of the L.L.C. comprised of equal numbers of employees from Pioneer and DuPont, as more fully described in the Limited Liability Company Agreement; 1.1.33. "Member Representative" shall mean each employee of Pioneer and each employee of DuPont selected to serve on the Members Committee; 1.1.34. "Offer of Settlement" shall have the meaning ascribed to that term in Section 5.2.1 of this Agreement; 1.1.35. "Pioneer Assets" shall have the meaning ascribed to that term in Section 2.3.1 of this Agreement. This shall not include any of the germplasm of Pioneer; 5 1.1.36. "Pioneer End-Use Business" shall mean the Pioneer Assets and any other assets, personnel, technology, development, marketing capabilities, intellectual properties, supply and sales contracts, and any other items and properties necessary or required in carrying on the existing operations of Pioneer and its Affiliates responsible for the creation and capturing of value for Quality Trait (as defined below) seed, grain, grain products and plant materials on a global basis; 1.1.37. "Pioneer Defined Benefit Plan" shall mean a Pioneer Plan that is a defined benefit plan within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code; 1.1.38. "Pioneer Plans" shall mean all pension, profit sharing, retirement, deferred compensation, stock purchase, stock option, incentive, bonus, vacation, severance, disability, hospitalization, medical insurance, life insurance or any other type of employee benefit plan, program, or arrangement within the meaning of Section 3(3) of ERISA or any equivalent plans governed by applicable foreign law on behalf of any of the current or former Quality Grains Employee of Pioneer or their beneficiaries, whether on an active or frozen basis; 1.1.39. "Pioneer End-Use Products" shall mean those products transferred to the Venture as part of the Pioneer Assets and the Pioneer End-Use Business as listed on Schedule 2.3.1 and shall not be read to include any further products as it is the clear intent not to vest the joint enterprise with any interest in the germplasm of Pioneer; 1.1.40. "Pioneer Technology" shall mean the total of all technologies and intellectual properties licensed or assigned to the Venture pursuant to the terms of the Pioneer Technology License Agreement for the Business Purpose; 1.1.41. "Pioneer Technology License Agreement" shall mean the agreement between Pioneer and the Venture dated as of the Closing Date for the license by Pioneer to the Venture of Pioneer Technology in the form attached as Exhibit 1.1.33; 1.1.42. "Quality Trait Seed" shall mean a seed product developed by or on behalf of the Venture which contains a Quality Trait; 1.1.43. "Quality Grains Employees" shall have the meaning ascribed to that term in Section 11.2.1 of this Agreement; 1.1.44. "Quality Trait(s)" shall mean a characteristic which results in a modification of the plant, grain composition or its attributes that has a value to end-users of grain, grain products or plant materials and which commands value in the market and such value is capable of being captured; 1.1.45. "Related Company " shall mean, with respect to Pioneer and DuPont, any Entity one hundred percent (100%) of the voting interest or other indicia of ownership of which is owned, directly or indirectly, by Pioneer or DuPont, as applicable; provided, however, that for purposes of Section 10.3 and Section 15.11 hereof, any Spin-Off Entity (as defined in the Investment Agreement) (which term for purposes of such Sections, shall include any person who would otherwise be deemed a Spin-Off Entity but for such person's status as a subsidiary of DuPont) which is a subsidiary of the Investor or satisfies each of the conditions set forth in clauses (i) through (v) of the definition of the term "Sale of Ag Products" in the Investment Agreement, shall constitute a Related Company of DuPont. 1.1.46. "Research Alliance" shall mean the cooperative effort between the parties as set forth in the Research Alliance Agreement executed on even date herewith; 1.1.47. "Retained Liabilities" shall have the meaning ascribed to that term in Section 2.6.1 of this Agreement; 1.1.48. "Substantial Disagreement" shall mean the inability of the Members Committee to reach agreement on any issue regarding 6 the strategic direction of the Venture and having a material impact on the business or operations of the Venture, Pioneer or DuPont; 1.1.49. "Transferred Employees" shall mean Quality Grains Employees who accept employment with the Venture; 1.1.50. "Venture" shall mean the L.L.C. a Delaware Limited Liability Company organized as described in Section 2.2.1 of this Agreement and any Entities, the majority of the stock or other ownership interest of which is owned, directly or indirectly, by the Venture; 1.1.51. "Venture Interest" shall mean a party's interest in the Venture. 1.2. Other Terms. ----------- Other words, terms or phrases used, but not specifically defined, in this Agreement shall have the meanings commonly ascribed to such words, terms or phrases. 1.3. Rules of Construction. --------------------- Unless the context otherwise requires: 1.3.1. A term has the meaning assigned to it; 1.3.2. References in the singular or to "him," "her," "it," "itself," or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be; 1.3.3. References to Articles and Sections shall refer to articles and sections of this Agreement, unless otherwise specified; 1.3.4. The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof; and 1.3.5. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party or parties that drafted or caused this Agreement to be drafted. ARTICLE II - FORMATION - ---------------------- 2.1. Business Purpose. ---------------- The business purpose of the Venture (the "Business Purpose") shall be to create and capture value for Quality Trait seed, grain, grain products and plant materials delivered through corn, soybean and selected oilseeds, on a global basis. To this end, Pioneer and DuPont shall have the Venture represent all of their respective interests within the Business Purpose, shall not engage in competition with the Venture's Business Purpose, and shall cause the Venture to focus on building core competencies and strong market access within the scope of the Business Purpose. The Business Purpose may be expanded from time to time upon approval of the Members Committee. 2.2. Venture Formation. ----------------- 2.2.1. Pioneer and DuPont have organized the L.L.C. pursuant to the provisions of the Delaware Limited Liability Company Act. The formation of the L.L.C. was in accordance with the Limited Liability Company Agreement. Pioneer and DuPont each have a fifty percent (50%) ownership interest in the Venture. The L.L.C. shall operate the Combined Business in the United States; 2.2.2. The Members Committee shall supervise the business and affairs of the L.L.C. in accordance with the powers granted to it in the Limited Liability Company Agreement. The Members Committee shall be constituted in accordance with the provisions of the 7 Limited Liability Company Agreement, and shall consist of an equal number of Member Representatives from each of Pioneer and DuPont; 2.2.3. The ownership interests issued by the L.L.C. shall have restrictions which shall appear prominently on any document that represents that ownership interest to the effect that the interest may not be transferred without the prior written consent of Pioneer or DuPont, as applicable; 2.2.4. In order to operate the Combined Business on a global basis, Pioneer and DuPont shall cause the Venture to organize and conduct its international business through such Entities and in such countries as the Members Committee shall deem appropriate. 2.3. Transfer of Assets and Liabilities. ---------------------------------- Except as otherwise specified, at the Closing, Pioneer shall, and shall cause its Affiliates to, and DuPont shall, and shall cause its Affiliates to, transfer to the Venture the following; 2.3.1. Pioneer Assets. -------------- Except as otherwise agreed at Closing, Pioneer shall, and shall cause its Affiliates to, transfer to the Venture at Closing the following assets (the "Pioneer Assets"): (a) The Pioneer End-Use Products and Pioneer trademarks as listed in Schedule 2.3.1; (b) The pollinators listed on Schedule 2.3.1; (c) Rights under the patents, patent applications, know-how and other technology with regard to the Pioneer End-Use Business pursuant to the Pioneer Technology License Agreement including the freedom to operate under such rights consistent with the provisions of this Agreement; (d) Customer lists for Pioneer End-Use Products from the Pioneer End-Use Business as defined herein; (e) All sales contracts and distributor agreements principally dedicated to the sale of the Pioneer End-Use Products to customers; (f) All inventories and work-in-process for Pioneer End-Use Products, and raw materials identified for the manufacture of Pioneer End-Use Products exclusive of any germplasm or intellectual property related thereto; (g) At least one full copy of, or reasonable access to, the books, records, files, papers and other such documents, and portions thereof, specific to the Pioneer End-Use Business; (h) To the extent transferable, all right, title and interest in any Claims with regard to the Pioneer End-Use Business brought or asserted against third parties by Pioneer or its Affiliates; (i) Any other assets to the extent identified on Schedule 2.3.1(j); (j) The laboratories and facilities comprising Pioneer Livestock Nutrition Center and the capabilities of the Johnston grain functionality lab; and (k) Office equipment, furniture and other items of personal property principally dedicated to the administration or management of the Pioneer End-Use Business. 2.3.2. DuPont Assets. ------------- Except as otherwise agreed at Closing, DuPont shall, and shall cause its Affiliates to, transfer to the Venture at Closing at least the following assets (the "DuPont Assets"): (a) The DuPont End-Use Products and DuPont trademarks as listed in Schedule 2.3.2; (b) The TC Blend pollinators listed on Schedule 2.3.2; (c) Rights under the patents, patent applications, know-how and other technology with regard to the DuPont End-Use Business pursuant to the DuPont Technology License Agreement including the freedom to operate under such rights consistent with the provisions of this Agreement; (d) Customer lists for DuPont End-Use Products; (e) All sales contracts and distributor agreements principally dedicated to the sale of DuPont End-Use Products to customers; 8 (f) All inventories and work-in-process for DuPont End-Use Products, and raw material identified for the manufacture of DuPont End-Use Products; (g) At least one full copy of, or reasonable access to, books, records, files, papers and other such documents, and portions thereof, specific to the conduct of the DuPont End-Use Business; (h) To the extent transferable, all right, title and interest in any Claims with regard to the DuPont End-Use Business brought or asserted against third parties by DuPont or its Affiliates; (i) Any other assets to the extent identified on Schedule 2.3.2; (j) The Quality Trait grain functionality development capability at DuPont's Stine Laboratory and Experimental Station and seed product development capability at El Paso, Illinois; (k) DuPont's Quality Grain facility in Des Moines, Iowa; and (l) Office equipment, furniture and other items of personal property principally dedicated to the administration or management of the DuPont End-Use Business. 2.4. Excluded Assets. --------------- The aforementioned assets represent all of the assets to be transferred to the Venture, and unless such assets are described with specificity herein or in other documents which are part of the Closing, such assets shall not be transferred into the Venture. Both DuPont and Pioneer fully intend to leave intact their core businesses and none of the documents contemplate any transfer of any rights to the Venture other than as specifically set forth herein. 2.5. Liabilities Assumed by the Venture. ---------------------------------- After the Closing Date, the Venture shall assume liabilities and obligations incurred by it for its own account, and ongoing debts, liabilities, and obligations associated with either the Pioneer End-Use Business or the DuPont End-Use Business with regard to: 2.5.1. Debts, liabilities and obligations arising out of the ongoing operations of the Venture or to be performed or discharged under any contract or other obligation assigned or otherwise transferred to the Venture by Pioneer or DuPont or their respective Affiliates, but only to the extent that any such debt, liability or obligation is for, or relates to, actions or performance or obligations due after the Closing Date; provided, however, that Pioneer and DuPont or their respective Affiliates shall retain liability for Claims or Damages relating to the breach or nonperformance of contracts or other obligations on or before the Closing Date; 2.5.2. Accounts payable that arise after the Closing Date, regardless of whether such accounts payable result from the operation of the Pioneer End-Use Business or the DuPont End-Use Business on or before the Closing Date; 2.5.3. Debts, liabilities and obligations specifically transferred to the Venture by Pioneer or DuPont or their respective Affiliates pursuant to the provisions of this Agreement or any other agreements executed in the furtherance of the transactions contemplated in this Agreement; and 2.5.4. Debts, liabilities and obligations incurred by the Venture for its own account. 2.6. Liabilities. ----------- Pioneer and DuPont agree that the following liabilities shall be apportioned among Pioneer and its Affiliates, DuPont and its Affiliates, and the Venture, as follows: 2.6.1. Liabilities Incurred During the Ordinary Course of Business. ----------------------------------------------------------- Other than the liabilities specifically assumed by the Venture pursuant to Section 2.5, and except as otherwise provided in this Agreement, Pioneer and its Affiliates shall retain from the Pioneer End-Use Business, and DuPont and its Affiliates shall retain from the DuPont End-Use Business, any and all liabilities that result from the ordinary course of the 9 Pioneer End-Use Business and the DuPont End-Use Business respectively on or before the Closing Date (the "Retained Liabilities") whether or not the Claim relating to such Retained Liabilities arises before, on, or after the Closing Date. The Retained Liabilities shall include, but shall not be limited to: 2.6.2. Environmental Liabilities. ------------------------- (a) Pioneer and its Affiliates, with regard to the Pioneer End-Use Business, and DuPont and its Affiliates, with regard to the DuPont End-Use Business, shall retain any and all Environmental Liabilities that exist at Closing, provided however, if a condition was lawful at Closing and after Closing such condition requires correction, any costs or Damages associated with such correction shall be the responsibility of the Venture; (b) The Venture shall be responsible for any Environmental Liabilities attributable to any process, mode of operation or business carried on by the Venture after Closing. 2.7. Indemnity from Liabilities. -------------------------- 2.7.1. Pioneer, with regard to the Pioneer End-Use Business, and DuPont, with regard to the DuPont End-Use Business, shall indemnify, defend and hold the Venture harmless against any Claims that may be filed against the Venture with respect to liabilities for which Pioneer, DuPont, or their respective Affiliates, as applicable, are responsible under Section 2.6. Pioneer or DuPont, as the case may be, reserves the right to manage any such Claims, including the defense, settlement or appeal thereof. Pioneer or DuPont shall keep the Venture informed of the status of the Claims and, as appropriate, shall solicit the advice of the Venture with regard to the defense, settlement or appeal of the Claims. The Venture shall provide any support reasonably requested by Pioneer or DuPont with regard to such Claims, and shall notify Pioneer or DuPont, as appropriate, of any Claims filed against the Venture with regard to such liabilities. 2.7.2. The Venture, with regard to the Combined Business, shall indemnify, defend and hold harmless Pioneer and its Affiliates, and DuPont and its Affiliates, against any Claims that may be filed against Pioneer or its Affiliates, or DuPont or its Affiliates, with respect to any debts, liabilities or other obligations of the Venture set forth in this Agreement. The Venture reserves the right to manage any such Claims, including the defense, settlement or appeal thereof. The Venture shall keep Pioneer and its Affiliates, and DuPont and its Affiliates, as applicable, informed of the status of the Claims and, as appropriate, shall solicit advice of Pioneer and its Affiliates, or DuPont or its Affiliates, as applicable, with regard to the defense, settlement or appeal of the Claims. Pioneer or its Affiliates, or DuPont or its Affiliates, shall provide any support reasonably requested by the Venture with regard to such Claims, and shall notify the Venture of any Claims filed against Pioneer or its Affiliates, or DuPont or its Affiliates, with regard to the debts, liabilities or other obligations of the Venture set forth in this Agreement. 2.8. Apportionment of Certain Formation Costs. ---------------------------------------- Unless Pioneer and DuPont mutually agree otherwise prior to the Closing Date: 2.8.1. Costs incurred by Pioneer and DuPont and their respective Affiliates in analyzing the feasibility of; and negotiating the agreements regarding the formation of; the Venture and the orderly transfer of the Combined Business to the Venture including, without limitation, costs for evaluation, due diligence investigations, and transition planning, including any travel and other related costs with regard to such activities, shall be borne by the party incurring such costs. 2.8.2. Costs incurred to establish the Venture as an independent entity, as well as costs incurred that primarily are for the benefit of the Venture, such as new telephone systems, new information systems, and the formation of the Venture and its 10 direct or indirect subsidiaries, shall be borne by the Venture. Pioneer and its Affiliates, and DuPont and its Affiliates, shall keep records adequate to substantiate the costs with regard to such expenditures. Each of Pioneer and DuPont periodically will notify the other of the category and extent of such costs. Pioneer and DuPont shall agree on the total amount of the costs to be reimbursed by the Venture and shall provide an accounting of such costs to the Venture promptly after Closing. The Venture shall reimburse the appropriate party for such costs within thirty (30) days of the receipt by the Venture of such accounting. Pioneer and DuPont may agree on, and request payment from, the Venture for additional costs incurred pursuant to this Section 2.8.2 from time to time for a period of six (6) months after the Closing Date. 2.8.3. If this Agreement is terminated pursuant to Section 9.1, prior to Closing then the costs incurred pursuant to Section 2.8.2 shall be borne equally by Pioneer and DuPont. 2.9. Discounts or Rebates. -------------------- 2.9.1. Pioneer and its Affiliates, with regard to sales contracts for Pioneer End-Use Products that extend past the Closing Date, and DuPont and its Affiliates, with regard to sales contracts for DuPont End-Use Products that extend past the Closing Date, shall be responsible to make good any discounts rebates, or other price adjustments that relate to sales of such Pioneer End-Use Products or DuPont End-Use Products up to and including the Closing Date. The Venture shall be responsible to make good on any discounts, rebates or other price adjustments that relate to sales of Pioneer End-Use Products or DuPont End- Use Products pursuant to such sales contracts after the Closing Date. 2.9.2. Pioneer and its Affiliates, with regard to the purchase of materials for the Pioneer End-Use Business, or DuPont and its Affiliates, with regard to the purchase of materials for the DuPont End-Use Business, shall be entitled to any discounts, or other price adjustments that relate to purchases of such materials to the extent paid for by them, as appropriate. The Venture shall be entitled to any such discounts, rebates or other price adjustments that relate to its purchase of such materials to the extent paid for by it. 2.9.3. Pioneer and its Affiliates, with regard to discounts, rebates or other price adjustments for the purchase or sale of products (including Pioneer End-Use Products) relating to the Pioneer End-Use Business, and DuPont and its Affiliates, with regard to discounts, rebates or other price adjustments for the purchase or sale of products (including DuPont End-Use Products) relating to the DuPont End-Use Business, and the Venture shall apportion any such discounts, rebates, or other price adjustments in a fair and equitable manner to the extent that they are determined on the purchase or sale of products during a period that extends both before and after the Closing Date. ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PIONEER - ------------------------------------------------------- Pioneer hereby represents and warrants to DuPont as follows: 3.1. Organization. ------------ Pioneer is a corporation duly organized, validly existing and in good standing under the laws of the State of Iowa. Pioneer has the corporate power and authority to own, lease, use, and operate the tangible and intangible assets held or used by it in connection with, and to conduct, the Pioneer End-Use Business as currently conducted. Pioneer is duly licensed or qualified to do business as a foreign corporation, and in good standing, in all jurisdictions in which the Pioneer End-Use Business is required to be so licensed or qualified. 3.2. Authority: Enforceability. ------------------------- Pioneer has the corporate power and authority to execute and deliver this Agreement and other instruments and documents required or contemplated herein and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each of such other instruments and documents and the consummation of the transactions provided for hereby and thereby have been duly authorized by the Board of 11 Directors of Pioneer and no other corporate proceeding on the part of Pioneer necessary to authorize the execution, delivery and performance of this Agreement or any of such other instruments or documents or the consummation of any of the transactions contemplated hereby or thereby. With respect to Pioneer, each of this Agreement and such other documents and instruments is, or upon its execution and delivery will be, legal, valid, binding and enforceable in accordance with its terms. 3.3. Consents and Approvals. ---------------------- Except as set forth on Schedule 3.3, no consent, waiver, approval, authorization, exemption, registration, license or declaration of or by, or filing with, any other Entity (including, without limitation, any domestic or foreign government or political subdivision or any agency, department or instrumentality thereof) is required with respect to Pioneer, in connection with the execution, delivery or enforceability of this Agreement or the other instruments and documents required or contemplated herein or the consummation of the transactions provided for hereby or thereby, except for such consents, waivers, approvals, authorizations, exemptions, registrations, licenses and declarations of or by, or filings with, other Entities which, if not made or obtained, would not individually or in the aggregate, materially impair Pioneer's ability to perform its obligations hereunder or thereunder or consummate such transactions contemplated hereby or thereby. 3.4. No Conflict. ----------- Except as set forth on Schedule 3.4, the execution, delivery and performance by Pioneer of this Agreement and the other instruments and documents required or contemplated herein does not, and the consummation of the transactions contemplated hereby and thereby will not: (a) Contravene the certificate of incorporation or bylaws of Pioneer; (b) Violate, conflict with or result in the breach or termination of or default under any material agreement, instrument or indenture to which Pioneer or any of its respective Affiliates is a party or by which any of them are bound; (c) Violate any order, judgment, decree, rule or regulation applicable to Pioneer or by which Pioneer may be bound; or (d) Constitute a violation by Pioneer of any Federal, state, local or municipal law or ordinance or any material rule or regulation of an applicable regulatory authority. 3.5. No Brokers. ---------- Pioneer has not taken any action that would entitle any agent, broker, investment banker or other firm or person to any broker's or finder's fee or any other commission or similar fee directly or indirectly in connection with the transactions contemplated by this Agreement. 3.6. Adequacy of Pioneer Assets. -------------------------- Except as set forth on Schedule 3.6, the Pioneer Assets, together with the Ancillary Agreements and the leases and other assets transferred to the Venture directly or through contract, include access to all material tangible and intangible assets and properties used principally for the operation of the Pioneer End-Use Business and are free and clear of any claim, mortgage, lien, pledge, option, security interest, charge or other encumbrance, except for (a) liens for current taxes not yet due and payable and (b) statutory liens of warehousemen, mechanics and materialmen and other similar statutory liens. 3.7. Intellectual Property. --------------------- 3.7.1. Except as specified in Schedule 3.7.1, the Pioneer Technology contains all patents, patent applications, technology, enabling technology and know-how used principally for the operation of the Pioneer End-Use Business and no Claim is pending or has been threatened in writing with regard to the Pioneer Technology. 3.7.2. Except as specified on Schedule 3.7.2, Pioneer holds all right, title, and interest to the trademarks, trade names, and copyrights (excluding software copyrights) principally dedicated to the Pioneer End-Use Business and can transfer them to the Venture, and no Claim has been threatened in writing or is pending with regard to such trademarks, trade names or copyrights. 3.8. Contracts. 12 --------- Except as disclosed on Schedule 3.8, all sales contracts with a duration of at least one year or for an amount in excess of Twenty-five Thousand Dollars ($25,000), and all other contracts, leases, licenses, and other agreements with a duration of at least one year or for an amount in excess of Fifty Thousand Dollars ($50,000), included in the Pioneer Assets are legal and binding agreements enforceable in accordance with their terms, are in full force and effect and are assignable or otherwise transferable by Pioneer or its Affiliates to the Venture. 3.9. Accuracy of Information. ----------------------- 3.9.1. The business valuation with respect to the Pioneer End- Use Business provided by Pioneer to DuPont as part of a process to establish the relative values of the Pioneer End-Use Business and the DuPont End-Use Business, were based on good faith projections, calculated on a reasonable basis from information and data available at the time do not contain information that is deliberately false or misleading. 3.9.2. The written historical factual data with respect to the Pioneer End-Use Business provided by Pioneer in accordance with the due diligence performed by DuPont was prepared from the books and records of Pioneer maintained in accordance with the internal practices and procedures of Pioneer and, subject to any accompanying written explanations, is accurate in all material respects as of the date given. The written responses to DuPont questions and requests for information represent the good faith opinion and/or judgment of Pioneer as of the date given based, to the extent applicable, upon the books and records of Pioneer maintained in accordance with the internal practices and procedures of Pioneer. 3.10. Claims. ------ Except as set forth on Schedule 3.10, no Claims are pending or threatened in writing against Pioneer or its Affiliates and related to the Pioneer End-Use Business that individually have or could result in Damages in excess of Five Hundred Thousand Dollars ($500,000). 3.11. Inventories. ----------- Except as set forth on Schedule 3.12, the inventories of Pioneer End-Use Products, raw materials for the manufacture of Pioneer End-Use Products, and work-in-process are sufficient for the operation of the Pioneer End-Use Business in the ordinary course. Except as set forth on Schedule 3.12, the inventories of Pioneer End-Use Products, raw materials for the manufacture of Pioneer End-Use Products and work-in-process are free and clear of any lien, security interest or other encumbrance, except for: (a) Liens for current taxes not yet due and payable; and (b) Statutory liens of warehousemen, mechanics, materialmen and other similar statutory liens. 3.12. Certain Labor Matters. --------------------- Except as disclosed in Schedule 3.13, during the last three (3) years Pioneer, with regard to the Pioneer End-Use Business: (a) Has not engaged in any unfair labor practice, and does not have pending any unfair labor practice complaint; (b) Except for routine grievance procedures, has not had a labor strike, dispute, slow-down or stoppage pending or threatened in writing against or affecting the Pioneer End-Use Business; and (c) Except for routine grievance procedures, has not been a party to any Claims relating to severance, compensation, benefits, employment discrimination, wrongful or constructive discharge, breach of contract, invasion of privacy or other tort claims, or claims involving workplace injury or occupational illness. 3.13. No Material Adverse Change. -------------------------- Except as disclosed on Schedule 3.14, since March 1, 1997, there has not been any change, event or condition which, individually or in the aggregate, has a material adverse effect on the Pioneer End-Use Business. 3.14. Operation in the Ordinary Course. -------------------------------- Except as disclosed on Schedule 3.15, and except for activities related to the transactions contemplated in this Agreement, Pioneer and its Affiliates have operated the Pioneer End-Use Business in the ordinary 13 course since March 1, 1997. The Schedules referenced in any representation or warranty provided by Pioneer in Article III of this Agreement shall be considered an integral part of such representation or warranty and shall be construed in accordance with such representation or warranty. ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF DUPONT - ----------------------------------------------------- DuPont hereby represents and warrants to Pioneer as follows: 4.1. Organization. ------------ DuPont is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. DuPont has the corporate power and authority to own, lease, use, and operate the tangible and intangible assets held or used by it in connection with, and to conduct, the DuPont End-Use Business as currently conducted. DuPont is duly licensed or qualified to do business as a foreign corporation, and in good standing, in all jurisdictions in which the character of the DuPont Assets or the nature of the DuPont End-Use Business requires it to be so licensed or qualified. 4.2. Authority: Enforceability. ------------------------- DuPont has the corporate power and authority to execute and deliver this Agreement and other instruments and documents required or contemplated herein and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each of such other instruments and documents and the consummation of the transactions provided for hereby and thereby have been duly authorized by the Board of Directors of DuPont and no other corporate proceeding on the part of DuPont is necessary to authorize the execution, delivery and performance of this Agreement or any of such other instruments or documents or the consummation of any of the transactions contemplated hereby or thereby. With respect to DuPont, each of this Agreement and such other documents and instruments is, or upon its execution and delivery will be, legal, valid, binding and enforceable in accordance with its terms. 4.3. Consents and Approvals. ---------------------- Except as set forth on Schedule 4.3, no consent, waiver, approval, authorization, exemption, registration, license or declaration of or by, or filing with, any other Entity (including, without limitation, any domestic or foreign government or political subdivision or any agency, department or instrumentality thereof) is required with respect to DuPont, in connection with the execution, delivery or enforceability of this Agreement or the other instruments and documents required or contemplated herein or the consummation of the transactions provided for hereby or thereby, except for such consents, waivers, approvals, authorizations, exemptions, registrations, licenses and declarations of or by, or filings with, other Entities which, if not made or obtained, would not individually or in the aggregate, materially impair DuPont's ability to perform its obligations hereunder or thereunder or consummate such transactions contemplated hereby or thereby. 4.4. No Conflict. ----------- Except as set forth on Schedule 4.4, the execution, delivery and performance by DuPont of this Agreement and the other instruments and documents required or contemplated herein does not, and the consummation of the transactions contemplated hereby and thereby will not: (a) Contravene the certificate of incorporation or bylaws of DuPont; (b) Violate, conflict with or result in the breach or termination of or default under any material agreement, instrument or indenture to which DuPont or any of its respective Affiliates is a party or by which any of them are bound; (c) Violate any order, judgment, decree, rule or regulation applicable to DuPont or by which DuPont may be bound; or (d) Constitute a violation by DuPont of any Federal, state, local or municipal law or ordinance or any material rule or regulation of an applicable regulatory authority. 4.5. No Brokers. ---------- DuPont has not taken any action that would entitle any agent, broker, investment banker or other firm or person to any broker's or finder's fee or any other commission or similar fee directly or indirectly in connection with the transactions contemplated by this Agreement. 14 4.6. Adequacy of DuPont Assets. ------------------------- Except as set forth on Schedule 4.6, the DuPont Assets, together with the Ancillary Agreements and the leases and other assets transferred to the Venture directly or through contract, include access to all material tangible and intangible assets and properties used principally for the operation of the DuPont End-Use Business and those assets can be further licensed by the Venture to Pioneer if contemplated in the Preferred Seed Support Agreement and are free and clear of any claim, mortgage, lien, pledge, option, security interest, charge or other encumbrance, except for (a) liens for current taxes not yet due and payable and (b) statutory liens of warehousemen, mechanics and materialmen and other similar statutory items. 4.7. Intellectual Property. --------------------- 4.7.1. Except as specified in Schedule 4.7.1, the DuPont Technology contains all patents, patent applications, technology, enabling technology and know-how used principally for the operation of the DuPont End-Use Business and those licenses can be further sub-licensed by the Venture to Pioneer as contemplated in the Preferred Seed Support Agreement and no Claim is pending or has been threatened in writing with regard to the DuPont Technology. 4.7.2. Except as specified in Schedule 4.7.2, DuPont holds all right, title and interest to the trademarks, trade names and copyrights (excluding software copyrights) principally dedicated to the DuPont End-Use Business and can transfer them to the Venture, and no Claim has been threatened in writing or is pending with regard to such trademarks, trade names or copyrights. 4.8. Contracts. --------- Except as disclosed in Schedule 4.8, all sales contracts with a duration of at least one year or for an amount in excess of Twenty-five Thousand Dollars ($25,000), and all other contracts, leases, licenses and other agreements with a duration of at least one year or for an amount in excess of Fifty Thousand Dollars ($50,000), included in the DuPont Assets are legal and binding agreements enforceable in accordance with their terms, are in full force and effect, and are assignable or otherwise transferable by DuPont or its Affiliates to the Venture. 4.9. Accuracy of Information. ----------------------- 4.9.1. The business valuation with respect to the DuPont End-Use Business provided by DuPont to Pioneer were based on good faith projections, calculated on a reasonable basis from information and data available at the time do not contain information that is deliberately false or misleading. 4.9.2. The written historical factual data with respect to the DuPont End-Use Business provided by DuPont in accordance with the due diligence performed by Pioneer was prepared from the books and records of DuPont maintained in accordance with the internal practices and procedures of DuPont and, subject to any accompanying written explanations, is accurate in all material respects as of the date given. The written responses to Pioneer questions and requests for information represent the good faith opinion and/or judgment of DuPont as of the date given based, to the extent applicable, upon the books and records of DuPont maintained in accordance with the internal practices and procedures of DuPont. 4.10. Claims. ------ Except as set forth on Schedule 4.10, no Claims are pending or threatened in writing against DuPont or its Affiliates and related to the DuPont End-Use Business that individually have or could result in Damages in excess of Five Hundred Thousand Dollars ($500,000). 4.11. Inventories. ----------- Except as set forth on Schedule 4.11, the inventories of DuPont End-Use Products, raw materials for the manufacture of DuPont End-Use Products, and work-in-process are sufficient for the operation of the DuPont End-Use Business in the ordinary course. Except as set forth on Schedule 15 4.11, the inventories of DuPont End-Use Products, raw materials for the manufacture of DuPont End-Use Products and work-in-process are free and clear of any lien, security interest or other encumbrance, except for: (a) Liens for current taxes not yet due and payable; and (b) Statutory liens of warehousemen, mechanics, materialmen and other similar statutory liens. 4.12. Certain Labor Matters. --------------------- Except as disclosed on Schedule 4.12, during the last three (3) years, DuPont, with regard to the DuPont End-Use Business: (a) Has not engaged in any unfair labor practice, and does not have pending any unfair labor practice complaint; (b) Except for routine grievance procedures, has not had a labor strike, dispute, slow-down or stoppage pending or threatened in writing against or affecting the DuPont End-Use Business; and (c) Except for routine grievance procedures, has not been a party to any Claims relating to severance, compensation, benefits, employment discrimination, wrongful or constructive discharge, breach of contract, invasion of privacy or other tort claims, or claims involving workplace injury or occupational illness. 4.13. No Material Adverse Change. -------------------------- Except as disclosed on Schedule 4.13, since March 1, 1997, there has not been any change, event or condition which, individually or in the aggregate, has a material adverse effect on the DuPont End-Use Business. 4.14. Operation in the Ordinary Course. -------------------------------- Except as disclosed on Schedule 4.14, and except for activities related to the transactions contemplated in this Agreement, DuPont and its Affiliates have operated the DuPont End-Use Business in the ordinary course since March 1, 1997. The Schedules referenced in any representation or warranty provided by DuPont in Article VI of this Agreement shall be considered an integral part of such representation or warranty and shall be construed in accordance with such representation or warranty. ARTICLE V - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES - ------------------------------------------------------------------- 5.1. Survival of Representations and Warranties Claims. ------------------------------------------------- 5.1.1. The representations and warranties contained in Articles III and IV of this Agreement shall be true and correct on the Closing Date and shall survive the Closing Date as though made on the Closing Date, regardless of any investigation made by or on behalf of the parties to this Agreement. DuPont shall be liable to Pioneer and the Venture for any Claims or Damages for breach or misrepresentation of any of the representations and warranties in Article IV of this Agreement, but only after the amount of such Claims and Damages in the aggregate exceeds One- million Dollars ($1,000,000) and then only to the extent that any such Claim or Damages shall exceed Twenty-five Thousand Dollars ($25,000). Pioneer shall be liable to DuPont and the Venture for any Claims or Damages for breach or misrepresentation of any of the representations and warranties in Article III of this Agreement but only after the amount of such Claims and Damages in the aggregate exceeds One Million Dollars ($1,000,000) and then only to the extent that any such Claim or Damages shall exceed Twenty-five Thousand Dollars ($25,000). 5.1.2. No party to this Agreement (including the Venture) may bring or assert any Claim against any other party to this Agreement on account of breach of warranty or misrepresentation relating to the representations and warranties set forth in Articles III and IV hereof more than [thirty (30)] months after the Closing Date, and no party to this Agreement (including the Venture) may bring any action or institute any arbitration against any other party to this Agreement on account of breach of warranty or misrepresentation relating to the representations and warranties set forth in Articles III and IV hereof more than thirty-six (36) months after the Closing Date. 5.1.3. Any Claims brought or asserted by Pioneer or DuPont on account 16 of misrepresentation or breach of warranty relating to the representations and warranties set forth in Articles III and IV of this Agreement, shall be on behalf of the Venture, and any Damages recovered shall be contributed to the Venture, excluding any attorneys' fees or costs to which a party is entitled pursuant to Section 5.2 of this Article V which may be retained by the party. 5.2. Offer of Settlement. ------------------- Any Claim that is instituted pursuant to Section 5.1 shall be subject to the following procedure: 5.2.1. Any party to the Claim, at any time prior to the date of the arbitrators' order or the Final judgment of a court of competent jurisdiction (the "Judgment"), may make and amend a monetary offer of settlement to the other party to finally and completely resolve the dispute between the parties ("Offer of Settlement"). 5.2.2. If the dispute is not settled prior to the Judgment, despite an Offer of Settlement by Pioneer and the Judgment is more favorable to Pioneer than Pioneer's Offer of Settlement, as amended, and, if applicable, such Judgment is less favorable to DuPont than DuPont's Offer of Settlement, as amended, then Pioneer shall be entitled to recover from DuPont all reasonable costs and expenses of the arbitration or litigation (including, but not limited to, attorneys' fees, arbitration costs, court costs and cost of experts) incurred by Pioneer in connection with the arbitration or litigation proceedings. 5.2.3. If the dispute is not settled prior to the Judgment, despite an Offer of Settlement by DuPont and the Judgment is more favorable to DuPont than DuPont's Offer of Settlement, as amended, and, if applicable, such Judgment is less favorable to Pioneer than Pioneer's Offer of Settlement, as amended, then DuPont shall be entitled to recover from Pioneer all reasonable costs and expenses of the arbitration or litigation (including, but not limited to, attorneys' fees, arbitration costs, court costs and costs of experts) incurred by DuPont in connection with the arbitration or litigation proceedings. 5.2.4. In the event neither Sections 5.2.2 nor 5.2.3 apply, then the parties shall bear their own costs and expenses in connection with the arbitration or litigation proceedings. 5.3. Method of Indemnification. ------------------------- If any party to this Agreement (including the Venture) is entitled to indemnification pursuant to Section 5.1 (the "Indemnified Party") from another party to this Agreement (the "Indemnifying Party"), then: 5.3.1. The Indemnified Party promptly shall give written notice within fifteen (15) business days to the indemnifying Party of any such Claim, specifying the nature of and the basis for such Claim and the amount or the estimated amount thereof to the extent that it is feasible to determine such amount; provided however, that failure by the Indemnified Party to provide notice to the Indemnifying Party shall not affect the Indemnified Party's right to indemnification unless the Indemnifying Party is unduly prejudiced by such failure; 5.3.2. Upon receipt of such written notice, the Indemnifying Party shall have the right to manage the Claim and, at its option and expense, to retain counsel reasonably satisfactory to the Indemnified Party in order to defend such claim; provided however, that the Indemnified Party may, at its expense, retain its own counsel to defend the Claim so long as such participation does not significantly interfere with the management of the Claim by the Indemnifying Party; and 5.3.3. The Indemnifying Party, upon notice to and approval by the Indemnified Party, which approval shall not be unreasonably withheld, may settle any such Claim. The parties to this Agreement, whether they be an Indemnifying Party or an Indemnified Party, shall cooperate fully with each other in the defense, negotiation settlement or appeal of any Claim. 17 ARTICLE VI - COVENANTS - ---------------------- 6.1. Access to Books and Records. --------------------------- Before the Closing Date, Pioneer and DuPont each shall allow reasonable access, and shall cause their respective Affiliates to allow reasonable access, by employees or authorized representatives of the other, to: (a) Corporate records, books of accounts; contracts, deeds and other documents, or portions thereof specific to the Pioneer End-Use Business or the DuPont End-Use Business, as applicable, as the same may be reasonably requested by the other; (b) Facilities, properties, plants and equipment principally relating to the Pioneer End-Use Business or the DuPont End-Use Business, as applicable; (c) Patent, technology, know-how, research and development specific to the Pioneer End-Use Business or the DuPont End-Use Business, as applicable; and (d) Employees, representatives or agents principally relating to the Pioneer End-Use Business or the DuPont End-Use Business, as applicable, in order to permit a reasonable examination and inspection to evaluate the feasibility of the transactions contemplated in this Agreement. Such examination and inspection shall be scheduled during normal business hours and upon other reasonable terms and conditions so as to minimize any interference with the normal conduct of business and shall be subject to the applicable safety and security policies of Pioneer or DuPont, or their respective Affiliates, and the Confidentiality Agreement dated March 13, 1997, between Pioneer and DuPont. 6.2. Conduct of Business in the Ordinary Course. ------------------------------------------ Except as otherwise provided for in this Agreement, prior to the Closing Date, Pioneer and its Affiliates, with regard to the Pioneer End-Use Business, and DuPont and its Affiliates, with regard to the DuPont End-Use Business, shall: (a) Except for activities relating to the transactions contemplated in this Agreement, conduct the Pioneer End-Use Business and the DuPont End-Use Business, as applicable, in the ordinary course and consistent with prior practices; (b) Maintain their respective books and records in accordance with their standard practices and procedures; and (c) Reasonably maintain, preserve and protect the Pioneer Assets and the DuPont Assets, as applicable, including, without limitation, goodwill and relationships with customers, distributors, formulators, lessors and licensors, except as may be otherwise agreed. 6.3. Disposition of Assets. --------------------- Except as otherwise expressly stated in this Agreement, Pioneer shall not, and shall cause its Affiliates not to, dispose of any Pioneer Assets that are material to the operation of the Pioneer End-Use Business, and DuPont shall not and shall cause its Affiliates not to, dispose of any DuPont Assets that are material to the operation of the DuPont End-Use Business, whether by sale, assignment, lease, license, contribution or otherwise, without the express written consent of Pioneer or DuPont, as appropriate; provided however, that Pioneer and its Affiliates may dispose of Pioneer Assets, and DuPont and its Affiliates may dispose of DuPont Assets, in the ordinary course of business and consistent with prior practices. 6.4. Further Assurances. ------------------ 6.4.1. Pioneer, DuPont and the Venture shall cooperate fully in order to complete the transactions contemplated in this Agreement. In connection therewith, from time to time after the Closing Date, upon request and without further consideration, Pioneer, DuPont and the Venture, and their respective Affiliates, as appropriate, will execute and deliver such documents and instruments; assist in obtaining the necessary operating, environmental, zoning and other permits; and take such other action as may be necessary in order to transfer (by assignment, contribution, sale, lease, license or otherwise) the Pioneer Assets and the DuPont Assets to the Venture. 6.4.2. Each of Pioneer, DuPont and the Venture shall, and shall cause each of their Affiliates to, take any and all actions necessary to complete the transactions contemplated under this 18 Agreement, including the transfer of; or access to, any additional assets that in the opinion of the parties should be owned or utilized by the Venture in order to best achieve the Business Purpose in the most efficient manner. 6.5. Notice of Events. ---------------- Each of Pioneer and DuPont shall give prompt notice to the other of the occurrence or non-occurrence of any event or condition prior to the Closing Date which, alone or in the aggregate with other events or conditions, would have a material adverse effect on the transactions contemplated in this Agreement, such that it could form the basis for postponing or canceling the Closing. 6.6. No Solicitations. ---------------- Until this Agreement is terminated pursuant to its terms, Pioneer or its Affiliates, with regard to the Pioneer Assets or the Pioneer End-Use Business, and DuPont or its Affiliates, with regard to the DuPont Assets or the DuPont End-Use Business, shall not solicit any inquiries or proposals to enter into or continue any discussions or agreements relating to the acquisition, disposition, consolidation or merger of all or any material portion of the Pioneer End-Use Business or the Pioneer Assets, or the DuPont End-Use Business or the DuPont Assets, or provide information or assistance with regard to any such transaction. If Pioneer or DuPont or any of their respective Affiliates, receives an unsolicited offer for any such transaction or obtains information that such an offer likely will be made, then such party promptly will provide notice to Pioneer or DuPont, as applicable, of the existence of such offer, including the identity of the prospective offeror or soliciting party. The provisions of this Section 6.6 shall not preclude Pioneer or DuPont or their respective Affiliates from working with customers (including entering into joint development agreements) in order to expand the markets and opportunities for Quality Trait seed, grain, grain products and plant materials. 6.7. Public Statements. ----------------- Until the earlier of the termination of this Agreement or the Closing Date, Pioneer and DuPont shall cooperate in making any public statement, issuing any press release, or making any statement to a third party (other than to a government agency pursuant to a formal request) with respect to any information concerning the transactions contemplated by this Agreement. 6.8. Conditions and Consents. ----------------------- Pioneer and DuPont, as the case may be, shall use best reasonable efforts, and shall cause their respective Affiliates to use best reasonable efforts, to: (a) Obtain all necessary approvals, assignments, consents and releases; and (b) Obtain all necessary third-party waivers, approvals and consents, including consents for the assignment, delegation, sublease or sublicense of contracts, leases, licenses or other agreements, that form a part of the Pioneer Assets, or the DuPont Assets; in order to effect all of the transfers and satisfy each of the conditions and obligations contemplated by this Agreement. 6.9. Transfer of Appropriate Levels of Working Capital. ------------------------------------------------- At Closing, Pioneer and its Affiliates, with regard to the Pioneer End-Use Business, and DuPont and its Affiliates, with regard to the DuPont End-Use Business, shall transfer working capital to the Venture. The amount of working capital and whether the transfer of such working capital shall be made as a capital contribution or in the form of a loan, shall be determined by the parties. 6.10. Seed Support. ------------ At Execution, Pioneer shall contract with the Venture to provide, pursuant to a Preferred Seed Support Agreement, for the development and production of Quality Trait Seed. 6.11. Provision of Services to the Venture. ------------------------------------ At Closing, Pioneer and DuPont and their respective Affiliates shall enter into service agreements with the Venture in order to provide services required by the Venture to operate. 19 6.12. Research Alliance Agreement. --------------------------- At Closing, Pioneer and DuPont shall form the Research Alliance which shall be evidenced by the Research Alliance Agreement. 6.13. Insurance. --------- 6.13.1. Pioneer, with regard to the Pioneer Assets, and DuPont, with regard to the DuPont Assets, shall maintain insurance in amounts at least equal to their respective historic levels up to and including the Closing Date. 6.13.2. After the Closing Date, the Venture shall establish a policy on risk management and contract for such insurance as it deems appropriate. To the extent appropriate, the Venture shall coordinate its insurance coverage with the insurance carriers of Pioneer and DuPont. 6.14. Contributions. ------------- 6.14.1. On or before the Closing Date, Pioneer, shall, or shall cause its Affiliates to: (a) Contribute to the capital of the Venture; (b) Transfer the Pioneer Assets to the Venture; and (c) Make available to the Venture pursuant to the Ancillary Agreements certain non-contributed assets of Pioneer. 6.14.2. On or before the Closing Date, DuPont shall, or shall cause its Affiliates to: (a) Contribute to the capital of the Venture; (b) Transfer the DuPont Assets to the Venture; and (c) Make available to the Venture pursuant to the Ancillary Agreements certain non-contributed assets of DuPont. 6.15. Tax Incentives. -------------- Pioneer and its Affiliates with regard to the Pioneer End-Use Business, and DuPont and its Affiliates, with regard to the DuPont End-Use Business, shall endeavor to transfer to the Venture any tax incentives enjoyed by the Pioneer End-Use Business or the DuPont End-Use Business, as applicable, to the extent pertaining to the Pioneer Assets or the DuPont Assets. ARTICLE VII - CONDITIONS PRECEDENT - ---------------------------------- 7.1. The obligations of Pioneer, DuPont and the Venture to consummate the transactions contemplated in this Agreement shall be subject to the fulfillment at or prior to Closing of each of the following conditions to the satisfaction of the affected party or parties: 7.1.1. Regulatory and Government Approvals. ----------------------------------- Pioneer and DuPont shall have obtained all domestic and foreign government consents and approvals that are necessary to consummate the transactions contemplated in this Agreement; no injunction or restraining order shall have been filed by, or written notification thereof received from, issued by a court or other agency or body of competent jurisdiction or any other law or regulation prohibits the consummation of the transactions contemplated in this Agreement; and no Claim shall be pending or threatened in writing challenging the transactions contemplated under this Agreement; and no written notice shall have been received from any governmental agency threatening to prohibit any transaction contemplated under this Agreement. 7.1.2. Compensation and Benefit Plan. ----------------------------- Pursuant to Section 11.2.2 the parties shall have met and agreed upon an appropriate compensation and benefit package. 7.1.3. Board Approval. -------------- The Board of Directors of each of Pioneer and DuPont shall have approved the execution, delivery and performance of this Agreement and the transactions contemplated hereby which approvals have previously been obtained on the part of each of Pioneer and DuPont. 20 7.1.4. Investment Agreement. -------------------- The Closing (as defined in the Investment Agreement) of the transactions contemplated by the Investment Agreement shall have occurred concurrently herewith; provided however that if the Investment Agreement terminates pursuant to its terms prior to the Closing (as defined in the Investment Agreement) thereunder, this Agreement shall terminate in accordance with Section 9.1(a)(1). ARTICLE VIII - EXECUTION AND CLOSING - ------------------------------------ 8.1. Time and Place of Execution. --------------------------- The Execution Date of this Agreement shall be August 6, 1997. 8.2. Proceedings at Execution. ------------------------ At Execution all proceedings to be taken and all documents to be executed and/or delivered by a party or its Affiliates or their officers or counsel in connection with this Agreement shall be reasonably satisfactory in form and context to the parties hereto and their respective counsel. 8.3. Action of Pioneer at Execution. ------------------------------ At Execution Pioneer shall and, as appropriate, shall cause its Affiliates to execute, deliver and/or provide for inspection the following documents: (a) Certified resolutions of the Board of Directors of Pioneer authorizing Pioneer to consummate the transactions contemplated in this Agreement; (b) Limited Liability Company Agreement , Formation Agreement, Research Alliance Agreement, and Preferred Seed Support Agreement executed by an authorized representative of Pioneer. 8.4. Actions of DuPont at Execution. ------------------------------ At Execution, DuPont shall and, as appropriate, shall cause its Affiliates to execute, deliver, and/or provide for inspection the following documents: (a) Certified resolutions of the Board of Directors of DuPont authorizing DuPont to consummate the transactions contemplated in this Agreement; (b) Limited Liability Company Agreement, Formation Agreement, and Research Alliance Agreement executed by an authorized representative of DuPont. 8.5. Actions of the L.L.C. at Execution. ---------------------------------- At the Execution, Pioneer and DuPont shall cause the L.L.C. to execute and/or deliver the Preferred Seed Support Agreement and any other documents necessary to complete the transactions contemplated in this Agreement. 8.6. Time and Place of Closing. ------------------------- The Closing shall occur on the Closing Date at a time and place agreed between Pioneer and DuPont . 8.7. Proceedings at Closing. ---------------------- At Closing all proceedings to be taken, all transfers, contributions, or assignments to be made, and all documents to be executed and/or delivered by a party or its Affiliates or their officers or counsel in connection with the transactions contemplated in this Agreement shall be reasonably satisfactory in form and content to the parties hereto and their respective counsel. All proceedings to be taken, all transfers, contributions or assignments to be made, and all documents to be executed and/or delivered by all or any one or more of the parties or their Affiliates at the Closing shall be deemed to have been taken, transferred, contributed, assigned, executed and delivered simultaneously. No proceedings shall be deemed taken, no assets or things shall be deemed transferred, contributed or assigned and no documents shall be deemed executed or delivered until all have been taken, transferred, contributed, assigned, executed and delivered. 8.8. Actions of Pioneer at Closing. ----------------------------- 21 At Closing, Pioneer shall and, as appropriate, shall cause its Affiliates to execute, deliver and/or provide for inspection all Ancillary Agreements, the Pioneer Technology License Agreement and all other appropriate deeds, asset transfer documents, assignments, leases, licenses, and other instruments of conveyance and transfer to evidence the contribution and transfer of the Pioneer Assets to the Venture. 8.9. Actions of DuPont at Closing. ---------------------------- At the Closing, DuPont shall and, as appropriate, shall cause its Affiliates to execute, deliver, and/or provide for inspection all Ancillary Agreements, the DuPont Technology License Agreement and all other appropriate deeds, asset transfer documents, assignments, leases, licenses, and other instruments of conveyance and transfer to evidence the transfer of the DuPont Assets from DuPont to the Venture. 8.10. Actions of the L.L.C. -------------------- At the Closing Pioneer and DuPont shall cause the L.L.C. to: (a) Deliver and/or provide for inspection the following documents: (i) A signed statement of the L.L.C. to the effect that the L.L.C. accepts all rights and obligations under this Agreement; (ii) A limited liability company certificate from the Secretary of State of Delaware certifying that the L.L.C. is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware; (iii) The Limited Liability Company Agreement; and (iv) Documentation to the effect that Pioneer and DuPont each have a fifty percent (50%) ownership interest in the Venture. (b) Execute and/or deliver the Ancillary Agreements and any other documents necessary to complete the transactions contemplated in this Agreement. ARTICLE IX - TERMINATION AND DISSOLUTION - ---------------------------------------- 9.1. Termination Prior to Closing. ---------------------------- (a) This Agreement, and the transactions contemplated hereunder, may be terminated by written notice if any of the following events occur prior to the Closing: (i) By the mutual consent of Pioneer and DuPont; or (ii) By Pioneer or DuPont if any of the Conditions Precedent set forth in Section 7.1 shall not have been fulfilled or waived prior to the Closing Date; (b) In the event of the termination of this Agreement pursuant to 9.1(a) above, the party invoking the termination shall provide prompt written notice to the other party. Upon providing such notice, this Agreement shall terminate in accordance with the following procedures: (i) If termination results pursuant to Section 9.1(a) above, the L.L.C. Agreement, the Research Alliance Agreement, all Ancillary Agreements, the Preferred Seed Support Agreement and all licenses (including, but not limited to, trade name licenses), loans, leases, and other contracts or arrangements between Pioneer or its Affiliates and the Venture, and DuPont or its Affiliates and the Venture, shall terminate except for any confidentiality agreements or the research agreement for high oil corn. 9.2. Termination Subsequent to Closing-Involuntary Default. ----------------------------------------------------- This Agreement, and the transactions contemplated hereunder, may be terminated after the Closing Date upon the occurrence of one of the following events of default which as described below in this 9.2 (a), (b), (c) or (d) shall be deemed to be an event of "Involuntary Default": (a) At any time after the Closing Date upon the bankruptcy of Pioneer or DuPont or a Change of Control, or upon the occurrence, prior to the fifth anniversary of the date of the Investment Agreement, of a Sale of Ag Products (as defined in the Investment Agreement) (provided that in the event of such a Sale of Ag Products, Pioneer shall be deemed the non-defaulting party for purposes of this Section 9.2(a)); provided however, that in the event of such bankruptcy, Change in Control, or the Sale of Ag Products the Venture Interest of the Party other than the non-defaulting Party may be purchased by the non-defaulting Party for fair market value in 22 accordance with the provisions in Section 9.7 Fair Market Value; (b) At any time pursuant to a final judgment by a court of competent jurisdiction or by regulatory authority ordering the dissolution of the Venture where such dissolution does not arise by reason of action taken by either party; provided however that, in the event of any such judgment or order, the disposition of each party's Venture Interest shall be in accordance with the provisions of Section 9.6 Auction Termination; (c) At any time after the tenth anniversary of the Closing Date upon a Substantial Disagreement that is not resolved pursuant to the provisions of Section 9.5 (a) or (b) of Section 9.5 Resolution of Substantial Disagreement; or upon the occurrence, on or following the fifth anniversary of the date of the Investment Agreement, of a Sale of Ag Products (as defined in the Investment Agreement); provided however, that there shall be a disposition of one Party's Venture Interest to the other Party in accordance with the provisions of Section 9.6 Auction Termination; and (d) At any time upon the occurrence of Release Events and Change in Control Release Events (each as defined in the Investment Agreement) as contemplated by, and to the extent provided in, Section 6.9 and Section 8.2(c) of the Investment Agreement; provided that (X) in the event of a Release Event arising out of the provisions set forth in clause (i) of the fourth sentence of Section 6.9 of the Investment Agreement or a Change in Control Release Event arising out of the provisions set forth in clause (i) of the first sentence of Section 8.2(c) of the Investment Agreement, the Venture Interest of the Party other than the non-defaulting Party may within the time periods specified in the Investment Agreement be purchased by the non-defaulting Party for fair market value in accordance with the provisions in Section 9.7 Fair Market Value, and (Y) in the event of a Release Event arising out of the provisions set forth in clause (ii) of the fourth sentence of Section 6.9 of the Investment Agreement or a Change in Control Release Event arising out of the provisions set forth clause (ii) of the first sentence of Section 8.2(c) of the Investment Agreement, there shall be a disposition of one party's Venture Interest to the other party in accordance with the provisions of Section 9.6 Auction Termination. Notwithstanding anything to the contrary contained in this Agreement, no Party shall be entitled to purchase the Venture Interest of the other Party following such time as its Venture Interest has been purchased by the other Party in accordance with the provisions of this Section 9.2 or otherwise. 9.3. Termination Subsequent to Closing-Voluntary Default. --------------------------------------------------- This Agreement, and the transactions contemplated hereunder, may be terminated after the Closing Date upon the occurrence of one of the following events of default, which as described below in 9.3 (a), (b), (c) and (d), shall be deemed to be an event of "Voluntary Default": (a) At any time after the sixteenth (16th) anniversary of Closing, should either Party provide written notice expressing its desire to transfer their interest in the Venture; provided however, that such transfer shall be in accordance with the provisions of Article X Transfer of Venture Interest. (b) At any time by the non-defaulting party in the case of a willful and substantial breach of any material term of this Agreement, the Research Alliance Agreement, or the Preferred Seed Support Agreement where such breach has not been cured within the cure period set forth in such agreement or if none specified, then within 180 days of receipt by the defaulting party of a written notice of the breach from the non-defaulting party. If such breach occurs within ten (10) years of the anniversary of Closing, then the non-defaulting party shall be entitled to purchase the defaulting party's Venture Interest for the sum of one-dollar ($1.00). If the breach occurs after the tenth (10th) anniversary of Closing then non-defaulting party shall be entitled to purchase the defaulting party's Venture Interest for fair market value in accordance with the provisions at Section 9.7 Fair Market Value. (c) Action by either party that results in regulatory or court ordered dissolution of the Venture, but only at such time as the later of (i) the time limit for the filing of any stay, countersuit, appeal or appeals in respect of such dissolution having expired, or (ii) any final appeal against such dissolution having failed. 23 9.4. Post-Termination Rights and Obligations-Involuntary Default and Voluntary Default. ------- (a) For termination in the case of an event of Involuntary Default or a Voluntary Default, and if DuPont becomes the sole owner of the Venture the following conditions shall apply: (i) Within one (1) year from the notice of termination, DuPont shall have notified Pioneer of DuPont's desire to either begin the transition of all traits that result in Venture Products, DuPont Crop Production Products, DuPont Industrial Products, or Other Products (all as defined in the Research Alliance Agreement) (together hereinafter referred to as "the Transfer Traits") to another seed company pursuant to one of the two options set out below in 9.4(a)(ii) or (iii), or DuPont shall have notified Pioneer of DuPont's desire to continue in a Preferred Seed Support Agreement with Pioneer. During such one-year period the Preferred Seed Support Agreement and the Research Alliance Agreement shall continue per the terms of those agreements as they exist prior to the notice of termination. The Research Alliance Agreement and the research thereunder shall continue at the level of funding and with research programs similar to and consistent with those in place during the 12 month period prior to the termination notice. (ii) If during the one-year period following termination DuPont elects to have Pioneer cooperate to transition the Transfer Traits to another seed company as a new seed supplier that will have preference over Pioneer with regard to Quality Trait planted acres, then upon such notice from DuPont to Pioneer (the "Transition Notice") the following provisions shall govern: 1) The Preferred Seed Support Agreement shall continue for 3 additional years on the same terms and conditions as prior to the Transition Notice; 2) The Research Alliance Agreement shall continue for an additional three years for the purpose of completing any ongoing Collaborative Efforts. If any Collaborative Efforts are not completed at such three year expiration date, the parties shall mutually determine the best approach for completion of such Collaborative Efforts. All irrevocable licenses for Transfer Traits where such Transfer Traits have been transformed into or otherwise combined with Pioneer germplasm and previously granted from the Venture to Pioneer, whether resulting from Collaborative Efforts concluded prior to or after the Transition Notice shall become non-exclusive and shall remain in full force and effect including the obligation of Pioneer to pay premiums and royalties to DuPont (or the L.L.C., as the case may be) and subject to restrictions as may exist in such licenses as to the sale of grain to end-users; 3) Pioneer shall cooperate with DuPont to transition the Transfer Traits that have been previously licensed to Pioneer and transformed into Pioneer germplasm prior to the Transition Notice. The transfer shall be accomplished by Pioneer making the most efficient F1 crosses available for back-crossing that assist the transfer of the Transfer Traits into another company's or companies' germplasm subject to the restriction that such other seed company must backcross the germplasm four times or ensure that via molecular marker analysis at least ninety-five percent (95%) of the Pioneer germplasm is removed from such transferred germplasm and that other than the five percent (5%) with the Transfer Trait the other seed company obtains no rights to breed with such germplasm; 4) At the conclusion of the three year Preferred Seed Support Agreement and the transition to another party seed company, Pioneer shall continue to be a non-exclusive licensee of the Venture with an obligation to pay premiums and royalties and supply Quality Trait Seed to the Venture on a non-exclusive basis and in competition with other seed companies for an additional four years. 24 Subsequent to such four (4) year period the irrevocable licenses granted to Pioneer for Quality Traits transformed prior to the Transition Notice shall become royalty free and shall be without restriction regarding grain sales to the Venture; however, the licenses to Pioneer for Quality Traits developed through Collaborative Efforts after the Transition Notice shall remain royalty bearing on a most favored nation status for Pioneer and subject to all restrictions that are applicable to other seed companies; provided that, in the event of a voluntary breach by Pioneer (as described in Section 9.3 (b) above) during the five year period following Closing, all of the Pioneer Technology previously exclusively licensed by Pioneer to the Venture pursuant the Pioneer Technology License shall be thereafter licensed non-exclusively by Pioneer to the Venture and all of the licenses granted to Pioneer from the Venture for Quality Traits shall become non-exclusive and otherwise remain in force and Pioneer shall continue to support the Venture with Quality Trait Seed sales on a non-exclusive basis pursuant to the terms of the those licenses. (iii) If during the one year period following termination DuPont elects to have Pioneer cooperate to transition the Transfer Traits to a seed supplier or a group of seed suppliers on terms and market access no more favorable than granted to Pioneer, then upon such notice from DuPont to Pioneer, the following provisions shall govern: 1) The Preferred Seed Support Agreement shall continue for three (3) additional years on the same terms and conditions as prior to the Transition Notice; 2) The Research Alliance Agreement shall continue for an additional three years for the purpose of completing any ongoing Collaborative Efforts; however, at the time of such Transition Notice, Pioneer shall be free to begin its Independent Effort research without obligation to provide licenses to DuPont for the Intellectual Property or Proprietary Property arising from such Independent Efforts. If any Collaborative Efforts are not completed at such three year expiration date, the parties shall mutually determine the best approach for completion of such Collaborative Efforts. All irrevocable licenses for Transfer Traits where such Transfer Traits have been transformed into or otherwise combined with Pioneer germplasm and previously granted from the Venture to Pioneer, whether resulting from Collaborative Efforts concluded prior to or after the Transition Notice shall become non-exclusive and shall remain in full force and effect including the obligation of Pioneer to pay premiums and royalties to DuPont (or the L.L.C., as the case may be) and subject to restrictions as may exist in such licenses as to the sale of grain to end-users; 3) Pioneer shall cooperate with DuPont to transition the Transfer Traits that have been previously licensed to Pioneer and transformed into Pioneer germplasm prior to the Transition Notice. The transfer shall be accomplished by Pioneer making the most efficient F1 crosses available for back-crossing that assist the transfer of the Transfer Traits into another company's or other companies' germplasm subject to the restriction that such other seed company must backcross the germplasm four times or ensure that via molecular marker analysis at least ninety-five percent (95%) of the Pioneer germplasm is removed from such transferred germplasm and that other than the five percent (5%) with the Transfer Trait the other seed company obtains no rights to breed with such germplasm; 4) At the conclusion of the three year Preferred Seed Support Agreement and the transition to a group of other seed companies, Pioneer shall continue to be a non-exclusive licensee of the Venture and supply 25 Quality Trait Seed to the Venture on a non-exclusive basis; however, Pioneer shall be entitled to a "most favored nation" status on all seed market access and license terms including premiums and royalties owing to DuPont, as sole owner of the Venture. (iv) If during the one-year period following notice of termination DuPont elects to continue the Preferred Seed Support Agreement then upon notice of such election to Pioneer (the "Continuation Notice") the following provisions shall govern: 1) The Preferred Seed Support Agreement shall continue for three additional years on the same terms and conditions that existed prior to the Continuation Notice. At the expiration of such three-year period, the parties may re-negotiate the Preferred Seed Support Agreement for an additional period or either party may give notice to the other that the Preferred Seed Support Agreement shall continue for three (3) more years but during such period the transition of Transfer Traits to another seed company shall occur. In such case, DuPont shall elect whether it desires the transition to be to a new "preferred" supplier in accordance with 9.4(a)(ii) or transition to one or a group of seed suppliers pursuant to 9.4(a)(iii). (b) For termination in the case of an event of Involuntary Default or a Voluntary Default, and if Pioneer becomes the sole owner of the Venture the following conditions shall apply: (i) DuPont shall continue performing its obligations under the Research Alliance Agreement for an additional four (4) years. If any Collaborative Efforts are not completed at such four year expiration date, the parties shall mutually determine the best approach for completion of and transition to Pioneer of such Collaborative Efforts. (ii) Following the notice of termination, to the extent that the Venture has created a mechanism or a preference for DuPont chemical sales that occur during the twelve (12) month period prior to the notice of termination, then Pioneer, as sole owner of the Venture, will continue to facilitate for four years DuPont chemical sales at the same level of support and with programs similar to and consistent with those in place for the twelve (12) month period prior to the termination notice. 9.5. Resolution of Substantial Disagreement. -------------------------------------- Any Substantial Disagreement shall be resolved in accordance with the following procedure: (a) Determination of Substantial Disagreement ----------------------------------------- If the parties are in Substantial Disagreement, then one party shall notify the other party of the disagreement. The parties shall then have a period of forty-five (45) days to attempt to resolve the Substantial Disagreement. If the parties cannot resolve the Substantial Disagreement within such period, then they will agree on the issues giving rise to the Substantial Disagreement and submit the matter to their respective chief executive officers. (b) Resolution by Executive Officers -------------------------------- Upon receipt of notice of the Substantial Disagreement, the respective chief executive officers (or a pre-specified senior executive) of Pioneer and DuPont, each shall appoint a single delegate from among their respective senior executives, with full power and authority to resolve the Substantial Disagreement. The delegates shall then have a period of fifteen (15) days to meet and resolve the Substantial Disagreement. If the senior executives cannot resolve the Substantial Disagreement within such time period, then the chief executive officers (or the pre-specified senior executives) shall meet to discuss and resolve the Substantial Disagreement by mutual consent. If the Substantial Disagreement has not been resolved within ninety (90) days of the notice starting the process described in this Section 9.4(b), then either Pioneer or DuPont may certify that the parties have reached Deadlock. (c) If either Pioneer or DuPont certifies to the other that Deadlock has been reached and such Deadlock occurred more that 26 ten (10) years since the Closing Date, then the parties agree to continue the Preferred Seed Support Agreement for two successive North American Quality Trait Seed sales seasons. After July 1 of the second of such sales seasons either party may then offer to purchase the Venture Interest of the other in accordance with the provisions of Section 9.6. Auction Termination Provisions as set out below. 9.6. Auction Termination Provisions. ------------------------------ If Pioneer and DuPont reach Deadlock and more than ten (10) years has elapsed from the Closing Date or in the event of a Change in Control Release Event or a Release Event (each as defined in the Investment Agreement) with the consequences set forth in Section 9.2(d)(Y) hereof as specified in the Investment Agreement or a Sale of Ag Products (as defined in the Investment Agreement) as provided in Section 9.2(c) hereof, then either party may purchase the Venture Interest from the other in accordance with the following procedures. (I) If, in the case of a Denolock, both parties wish to purchase the Venture Interest of the other, then either may invoke the following Deadlock termination provisions: (a) Each of Pioneer and DuPont independently shall appraise the value of the Venture within forty-five (45) days of the declaration of Deadlock; (b) Upon completion of the valuation, the parties each shall submit a sealed bid to the independent auditor of the Venture or another mutually acceptable independent third party, to purchase the Venture Interest of the other party; (c) The independent third party to which such bids are delivered shall open and examine the bids and certify which party submitted the higher bid; and (d) The party submitting the higher bid shall purchase the Venture Interest from the other party at such price certified by the independent third party. (II) In all other circumstances in which this Section 9.6 is applicable, the following termination provisions shall apply: (a) Within ten business days following a Sale of Ag Products, a delivery of a Competitor Release Notice or a delivery of a Change in Control Release Notice, as applicable, (each as defined in the Investment Agreement), the parties shall mutually agree on an investment bank of national reputation. If the parties cannot agree on an investment bank in accordance with the provisions of the foregoing sentence, then: (i) Each party shall select an investment bank of national reputation within five business days of the expiration of such ten business day period; and (ii) The two investment banks selected pursuant to clause (a) above shall select a third investment bank of national reputation (the investment bank selected pursuant to this Section 9.6(II)(a), the "Auctioneer"). (b) The Auctioneer shall conduct an auction (the "Auction"), commencing on the third business day following its selection, of the applicable Venture Interest pursuant to which the party who submits the highest price payable in cash upon consummation of the Auction will buy the other party's Venture Interest at the price so submitted by such party. The fees and expenses of the Auctioneer shall be divided equally between Pioneer and DuPont. (c) DuPont shall make the first bid in the Auction by submitting in writing to the Auctioneer its bid, after which the parties shall alternate in submitting bids in writing to the Auctioneer. The Auctioneer shall promptly notify each party of its receipt of a bid and the amount of such bid, after which the party who had not made the previous bid shall have one business day to submit its bid to the Auctioneer. In the event a party does not submit a bid (or an invalid bid is submitted as specified in clause (d) below and no subsequent valid bid is submitted) in such one business day period or at such time as a party indicates that it is unwilling to submit any further bids, the Auctioneer shall declare the Auction completed. Upon completion of the Auction, the party who had submitted the highest valid final bid shall promptly complete the purchase of the other parties' Venture Interest at the price specified in such bid. 27 (d) Any bid submitted to the Auctioneer (other than with respect to the first bid) that does not exceed the immediately preceding bid by 5 percent shall be considered an invalid bid and shall not be accepted by the Auctioneer. (e) The Auction shall be conducted by the Auctioneer in an even-handed, equitable and impartial manner in accordance with the provisions of this Section 9.6(II) and in accordance with any further provisions specified by the Auctioneer which are consistent with and do not contravene the provisions of this Section 9.6(II); provided however that the parties may mutually agree to any procedures with respect to the Auction irrespective of the provisions of this Section 9.6(II). 9.7. Fair Market Value. ----------------- If Pioneer, DuPont, or the Venture, as applicable, independently cannot agree on the Fair Market Value of the Transferred Property, then, upon agreement of the parties to follow the procedures contained in this Section 9.7: (a) They mutually shall agree on an independent appraiser of national reputation which shall determine such Fair Market Value. The parties shall have thirty (30) days within which to agree on such independent appraiser; (b) If the parties cannot agree on an independent appraiser in accordance with the provisions of Section 9.7(a), then: (i) Each party, within thirty (30) days, shall select an appraiser of national reputation, qualified to determine the Fair Market Value of the Transferred Property; (ii) The appraisers selected pursuant to Section 9.7(b)(i) mutually shall select a third independent appraiser of national reputation who is qualified to determine the Fair Market Value of the Transferred Property and who shall have no material relationship with either party; and (iii) The three appraisers so selected mutually shall agree on the Fair Market Value or, absent agreement, the Fair Market Value shall be the average of the values calculated by each appraiser. (c) Any determination of Fair Market Value pursuant to this Section 9.7 shall take into consideration all relevant factors and shall be calculated by multiplying (x) the price that a willing buyer will pay and a willing seller will accept for the purchase of all of the assets and business of the Venture as a going concern immediately prior to the transaction giving rise to the determination of Fair Market Value and without any discount for lack of liquidity or control and assuming that all agreements between the Venture and the parties to this Agreement that were in effect prior to such transaction would have continued in effect by (y) the percentage interest in the Venture being acquired. (d) Each party shall bear the costs of any independent appraisers that it selects. The costs of any independent appraiser selected jointly by the parties, or the costs of a third independent appraiser selected pursuant to Section 9.7(b)(ii), shall be borne equally by the parties. Each party shall bear its respective internal costs. (e) Within thirty (30) days of the determination of Fair Market Value, the party having the right to purchase the Venture shall either submit an irrevocable offer to purchase the Venture for the determined Fair Market Value for cash or shall notify the other party that no offer will made. If an offer is made, then closing of the transaction shall occur within 90 days from the offer, subject to the appropriate regulatory approvals. ARTICLE X - TRANSFER OF VENTURE INTEREST - ---------------------------------------- 10.1. Should any party desire to transfer their interest in the Venture after the sixteenth year following Closing, they shall first give the other party notice of that desire more than twelve months prior to the sixteenth year and the parties shall meet and attempt to negotiate a transfer of the Venture Interest and negotiate in good faith for continuation of the Research Alliance or the Preferred Seed Support Agreement. If the parties are unable to successfully conclude such negotiations within ninety (90) days after such notice, the party desiring to sell their interest may do so by seeking a bona fide offer to purchase from a bona fide third party. 28 10.2. Should any party receive a bona fide offer to purchase their interest, they shall disclose all of the terms thereof to the other party and the other party shall have thirty (30) days within which to match that offer and sixty (60) days thereafter to close the proposed transaction, subject to the appropriate regulatory approvals, and thereby purchase the interest of the selling party. Otherwise the selling party may complete the sale to that bona fide purchaser so long as the sale is closed within 180 days of the disclosure of the original offer to purchase. 10.3. This provision shall not preclude the transfer by Pioneer or DuPont to a Related Company of Pioneer or DuPont respectively. 10.4. If the above provisions are invoked then the parties shall no longer be obligated to continue the Research Alliance Agreement, to the extent it has not yet expired nor shall they be obligated to continue the Preferred Seed Support Agreement. Continuation of either of these agreements shall be a matter for negotiation between the parties after the notice is given as provided in Section 10.1. ARTICLE XI - HUMAN RESOURCES MATTERS - ------------------------------------ 11.1. Human Resources Philosophy. -------------------------- 11.1.1. Pioneer and DuPont recognize that the success of the Venture will depend largely on the quality of the employees that they will transfer to the Venture and the careful selection of persons to fill key positions. Pioneer and DuPont will endeavor to balance the selection of persons for key positions equally between Pioneer and DuPont employees, recognizing that these persons must have the capability to establish a new entrepreneurial culture for the Venture. The Venture management team shall be responsible for filling other management positions in the Venture. 11.1.2. Pioneer and DuPont anticipate that many of the personnel presently involved in the Pioneer End-Use Business or the DuPont End-Use Business will become employees of the Venture. The parties, however, recognize that there may be overlaps or that it may be more efficient to have employees in certain functions remain with their current employers and provide services to the Venture on a contract basis. 11.1.3. Pioneer and DuPont will work together to build a personnel plan prior to Closing with a bias toward (a) having the optimum number of employees become employed by the Venture and (b) ensuring that Venture management has control over those services or functions that are unique to the Combined Business. Pioneer and DuPont shall be responsible for any of their respective employees who provide services to the Venture on a contract basis. 11.2. Transfer of Employees to the Venture. ------------------------------------ 11.2.1. The Venture shall offer employment effective as of the Closing Date to the following persons ("Quality Grains Employees"): (a) Certain employees of Pioneer and its Affiliates, to be identified prior to Closing, principally dedicated to the design, development, manufacture, marketing, distribution and sale of Pioneer End-Use Products in the Pioneer End-Use Business; and (b) Certain employees of DuPont and its Affiliates, to be identified prior to Closing, principally dedicated to the design, development, manufacture, marketing, distribution, and sale of DuPont End-Use Products in the DuPont End-Use Business. Pioneer and DuPont will use their best efforts to cause such Quality Grains Employees to accept such employment, and shall provide the Venture with information as to the title and current compensation levels of such employees and assist the Venture in effecting the change of employment in an orderly fashion. 11.2.2. The offers of employment to the Quality Grains Employees shall include compensation and benefits as the Members Committee shall deem appropriate to attract and retain such employees including credits for prior years of service which shall be developed and agreed upon prior to Closing. Pioneer and DuPont 29 shall be responsible for the salary and benefits of their respective Transferred Employees for the period up to and including the date of their change of employment, including any accrued vacation or other benefits unless they are assumed by the Venture. ARTICLE XII - NON-COMPETITION FUTURE DEVELOPMENTS - ------------------------------------------------- 12.1. Competition with Venture. ------------------------ 12.1.1. Except as otherwise specifically provided in this Agreement, or in the Pioneer Technology License Agreement or the DuPont Technology License Agreement, and for as long as Pioneer and DuPont each own, directly or indirectly, fifty percent (50%) of the Venture, Pioneer and DuPont shall not, and shall cause their respective Affiliates not to, compete with the Venture within the scope of its Business Purpose. 12.2. Acquisitions Within the Scope of the Business Purpose. ----------------------------------------------------- 12.2.1. Pioneer and DuPont shall not, and shall cause their respective Affiliates not to, purchase all or any portion of an Entity, a majority of the business of which is within the scope of the Business Purpose, without the written consent of the Members Committee. 12.2.2. If Pioneer or DuPont, or any of their respective Affiliates, purchase an Entity less than a majority of the business of which is within the scope of the Business Purpose, then the purchaser shall offer the portion of the Entity that falls within the scope of the Business Purpose to the Venture at Fair Market Value. The Venture then shall have ninety (90) days within which to accept or reject the offer. If the Venture rejects the offer, then Pioneer or DuPont, or their respective Affiliates, as appropriate, may continue to own and operate the Entity, including the portion that falls within the scope of the Business Purpose, and continue its operation or sell the portion that falls within the Business Purpose; provided however, that, for a period of one (1) year, Pioneer, DuPont or their respective Affiliates shall not offer that portion of the Entity that falls within the Business Purpose to a third party upon terms more favorable than those offered to the Venture. 12.2.3. The provisions of Sections 12.2.1 and 12.2.2 shall apply only for so long as Pioneer and DuPont each own, directly or indirectly, fifty percent (50%) of the Venture. 12.2.4. The provisions of Sections 12.2.1 and 12.2.2 shall not apply to the acquisition by either Pioneer or DuPont, of all or any portion of any Equity in the business of food, food ingredient, feed or agriculturally derived industrial products so long as they create an opportunity for Venture Products or other businesses of either DuPont, Pioneer or their respective Affiliates. ARTICLE XIII - CERTAIN INTELLECTUAL PROPERTY MATTERS - ---------------------------------------------------- 13.1. Trademark Licenses. ------------------ Pioneer, with regard to the Pioneer trade name and certain of the trademarks for Pioneer End-Use Products, and DuPont, with regard to the DuPont trade name and certain of the trademarks for DuPont End-Use Products, shall enter into appropriate licenses or other written instruments with the Venture for the use of such trade names and trademarks. The Venture shall have no right to use any other Pioneer or DuPont marks except as expressly provided for by Pioneer or DuPont. 13.2. Use of Trade Names. ------------------ The Venture shall not use or permit to be used the trade names or trademarks of Pioneer or DuPont or any of their respective Affiliates, except as otherwise may be provided by separate agreement or written instrument executed by Pioneer or DuPont or their respective Affiliates, pursuant to Section 13.1, and then only in accordance with the specific terms of such agreement or instrument. For a period not to exceed one (1) year from the Closing Date the Venture may use inventories of product 30 literature, labels, invoices, and other documents specifically related to the Pioneer End-Use Business or the DuPont End-Use Business that contain trade names or trademarks not specifically transferred, by license or otherwise, to the Venture; provided, however, that, in its use of such product literature, labels, invoices and other documents, the Venture shall take all reasonable steps necessary to clarify that the Venture, and not Pioneer or DuPont or their respective Affiliates, is providing, and is responsible for, such product literature, labels, invoices and other documents. ARTICLE XIV - VENTURE FINANCES - ------------------------------ 14.1. Distribution Policy. ------------------- The Venture shall distribute to Pioneer and DuPont, in proportion to their respective ownership interests, any excess cash in the Venture, taking into account Venture capital expenditure plans and working capital requirements. Distributions shall be declared by the Members Committee and shall occur at least annually. 14.2. Debt. ---- Any third party borrowings by the Venture shall be limited to the amount and type as may be authorized from time to time by the Members Committee. 14.3. Inter-Company Borrowings. ------------------------ The Venture may borrow or lend money among its Affiliates, or among Pioneer or DuPont and their respective Affiliates, upon such terms and conditions as may be authorized from time to time by the Members Committee. 14.4. Limitation on Secured Borrowings. -------------------------------- The Venture shall not encumber, mortgage, hypothecate, pledge or create a security interest in any Combined Assets that would cause Pioneer or DuPont or their respective Affiliates to be in default with respect to any covenant or other obligation contained in any indenture, loan agreement, mortgage, security agreement or other similar agreement. ARTICLE XV - MISCELLANEOUS - -------------------------- 15.1. Term. ---- This Agreement shall become binding upon its execution by Pioneer and DuPont and shall continue in full force and effect until the dissolution of the Venture or the sale or transfer by Pioneer or DuPont of all or any portion of their respective interests in the Venture. 15.2. Rights and Remedies. Specific Performance. ----------------------------------------- The rights and remedies granted under this Agreement shall not be exclusive but shall be in addition to all other rights and remedies available at law or in equity. It is expressly agreed that the remedy at law for breach by any party hereto of its obligations hereunder is inadequate in view of the complexities and uncertainties in measuring the actual damages that would be sustained by reason of such party's failure to comply fully with each of such obligations. Accordingly, the obligations of each party hereunder are expressly made enforceable by specific performance to the extent appropriate. 15.3. Transfer Tax. ------------ Prior to Closing, the parties shall agree on the responsibility for the payment of any tax or other fee imposed on the transfer of Pioneer Assets or DuPont Assets as a result of the consummation of the transactions described herein. At Closing, the Venture shall provide Pioneer, DuPont and their respective Affiliates with appropriate sales and use tax exemption certificates for assets transferred by Pioneer or DuPont or their respective Affiliates to the Venture. 15.4. Governing Law and Waiver of Jury Trial. -------------------------------------- 15.4.1. This Agreement shall be governed by and construed in accordance with the substantive law of the State of Delaware; however, the parties agree that any legal proceeding shall take place in the federal court located in the State of Illinois. 31 15.4.2. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT. 15.5. Dispute Resolution. ------------------ 15.5.1. Any dispute or claim arising out of or relating to this Agreement, or any breach thereof, including, without limitation, the validity of the provisions of this Section 15.5, but specifically excluding any disputes with regard to Substantial Disagreements, or the determination of Fair Market Value pursuant to Section 9.8 when there is no manifest error, shall be settled in accordance with the provisions of this Section 15.5. 15.5.2. Initiation of Negotiations. -------------------------- In the event of a dispute or claim either party may give to the other a Notice of Negotiation requiring each party to appoint a single delegate from among their respective senior executives, with full power and authority to resolve the dispute or claim. The delegates shall then have a period of fifteen (15) days to meet and resolve the dispute or claim. If the senior executives cannot resolve the dispute or claim within such time period, then the chief executive officers (or the pre-specified senior executives) shall meet to discuss and resolve the dispute or claim by mutual consent. 15.5.3. Initiation of Mediation. ----------------------- If the dispute or claim has not been resolved pursuant to Section 15.6.2 hereof within 90 days from referral, any party to the dispute may give a Notice of Mediation to all other parties and to the CPR Institute for Dispute Resolution. The party receiving such notice shall be obligated to participate in the mediation in good faith. 15.5.4. Selection of the Mediator. ------------------------- (a) Promptly following receipt of a Notice of Mediation, CPR shall convene the parties participating in the mediation, in person or by telephone, to attempt to select a mediator by agreement of the parties. If the parties do not promptly reach agreement, CPR shall submit to the parties the names of not less than three mediator candidates from the CPR Panels of Distinguished Neutrals, with their resumes and hourly rates. If the parties are unable to agree on a candidate from the list within seven days following receipt of the list, each party will, within ten days following receipt of the list, send to CPR the list of candidates ranked in descending order of preference. The candidate with the lowest combined score will be appointed as the mediator by CPR. CPR shall break a tie. (b) Before proposing any mediator candidate CPR shall request the candidate to disclose any circumstances known to him or her which would cause reasonable doubt regarding the candidate's impartiality. If such circumstances are disclosed, the individual shall not serve, unless all parties agree. A party may challenge a mediator candidate if it knows of circumstances giving rise to reasonable doubt regarding the candidate's impartiality. (c) The procedure set forth in this Section 15.5.4 notwithstanding, the parties shall be free to select a mediator by themselves or by other means. 15.5.5. Mediator Expense. ---------------- The mediator's compensation rate will be determined before appointment. Each party will pay an equal share of the compensation and any other costs of the process, including the administrative fee CPR will charge for its services in the selection of the mediator. 15.5.6. Rules of the Mediation. ---------------------- 32 The rules of the mediation shall be as follows: (a) The process is non-binding. (b) The mediator shall be neutral and impartial. (c) The parties shall cooperate fully with the mediator. (d) The mediator shall control the procedural aspects of the mediation. (i) The mediator may meet and communicate separately with each party. (ii) The mediator normally will hold an initial joint meeting with the parties and then decide when to hold joint and/or separate meetings. The mediator will fix the time, place and agenda for each session. There will be no record of any meeting. Formal rules of evidence will not apply. (e) At least one senior business executive of each party, authorized to negotiate a resolution of the dispute, shall attend each session. (f) The process will be conducted expeditiously. Each representative shall make every effort to be available for meetings. (g) The mediator shall not transmit information received from any party to another party or any third party unless authorized to do so by the party transmitting the information. (h) Subject to the provisions of Section 15.5, the parties will refrain from pursuing judicial and/or administrative remedies during the mediation. (i) The mediator shall be disqualified as a witness, consultant or expert in any pending or future investigation, action or proceeding relating to the subject matter of the mediation. (j) The mediator may obtain assistance and independent expert advice, subject to the agreement and at the expense of the parties. (k) Unless the parties agree otherwise, the procedure shall be deemed terminated without any agreed resolution if: (i) After 60 days from the date of selection of the mediator a written resolution has not been agreed upon by the parties and a party has given written notice to the mediator and the other party of its intention to withdraw. (ii) The mediator concludes that further efforts would not be useful. (l) Neither CPR nor the mediator shall be liable for any act or omission in connection with the mediation. 15.5.7. Presentation to the Mediator. ---------------------------- Upon entering into mediation, and at least seven days before the first mediation conference, each party will deliver to the mediator a statement summarizing the dispute's background and such other information it deems necessary to familiarize the mediator with the dispute. Any materials the parties agree upon may be submitted jointly. The mediator may request each party to provide clarification and additional information, and to present its case informally to the mediator at the initial joint meeting or at later separate meetings. The parties are encouraged to exchange all information submitted to the mediator to further each party's understanding of the other's viewpoint. Except as the parties otherwise agree, the mediator shall keep confidential any information submitted. At the conclusion of the mediation, the mediator will return to each party all written materials which that party provided to the mediator without retaining copies. 15.5.8. Exchange of Information. ----------------------- If any party has a substantial need for documents or other material in the possession of another party, the parties shall attempt to agree on an exchange of documents or other material. Should they fail to agree, either party may request a joint consultation with the mediator who shall assist the parties in reaching agreement. The parties and mediator may establish a plan for limited, informal, expeditious discovery that may facilitate a settlement. At the conclusion of the mediation process, upon the request of a party which provided documents or other material to one or more other parties, upon the request of a party which provided documents or other material to one or more other 33 parties, the recipients shall return the same to the originating party without retaining copies thereof. 15.5.9. Negotiation of Terms. -------------------- The mediator may promote a resolution in any manner the mediator believes is appropriate. The parties are expected to initiate proposals for resolution. If the mediator concludes that mediation techniques have been exhausted and the parties have not reached agreement, the mediator, with the consent of all parties, will promptly give them an evaluation (which if the parties so choose will be in writing) of the likely outcome of the case if it were tried to final judgment and/or a final settlement proposal which the mediator considers fair and equitable. Thereupon, the mediator will call another mediation conference, in the hope that the mediator's evaluation or proposal will lead to a resolution. 15.5.10. Resolution. ---------- If a resolution is reached, the mediator, or a representative of a party, will draft a written settlement agreement incorporating all terms. This draft will be circulated among the parties, amended as necessary and formally executed. 15.5.11. Failure to Agree. ---------------- If a resolution is not reached, the mediator will discuss with the parties the possibility of their agreeing on binding regular arbitration or "last offer" arbitration of their dispute. If the parties agree to arbitration in principle, the mediator will offer to assist them in structuring a procedure designed to result in a prompt, economical adjudication. The mediator will not serve as the arbitrator, unless all parties agree. 15.5.12. Confidentiality. --------------- The entire mediation process shall be confidential. Unless agreed among all the parties or required to do so by law, the parties and the mediator shall not disclose to any person who is not associated with participants in the process, including any judicial officer, any information regarding the process (including pre-process exchanges and agreements), consent (including written and oral information), settlement terms or outcome of the proceeding. Under this procedure, the entire process is a compromise negotiation subject to Federal Rule of Evidence 408 and all state counterparts, together with any applicable statue protecting the confidentiality of mediation. All offers, promises, conduct and statements, whether oral or written, made in the course of the proceeding by any of the parties, their agents, employees, experts and attorneys, and by the mediator shall be confidential. Such offers, promises, conduct and statements are privileged under any applicable mediation privilege and are inadmissible and not discoverable for any purpose, including impeachment, in litigation between the parties. However, evidence that is otherwise admissible or discoverable shall not be rendered in admissible or non-discoverable solely as a result of its presentation or use during the mediation. The mediator and any documents and information in the mediator's possession shall be subject to subpoena in any investigation, action or proceeding, and all parties will oppose any effort to subpoena the mediator or documents. The mediator will promptly advise the parties of any attempt to compel him/her to divulge information received in mediation. 15.5.13. Preservation of Rights. ---------------------- Subject to the provisions of Section 15.5.1, the procedures set forth in this Section 15.5 shall be the sole and exclusive procedures for the resolution of dispute or claims between the parties until such procedures are terminated in accordance with their terms, provided however that a party may initiate legal action if in its sole judgment such action is necessary to avoid irreparable damage or otherwise to preserve the 34 status quo. Despite such action the parties shall continue to participate in the procedures set forth herein in good faith. 15.6. No Partnership. -------------- Except for tax purposes, nothing contained in or relating to this Agreement shall constitute or be deemed to constitute a partnership between the parties hereto. 15.7. Entire Agreement. ---------------- This Agreement, together with the LLC Agreement, the Research Alliance Agreement, the Investment Agreement, the Preferred Seed Support Agreement and related implementing agreements executed herewith or after the execution of this Agreement, sets forth the entire understanding and agreement between the parties as to the matters covered herein and supersedes and replaces any prior understanding, agreement or statement of intent, in each case, written or oral. 15.8. Notice. ------ Any notice, request, demand, report, offer, acceptance, certificate or other instrument that may be required or permitted to be delivered or served hereunder shall be delivered by a recognized courier service, by facsimile transmission (followed by a copy by mail) or by certified mail, return receipt requested, and shall be effective upon receipt, provided however, that notices shall be presumed to have been received: (a) If given by courier service, upon receipt by the addressee or upon the third business day following delivery of the notice to a recognized courier service, delivery costs prepaid, whichever is sooner; (b) If given by facsimile transmission, on the next business day, provided that the facsimile transmission is confirmed by answer back, written evidence of electronic confirmation of delivery, or oral or written acknowledgment of receipt thereof by the addressee; or (c) If given by certified mail, return receipt requested, upon the date indicated on the return receipt. Notices shall be sent to the addresses as follows (until notice of a change thereof is given as provided in this Section 15.8). If to Pioneer: Pioneer Hi-Bred International, Inc. 700 Capital Square 400 Locust Street Des Moines, Iowa 50309 Attn: General Counsel Facsimile: (515) 248-4844 Phone: (515) 248-4800 If to DuPont: E. I. du Pont de Nemours and Company DuPont Legal 1007 Market Street Wilmington, DE 19898 Attn: General Counsel Facsimile:(302) 773-4679 Phone: (302) 773-0177 If to the Venture: Optimum Quality Grains L.L.C. 15.9. Amendments. ---------- This Agreement may be amended, modified or superseded, and any of the terms, covenants or conditions hereof may be waived, at any time only by a written instrument executed by the parties hereto, or, in the case of a waiver, by the party waiving compliance. Any such amendment, modification or waiver shall be valid only for the specific purposes contained in the executed written instrument related thereto. 15.10. Waiver of Breach. ---------------- The failure at any time of any party hereto to require performance by another party of any responsibility or obligation provided for or contemplated in this Agreement shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by any party of a breach of any provision of this Agreement by another party 35 constitute a waiver of any succeeding breach of the same or any other provision nor constitute a waiver of the responsibility or obligation itself. 15.11. Assignability. ------------- Except as otherwise provided herein, neither this Agreement nor any right or obligation hereunder may be assigned or delegated in whole or in part by any party hereto without the prior written consent of the parties hereto and any such attempted assignment or delegation without such consent shall be null, void ab initio and without effect; however, notwithstanding the above, this Agreement may be assigned by either party to a Related Company of such party. Any permitted assignment of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 15.12. Severability. ------------ If any one or more of the provisions contained in this Agreement or any document executed in connection herewith shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired; provided however, that in such case the parties hereto agree to use their best efforts to achieve the purpose of the invalid provision by a new legally valid stipulation. 15.13. Headings. -------- The headings contained in this Agreement are for convenience of reference only and do not modify or affect in any way the meaning or interpretation of this Agreement. 15.14. No Third Party Rights. --------------------- This Agreement is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of; any Entity other than their parties hereto, except as expressly provided to the contrary elsewhere in this Agreement. 15.15. The L.L.C. --------- It is the intent of Pioneer and DuPont that, upon acceptance of this Agreement by the L.L.C., the L.L.C. shall become a party to this Agreement and shall enjoy the benefits and be subject to the obligations set forth in this Agreement. 15.16. No Duplicate Recovery. --------------------- A party shall only be entitled to recover, and only one party shall be entitled to recover, the full actual loss suffered on account of any act or omission by another party that constitutes a breach of any of the representations, warranties, covenants or obligations set forth in this Agreement or in any Ancillary Agreement notwithstanding the fact that the act or omission constitutes a breach of more than one of such representations, warranties, covenants or obligations made or owed to one or more parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized representatives as of the date first above written. PIONEER HI-BRED INTERNATIONAL, INC. /s/ Jerry L. Chicoine - ---------------------------------------- By: ----------------------------------- Title: --------------------------------- E. I. DU PONT DE NEMOURS AND COMPANY /s/ W.F. Kirk - ---------------------------------------- By: ----------------------------------- 36 Title: --------------------------------- The undersigned, Optimum Quality Grains L.L.C., as of this _____ day of ______________, 1997, hereby agrees to become a party to this Agreement, accepts the rights and obligations under this Agreement, and agrees to perform and abide by all of the provisions of this Agreement to be performed by or which are applicable to it. OPTIMUM QUALITY GRAINS L.L.C. /s/ Dick Reasons - ---------------------------------------- By: ----------------------------------- Title: --------------------------------- EX-99.(C)2 12 RESEARCH ALLIANCE AGREEMENT Exhibit (C)2 RESEARCH ALLIANCE AGREEMENT THIS AGREEMENT, effective this 6th day of August, 1997 ("Effective Date"), by and between E. I. du Pont de Nemours and Company, a corporation of the State of Delaware having a principal business address at 1007 Market Street, Wilmington, Delaware 19898 ("DUPONT") and Pioneer Hi-Bred International, Inc., a corporation of the State of Iowa having a principal business address at 700 Capital Square, 400 Locust Street, Des Moines, Iowa 50309 ("PIONEER"). WITNESSETH: WHEREAS, the parties have developed complementary expertise, technology and know-how concerning quality grain traits, agronomic traits, industrial use traits, genomics and enabling technologies for developing seed, grain, grain products, plant materials and other crop improvement products and desire to collaborate in order to realize significant synergies for the benefit of both parties in a research alliance ("Research Alliance") and to speed the discovery of new developments in corn, soybean and other selected oilseeds, genetics and crop improvement, both in agronomic traits and quality traits, and in industrial uses and in grain, grain products and plant materials that have unique end-use functionality; WHEREAS, the parties have formed a jointly owned, commercial joint venture ("Venture") in accordance with a Formation Agreement executed herewith that will take advantage of the complementary skills and resources, and through such synergies create value for quality trait seed, grain, grain products and plant material with beneficial end-use functionality delivered through corn, soybean and other selected oilseeds to enable the parties to speed new discoveries and their development for the market, and to maximize their business opportunity in such developments; and WHEREAS, it is the desire of the parties to form the Research Alliance between themselves with the primary goal to take advantage of opportunities for synergy which will speed new discoveries and support the business objectives of the Venture in the area of quality trait seed, grain, grain products and plant material in corn, soybean and other selected oilseeds. Secondarily, the Research Alliance will support each party's core business in these crops. NOW, THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS ----------- A. "Field of Interest" means corn, soybean and other selected oilseed crops. B. "Field of Agricultural Research" means improvement of economically important quality seed, grain, grain products or plant material traits and agronomic and industrial traits in the Field of Interest. The improvements may result from, but are not limited to, plant breeding, genetics, genomics research, gene discovery, gene expression and regulation technology, grain traits, transformation, gene targeting, enabling technology, industrial traits, agronomic traits, molecular markers, bioinformatics, analytical chemistry, and crop production chemical technology including technology related to the interaction of chemicals with genes and gene products. C. "Venture Products" means seed, grain, grain products and plant material in the Field of Interest that embodies a trait or traits that results in modifications of plant or grain composition or its attributes (excluding silage that does not include such a trait) that have value to end-users of grain, grain products, or plant materials and that commands a value in the market which is capable of being captured. D. "PIONEER Product" means planting seed or plants in the Field of Interest that embody a trait or traits that impact crop yield potential or the realization of yield potential. E. "DUPONT Crop Production Product" means any chemical or biological substance or microorganism or technology related to the interaction of chemicals with genes and gene products that 2 beneficially protects, modifies, regulates or controls crop growth or development when applied to the soil, seed, or plant in the Field of Interest. F. "DUPONT Industrial Product" means raw materials, intermediates, proteins, molecules or chemicals for use in non- agricultural markets including biochemical catalysts (enzymes and microorganisms), chemicals for industrial, pharmaceutical and consumer applications, and polymer intermediates, polymer and fibers for applications typical of DUPONT's coatings and industrial businesses. G. "Other Product" means any product other than those defined above in C, D, E, or F. H. "Collaborative Effort" means research and development undertaken by the parties based upon mutually agreed upon product targets, timelines, strategies, division of responsibilities, allocation of resources, and funding. I. "Affiliate" means: (1) Any corporation owning or directly or indirectly controlling at least fifty percent (50%) of the stock normally entitled to vote for election of directors of a party; and (2) Any corporation owned or directly or indirectly controlled by a party, or by a corporation defined by subparagraph (1) above through ownership of at least fifty percent(50%) of stock normally entitled to vote for election of directors. J. "Independent Effort" means research and development conducted by either of the parties independently of the Collaborative Effort, either prior to or after the Effective Date. K. "PIONEER Proprietary Property" means all existing or future PIONEER know-how, trade secrets, proprietary processes, formulae, PIONEER sourced germplasm, patents, patent applications, plant variety protection certificates, inventions, and rights in licenses or sublicenses owned by PIONEER or its Affiliates applicable within the Field of Interest developed through Independent Effort which it has the right to convey. L. "DUPONT Proprietary Property" means all existing or future DUPONT know-how, trade secrets, proprietary processes, formulae, DUPONT sourced germplasm, patents, patent applications, plant variety protection certificates, inventions, and rights in licenses or sublicenses owned by DUPONT or its Affiliates applicable within the Field of Interest developed through Independent Effort which it has the right to convey. M. "Confidential Information" means any and all proprietary information (including without limitation, information related to technical, business and Intellectual Property matters), know-how, data, Intellectual Property, trade secrets, and germplasm and biological and other physical materials owned or held by either party to this Agreement, now and in the future, which such party maintains as confidential. N. "Intellectual Property" means all germplasm and industrial and intellectual property rights including, but not limited to, patents, patent applications, patent rights, plant variety protection certificates, inventions, trade secrets, know- how, trademarks, service marks, brand names, trade names, copyrights, licenses, sublicenses and proprietary processes and formulae and all regulatory registrations/approvals or applications for registration of any of the foregoing. O. "Joint Intellectual Property" means Intellectual Property developed as the result of a Collaborative Effort. P. "Commingled Germplasm" means germplasm in the Field of Interest containing a Venture Product trait or traits descending from crossing PIONEER-sourced germplasm and DUPONT-sourced germplasm, or the introduction of a gene or genes for a Venture Product trait from one party into the germplasm of the other. ARTICLE II General Purpose 3 --------------- A. The parties agree to form a Research Alliance to speed the discovery and development of new beneficial agronomic, quality, industrial, and crop production traits, and optimize research efforts and share expertise, technology and know-how in the Field of Agricultural Research to benefit primarily the Venture and secondarily PIONEER and DUPONT. The role and management of the Research Alliance will evolve; however, at a minimum the Research Alliance will be organized and managed to: (1) ensure that the research needs of the Venture are met through the discovery and development of Venture Products in a timely way; (2) operate in a way that allows the research organizations of both parties to capitalize on their respective scientific competencies, strengths, and resources; (3) assign portions of the Collaborative Effort so as to reduce inefficiencies; (4) support the core businesses of the parties in PIONEER Products for PIONEER and DUPONT Crop Production Products and DUPONT Industrial Products for DUPONT; (5) develop and implement state of the art technologies in genomics, transformation, gene targeting, gene regulation, and gene expression for Venture Products, PIONEER Products, DUPONT Crop Production Products and DUPONT Industrial Products; (6) develop technologies to enable plant scientists to be more efficient in managing and exploiting corn, soybean, and selected oilseed germplasm bases to improve selections therefrom; (7) develop strategies to protect Joint Intellectual Property thereby protecting the investments of both parties; (8) identify and use new technologies in the Collaborative Efforts. ARTICLE III Management of Research Alliance ------------------------------- A. Management of the Research Alliance shall be the responsibility of a Research Board that will oversee the coordination and execution of all Collaborative Efforts conducted in accordance herewith. The Research Board shall be composed of two representatives from each party, with each party having one vote on issues as appropriate, plus a representative of the Venture, who shall be non-voting until such time that the Venture contributes at least 50% of the total funding of all Collaborative Efforts after which the Venture shall have one vote. B. A seven person Research Committee shall be formed and will be composed of three representatives from each party, one of whom will also be a Research Board member of said party, and the person representing the Venture on the Research Board. The Research Committee will report to the Research Board and be responsible for detailed management of all Collaborative Efforts. C. Each party and the Venture may replace any of its designated Research Board or Research Committee members as it may desire at its sole discretion. D. The Research Board shall have the following powers and duties: (1) Ensure that each Collaborative Effort is prioritized, sufficiently resourced and focused to maximize the value realized by the parties through the Venture; (2) Approve initiation of new Collaborative Efforts and the assignment of responsibilities of each 4 party under such programs based upon input and recommendations of the Research Committee; (3) Make decisions to continue or terminate Collaborative Efforts based upon input and recommendations of the Research Committee including, without limitation, rescinding any Collaborative Effort or any part of any Collaborative Effort; (4) Make all decisions regarding significant changes in resources and funding to ensure a balanced, efficient effort between the parties; (5) Identify opportunities for collaboration between parties. E. All decisions by the Research Board will require unanimity. F. Since decisions of the Research Board have the potential for significant impact on the success of the Venture, every effort to evaluate the options for major decisions shall be made and shared among the parties and the Venture. The Research Board shall meet frequently, but in no event less than once in each calendar quarter. Minutes of each meeting shall be kept and promptly circulated to each of the parties. G. The Research Committee shall have the following powers and duties: (1) Appoint research teams ("Research Teams") to efficiently and effectively implement each Collaborative Effort which include representatives of the parties and the Venture as appropriate; (2) Define and evaluate (i) the objective of each Collaborative Effort, (ii) the technical challenges and chance of success of each Collaborative Effort, (iii) timelines of Collaborative Efforts, (iv) the responsibility of each party under each Collaborative Effort, and (v) the resources needed to pursue and complete each Collaborative Effort; (3) Recommend to the Research Board the initiation of a new Collaborative Effort and the responsibilities of each party; (4) Provide regular reports to the Research Board addressing progress against budget, technical goals, and significant developments and issues under the Collaborative Effort; (5) Recommend to the Research Board the continuation or termination of any Collaborative Effort; (6) Organize and empower a sub-committee on intellectual property and licensing relating to Collaborative Efforts to review, evaluate and recommend to the Research Committee the need for any third party technology and patent rights to complete any Collaborative Effort, and to the extent possible, the Independent Efforts of and party in the Field of Interest; (7) Oversee and assess technical developments and progress against objectives of each Collaborative Effort. ARTICLE IV Collaborative Efforts --------------------- A. To ensure the business success of the Venture, the parties will conduct Collaborative Efforts presently contemplated in the following areas: (1) Oils (2) Carbohydrates 5 (3) Protein and amino acids (4) Other quality grain traits (5) Crop yield (6) Crop production traits (7) Industrial traits (8) Genomics (9) Transformation and gene targeting (10) Gene expression and evaluation (11) Trait functionality (12) Energy availability and nutritional quality (13) Phosphate availability Detailed planning of any Collaborative Effort in said areas and the assignment of responsibilities to each party for certain points of each Collaborative Effort will be concluded as soon as possible following execution of this Research Alliance Agreement. B. Either party or the Venture at any time can request an evaluation to initiate a new Collaborative Effort, provided that such potential new Collaborative Effort can be reasonably completed on or before the expiration of this Agreement, as determined by the Research Board. The request will be made to the Research Board which will instruct the Research Committee to define and evaluate all aspects of the proposed Collaborative Effort and recommend to the Board: (i) where the program should be conducted; (ii) the budget and resources needed; (iii) the probability of technical success; (iv) the anticipated development schedule; (v) critical decision points and milestones along the development schedule; and (vi) an estimated time frame for completing the effort. Based on the recommendations of the Research Committee, the Research Board will approve or reject such Collaborative Effort or resubmit the effort to the Research Committee with suggested revisions for reevaluation. C. The Research Team assigned for a particular Collaborative Effort by the Research Committee will recommend which party should be responsible for specific parts of any Collaborative Effort based on the technical capabilities of the parties. The Research Team's recommendation will be presented to the Research Committee for review. Once a Collaborative Effort has been approved by the Research Board, each party will then be committed to perform its part of such Collaborative Effort within the levels of effort approved by the Research Board. If it is later determined that such Collaborative Effort requires substantial additional resources in excess of initial expectations, then approval of the Research Board will be needed before additional resources are committed. D. Unless the Research Board decides to drop or defer a Collaborative Effort or part of an effort each party will use best efforts to perform any material part of any Collaborative Effort. Failure to use best efforts (after notice from the other party and a ninety (90) day cure period, or such period established by the Research Board) will result in a material breach of this Agreement. E. In the event that substantial additional resources (substantially in excess of the resources initially anticipated by the Research Committee) need to be devoted by a party to complete a specific part of a Collaborative Effort, then the Research Board will be responsible for resolving any inequities that may result from the extra effort. ARTICLE V Grant of Rights to Conduct Research ----------------------------------- A. PIONEER hereby grants to DUPONT, to the extent it has the authority and ability to do so, a worldwide, nonexclusive, nontransferable royalty free license to PIONEER Proprietary 6 Property solely for the purpose of, and solely to the extent necessary for DUPONT to conduct its research activities under Collaborative Efforts and Independent Efforts in the Field of Interest. B. DUPONT hereby grants to PIONEER, to the extent it has the authority and ability to do so, a worldwide, nonexclusive, nontransferable royalty free license to DUPONT Proprietary Property solely for the purpose of, and solely to the extent necessary for PIONEER to conduct its research activities under Collaborative Efforts and Independent Efforts in the Field of Interest. ARTICLE VI Funding and Efforts ------------------- A. Each party shall fund its own efforts under each Collaborative Effort approved and assigned by the Research Board; provided however, that the Research Board shall attempt, if possible, to balance the resources and funding provided by each party so that there will be approximately an equal contribution by each party to the funding of the sum total of all Collaborative Efforts. An annual review of the total funding of each party to each Collaborative Effort shall be made by the Research Board to determine the equality of funding based on the level of effort by each of the parties. It is anticipated that in the future, the Venture will assist in funding all or a significant portion of any Collaborative Effort relating to Venture Products as determined in the sole discretion of the Venture Board (as defined in the Formation Agreement). B. The Research Board will review and consider the level of funding that each party undertakes toward all Collaborative Efforts. Although the parties recognize that there may be a reallocation and change in focus of their research efforts as a result of the Research Alliance, the parties agree that their current levels of research spending and effort for Venture Product traits will be maintained or increased. ARTICLE VII Ownership and Licensing of Intellectual Property and Proprietary Property ---------------------------------------------- A. The parties will promptly inform the Research Committee of any ideas or improvements, including any potentially patentable inventions, arising from any ongoing research under any Collaborative Effort, and make a reasonable effort to disclose to the Research Committee proprietary property from Independent Efforts wherein said proprietary property is potentially applicable to DUPONT Crop Production Products, DUPONT Industrial Products, PIONEER Products or Venture Products. B. All Joint Intellectual Property shall be jointly owned by the parties. In those instances where the Venture has contributed 50% or more of the funding to such Collaborative Effort, the Venture shall be a joint owner of such Intellectual Property. Any Intellectual Property resulting from an Independent Effort by either party shall be owned by the party that developed it. Any Intellectual Property independently developed by the Venture, or the development of which was fully funded by the Venture shall be owned solely by the Venture. C. The classification of the rights in Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to establish which party possesses the right to make, have made, use or sell product for various commercial applications shall be carried out using the following sequential queries: (1). Is the Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to be exploited or value captured through a DUPONT Crop Production Product? If yes, DUPONT possesses the commercial application. If no, proceed to (2.); (2). Is the Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to be exploited or value captured through a DUPONT Industrial Product? If yes, DUPONT possesses the commercial application. If no, proceed to (3.); 7 (3). Is the Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to be exploited or value captured through a Venture Product? If yes, the Venture possesses the commercial application. If no, proceed to (4.); (4). Is the Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to be exploited or value captured through a PIONEER Product? If yes, PIONEER possesses the commercial application. If no, proceed to (5.); (5). The Joint Intellectual Property or PIONEER Proprietary Property or DUPONT Proprietary Property to be exploited or value captured is Other Product. D. Each party shall grant to the Venture an irrevocable, exclusive, worldwide and royalty free license to make, use or sell Venture Products, with the right to grant sublicenses, to the extent permitted, under said party's rights in Joint Intellectual Property, Commingled Germplasm, and its respective Proprietary Property. The Venture shall license PIONEER to produce and sell seed for production of Venture Products under terms of the Seed Supply Agreement executed herewith. Further, the Venture shall grant DUPONT a right of first refusal for an exclusive license to produce and sell DUPONT Industrial Products which may be derived from Venture Products. E. DUPONT shall grant to PIONEER an irrevocable, exclusive, worldwide and royalty bearing license to make, use, or sell PIONEER Products, including the right to grant sublicenses, under DUPONT's rights in Joint Intellectual Property. Subject to the exclusive rights granted herein to the Venture, DUPONT shall grant to PIONEER an irrevocable, nonexclusive, worldwide and royalty bearing license to make, use, or sell PIONEER Products, including the right to grant sublicenses, to the extent permitted and subject to the restrictions of ARTICLE IX, under DUPONT Proprietary Property. PIONEER shall be free to use PIONEER Proprietary Property in any manner without any obligation to pay royalties to DUPONT. PIONEER shall be free to use in any manner, including the right to license, its ownership rights in Joint Intellectual Property outside the Field of Interest in any product areas outside DUPONT Industrial Products, DUPONT Crop Production Products and Venture Products without the approval of DUPONT and without any obligation to pay royalties to DUPONT, subject to the rights of Paragraph G, below. F. PIONEER shall grant to DUPONT an irrevocable, exclusive, worldwide and royalty bearing license to make, use, or sell DUPONT Industrial Products and DUPONT Crop Production Products, including the right to grant sublicenses, under PIONEER's rights in Joint Intellectual Property with the proviso that in the case of DUPONT Crop Production Products in the Field of Interest, PIONEER shall retain a nonexclusive right under the Joint Intellectual Property, and DUPONT shall grant to PIONEER, to the extent permitted, a nonexclusive license under DUPONT Proprietary Property as required for PIONEER for the purpose of producing and selling seed responsive to a DUPONT Crop Production Product in return for a reasonable royalty to be negotiated in good faith. Further, in the event that a DUPONT Industrial Product or a DUPONT Crop Production Product is produced in a plant or grain within the Field of Interest, to the extent the Venture can competitively source such a DUPONT Industrial Product or DUPONT Crop Production Product, DUPONT shall obtain its requirements from the Venture. Subject to the exclusive rights granted herein to the Venture, PIONEER shall grant to DUPONT an irrevocable, nonexclusive, worldwide and royalty bearing license to make, use, or sell DUPONT Industrial Products or DUPONT Crop Production Products, including the right to grant sublicenses to the extent permitted and subject to the restrictions of ARTICLE IX, under PIONEER Proprietary Property. DUPONT shall be free to use DUPONT Proprietary Property in any manner without any obligation to pay royalties to PIONEER. DUPONT shall be free to use in any manner, including the right to license, its ownership rights in Joint Intellectual Property outside the Field of Interest in any product areas outside PIONEER Products and Venture Products without the approval of PIONEER and without any obligation to pay royalties to PIONEER, subject to the rights of Paragraph G, below. 8 G. DUPONT, PIONEER, and the Venture shall grant DUPONT and PIONEER a right of first refusal for an irrevocable, exclusive and royalty bearing license to make, use or sell Other Product in the Field of Interest, including the right to grant sublicenses, under their rights in Joint Intellectual Property. H. Each royalty bearing license for Joint Intellectual Property and DUPONT or PIONEER Proprietary Property granted to PIONEER or DUPONT shall have a royalty rate and terms negotiated in good faith by the parties involved. Such royalty rate shall be reasonable and based upon a good faith estimate of the royalty rate that would be granted or is granted to a third party for an identical license having terms and conditions reasonable and customary in the subject area and resulting from arms length negotiations. In the event that the parties involved cannot agree on a royalty rate and terms for any particular license, the issue shall be arbitrated in accordance with the rules of the American Arbitration Association. The parties agree to maintain adequate records in sufficient detail to enable the royalties due from each under the grants of rights above to be determined and permit said records to be inspected on no more than an annual basis at any time during regular business by an independent auditor acceptable to DUPONT and PIONEER for this purpose, who shall report to the appropriate licensor only the amount of the fees due hereunder. ARTICLE VIII Confidentiality --------------- A. During the term of this Agreement and for a period of five (5) years from the termination of this Agreement, each party will keep confidential any and all Confidential Information (not otherwise excluded from the confidentiality and nonuse obligations of this Article as set forth below) received from the other party in connection with the performance of this Agreement and will not disclose it to third parties or use it for any purpose other than pursuant to this Agreement, without the prior written consent of the disclosing party. The confidentiality and nonuse obligations of this Article VIII will not apply to information and other items listed under the definition of Confidential Information: (a) which is public knowledge at the time of disclosure, or which after disclosure becomes public knowledge in any way except through the wrongful act of the party so disclosing it; (b) which the receiving party is able to prove was in its possession at the time of disclosure by the disclosing party or subsequently and independently developed and which had not been obtained from the latter, either directly or indirectly; (c) whose disclosure is compelled by administrative or judicial requirement; or (d) which either party received from a third party having the legal right to disclose such information, provided that such information was not obtained by the third party directly or indirectly from the other party to this Agreement on a confidential basis. B. Confidential Information may be disclosed to an Affiliate for purposes of carrying out research under this Agreement where the receiving party agrees in writing to be bound by the terms of confidentiality and other applicable obligations expressed in this Agreement. C. The provisions of this Article VIII will survive any termination of this Agreement. ARTICLE IX Protection and Use of Germplasm ------------------------------- A. DUPONT shall not give, transfer, convey or license PIONEER-sourced germplasm or Commingled Germplasm to any third party without the prior written approval of PIONEER. B. PIONEER shall not give, transfer, convey or license DUPONT-sourced germplasm or Commingled Germplasm to any third 9 party without the prior written approval of DUPONT. C. Notwithstanding Paragraphs A and B, above, in the event of termination the parties shall be free to use Commingled Germplasm for any purpose without payment of a royalty if the following conditions are met: 1. In the case of PIONEER, PIONEER shall remove any Venture Product trait from the Commingled Germplasm; and 2. In the case of DUPONT, DUPONT shall carry out four (4) backcrosses of Commingled Germplasm with other germplasm, or achieve greater than 95% dissimilarity of the resulting germplasm from the Commingled Germplasm as assessed by molecular marker analysis. ARTICLE X Patent Prosecution, Defense and Enforcement ------------------------------------------- A. (1) Each party shall promptly disclose to the other party and the Research Committee the conception or reduction to practice under a Collaborative Effort of inventions by employees or others acting on behalf of such party. When such an invention has been made that may reasonably be considered to be patentable, a priority patent application shall be filed as soon as reasonably possible. The party conducting the project shall have the first right, using in-house or outside legal counsel selected at its sole discretion and expense, to prepare, file, prosecute, maintain and extend patent applications and patents concerning all such inventions. The party having such first right shall solicit the Research Committee's and the other party's advice and review of the nature and text of such patent applications and important prosecution matters related thereto in reasonably sufficient time prior to filing thereof, and shall take into account the reasonable comments related thereto. If the party having the first right, prior or subsequent to filing certain patent applications on any inventions or discoveries, elects not to file, prosecute or maintain such patent applications inventions or discoveries, elects not to file, prosecute or maintain such patent applications or ensuing patents or certain claims encompassed by such patent applications or ensuing patents in any country, that party shall give the other party notice thereof within a reasonable period prior to allowing such patent applications or patents or such certain claims encompassed by such patent applications or patents to lapse or become abandoned or unenforceable, and the other party shall thereafter have the right, at its sole expense, to prepare, file, prosecute and maintain patent applications and patents or divisional applications related to such certain claims encompassed by such patent applications or patents concerning all such inventions and discoveries in countries of its choice throughout the world. (2) No later than nine (9) months following the filing date of a priority patent application with respect to an invention made under a Collaborative Effort and filed according to the above paragraph, the parties shall consult together, through the Research Committee or otherwise, to determine whether such priority application with respect to such invention should be abandoned without replacement; abandoned and refiled; proceeded within the country of filing only; or used as the basis for a claim of priority under the Paris Convention for corresponding applications in or designating other countries. The parties shall consult together to ensure that so far as practicable the texts filed in the United States and in other countries contain the same information and claim the same scope of protection. The parties agree that they will cooperate in good faith in supplying whatever assistance is reasonably needed by the other for the preparing, filing and prosecuting of any such patent applications. B. Each party agrees to indemnify and defend the other party and the Venture from any claim of infringement by a third party based upon the use by the indemnifying party of Joint Intellectual Property or DUPONT Proprietary Property or PIONEER Proprietary Property. Each party shall have full responsibility with respect to its own potentially infringing activities which occurred prior to this Agreement. C. In the event that a third party is misappropriating or 10 infringing any Joint Intellectual Property right, then the parties will consult with one another regarding enforcement of such Joint Intellectual Property right. In this respect, the parties will consider the nature and extent of the misappropriation or infringement, the strength of such Joint Intellectual Property right with respect thereto and the existence of facts or circumstances that would weigh against enforcement of such rights. If the parties agree that such Joint Intellectual Property right should be sufficient to stop the infringing activity or collect damages or compel the misappropriating or infringing party to seek a license from either party, then the parties will consider whether they want to act in concert in an enforcement action. If a party does not want to engage in a joint enforcement action, then the other party will be free to enforce such Joint Intellectual Property right on its own and at its own expense and will retain all monetary damages that it may be awarded as a result of such enforcement. If the parties decide to act in concert in an enforcement action then they will agree upon: (i) retention of legal counsel; (ii) who controls the action; (iii) sharing of legal and other expenses; (iv) settlement authority and (v) sharing of damages or other award. ARTICLE XI Termination ----------- A. This Agreement, unless terminated earlier as set forth below, may be terminated by three (3) years prior notice in writing by either party which notice may be delivered at any time after the 13th anniversary of the date of this Agreement, except that if the Venture is terminated, the termination provisions of the Venture Agreement shall apply. This Agreement shall be extendable by mutual agreement of the parties. B. Termination may be effected under the terms and conditions of Article IX-TERMINATION AND DISSOLUTION provisions of the Venture Formation Agreement executed concomitantly by the parties. The rights and obligations of the parties in the event of termination shall also be found in such Article IX. ARTICLE XII Representations and Warranties ------------------------------ Each party to this Agreement, only with respect to itself, hereby represents and warrants to the other party as follows: a. Each party has all the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated herein and to perform its obligations hereunder. The execution, delivery and performance of this Agreement, including, without limitation, the grant of licenses authorized herein has been duly and validly authorized by proper corporate action and constitutes a valid and legally binding agreement of such party, without requiring the consent of any third party or governmental authority. b. Each party warrants that it has good title (either as the owner or as a licensee) to that Proprietary Property in which it has granted a nonexclusive license for research and commercial purposes to the other party in accordance herewith. Each party further warrants that the practice or use of any of their technology and patent rights of proprietary property is free of infringement or interference with any valid or enforceable property rights belonging to a third party. c. Neither party has entered into any understanding or agreement with any third party that will in any way conflict with any right granted, or obligation arising, under this Agreement, other than those agreements previously disclosed by each party to the other. ARTICLE XIII Notices and Reports ------------------- Any notice required or permitted to be given to any party for all of the purposes hereof shall be mailed by registered mail, return receipt requested, or hand delivered, addressed as follows: 11 To: E.I. du Pont de Nemours and Company Agricultural Products P.O. Box 80038 Wilmington, DE 19880-0038 Attention: E. M. Beyer-Director, Global Technology To: Pioneer Hi-Bred International, Inc. 700 Capital Square 400 Locust Street Des Moines, Iowa 50309 Attention: General Counsel or to such other address or addresses as any of the parties shall designate by notice given as herein required. Notices shall be effective upon receipt by the party to whom they are addressed. ARTICLE XIV Force Majeure ------------- A. One should consider as a case of force majeure, involving an exoneration of liability, any unpredictable or inevitable event which, as for its nature or consequences for the party invoking it, cannot be avoided or overcome by said party, and which does not result from a fault, committed by the latter, and is such as to render impossible, fully or partially, temporarily or finally, the performance of contractual obligations. B. A case of force majeure can only be invoked if the party invoking it has informed the other party of the beginning and end of the case of force majeure by registered mail, return receipt requested, within thirty (30) calendar days of the date of its appearance and disappearance. C. In the case of force majeure duly communicated according to the preceding paragraph, the obligations of the parties will be automatically prolonged for the time of the delay caused by such force majeure, and the parties shall consult each other. ARTICLE XV Assignability ------------- Neither this Agreement nor the rights or licenses herein granted to any party shall, except as expressly permitted or required under the Investment Agreement, be assignable or otherwise transferable by any party other than to an Affiliate without the prior written consent of the other party. Each of PIONEER and DUPONT agree that they shall each cause their respective Subsidiaries (as defined in the Investment Agreement) to take such action as shall be necessary to enable PIONEER and DUPONT, as the case may be, to fulfill their respective obligations under this Agreement, including without limitation, by providing or making available to their respective parent companies such research capabilities as may be transferred to such Subsidiaries by each such parent company. ARTICLE XVI Applicable Law -------------- This Agreement shall be interpreted in accordance with the laws of the State of Delaware. ARTICLE XVII Severability ------------ If any term of this Agreement is held unenforceable or in conflict with the law of any applicable jurisdiction, it is the intention of the parties that the validity of the remaining terms hereof shall not be affected by such holding and that such conflicting term be construed and enforced to the fullest extent permissible under law. ARTICLE XVIII Complete Agreement ------------------ This Agreement together with the LLC Agreement, the Formation Agreement, the Investment Agreement, the Preferred Seed Support Agreement and related implementing agreements executed 12 herewith or after the Effective Date constitutes the entire Agreement between the parties and supersedes and merges all prior agreements with respect to the subject matter discussed herein and any warranty, representation, promise or condition in connection therewith not expressly incorporated herein shall not be binding upon any party. No modification, extension or waiver of this Agreement or any of its provisions shall be binding unless in writing signed by a duly authorized representative of each of the parties. ARTICLE XIX Descriptive Headings -------------------- The descriptive headings in this Agreement are for convenience only and shall not be interpreted so as to limit or affect in any way the meaning of the language in the pertaining article, paragraph or subparagraph. IN WITNESS WHEREOF, the parties hereby execute and deliver this Agreement as of the date first written above. E.I. du Pont de Nemours and Company By: /s/W.F. Kirk ------------------------------ Pioneer Hi-Bred International, Inc. By: /s/Richard L. McConnell ------------------------------ bwm/August 6, 1997 EX-99.(C)3 13 INVESTMENT AGREEMENT INVESTMENT AGREEMENT dated as of August 6, 1997 between E.I. DU PONT DE NEMOURS AND COMPANY and PIONEER HI-BRED INTERNATIONAL, INC. TABLE OF CONTENTS SECTION 1 DEFINITIONS..............................................1 Section 1.1. Definitions..........................................1 Section 1.2. General Interpretive Principles.....................16 SECTION 2 ISSUANCE AND SALE OF SHARES.............................16 Section 2.1. Issuance and Sale of Shares.........................16 Section 2.2. Closing.............................................17 SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........17 Section 3.1. Corporate Organization and Qualification............17 ---------------------------------------- Section 3.2. Authorization of Agreements.........................18 --------------------------- Section 3.3. Consents; No Conflicts..............................19 ---------------------- Section 3.4. Capitalization......................................20 -------------- Section 3.5. Company Reports; Financial Statements...............21 ------------------------------------- Section 3.6. Absence of Certain Changes..........................22 -------------------------- Section 3.7. Litigation..........................................22 ---------- Section 3.8. Compliance with Laws; Regulatory Approvals..........22 ------------------------------------------ Section 3.9. Exemption from Registration.........................22 --------------------------- SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..........22 Section 4.1. Organization........................................23 ------------ Section 4.2. Authorization of Agreements.........................23 --------------------------- Section 4.3. Consents; No Conflicts..............................23 ---------------------- Section 4.4. Investor Reports; Financial Statements..............24 -------------------------------------- Section 4.5. Absence of Certain Changes..........................25 -------------------------- Section 4.6. Purchase for Purpose of Investment..................25 ---------------------------------- SECTION 5 GOVERNANCE..............................................25 Section 5.1. Directors Designated by the Shareholder.............25 Section 5.2. Resignation of Investor Nominees....................29 Section 5.3. Committees..........................................29 SECTION 6 ADDITIONAL AGREEMENTS...................................30 Section 6.1. Standstill Agreement................................30 Section 6.2. Voting..............................................33 Section 6.3. Dispositions........................................35 Section 6.4. Company's Right to Purchase Voting Securities.......39 Section 6.5. Company's Right to Purchase Voting Securities in Case of Unsolicited Offer...........................43 Section 6.6. Required Dispositions...............................47 Section 6.7. Top-Up Rights; Permitted Reacquisitions; Exchange of Share Certificates......................48 Section 6.8. Spin-off Distributions..............................50 Section 6.9. Competing Investments...............................51 Section 6.10. Rights of the Company upon a Trigger Event.........54 SECTION 7 PRE-CLOSING COVENANTS...................................55 Section 7.1. Taking of Necessary Action..........................55 -------------------------- Section 7.2. Notifications.......................................55 ------------- Section 7.3. No-Shop.............................................56 ------- Section 7.4. Share Listing.......................................56 ------------- Section 7.5. Registration Rights Agreement.......................56 ----------------------------- Section 7.6. Pre-Closing Information.............................56 ----------------------- SECTION 8 ADDITIONAL COVENANTS....................................56 Section 8.1. Certain Information.................................56 ------------------- Section 8.2. Right to Participate in Sale of the Company.........57 ------------------------------------------- Section 8.3. Use of Proceeds.....................................61 --------------- Section 8.4. Rights Agreement....................................62 ---------------- Section 8.5. Publicity...........................................63 --------- Section 8.6. Legend..............................................63 ------ Section 8.7. No Restrictions.....................................64 --------------- Section 8.8. Amendment to Articles of Incorporation..............64 -------------------------------------- Section 8.9. HSR Act Filings.....................................66 --------------- SECTION 9 CONDITIONS..............................................66 Section 9.1. Conditions of Investor's Obligation.................66 Section 9.2. Conditions of the Company's Obligation..............67 SECTION 10 TERMINATION............................................68 Section 10.1. Termination........................................68 Section 10.2. Effect of Termination..............................69 SECTION 11 MISCELLANEOUS..........................................69 Section 11.1. Fees and Expenses..................................69 Section 11.2. Survival...........................................69 Section 11.3. Notices............................................70 Section 11.4. Entire Agreement; Amendment........................71 Section 11.5. Counterparts.......................................71 Section 11.6. Governing Law; Submission to Jurisdiction..........71 Section 11.7. Successors and Assigns.............................71 Section 11.8. Assignment.........................................71 Section 11.9. Remedies; Waiver...................................72 Section 11.10. Specific Performance..............................72 Section 11.11. Severability......................................72 EXHIBIT A Form of Registration Rights Agreement EXHIBIT B Form of Rights Agreement Amendment EXHIBIT C Form of Certificate of Designation EXHIBIT D Initial Investor Nominee Notice INVESTMENT AGREEMENT INVESTMENT AGREEMENT, dated as of August 6, 1997 (the "Agreement"), by and between E.I. du Pont de Nemours and Company, a Delaware corporation (the "Investor"), and Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"). W I T N E S S E T H: WHEREAS, contemporaneously herewith, the parties are entering into a Joint Venture Agreement and a Research Alliance Agreement (each as defined herein); WHEREAS, the Company and the Investor have each determined to enter into this Agreement pursuant to which the Investor has agreed to purchase from the Company, and the Company has agreed to issue and sell to the Investor, in each case subject to the conditions herein, the Shares at the Closing (each as defined herein); NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: SECTION 1 DEFINITIONS ----------- Section 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Acceptance Notice" has the meaning set forth in Section 6.4(a) hereof. "Affiliate" of a Person has the meaning set forth in Rule 12b-2 under the Exchange Act. "Agreement" has the meaning set forth in the preamble hereto. "Amended Rights Agreement" means the Rights Agreement, as amended by the Rights Agreement Amendment and as further amended from time to time in accordance with the terms of this Agreement. "Articles of Incorporation" means the Third Restated and Amended Articles of Incorporation of the Company, as amended from time to time. "Associate" of a Person has the meaning set forth in Rule 12b-2 under the Exchange Act. "Beneficially Own" with respect to any securities means having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, as in effect on the date hereof, without limitation by the 60-day provision in paragraph (d)(1)(i) thereof). The terms "Beneficial Ownership" and "Beneficial Owner" have correlative meanings. "Board" or "Board of Directors" means the Board of Directors of the Company. "Business Day" means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of Iowa or the State of Delaware are authorized or obligated by law or executive order to close. "Bylaws" means the Restated and Amended Bylaws of the Company as amended from time to time. "Change in Control" means the occurrence of any of the following events: (a) the direct or indirect purchase or acquisition by any Person or 13D Group (other than an Excluded Person) of Beneficial Ownership of Voting Securities or Common Securities of the Company if, after giving effect to such acquisition, such Person or 13D Group would Beneficially Own Voting Securities or Common Securities representing an Equity Percentage of 30% or more on a fully diluted basis; or (b) the consummation by the Company or any of its Subsidiaries of a merger, consolidation or other business combination (including a sale of all or substantially all of the assets of the Company (other than to wholly-owned Subsidiaries of the Company)) that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in such transaction, if immediately after giving effect to such transaction, the Persons who Beneficially Owned Voting Securities or Common Securities immediately prior to such transaction Beneficially Own in the aggregate Voting Securities or Common Securities (or voting securities or common securities in the case of a surviving entity other than the Company) representing a Voting Ownership Percentage or a Total Ownership Percentage (or voting power or common equity ownership of common securities in the case of a surviving entity other than the Company) on a fully diluted basis of less than 50% immediately after giving effect to such transaction; or (c) the consummation by the Company of a plan of complete liquidation or dissolution of the Company. "Change in Control Transaction" means a transaction which, if consummated, would result in a Change in Control. "Closing" means the closing of the sale and purchase of the Shares pursuant to Section 2.1 hereof. "Closing Date" has the meaning set forth in Section 2.2 hereof. "Commission" means the Securities and Exchange Commission. "Common Securities" means the Common Stock, the Series A Convertible Preferred Stock and any other securities of the Company (excluding non-voting securities (other than capital stock) issued to directors, officers or employees of the Company as compensation) to the extent to which such securities by the terms thereof (i) are not effectively limited in amount as to dividends or amounts payable upon liquidation of the Company or (ii) are otherwise a substantial equivalent of Common Stock as to dividends or upon liquidation of the Company or upon consummation of a merger or other extraordinary transaction in which the outstanding shares of Common Stock participate. "Common Stock" means the Common Stock, par value $1.00 per share, of the Company. "Company" has the meaning set forth in the preamble hereto. "Company Buy Back Period" means the period beginning on the Closing Date and ending twelve months thereafter. "Company Repurchase" has the meaning set forth in Section 6.6(a). "Competing Investment" means the acquisition by a Competitor (other than in connection with a Change in Control Transaction) of Beneficial Ownership of (i) Common Securities (A) directly from the Company or any Subsidiary of the Company, (B) pursuant to an agreement with the Company or any of its Subsidiaries (a "Competitor Agreement") providing either for the issuance or transfer by the Company or any of its Subsidiaries of such Common Securities or providing for the waiver or inapplicability of the Amended Rights Agreement (or a Substantially Similar Plan) with respect to the ownership of such Common Securities, or (C) where, in connection with such acquisition, the Company waives or renders the Amended Rights Agreement (or a Substantially Similar Plan) inapplicable thereto, in each case, if, after giving effect to such acquisition, the Competitor would, in the case of clauses (A), (B) and (C) above, to the knowledge of the Company, after reasonable inquiry, Beneficially Own Common Securities either (x) in excess of the Trigger Amount (as defined in the Amended Rights Agreement, as then in effect, as such term (or comparable term) may be amended from time to time by the Company in its sole discretion) or (y) representing an Equity Percentage of 15% or more or with a number of Votes of 15% or more of the Total Voting Power, (ii) Common Securities representing an Equity Percentage of 15% or more (whether acquired from the Company or otherwise) (provided that this clause (ii) will apply only if the Company shall amend, waive or modify the Amended Rights Agreement as in effect on the date of this Agreement (or a Substantially Similar Plan) so as to increase the percentage "15%" referred to in clause (i) of the definition of Trigger Amount in the Amended Rights Agreement or increase the percentage "10%" or the fraction "one-fourth (1/4)" referred to in clause (ii) of the definition thereof or otherwise render the Amended Rights Agreement inapplicable (including by taking action to cause a Section 11(a)(ii) Event or Section 13 Event (each as defined in the Amended Rights Agreement as in effect on the date hereof), not to occur that, absent such action, would otherwise have occurred, or to redeem the Preferred Stock Purchase Rights) to an acquisition referred to in this clause (ii) (whether or not done in connection therewith or in anticipation thereof) or so as to provide that the acquisition of any additional shares of Common Stock under the circumstances contemplated by clause (2) of the proviso to paragraph (a)(ii) of the definition of Acquiring Person contained in the Amended Rights Agreement (or similar provision of any Substantially Similar Plan) will not have the effect specified in said clause (2) (other than any such amendment, waiver, modification or redemption legally required to be made by the Board as a result of a shareholder-sponsored resolution or a final and non-appealable court order, in each case, that is opposed by the Board; provided, that for purposes of this clause (ii) references to the "Amended Rights Agreement" shall also refer to a Substantially Similar Plan in which the term "Trigger Amount" or comparable term thereto, and the consequences resulting from its occurrence, are substantially identical to those set forth in the Amended Rights Agreement on the date of this Agreement including containing the same percentages and fraction as those set forth above), or (iii) (a) Common Securities representing an Equity Percentage of 10% or more, and (b) the right (whether such right is contingent, conditional or otherwise) to designate or nominate one or more Directors (or if the Board within five years after the date of the acquisition of shares specified in clause (a), nominates or appoints any designee of such Competitor or its Affiliates to the Board). An acquisition of Beneficial Ownership of Common Securities in excess of a percentage of Votes shall be deemed to have occurred when, as a result of such Common Securities becoming entitled to additional Votes by reason of the passage of time, such securities represent or have a number of Votes which represent more than the specified percentage and, in the case of clause (iii)(a) above, an acquisition of Beneficial Ownership of Common Securities in excess of an Equity Percentage shall be deemed to have occurred when, as a result of repurchases by the Company of Common Securities, such securities represent more than the specified percentage (provided that such 10% level in clause (iii)(a) above shall not be deemed exceeded by reason of the repurchase of Common Securities by the Company unless (i) an Equity Percentage of 10.5% or more is achieved and (ii) the Competitor fails to reduce its Beneficial Ownership of Common Securities to an Equity Percentage below 10% within one year after equaling or exceeding the 10.5% level). Notwithstanding the foregoing, (A) no transaction with a Person who is not, at the time such transaction is consummated or entered into, then designated as a Competitor shall be deemed a Competing Investment as a result of the subsequent designation of such Person by the Investor as a Competitor, but (B) by way of illustration, the acquisition of Common Securities from the Company by a Person (I) after which such acquisition such Person Beneficially Owned Common Securities in an amount satisfying the 15% requirement of clause (i) above, and (II) before which acquisition such Person had been designated a Competitor but whose Beneficial Ownership did not satisfy such 15% requirement, shall be deemed to be a Competing Investment. "Competitor" means any Person that is one of eight participants in the agricultural chemicals or biotechnology market as designated to the Company by the Investor as a Competitor (which term shall include any Controlled Affiliate of each such Competitor and any 13D Group with respect to securities of the Company of which such Person is a member). The Investor shall provide to the Company prior to the date of this Agreement, and within 10 Business Days prior to each anniversary of the Closing Date, a written list of such Competitors (which Investor may change from year to year as of each anniversary of the Closing Date) which Competitors shall conform to the provisions of the definition of Competitor contained herein. The Competitors so designated shall constitute the Competitors hereunder for the initial period commencing on the Closing date hereof and ending one year following the Closing Date and the successive one year period following each applicable anniversary of the Closing Date and if no such notice is provided for any year, the Competitors specified in the notice for the most recent year that such notice was given shall continue to be deemed the Competitors. "Competitor Agreement " shall have the meaning set forth in the definitions of the term "Competing Investment". "Confidentiality Agreement" has the meaning set forth in Section 8.1(a) hereof. "control" with respect to any Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Controlled Affiliate" shall mean, with respect to any Person, any Affiliate of such Person that is controlled by or that controls or is under common control with such Person such that, in any such case, the controlling party has the legal or contractual power (including, without limitation, through negative control or through the controlling parties designees or representatives on the board of directors or other governing body of the parties controlled by the controlling or under the articles of incorporation or other constituent documents of such controlled parties or as a result of voting rights of any securities or other instruments issued by such controlled parties) to direct or to manage the direction of the business and policies of such Affiliate. "Derivative Securities" means any subscriptions, options, conversion rights, warrants, phantom stock rights or other agreements, securities or commitments of any kind obligating the Company or any of its Subsidiaries to issue, grant, deliver or sell, or cause to be issued, granted, delivered or sold (i) any Common Securities or Voting Securities of the Company, (ii) any securities convertible into or exchangeable for any Common Securities or Voting Securities of the Company, or (iii) any obligations measured by the price or value of any shares of capital stock of the Company. "Dilutive Issuance" has the meaning set forth in Section 6.7(e) hereof. "Director" shall mean a director of the Company. "Disposition" has the meaning set forth in Section 6.3(a) hereof. "Equity Percentage" means, with respect to any Common Securities calculated at any particular point in time, the ratio, expressed as a percentage of (a) the total number of shares of Common Stock included in, or issuable upon conversion of (whether or not then convertible), or otherwise constituting the economic equivalent of, such Common Securities over (b) the total number of shares of Common Stock then outstanding and the number of shares of Common Stock issuable upon conversion of (whether or not then convertible), or otherwise constituting the economic equivalent of, all outstanding Common Securities. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "Excluded Person" shall mean (i) any member of the Investor Group, (ii) any Grandfathered Person, (iii) any wholly owned Subsidiary of the Company, or (iv) any underwriter temporarily holding Common Securities in connection with a public offering of such securities. "First Offer Price" has the meaning set forth in Section 6.4(a) hereof. "Fully Independent Director" means a person who qualifies as an "outside director" of the Company and the Investor within the meaning of Section 162(m) of the Internal Revenue Code of 1986 as in effect on the date hereof and who is not (apart from such directorship) (i) a current or former officer or employee of the Company or any Affiliate of the Company, (ii) a current or former director, officer or employee of the Investor or any member of the Investor Group, (iii) did not in either of the last two completed calendar years receive, and is not an officer, director, employee, stockholder holding more than 10% of the voting interest of, partner or Affiliate of any person ("Entity") that in either of such Entity's two most recent fiscal years, received, more than 10% of such person's total revenues from either the Company or the Investor. "GAAP" means United States generally accepted accounting principles. "Governmental Entity" means any government or any agency, bureau, board, commission, court, department, political subdivision, tribunal, or other instrumentality of any government (including any regulatory or administrative agency), whether federal, state or local, domestic or foreign. "Grandfathered Person" means any of the Persons specified in clauses (i) through (vi) of the term "Grandfathered Person" in the Amended Rights Agreement as in effect on the date of this Agreement and any 13D Group referred to in clause (B) below; provided, however, that a Grandfathered Person shall cease to be a Grandfathered Person if any of the following occur at any time: (A) such Grandfathered Person, individually or together with one or more other Grandfathered Persons, acting together or as part of a 13D Group, Beneficially Owns Common Securities representing an Equity Percentage of 40% or more on a fully diluted basis, or (B) such Grandfathered Person, individually or together with one or more Grandfathered Persons, are acting as part of a 13D Group which includes Persons who are not Grandfathered Persons and who individually or in the aggregate Beneficially Own, directly or indirectly, in excess of 1% of the then outstanding Common Securities provided that the reference to "1%" referred to in this clause (B) shall be increased to up to 5% so long as the Beneficial Ownership of the entire 13D Group referred to in this clause (B) does not have an Equity Percentage greater than 35%. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations promulgated thereunder. "Independent Director" means a person who is not (apart from such directorship) (i) a current or former officer or employee of the Company or any Affiliate of the Company or (ii) a current or former director, officer or employee of the Investor or any member of the Investor Group or Other Investor Affiliate. "Initial Investor Nominee Notice" has the meaning set forth in Section 5.1(a) hereof. "Initial Top-Up Period" has the meaning set forth in Section 6.7(b)(i) hereof. "Investor" has the meaning set forth in the preamble hereto. "Investor Group" shall mean (a) the Investor, (b) any Subsidiary of the Investor, (c) any Affiliate of the Investor controlled by the Investor such that the Investor has the legal or contractual power (including, without limitation, through negative control or through the Investor's designees or representatives on the board of directors or other governing body of such Affiliate or under the articles of incorporation or other constituent documents of such Affiliate or as a result of the voting rights of any securities or other instruments issued by such Affiliate) to cause such Affiliate to comply with the terms of this Agreement applicable to the Investor, and (d) any Person with whom the Investor or any Person included in the foregoing clauses (b) or (c) is part of a 13D Group. "Investor Nominee Notice" has the meaning set forth in Section 5.1(a) hereof. "Investor Nominee" has the meaning set forth in Section 5.1(a) hereof. "Investor SEC Reports" has the meaning set forth in Section 4.4 hereof. "Joint Venture Agreement" shall mean (i) the Formation Agreement, dated as of August 6, 1997, between the Company and the Investor (the "Formation Agreement") and (ii) the LLC Agreement referred to therein. "Junior Preferred Stock" has the meaning set forth in Section 3.4(a) hereof. "Law" means any law, treaty, statute, ordinance, code, rule or regulation of a Governmental Entity. "Lien" means any security interest, claim, voting agreement, restriction, option, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever and any contingent or other agreement to provide any of the foregoing. "Loss" has the meaning set forth in Section 6.6(b) hereof. "Market Price," shall mean on any trading day, with respect to shares of Common Stock or any other security which is listed on a national securities exchange, the last sale price regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case on the NYSE, or, if the Common Stock or other security is not listed or admitted to trading on such exchange, on the principal national securities exchange on which the Common Stock or other security is listed or admitted to trading, or, if the Common Stock or other security is not listed or admitted to trading on any national securities exchange but is designated as national market system security by the NASD, the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as report on the NASD Automated Quotation/National Market System, or if the Common Stock or other security is not so designated as a national market systems security, the average of the highest reported bid and lowest reported asked prices as furnished by the NASD or similar organization if the NASD is no longer reporting such information. "Material Adverse Effect" means any material adverse effect on the financial condition, business or operations of the Company and its Subsidiaries taken as a whole. "Maximum Offer Price" has the meaning set forth in Section 8.3(a) hereof. "NASD" has the meaning set forth in Section 6.4(b) hereof. "NYSE" means the New York Stock Exchange. "Offer" has the meaning set forth in Section 8.3(a). "Offer Purchase Price" has the meaning set forth in Section 8.3(a). "Options" has the meaning set forth in Section 3.3(b) hereof. "Order" means any judgment, decree, order, writ, award, ruling, stipulation, injunction or determination of an arbitrator or court or other Governmental Entity. "Other Investor Affiliate" has the meaning set forth in Section 6.1(A) hereof. "Ownership Cap" means a Total Ownership Percentage of 20%, subject to reduction as provided in Section 6.7(b). "Per Share Price Range" has the meaning set forth in Section 8.3(a). "Permitted Underwriter" has the meaning set forth in Section 6.3(b)(I) hereof. "Person" means any individual, corporation, company, association, partnership, joint venture, limited liability company, trust or unincorporated organization, group (within the meaning of Rule 13d-5 under the Exchange Act) or a government or any agency or political subdivision thereof. "Pioneer Competitor" means any Person that is one of eight participants in the seed market within the Field of Interest (as defined in the Research Alliance Agreement) as designated to the Investor by the Company as a Pioneer Competitor (which term shall exclude the Investor and its Subsidiaries but shall include any Controlled Affiliate of each such Pioneer Competitor, and the persons specified in writing by the Company to the Investor on the date of this Agreement, and any 13D Group with respect to voting securities of the Spin-Off Entity of which such Person is a member). The Company shall provide to the Investor prior to the date of this Agreement, and within 10 Business Days prior to each anniversary of the Closing Date, a written list of such Pioneer Competitors (which the Company may change from year to year as of each anniversary of the Closing Date) which Pioneer Competitors shall conform to the provisions of the definition of Pioneer Competitor contained herein. The Pioneer Competitors so designated shall constitute the Pioneer Competitors hereunder for the initial period commencing with the date hereof and ending one year following the Closing Date and the successive one year periods following each applicable anniversary of the Closing Date and if no such notice is provided for any year, the Competitors specified in the notice for the most recent year that such notice was given shall continue to be deemed the Pioneer Competitors. "Post Termination Standstill Period" has the meaning set forth in Section 6.1(A) hereof. "Preferred Stock Purchase Rights" means rights to purchase the Junior Preferred Stock pursuant to the Amended Rights Agreement, as amended from time to time. "Process" has the meaning set forth in Section 8.2 hereof. "Proposal" means any inquiry, indication of interest, proposal or offer made to the Company or publicly disclosed by any Person relating to any Change in Control Transaction or Competing Investment. "Purchase Price" has the meaning set forth in Section 2.1 hereof. "Purchaser Standstill Agreement" has the meaning set forth in Section 6.3(B)(II) hereof. "Purchasing Person" has the meaning set forth in Section 6.3(b) hereof. "Reclassification Amendment" shall have the meaning set forth on Section 8.8. "Registration Rights Agreement" means the agreement to be entered into on the Closing Date between the Company and the Investor in the form set forth in Exhibit A hereto. "Regulatory Approvals" means any and all certificates, permits, licenses, franchises, concessions, grants, consents, approvals, orders, registrations, authorizations, waivers, variances or clearance from a Governmental Entity. "Release Event" has the meaning set forth in Section 6.9 hereof. "Representatives" means, with respect to any Person, any of such Person's officers, directors, partners, employees, agents, attorneys, accountants, consultants or financial or other advisors or other Person associated with or acting on behalf of such Person. "Required Disposition" has the meaning set forth in Section 6.6(a) hereof. "Required Disposition Amount" has the meaning set forth in Section 6.6(a) hereof. "Requisite Number" has the meaning set forth in Section 8.3(a). "Research Alliance Agreement" shall mean the Research Alliance Agreement, dated as of August 6, 1997, between the Company and the Investor. "Rights Agreement" means the Amended and Restated Rights Agreement, dated as of December 13, 1996, by and between the Company and The First National Bank of Boston, as Rights Agent. "Rights Agreement Amendment" means the amendment to the Rights Agreement executed by the Company and the Rights Agent concurrently herewith in the form set forth in Exhibit B hereto. "Sale of Ag Products" means (x) a sale or other transfer to one or more Persons other than a Subsidiary of the Investor of all or substantially all of the assets or business of the Agricultural Products business of the Investor or (y) a transfer (whether by sale, merger or other transaction) of any of the common equity of any Person through which any such assets are held (such entity or any transferee pursuant to clause (x) hereof a "Spin-Off Entity") if, after giving effect to such transfer, such Person is not a Subsidiary of the Investor, provided that a transfer referred to in this clause (y) effected by means of a dividend, distribution, bona fide public offering or otherwise, and a sale or transfer referred to in clause (x), in either case, shall not be a "Sale of Ag Products" if and for so long as all of the following conditions are and continue to be satisfied: (i) the Spin-Off Entity agrees to be and is bound by the provisions of Section 6.1(A) of the Agreement (to the same extent as if the Spin-Off Entity were a Subsidiary of the Investor), (ii) the Spin-Off Entity shall agree to be and is bound by the Research Alliance Agreement to the same extent as the Investor (it being understood that in no event shall the Investor be released from any of its obligations under this Agreement or the Research Alliance Agreement as a result of the Spin-Off Entity's agreement to the matters referred to in clauses (i) and (ii) above except that, in the case of the Research Alliance Agreement, if substantially all of the research capabilities of the Investor in agricultural products is transferred to the Spin-Off Entity, then the Investor will continue pursuant to the Research Alliance Agreement to provide the Company with, but only with, genomic and biotechnology support sufficient so that the research available to the Company from the Spin-Off Entity under the Research Alliance Agreement, when taken together with such support from the Investor, is substantially the same in scope and capability as the research available from the Investor prior to the transfer of such assets to the Spin-Off Entity), (iii) if at any time, any Person or 13D Group owns 15% or more of any class of voting securities of the Spin-Off Entity, the Investor and its wholly owned Subsidiaries must have an interest in the Voting Securities of the Spin-Off Entity greater than or equal to any other Person or 13D Group (however, such interest must be greater than that of any Person or 13D Group which is a Pioneer Competitor), (iv) no Pioneer Competitor may own voting or common securities of the Spin-Off Entity (A) representing more than 15% of the common securities or voting power of the Spin-Off Entity, which securities have been acquired directly from the Investor or the Spin-Off Entity or a Subsidiary of either, (B) representing 10% or more of the common securities of the Spin-Off Entity if the Pioneer Competitor has the right (whether such right is contingent, conditional or otherwise) to designate or nominate one or more directors of the Spin-Off Entity (or if the board of directors of the Spin-Off Entity within five years after the date of acquisition of shares referred to in this clause (B) nominates any designee of such Pioneer Competitor or any Affiliate of such Pioneer Competitor to the board of the Spin-Off Entity), provided that such 10% level in this clause (B) shall not be deemed exceeded by reason of the repurchase of common securities by the Spin-Off Entity unless (i) an ownership of 10.5% or more of the common securities is achieved and (ii) the Pioneer Competitor fails to reduce its Beneficial Ownership of common securities to an ownership level below 10% within one year after equaling or exceeding the 10.5% level or (C) representing in excess of the level of ownership that would cause a triggering event to occur under any rights plan or "poison pill" adopted by the Spin-Off Entity and then in effect, and (v) so long as the Investor owns less than 30% of the common equity of the Spin-Off Entity, the Company has the right to nominate one representative of the Company to the board of the Spin-Off Entity analogous to the rights of the Investor under Sections 5.1(b) and (c) and the first sentence of clause (d) thereof (provided that such representative must be one of the four most senior executives of the Company, and provided that, if any such representative of the Company on the board of the Spin-Off Entity is unable to attend any meeting of such board, the Company shall have the right to designate an alternate designee of the Company, who is also one of the four most senior executives of the Company, to attend such meeting of the board of the Spin-off Entity as an observer) and the Investor shall use commercially reasonable efforts (including by voting its voting securities in favor of such nominee) to cause such nominee to be elected to the board of the Spin-Off Entity (it being understood that a Sale of Ag Products will be deemed to occur at any time any of the foregoing conditions cease to be satisfied; provided, however, that in the case of a failure of either clauses (iii) or (iv) above, the conditions as to ownership of common securities or voting securities by a Pioneer Competitor must have ceased to have been satisfied with respect to any Person or 13D Group only after the designation (to the extent in effect at such time) by the Company of such Person or 13D Group as a Pioneer Competitor). "Section 6.4 Closing" has the meaning set forth in Section 6.4(a) hereof. "Section 6.4 Price" has the meaning set forth in Section 6.4(b) hereof. "Section 6.4 Securities" has the meaning set forth in Section 6.4(a) hereof. "Section 6.5 Acceptance Notice" has the meaning set forth in Section 6.5(a) hereof. "Section 6.5 Closing" has the meaning set forth in Section 6.5(a) hereof. "Section 6.5 Price" has the meaning set forth in Section 6.5(b) hereof. "Section 6.5 Securities" has the meaning set forth in Section 6.5(a) hereof. "SEC Reports" has the meaning set forth in Section 3.5(a) hereof. "Securities Act" means the Securities Act of 1933, as amended, and the regulations promulgated thereunder. "Sell Down Period" has the meaning set forth in Section 6.6(a) hereof. "Series A Convertible Preferred Stock" has the meaning set forth in Section 2.1 hereof. "Shares" has the meaning set forth in Section 2.1 hereof. "Spin-Off Agreement" has the meaning set forth in Section 6.8 hereof. "Spin-Off Company" means the corporation or other entity the capital stock or other equity interests of which are distributed in a Spin-off Distribution. "Spin-Off Distribution" means any distribution by the Company to all holders of Common Securities of capital stock of or other equity interests in any corporation or entity other than the Company. "Spin-Off Entity" has the meaning set forth in the definition of the term "Sale of Ag Products". "Standstill Period" means the period commencing on the date hereof and ending on the termination of this Agreement pursuant to Section 10.1; subject to extension upon the occurrence of a Trigger Event or a Release Event as provided in Section 10.2(iv). "Subsidiary" means, as to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries. A Subsidiary that is directly or indirectly wholly-owned by another Person except for directors' qualifying shares shall be deemed wholly-owned for purposes of this Agreement. "Substantially Similar Plan" has the meaning set forth in Section 8.4 hereof. "Surviving Change in Control Transaction" has the meaning set forth in Section 8.2(b). "13D Group" shall mean any group of Persons who, with respect to those acquiring, holding, voting or disposing of Voting Securities would, assuming ownership of the requisite percentage thereof, be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder to file a statement on Schedule 13D with the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes of Section 13(g)(3) of the Exchange Act. "13D Group" when used with reference to standards or tests that are based on securities other than Voting Securities shall have the foregoing meaning except that the words "Voting Securities" in the second line of the definition of "13D Group", (i) in the case of standards or tests based on "securities of the Company", shall be replaced with the words "securities of the Company", and (ii) in the case of standards or tests based on "voting securities of the Spin-Off Entity", shall be replaced with the words "voting securities of the Spin-Off Entity." "Third Party Offer" has meaning set forth in Section 6.4(a) hereof. "Total Ownership Percentage" means, with respect to any Person calculated at a particular point in time, the ratio, expressed as a percentage, of (a) the total number of shares of Common Stock Beneficially Owned by such Person and issuable upon conversion of (whether or not then convertible), or otherwise constituting the economic equivalent of, all Common Securities Beneficially Owned by such Person, over (b) the total number of shares of Common Stock then outstanding and the number of shares of Common Stock issuable upon conversion (whether or not then convertible) of, or otherwise constituting the economic equivalent of, all outstanding Common Securities. "Total Voting Power" shall mean, calculated at a particular point in time, the aggregate Votes represented by all then outstanding Voting Securities then entitled to vote (a) as estimated conclusively for purposes of the definition of the terms "Change in Control" and "Competing Investment" at any time in good faith by the Company on the assumption that all holders of Common Stock who would, upon taking the necessary documentation steps under the Articles of Incorporation, be entitled to five votes per share at such time, have effectively taken such steps, it being understood that it will be necessary for the Company to make various assumptions in connection therewith (such as identity of holders and period of ownership of shares of Common Stock) and (b) for all other purposes of this Agreement, based on the number of Votes as were actually entitled to vote at the then current or the most recent meeting of shareholders as determined by the Company which excludes any estimation of any kind (including, as to who would have been entitled to 5 votes per share if such shareholder had taken the requisite steps to obtain such vote) plus, without duplication of any Votes otherwise taken into account, the number of Votes attributable to any Voting Securities issued by the Company since the most recent meeting of shareholders of the Company. "Transaction Agreements" means this Agreement, the Registration Rights Agreement and the Rights Agreement Amendment. "Transfer" has the meaning set forth in Section 6.7(b)(iii). "Transfer Notice" has the meaning set forth in Section 6.4(a) hereof. "Trigger Event" has the meaning set forth in Section 6.10 hereof. "Unsolicited Offer" has the meaning set forth in Section 6.3(e) hereof. "Votes" shall mean, at any time, with respect to any Voting Securities, the total number of votes that would be entitled to be cast by the holders of such Voting Securities generally (by the terms of such Voting Securities, the Articles of Incorporation or any certificate of designations for such Voting Securities) in a meeting for the election of Directors held at such time, including the votes that would be able to be cast by holders of shares of Series A Convertible Preferred Stock. "Voting Amendment" has the meaning set forth in Section 6.2(a) hereof. "Voting Ownership Percentage" shall mean, calculated at a particular point in time, the Voting Power represented by the Voting Securities Beneficially Owned by the Person whose Voting Ownership Percentage is being determined. "Voting Power" shall mean, calculated at a particular point in time, the ratio, expressed as a percentage, of (a) the Votes represented by the Voting Securities with respect to which the Voting Power is being determined to (b) Total Voting Power. "Voting Securities" means the shares of Common Stock, the Series A Convertible Preferred Stock and any other securities of the Company entitled to vote generally for the election of directors, and any securities (other than employee stock options) which are convertible into, or exercisable or exchangeable for, Voting Securities. Section 1.2. General Interpretive Principles. Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. The name assigned this Agreement and the section captions used herein are for convenience of reference only and shall not be construed to affect the meaning, construction or effect hereof. Unless otherwise specified, the terms "hereof," "herein" and similar terms refer to this Agreement as a whole (including the exhibits, schedules and disclosure statements hereto), and references herein to Sections refer to Sections of this Agreement. SECTION 2 ISSUANCE AND SALE OF SHARES Section 2.1. Issuance and Sale of Shares. Upon the terms and subject to the conditions set forth in this Agreement, and in reliance upon the representations and warranties hereinafter set forth, on the Closing Date, the Company will issue, sell and deliver to the Investor, and the Investor will purchase from the Company, 164,445.86 shares of Series A Convertible Preferred Stock of the Company, par value $.01 per share, having the terms set forth in the Certificate of Designation attached hereto as Exhibit C (the "Series A Convertible Preferred Stock"), together with the associated Preferred Stock Purchase Rights (such shares of Series A Convertible Preferred Stock, together with such Preferred Stock Purchase Rights, the "Shares"), free and clear of all Liens (other than Liens pursuant to this Agreement), for an aggregate purchase price of $1,710,236,944 (the "Purchase Price"). Section 2.2. Closing. (a) The Closing shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson at 10:00 a.m., One New York Plaza, New York, NY 10004, New York City time, on the Business Day of the satisfaction or concurrent satisfaction or, if permissible, waiver of the conditions set forth in Sections 9.1 and 9.2 hereof (the "Closing Date") or at such other time and place as the parties may agree. (b) At the Closing (i) the Company will deliver to the Investor certificates representing the Shares against payment of the Purchase Price, registered in the name of the Investor, or any wholly-owned United States Subsidiary of the Investor designated by it (provided that such Subsidiary agrees in writing to be bound by this Agreement to the same extent as the Investor and such Subsidiary at all times remains a wholly-owned United States Subsidiary of the Investor), together with the other documents and certificates to be delivered pursuant to Section 9.1 hereof, and (ii) the Investor, in full payment for the Shares, will deliver to the Company an amount equal to the Purchase Price in immediately available funds by wire transfer to the account designated by the Company, at least two Business Days prior to the Closing Date, or by such other means as may be agreed by the parties, together with the other documents and certificates to be delivered pursuant to Section 9.2 hereof. SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to, and agrees with, the Investor as follows: Section 3.1. Corporate Organization and Qualification. Each of the Company and its material Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own or lease its assets and to conduct its business. Each of the Company and its Subsidiaries is duly licensed or qualified as a foreign corporation for the transaction of its business and is in good standing under the laws of each other jurisdiction in which its ownership, lease or operation of property or conduct of its business requires such qualification, except where the failure to be so licensed, authorized and qualified and in good standing would not reasonably be expected to have a Material Adverse Effect. The Company has made available to the Investor a complete and correct copy of the Articles of Incorporation and the Bylaws of the Company, in each case as amended to date, and each of which as so made available, as the case may be, is in full force and effect. Section 3.2. Authorization of Agreements. (a) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Transaction Agreements, to issue and sell the shares of Series A Convertible Preferred Stock to be sold to the Investor (or its permitted designee) hereunder and the shares of Common Stock issuable upon the conversion thereof and to otherwise consummate the transactions contemplated hereby and thereby and such issuance, sale and delivery of such shares of Series A Convertible Preferred Stock to the Investor (or its permitted designee) will convey to the Investor (or its permitted designee) (and any issuance of Common Stock upon any such conversion will convey to the Person to whom such Common Stock is issued) good and marketable title to such shares, free and clear of all Liens, other than Liens arising pursuant to any Transaction Agreement. The execution, delivery and performance of the Transaction Agreements, and the consummation by the Company of the transactions contemplated hereby and thereby, have been approved by the Board of Directors (by the vote of the directors as advised by the Company to the Investor in writing prior to the execution of this Agreement) and have been duly authorized by all other necessary corporate action on the part of the Company. The Company has taken the corporate action necessary to approve the transactions contemplated by this Agreement for purposes of Section 490.1109 of the Business Corporation Act of the State of Iowa and to provide that the Transaction Agreements and the transactions contemplated thereby shall be exempt from the requirements of any "moratorium," "control share," "fair price" or other anti-takeover laws or regulations of any state which, to the knowledge of the Company, is reasonably likely to otherwise be applicable thereto. (b) Each of this Agreement and the Rights Agreement Amendment have been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. The Registration Rights Agreement, when executed, will have been duly executed and delivered by the Company and will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. (c) The execution, delivery and performance of the Transaction Agreements and the acquisition of the Shares contemplated thereby and the issuance of Common Stock to the Investor Group upon the conversion thereof in accordance with the Certificate of Designation for the Series A Convertible Preferred Stock will not cause a Distribution Date or constitute a Triggering Event, a Section 11(a)(ii) Event or a Section 13 Event (in each case, as defined in the Amended Rights Agreement) under the Amended Rights Agreement. Section 3.3. Consents; No Conflicts. (a) Except for (i) the expiration of the waiting period under the HSR Act, (ii) if necessary, the approval of the NYSE required for listing of the Common Stock into which the Series A Convertible Preferred Stock is convertible, (iii) all consents, authorizations, orders and approvals of, and all filings and registrations, including the effectiveness of a registration statement and applicable "Blue Sky" clearance and, in each case required for, or in connection with, the consummation of the transactions contemplated by the Registration Rights Agreement, and (iv) the Regulatory Approvals set forth on Schedule 3.3, no Regulatory Approval from, or registration, declaration, notice or filing with, any Governmental Entity is required to be made or obtained by the Company or any of its Subsidiaries in connection with the execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated hereby and thereby, except for such Regulatory Approvals, registrations, declarations, notices and filings, (A) the failures of which to be made or obtained, would not in the aggregate reasonably be expected to have a Material Adverse Effect, or (B) which are applicable by reason of any facts specifically relating to, or the particular regulatory status of, the Investor. (b) The execution and delivery of this Agreement and the Rights Agreement Amendment does not, and the execution and delivery of the Registration Rights Agreement will not, and the performance of the obligations set forth herein and therein and the consummation of the transactions contemplated hereby and thereby will not, (i) violate any provision of the Articles of Incorporation or the Bylaws or the other organizational documents of the Company or the comparable governing instruments of any of its material Subsidiaries; (ii) conflict with, contravene or result in a breach or violation of any of the terms or provisions of, or constitute a default (with or without notice or the passage of time) under, or result in or give rise to a right of termination, cancellation, acceleration, amendment or modification of any right or obligation under, or to a loss of any benefit to which any of the Company or its Subsidiaries is entitled, or give rise to a right to put or to compel a tender offer for outstanding securities of the Company or any of its Subsidiaries under, or require any consent, waiver, provision of notice or approval under, any note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan agreement, joint venture agreement, Regulatory Approval, contract or any other agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries is bound; (iii) result in the creation or imposition of any Lien upon any assets or properties of the Company or any of its Subsidiaries except pursuant to any Transaction Agreement; or (iv) violate or conflict with any Law or Order applicable to the Company or any of its Subsidiaries or any of their respective assets or properties of any Governmental Entity having jurisdiction over the Company or any of its Subsidiaries or any of their respective assets or properties, except in the case of clause (ii), clause (iii) and clause (iv) for such violations, conflicts, defaults, creation of Liens and other matters which would not in the aggregate reasonably be expected to have a Material Adverse Effect. Section 3.4. Capitalization. (a) The authorized capital stock of the Company consists of (i) 150,000,000 shares of Common Stock, of which 82,222,935 shares are issued and outstanding and (ii) 10,000,000 shares of preferred stock, no par value, of which (x) 150,000 shares have been designated Junior Participating Preferred Stock (the "Junior Preferred Stock"), of which no shares are outstanding and (y) 200,000 shares have been designated Series A Convertible Preferred Stock, of which no shares are outstanding. All of such outstanding shares of Common Stock were duly authorized and validly issued and are fully paid and non-assessable. (b) Other than (i) shares of Common Stock reserved for issuance pursuant to the Company's stock option plan (the "Options"), (ii) shares of Common Stock reserved for issuance upon conversion of the Series A Convertible Preferred Stock and (iii) shares of Junior Preferred Stock reserved for issuance upon exercise of the currently existing Preferred Stock Purchase Rights, and except as set forth on Schedule 3.4(b)(1), there are not authorized or outstanding (or any obligations to authorize or issue) any Derivative Securities or any contract, agreement or understanding to pay any dividend on or make any distribution with respect to any capital stock or other securities of the Company. Schedule 3.4(b)(2) sets forth the terms (including, without limitation, the exercise price and the expiration date) and number of each type of Derivative Securities outstanding. The transactions contemplated hereby will not affect the terms and provisions of, and will not alter the rights of holders of, any Derivative Securities, including but not limited to any anti-dilution adjustments to the number of outstanding Options, the exercise price thereof or the number of shares of Common Stock to be acquired upon exercise thereof. Other than pursuant to the Transaction Agreements and the Rights Agreement, there are no restrictions on the transfer of shares of capital stock of the Company, and no contract, agreement or understanding to which the Company is a party exists among holders of capital stock of the Company with respect to the ownership, holding, voting or any other rights or obligations with respect to such capital stock, except as set forth in Schedule 3.4(b)(3). (c) The shares of Series A Convertible Preferred Stock to be issued pursuant to this Agreement and the shares of Common Stock issuable upon conversion of such shares have been duly and validly authorized and, when such shares are issued as contemplated by this Agreement, will have been validly issued, fully paid and non-assessable. There are no, and the issuance and sale of the Series A Convertible Preferred Stock pursuant to this Agreement and the issuance of shares of Common Stock upon conversion of the Series A Convertible Preferred Stock will not give rise to any, preemptive rights, rights of first refusal or other similar rights on behalf of any Person under any provision of applicable Law or any provision of the Articles of Incorporation or Bylaws of the Company or of any agreement or instrument to which the Company or any of its material Subsidiaries is a party or by which the Company or any of its material Subsidiaries is bound in respect of any capital stock or other securities of the Company or its material Subsidiaries other than pursuant to the Transaction Agreements. No consent or approval of the Company's shareholders is required by Law, the Articles of Incorporation or Bylaws or otherwise for the execution, delivery and performance by the Company of the Transaction Agreements and the consummation of the transactions contemplated hereby and thereby. Section 3.5. Company Reports; Financial Statements. (a) The Company has delivered to the Investor a true and complete copy of (i) the Company's Annual Report on Form 10-K for the fiscal years ended August 31, 1996, 1995 and 1994; (ii) the Company's Quarterly Report on Form 10-Q for the periods ended November 30, 1996, February 29, 1997 and May 30, 1997; and (iii) each registration statement, report on Form 8-K and Form 8-A, proxy statement, information statement or other document, report or statement filed by the Company or any of its Subsidiaries with the Commission since December 31, 1994, in each case in the form (including financial statements, schedules, exhibits and any amendments thereto) filed with the Commission (collectively, the "SEC Reports"). As of their respective dates, the SEC Reports (i) were timely filed with the Commission; (ii) complied, in all material respects, with the applicable requirements of the Exchange Act and the Securities Act; and (iii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Other than the SEC Reports, the Company and its Subsidiaries have not filed or been required to file any other reports or statements with the Commission since December 31, 1994. (b) Each of (i) the consolidated balance sheets (including the related notes and schedules) included in or incorporated by reference into the SEC Reports fairly presents the consolidated financial position of the Company and its Subsidiaries as of the date thereof, subject, in the case of unaudited statements, to normal year-end adjustments, and (ii) the consolidated statements of income (or statements of results of operations), shareholders' equity and cash flows (including the related notes and schedules) included in or incorporated by reference into the SEC Reports fairly presents the results of operations, retained earnings and cash flows, as the case may be, of the Company and its Subsidiaries (on a consolidated basis) for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end adjustments and except as permitted by Form 10-Q of the Commission) in each case in accordance with GAAP applied on a consistent basis throughout the periods covered (except as stated therein or in the notes thereto) and in compliance with the rules and regulations of the Commission. Section 3.6. Absence of Certain Changes. Except for transactions contemplated by the Transaction Agreements or as disclosed in the SEC Reports or as set forth in Schedule 3.6, since August 31, 1996, there have not been any changes, conditions, occurrences, circumstances or other events that have had or would reasonably be expected to have a Material Adverse Effect. Section 3.7. Litigation. Except as disclosed in SEC Reports and Schedule 3.7 hereto, there are no claims, suits, actions, proceedings, arbitrations or investigations pending or, to the knowledge of the Company, threatened in writing against the Company or any of its material Subsidiaries that in the aggregate would reasonably be expected to have a Material Adverse Effect; nor are there any Orders outstanding against or applicable to the Company or any of its material Subsidiaries or against or applicable to any of their respective assets, properties or businesses which would reasonably be expected to have a Material Adverse Effect. Section 3.8. Compliance with Laws; Regulatory Approvals. Except as disclosed in the SEC Reports and except for matters which in the aggregate would not have a Material Adverse Effect, the Company and its Subsidiaries are in compliance with all applicable Laws. Except, for matters which in the aggregate, as would not have a Material Adverse Effect, (a) all material Regulatory Approvals required by the Company and its Subsidiaries to conduct their respective business as now conducted by them have been obtained and are in full force and effect and (b) the Company and its Subsidiaries are in compliance in all material respects with the terms and requirements of such Regulatory Approvals. Section 3.9. Exemption from Registration. Assuming the representations and warranties of the Investor set forth in Section 4 hereof are true and correct, the offer and sale of the shares of Series A Convertible Preferred Stock made pursuant to this Agreement will be in compliance with the Securities Act and any applicable state securities laws and will be exempt from the registration requirements of the Securities Act and such state securities laws. SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR The Investor hereby represents and warrants to, and agrees with, the Company as follows: Section 4.1. Organization. The Investor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own or lease its assets and to conduct its business. Section 4.2. Authorization of Agreements. (a) The Investor has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, the Registration Rights Agreement and each other document, instrument or certificate to be executed by the Investor in connection with the consummation of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the Registration Rights Agreement, and the consummation by the Investor of the transactions contemplated hereby and thereby, have been approved by the board of directors of the Investor (by the vote of the directors as advised by the Investor to the Company in writing prior to execution of this Agreement) and have been duly authorized by all other necessary corporate action on the part of the Investor. (b) This Agreement has been duly executed and delivered by the Investor and constitutes a valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. The Registration Rights Agreement, when executed, will have been duly executed and delivered by the Investor and will constitute a valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. Section 4.3. Consents; No Conflicts. (a) Except for (i) the expiration of the waiting period under the HSR Act, (ii) all consents, authorizations, orders and approvals of, and filing and registrations including the effectiveness of a registration statement and applicable "Blue Sky" clearance required for, or in connection with, the consummation of the transactions contemplated by the Registration Rights Agreement, and (iii) the Regulatory Approvals set forth on Schedule 4.3, no Regulatory Approval from, or registration, declaration, notice or filing with, any Governmental Entity is required to be made or obtained by the Investor in connection with the execution, delivery and performance of this Agreement and the Registration Rights Agreement and the consummation of the transactions contemplated hereby and thereby except for such Regulatory Approvals, registrations, declarations, notices and filings, (A) the failures of which to make or obtain would not reasonably be expected to have a material adverse effect on the ability of the Investor to consummate or to perform its obligations under the Transaction Documents, or (B) which are applicable by reason of any facts specifically relating to, or the particular regulatory status of, the Company or its Subsidiaries. (b) The execution and delivery of this Agreement does not, and the execution and delivery of the Registration Rights Agreement will not, and the performance of the obligations set forth herein and therein and the consummation of the transactions contemplated hereby and thereby will not, (i) violate any provision of the certificate of incorporation, by-laws or the other organizational documents of the Investor or any of its material Subsidiaries; (ii) give rise to a right to put or to compel a tender offer for outstanding securities of the Investor or any of its Subsidiaries under, or require any consent, waiver, provision of notice or approval under, any note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan agreement, joint venture agreement, Regulatory Approval, contract or any other agreement, instrument or obligation to which the Investor or any of its Subsidiaries is a party or by which the Investor or any property of the Investor or any of its material Subsidiaries is bound; (iii) result in the creation or imposition of any Lien upon the Series A Convertible Preferred Stock to be issued to the Investor pursuant to this Agreement, other than pursuant to a Transaction Agreement or (iv) violate or conflict with any Law or Order applicable to the Investor or any of its Subsidiaries or any of their respective assets or properties of any Governmental Entity having jurisdiction over the Investor or any of its Subsidiaries or any of their respective assets or properties, except in the case of clause (ii), clause (iii) and clause (iv) for such violations, conflicts, defaults, creation of Liens and other matters which would not reasonably be expected to have a material adverse effect on the ability of the Investor to consummate or to perform its obligations under the Transaction Documents. Section 4.4. Investor Reports; Financial Statements. (a) The Investor has delivered to the Company a true and complete copy of (i) the Investor's Annual Report on Form 10-K for the fiscal years ended December 31, 1996, 1995 and 1994; (ii) the Investor's Quarterly Report on Form 10-Q for the period ended March 31, 1997; and (iii) each registration statement, report on Form 8-K and Form 8-A, proxy statement, information statement or other document, report or statement filed by the Investor or any of its Subsidiaries with the Commission since December 31, 1994, in each case in the form (including financial statements, schedules, exhibits and any amendments thereto) filed with the Commission (collectively, the "Investor SEC Reports"). As of their respective dates, the Investor SEC Reports (i) were timely filed with the Commission; (ii) complied, in all material respects, with the applicable requirements of the Exchange Act and the Securities Act; and (iii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Other than the SEC Reports, the Investor and its Subsidiaries have not filed or been required to file any other reports or statements with the Commission since December 31, 1994. (b) Each of (i) the consolidated balance sheets (including the related notes and schedules) included in or incorporated by reference into the Investor SEC Reports fairly presents the consolidated financial position of the Investor and its Subsidiaries as of the date thereof, subject, in the case of unaudited statements, to normal year-end adjustments, and (ii) the consolidated statements of income (or statements of results of operations), shareholders' equity and cash flows (including the related notes and schedules) included in or incorporated by reference into the Investor SEC Reports fairly presents the results of operations, retained earnings and cash flows, as the case may be, of the Investor and its Subsidiaries (on a consolidated basis) for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end adjustments and except, as permitted by Form 10-Q of the Commission) in each case in accordance with GAAP applied on a consistent basis throughout the periods covered (except as stated therein or in the notes thereto) and in compliance with the rules and regulations of the Commission. Section 4.5. Absence of Certain Changes. Except for transactions contemplated by the Transaction Agreements or as disclosed in the Investor SEC Reports or as set forth in Schedule 4.5, since December 31, 1996 there have not been any changes, conditions, occurrences, circumstances or other events that have had or would reasonably be expected to have a material adverse effect on the financial condition of the Investor and its Subsidiaries, taken as a whole. Section 4.6. Purchase for Purpose of Investment. The Investor (or its permitted designee) is acquiring the Shares under this Agreement for its own account solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act. The Investor acknowledges that the shares of Series A Convertible Preferred Stock to be acquired by it or any other member of the Investor Group have not been registered under the Securities Act and may be sold or disposed of in the absence of such registration only pursuant to any exemption from such registration and in accordance with the terms of the Transaction Agreements. Neither the Investor nor any other member of the Investor Group Beneficially Owns any Voting Securities. SECTION 5 GOVERNANCE Section 5.1. Directors Designated by the Shareholder. (a) Immediately following the Closing, the Board shall appoint as additional Directors the two (2) Investor Nominees (as defined in Section 5.1(b) below) who have been designated by the Investor in the Investor Nominee Notice (as defined in Section 5.1(b) below) attached as Exhibit D hereto (the "Initial Investor Nominee Notice"). One Investor Nominee shall be placed in the class of Directors next standing for election, and the remaining Investor Nominee shall be placed in the class of Directors next but one standing for election. In addition, if at any time following the annual meeting of shareholders to be held in January 1999, the number of members constituting the entire Board of Directors shall equal or exceed 15, including the Investor Nominees appointed pursuant to the previous sentence, the Investor shall be entitled to designate pursuant to an Investor Nominee Notice, and the Board shall appoint to the Board, an additional Investor Nominee in accordance with the provisions of this Section 5, provided that, for purposes of this sentence (but not for purposes of requiring the resignation of any Investor Nominee pursuant to Section 5.2(w)), the number of directors constituting the entire Board of Directors at any time after the annual meeting of shareholders to be held in January 2000 shall exclude any Director who has advised (and not withdrawn) the Company of his or her intention, or would be scheduled pursuant to the policies of the Company, to retire or resign from the Board within 12 months of the date as of which the determination pursuant to this sentence is being made; provided, further, that no such Director shall be excluded for purposes of determining the number of directors constituting the entire Board for a period of greater than 12 consecutive months until he or she no longer serves as a member of the Board. Any such additional Investor Nominee shall be placed in the class of Directors which does not include an Investor Nominee. In the event of a vacancy caused by the disqualification, removal, resignation or other cessation of service of any Investor Nominee from the Board, the Board shall elect as a Director (to serve until the Company's immediately succeeding annual meeting of shareholders) a new Investor Nominee who has been designated by the Investor in an additional Investor Nominee Notice that has been provided to the Company at least seven (7) days prior the date of a regular meeting of the Board. The Investor shall nominate each Investor Nominee pursuant to an additional Investor Nominee Notice in advance of each meeting of shareholders at which such Investor Nominee is to be elected. (b) The Investor shall provide notice to the Company (the "Investor Nominee Notice") as required by Section 5.1(a) above for each Investor Nominee, which notice shall contain the following information: (i) the name of the person(s) it has designated to become Director(s) (the "Investor Nominees"), and (ii) all information required by Regulation 14A and Schedule 14A under the Exchange Act with respect to each such Investor Nominee. Subject to Section 5.1(c) below, (x) if there shall be two or fewer Investor Nominees, such Investor Nominees may be any person designated by the Investor, including persons who are officers, directors or employees of the Investor; and (y) if there shall be three Investor Nominees, two of such Investor Nominees may be persons described in clause (x) above and one Investor Nominee shall be an Independent Director. (c) Any proposed Investor Nominee shall be a person acceptable to the Board in its reasonable discretion prior to the initial appointment, or election, as the case may be of each Investor Nominee to the Board; provided, that at any time (i) any of the five most senior executives of the Investor (as determined by the Investor in its reasonable discretion) and (ii) the head of the Investor's Agricultural Products business, so long as (subject to the following proviso) such business is owned by the Investor or a Subsidiary of the Investor, each shall be conclusively deemed to be acceptable to the Board for purposes of this Section 5.1(c); and provided, further, that once an Investor Nominee is accepted by, or deemed acceptable to, the Board, such person shall thereafter be conclusively deemed to be acceptable pursuant to this Agreement (together with such persons specified in the foregoing clauses (i) and (ii), the "Pre-Approved Persons"). Any objection by the Company to a proposed Investor Nominee must be made no later than five Business Days after the Investor delivers the applicable Investor Nominee Notice for the proposed Investor Nominee; provided, however, that the Company shall in all cases notify the Investor of any such objection sufficiently in advance of the date on which proxy materials are mailed by the Company in connection with such election of directors to enable the Investor to propose an alternate Investor Nominee pursuant to and in accordance with the terms of this Agreement. (d) The Company agrees, subject to Section 5.1(c) above and Section 5.2 below, to include such Investor Nominee to be added to or retained on the Board pursuant to this Agreement in the slate of nominees recommended by the Board to the Company's shareholders for election as Directors and shall use its reasonable efforts to cause the election or reelection of each such Investor Nominee to the Board at each meeting of shareholders at which such Investor Nominee is up for election, including soliciting proxies in favor of the election of such persons, it being understood that efforts consistent with those used for other members of the slate recommended by the Board shall be deemed reasonable. In the event that, notwithstanding the provisions of this Section 5.1(d), any one or more Investor Nominees is not elected to the Board then, at the written request of the Investor made within 30 days after the date of the shareholder meeting at which such Investor Nominee was not elected, either, as directed by the Investor, (a) the Company shall promptly call a special meeting of the Company's shareholders proposing the election of such Investor Nominees not elected to the Board or an alternative Investor Nominee as may be designated by the Investor in accordance with Section 5.1 and in connection with such special meeting shall use its reasonable efforts to cause the election of such Investor Nominees by the shareholders of the Company, including recommending the election of such Investor Nominees and soliciting proxies in favor of the election of such Investor Nominees by the shareholders of the Company; or (b) the Company shall appoint another individual selected by the Investor, who shall be a Fully Independent Director and shall otherwise qualify under Section 5.1(c), as an additional Director of the Company who shall serve for a term co-extensive with the term such Investor Nominee would have served if such Investor Nominee had been elected (provided that the Investor shall cause such additional Director to resign at such time as an Investor Nominee is elected to the Board seat that would have been held by the Investor Nominee whose failure to be elected triggered the Investor's right to designate such additional Director). In connection with the expiration of the term of office of any Fully Independent Director appointed in accordance with the foregoing clause (b), the Investor shall be free to designate an Investor Nominee in accordance with this Section 5.1 to replace such Fully Independent Director. In the event the Investor elects to call a special meeting of stockholders pursuant to clause (a), the Company shall, until such time as the Investor Nominee being proposed by the Investor is elected to the Board, invite such Investor Nominee who was not elected to the Board to attend meetings of the Board as an observer and the Company shall afford to such Investor Nominee, on as nearly equivalent basis as is possible (other than the right to vote) as would have been the case if such Investor Nominee had been elected to the Board, the opportunity to meaningfully participate in, express views with respect to and have influence on the deliberations of the Board, including through receipt, at the same time as the Board receives the same, of all information and material as is distributed to the Board. Notwithstanding the foregoing, if at any time as a result of the failure of all Investor Nominees designated by the Investor who are not Independent Directors or Fully Independent Directors to be elected to the Board as provided in this Section 5.1, the Investor Nominees shall consist entirely of Independent Directors and Fully Independent Directors, the Investor shall be entitled to designate one individual who is an officer, employee or director of the Investor and who qualifies as an Investor Nominee under Section 5.1(c) to serve as an observer at the meetings of the Board in accordance with the foregoing sentence until such time as an Investor Nominee designated by the Investor who is not an Independent Director or a Fully Independent Director shall be elected by the shareholders of the Company to the Board provided that the foregoing right to designate an observer shall not apply if the Investor shall have (without being required by this Agreement to do so) designated for election to the Board pursuant to Section 5.1(a) only Investor Nominees who were Independent Directors or a Fully Independent Director. If the Board of Directors shall cease to be a classified board, the Investor shall be entitled to present to the Board of Directors or the Nominating Committee thereof the full number of Investor Nominees for election to the Board of Directors at each annual meeting of shareholders of the Company contemplated by paragraph (a) above (without regard to the provisions regarding classes of directors contained therein). At the direction of the Investor, the Company shall use reasonable efforts to cause the removal from the Board of Directors of any Investor Nominee (other than an Independent Director or Fully Independent Director). (e) The Investor agrees, to the extent required by Iowa law, to cause the Investor Nominees to comply with the standards for recusal from Board meetings applicable to all members of the Board. Except for any Investor Nominee who is an Independent Director or a Fully Independent Director, the Investor acknowledges that the Investor Nominees to the Board will not be entitled to receive any compensation as directors. Section 5.2. Resignation of Investor Nominees. Unless otherwise agreed by the Company, (w) at any time that there are three Investor Nominees serving on the Board, the Investor shall cause one of the Investor Nominees then serving on the Board to offer his or her resignation from the Board immediately upon the number of directors constituting the entire Board constituting 15 or fewer, (x) the Investor shall cause all of the Investor Nominees then serving on the Board to offer their resignations from the Board immediately upon either (i) at any time after the Initial Top-Up Period the Investor Group's Total Ownership Percentage falls below 10% for twelve consecutive months (subject to extension by the number of days equal to the period of time purchases by the Investor Group would be prohibited by Section 6.7(b)(iv) or Section 6.7(d)) or (ii) the Ownership Cap is at any time less than 10%; (y) the Investor shall cause Investor Nominees then serving on the Board to offer his or her resignations from the Board immediately upon the Ownership Cap at any time being less than 18%, so that the total number of Investor Nominees does not exceed 2 at any time thereafter; and (z) the Investor shall cause all of the Investor Nominees then serving on the Board to offer their resignations from the Board immediately upon the occurrence of a Trigger Event or a Release Event; provided, however, that in the event that the Investor Group's Total Ownership Percentage is less than the 10% amount referred to in clause (x)(i) of this Section 5.2 and would not be so but for the issuance of capital stock by the Company during, or within one month prior to, the twelve month period referred to in clause (x)(i) of this Section 5.2, such twelve month period shall be extended by an additional six months to eighteen consecutive months. To effectuate the resignations provided for in this Section 5.2, the Investor shall cause each Investor Nominee to provide the Investor with a letter of resignation upon such Investor Nominee's election to the Board which may be used by the Investor at any time. Section 5.3. Committees. The Board will not establish an executive committee authorized to exercise the power of the Board generally unless the Investor is granted representation on such committee proportional to its representation on the Board, nor will the Board establish or employ committees (unless the Investor is granted proportional representation thereon) as a means designed to circumvent or having the effect of circumventing the rights of the Investor under this Agreement to representation on the Board. SECTION 6 ADDITIONAL AGREEMENTS Section 6.1. Standstill Agreement. (A) During the Standstill Period, and, if this Agreement is terminated prior to Closing pursuant to Section 10.1(a), for the one year period after the end of the Standstill Period (such one year period, the "Post Termination Standstill Period"), unless the Company shall have materially breached its obligation to nominate Investor Nominees or to appoint any Fully Independent Director pursuant to Section 5 (provided that, with respect to any such material breach that does not concern a Pre-Approved Person, a court of competent jurisdiction shall have determined pursuant to a final non-appealable order that the Company has so materially breached its obligations), the Investor shall not, shall cause each other member of the Investor Group not to, and shall use reasonable commercial efforts to cause other Affiliates and Associates of the Investor not members of the Investor Group ("Other Investor Affiliates") not to, directly or indirectly, alone or in concert with others: (a) acquire, offer or propose to acquire or agree to acquire, whether by purchase, tender or exchange offer, through the acquisition of control of another person, by joining a partnership, limited partnership, syndicate or other 13D Group or otherwise, Beneficial Ownership of any Voting Securities, Derivative Securities or any other securities of the Company or any rights to acquire (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any Voting Securities, other than (i) the purchase of Shares or other Voting Securities expressly permitted by this Agreement, (ii) the acquisition of Voting Securities as a result of any stock split, stock dividends or other distributions, recapitalizations or offerings made available by the Company to holders of Voting Securities generally or (iii) in a transaction in which the Investor or a Subsidiary of the Investor acquires a previously unaffiliated business entity that, to the knowledge of the Investor after reasonable inquiry, owns shares of Common Stock that represents less than 4% of the Company's outstanding Common Stock and less than 10% of the unaffiliated entity's assets; provided, that all such Voting Securities shall be subject to the terms of this Agreement; provided, further, however, that in the event of a transaction as contemplated by clause (iii) hereof, the Investor will transfer, or cause such Subsidiary to transfer, in a manner consistent with Section 6.3, such shares of Common Stock previously owned by the unaffiliated entity within twelve months following the consummation of such transaction and all such shares of Common Stock, pending their transfer, shall be voted by the Investor or such Subsidiary in accordance with the requirements of clauses (w) through (z) of Section 6.2 and on any other matter in the same proportion as the votes cast by or on behalf of all holders of the Company's Voting Securities other than the Investor Group and Other Investor Affiliates; (b) propose or seek to effect any merger, business combination, restructuring, recapitalization or similar transaction involving the Company or any of its Subsidiaries or the sale or other disposition outside the ordinary course of business of any material portion of the assets of the Company or any of its Subsidiaries except pursuant to Section 8.2 hereof; (c) deposit any Voting Securities in a voting trust or subject any Voting Securities to any arrangement or agreement with respect to the voting of such Voting Securities except pursuant to Section 8.8 hereof; (d) seek election to, seek to place a representative on, or seek the removal of any member of, the Board, except pursuant to Section 5 hereof; (e) engage in any "solicitation" (within the meaning of rule 14a-1 under the Exchange Act) of proxies or consents (whether or not relating to the election or removal of directors) with respect to the Company, or become a "participant" in any "election contest" (within the meaning of Rule 14a-11 under the Exchange Act) or, unless the execution by the Investor, member of the Investor Group or Other Investor Affiliate is first approved by the Board, execute any written consent in lieu of a meeting of the holders of any class of Voting Securities that is solicited by or on behalf of any shareholder of the Company; (f) call or seek to have called any meeting of the shareholders of the Company (except for the exercise by the Investor of its rights pursuant to Section 5.1(d)); (g) initiate, propose or otherwise solicit shareholders for the approval of any shareholder proposal (as described in Rule 14a-8 under the Exchange Act or otherwise) with respect to the Company; (h) form, join or in any way participate in or assist in the formation of a 13D Group with respect to any Voting Securities, other than any such "group" consisting exclusively of the Investor and other wholly-owned United States Subsidiaries of the Investor who have acquired Voting Securities in accordance with Section 2.2(b) or Section 6.3(a); (i) otherwise act, alone or in concert with others, to seek control or influence the management, the Board or the policies of the Company in a manner designed or having the deliberate effect of circumventing the restrictions otherwise imposed under this Section 6.1(A); (j) disclose or publicly announce any intention, plan or arrangement inconsistent with the foregoing; (k) advise, assist or encourage or finance any other persons in connection with any of the foregoing types of activities; or (l) request the Company (or its directors, officers, employees or agents) to amend or waive any provision of this Agreement; provided that nothing in this Section 6.1(A) shall limit any rights of the members of the Investor Group under the Joint Venture Agreement or the Research Alliance Agreement, or (I) prohibit any individual who is serving as a Director of the Company, solely in his or her capacity as such Director and provided no public disclosure thereof by the Company would be required, from (x) taking any action or making any statement at any meeting of the Board of Directors or of any committee thereof, (y) making any statement to any Representative of the Company, or (z) making any statement or disclosure required under federal securities laws or other applicable Law, (II) restrict any private communications not requiring public disclosure between the Investor and any Investor Nominee, (III) restrict any disclosure or statements required to be made by any member of the Investor Group under applicable Law to the extent any such requirement does not arise from actions by the Investor Group inconsistent with this Agreement, or (IV) limit the rights of the Investor Group pursuant to Section 6.2, Section 6.9 or Section 8.2. (B) Notwithstanding the foregoing, if this Agreement is terminated prior to Closing pursuant to Section 10.1(a), the provisions of paragraph (A) of this Section 6.1 (other than the provisions of clauses (a) (except as to proposals to the Company as to the matters in clause (b)) and (h) thereof and the provisions of (i), (j), (k) and (l) thereof to the extent such provisions relate to the acquisition of Voting Securities or other securities of the Company) shall cease to apply during the Post-Termination Standstill Period if (i) the Company enters into an agreement contemplating a Change in Control Transaction or a Competing Investment or the Company makes any filing with respect to, or seeks expiration of the waiting period under, the HSR Act with respect to a Change in Control Transaction or Competing Investment; (ii) the Board of Directors publicly announces its intention to solicit or publicly solicits any Proposal or publicly approves, accepts, authorizes or recommends to shareholders of the Company their approval of or the conveyance of shares pursuant to a Change in Control Transaction or Competing Investment; (iii) during or prior to the pendency of a bona fide tender or exchange offer made by any Person or 13D Group (other than a member of the Investor Group), the Board of Directors determines or resolves to, or announces its intention to, or is ordered or directed by any Governmental Entity to, redeem, amend or modify (to render inapplicable (including by taking action to cause a Section 11(a)(ii) Event or Section 13 Event (each as defined in the Amended Rights Agreement as in effect on the date hereof), not to occur that, absent such action, would otherwise have occurred, or to redeem the Preferred Stock Purchase Rights) thereto or otherwise exempt therefrom) the Preferred Stock Purchase Rights or the Amended Rights Agreement (or a Substantially Similar Agreement) or; (iv) any Person other than the Investor or an Excluded Person acquires or agrees to acquire 20% or more of the then outstanding Voting Securities or Common Securities. Section 6.2. Voting. (a) At all times during the Standstill Period, the Investor shall, shall cause each other member of the Investor Group to, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate to, vote all Voting Securities which they Beneficially Own, at any shareholder meeting or in connection with any action by written consent at or in which such Voting Securities are entitled to vote, (w) in favor of the slate of nominees (including any Investor Nominee to be included in such slate in accordance with Section 5) proposed by the Board; provided, that any Investor Nominee nominated by the Investor for inclusion in such slate pursuant to Section 5.1 is so included, (x) in favor of any amendment to the Company's Articles of Incorporation proposed by the Board to change the voting rights of the Common Stock to one vote per share of Common Stock (a "Voting Amendment"), (y) in favor of the Reclassification Amendment at each meeting of the Company's shareholders at which the Reclassification Amendment is submitted for approval of the Company's shareholders, and (z) on any matter relating to the adoption of any stock option, stock purchase or other benefit or compensation plan for employees, executives or directors of the Company, and on any non-Company sponsored shareholder proposal which is opposed by the Company, in accordance with the direction of the Board as to how such Voting Securities shall be voted, except that during any period or at any time when there shall be in full force and effect a valid order or judgment of a court of competent jurisdiction or a ruling, pronouncement or requirement of the NYSE to the effect that the foregoing provisions of this Section 6.2 are invalid, void, unenforceable or not in accordance with NYSE policy, then the Investor will, if so requested by the Board, vote or cause (or, in the case of the Other Investor Affiliates, use its commercially reasonable efforts to cause) to be voted all of the Voting Securities beneficially owned by it, the Investor Group and the Other Investor in the same proportion as the votes cast by or on behalf of the other holders of the Company's Voting Securities other than the Investor Group and Other Investor Affiliates, but only with respect to the foregoing matters. On all other matters the Investor, the members of the Investor Group and the Other Investor Affiliates shall be entitled to vote the Voting Securities held by them in their discretion; provided, that at any meeting at which a quorum would not be present but for the inclusion of the Voting Securities Beneficially Owned by the Investor Group, the Investor shall cause such Voting Securities to be voted with respect to each of the matters presented to shareholders at such meeting and such vote shall be in accordance with the foregoing provisions of this Section 6.2(a). At all times during the Standstill Period, the Investor shall be, shall cause each other member of the Investor Group to be, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate to be, as the Beneficial Owners of Voting Securities, present, in person or by proxy, at all meetings of shareholders of the Company, so that all Voting Securities which Investors or any other member of the Investor Group or any Other Investor Affiliate Beneficially Owns may be counted for the purpose of determining the presence of a quorum at all meetings of shareholders of the Company. (b) If the holders of the outstanding shares of Common Stock are entitled to vote as a separate class or voting group under the Articles of Incorporation or the corporation laws of the Company's jurisdiction of incorporation on any matter on which a shareholder vote is otherwise required, then the Company hereby covenants and agrees that if the Investor advises the Company in writing prior to the meeting held (or the record date for action taken by written consent in lieu of a meeting) to approve such matter that the Investor opposes such matter so to be voted upon by such class or voting group, then it shall be a condition to the effectiveness of the matter to be voted on that the matter be approved by an aggregate number of Votes that would have been sufficient to approve such matter under the Articles of Incorporation and the corporation laws of the Company's jurisdiction of incorporation if all the Votes that could have been voted by the Investor Group had such class or voting group included the Voting Power represented by the Series A Convertible Preferred Stock held by the Investor Group been included in such class or voting group and cast against the approval of such matter. (c) To the full extent permitted by Iowa law, the Investor hereby waives, shall cause each member of the Investor Group to waive, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate to waive, any rights that the Investor, any member of the Investor Group or any Other Investor Affiliate, as the case may be, may have or hereafter acquire under Division XIII of the Iowa Business Corporation Act with respect to any disposition of Voting Securities pursuant to this Agreement. (d) At any time after the conversion of the Series A Convertible Preferred Stock into Common Stock pursuant to Section 6(a)(ii) of the Certificate of Designation for the Series A Convertible Preferred Stock, the Investor will cause all Votes attributable to any shares of Common Stock thereafter owned by the Investor Group and acquired prior to the termination of this Agreement to be voted (a) with respect to a number of Votes representing no more than voting power equal to the Investor Group's Total Ownership Percentage at such time, during the Standstill Period, in accordance with the provisions of Section 6.2(a) and after the Standstill Period, in the sole discretion of the Investor, and (b) with respect to all other Votes, on any matter pro rata in accordance with the Votes voted on such matter by all holders of Voting Securities other than the Investor Group and Other Investor Affiliates. (e) Notwithstanding the foregoing provisions of this Section 6.2, at any time following the occurrence of a Trigger Event or a Release Event, the Investor shall, shall cause each other member of the Investor Group to, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate to vote all Voting Securities which they Beneficially Own, (i) in favor of the slate of nominees proposed by the Board (except that during any period or at any time when there shall be in full force and effect a valid order or judgment of a court of competent jurisdiction or a ruling, pronouncement or requirement of the NYSE to the effect that the foregoing provisions of this Section 6.2(e) are invalid, void, unenforceable or not in accordance with NYSE policy, in which case, the Investor will, if so requested by the Board, vote or cause to be voted all of its Voting Securities Beneficially Owned by it and the other members of the Investor Group, and use commercially reasonable efforts to cause all Voting Securities Beneficially Owned by Other Investor Affiliates to be voted, for the election of directors in the same proportion as the votes cast by or on behalf of the other holders of the Company's Voting Securities other than the Investor Group and Other Investor Affiliates) and (ii) on all other matters at any shareholder meeting or in connection with any action by written consent, in the same proportion as the votes cast by or on behalf of all holders of the Company's Voting Securities other than the Investor Group and Other Investor Affiliates. Section 6.3. Dispositions. During the Standstill Period and thereafter in perpetuity in the case of clauses (f) and (g) hereof to the extent specified therein, the Investor shall not, shall cause each other member of the Investor Group not to, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate not to, directly or indirectly (including, without limitation, through the disposition or transfer of any equity interest in another Person), sell, assign, transfer, pledge, hypothecate, grant any option with respect to or otherwise dispose of any interest in (or enter into an agreement or understanding with respect to the foregoing) any Voting Securities (a "Disposition"), except as set forth below in this Section 6.3. (a) Dispositions may be made to wholly-owned United States Subsidiaries of the Investor; provided, that such Subsidiaries agree in writing to be bound by this Agreement to the same extent as the Investor and such Subsidiaries at all times remain wholly-owned United States Subsidiaries of the Investor. (b) Dispositions of Voting Securities may be made to Persons other than members of the Investor Group and Other Investor Affiliate pursuant to (i) a bona fide public offering effected in accordance with the Registration Rights Agreement, (ii) in bona fide open market "brokers' transactions" as permitted by the provisions of Rule 144 as currently promulgated under the Securities Act (other than pursuant to the provisions of clause (k) thereof) and subject to the requirement that the amount of Voting Securities sold may not exceed the lesser of the amounts specified under clauses (i) and (ii) of paragraph (e)(1) of Rule 144 as currently in effect, (iii) in privately-negotiated transactions to (A) any Person specified in Rule 13d-1(b)(1)(ii) promulgated under the Exchange Act who would be eligible based on such person's status and passive intent with respect to the ownership, holding and voting of such Voting Securities to report such person's ownership of such Voting Securities (assuming such person owned a sufficient number of such Voting Securities to require such filing) on Schedule 13G or (B) any other Person, and (iv) pursuant to a pro rata dividend to the stockholders of the Investor, provided, however, that: (I) Dispositions shall not be made pursuant to clauses (i), (ii), (iii)(A) or (iv) of this Section 6.3(b) if, (A) in the case of Dispositions pursuant to clauses (i), (ii) and (iii)(A) of this Section 6.3(b), any Person (other than any underwriter who is in the business of underwriting securities and who, in the ordinary course of its business as an underwriter, acquired Common Securities in connection with a public offering with the bona fide intention of reselling all of the Common Securities so acquired pursuant to such public offering (a "Permitted Underwriter")) to whom the Disposition in question is made would, to the actual knowledge of the Investor (without any duty of inquiry) in the case of Dispositions pursuant to clause (ii) of Section 6.3(b), and to the knowledge of the Investor, after reasonable inquiry, in all other cases after giving effect to such Disposition, together with such Person's Affiliates and Associates and the members of any 13D Group existing with respect to Voting Securities of which such Person is a part (any such Person and its Affiliates, Associates and 13D Group members being collectively referred to herein as a "Purchasing Person"), Beneficially Own Voting Securities representing more than 3% (or 5% in the case of clause (iii)(A)), as the case may be (or, in any such case, 1% if any Person included in a Purchasing Person is a Pioneer Competitor) of the Total Voting Power or Total Ownership Percentage then outstanding, (B) in the case of Dispositions pursuant to clauses (ii) and (iii)(A) of this Section 6.3(b), the Investor Group shall have complied with the provisions of Section 6.4 and the Company shall have had the right to purchase pursuant to Section 6.4 the Voting Securities subject to such Disposition; or (C) in the case of a Disposition pursuant to clause (iv) of this Section 6.3(b), any shareholder receives in such dividend more than 2% of the Total Voting Power or Total Ownership Percentage, unless such shareholder shall have executed and delivered a Purchaser Standstill Agreement (as defined below) pursuant to which such shareholder agrees to be bound by Section 6 of this Agreement (other than Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the same extent as the Investor as if references to the Investor in such Section were to such shareholder with an Ownership Cap equal to its then current ownership provided that for purposes of Section 6.6(a) only the Ownership Cap of such shareholder shall be 5%; provided, however, that in no event shall any disposition be made pursuant to such clause (iv) if any shareholder would be entitled to receive in connection therewith 7.5% (or 2% if such shareholder is a Pioneer Competitor) or more of the Total Voting Power or Total Ownership Percentage; (II) Dispositions shall not be made pursuant to clauses (iii)(B) of this Section 6.3(b) if the Purchasing Person would, to the knowledge of the Investor, after reasonable inquiry, after giving effect to the Disposition, Beneficially Own Voting Securities representing more than 5% (or 1% if any Person included in the Purchasing Person is a Pioneer Competitor) of the Total Voting Power or Total Ownership Percentage then outstanding, provided that if any such Purchasing Person would, to the knowledge of the Investor, after reasonable inquiry, after giving effect to such Disposition, Beneficially Own Voting Securities representing more than 3% of the Total Voting Power or Total Ownership Percentage then outstanding, (x) the Investor Group shall, in the case of Dispositions pursuant to clause (iii)(B) of this Section 6.3(b), have complied with the provisions of Section 6.4 and the Company shall have had the right to purchase pursuant to Section 6.4 the Voting Securities subject to the Disposition, and (y) the Purchasing Person shall have executed and delivered to the Company a written agreement (which agreement shall be addressed to the Company and reasonably satisfactory in form and substance to the Company) (a "Purchaser Standstill Agreement") of each such Purchasing Person to be bound by Section 6 of this Agreement (other than Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the same extent as the Investor as if references to the Investor in such Section were to such Purchasing Person with an Ownership Cap equal to its then current ownership provided that for purposes of Section 6.6(a) only the Ownership Cap of such Purchasing Person shall be 5%; and (III) No Disposition pursuant to this Section 6.3(b) (other than pursuant to Section 6.3(b)(iv)) shall be effected prior to the third anniversary of the Closing Date, unless the Investor Group is required to make a Disposition pursuant to the last proviso to Section 6.1(A)(a)(iii) or Section 6.6 hereof, nor shall any Disposition be made (other than pursuant to Section 6.3(b)(i)) if such Disposition would constitute a distribution in violation of Regulation M under the Securities Act by reason of any repurchase program of the Company then announced. (c) Dispositions may be made to the Company in accordance with Sections 6.4 through 6.6 hereof. (d) Dispositions may be made pursuant to a tender offer or exchange offer (or, during the pendency thereof pursuant to Section 6.3(b)(iii)(A) or in open market transactions permitted under Section 6.3(b)(ii) and, in each case, subject to the restrictions of clause (I)(A) thereof but not subject to clause (I)(B) thereof) or any other transaction (x) which is recommended to shareholders of the Company by the Board of Directors (or, in the case of a tender or exchange offer, which is not within 10 Business Days of the commencement thereof opposed by the Board of Directors or, in the case of an Unsolicited Offer which is opposed, in the event such opposition is thereafter withdrawn by the vote of the Board of Directors) or (y) in the case of a merger or other business combination transaction, which has been approved by the shareholders of the Company (including approval without a meeting pursuant to the short-form merger provisions of the Iowa Business Corporation Act) in a manner so as to be legally binding on all shareholders of the Company and so as to require the disposition by such shareholders of their shares pursuant to such merger or other business combination transaction (without regard to this Agreement); and (e) Dispositions may be made pursuant to a tender offer or exchange offer which is not recommended by a majority of the entire Board (an "Unsolicited Offer"); provided that such Unsolicited Offer is for at least a majority of the Common Stock outstanding on a fully diluted basis; and provided further, (i) if the Amended Rights Agreement (or a Substantially Similar Plan) was in effect prior to the commencement of such Unsolicited Offer, the Company has redeemed the Rights (as defined in the Amended Rights Agreement) or otherwise amended or modified the Amended Rights Agreement (or a Substantially Similar Plan) to be inapplicable (including by taking action to cause a Section 11(a)(ii) Event or Section 13 Event (each as defined in the Amended Rights Agreement as in effect on the date hereof), not to occur that, absent such action, would otherwise have occurred, or to redeem the Preferred Stock Purchase Rights) to such Unsolicited Offer or otherwise taken any Board action pursuant to the Amended Rights Agreement (or a Substantially Similar Plan) in order to permit the Unsolicited Offer to be consummated without causing a Triggering Event (as defined in the Amended Rights Agreement) to occur and (ii) in any event, the Investor and each member of the Investor Group shall have complied with the provisions of Section 6.5 and the Company shall have had the right pursuant to Section 6.5 to purchase the Voting Securities subject to such Disposition. (f) At any time subsequent to the Standstill Period, the Investor shall not, shall cause each other member of the Investor Group not to, and shall use its commercially reasonable efforts to cause each Other Investor Affiliate not to, directly or indirectly, effect any Disposition of Voting Securities if, to the knowledge of the Investor, such member of the Investor Group or such Other Investor Affiliate, after reasonable inquiry, the Purchasing Person (other than a Permitted Underwriter and broker-dealers acting in connection with a block trade in which no Person or 13D Group acquires Voting Securities representing an Equity Percentage of more than 5%) would, after giving effect to such Disposition, Beneficially Own Voting Securities representing more than 5% of the Total Voting Power or Total Ownership Percentage then outstanding; provided, however, that the foregoing restrictions shall not be applicable to any Disposition in connection with a tender or exchange offer or a merger, business combination or other extraordinary transaction. (g) Notwithstanding the foregoing, at any time subsequent to (i) the consummation of a Surviving Change in Control Transaction (as defined in Section 8.2(b)), (ii) a Release Event, or (iii) a Trigger Event, the provisions of Sections 6.3(a) through (c) and Section 6.3(f) shall not apply and in lieu thereof, the Investor shall not, and shall cause each other member of the Investor Group not to, and shall use commercially reasonable efforts to cause each Other Investor Affiliate not to, directly or indirectly effect any Disposition of Voting Securities (a) representing an Equity Percentage of more than 3% to any one Person or 13D Group (other than a Permitted Underwriter and broker-dealers acting in connection with a block trade in which no Person or 13D Group acquires Voting Securities representing an Equity Percentage of more than 3%) or (b) to any Person or 13D Group who has filed a Schedule 13D with the Commission with respect to any Voting Securities issued by the Company; provided, however, that the foregoing restrictions shall not be applicable to any Disposition of Voting Securities in compliance with Section 6.3(d) or (e) and Section 6.5. (h) If the Investor intends to effect a Disposition in accordance with this Section 6.3, it shall give the Company as much prior notice of such intention as is reasonably practicable. Section 6.4. Company's Right to Purchase Voting Securities. Prior to any Disposition of Voting Securities pursuant to clauses (ii) and (iii) of Section 6.3(b), the Company shall have the right, to the extent provided in Section 6.3(b), exercisable in accordance with this Section 6.4, to purchase all, but not less than all, of the Voting Securities intended to be subject to such Disposition by the Investor or any other member of the Investor Group. (a) To the extent required by Section 6.3(b), if any member of the Investor Group wishes to effect any Disposition of Voting Securities pursuant to clauses (ii) and (iii) of Section 6.3(b), the Investor shall give notice (a "Transfer Notice") to the Company of such intended Disposition, specifying the Voting Securities to be subject to Disposition and the intended method of Disposition. The Transfer Notice shall specify, in the case of Dispositions pursuant to clauses (ii) or (iii)(A) of Section 6.3(b), the cash price (the "First Offer Price") at or above which the Investor intends to effect such Dispositions and, in the case of Dispositions pursuant to clause (iii)(B) of Section 6.3(b), the terms of a bona fide third party offer (a "Third Party Offer") to purchase such Voting Securities theretofore received by the Investor and then remaining open (including the identity of the offeror and the price offered). If the Company wishes to purchase the Voting Securities specified in the Transfer Notice, then within fifteen Business Days (or, in the case of any Required Disposition being made as a result of a Company request pursuant to Section 6.6, five Business Days) following receipt of the Transfer Notice, the Company shall deliver a written notice (an "Acceptance Notice") to the Investor indicating that the Company wishes to purchase such Voting Securities (such Voting Securities, the "Section 6.4 Securities"), a date for the closing of such purchase, which shall not be more than 45 days after delivery of such Acceptance Notice (subject to extension as provided in Section 6.4(f) hereof), and a place for the closing of such purchase (a "Section 6.4 Closing"). Upon delivery of an Acceptance Notice, a binding agreement shall be deemed to exist providing for the purchase by the Company of the Section 6.4 Securities to which such Acceptance Notice relates, upon the terms and subject to the conditions set forth in this Section 6.4 and the Company shall use its reasonable best efforts to secure all approvals required in connection therewith; provided, that (i) the Company may rescind its Acceptance Notice (in which event it will have no obligation to purchase such Section 6.4 Securities) at any time within two Business Days following any determination of (x) the value of any untraded securities pursuant Section 6.4(b)(ii) hereof or (y) fair market value pursuant to Section 6.4(b)(ii) hereof; and (ii) the Investor may rescind its Transfer Notice (in which event it will have no obligation to sell such Section 6.4 Securities) at any time within two Business Days following any determination of (a) the value of any untraded securities pursuant to Section 6.4(b)(ii) hereof or (y) fair market value pursuant to Section 6.4(b)(ii) hereof. (b) The purchase price for any Section 6.4 Securities (the "Section 6.4 Price") shall be determined as set forth below. (i) With respect to any Section 6.4 Securities for which a Third Party Offer consisting of other than solely cash and/or readily marketable securities is disclosed in the applicable Transfer Notice, the Section 6.4 Price per share or other unit of such Section 6.4 Securities (which shall refer, in the case of shares of Series A Convertible Preferred Stock that are Section 6.4 Securities, to the applicable number of shares of Common Stock issuable upon conversion of such Series A Convertible Preferred Stock), shall equal the average Market Price per share or per unit of the Section 6.4 Securities during the 30 consecutive trading days immediately preceding the Company's receipt of the Transfer Notice. (ii) With respect to any Section 6.4 Securities for which a First Offer Price or a Third Party Offer is disclosed in the applicable Transfer Notice which provides for consideration consisting solely of cash and/or readily marketable securities, the Section 6.4 Price per share or other unit of such Section 6.4 Securities shall equal the per share or per unit price specified in such First Offer Price or Third Party Offer; provided, however, that, except for Acceptance Notices delivered in respect of a Required Disposition, in the event the Market Price per share or per unit on the last Business Day prior to the date the Acceptance Notice is delivered is more than 10% greater than the per share or per unit price specified by such First Offer Price or Third Party Offer, than the price per share or per unit shall equal the Market Price per share or per unit on the last Business Day prior to the date the Acceptance Notice is delivered. The value of any readily marketable securities identified in such Third Party Offer shall equal the average Market Price per share or per unit of such securities during the 30 consecutive trading days immediately preceding the Company's receipt of the Transfer Notice. In the case of any securities not theretofore traded, such securities must be issued or proposed to be issued by an entity which has been subject to the reporting requirements of the Exchange Act for at least one year, and the value of such securities shall be determined by two nationally recognized investment banking firms, one firm to be selected by each of the Investor and the Company, or in the event such firms are unable to agree, by a third nationally recognized investment banking firm selected by such firms. The Investor and the Company shall use their reasonable best efforts to cause any such determination of value to be made within five Business Days following the Company's receipt of the applicable Transfer Notice. In connection with any determination of fair market value pursuant to this Section 6.4(b)(ii), each party will bear the fees and expenses of the investment banking firm selected by it and the parties will bear equally the fees and expenses of any third investment banking firm. (c) At any Section 6.4 Closing, the Company shall pay to the Investor (or its designees) the aggregate Section 6.4 Price for the Section 6.4 Securities by wire transfer of immediately available funds, and the Investor shall deliver or cause to be delivered to the Company such Section 6.4 Securities, with documentation satisfactory to the Company evidencing the transfer of such Section 6.4 Securities, in form acceptable for transfer on the Company's books. (d) If the Company does not exercise its right to purchase Voting Securities specified in a Transfer Notice, or if the Company exercises its right to rescind as described in the proviso to the last sentence of Section 6.4(a) hereof, or if any agreement deemed to exist with respect to Voting Securities upon delivery of an Acceptance Notice is terminated pursuant to Section 6.4(f), then the party giving such Transfer Notice shall be free to effect the Disposition of such Voting Securities, subject to any other requirements applicable to such Disposition pursuant to Section 6.3; provided, that any such Disposition is completed within 60 days following the expiration of the period in which the Company had the right to elect to purchase such Voting Securities or such rescission or termination, as the case may be (which 60 day period may be extended day by day by the Investor if as of such 60th day or any day thereafter on which such period is extended (x) all waiting periods, if any, applicable to such Disposition under the HSR Act, shall not have expired or been terminated or (y) any statute, rule, regulation, executive order, decree, ruling, injunction or other order shall have been enacted, entered, promulgated or enforced by any court or governmental authority of competent jurisdiction which prohibits such Disposition or makes such Disposition illegal, provided that no such extension shall be for more than 60 days in the aggregate); provided, further, that such Disposition is effected in accordance with the intended method of Disposition described in the applicable Transfer Notice; provided, further, that with respect to any such Disposition of Voting Securities for which a First Offer Price or a Third Party Offer is disclosed in the applicable Transfer Notice, the Disposition of such Voting Securities is at the price specified therein or at any price in excess thereof (or, in the case of Dispositions pursuant to Section 6.3(b)(ii) or in the case of Dispositions pursuant to Section 6.3(b)(iii)(A) which are being made as a result of the Company's request for a Required Disposition pursuant to Section 6.6 (a), where, in each case, the applicable First Offer Price per share of Common Stock does not exceed the average Market Price for the Common Stock for the three trading days immediately preceding the receipt by the Company of the related Transfer Notice, the Disposition is completed at prices in excess of 95% of the applicable First Offer Price) and, in the case of a Third Party Offer, to the transferee specified in the Transfer Notice. In the case of any Disposition pursuant to clause (iii) of Section 6.3(b), the price per share of Common Stock at which such Disposition is deemed to be effected shall (i) not have deducted therefrom any ordinary brokerage or placement fees, and (ii) be increased by the amount of any discount in purchase price granted to any broker-dealer in connection with such Disposition in lieu of any such ordinary brokerage or placement fees. If any such Disposition is not completed within the 60-day period specified in the first proviso of the preceding sentence, any Voting Securities specified in the applicable Transfer Notice and not disposed of in such Disposition shall again be subject to the restrictions on transfer set forth in Section 6.3, including the Company's purchase rights under this Section 6.4, to the extent provided in Section 6.3. (e) Without limiting Section 6.3(b), if any Disposition is made to any Purchasing Person who is required to have entered into a Purchaser Standstill Agreement, then such person shall be deemed to have consented to be bound by Section 6 of this Agreement (other than Section 6.6(b), Section 6.7 and Section 6.9 hereof) to the same extent as the Investor and to the extent of such Purchasing Person's ownership interest as if references to the Investor in such Section were to such Purchasing Person provided that for purposes of Section 6.6(a) only, the Ownership Cap of the Purchasing Person shall be 5%. (f) The obligations of the parties to effect any Section 6.4 Closing shall be subject to the satisfaction of the following conditions: (i) all waiting periods, if any, applicable to the transactions occurring at such Section 6.4 Closing under the HSR Act, shall have expired or been terminated and (ii) no statute, rule, regulation, executive order, decree, ruling, injunction or other order shall have been enacted, entered, promulgated or enforced by any court or governmental authority of competent jurisdiction which prohibits such transactions or makes such transactions illegal. If, as of any date on which a Section 6.4 Closing is scheduled to occur, the foregoing conditions relating thereto have not been satisfied, then such Section 6.4 Closing shall occur as promptly as practicable following such satisfaction, and the parties shall use their reasonable best efforts to cause the satisfaction of such conditions; provided that if the foregoing conditions relating to any Section 6.4 Closing are not satisfied within 120 days in the case of clause (i), and 180 days in the case of clause (ii), following delivery of the applicable Acceptance Notice (or in the case of an order or injunction arising out of any proceeding initiated by the Investor or any member of the Investor Group, such later date on which such order or injunction becomes final and nonappealable), then the Investor or the Company may terminate the agreement deemed to exist upon delivery of the applicable Acceptance Notice; provided that no such termination shall excuse any party for a breach of its obligations thereunder. Section 6.5. Company's Right to Purchase Voting Securities in Case of Unsolicited Offer. Prior to any Disposition of Voting Securities pursuant to Section 6.3(e), the Company (and/or its designees) shall have the right, exercisable in accordance with this Section 6.5, to purchase all of the Voting Securities permitted to be subject to such Disposition by the Investor Group. (a) If any member of the Investor Group wishes to effect any Disposition of Voting Securities pursuant to Section 6.3(e), the Investor shall give notice (a "Section 6.5 Transfer Notice") to the Company of such intended Disposition at least 9 Business Days prior to the latest date, as provided below, on which the Company (and/or its designees) is entitled to exercise its right to purchase the Voting Securities specified in such Section 6.5 Transfer Notice, unless a shorter period after commencement of the Unsolicited Offer or a change in the price term thereof is provided for acceptance or qualification for proration, in which case the Section 6.5 Transfer Notice shall be given promptly after commencement of the Unsolicited Offer or such change; provided that the Investor may rescind such Section 6.5 Transfer Notice at any time prior to delivery of a Section 6.5 Acceptance Notice (as defined below). The Section 6.5 Transfer Notice shall specify the Voting Securities to be tendered. If the Company (and/or its designees) wishes to purchase the Voting Securities specified in the Transfer Notice, then not later than 24 hours prior to the latest time by which such securities must be tendered in order to be accepted in the Unsolicited Offer, the Company shall deliver a written notice (a "Section 6.5 Acceptance Notice") to the Investor specifying that the Company (and/or its designees) wishes to purchase such Voting Securities (such Voting Securities, the "Section 6.5 Securities"), a date for the closing of such purchase, which shall not be more than 45 days after delivery of such Section 6.5 Acceptance Notice (subject to extension as provided in Section 6.5(e) hereof), and a place for the closing of such purchase (a "Section 6.5 Closing"). Upon delivery of a Section 6.5 Acceptance Notice, a binding agreement shall be deemed to exist providing for the purchase by the Company (and/or its designees) of the Section 6.5 Securities to which such Section 6.5 Acceptance Notice relates, upon the terms and subject to the conditions set forth in this Section 6.5 and the Company shall use its reasonable best efforts to secure all approvals required in connection therewith; provided, that if the Unsolicited Offer is for less than all of the outstanding shares of Common Stock, the Section 6.5 Securities to be purchased by the Company as a result of the Section 6.5 Acceptance Notice shall equal (i) if the Section 6.5 Closing occurs after the date of consummation of the applicable Unsolicited Offer, the Voting Securities specified in the Section 6.5 Transfer Notice that would have been purchased (taking into account prorationing) if all of such Voting Securities so specified had been tendered into such Unsolicited Offer and (ii) otherwise, the Voting Securities specified in the Section 6.5 Transfer Notice that would have been so purchased (taking into account prorationing) if the party giving the Section 6.5 Transfer Notice had tendered such Voting Securities into the Unsolicited Offer, and all other shareholders of the Company had tendered all their Voting Securities into the Unsolicited Offer; and, provided, further, that if following delivery of a Section 6.5 Acceptance Notice, the price per share of Common Stock in the Unsolicited Offer is increased, the Company may, not later than 24 hours prior to the latest time by which Common Stock must be tendered in order to be accepted in the Unsolicited Offer, rescind its Section 6.5 Acceptance Notice (in which event it will have no obligation to purchase such Section 6.5 Securities and such Section 6.5 Securities may be sold into the Unsolicited Offer). Notwithstanding anything to the contrary contained in this Section 6.5, for so long as the agreement deemed to exist upon delivery of a Section 6.5 Acceptance Notice remains in effect, the Investor shall not and shall cause the Investor Group not to, tender any Voting Securities pursuant to the Unsolicited Offer. (b) The purchase price for any Section 6.5 Securities (the "Section 6.5 Price"), assuming simultaneous conversion of any Series A Convertible Preferred Stock, shall be the per share price of Common Stock paid in the Unsolicited Offer. The value of any securities offered in the Unsolicited Offer shall equal the average Market Price per share or per unit of such securities during the 30 consecutive trading days immediately preceding the Company's receipt of the Section 6.5 Transfer Notice. In the case of any securities not theretofore traded, the value of such securities shall be determined by two nationally recognized investment banking firms, one firm to be selected by each of the Investor and the Company, or in the event such firms are unable to agree, by a third nationally recognized investment banking firm selected by such firms. The Investor and the Company shall use their reasonable best efforts to cause any such determination of value to be made within five business days following the Company receipt of a Section 6.5 Transfer Notice. In connection with any determination of value pursuant to this Section 6.5(b), each party will bear the fees and expenses of the investment banking firm selected by it and the parties will bear equally the fees and expenses of any third investment banking firm. (c) At any Section 6.5 Closing, the Company (and/or its designees) shall pay to the Investor (or its designees) the aggregate Section 6.5 Price for the Section 6.5 Securities by wire transfer of immediately available funds, and the Investor shall deliver or cause to be delivered to the Company (and/or its designees) such Section 6.5 Securities, with documentation satisfactory to the Company evidencing the transfer of such Section 6.5 Securities, in form acceptable for transfer on the Company's books. In the event a Section 6.5 Closing occurs after the 30th day following delivery of the applicable Section 6.5 Acceptance Notice, then, in addition to the aggregate Section 6.5 Price, the Company (and/or its designees) shall pay to the Investor (or its designees) interest on the aggregate Section 6.5 Price for the period from and after such 30th day to and including the date of such Section 6.5 Closing. Such interest shall accrue at the Federal Funds Rate as in effect from time to time, plus 1/4 of 1%. Such interest shall not be compounded and shall be calculated on the basis of a 360-day year and the actual number of days elapsed. (d) If the Company (and/or its designee) does not, to the extent specified in Section 6.5(a), exercise its right to purchase the securities specified in a Section 6.5 Transfer Notice, then the party giving such Section 6.5 Transfer Notice shall be free to effect the Disposition pursuant to the Unsolicited Offer of such Voting Securities, but only such Voting Securities, so specified in such Section 6.5 Transfer Notice (without being subject to the restrictions contained in Section 6.3(e) hereof relating to the Company's purchase rights under this Section 6.5) and the Company shall take such steps as are necessary to effectuate the conversion into Common Stock of any Series A Convertible Preferred Stock to be tendered by the party giving the Section 6.5 Transfer Notice prior to the acceptance of such shares for payment pursuant to the Unsolicited Offer so that such party shall have a reasonable opportunity to timely tender such shares in accordance with such Unsolicited Offer (including tenders of such shares by the Company on behalf of such party); provided that the Company and the Investor shall request that such shares be returned to the Company for exchange in accordance with Section 6.7(c) if such shares are not accepted for purchase pursuant to the Unsolicited Offer and that, in the event of the return of such shares to the Investor, the Investor shall promptly return such shares to the Company for exchange in accordance with Section 6.7(c); provided, further, that the Company shall take such steps to ensure that any shares not tendered shall be duly issued and outstanding; provided, further, that (i) such Disposition is effected at a price equal to or in excess of the price offered in the Unsolicited Offer at the time that the Company's right to purchase such securities expires, taking into account any extension of the time by which the Company must exercise such right including by reason of clause (iii) below, (ii) except as provided in Section 6.5(e) below, the foregoing shall not apply with respect to any shares as to which the Company shall have delivered a Section 6.5 Acceptance Notice in the event that the agreement deemed to exist with respect to such securities upon delivery of the applicable Section 6.5 Acceptance Notice is terminated pursuant to Section 6.5(e) hereof, and (iii) in the event that the price per share of Common Stock in the Unsolicited Offer is decreased at any time during such offer, any member of the Investor Group who wishes to effect a Disposition of Voting Securities pursuant to Section 6.3(e) shall give a Section 6.5 Transfer Notice to the Company of such intended Disposition (irrespective of whether a Section 6.5 Transfer Notice was previously delivered with respect thereto) at least 48 hours prior to the latest time by which such securities must be tendered in order to be accepted in the Unsolicited Offer, and, notwithstanding any other provision of this Section 6.5, the Company shall have 24 hours following delivery of such Section 6.5 Transfer Notice to deliver a Section 6.5 Acceptance Notice. If any such Disposition is not, subject to Section 6.3(e) hereof, completed prior to the later of (i) 60 days following the expiration of the Company's right to purchase the securities specified in a Section 6.5 Transfer Notice, and (ii) 30 days following the redemption, amendment or modification of the Preferred Stock Purchase Rights or the Amended Rights Agreement (or a Substantially Similar Plan), any Voting Securities specified in such Section 6.5 Transfer Notice and not disposed of in such Disposition shall again be subject to the Company's purchase rights under this Section 6.5, to the extent provided in Section 6.3(e) hereof. (e) The obligations of the parties to effect any Section 6.5 Closing shall be subject to the satisfaction of the following conditions: (i) all waiting periods, if any, applicable to the transactions occurring at such Section 6.5 Closing under the HSR Act, shall have expired or been terminated and (ii) no statute, rule, regulation, executive order, decree, ruling, injunction or other order shall have been enacted, entered, promulgated or enforced by any court or governmental authority of competent jurisdiction which prohibits such transactions or makes such transactions illegal. The obligation of the Company (and/or its designees) to effect any Section 6.5 Closing shall be further subject to the condition that shares of Common Stock validly tendered in accordance with the terms of the Unsolicited Offer subject to prorationing in accordance therewith shall have been paid for or shall simultaneously with such Section 6.5 Closing be paid for pursuant to the Unsolicited Offer. If, as of any date on which a Section 6.5 Closing is scheduled to occur, the foregoing conditions relating thereto have not been satisfied, then such Section 6.5 Closing shall occur as promptly as practicable following such satisfaction, and, with respect to the conditions set forth in the first sentence of this Section 6.5(e), the parties shall use their reasonable best efforts to cause the satisfaction of such conditions. If (x) the conditions relating to any Section 6.5 Closing are not satisfied within 120 days in the case of clause (i), and 180 days in the case of clause (ii), following delivery of the applicable Section 6.5 Acceptance Notice (or in the case of an order or injunction arising out of any proceeding initiated by the Investor or any member of the Investor Group, such later date on which such order or injunction becomes final and nonappealable), or (y) the Unsolicited Offer is terminated without the condition set forth in the second sentence of this Section 6.5 (e) being satisfied, then the Investor or the Company in the case of the preceding clause (x), or the Company in the case of the preceding clause (y), may, prior to the acceptance for payment of shares pursuant to the Unsolicited Offer, terminate the agreement deemed to exist upon delivery of the applicable Section 6.5 Acceptance Notice by delivering written notice to the other; provided that no such termination shall excuse a party for a breach of its obligations thereunder and, in the case of a termination by the Company pursuant to clause (x), the party having given the applicable Section 6.5 Transfer Notice shall be free to sell the Section 6.5 Securities into the Unsolicited Offer. Section 6.6. Required Dispositions. (a) If, at any time during the Standstill Period, the Total Ownership Percentage of the Investor Group shall exceed the Ownership Cap plus 1%, whether as a result of any repurchase of Common Stock by the Company pursuant to a tender offer, open market purchases or otherwise (a "Company Repurchase") or for any other reason, then, if and to the extent requested by the Company by written notice to the Investor which may be made at any time, the Investor shall, within twelve months after such request (the "Sell Down Period"), dispose of, or cause the other members of the Investor Group to dispose of (a "Required Disposition"), such number of Common Securities owned by the Investor Group as shall be necessary to reduce the Total Ownership Percentage of the Investor Group to no more than the then applicable Ownership Cap immediately prior to such Company Repurchase or other event giving rise to such Required Disposition (the "Required Disposition Amount"), as applicable; provided that any such Required Disposition shall be subject to the provisions of Section 6.3 and provided, further, that the Investor agrees that such Common Securities in excess of the Ownership Cap shall be voted by the Investor Group at any meeting of shareholders (or action by written consent in lieu of any such meeting) pro rata in accordance with the vote of all shares held by Persons other than the members of the Investor Group and Other Investor Affiliates. Notwithstanding the foregoing, if any Required Disposition during the applicable Sell Down Period (A) would result in liability to the Investor or other members of the Investor Group under Section 16(b) of the Exchange Act or any similar successor statute, or (B) would be prohibited as a result of the restrictions set forth in Section 9 of the Registration Rights Agreement on transfer of Common Securities, then such Sell Down Period (x) shall, in the case of clause (A) above, begin on the first date on which such Required Disposition may be effected without liability under Section 16(b) of the Exchange Act and (y) with respect to clause (B) above, be extended by the number of days that the Investor Group is restricted from selling Common Securities under the Registration Rights Agreement. (b) The Company agrees to indemnify the Investor Group against any Loss (as defined below) incurred by the Investor Group as a result of any Required Disposition; provided, that (i) such Required Disposition is effected on an arm's-length basis to a Person that is not affiliated with any member of the Investor Group or Other Investor Affiliate either in a bona fide open market "brokers' transaction" or in a privately negotiated transaction, (ii) the purchase price in connection with such Required Disposition is paid in cash and (iii) the Required Disposition is made during the Sell Down Period following the receipt by the Investor of the notice from the Company specified in the first sentence of Section 6.6(a). For purposes of this Section 6.6, Voting Securities disposed of in a Required Disposition shall be deemed to have been disposed of in the order in which such Voting Securities were purchased. "Loss" means the amount, if any, by which (A) the weighted average purchase price of the Voting Securities disposed of by the Investor Group in a Required Disposition during a Sell Down Period calculated on a per share of Common Stock basis (based on the number of shares of Common Stock such Voting Securities are convertible into at such time, if applicable) (which shall not include (x) sales pursuant to the last proviso of Section 6.1(A)(a) or (y) sales of Voting Securities in excess of the Required Disposition Amount) (excluding any out-of-pocket expenses incurred in connection with such purchase) exceeds (B)(1) the higher of (x) the Market Price of the Common Stock for the trading day immediately preceding the closing of such Required Disposition and (y) the price received by the Investor Group pursuant to such Required Disposition (net in each case of ordinary brokerage or placement commissions incurred by the Investor to effect such Required Disposition) multiplied by (2) the number of Voting Securities sold in connection with such Required Disposition (excluding any Voting Securities in excess of the Required Disposition Amount). In no event will Losses be deemed to include any taxes payable in connection with such Required Disposition. Such indemnification payment, if any, shall be made, without interest, within five business days after the sale occurs. Section 6.7. Top-Up Rights; Permitted Reacquisitions; Exchange of Share Certificates. (a) After the end of the Company Buy Back Period the Investor at its option may, at any time, purchase Voting Securities in open market purchases or privately negotiated transactions provided that, after giving effect to such purchase, the Investor Group's Total Ownership Percentage does not exceed the Ownership Cap then applicable to the Investor Group; provided that a block purchase of Voting Securities in accordance with the foregoing effected as a single transaction which results in the Investor Group's Total Ownership Percentage exceeding the Ownership Cap then applicable to the Investor Group shall not be deemed to violate this Section 6.7(a), Section 6.1 or any other provision hereof solely as a result of the acquisition of such excess securities so long as the aggregate Voting Securities so held by the Investor Group at any time in excess of the Ownership Cap represent an Equity Percentage of less than .04% and have an aggregate Market Price at the time of purchase of less than $2,000,000; provided that the Investor will transfer, or cause to be transferred, such excess Voting Securities to an unaffiliated entity within twelve months of the acquisition thereof by the Investor Group and all such excess Voting Securities, pending their transfer, shall be voted by the Investor Group in accordance with the requirements of clause (w) through (z) of Section 6.2 and on any other matter in the same proportion as the votes cast by or on behalf of all holders of the Company's Voting Securities other than the Investor Group and Other Investor Affiliates. (b) The Ownership Cap shall initially be 20%, subject to reduction as follows: (i) If, on the last day of the twelve-month period commencing on the day immediately succeeding the last day of the Company Buy Back Period (or in the event that the Company shall issue during such twelve-month period Common Securities having an aggregate Equity Percentage after such issuance of 3% or more, the twenty-four-month period commencing on the day immediately succeeding the last day of the Company Buy Back Period (the "Initial Top-Up Period")) the Investor Group's Total Ownership Percentage is less than 20%, the Ownership Cap shall be reduced to the amount of such Total Ownership Percentage. (ii) At any time after the expiration of the Initial Top-Up Period, the Ownership Cap shall be reduced by the amount by which, during each successive twelve-month period following any Dilutive Issuance, the Common Stock purchased by the Investor represents an Equity Percentage of less than 3% (disregarding in computing such Equity Percentage any subsequent Dilutive Issuance); notwithstanding the foregoing, the Ownership Cap shall not be reduced at any time the Total Ownership Percentage is equal to the Ownership Cap. (iii) The Ownership Cap shall be reduced by the Equity Percentage represented by all Transfers (as hereinafter defined) by the Investor Group of Common Securities to Persons other than members of the Investor Group other than (a) inadvertent dispositions or (b) dispositions in excess of the Required Disposition Amount in connection with block trades executed to facilitate a Required Disposition, provided that the aggregate amount excluded under (a) and (b) above does not exceed .5% of the Equity Percentage and is actually purchased by the Investor or a wholly-owned United States Subsidiary of the Investor within twelve months of the date of the disposition referred to in (a) or (b) above, as the case may be. For purposes of this Section 6.7(b)(iii), the term "Transfer" with respect to Voting Securities shall include any sale, exchange, offer to sell or exchange, contract to sell or exchange, option or warrant to purchase or exchange, any dividend of, or any swap or other agreement or transaction that transfers, directly or indirectly, the economic consequence of ownership of Voting Securities and such Transfer shall be deemed to occur on the date upon which the all conditions to the consummation of such Transfer are subject to the discretion of the transferee. (iv) Any period of twelve or twenty-four months under this Section 6.7 shall be extended by the number of days that the Investor Group cannot purchase Common Stock without liability under Section 16(b) of the Exchange Act due to a Required Disposition. (c) The Investor shall present for exchange, and the Company shall exchange at no cost to the Investor, any Common Securities acquired by the Investor Group, whether purchased pursuant to this Section 6.7 or received by way of dividend or otherwise (other than shares of Common Stock acquired pursuant to Section 6.1(A)(a)(iii)) for shares of Series A Convertible Preferred Stock (at a ratio of one share of Series A Convertible Preferred Stock in exchange for each 100 shares of Common Stock (as appropriately adjusted to reflect any stock split, stock dividend, reverse stock split, reclassification or any other transaction with a comparable effect)). (d) No purchase pursuant to this Section 6.7 may be made by the Investor Group during any period during which the Company notifies the Investor that this Company is effecting a "distribution" as defined in Regulation M under the Securities Act; provided, that any period of twelve months or twenty-four months under this Section 6.7 shall be extended by the number of days that the Investor Group is so prohibited from purchasing shares of Common Securities as a result of this Section 6.7(d). (e) A "Dilutive Issuance" shall mean any issuance of Common Securities by the Company after the Closing Date; provided, that no Dilutive Issuance shall be deemed to have occurred unless such issuance, together with all other issuances since the Closing Date or the most recent Dilutive Issuance to occur (other than those which have been theretofore taken into account for purposes of this Section 6.7(e)), shall represent an Equity Percentage of 1% or more; provided, however, that any adjustments which by reason of this Section 6.7(e) are not required to be made shall be carried forward and taken into account in, and as of the date of, any subsequent adjustment. All calculations shall be made to the nearest one thousandth of a percent. Section 6.8. Spin-off Distributions. In the event that the Company makes any Spin-off Distribution, then effective as of the date of such Spin-off Distribution, without any action on the part of the Company, the Spin-off Company or the Investor, there shall be deemed to exist, in addition to this Agreement, between the Investor and the Spin-off Company a binding agreement (the "Spin-off Agreement") containing provisions substantially identical to Section 6 hereof, including the definitions of any capitalized terms used in such Sections but defined in other Sections of this Agreement; provided that, for purposes of the Spin-off Agreement (i) references to the Company shall mean the Spin-off Company; (ii) references to Voting Securities shall mean the Voting Securities of the Spin-off Company, (iii) references to "the date hereof" and "the date of this Agreement" shall mean the date of the Spin-off Distribution; and (iv) the Spin-off Agreement shall terminate on the date this Agreement would have terminated or does terminate pursuant to Section 10. Prior to any Spin-off Distribution, the Investor shall, and the Company shall cause the Spin-off Company to, enter into an agreement memorializing the Spin-off Agreement. Section 6.9. Competing Investments. From and after the date hereof, and following the Closing for so long as the Ownership Cap is 18% or more and no Trigger Event or Release Event shall have occurred, the Company shall not consummate or agree pursuant to a binding agreement to consummate a Competing Investment at any time prior to the fourth anniversary of the date of this Agreement. So long as the Ownership Cap is 18% or more and no Trigger Event or Release Event shall have occurred, the Company shall not consummate or agree pursuant to a binding agreement to consummate a Competing Investment at any time after the fourth anniversary of the date of this Agreement, unless (a) the Company shall have provided the Investor prior written notice of such proposed Competing Investment at least 30 days prior to the earlier of the consummation of or the entering into a binding agreement providing for such Competing Investment specifying the principal terms thereof (including the form and amount of such Competing Investment and the identity of the Competitor proposing to make such Competing Investment) (such notice, the "Competing Investment Notice") and (b) the Competitor shall have agreed in the Competitor Agreement or otherwise that (x) neither it nor any of its Affiliates or Associates (including any of its designees on the Board) will have access to any DuPont Proprietary Information or Joint Intellectual Property (as such terms are defined in the Research Alliance Agreement) except pursuant to a sublicense from the Company with respect to Pioneer Products (as defined in the Research Alliance Agreement) that is permitted pursuant to the Research Alliance Agreement, (y) upon any breach of the agreement referred to in clause (x) above, and so long as the Investor shall have the right to designate any Investor Nominees for election or appointment to the Board pursuant to Section 5 (and without limiting any other remedies the Investor may otherwise have), the Competitor will cause all designees of the Competitor on the Board to immediately resign and the Competitor will not have any rights to nominate any other persons to the Board, and (z) the provisions of the agreement referred to in this clause (b) shall be for the express benefit of the Investor and the Investor shall be a third party beneficiary thereof. The Investor shall have the right, which may be exercised by written notice to the Company delivered during the period commencing on the date of delivery of the Competing Investment Notice to the Investor and ending on the date which is the later of (i) the 30th day thereafter, (ii) the execution by the Company of a binding agreement providing for the Competing Investment (or, if no such agreement is executed, the consummation of such Competing Investment) and (iii) the second Business Day after the Company notifies the Investor in writing it will execute an agreement effectuating (or consummate, as the case may be) the transactions contemplated in the preceding clause (ii), provided that such notification shall not be deemed given unless such agreement is in fact executed (or transaction consummated, as the case may be) within such two Business Day period, notwithstanding the provisions of Section 6.1(A), to discuss the merits of the Competing Investment with the Company and the Board or to make alternative public or private proposals with respect thereto. The Investor shall also have the right, exercisable by delivering a notice (the "Competitor Release Notice") to the Company within the time period specified below, of its election to immediately terminate the Formation Agreement (the election of the Investor to so terminate the Formation Agreement, a "Release Event"), which termination shall be carried out, (i) if the Competing Investment resulting in such Release Event occurs or is consummated, or if the agreement providing therefor is executed by the parties thereto, prior to the seventh anniversary of the date of this Agreement, in accordance with the provisions of Section 9.2(d)(X) of the Formation Agreement as if an Involuntary Default described therein had occurred (and as if the Investor was the non-defaulting "Party" for purposes of Section 9.2(d)(X) of the Formation Agreement) upon consummation of the Competing Investment, and (ii) in all other cases, in accordance with the provisions Section 9.2(d)(Y) of the Formation Agreement as if an Involuntary Default described therein had occurred (and as if the Investor was the non-defaulting "Party" for purposes of Section 9.2(d)(Y) of the Formation Agreement). A Release Event shall be irrevocable and binding upon the Investor and the Company, except that (A) the Investor may, in the case of a termination carried out in accordance with clause (i) of the preceding sentence, rescind such Release Event (in which event all rights and obligations of the parties shall be as if no Release Event shall have ever occurred) for a period of five Business Days after the determination of Fair Market Value (as defined in, and calculated pursuant to, the Formation Agreement) by delivering a written notice of such rescission to the Company within such period, and (B) the Investor may rescind such Release Event (in which event all rights and obligations of the parties shall be as if no Release Event shall have ever occurred) for a period of five Business Days following the entry of a final and non-appealable Order as contemplated by the following sentence and (C) the Release Event shall automatically be rescinded (in which event all rights and obligations of the parties shall be as if no Release Event shall have occurred) if the Competing Investment which triggered such Release Event was not consummated, as advised in writing by the Company to the Investor. The closing of the transfer of the Investor's or the Company's Venture Interest, as applicable (as defined in the Formation Agreement) following a Release Event shall be as soon as practicable following the expiration or termination of all waiting periods, if any, under the HSR Act and in any event no later than the later to occur of (I) 15 days after the delivery of the Competitor Release Notice and (II) 5 business days after the expiration or termination of all waiting periods, if any, under the HSR Act, subject to no Order having been entered, promulgated or enforced by a court or governmental authority of competent jurisdiction which prohibits such transaction (and the Investor and the Company shall use commercially reasonable efforts to have any such Order lifted or terminated in order to allow consummation of such transaction unless and until such time as such Order becomes final and non-appealable). The Competitor Release Notice, in order to result in the rights described above, must be delivered by the Investor to the Company within twenty Business Days after the earlier of (i) the public announcement by the Company of the consummation of the Competing Investment, and (ii) the Company notifying the Investor in writing that the Competing Investment has been consummated (and the Company agrees to promptly so notify the Investor); provided, however, that the Investor may deliver a Competitor Release Notice at any time after it becomes aware of the consummation of a Competing Investment until twenty Business Days after either of the events described in clauses (i) or (ii) above shall have occurred. Notwithstanding anything to the contrary in this Agreement, following consummation of the Competing Investment, the Investor, with the consent of the Company, may engage in discussions with the Company as to matters relating to the Joint Venture Agreement (including the entity established pursuant to the Formation Agreement) and the Research Alliance Agreement, including the terms of a purchase or sale of any interest therein. Notwithstanding anything herein to the contrary, solely for purposes of Section 5.2(z), 6.2(e) and clause (iii) and the reference to Sections 8.1(b) and (c) contained in the second to last sentence of Section 6.9, the Release Event will not be deemed to have occurred (and the rights and obligations of the parties referenced therein will not come into effect) until the earlier of (I) the time, following a Release Event, of the consummation of the transfer of the Company's or the Investor's Venture Interest, as applicable (each as defined in the Formation Agreement) in connection with such Release Event and (II) six months following such Release Event. Upon the occurrence of a Release Event, (i) the Standstill Period shall be extended, in respect of the sections indicated, and to the extent provided, in Section 10.2(iv), (ii) the Company shall file and use commercially reasonable efforts to obtain and maintain the effectiveness of a shelf registration statement on the terms set forth in the Registration Rights Agreement, (iii) the Investor shall immediately cause all of the Investor Nominees then serving on the Board to offer their resignations from the Board, and the Company's obligations to designate Investor Nominees to the Board pursuant to Section 5 shall terminate, (iv) the parties' obligations and rights pursuant to Section 6.7(a), Section 8.1(b) and (c), Section 8.2, Section 8.3 and Section 8.8 shall terminate, (v) the provisions of Section 6.3(g) shall thereafter apply and (vi) the provisions of Section 6.1(A), Section 6.2(e), Section 6.6, Section 6.7(b) through (e) and Section 6.8 shall remain in full force and effect in perpetuity. The rights of the Investor to terminate the Formation Agreement pursuant to Section 6.9 and Section 8.2(c) hereof shall automatically be transferred and assigned at the election of the Investor, upon notice to and acknowledgment by the Company of such notice, but without any consent required on the part of the Company, to any Spin-Off Entity (which term, for purposes of this sentence, shall include any Person who would otherwise be deemed a Spin-Off Entity but for such Person's status as a Subsidiary of the Investor) which is a Subsidiary of the Investor or satisfies each of the conditions set forth in clauses (i) through (v) of the definition of the term "Sale of Ag Products." Section 6.10. Rights of the Company upon a Trigger Event. In the event that: (A) the Research Alliance Agreement or the Formation Agreement shall be terminated (notwithstanding the survival of certain obligations of the parties for the periods following such termination as provided in Section 9.4 of the Formation Agreement) other than (i) a termination of the Research Alliance Agreement or the Formation Agreement as a result of a willful and substantial breach by the Company of any material term of the Formation Agreement or the Research Alliance Agreement, (ii) a termination of the Research Alliance Agreement at or after the sixteenth anniversary of the date of such agreement, and (iii) a termination of the Formation Agreement or the Research Alliance Agreement in connection with the acquisition by one party of the Venture Interest of the other pursuant to a Change in Control Release Event or a Release Event and where the consequences set forth in Section 8.2(b) or in the second to last sentence of Section 6.9, as and to the extent applicable, shall apply; or (B) there shall have occurred a Sale of Ag Products; (any of such events, a "Trigger Event"), then, effective immediately upon the occurrence of such Trigger Event (i) the Standstill Period shall be extended, in respect of the sections indicated, and to the extent provided, in Section 10.2(iv), (ii) the Company shall file and use its commercially reasonable efforts to obtain and maintain the effectiveness of a shelf registration statement on the terms set forth in the Registration Rights Agreement, (iii) the Investor shall immediately cause all Investor Nominees then serving on the Board to offer their resignations from the Board, and the Company's obligations to designate Investor Nominee to the Board pursuant to Section 5 shall terminate, (iv) the parties' obligations and rights pursuant to the provisions of Section 6.6(b) (but only with respect to Section 6.6(b) in the case of a Trigger Event pursuant to clause (B) above or in the case of a Trigger Event pursuant to clause (A) above occurring as a result of a willful and substantial breach by the Investor of any material term of the Joint Venture Agreement or the Research Alliance Agreement), Section 6.7(a), Section 6.9, clauses (b) and (c) of Section 8.1, Section 8.2, Section 8.3, and Section 8.8 shall terminate, (v) the provisions of Section 6.3(g) shall thereafter apply, and (vi) Section 6.1(A), Section 6.2(e), Section 6.6(a), Section 6.6(b) (but only with respect to Section 6.6(b) in the case of a Trigger Event pursuant to clause (A) above other than a Trigger Event occurring as a result of a willful and substantial breach by the Investor of any material term of the Joint Venture Agreement or the Research Alliance Agreement), Section 6.7(b)-(e) and Section 6.8 shall remain in full force and effect in perpetuity. The Investor agrees that it will not permit a transaction constituting a Sale of Ag Products (including, without limitation, a transaction that would otherwise be excluded from the definition of a Sale of Ag Products by reason of the satisfaction of the conditions set forth in clauses (i) through (v) of the proviso thereof) to be consummated or a binding agreement with respect thereto to be entered into prior to the first anniversary of the Closing Date. SECTION 7 PRE-CLOSING COVENANTS Section 7.1. Taking of Necessary Action. Each of the parties hereto agrees to use its reasonable best efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Closing of the transactions contemplated by this Agreement. Without limiting the foregoing, the Investor and the Company (a) will use their reasonable best efforts to make all filings, including filings under the HSR Act, and obtain all other Regulatory Approvals necessary or, in the opinion of the Investor or the Company, advisable in order to permit the consummation of the transactions contemplated hereby and (b) will not take actions (including by making other acquisitions of or investments in any other Person) that could reasonably be expected to have the effect of delaying or hindering the Closing of the transactions contemplated hereby. Each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement the transactions contemplated hereby or to evidence such events or matters. Section 7.2. Notifications. (a) At all times prior to the Closing Date, the Investor shall promptly notify the Company and the Company shall promptly notify the Investor in writing of any fact, change, condition, circumstance or occurrence or nonoccurrence of any event which will or is reasonably likely to (i) constitute a breach of any representation or warranty of such party contained in the Transaction Agreements; or (ii) result in the failure to satisfy the conditions to be complied with or satisfied by it hereunder; provided, that the delivery of any notice pursuant to this Section 7.2 shall not limit or otherwise affect the remedies available hereunder to any party receiving such notice. (b) To the extent that the Investor or the Company is required to make any filings with the Commission in connection with the transactions contemplated by this Agreement, such party shall give the other party a reasonable opportunity to review and comment on such filings prior to the filing thereof with the Commission. Section 7.3. No-Shop. From the date hereof until the Closing or the earlier termination of this Agreement, except with respect to an unsolicited Proposal to the extent required by the fiduciary obligations of the Board of Directors of the Company, as determined in good faith by the Board of Directors based on the advice of outside counsel, the Company shall not and shall not permit or authorize any of its Subsidiaries, Affiliates or Representatives to, directly or indirectly, (i) solicit or initiate, or encourage the submission of, any Proposal with respect to the Company, or (ii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Proposal, other than the transaction contemplated hereby with the Investor. Section 7.4. Share Listing. As soon as practicable but in any event prior to the date that the Closing would otherwise have occurred, the Company shall take reasonable action as is required to cause the shares of Common Stock into which the shares of Series A Convertible Preferred Stock are convertible to be listed for trading on the NYSE. Section 7.5. Registration Rights Agreement. At the Closing, the Company and the Investor shall enter into the Registration Rights Agreement. Section 7.6. Pre-Closing Information. The Company shall (and shall cause each of its Subsidiaries to), from and after the date hereof and until the Closing and subject to Section 8.1(a), afford to the Investor and its Representatives reasonable access, upon reasonable notice and in such manner as will not unreasonably interfere with the conduct of the Company's business, to material financial information regarding the Company. The Company will reasonably promptly inform the Investor of the principal terms of any Proposal with respect to which the Company has entered into substantive discussions or negotiations. SECTION 8 ADDITIONAL COVENANTS Section 8.1. Certain Information. (a) Subject to applicable law and the provisions of this Agreement, all information provided to the Investor or the Company hereunder shall be provided in confidence in accordance with the provisions of the Confidentiality Agreement (the "Confidentiality Agreement"), dated March 13, 1997, between the Company and the Investor. (b) At such time as the Investor shall notify the Company that it shall account for its investment in the Company pursuant to the full equity method (including earnings and investments), the Company will, at Investor's sole cost and expense, cooperate to the extent necessary to furnish to the Investor all information that is required by GAAP to enable the Investor to account for its investment in such manner and the Company hereby consents to the Investor doing so. To the extent reasonably requested by the Investor, the Company will and will cause its Representatives to, at the Investor's sole cost and expense, provide information regarding the Company and its Subsidiaries, and otherwise cooperate with, the Investor so as to enable the Investor to prepare financial statements in accordance with GAAP and to comply with its disclosure requirements under securities laws and regulations. (c) From time to time upon reasonable advance request by the Company, the Investor will notify the Company of the amount of each class of Voting Securities then Beneficially Owned by the Investor Group. From time to time upon reasonable advance request by the Investor, the Company will provide the Investor with information known to the Company with respect to the number of votes entitled to be voted by shareholders of the Company at the time of such request; provided, however, that the Company shall not be obligated pursuant to this Section 8.1(c) to make any general solicitation of shareholders of the Company in connection therewith. Section 8.2. Right to Participate in Sale of the Company. (a) Prior to the Closing and thereafter, so long as the Ownership Cap is 18% or more, (I) the Company shall not enter into, and the Board shall not publicly recommend to shareholders or approve, a definitive agreement providing for a Change in Control Transaction and (II) the Board shall not redeem the Preferred Stock Purchase Rights or otherwise amend or modify the Amended Rights Agreement (or a Substantially Similar Plan) to be inapplicable (including by taking action to cause a Section 11(a)(ii) Event or Section 13 Event (each as defined in the Amended Rights Agreement as in effect on the date hereof), not to occur that, absent such action, would otherwise have occurred, or to redeem the Preferred Stock Purchase Rights) to a proposed Change in Control Transaction for which no definitive agreement is entered into as a means, in any such case, intended to permit a proposed Change in Control Transaction to be consummated without causing a Triggering Event (as defined in the Amended Rights Agreement) to occur or otherwise exempt such transaction therefrom, unless prior thereto (i) the Investor shall have been given at least 30 days prior notice of the proposed Change in Control Transaction and of the material terms thereof and a full and fair opportunity, as conclusively determined by the Board in good faith and in the exercise of its fiduciary duties, after consultation with outside counsel, to participate in the Company's bidding process (the "Process") undertaken by the Company (if any) in advance of such Change in Control Transaction on terms, and to have any proposal submitted by the Investor pursuant to clause (ii) below evaluated on a basis, no less favorable to the Investor than those afforded to other interested parties, (ii) the Investor shall have been permitted notwithstanding the restrictions contained in Section 6.1, to submit a proposal for an alternative transaction during the Interim Period (as defined below) or in connection with such Process, subject in any event to the Board's right to accept or reject any such proposal as may be made and (iii) the Interim Period shall have terminated. "Interim Period" shall mean the period commencing on the date of the delivery to the Investor by the Company of written notice (such notice, the "Change in Control Transaction Notice") of its considering to take any action specified in clause (I) or clause (II) of the preceding sentence and ending on the date which is the later of (i) the 30th day thereafter, and (ii) the public announcement by the Company of the taking of any action specified in clause (I) or clause (II) of the preceding sentence. In connection with the foregoing, the Investor agrees that if the Company establishes procedures uniformly applicable to all interested parties for the evaluation of proposals for a Change in Control Transaction and if the Investor wishes to participate in the sale process, then, the Investor will, subject to the Investor not violating applicable law (other than violations based on claims or allegations of breach of the Company's fiduciary duty), comply with such procedures as long as such procedures (i) are applied uniformly to all interested parties (and the Company agrees that it shall give the Investor at least one Business Day's prior written notice if any such procedures are not to be uniformly applied to all such interested parties), (ii) except as conclusively determined by the Board in good faith and in the exercise of its fiduciary duties, after consultation with outside counsel, do not have a materially greater impact when applied to the Investor than when applied to other participants, and (iii) except as provided in Section 8.2(c) below and the Formation Agreement, shall not establish procedures relating to the Joint Venture Agreement, or the entity established thereby, or the Research Alliance Agreement, or the rights and obligations of the Investor relating thereto. If the Company rejects any offer made by the Investor pursuant to the Process, the Company will advise the Investor in writing of the reasons for such rejection. (b) Following the consummation of a Change in Control Transaction, unless either (x) any Person or 13D Group shall Beneficially Own Common Securities representing an Equity Percentage of more than 50% of the Company or of the common securities of the company or other entity surviving such Change in Control Transaction or (y) the Investor Group shall Beneficially Own Voting Securities representing less than 5% of the Total Voting Power of the Company or the voting power of the company or other entity surviving such Change in Control Transaction (a Change in Control Transaction where neither clause (x) nor (y) is satisfied, a "Surviving Change in Control Transaction"), then (unless, in the case of clause (i) below, the Company or other entity surviving such Change in Control Transaction shall otherwise determine as to all of such provisions) (i) the provisions of Section 6.1(A), Section 6.6, Section 6.7 (other than clause (c) thereof to the extent that the Common Stock of the Company or the voting securities of the company or other entity surviving such Change in Control Transaction (1) is not entitled to more than one vote per share or (2) is entitled to more than one vote per share, but all shares of such class are so entitled), Section 6.8, Section 6.10, Sections 8.1(b) and (c) and Sections 8.2(a) and (b), shall continue in full force and effect through the balance of the Standstill Period (except that the Ownership Cap shall be appropriately adjusted to equal the ownership that the Investor Group would have owned after the Surviving Change in Control Transaction if the Investor Group had owned Common Securities equal to the Ownership Cap immediately prior to the Surviving Change in Control Transaction), (ii) the provisions of Section 5 and Section 6.2 shall terminate and (iii) the provisions of Section 6.3(g) shall thereafter apply provided, however, notwithstanding anything to the contrary contained in this Agreement (other than the following sentence), that at and following such time as (a) any Person or 13D Group shall Beneficially Own Common Securities representing an Equity Percentage of more than 50% of the Company or the company or other entity surviving such Change in Control Transaction or (b) the Investor Group shall Beneficially Own Voting Securities representing less than 5% of the Total Voting Power of the Company or of the voting power of the company or other entity surviving such Change in Control Transaction, then, in either case, none of the provisions or obligations set forth in this Agreement shall be applicable to the members of the Investor Group or to any Other Investor Affiliate. Following a Surviving Change in Control Transaction, the Company (or the surviving company or entity) shall file and use its commercially reasonable efforts to obtain and maintain the effectiveness of a shelf registration statement on the terms set forth in the Registration Rights Agreement. Notwithstanding anything to the contrary contained in the Agreement, following any Change in Control Transaction, the provisions of Section 8.2(c) shall apply to such Change in Control Transaction and, unless the Company or other entity surviving such Change in Control Transaction shall otherwise determine by written notice to the Investor at least 10 days prior to the date by which the Investor must exercise its rights to declare a Change in Control Release Event to occur as a result of such Change in Control Transaction, the provisions of Section 8.2(c) and Section 6.9 shall apply to any Change in Control Transaction or Competing Investment, as the case may be, arising thereafter with respect to the Company or other entity surviving such Change in Control Transaction. (c) Without limiting the rights of the Investor set forth in Section 8.2(a) hereof, the Investor shall have the right, exercisable by delivering a notice (the "Change in Control Release Notice") to the Company within the time period specified below, of its election to immediately terminate the Formation Agreement (the election of the Investor to so terminate the Formation Agreement, a "Change in Control Release Event"), which termination shall be carried out, (i) if the Change in Control Transaction resulting in such Change in Control Release Event occurs or is consummated, or if the Company enters into, or the Board publicly recommends to shareholders or approves, a binding agreement providing for a Change in Control Transaction prior to the sixth anniversary of the date of this Agreement (or, in the case of a Change of Control Transaction involving a Person who is not a Competitor, the fifth anniversary of the date of this Agreement), in accordance with the provisions of Section 9.2(d)(X) of the Formation Agreement as if an Involuntary Default described therein had occurred (and as if the Investor was the non-defaulting "Party" for purposes of Section 9.2(d)(X) of the Formation Agreement) upon consummation of the Change in Control Transaction, and (ii) in all other cases, in accordance with the provisions of Section 9.2(d)(Y) of the Formation Agreement as if an Involuntary Default described therein had occurred (and as if the Investor was the non-defaulting "Party" for purposes of Section 9.2(d)(Y) of the Formation Agreement). A Change in Control Release Event shall be irrevocable and binding upon the Investor and the Company, except that (A) the Investor may, in the case of a termination carried out in accordance with clause (i) of the preceding sentence, rescind such Change in Control Release Event (in which event all rights and obligations of the parties shall be as if no Change in Control Release Event shall have ever occurred) for a period of five Business Days after the determination of Fair Market Value (as defined in, and calculated pursuant to, the Formation Agreement) by delivering a written notice of such rescission to the Company within such period, and (B) the Investor may rescind such Change in Control Release Event (in which event all rights and obligations of the parties shall be as if no Change in Control Release Event shall have ever occurred) for a period of five Business Days following the entry of a final and non-appealable Order as contemplated by the following sentence, and (C) the Change in Control Release Event shall be automatically rescinded (in which event all rights and obligations of the parties shall be as if no Change in Control Release Event shall have occurred) if the Change in Control Transaction which triggered such Change in Control Release Event was not consummated, as advised in writing by the Company to the Investor. The closing of the transfer of the Investor's or the Company's Venture Interest, as applicable (as defined in the Formation Agreement) following a Change in Control Release Event shall be as soon as practicable following the expiration or termination of all waiting periods, if any, under the HSR Act and in any event no later than the later to occur of (I) 15 days after delivery of the Change in Control Release Notice and (II) 5 business days after the expiration or termination of all waiting periods, if any, under the HSR Act, subject to no Order having been entered, promulgated or enforce by a court or governmental authority of competent jurisdiction which prohibits such transaction (and the Investor and the Company shall use their commercially reasonable efforts to have any such Order lifted or terminated in order to allow consummation of such transaction unless and until such time as such Order becomes final and non-appealable). The Change in Control Release Notice, in order to result in the rights described above, must be delivered by the Investor to the Company within twenty Business Days after the earlier of (i) the public announcement by the Company of the consummation of the Change in Control Transaction, and (ii) the Company notifying the Investor in writing that the Change in Control Transaction has been consummated (and the Company agrees to promptly so notify the Investor); provided, however, that the Investor may deliver a Change in Control Release Notice at any time after it becomes aware of the consummation of a Change in Control Transaction until twenty Business Days after either of the events described in clauses (i) or (ii) above shall have occurred. Notwithstanding anything to the contrary in this Agreement, following consummation of Change in Control Transaction, the Investor may engage in discussions with the Company (and/or the Person consummating such Change in Control Transaction) as to matters relating to the Joint Venture Agreement (including the entity established pursuant to the Formation Agreement) and the Research Alliance Agreement, including the terms of a purchase or sale of any interest therein.. Section 8.3. Use of Proceeds. (a) Subject to the provisions of this Agreement, as promptly as practicable, but in no event later than five business days after the Closing, the Company shall commence a self-tender offer (the "Offer") to purchase 16,444,586 shares of Common Stock (the "Requisite Number") at a price per share not in excess of $104 per share (the "Maximum Offer Price"), nor less than a per share price to be determined in the sole discretion of the Company after consultation with the Investor (the price range from such maximum to minimum price, the "Per Share Price Range") net to the seller in cash. Pursuant to the Offer, the Company will determine the single per share price, within the Per Share Price Range, net to the seller in cash (the "Offer Purchase Price") that it will pay for shares properly tendered pursuant to the Offer, taking into account the number of shares so tendered and the prices specified by the tendering stockholders. The Company will select the lowest Offer Purchase Price that will allow it to buy the Requisite Number of shares of Common Stock (or such lesser number of shares as are properly tendered and not withdrawn at prices within the Per Share Price Range). All shares of Common Stock properly tendered at prices at or below the Offer Purchase Price and not withdrawn will be purchased at the Offer Purchase Price, subject to the terms and conditions of the Offer. All shares of Common Stock acquired in the Offer will be acquired at the Offer Purchase Price. Subject to the terms and conditions thereof, the Offer shall expire at midnight New York City time on the date that is 20 business days from the date the Offer is first published or sent to holders of Common Stock; provided, however, that the Company may (A) extend the Offer, if at the scheduled expiration date of the Offer any of the conditions to the Company's obligation to accept for payment, and pay for, shares of Common Stock shall not have been satisfied or waived, until such time as such conditions are satisfied or waived, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer and (C) extend the Offer for any reason on one or more occasions for an aggregate period of not more than 5 business days beyond the latest expiration date that would otherwise be permitted under clause (A) or (B) of this sentence. No member of the Investor Group shall, and the Investor shall use commercially reasonable efforts to cause all Other Investor Affiliates not to, tender any shares of Common Stock owned by them into the Offer. (b) If the Company, pursuant to the Offer, shall have purchased fewer than the Requisite Number of shares of Common Stock, the Company shall use commercially reasonable efforts during the remainder of the Company Buy Back Period to repurchase shares of Common Stock from the shareholders of the Company other than the Investor, any member of the Investor Group or any Other Investor Affiliates in open market purchases or pursuant to additional self-tender offers by the Company to the extent necessary so that the Total Ownership Percentage of the Investor Group shall be equal to Ownership Cap; provided, however, that in no event shall (i) unless the provisions of clause (c) of this Section 8.3 are applicable, the Company be required to pay greater than $104 per share of Common Stock in any such repurchase, (ii) the aggregate amount paid by the Company (deducting therefrom all amounts paid by the Investor to the Company pursuant to paragraph (c) below) for shares of Common Stock pursuant to the Offer and pursuant to additional repurchases under this Section 8.3(b) exceed the total Purchase Price, and (iii) the number of shares of Common Stock acquired by the Company pursuant to the Offer and this Section 8.3(b) exceed the Requisite Number. (c) Following completion of the Offer, the Investor shall have the right to designate in writing from time to time a maximum price or prices at which the Company shall seek to purchase shares of Common Stock that is in excess of $104 per share provided that at the end of the Company Buy-Back Period, the Investor shall pay in cash in immediately available funds to the Company an amount equal to the excess, if any, of (x) the weighted average cost to the Company for the purchase of all shares of Price Protected Common Stock (as defined below) purchased by the Company during the Company Buy-Back Period over (y) the Purchase Price, together with interest thereon at the Company's borrowing rate under its bank lines of credit, for each day the Company has incurred all or any portion of such excess. "Price Protected Common Stock" shall mean all shares of Common Stock purchased by the Company pursuant to the Offer and the first shares of Common Stock purchased by the Company after the consummation of the Offer at or below the maximum price or prices specified by the Investor pursuant to this paragraph (c) which, taken together with the number of shares of Common Stock purchased pursuant to the Offer, are equal to the Requisite Number. (d) References herein to Requisite Number and price per share of Common Stock shall be appropriately adjusted in the event of any stock split, stock combination or similar adjustment in the number of shares of Common Stock outstanding. Section 8.4. Rights Agreement. From and after the date hereof the Company shall not amend, modify, waive, terminate or invalidate any provision of the Amended Rights Agreement or any similar shareholder rights plan or similar device (a "Substantially Similar Plan"), in a manner which would cause the Investor Group to become an "acquiring person" under the Amended Rights Agreement or any Substantially Similar Plan upon the exercise of any rights granted to the Investor hereunder. Section 8.5. Publicity. Except as required by Law or by obligations pursuant to any listing agreement with any relevant securities exchange, neither the Company or any of its Affiliates nor the Investor or any of its Affiliates shall, without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, make any public announcement or issue any press release with respect to the transactions contemplated by this Agreement. Prior to making any public disclosure required by applicable Law or pursuant to any listing agreement with any relevant national exchange, the disclosing party shall consult with the other party, to the extent feasible, as to the content of such public announcement or press release. Notwithstanding the foregoing, the Investor and the Company may, in meetings with securities and other financial analysts and press interviews, disclose information (other than non-public information) concerning the transactions contemplated hereby and the Investor's investment in the Company and in a manner not inconsistent with prior joint public announcements regarding the transactions and in a manner consistent with the other terms of this Agreement. Section 8.6. Legend. The Investor agrees to the placement on certificates representing shares of Series A Convertible Preferred Stock purchased by the Investor pursuant hereto, of a legend substantially as set forth below (except that the first sentence of such legend shall not be placed on any shares of Common Stock issuable upon conversion of Series A Convertible Preferred Stock that have been registered under the Securities Act or if, in the opinion of counsel, such sentence is not required under the Securities Act), unless the Company determines otherwise, in accordance with the opinion of counsel: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR NON-U.S. JURISDICTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER JURISDICTIONS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS THAT RESTRICT THE TRANSFER OF SUCH SECURITIES) OF AN INVESTMENT AGREEMENT DATED AS OF AUGUST 6, 1997 BETWEEN THE E.I. DU PONT DE NEMOURS AND COMPANY AND PIONEER HI-BRED INTERNATIONAL, INC. (THE "COMPANY"), COPIES OF WHICH ARE ON FILE AT THE OFFICES OF THE SECRETARY OF THE COMPANY." Section 8.7. No Restrictions. For so long as the Total Ownership Percentage of the Investor Group shall equal 10% or more, in the aggregate, the Company will not take or recommend to its shareholders any amendment to the Company's Articles of Incorporation or Bylaws which would impose limitations on the legal rights of the Investor Group as Company shareholders (other than those imposed pursuant to this Agreement) based upon the size of security holding permitted under this Agreement, the business in which a security holder is engaged or other considerations applicable to the Investor Group and not to security holders generally. Section 8.8. Amendment to Articles of Incorporation. So long as the Ownership Cap is 18% or more, the Company will propose, and the Board shall recommend for adoption by the shareholders of the Company, no later than the first annual meeting of shareholders following the end of the Company Buy Back Period (or such earlier time as the Total Ownership Percentage of the Investor Group shall equal the Ownership Cap), and no less frequently than each annual meeting thereafter until the Reclassification Amendment (as hereinafter defined) is adopted, an amendment (the "Reclassification Amendment") to the Articles of Incorporation of the Company providing for, and only for, (a) the authorization of a new class of common stock (in addition to the Common Stock) to be designated as the Class B Common Stock and consisting of the same number of authorized shares as the number of authorized shares of Series A Convertible Preferred Stock and which Class B Common Stock shall, as to each share, have the identical rights, powers and preferences (including as to dividends, voting rights, liquidation preference, restriction on transfer, adjustment and conversion) as pertains to each share of Series A Convertible Preferred Stock and (b) upon the adoption and effectiveness of the Reclassification Amendment, the automatic reclassification of each outstanding share of Series A Convertible Preferred Stock into one validly issued and fully paid share of Class B Common Stock (whereupon, all references to the Series A Convertible Preferred Stock in this Agreement shall thereafter mean and refer to the corresponding number of shares of Class B Common Stock). In connection with each meeting of the Company's shareholders at which the Reclassification Amendment is submitted for approval of the Company's shareholders, the Company shall use its commercially reasonable efforts to cause the adoption of the Reclassification Amendment by the shareholders of the Company, including soliciting proxies in favor of the adoption of the Reclassification Amendment by the shareholders of the Company. If, after the date of the fifth annual meeting of the Company's shareholders following the end of the Company Buy-Back Period, (x) the Reclassification Amendment shall not have been approved by the shareholders of the Company, and (y) the Investor shall have been advised in writing by its regular independent public accounting firm that unless the shares of Series A Convertible Preferred Stock owned by the Investor Group are converted into Common Stock in accordance with this Section 8.8, such firm cannot deliver its opinion that the Investor is entitled to account for its investment in the Company on the full equity accounting method (including earnings and investments) (other than, in any such case referred to in this clause (y), as a result of the failure of the Investor to fully exercise its rights under this Agreement, including its rights to acquire Voting Securities hereunder (but assuming for purposes hereof that the Investor owned Voting Securities equal to the then applicable Ownership Cap) or to designate Investor Nominees for election or appointment to the Board or to have such Board members participate as Board members in the management of the business and affairs of the Company), then, at the written request of the Investor, both parties will use commercially reasonable efforts to seek approval of the Commission or its staff that would permit the Investor to account (or, if such accounting has theretofore been allowed, to permit the Investor to continue to account) for its investment in the Company on the full equity accounting method (including earnings and investments) without the conversion of the Series A Convertible Preferred Stock owned by the Investor into Common Stock on the terms set forth below. If the Commission or its staff shall not have approved such accounting within six months after the Investor's written request referred to above, the Investor shall have the option (the "Optional Conversion Right"), which shall be exercisable by the Investor by delivering written notice to the Company within 30 days after the end of such six month period, to convert all of the Series A Convertible Preferred Stock owned by the Investor Group into Common Stock as set forth in Section 6(a)(iii) of the Certificate of Designation for the Series A Convertible Preferred Stock. All Common Stock issued to the Investor Group upon exercise of the Optional Conversion Right, together with all other shares of Common Stock thereafter acquired by the Investor pursuant to the Agreement, shall immediately upon each acquisition thereof, be deposited by the Investor Group into a permanent voting trust in accordance with applicable Law (the "Voting Trust") pursuant to a perpetual voting trust agreement in a form reasonably satisfactory to the Company, and, with respect to matters contained therein which are not specifically contemplated hereby, in a form reasonably satisfactory to the Investor, and with an independent trust company, commercial bank or other financial institution reasonably satisfactory to the Company and the Investor designated as voting trustee (the "Voting Trustee"). Pursuant to such Voting Trust, the aggregate number of Votes as the Investor Group would from time to time have been able to vote if the Investor had not exercised the Optional Conversion Right and continued to own the Series A Convertible Preferred Stock will be voted by the Voting Trustee at the direction of the Investor consistent with how such Votes could have been voted under this Agreement if the Optional Conversion Right had not been exercised, and the balance of the Votes attributable to all shares of Common Stock deposited in the Voting Trust shall be voted by the Voting Trustee pro rata in accordance with the votes of all shareholders of the Company other than the members of the Investor Group and the Other Investor Affiliates. The Voting Trust shall provide for the release and delivery to the Investor of shares of Common Stock, free of the restrictions of the Voting Trust, and the termination of the provisions thereof with respect to shares of Common Stock, upon transfer of such shares by the Investor to unaffiliated parties in accordance with the provisions of this Agreement. The parties hereto hereby agree to enter into arrangements to permit the timely tender into a tender or exchange offer of Common Stock subject to the Voting Trust in a manner similar to that applied to the Series A Convertible Preferred Stock. There shall not be any obligation to deliver any shares of Common Stock to the Voting Trust, and the Voting Trust shall immediately terminate if it has already been established, at such time as all outstanding shares of Common Stock (or such securities as the Common Stock has been converted into) has the same votes per share if any, as all other such shares or other securities, without any "time phased" voting. Section 8.9. HSR Act Filings. Notwithstanding anything to the contrary contained in this Agreement, the Investor Group shall be entitled to make any HSR Act filing in connection with the Investor Group's intention to acquire or its acquisition of Common Securities pursuant to Section 6.1(A)(a)(iii) or Section 6.7 of this Agreement. The Company shall use its reasonable best efforts to make all HSR filings required to be made by it and to cause any waiting period under HSR Act related to the Investor's and its filings to expire as soon as practicable. SECTION 9 CONDITIONS Section 9.1. Conditions of Investor's Obligation. The obligation of the Investor to purchase and pay for the Shares at the Closing is subject to satisfaction or waiver of each of the following conditions precedent: (a) Representations and Warranties; Covenants. The representations and warranties of the Company contained in this Agreement shall be true and correct in all respects on and as of the date of this Agreement. The Company shall have in all material respects performed all obligations and complied with all agreements, undertakings, covenants and conditions required hereunder to be performed by it at or prior to the Closing. (b) Compliance with Laws; No Adverse Action or Decision. No Governmental Entity of competent jurisdiction shall have issued any Order restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the Transaction Agreements. No action, suit or other proceeding by any Governmental Entity shall have been instituted that seeks to restrain, enjoin, prohibit or otherwise make illegal the performance of any of the Transaction Agreements or the consummation of the transactions contemplated hereby or thereby. (c) Consents. All Regulatory Approvals from any Governmental Entity and all consents, waivers or approvals from any other Person required for or in connection with the execution and delivery of the Transaction Agreements and the consummation at the Closing by the parties hereto and thereto of the transactions contemplated hereby and thereby shall have been obtained or made on terms reasonably satisfactory to the Investor, except for the failures to obtain such Regulatory Approvals, consents, waivers and approvals which would not reasonably be expected to have a Material Adverse Effect, and the waiting period specified under the HSR Act shall have expired or been terminated. (d) Transaction Agreements. The Investor shall have received counterpart originals or certified or other copies of the Transaction Agreements. (e) Registration Rights Agreements. The Investor shall have received a fully executed counterpart of the Registration Rights Agreement and the Registration Rights Agreement shall be in full force and effect. (f) Consummation of Certain Transactions. The closing under the Joint Venture Agreement, and all transactions to be consummated in connection therewith, shall have occurred. Section 9.2. Conditions of the Company's Obligation. The obligation of the Company to issue and sell the Shares at the Closing is subject to satisfaction or waiver of each of the following conditions precedent: (a) Representations and Warranties; Covenants. The representations and warranties of the Investor contained in this Agreement shall be true and correct on and as of the date of this Agreement. The Investor shall have in all material respects performed all obligations and complied with all agreements, undertakings, covenants and conditions required hereunder to be performed by it at or prior to the Closing. (b) Compliance with Laws; No Adverse Action or Decision. No Governmental Entity of competent jurisdiction shall have issued any Order restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the Transaction Agreements. No action, suit or other proceeding by any Governmental Entity shall have been instituted that seeks to restrain, enjoin, prohibit or otherwise make illegal the performance of any of the Transaction Agreements or the consummation of the transactions contemplated hereby or thereby. (c) Consents. All Regulatory Approvals from any Governmental Entity and all consents, waivers or approvals required for or in connection with the execution and delivery of the Transaction Agreements and the consummation at Closing by the parties hereto and thereto on terms reasonably satisfactory to the Company, of the transactions contemplated hereby and thereby shall have been obtained or made, except for the failures to obtain such Regulatory Approvals, consents, waivers and approvals which would not reasonably be expected to have a material adverse effect on the ability of the Investor to consummate the transactions contemplated by the Transaction Agreements, and the waiting period specified under the HSR Act shall have expired or been terminated. (d) Transaction Agreements. The Company shall have received all counterpart originals or certified or other copies of the Transaction Agreements. (e) Consummation of Certain Transactions. The closing under the Joint Venture Agreement, and all transactions to be consummated in connection therewith, shall have occurred. SECTION 10 TERMINATION Section 10.1. Termination. (a) Subject to Section 10.2 hereof, this Agreement may be terminated by notice in writing at any time prior to the Closing by either the Investor or the Company if: (i) the Closing shall not have occurred on or before August 6, 1998; or (ii) the Company and the Investor so mutually agree in writing. (b) Subject to Section 10.2 hereof, and without limiting any liability of the Company or the Investor for any breach of its obligations hereunder, this Agreement may be terminated by notice in writing at any time prior to the Closing (x) by the Investor if a Change in Control Transaction or a Competing Investment shall have been consummated or if the Company has entered into a binding agreement or a letter of intent with respect thereto or (y) by the Company if a Change in Control Transaction shall have been consummated or if the Company shall have entered into a binding agreement with respect thereto. (c) Subject to Section 10.2 hereof, if the Closing shall occur, this Agreement may be terminated by one year's prior notice in writing by either the Investor or the Company which notice may be delivered at any time after the 15th anniversary of the date of this Agreement. Section 10.2. Effect of Termination. If this Agreement is terminated in accordance with Section 10.1 hereof, this Agreement shall become null and void and of no further force and effect except that (i) the terms and provisions of this Section 10.2, Section 8.1(a) and Section 11.1 (and, in the event this Agreement was terminated in accordance with Section 10.1(c), then Section 6.2(d) and Section 6.3(f)) shall remain in full force and effect, (ii) so long as any member of the Investor Group shall own any Series A Convertible Preferred Stock, the provisions of Section 6.2(b) shall remain in force and effect, (iii) any termination of this Agreement shall not relieve any party hereto from any liability for any breach of its obligations hereunder, regardless of whether such party terminated this Agreement pursuant to Section 10.1(a)(i); and (iv) subject to the proviso to the first sentence in Section 8.2(b) hereof, in the event that a Trigger Event or a Release Event shall have occurred, prior to such termination, the provisions of Section 6.1(A), Section 6.2(e), Section 6.3(g), Section 6.6 (to the extent with respect to a Trigger Event, as provided in Section 6.10), Section 6.7(b) through (e) and Section 6.8 shall remain in full force and effect. SECTION 11 MISCELLANEOUS Section 11.1. Fees and Expenses. Each party shall bear its own expenses, including the fees and expenses of any Representatives engaged by it, incurred in connection with the Transaction Agreements and the transactions contemplated hereby and thereby. Section 11.2. Survival. The representations, warranties, covenants and agreements contained in or made pursuant to this Agreement shall expire as of the consummation of the transactions to be completed at the Closing, except (i) for the representations and warranties contained in Sections 3.1, 3.2, 3.4(c), 4.1 and 4.2 which shall survive without limitation, and (ii) the covenants and agreements contained in or made pursuant to this Agreement which by their terms are to survive after the Closing, which shall survive for the period specified therein, provided, that if a claim or notice is given with respect to any representation, warranty, covenant or agreement prior to any such expiration date, the claim with respect to such representation, warranty, covenant or agreement shall continue indefinitely until such claim is finally resolved. Section 11.3. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given, if delivered personally, by telecopier or sent by first class mail, postage prepaid, as follows: (a) If to the Company, to: Pioneer Hi-Bred International, Inc, 700 Capital Square Des Moines, Iowa 50309 Attention: General Counsel Telephone: 515-248-4800 Telecopier: 515-248-4844 With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10044 Attention: Stephen Fraidin, Esq. Telephone: 212-859-8000 Telecopier: 212-859-4000 (b) If to the Investor, to: E.I. du Pont de Nemours and Company Agricultural Products Barley Mill Plaza #38 P.O. Box 80038 Wilmington, DE 19880-0038 Attention: William F. Kirk, Vice President and General Manager Telephone: 302-774-1000 Telecopier: 302-992-6184 With a copy to: Skadden, Arps, Slate, Meagher & Flom, LLP 919 Third Avenue New York, New York 10022 Attention: Lou R. Kling, Esq. Telephone: 212-735-3000 Telecopier: 212-735-2000 (c) If to any other holder of capital stock of the Company, addressed to such holder at the address of such holder in the record books of the Company; or to such other address or addresses as shall be designated in writing. All notices shall be effective when received. Section 11.4. Entire Agreement; Amendment. This Agreement and the documents described herein or attached or delivered pursuant hereto (including, without limitation, the Registration Rights Agreement and the Rights Agreement Amendment) and the Confidentiality Agreement set forth the entire agreement between the parties hereto with respect to the matters provided herein and therein. Any provision of this Agreement may be amended or modified in whole or in part at any time by an agreement in writing among the parties hereto executed in the same manner as this Agreement. No failure on the part of any party to exercise, and no delay in exercising, any right shall operate as waiver thereof, nor shall any single or partial exercise by either party of any right preclude any other or future exercise thereof or the exercise of any other right. Section 11.5. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same document. Section 11.6. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and interpreted, in accordance with, the laws of the State of Iowa applicable to contracts made and to be performed in that state. The parties hereto irrevocably (a) submit to the exclusive personal jurisdiction of any state or federal court in the State of Illinois in any suit, action or other legal proceeding relating to this Agreement; (b) agree that all claims in respect of any such suit, action or other legal proceeding may be heard and determined in, and enforced in and by, any such court; and (c) waive any objection that they may now or hereafter have to venue in any such court or that such court is an inconvenient forum. Section 11.7. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the Company's successors and assigns. Section 11.8. Assignment. Except as otherwise expressly provided in the last sentence of Section 6.9 hereof, neither this Agreement nor any rights or obligations hereunder shall be assignable. Section 11.9. Remedies; Waiver. To the extent permitted by Law, all rights and remedies existing under this Agreement and any related agreements or documents are cumulative to, and are exclusive of, any rights or remedies otherwise available under applicable Law. No failure on the part of any party to exercise, or delay in exercising, any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. Section 11.10. Specific Performance. Each party hereto acknowledges that, in view of the uniqueness of the transactions contemplated by this Agreement, the other party would not have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms. Each party therefore agrees that the other party shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity. Section 11.11. Severability. If any provision of this Agreement is determined to be invalid, illegal, or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect provided that the economic and legal substance of the transactions contemplated is not affected in any manner materially adverse to any party. In the event of any such determination, the parties agree to negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intent and purpose hereof. To the extent permitted by law, the parties hereby to the same extent waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect. IN WITNESS WHEREOF, this Agreement has been executed on behalf of the parties hereto by their respective duly authorized officers, all as of the date first above written. PIONEER HI-BRED INTERNATIONAL, INC. By: /s/ Charles S. Johnson ------------------------------- Name: Charles S. Johnson Title: President and Chief Executive Officer E.I. DU PONT DE NEMOURS AND COMPANY By: /s/ William F. Kirk ---------------------------------------- Name: Title: EXHIBIT A Form of Registration Rights Agreement EXHIBIT B Form of Rights Agreement Amendment EXHIBIT C Form of Certificate of Designation EXHIBIT D Initial Investor Nominee Notice EXHIBIT A Form of Registration Rights Agreement REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of ____________, 1997 between Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), and E.I. du Pont de Nemours and Company, a Delaware corporation (the "Holder"). RECITALS WHEREAS, the Holder has purchased from the Company pursuant to an Investment Agreement, dated as of _____________ ___, 1997 (the "Investment Agreement"), between the Company and the Holder, shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Convertible Preferred Stock"); WHEREAS, the parties hereto desire to set forth the Holder's rights and the Company's obligations with respect to the registration of the Registrable Securities pursuant to the Securities Act; and WHEREAS, the execution and delivery of this Agreement by the parties hereto is a condition to the obligations of each of the Company and the Holder under the Investment Agreement; NOW, THEREFORE, in consideration of the covenants and agreements of the Holder and the Company contained herein and in the Investment Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions and Usage. --------------------- As used in this Agreement: 1.1. Definitions. ----------- "Board" shall mean the Board of Directors of the Company. "Class B Common Stock" shall mean the Class B Common Stock of the Company, if and when authorized and issued to the Holder. "Closing" shall mean the closing for the purchase of the Series A Convertible Preferred Stock pursuant to the Investment Agreement. "Closing Date" shall mean the date of the Closing. "Commission" shall mean the Securities and Exchange Commission. "Common Stock" shall mean the Common Stock, par value $1.00 per share, of the Company. "Continuously Effective," with respect to a specified registration statement, shall mean that such registration statement shall not cease to be effective and available for transfers of Registrable Securities thereunder for longer than either (i) any ten (10) consecutive business days, or (ii) an aggregate of fifteen (15) business days during the period specified in the relevant provision of this Agreement. "Demand Registration" shall have the meaning set forth in Section 2.1(i). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Investment Agreement" shall have the meaning set forth in the first Recital to this Agreement. "Investor Group" shall have the meaning specified in the Investment Agreement. "Permitted Holder Group Transferee" shall mean any wholly owned (other than directors' qualifying shares) United States subsidiary of the Holder which, at the time of determination, owns shares of Series A Convertible Preferred Stock or Class B Common Stock acquired from the Holder during the term of the Investment Agreement and in accordance with terms thereof. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. "Piggyback Registration" shall have the meaning set forth in Section 3. "Register," "registered," and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registrable Securities" shall mean the Common Stock issuable upon conversion of the Series A Convertible Preferred Stock or Class B Common Stock (which conversion shall be deemed to occur upon the sale of such shares of Series A Convertible Preferred Stock or Class B Common Stock to the underwriter or underwriters in connection with any Registration hereunder) which Series A Convertible Preferred Stock or Class B Common Stock the Holder, or any Permitted Holder Group Transferee acquires in accordance with the Investment Agreement and which is owned by the Holder or such Permitted Holder Group Transferee on the date of determination; provided, however, that Registrable Securities shall not include any security of the Company acquired by the Holder or any member of the Investor Group other than in accordance with or in violation of the terms of the Investment Agreement. In the event that the Common Stock is converted into any other security pursuant to any merger, consolidation, recapitalization, liquidation or other similar transaction, and if any securities are distributed in respect of any Registrable Securities, then all of such securities shall be considered Registrable Securities for purposes of this Agreement. "Registration Expenses" shall have the meaning set forth in Section 7.1. "Securities Act" shall mean the Securities Act of 1933, as amended. "Shelf Registration" means a Registration Statement effected pursuant to Section 4. "Shelf Registration Event" means the receipt by the Company from the Investor at any time following the occurrence of a Surviving Change in Control Transaction, a Release Event or a Trigger Event (each, as defined in the Investment Agreement) of a written request to file a shelf registration statement in accordance with Section 4 provided that in no event may the Investor give such notice at any time that the Total Ownership Percentage (or percentage ownership of the common equity of any other company or entity surviving a Surviving Change in Control Transaction) of the Investor Group is 10% or more. In the event of a Surviving Change in Control Transaction, or in the event the Company or other company or entity that survives a Surviving Change in Control Transaction determines that the provisions of Section 8.2(b)(i) of the Investment Agreement will not apply to the Company or such surviving company or entity, references herein to the Company shall apply to the Company or other entity surviving such Change in Control Transaction (the "Standstill Successor") but in the event of any other Change in Control Transaction, the provisions of Section 4 herein shall terminate. "Shelf Registration Statement" means a Registration Statement of the Company filed with the Commission or Form S-3 (or any successor form) for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the Commission) covering some or all of the Registrable Securities, as applicable. "Transfer" shall mean and include the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security) (and correlative words shall have correlative meanings); provided, however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a "Transfer." "Underwriters' Representative" shall mean the managing underwriter, or, in the case of a co-managed underwriting, the managing underwriter designated as the Underwriters' Representative by the co-managers. "Violation" shall have the meaning set forth in Section 8.1. 1.2. Usage. ----- (i) References to a Person are also references to its successors in interest (by means of merger, consolidation or sale of all or substantially all the assets of such Person or otherwise, as the case may be) and permitted assigns. (ii) References to a document are to it as amended, waived and otherwise modified from time to time and references to a statute or other governmental rule are to it as amended and otherwise modified from time to time (and references to any provision thereof shall include references to any successor provision). (iii) References to Sections, unless the context otherwise requires. (iv) The definitions set forth herein are equally applicable both to the singular and plural forms and the feminine, masculine and neuter forms of the terms defined. (v) The term "including" and correlative terms shall be deemed to be followed by "without limitation" whether or not followed by such words or words of like import. (vi) The term "hereof" and similar terms refer to this Agreement as a whole. (vii) The "date of" any notice or request given pursuant to this Agreement shall be determined in accordance with Section 12.2. Section 2. Demand Registration. ------------------- 2.1. (i) At any time after the third anniversary of the Closing Date, and subject to compliance by the Holder with the provisions of Section 6 of the Investment Agreement, if the Holder shall make a written request to the Company, the Company shall cause to be filed with the Commission a registration statement, including all exhibits required by the Commission to be filed therewith (a "Demand Registration Statement") meeting the requirements of the Securities Act for an underwritten public offering of Registrable Securities (a "Demand Registration"), and the Holder shall be entitled to have included therein all or such number of Registrable Securities as the Holder shall request in writing; provided, however, that no request may be made pursuant to this Section 2.1 if within twelve (12) months prior to the date of such request a Demand Registration Statement pursuant to this Section 2.1 shall have been declared effective by the Commission. Any request made pursuant to this Section 2.1 shall be addressed to the attention of the Secretary of the Company, and shall specify the number of Registrable Securities to be registered (which shall be not less than 1,500,000 shares, provided, however that the Holder may request registration of any amount of Registrable Securities where the Holder requests registration (i) of all of its remaining Registrable Securities, or (ii) pursuant to its last Demand Registration right), the intended method of distribution thereof and that the request is for a Demand Registration pursuant to this Section 2.1(i). (ii) The Company shall be entitled to postpone for up to 180 days, but in no event more than 180 days during any 24 month period and no sooner than 180 days after the end of any prior postponement under this Section 2.1(ii) or any holdback period described in the first sentence of Section 9.1 the filing of any Demand Registration Statement otherwise required to be prepared and filed pursuant to this Section 2.1 (or delay seeking effectiveness of a Demand Registration Statement which has been filed), if the Board determines, in its reasonable good faith judgment, that such Demand Registration would materially interfere with, or require premature disclosure of, any material financing, acquisition, reorganization or other material transaction involving the Company or any of its subsidiaries and the Company promptly gives the Holder notice of such determination. 2.2. Following receipt of a request for a Demand Registration, the Company shall: (i) File the Demand Registration Statement with the Commission as promptly as reasonably practicable, and, subject to Section 2.1(ii), shall use the Company's commercially reasonable efforts to have the Demand Registration Statement declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering. (ii) Use the Company's commercially reasonable efforts to keep the relevant registration statement Continuously Effective, if a Demand Registration Statement, for up to 60 days or until such earlier date as of which all the Registrable Securities under the Demand Registration Statement shall have been disposed of in the manner described in the Registration Statement, or such longer period (but in no event longer than 120 days) as in the judgment of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer in accordance with plan of distribution included in such Demand Registration Statement. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration Statement pursuant to this Section 2 is delayed or suspended or filing of the Demand Registration Statement or seeking effectiveness thereof is postponed as permitted by Section 2.1(ii), the commencement of the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. 2.3. The Company shall be obligated to effect not more than six Demand Registrations, subject to the provisions of Section 4.1. For purposes of the preceding sentence, a Demand Registration shall not be deemed to have been effected (i) unless a Demand Registration Statement with respect thereto has become effective, (ii) if after such Demand Registration Statement has become effective, such Demand Registration Statement or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Holder and such interference is not thereafter eliminated, or (iii) if the conditions to closing specified in the underwriting agreement entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Holder. If the Company shall have complied with its obligations under this Agreement, a right to demand a registration pursuant to this Section 2 shall be deemed to have been satisfied upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been distributed pursuant to the Registration Statement, and (y) the date as of which such Demand Registration shall have been Continuously Effective for a 60-day period or other period specified in 2.2(ii) following the effectiveness of such Demand Registration Statement, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. 2.4. A registration pursuant to this Section 2 shall be on such appropriate registration form of the Commission as shall (i) be selected by the Company and be reasonably acceptable to the Holder, and (ii) permit the distribution of the Registrable Securities in accordance with the intended method or methods of distribution specified in the request pursuant to Section 2.1(i). 2.5. The Holder shall have the right to select the underwriter or underwriters and manager or managers to administer such offering; provided, however, that each Person so selected shall be acceptable to the Company in its reasonable judgment. 2.6. The Company may not include in a Demand Registration pursuant to Section 2.1 shares of Common Stock for the account of the Company or any subsidiary of the Company, but may include shares of Common Stock for the account of any other person or entity who holds shares of Common Stock; provided, however, that if the Underwriters' Representative of any offering described in this Section 2.6 shall have informed the Company in writing that in its opinion the total number of shares of Common Stock that the Holder, and any other persons or entities desiring to participate in such registration intend to include in such offering is such as to materially and adversely affect the success or pricing of such offering, then the Company shall include in such Demand Registration all Registrable Securities requested to be included in such registration by the Holder together with up to such additional number of shares of Common Stock that any other persons or entities entitled to participate in such registration desire to include in such registration and that the Underwriters' Representative has informed the Company may be included in such registration without adversely affecting the success of pricing of such offering; provided that the number of shares of Common Stock to be offered for the account of all such other persons and entities participating in such registration shall be reduced or limited pro rata in proportion to the respective number of shares of Common Stock requested to be registered by such persons and entities to the extent necessary to reduce the respective total number of shares of Common Stock requested to be included in such offering to the number of shares of Common Stock recommended by such Underwriters' Representative. Section 3. Piggyback Registration. ---------------------- 3.1. If at any time after the third anniversary of the Closing Date, the Company proposes to register (including for this purpose a registration effected by the Company for the account of the Company or shareholders of the Company other than the Holder) shares of Common Stock or securities convertible or exercisable into shares of Common Stock under the Securities Act in connection with the public offering solely for cash on Form S- 1, S-2 or S-3 (or any replacement or successor forms) as soon as practicable (but in not event less than ten (10) business days prior to the date of filing any related Registration Statement), the Company shall promptly give the Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of the Holder given within 10 days following the date of such notice, the Company shall use commercially reasonable efforts to cause to be included in such registration statement (a "Piggyback Registration Statement," the Shelf Registration Statement, the Demand Registration Statement and Piggyback Registration Statement are hereinafter called collectively, "Registration Statements" and, individually, a "Registration Statement"), and use its commercially reasonable efforts to cause to be registered under the Securities Act all the Registrable Securities that the Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any Piggyback Registration Statement for any offering referred to in this Section 3 without any obligation or liability to the Holder; provided, that the Company shall promptly notify the Holder in writing of any such action. 3.2. If the Piggyback Registration Statement relates to an underwritten offering of Common Stock or securities convertible or exercisable into shares of Common Stock and if the Underwriters' Representative of such underwritten offering shall inform the Company that in its opinion the inclusion in such underwritten distribution of all or a specified number of such Registrable Securities or of any other shares of Common Stock requested to be included would materially and adversely effect the success or pricing of such offering or of such distribution by the underwriters, then the Company may, upon written notice to the Holder, exclude from such underwritten offering (i) in the event the Piggyback Registration Statement relates to an offering for the account of the Company, shares of Common Stock requested to be included by any persons or entities other than the Company, pro rata in proportion to the respective number of shares of Common Stock requested to be included by such persons and entities, to the extent necessary to reduce the respective total number of shares of Common Stock requested to be included in such offering to the number of shares of Common Stock recommended by such Underwriters' Representative and (ii) in the event the Piggyback Registration Statement relates to an offering for the account of any person or entity other than the Company, (A) first, shares of Common Stock requested to be registered for the account of any persons or entities other than the person or entity making the initial request for such registration (the "Requesting Party"), pro rata in proportion to the respective number of shares of Common Stock requested to be registered by such other persons and entities to the extent necessary to reduce the respective total number of shares of Common Stock requested to be included in such offering to the number of shares of Common Stock recommended by such Underwriters' Representative, (B) second, to the extent reduction as a result of clause (A) is insufficient, shares of Common Stock requested to be registered for the account of the Company, and (C) third, to the extent reduction as a result of clauses (A) and (B) is insufficient, shares of Common Stock requested to be registered for the account of the Requesting Party. The Company may decline to file a Piggyback Registration Statement referred to in this Section 3.2 after giving notice to the Holder, or withdraw such a Piggyback Registration Statement after filing, or otherwise abandon any such proposed underwritten offering; provided that the Company shall promptly notify the Holder in writing of any such action. 3.3. The Holder may not participate in any underwritten offering under Section 2.1 or Section 3.1 hereof unless it completes and executes all customary questionnaires, powers of attorney, custody agreements, underwriting agreements, and other customary documents required under the customary terms of such underwriting arrangements. In connection with any underwritten offering under Section 2.1, 3.1 or 4.1, each of the Holder and the Company shall be a party to the underwriting agreement with the underwriters and may be required to make certain customary representations and warranties (in the case of the Holder only as to the Registrable Securities being sold by the Holder and any Permitted Group Transferee in such underwritten offering and the plan of distribution thereof) and provide certain customary indemnifications for the benefit of the underwriters. 3.4. The Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 3. Section 4. Shelf Registration. ------------------ 4.1. Upon the occurrence of a Shelf Registration Event, the Company shall file with the Commission as promptly as practicable, but in no event later than 20 business days after the Shelf Registration Event, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holder and the Permitted Holder Group Transferees from time to time in accordance with the methods of distribution elected by the Holder and set forth in such Shelf Registration Statement and, thereafter, shall use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act as promptly as practicable. If, on the occurrence of a Shelf Registration Event, the Company does not qualify to file a Shelf Registration Statement, then the Holder shall be entitled to one additional Demand Registration pursuant to Section 3, but at any time thereafter that the Company does so qualify, it shall, as promptly as practicable, file a Shelf Registration Statement. 4.2. The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be usable by the Holder and the Permitted Holder Group Transferees for a period ending on the date twenty-four months (the "Shelf Maintenance Period") after the occurrence of the Shelf Registration Event (such date to be extended by the aggregate number of days any Shelf Registration Statement shall be subject to a Shelf Suspension) or such shorter period as shall terminate when all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (but in no event prior to the applicable period referred to in Section 4(3) of the Act and Rule 174 thereunder) (such period being the "Shelf Period"). 4.3. The Company shall be entitled to postpone the filing of any Shelf Registration Statement otherwise required to be prepared and filed pursuant to this Section 4 (or delay seeking, or maintaining continued, effectiveness of a Shelf Registration Statement that has been filed) if the Board determines in its reasonable good faith judgment, that such Shelf Registration would materially interfere with, or require premature disclosure of, any material financing, acquisition, reorganization or other material transaction involving the Company or any of its subsidiaries and the Company gives the Holder notice of such determination (a "Shelf Suspension"); provided, however, that the Company shall not have postponed pursuant to this Section 4.3, the commencement of the filing of, delay the seeking the effectiveness of, or suspend the use of any Shelf Registration Statement otherwise required to be prepared and filed pursuant to this Section 4, (i) more than 180 days during the Shelf Maintenance Period, (ii) for a period exceeding 180 days on any one occasion during or (iii) sooner than 90 days after the end of any prior Shelf Suspension and provided, further, that the Shelf Maintenance Period shall be extended by the aggregate number of days of each Shelf Suspension. In the case of a Shelf Suspension, the notice required above shall request the Holder to suspend any sale or purchase, or offer to sell or purchase the Registrable Securities, and to suspend any sale or purchase, or offer to sell or purchase the Registrable Securities, and to suspend use of the prospectus related to the Shelf Registration in connection with any such sale or purchase or offer to sell or purchase. The Company shall immediately notify the Holder upon the termination of any Shelf Suspension, shall amend or supplement the related prospectus, if necessary, so it does not contain any untrue statement or omission therein and shall furnish to the holders such numbers of copies of the prospectus as so amended or supplemental as the Holder may reasonably request. The Holder will advise the Company by at least 5 business days' prior written notice if the Holder intends to make any sale under the Shelf Registration Statement that would constitute a "distribution" for purposes of Regulation M under the Securities Act. 4.4. The Holder shall have the right to effect an underwritten offering covering not fewer than 1,500,000 shares pursuant to a Shelf Registration (in which case each such underwritten offering shall constitute a Demand Registration for purposes of Section 2.3) and to select the underwriter or underwriters and manager or managers to administer any offering pursuant to a Shelf Registration; provided, however, that each Person so selected shall be acceptable to the Company in its reasonable judgment. Section 5. Registration Procedures. ----------------------- Whenever required under Section 2, Section 3 or Section 4 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: 5.1. Prepare and file with the Commission a Registration Statement, including all exhibits required by the Commission to be filed therewith, with respect to such Registrable Securities and, subject to Section 2.1 and Section 4.3, use the Company's commercially reasonable efforts to cause such Registration Statement to become effective; provided, however, that before filing a Registration Statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the Registration Statement and prior to effectiveness thereof, the Company shall furnish to counsel for the Holder and underwriters, copies of all such documents in the form substantially as proposed to be filed with the Commission at a reasonable time prior to filing for review and comment by such counsel. 5.2. Prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the distribution of all securities covered by such Registration Statement and as may be reasonably requested by the Holder or necessary to keep such Registration Statement effective pursuant to Section 2.2(i) and 4.2. If the registration is for an underwritten offering, the Company shall amend the Registration Statement or supplement the prospectus whenever required by the terms of the underwriting agreement. Pending such amendment or supplement the Holder and all other members of the Investor Group, upon written notice by the Company, shall cease making offers or Transfers of Registrable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a Registration Statement subject to, or required by, this Agreement remain unsold at the end of the period during which the Company is obligated to use its commercially reasonable efforts to maintain the effectiveness of such Registration Statement, the Company may file a post-effective amendment to the Registration Statement for the purpose of removing such Securities from registered status. 5.3. Notify the Holder and the Underwriters' Representative and (if requested) confirm such advise in writing, as soon as practicable after notice thereof is received by the Company (i) when the Registration Statement or any amendment thereto has been filed or becomes effective, the prospectus or any amendment or supplement to the prospectus included therein has been filed, and, to furnish the Holder and the underwriters with copies thereof, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information, (iii) if at any time the representations and warranties of the Company contemplated by Section 3.3 cease to be true and correct, and (iv) of the receipt by the Company of any notification with respect to the suspension or qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. 5.4. Promptly notify the Holder and the Underwriters' Representative, if any, at any time when a prospectus relating thereto is required to be delivered under the Securities Act when the Company becomes aware of the happening of any event as a result of which the prospectus included in any Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of the prospectus and any preliminary prospectus, in light of the circumstances under which they were made) when such prospectus was delivered not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement the prospectus in order to comply with the Securities Act and, in either case as promptly as practicable thereafter, prepare and file with the Commission, and furnish without charge to the Holder and the Underwriters' Representative, if any, a supplement or amendment to such prospectus which will correct such statement or omission or effect such compliance. 5.5. If requested by the Underwriters' Representative or the Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as the Underwriters' Representative and the Holder agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment. 5.6. Cooperate with the Holder and the Underwriters' Representatives to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denomination and registered in such names as the Underwriters' Representative may request at least two business days prior to the sale of Registrable Securities to the underwriters. 5.7. Cooperate with the Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"), and otherwise use its best efforts to comply with the rules, by-laws and regulations of the NASD as they apply to the registration. 5.8. Furnish to the Holder such numbers of copies of the Registration Statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as the Holder may reasonably request in order to facilitate the distribution of Registrable Securities owned by the Holder. 5.9. Use the Company's commercially reasonable efforts (i) to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such states or jurisdictions as shall be reasonably requested by the Underwriters' Representative, and (ii) to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 5.10. In the event of any underwritten offering, enter into and perform the Company's obligations under an underwriting agreement (including indemnification and contribution obligations of underwriters or agents in the form set forth in Section 8), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Holder, and the Underwriters' Representative for such offering in the marketing, and customary selling efforts relating to the Registrable Securities, including participating in customary "road show" presentations as may be reasonably requested by the Underwriters' Representative. 5.11. Promptly notify the Holder of any stop order issued or threatened to be issued by the Commission in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. 5.12. Make available for inspection by the Holder, any underwriter participating in such offering and the representatives of the Holder and such underwriter all financial and other information as shall be reasonably requested by them, and provide the Holder, any underwriter participating in such offering and the representatives of the Holder and such underwriter the reasonable opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibilities under the Securities Act; provided, however, that information that the Company determines, in its reasonable and good faith judgment, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company and the Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. 5.13. Use the Company's commercially reasonable efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company addressed to the Holder, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Holder. The Company shall furnish to the Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. 5.14. Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement. 5.15. Use commercially reasonable efforts to cause the Registrable Securities covered by such Registration Statement to continue to be listed on all exchanges where the Company's Common Stock is listed and to be Registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Holder to consummate the distribution of the Registrable Securities which are included in such registration. 5.16. Take such other actions as are reasonably required in order to expedite or facilitate the registration of Registrable Securities included in such registration. Section 6. Holder's Obligations. -------------------- 6.1 It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities which are included in such registration that the Holder shall furnish to the Company such information regarding the Holder and any participating Permitted Holder Group Transferee, the number of the Registrable Securities owned by it and any participating Permitted Holder Group Transferee, and the intended method of distribution of such Registrable Securities as shall be required to effect the registration of such Registrable Securities, and to cooperate with the Company in preparing such registration. 6.2 The Holder agrees, and each Permitted Holder Group Transferee shall be deemed by acceptance of Registrable Securities to have agreed, that, upon receipt of any notice of the Company pursuant to clauses (ii) through (iv) of Section 5.3 and Section 5.4 hereof, the Holder and each Permitted Holder Group Transferee will discontinue disposition of such Registrable Securities covered by such Registration Statement until such Holder's or Permitted Holder Group Transferee's receipt of copies of the supplemental or amended prospectus contemplated by Section 5.4 hereof, or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under clauses (ii) through (iv) of Section 5.3 or Section 5.4 hereof during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 5.4 (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). Section 7. Expenses of Registration. Expenses in connection with registrations pursuant to this Agreement shall be allocated and paid as follows: 7.1. With respect to the first two Demand Registrations effected pursuant to Section 2 hereof, the Company shall bear and pay, and with respect to each additional Demand Registration, the Holder shall bear and pay, all expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration, including all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, and the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance (the "Registration Expenses"), but in no event shall the Company bear underwriting discounts and commissions relating to Registrable Securities or fees and expenses of Holder's counsel (which shall be paid by the Holder) and provided that the Company shall not be required to pay for any expenses of any registration begun pursuant to Section 2 if the registration is subsequently withdrawn at the request of the Holder (in which case the Holder shall bear such expense), other than by reason of failure of the Company to comply with Section 5.12 or if the proviso of such section becomes applicable unless the Holder agrees that such withdrawn registration shall constitute one of the Demand Registrations under Section 2 hereof. 7.2. The Company shall bear and pay all Registration Expenses incurred in connection with any Shelf Registrations pursuant to Section 4 and any Piggyback Registrations pursuant to Section 3 for the Holder, but excluding, incremental registration and qualification fees and expenses (including underwriting discounts and commissions relating to Registrable Securities) and any incremental costs and disbursements (including fees and expenses of the Holder's counsel) that result from the inclusion of the Registrable Securities in any Piggyback Registrations (each of which shall be paid by the Holder). Section 8. Indemnification; Contribution. If any Registrable Securities are included in a Registration Statement under this Agreement: 8.1. To the extent permitted by applicable law, the Company shall indemnify and hold harmless the Holder and each Permitted Holder Group Transferee, each Person, if any, who controls such Holder or Permitted Holder Group Transferee within the meaning of the Securities Act, and each officer, director, partner, and employee of the Holder and each Permitted Holder Group Transferee, and any such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including reasonable attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) Any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) The omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) Any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 8.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 8 shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holder provided, however, that no such underwriter shall be entitled to indemnification under this Agreement if such person shall have entered into a separate underwriting or indemnification agreement with the Company. 8.2. To the extent permitted by applicable law, the Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, and each officer, director, partner, and employee of the Company and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including reasonable attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with information furnished in writing by the Holder specifically for use in connection with such registration; provided, further, however, that the indemnification required by this Section 8.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, further, however, in no event shall the liability of the Holder be greater in amount than the dollar amount of the net proceeds by the Holder upon sale of Registrable Securities giving rise to such indemnification obligation. 8.3. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 8, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; subject to the rights of an indemnified party to retain its own counsel as hereinafter provided. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 8 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 8. Any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) owed by the indemnifying party hereunder shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (subject to refund if it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). 8.4. If the indemnification required by this Section 8 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 8: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8.1 and Section 8.2, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding; provided, however, that in no event shall the Holder be required to contribute an amount greater than the dollar amount of the net proceeds received by the Holder with respect to the sale of any securities. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 8.4(i). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 8.5. If indemnification is available under this Section 8 the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 8 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 8.4. 8.6. The obligations of the Company, the Holder and any Permitted Holder Group Transferee under this Section 8 shall survive the completion of any offering of Registrable Securities pursuant to a Registration Statement under this Agreement, and otherwise. Section 9. Holdback. -------- 9.1 If so requested by the Underwriters' Representative in connection with an offering of any securities covered by a registration statement filed by the Company, whether or not securities of the Holder or any Permitted Holder Group Transferee are included therein, the Holder shall agree not to effect or permit any Permitted Holder Group Transferee to effect any sale or distribution of shares of Common Stock including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten registration) during the 7-day period prior to, and during the 90-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that the Holder is timely notified of such effective date in writing by the Company or such Underwriters' Representative. In order to enforce the foregoing covenant, the Company shall be entitled to impose stop- transfer instructions with respect to the Registrable Securities of the Holder until the end of such period. The restrictions in this Section 9 are in addition to and not in limitation of the restrictions on transfer applicable to the Investor Group under the Investment Agreement. The Holder shall not be subject to the restrictions set forth in this Section 9.1 for longer than 90 days during any 12 month period. 9.2. If so requested by the Underwriters' Representative in connection with an offering of any Registrable Securities, the Company shall agree not to effect any sale or distribution of shares of Common Stock during the 7-day period prior to, and during the 90-day period beginning on, the date such Registration Statement is declared effective under the Securities Act by the Commission (or, in the case of an underwriting under the Shelf Registration, the date of the closing under the underwriting agreement). The Company agrees to use its commercially reasonable efforts to obtain from each holder of restricted securities of the Company the same as or similar to those being registered by the Company on behalf of the Holder, or any restricted securities convertible into or exchangeable or exercisable for any of its securities, an agreement not to effect any sale or distribution of such securities (other than securities purchased in a public offering) during any period referred to in this paragraph, except as part of any such Registration Statement if permitted. Without limiting the foregoing, if the Company grants any Person (other than a holder of Registrable Securities) any rights to demand or participate in a Registration, the Company agrees that the agreement with respect thereto shall include such Person's agreement as contemplated by the previous sentence. Section 10. Amendment, Modification and Waivers; Further Assurances. ------------------------------------ (i) This Agreement may be amended with the consent of the Company and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent of the Holder to such amendment, action or omission to act. (ii) No waiver of any terms or conditions of this Agreement shall operate as a waiver of any other breach of such terms and conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. No written waiver hereunder, unless it by its own terms explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provisions being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision. (iii) Each of the parties hereto shall exercise all such further instruments and documents and take all such further action as any other party hereto may reasonably require in order to effectuate the terms and purposes of this Agreement. The Company shall cause the Standstill Successor to be bound by the terms of this Agreement. Section 11. Assignment; Benefit. This Agreement and all of its provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by the Holder to any Person except a wholly owned direct or indirect subsidiary of the Holder to whom the Holder shall have transferred all of the Registrable Securities then owned by the Holder as permitted by, and subject to the terms of, the Investment Agreement. Section 12. Miscellaneous. ------------- 12.1 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Iowa applicable to contracts made and to be performed in that state. The parties hereto irrevocably (a) submit to the exclusive personal jurisdiction of any state or federal court in the State of Illinois in any suit, action or other legal proceeding relating to this Agreement; (b) agree that all claims in respect of any such suit, action or other legal proceeding may be heard and determined in, and enforced in and by, any such court; and (c) waive any objection that they may now or hereafter have to venue in any such court or that such court is an inconvenient forum. 12.2 Notices. All notices and requests given pursuant to this Agreement shall be in writing and shall be made by hand- delivery, first-class mail (registered or certified, return receipt requested), confirmed facsimile or overnight air courier guaranteeing next business day delivery to the relevant address specified below: (a) If to the Company, to: Pioneer Hi-Bred International, Inc. 700 Capital Square Des Moines, Iowa 50309 Attention: General Counsel Telephone: 515-248-4800 Telecopier: 515-248-4844 With a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10044 Attention: Stephen Fraidin, Esq. Telephone: 212-859-8000 Telecopier: 212-859-4000 (b) If to the Investor, to: E.I. du Pont de Nemours and Company Agricultural Products Barley Mill Plaza #38 P.O. Box 80038 Wilmington, DE 19880-0038 Attention: William F. Kirk, Vice President and General Manager Telephone: 302-774-1000 Telecopier: 302-992-6184 With a copy to: Skadden, Arps, Slate, Meagher & Flom, LLP 919 Third Avenue New York, New York 10022 Attention: Lou R. Kling, Esq. Telephone: 212-735-3000 Telecopier: 212-735-2000 Except as otherwise provided in this Agreement, the date of each such notice and request shall be deemed to be, and the date on which each such notice and request shall be deemed given shall be: at the time delivered, if personally delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next business day delivery. 12.3. Entire Agreement; Integration. This Agreement supersedes all prior agreements between or among any of the parties hereto with respect to the subject matter contained herein and therein, and such agreements embody the entire understanding among the parties relating to such subject matter. 12.4. Injunctive Relief. Each of the parties hereto acknowledges that in the event of a breach by any of them of any material provision of this Agreement, the aggrieved party may be without an adequate remedy at law. Each of the parties therefore agrees that in the event of such a breach hereof the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach hereof. By seeking or obtaining any such relief, the aggrieved party shall not be precluded from seeking or obtaining any other relief to which it may be entitled. 12.5. Section Headings. Section headings are for convenience of reference only and shall not affect the meaning of any provision of this Agreement. 12.6. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which shall together constitute one and the same instrument. All signatures need not be on the same counterpart. 12.7. Severability. If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity and enforceability of the remaining provisions of this Agreement, unless the result thereof would be unreasonable, in which case the parties hereto shall negotiate in good faith as to appropriate amendments hereto. 12.8. Filing. A copy of this Agreement and of all amendments thereto shall be filed at the principal executive office of the Company with the corporate records of the Company. 12.9. Termination. This Agreement may be terminated at any time by a written instrument signed by the parties hereto. Unless sooner terminated in accordance with the preceding sentences, this Agreement (other than Section 8 hereof) shall terminate in its entirety on such date as the Total Ownership Percentage (as defined in the Investment Agreement) of the Holder shall be less than 2%, provided that any shares of Common Stock previously subject to this Agreement shall not be Registrable Securities following the sale of any such shares in an offering registered pursuant to this Agreement. 12.10. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees (including any fees incurred in any appeal) in addition to its costs and expenses and any other available remedy. 12.11. No Third Party Beneficiaries. Nothing herein expressed or implied is intended to confer upon any person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement; provided, however, that any Permitted Holder Group Transferee shall be entitled to any rights, remedies, obligations or liabilities conferred under or by reason of this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first written above. E.I. DU PONT DE NEMOURS AND COMPANY By: ----------------------------- Name: Title: PIONEER HI-BRED INTERNATIONAL, INC. By: ----------------------------- Name: Title: EXHIBIT B Form of Rights Agreement Amendment AMENDMENT NO. 1, dated as of _________ __, 1997, to AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of December 13, 1996 (the "Amended and Restated Rights Agreement"), between Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Company"), and Bank Boston N.A. (formally known as The First National Bank of Boston), a national banking association ("Rights Agent"). On April 6, 1989, the Board of Directors of the Company (the "Board") authorized and declared a dividend of one common share purchase right (a "Right") for each share of Common Stock, par value $1.00 per share, of the Company ("Common Stock") outstanding at the Close of Business (as defined in the Amended and Restated Rights Agreement) on April 6, 1989 (the "Record Date"), each Right representing the right to purchase one (subject to adjustment as provided in the Amended and Restated Rights Agreement) share of Common Stock, upon the terms and subject to the conditions set forth in the Amended and Restated Rights Agreement, and has further authorized the issuance of one Right with respect to each share of Common Stock that shall become outstanding between the Record Date and the Distribution Date (as defined in the Amended and Restated Rights Agreement); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date in accordance with the provisions of Section 23 of the Amended and Restated Rights Agreement. On December 13, 1994, the Board amended and modified, and on December 13, 1996, the Board amended and restated, the terms of the Rights Agreement, dated as of April 6, 1989, between the Company and the Rights Agent, to, among other things, modify the Rights so that each Right represents the right to purchase one one-thousandth of a Preferred Share (as defined in the Amended and Restated Rights Agreement). On _________ __, 1997, the Board authorized the execution and delivery of this Amendment No. 1, which amends such Amended and Restated Rights Agreement. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. AMENDMENTS. (a) The definition of "Acquiring Person" contained in subsection 1(a) of the Amended and Restated Rights Agreement is hereby amended in its entirety to read as follows: "(a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of the Trigger Amount or more of the then outstanding Common Shares or was such a Beneficial Owner at any time after the date hereof, whether or not such person continues to be the Beneficial Owner of the Trigger Amount or more of the then outstanding Common Shares. Notwithstanding the foregoing, (i) the term "Acquiring Person" shall not include (A) the Company, (B) any Subsidiary of the Company, (C) any employee benefit plan of the Company or of any Subsidiary of the Company, (D) any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan acting in such capacity, (E) any Grandfathered Person or (F) the Investor or any Permitted Investor Transferee, but only to the extent of Common Shares held or acquired by the Investor and any Permitted Investor Transferee during the term of the Investment Agreement in accordance with the terms of the Investment Agreement and, following the termination of the Investment Agreement, only to the extent of Common Shares Beneficially Owned by the Investor and any Permitted Investor Transferee on the date of the termination (the "Termination Date") of the Investment Agreement, it being understood that (I) if, after the Termination Date, the Investor or any Permitted Investor Transferee acquires Beneficial Ownership of any Common Shares not owned by such person on the Termination Date, the Investor or such Permitted Investor Transferee will be deemed an Acquiring Person if, after giving effect to such acquisition, such person would be an Acquiring Person but for the provisions of this clause (F) and (II) if any Permitted Investor Transferee ceases to be a wholly-owned (other than directors' qualifying shares) United States Subsidiary of the Investor, such Permitted Investor Transferee will be deemed an Acquiring Person if such person would be an Acquiring Person at such time but for the provisions of this clause (F); and (ii) no Person shall become an "Acquiring Person" (x) as a result of the acquisition of Common Shares by the Company which, by reducing the number of Common Shares outstanding, increases the proportional number of shares beneficially owned by such Person together with all Affiliates and Associates of such Person, provided, that if (1) a Person would become an Acquiring Person (but for the operation of this clause (x)) as a result of the acquisition of Common Shares by the Company, and (2) after such share acquisition by the Company, such Person, or an Affiliate or Associate of such Person, becomes the Beneficial Owner of any additional Common Shares, then such Person shall be deemed an Acquiring Person, or (y) if (1) within five Business Days after such Person would otherwise have become or, if such Person did so inadvertently, after such Person discovers that such Person would otherwise have become, an Acquiring Person (but for the operation of this clause (y)), such Person notifies the Board that such Person did so inadvertently, and (2) within two Business Days after such notification (or such greater period of time as may be determined by action of the Board, but in no event greater than five Business Days), such Person divests itself of a sufficient number of Common Shares so that such Person is the Beneficial Owner of such number of Common Shares that such Person no longer would be an Acquiring Person." (b) The definition of "Common Shares" contained in subsection 1(g) of the Amended and Restated Rights Agreement is hereby amended in its entirety to read as follows: "(g) "Common Shares" when used with reference to the Company shall mean the shares of Common Stock, par value of One Dollar ($1.00) per share, of the Company or, in the event of a subdivision, combination or consolidation with respect to such shares of Common Stock, the shares of Common Stock resulting from such subdivision, combination or consolidation; provided that, so long as any Series A Convertible Preferred Stock remains outstanding, (i) the number of Common Shares outstanding at any time shall include all shares of Common Stock, par value $1.00 per share, of the Company issuable upon conversion of such outstanding Series A Convertible Preferred Stock, whether or not then convertible, and (ii) for purposes of Sections 3(a), (b) (except for the first three sentences) and (c), Section 12, Section 13, Section 15, Sections 16(a) and (c), Section 18, Section 21, Section 22, Section 23 (except for the provisions of (a)(i)), Section 26, Section 27 and Section 30 hereof, "Common Shares" shall be deemed to mean both the shares of Common Stock, par value $1.00 per share, then outstanding and shares of Series A Convertible Preferred Stock, used in the conjunctive or the alternative, as the context may require. "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest combined economic and voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person." (c) The definition of "Disinterested Directors" contained in subsection 1(h) of the Amended and Restated Rights Agreement is hereby deleted in its entirety. (d) The definition of "Permitted Offer" contained in subsection 1(k) of the Amended and Restated Rights Agreement is hereby deleted in its entirety. (e) The definition of "Trigger Amount" contained in subsection 1(r) of the Amended and Restated Rights Agreement is hereby amended in its entirety to read as follows: "(r) "Trigger Amount" shall mean the lesser of: (i) 15% or more of the Common Shares then outstanding; or (ii)10% or more of the Common Shares then outstanding, but only when and if such Common Shares represent one-fourth (1/4) or more of the combined voting power of the shares of Common Stock, par value $1.00 per share, of the Company, and the shares of Series A Convertible Preferred Stock then outstanding. As to any Beneficial Owner (and its Affiliates and Associates) with respect to which the Trigger Amount is being determined, the voting power will be determined by the Company in the ordinary course of corporate governance relating to the determination of voting power with respect to actions submitted to a vote of stockholders assuming such holder has taken the necessary documentation steps to have effectuated the right to have five votes per Common Share with no other estimation or assumption as to holdings." (f) Section 1 of the Amended and Restated Rights Agreement shall be amended to add the following subsections (t) through (x): "(t) "Investment Agreement" means the Investment Agreement, dated as of _____ __, 1997, between the Company and the Investor. (u) "Investor" shall have the meaning set forth in the Investment Agreement. (v) "Permitted Investor Transferee" shall mean any wholly owned (other than directors' qualifying shares) United States Subsidiary of the Investor which, at the time of determination continues to be a wholly-owned (other than directors' qualifying shares) United States Subsidiary of the Investor and, owns shares of Series A Convertible Preferred Stock acquired from the Holder or from the Company during the term of the Investment Agreement and in accordance with the terms thereof. (w) "Series A Convertible Preferred Stock" means the Series A Convertible Preferred Stock of the Company, par value $.01 per share and, following any reclassification of the Series A Convertible Preferred Stock into Class B Common Stock in accordance with Section 8.8 of the Investment Agreement, the Class B Common Stock (as defined in the Investment Agreement). (x) "13D Group" shall mean any group of Persons who, with respect to those acquiring, holding, voting or disposing of Voting Securities would be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder to file a statement on Schedule 13D with the Securities and Exchange Commission as a "person" within the meaning of Section 13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes of Section 13(g)(3) of the Exchange Act." (g) Section 13(d) of the Amended and Restated Rights Agreement is hereby deleted in its entirety. (h) The penultimate sentence of Section 3(a) of the Amended and Restated Rights Agreement is hereby amended in its entirety to read as follows: "As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and send, or cause to be sent, by first-class, insured, postage prepaid mail, to each record holder of Common Shares and Series A Convertible Preferred Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, substantially in the form of Exhibit B hereto (a "Right Certificate"), evidencing, in the case of holders of Common Shares, one Right for each Common Share so held, and, in the case of holders of Series A Convertible Preferred Stock, one Right for each share of Common Stock, par value $1.00 per share, into which such Series A Convertible Preferred Stock is convertible (whether or not then convertible)." (i) The third sentence of Section 7(b) of the Amended and Restated Rights Agreement is hereby amended in its entirety to read as follows: "Anything in this Agreement to the contrary notwithstanding, in the event that at any time after the date hereof and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case, each Common Share outstanding following such subdivision, combination or consolidation shall continue to have one Right (or, in the case of Series A Convertible Preferred Stock, one Right for each share of Common Stock, par value $1.00 per share, into which such Series A Convertible Preferred Stock is convertible (whether or not then convertible) following such subdivision, combination or consolidation) (subject to adjustment as provided here) associated therewith and the Purchase Price following any such event shall be proportionately adjusted to equal the result obtained by multiplying the Purchase Price immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event." SECTION 2. EFFECT OF AMENDMENT. Except as modified by this Amendment No. 1, the Amended and Restated Rights Agreement shall remain in full force and effect. SECTION 3. SEVERABILITY. If any term, provision, covenant or restriction of this Amendment No. 1 is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 4. GOVERNING LAW. This Amendment No. 1 shall be deemed to be a contract made under the laws of the State of Iowa and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State. SECTION 5. COUNTERPARTS. This Amendment No. 1 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the date and year first above written. PIONEER HI-BRED INTERNATIONAL, INC. By: Name: Charles S. Johnson Title: President and CEO By: Name: Jerry Chicoine Title: Vice President and Chief Financial Officer BANK BOSTON N.A. the Rights Agent By: Name: Kathryn Anderson Title: Administrative Manager EXHIBIT C Form of Certificate of Designation CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF SERIES A CONVERTIBLE PREFERRED STOCK OF PIONEER HI-BRED INTERNATIONAL, INC. Pioneer Hi-Bred International, Inc., an Iowa corporation (the "Corporation"), does hereby certify that the Board of Directors of the Corporation duly adopted the following resolution, at a meeting duly convened and held on August 5, 1997, in respect of a series of Preferred Stock of the Corporation, pursuant to authority conferred upon the Board by Article IV of the Articles of Incorporation of the Corporation and in accordance with Section ____ of the Business Corporation Act of the State of Iowa: BE IT RESOLVED, that the issuance of a series of Preferred Stock of the Corporation is hereby authorized, and the designation, amount, powers, preferences and relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof, of the shares of such series of Preferred Stock of the Corporation, are hereby fixed as follows: 1. DESIGNATION; CLASS AND AMOUNT; CERTAIN DEFINITIONS. The series of Preferred Stock, the issuance of which is hereby authorized, shall comprise 200,000 shares the distinctive serial designation of which shall be "Preferred Stock, Series A", which is sometimes herein referred to as "Series A Convertible Preferred Stock". Each share of Series A Convertible Preferred Stock shall be identical in all respects with all other shares of Series A Convertible Preferred Stock. The number of shares of Series A Convertible Preferred Stock which are purchased or otherwise acquired by the Corporation or converted into Common Stock shall be canceled and shall revert to authorized but unissued shares of Series A Convertible Preferred Stock undesignated as to series. The Corporation shall not issue, sell or otherwise transfer shares of Series A Convertible Preferred Stock to any Person other than the members of the Investor Group. Certain capitalized terms used herein have the meanings specified therefor in Section 10 below. 2. DIVIDENDS. (a) Except as set forth in the Investment Agreement, each Holder of shares of Series A Convertible Preferred Stock shall participate with the holders of Common Stock in all Dividends, when, as and if declared by the Board and paid or distributed by the Corporation on or in respect of the Common Stock on a share for share basis and in like tenor and forms as the Dividend paid on the Common Stock as if all shares of Series A Convertible Preferred Stock were converted into the number of shares of Common Stock (whether or not the Series A Convertible Preferred Stock is then so convertible) calculated in accordance with Section 6 below, immediately prior to the record date for such Dividend. Except as set forth above, holders of shares of Series A Convertible Preferred Stock shall not be entitled to receive any dividends. Except to the extent payable in respect of dividends paid on the Common Stock, no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on shares of Series A Convertible Preferred Stock. (b) Dividends on the Series A Convertible Preferred Stock in respect of each Dividend shall be payable, when and if declared by the Board of Directors, concurrently with each date of payment (each such date, a "Dividend Payment Date") by the Corporation of Dividends on the Common Stock. Dividends payable in cash shall be paid by wire transfer in immediately available funds to the accounts designated by the respective Holders in written notices given to the Corporation at least two Business Days prior to the payment date or by such other means as may be agreed to by the Corporation and the respective Holders. (c) The Corporation will cause written notice of each Dividend on the Series A Convertible Preferred Stock to be given to each Holder within five Business Days after it is determined by the Board of Directors. 3. VOTING RIGHTS. (a) Except as otherwise provided herein or as required by law, the Holders of Series A Convertible Preferred Stock shall not be entitled to any Vote. (b) At any meeting called for the purpose of voting on (or acting by written consent with respect to) any matter to be voted upon by the holders of Common Stock of the Corporation, the holders of shares of Series A Convertible Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters so submitted to a vote of stockholders of the Corporation. At any such meeting or in connection with any such action by written consent, each share of Series A Convertible Preferred Stock shall carry, as of the record date applicable to such vote, a number of votes equal to the Per Share Vote Amount as calculated by the Corporation for such meeting. (c) In accordance with Section 6.2(b) of the Investment Agreement, the Corporation will cause written notice of any vote as to which holders of Common Stock are entitled to vote as a separate class or voting group under the Articles of Incorporation or Iowa Law (a "Class Vote"), to be given to each Holder at least 15 Business Days prior to such Class Vote. 4. LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the Holders of shares of Series A Convertible Preferred Stock then outstanding shall be entitled, for each share of Series A Convertible Preferred Stock, to be paid out of the assets of the Corporation available for distribution to its stockholders the amount of cash or other property that would be payable on the number of shares of Common Stock then issuable upon conversion of such share of Series A Convertible Preferred Stock (whether or not then convertible) (such amount payable being adjusted appropriately to reflect any stock split, stock dividend, reverse stock split, or any transaction with comparable effect upon the Common Stock) (the "Liquidation Preference"). This entitlement of the Holders of shares of Series A Convertible Preferred Stock, to the extent equal to $.01 for each share of Series A Convertible Preferred Stock, shall be satisfied before any similar payment shall be made or any assets distributed to the holders of the Common Stock or any other security junior in rank to the Series A Convertible Preferred Stock as to distribution of assets upon such dissolution, liquidation or winding up and otherwise shall be satisfied on a pari passu basis with the holders of the Common Stock. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to all of the Holders of the outstanding shares of Series A Convertible Preferred Stock, then the Holders of all such shares shall share ratably in such distribution of assets in accordance with the liquidation preference to which they are entitled. For the purposes of this section, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a dissolution or winding up of the business of the Corporation. 5. RESTRICTIONS ON TRANSFER. The shares of Series A Convertible Preferred Stock are subject to the provisions of the Investment Agreement (including the provisions thereof restricting transfer of such stock). 6. CONVERSION. (a)(i) Concurrently with the transfer of Beneficial Ownership of any share of Series A Convertible Preferred Stock to any Person other than the Investor or another member of the Investor Group or Other Investor Affiliate, such share of Series A Convertible Preferred Stock shall convert into [100] < FN > Number of shares of Common Stock each share is convertible into is subject to adjustment prior to Closing in the event of a stock split, stock combination or similar adjustment in the number of shares of Common Stock outstanding./< FN > fully- paid and non-assessable shares of Common Stock (as adjusted pursuant to Section 6(c)), in accordance with the procedures provided in clause (b) of this Section 6. (ii) At any time (x) at the direction of the Corporation, but only if the Corporation intends to recommend approval of a Voting Amendment (as defined in the Investment Agreement), and (y) at the direction of the Investor, following the approval and effectiveness of a Voting Amendment, shares of Series A Convertible Preferred Stock shall be mandatorily convertible into fully-paid and non-assessable shares of Common Stock, with each share of Series A Convertible Preferred Stock being converted into [100] < FN> Number of shares of Common Stock each share is convertible into is subject to adjustment prior to Closing in the event of a stock split, stock combination or similar adjustment in the number of shares of Common Stock outstanding./< FN > shares of Common Stock (as adjusted pursuant to Section 6(c)). (iii) The Investor shall have the right, in accordance with Section 8.8 of the Investment Agreement, at any time that the Investor may exercise the Optional Conversion Right (as defined in the Investment Agreement) in accordance with the Investment Agreement, to cause all shares of Series A Convertible Preferred Stock to be converted into fully-paid and non- assessable shares of Common Stock, with each share of Series A Convertible Preferred Stock being converted into [100] < FN > Number of shares of Common Stock each share is convertible into is subject to adjustment prior to Closing in the event of a stock split, stock combination or similar adjustment in the number of shares of Common Stock outstanding./< FN > shares of Common Stock (as adjusted pursuant to Section 6(c)). (iv) At any time that all outstanding shares of Common Stock (or whatever security received upon conversion or exchange thereof) have the same vote per share, if any, without any time phase voting, all shares of Series A Convertible Preferred Stock shall be convertible into fully-paid and non-assessable shares of Common Stock, with each such share of Series A Convertible Preferred Stock being converted into [100] < FN > Number of shares of Common Stock each share is convertible into is subject to adjustment prior to Closing in the event of a stock split, stock combination or similar adjustment in the number of shares of Common Stock outstanding./ < FN > shares of Common Stock (as adjusted pursuant to Section 6(c)). (v) Except as set forth in this Section 6(a), the shares of Series A Convertible Preferred Stock are not convertible at the option of the Holder thereof. (b) (i) Any Holder of shares of Series A Convertible Preferred Stock required (or in the case of clauses (iii) or (iv) above requesting) to convert any or all such shares into Common Stock shall surrender the certificate(s) evidencing such shares of Series A Convertible Preferred Stock of the Holder at the office of the transfer agent appointed for the purpose of such conversion by the Corporation. Such surrendered certificate(s), if the Corporation shall so require, shall be duly endorsed to the Corporation or in blank, or accompanied by proper instruments of transfer to the Corporation or in blank. (ii) The Corporation shall, within one Business Day after such surrender of certificates evidencing shares of Series A Convertible Preferred Stock accompanied by written notice and in compliance with any other conditions contained herein, issue and deliver, or cause to be issued and delivered, to the Person(s) for whose account such certificate(s) evidencing shares of Series A Convertible Preferred Stock were so surrendered, or to the nominee(s) of such Person(s), certificates representing the number of full shares of Common Stock to which such Person shall be entitled pursuant to the then-applicable conversion rate. Such conversion shall be deemed to have been made on the date of such surrender of the certificate(s) evidencing shares of Series A Convertible Preferred Stock to be converted (the "Surrender Date") and the Person(s) entitled to receive the Common Stock deliverable upon conversion of such Series A Convertible Preferred Stock shall be treated for all purposes as the record holder(s) of such Common Stock on such date and thereafter. Conversion of Series A Convertible Preferred Stock may otherwise be achieved in accordance with such procedures as the Corporation and a majority of the Holders may agree. (iii) In the event that fewer than all shares of Series A Convertible Preferred Stock represented by a surrendered certificate are to be converted hereunder, a new certificate shall be issued at the Corporation's expense representing the shares of Series A Convertible Preferred Stock not so converted. (iv) In connection with the conversion of any shares of Series A Convertible Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Market Price (as defined in the Investment Agreement) per share of Common Stock on the day on which such shares of Series A Convertible Preferred Stock are deemed to have been converted. (c) The conversion rate shall be adjusted from time to time as follows: (i) In case the Corporation shall, at any time or from time to time while any of the shares of Series A Convertible Preferred Stock are outstanding, (A) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares, or (B) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the conversion rate in effect immediately prior to such action shall be adjusted so that the Holder of any shares of Series A Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which such Holder would have owned or have been entitled to receive immediately following such action had such shares of Series A Convertible Preferred Stock been converted immediately prior thereto. An adjustment made pursuant to this Section 6(c)(i) shall become effective immediately after the close of business on the effective date of a subdivision, reclassification or combination. If, as a result of an adjustment made pursuant to this Section 6(c)(i), the Holder of any shares of Series A Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors shall make an appropriate allocation of the adjusted conversion rate between or among shares of such classes of capital stock in accordance with the entitlements of the Common Stock underlying the Series A Convertible Preferred Stock in connection with such adjustment. (ii) Whenever an adjustment in the conversion rate is required, the Corporation shall forthwith place on file with its Transfer Agent a statement signed by its Chief Executive Officer, Chief Financial Officer or a Vice President and by its Secretary, Assistant Secretary, Treasurer or Assistant Treasurer, stating the adjusted conversion rate determined as provided herein. Such statements shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment. (d) (i) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized and unissued stock, such number of shares of its Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series A Convertible Preferred Stock from time to time outstanding, solely for the purpose of effecting such conversion. The Corporation shall, from time to time, in accordance with the laws of the State of Iowa, increase the authorized number of shares of Common Stock if at any time the number of shares of authorized and unissued Common Stock shall not be sufficient to permit the conversion of all the then outstanding shares of Series A Convertible Preferred Stock. (ii) The Corporation will pay any and all stamp and transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock upon conversion of shares of Series A Convertible Preferred Stock pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series A Convertible Preferred Stock so converted were registered and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (e) In case of (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) or (ii) any consolidation or merger of the Corporation with one or more other corporations (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock issuable upon conversion of Series A Convertible Preferred Stock) or (iii) any sale or conveyance to another corporation or other entity of all or substantially all of the property of the Corporation, then the Corporation, or such successor corporation or other entity, as the case may be, shall make appropriate provision so that the holder of each share of Series A Convertible Preferred Stock then outstanding shall have the right to convert such share into the kind and amount of shares of stock or other securities and property receivable upon such consolidation, merger, sale, reclassification, change or conveyance by a holder of the number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock might have been converted immediately prior to such consolidation, merger, sale, reclassification, change or conveyance, subject to adjustment which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 6(c). If the holders of Common Stock are entitled to elect the consideration payable pursuant any consolidation, merger, sale, conveyance or other transaction or event set forth above, the Holders also shall be entitled to elect between such forms of consideration. The provisions of this paragraph shall apply similarly to successive consolidations, mergers, sales, conveyances or other transactions or events. (f) Whenever the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is convertible is adjusted as provided in this Section 6, the Corporation shall promptly mail to the Holders a notice in accordance with Section 8 below stating that the number of shares of Common Stock into which the shares of Series A Convertible Preferred Stock are convertible has been adjusted and setting forth the new number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of Series A Convertible Preferred Stock is convertible, as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective. 7. LIMITED PRIORITY. The Series A Convertible Preferred Stock shall, to the extent of the Liquidation Preference set forth in Section 4, be senior in rank as to distribution of assets upon any liquidation, dissolution or winding up of the affairs of the Corporation, to the Common Stock, or any class of equity securities of the Corporation which by its terms are junior to the Series A Convertible Preferred Stock, unless the Holders of 66 2/3 percent of the outstanding shares of the Series A Convertible Preferred Stock shall otherwise consent. 8. NOTICES. The Corporation shall provide notice to each Holder of any action taken or proposed to be taken or any determination made by the Corporation and/or the Holder under the terms of this Certificate of Designations. Notice of any such action or determination by the Corporation and/or the Holder and all other notices and other communications provided for in this Certificate of Designations shall be delivered by facsimile and by reputable overnight courier, (a) If to the Company, to: Pioneer Hi-Bred International, Inc, 700 Capital Square Des Moines, Iowa 50309 Attention: General Counsel Telephone: 515-248-4800 Telecopier: 515-248-4844 with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Facsimile: (212) 859-4000 Attn.: Stephen Fraidin or such other address as the Corporation shall have furnished to the Holders in writing, (b) if to a Holder, to the address and facsimile number of such Holder listed on the Stock Books of the Corporation. 9. DEFINITIONS. Certain capitalized terms are used herein as defined below: "AFFILIATE" of a Person has the meaning set forth in Rule 12b-2 under the Exchange Act. "ARTICLES OF INCORPORATION" means the Third Restated and Amended Articles of Incorporation of the Corporation, as amended from time to time. "BENEFICIALLY OWNED" with respect to any securities means having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, as in effect on the date hereof, without limitation by the 60-day provision in paragraph (d)(1)(i) thereof). The terms "Beneficial Ownership" and "Beneficial Owner" have correlative meanings. "BOARD" means the Board of Directors of the Corporation. "BUSINESS DAY" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Iowa are authorized or obligated by law or executive order to close. "CERTIFICATE OF DESIGNATIONS" means this Certificate of Designations, Powers, Preferences and Relative, Participating, Optional or other Rights, and the Qualifications, Limitations or Restrictions Thereof, creating the Series A Convertible Preferred Stock. "COMMON STOCK" means the Common Stock, par value $1.00 per share, of the Corporation. "COMMON VOTING POWER" means, in respect of any record date for any meeting of stockholders (or action by written consent in lieu of a meeting) the aggregate Votes represented by all then outstanding Voting Securities other than the Series A Convertible Preferred Stock as determined by the Board in accordance with the procedures set forth in the Articles of Incorporation based on the actual Votes entitled to be voted at such meeting (excluding any estimation of any kind, including as to who would have been entitled to 5 Votes per share if such shareholders had taken the requisite steps to obtain such Vote). "DIVIDEND" means any dividend or distribution on or in respect of the Common Stock of the Corporation, whether in cash, additional shares of Common Stock or other property. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "HOLDER" means a holder of record of a share or shares of Series A Convertible Preferred Stock. "INVESTMENT AGREEMENT" means the Agreement, dated as of August 6, 1997, between the Investor and the Corporation, as amended and/or restated from time to time. "INVESTOR" means E.I. du Pont de Nemours and Company. "INVESTOR GROUP" shall have the meaning set forth in the Investment Agreement. "INVESTOR GROUP TOTAL OWNERSHIP PERCENTAGE" means, with respect to the Investor Group calculated at a particular point in time, the ratio, expressed as a percentage, of (a) the total number of shares of Common Stock Beneficially Owned by the Investor Group and issuable upon conversion of (whether or not then convertible), or otherwise constituting the economic equivalent of, all Common Securities (as defined in the Investment Agreement) Beneficially Owned by the Investor Group, over (b) the total number of shares of Common Stock then outstanding and the number of shares of Common Stock issuable upon conversion (whether or not then convertible) of, or otherwise constituting the economic equivalent of, all outstanding Common Securities; PROVIDED that in no event shall the Investor Group Total Ownership Percentage of all Holders of Series A Convertible Preferred Stock be greater than 20%. "IOWA LAW" shall mean the Business Corporation Act of the State of Iowa. "LIQUIDATION PREFERENCE" has the meaning specified in Section 4 above. "OTHER INVESTOR AFFILIATE" shall have the meaning set forth in the Investment Agreement. "PER SHARE VOTE AMOUNT" means in respect of any record date for any meeting of stockholders (or action by written consent in lieu of a meeting) that number of Votes per share of Series A Convertible Preferred Stock equal to (x) the Total Preferred Vote Amount as of such record date amount divided by (y) the number of shares of Series A Convertible Preferred Stock outstanding as of such record date. "PERSON" means any individual, corporation, company, association, partnership, joint venture, limited liability company, trust or unincorporated organization, group (within the meaning of Rule 13d-5 under the Exchange Act) or a government or any agency or political subdivision thereof. "SERIES A CONVERTIBLE PREFERRED STOCK" has the meaning specified in Section 1 above. "STOCK BOOKS" means the stock transfer books of the Corporation relating to its Common Stock and Preferred Stock. "SUBSIDIARY" means, as to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries. A Subsidiary that is directly or indirectly wholly-owned by another Person except for directors' qualifying shares shall be deemed wholly- owned for purposes of this Agreement. "SURRENDER DATE" has the meaning specified in Section 6 above. "13D GROUP" shall mean any group of Persons who, with respect to those acquiring, holding, voting or disposing of Voting Securities would, assuming ownership of the requisite percentage thereof, be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder to file a statement on Schedule 13D with the Securities and Exchange Commission as a "person" within the meaning of Section 13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes of Section 13(g)(3) of the Exchange Act. "TOTAL PREFERRED VOTE AMOUNT" means, in respect of the record date for any meeting (or action by written consent in lieu of a meeting) of shareholders of the Corporation to vote on any matter, an aggregate number of Votes equal to (a) the Common Voting Power as of such record date multiplied by (b) a fraction, the numerator of which is the Investor Group Total Ownership Percentage (expressed as a fraction carried to two decimal places) as of such record date and the denominator of which is 1.00 minus the Investor Group Total Ownership Percentage (expressed as a fraction carried to two decimal places) as of such record date; provided that in no event shall the Total Preferred Vote Amount be greater than 20% of Total Voting Power. "TOTAL VOTING POWER" means in respect of any record date for any meeting of stockholders (or action by written consent in lieu of a meeting) the aggregate Votes represented by all then outstanding Voting Securities as determined by the Board in accordance with the procedures set forth in the Articles of Incorporation based on the actual Votes entitled to be voted at such meeting (excluding any estimation of any kind, including as to who would have been entitled to 5 Votes per share if such shareholders had taken the requisite steps to obtain such Vote). "VOTES" shall mean, at any time, with respect to any Voting Securities, the total number of votes that would be entitled to be cast by the holders of such Voting Securities generally (by the terms of such Voting Securities, the Articles of Incorporation or any certificate of designations for such Voting Securities) in a meeting for the election of directors held at such time, including the votes that would be able to be cast by holders of shares of Series A Convertible Preferred Stock in accordance with the procedures set forth in the Articles of Incorporation based on the actual number of Votes entitled to be voted at such meeting (excluding any estimation of any kind, including as to who would have been entitled to 5 Votes per share if such shareholders had taken the requisite steps to obtain such Vote). "VOTING SECURITIES" means the shares of Common Stock, the Series A Convertible Preferred Stock and any other securities of the Corporation entitled to vote generally for the election of directors, and any securities (other than employee stock options) which are convertible into, or exercisable or exchangeable for, Voting Securities. IN WITNESS WHEREOF, Pioneer Hi-Bred International, Inc., has caused this Certificate to be made under the seal of the Corporation and signed and attested by the undersigned officers of the Corporation this ____ day of ___________, 1997. PIONEER HI-BRED INTERNATIONAL, INC. By Name: Title: (Corporate Seal) Attest: By Name: Title: EXHIBIT D INITIAL INVESTOR NOMINEE NOTICE PURSUANT TO SECTION 5.1(B) 1.Name of Investor Charles O. (Chad) Holliday, Nominee Jr. 14A Information: Age 49 (DOB 3/9/48) Current Since 1995, Executive Vice Position President, DuPont, Chairman, DuPont Asia Pacific and member of the Office of the Chief Executive. DuPont is a global chemical, energy and life sciences company. Previous Senior Vice President, Positions: DuPont (1992) President, (Past 5 + DuPont Asia Pacific (1990) years) Other Analog Devices, Inc. Directorships: DuPont Photmasks, Inc. E.I. du Pont de Nemours and Company 2.Name of Investor William F. (Bill) Kirk Nominee 14A Information: Age: 54 (DOB 9/11/42) Current Since 1990, Vice President, Position General Manager, DuPont Agricultural Products. Dupont is a global chemical energy and life sciences company. Previous General Manager, Positions: Agricultural (Past 5+ years) Products (1985) Other None Directorships: EX-99.(C)4 14 PREFERRED SEED SUPPORT AGREEMENT Exhibit (C)4 PREFERRED SEED SUPPORT AGREEMENT THIS AGREEMENT, effective this 6th day of August, 1997, is made between Pioneer Hi-Bred International, Inc. ("Pioneer") and Optimum Quality Grains, L.L.C., a Delaware limited liability company (hereinafter referred to as the "Venture") owned equally by Pioneer and E.I. du Pont de Nemours and Company ("DuPont"). W I T N E S S E T H: WHEREAS, Pioneer and DuPont have entered into various documents relating to the Venture dated the 6th day of August, 1997, (in the aggregate "Venture Agreements") pursuant to which, among other things, DuPont and Pioneer will be establishing and funding the Venture for the development and sale of Quality Trait Seed as defined herein; WHEREAS, the Venture and Pioneer (the "Parties") contemplate that the technology or germplasm necessary to develop the Quality Trait Seed will be sub-licensed by the Venture to Pioneer for combination with Pioneer's crop lines and germplasm for the purpose of developing Quality Trait Seed for sale by Pioneer on behalf and in support of the Venture; WHEREAS, the Parties contemplate that after the combination of the Venture's Quality Traits with selected crop lines and germplasm owned or licensed by Pioneer or the Venture, the resulting Quality Trait Seed will be sold by Pioneer to Seed Customers and/or Venture Customers with certain royalties and premiums being remitted to the Venture; WHEREAS, the Parties contemplate that the Quality Trait Seed marketed by Pioneer to support the business of the Venture shall in certain instances be sold or licensed to contract producers for production of Quality Trait Grain and that Pioneer will implement some portion of such grain production on behalf of and in support of the Venture; WHEREAS, Pioneer is the owner of certain Quality Trait Seed and that Pioneer will sell such seed to Seed Customers for the Venture consistent with the marketing plan set by the Venture, with certain royalties, premiums and commissions being remitted to the Venture; and WHEREAS, It is further contemplated that the Venture will provide market assistance to Pioneer for the sale of Quality Trait Seed. NOW, THEREFORE, Pioneer and the Venture (collectively the "Parties") desire that this document set forth that Preferred Seed Supply Agreement. ARTICLE 1 - DEFINITIONS - ----------------------- As used herein, the following terms shall have the following meanings: A. "Proprietary Property" - all patents, trade secrets, germplasm, parent lines, hybrids, pedigree or breeding information, breeding processes and procedures and related information, written or oral, that is the subject of this Agreement; B. "Quality Traits" - shall mean characteristics which result in modifications of the plant, grain composition or its attributes that have a value to end-users of grain, grain products or plant materials and which command value in the market and such value is capable of being captured; C. "Venture Products" - all, grain, grain products or plant material developed by or for the Venture that have as a component a Quality Trait; D. "Quality Trait Seed" - shall mean seed products developed by or on behalf of the Venture which contain a Quality Trait; E. "Combined Quality Trait Seed" - a Quality Trait Seed developed by Pioneer from Proprietary Property licensed by the Venture to Pioneer; 2 F. "Pioneer Quality Trait Seed" - a Quality Trait Seed owned and developed solely by Pioneer based solely on unique characteristics of the germplasm that result in a Quality Trait; G. "Research Alliance" - the relationship between Pioneer and DuPont as set forth in a Research Alliance Agreement executed by Pioneer and DuPont; H. "Seed Customer" - users of Quality Trait Seed; and I. "Venture Customers" - users of Venture Products. ARTICLE 2 - INTENTION OF THE PARTIES - ------------------------------------ The Parties agree that the purpose of this Agreement is to generally set forth the intent and framework upon which the Venture and Pioneer shall base their commercial relationship. It is acknowledged that this relationship is unique and given the complexity and uncertainty of how the business opportunity may develop in the future the Parties agree to use their best cooperative efforts to resolve disputes and issues consistent with the general principles set forth herein. ARTICLE 3 - PREFERRED SUPPLIER - ------------------------------ A. The Parties agree that the Venture shall be entitled to the benefit of a reliable supply of Quality Trait Seed to the marketplace to be developed and sold by Pioneer to market segments or Venture Customers identified by the Venture, as well as those Seed Customers identified by Pioneer as aligned with the Venture marketing plan. Pioneer will be the Venture's preferred worldwide provider and the preferred marketer of all of such Quality Trait Seed. B. The Parties acknowledge that in certain circumstances it will be appropriate that there are exceptions to the status of Pioneer as the preferred seed supplier to the Venture. Pioneer recognizes that there are currently third-party seed companies that supply Quality Trait Seed to the market on behalf of the Venture. The need for additional exceptions may arise from time to time in the future including when Pioneer does not have the capacity to meet the demand of the Venture for any particular line of Quality Trait Seed or when the Venture is unable to provide the necessary freedom to operate to Pioneer for the purpose of developing or selling Quality Trait Seed. Any such decision to add additional seed companies to those supporting the Venture shall be made by the Venture respecting the intent for a preferred seed supply status for Pioneer. C. Pioneer shall retain all revenues from the sale of Quality Trait Seed sold by Pioneer exclusive of premiums, royalties or commissions paid to the Venture as set forth in Article 9. The term "sale" as used herein with respect to the disposition of seed shall mean that such disposition is made in accordance with the Venture's licensing program incorporating Pioneer's licensing program for its seed. ARTICLE 4 - QUALITY TRAIT SEED PRODUCT DEVELOPMENT - -------------------------------------------------- A. The Venture and Pioneer agree to cooperate to enhance Pioneer's understanding of the needs of the Venture to successfully implement the Venture's business plan including identification and specific description of anticipated Venture Products, Venture Product advancement and life cycle management strategies and in forecasting demand for such Venture Products. This cooperation is further intended to assist in the identification of quality traits, enabling technologies and related freedom to operate issues such that the collaborative efforts of Pioneer and DuPont through their Research Alliance can support the business of the Venture and support Pioneer in its capacity as the developer of Quality Trait Seed on behalf of the Venture. The Parties acknowledge that the development of Quality Trait Seed will require the highest levels of cooperation and communication between the Venture and Pioneer and between Pioneer, DuPont and the Venture through the activities of the Research Alliance that support the Venture. B. The Venture shall license to Pioneer on a perpetual basis the necessary Venture Proprietary Property for combination with 3 Pioneer Proprietary Property for development of Quality Trait Seed to be sold by Pioneer on behalf of the Venture. ("Combined Quality Trait Seed"). Pioneer may also develop Quality Trait Seed without use of Venture Proprietary Property ("Pioneer Quality Trait Seed"), which will be marketed by the Venture and sold by Pioneer to Seed Customers. The term "perpetual" as used herein shall mean that the Pioneer licenses from the Venture shall not terminate; however, any consideration for such licenses shall not be payable beyond the legal limit for such payments under the laws of the United States or the European Community. ARTICLE 5 - SUPPLY OF QUALITY TRAIT SEED - ---------------------------------------- A. All sales, licensing, or use of Quality Trait Seed to or by Seed Customers shall be made consistent with the Venture marketing plan for Venture Products. B. All Quality Trait Seed developed by Pioneer as discussed above shall be distributed by Pioneer to Seed Customers and to support the business of the Venture, as more fully set forth below. C. The Parties shall agree upon the mechanics of providing a long-term Venture Product forecast from the Venture and shall utilize such forecast in developing a Quality Trait Seed supply plan to develop estimates for the purpose of allowing Pioneer to determine and produce the appropriate amount of seed it needs to plant for both parent seed and hybrid seed production (or varietal production in the case of certain oilseeds) in order to have available the Quality Trait Seed necessary to meet the demand in the commercial planting season that follows two years after the Estimate Year ("the Commercial Planting Year"). The Venture will participate and follow normal practice and timelines used within Pioneer for seed supply and demand planning. D. Prior to each Commercial Planting Year during the term of this Agreement, Pioneer shall use its best efforts to have available for delivery in a timely fashion to its Seed Customers or contract growers of the Venture the Quality Trait Seed in sufficient supply to meet the estimates discussed in Paragraph C. All of such Quality Trait Seed shall comply with written warranties for such products as established by the Venture with regard to their Quality Traits and shall meet the customary warranties of seed products sold by Pioneer. E. If Pioneer's supply of Quality Trait Seed is significantly greater than the demand for such seed, including management of the inventory on a carry-over basis to the next sales season, then the Parties shall agree upon an equitable method of risk sharing for the costs of production of the oversupply. F. The base price of such Quality Trait Seed sold by Pioneer shall be determined by Pioneer based upon its reasonable and customary pricing practices. Quality Trait premiums, royalties, or license fees shall be established by the Venture. The commissions for Venture activities supporting seed sales of Pioneer shall be established by mutual agreement of the Parties. Each of these are more fully set forth in Article 9 below. G. Pioneer and the Venture shall cooperate with each other in making decisions as to which pollinators, sterile females, hybrids, or varieties are appropriate for delivery of the Quality Traits to support the business of the Venture; however, Pioneer shall have the final decision regarding the selection of the appropriate pollinator, sterile females, hybrids, or variety for development, production and sale after combination with the necessary Venture Proprietary Property to produce the desired Quality Trait Seed. Pioneer has a good faith obligation to not limit market access for the Venture as a result of these decisions. ARTICLE 6 - FUTURE PRODUCTS - --------------------------- In the event that the Venture continues to develop various varieties of Quality Trait Grains or other related product, whether for food, feed or industrial markets, this Agreement shall extend to each and every one of those products. ARTICLE 7 - CONFIDENTIALITY - --------------------------- A. The Parties shall consider all written information furnished 4 by each other as confidential to be confidential and shall not disclose any such information to any person, or use such information itself for any purpose other than those specified in this Agreement, unless the receiving parties obtain prior written permission from the disclosing party to do so. No party shall advertise, publish, or disclose the nature of the relationship described in this Agreement to any third parties who do not have a need to know, because of their relationships with Pioneer, DuPont or the Venture, the fact that the parties have contracted for the provision of services hereunder nor shall information relating to this Agreement be disclosed without the other party's prior written permission. B. The above obligations of confidentiality and non-use shall not apply to: (i) information which at the time of disclosure can be demonstrated to be previously known to the receiving parties; or (ii) information which at the time of disclosure has been published which shall mean that the public in at least one country has had an opportunity to become aware of it (whether or not the public is free to make use of it); or which after disclosure is published, unless the publication of that information is a result of any breach of the obligation of confidentiality contained herein, except that a compilation of information in a form not itself published but comprising items of information each separately published shall not be excluded from the obligations as to confidentiality contained herein; (iii) information obtained by the recipient from a third party legitimately in possession of it and having a right to disclose it; or (iv) disclosures required pursuant to law. C. The parties may from time to time enter into separate confidentiality agreements for sharing information which they deem sensitive. D. The obligations set forth in this ARTICLE 7 - CONFIDENTIALITY shall survive and be binding upon the parties for two (2) years from the termination of this Agreement as set forth herein. ARTICLE 8 - OWNERSHIP OF AND ACCESS TO INTELLECTUAL PROPERTY - ------------------------------------------------------------ A. The Parties acknowledge that the Venture shall be the owner or assignee of certain Quality Trait technology owned by Pioneer and DuPont prior to execution of this Agreement and as provided in the Venture Agreements, and the Venture shall be the exclusive licensee of all Quality Trait technology developed through the Research Alliance evidenced by the agreement between Pioneer and DuPont executed prior to this Agreement, whether developed through Collaborative Efforts or Independent Efforts, as those terms are defined in the Research Alliance Agreement. It is the intention of the Parties that all Proprietary Property owned or licensed by the Venture shall be licensed preferably to Pioneer for development and production by Pioneer of Quality Trait Seed for sale on behalf of the Venture as contemplated herein; however, the parties recognize that in the certain circumstances that the Venture may utilize additional third party seed companies for supplying Quality Trait Seed to Seed Customers and to the marketplace. Accordingly, in such circumstances, the Venture shall grant non-exclusive licenses to certain of the Venture Proprietary Property to third party seed companies for production of Quality Trait Seed for sale on behalf of the Venture on terms no more favorable than those for the similar licenses to Pioneer. B. Pioneer shall, as it relates to fulfilling its commitments hereunder, bear the cost of maintaining and obtaining Pioneer Proprietary Rights and its associated freedom to operate anywhere in the world where protection is feasible and desirable by the Venture Board. In the event that Pioneer should develop any pollinator, hybrid, or variety that contains Venture Proprietary Property and that Pioneer and the Venture agree it is in the best interest of Pioneer or the Venture to seek patent or plant 5 variety protection on such pollinator, hybrid or variety, then Pioneer shall have the responsibility and the cost of filing, prosecution and enforcement of any such patent or plant variety protection. C. The Venture shall bear the costs of maintaining and obtaining all Venture Proprietary Property and associated enabling technology necessary for Pioneer to develop Quality Trait Seed, including securing the appropriate freedom to operate anywhere in the world as it may be necessary to facilitate the purpose of the Venture. D. Each Party shall cooperate in requiring its employees and agents to cooperate in the execution of any documents necessary to facilitate compliance with the provisions of this Agreement. ARTICLE 9 - REVENUE SHARING - --------------------------- A. The Parties agree that the following principles shall guide the sources of revenue capture by the Venture: i. Premiums or royalties captured in Quality Trait Seed in addition to basic seed value. ii. Premiums or royalties paid to the Venture for the sale of Venture Products. iii. Value captured from sales of Venture Products. iv. Commissions for marketing assistance provided by the Venture in support of certain Pioneer seed sales. B. Additionally, Pioneer may serve as a collection point for the revenue streams through a license granted to the purchaser or contract producer of the Quality Trait Seed, as appropriate, and pass on the royalty, premium or commission to the Venture as described in the examples below: i. The Parties agree that the Pioneer licenses under the Venture Proprietary Property for development of Combined Quality Trait Seed to be sold on behalf of the Venture shall bear a royalty determined by the Parties, which royalty in each case shall be at fair market value giving consideration to the value that can be captured by the farmer/purchaser of the Quality Trait Seed or the value to the end-user customer of the Venture. ii. The Parties agree that Pioneer shall pay to the Venture a Quality Trait premium on all Quality Trait Seed sold by Pioneer. The Quality Trait premium shall be determined by the Venture giving consideration to the value that can be captured by the farmer/purchaser of the Pioneer Quality Trait Seed or the value of the Quality Trait to the end- users of the Venture. iii. The Parties agree that all royalties or Quality Trait premiums payable by Pioneer to the Venture shall be reconsidered and adjusted based on market conditions. iv. It is acknowledged by the Parties that the Venture, at its discretion, may assist Pioneer in the marketing of seed that is not Quality Trait Seed. In such case the Venture shall be paid a commission commensurate with the volume of seed that is sold by Pioneer as the result of such assistance and in the amount that the Parties shall agree upon prior to such marketing assistance, being provided by the Venture. v. The parties agree that if the ability to capture value for a Quality Trait Seed diminishes or disappears at the farmer level and Pioneer desires to continue to sell such seed, then Pioneer shall pay the Venture a royalty for use of the Venture Proprietary Property that is contained in such seed. C. Pioneer may collect such license fee, royalty or Quality Trait premium from the farmer or contract producer through a license agreement to be executed by the farmer or contract producer. The Parties shall mutually develop and agree upon the terms and the form of any such license. 6 ARTICLE 10 - QUALITY TRAIT GRAIN PRODUCTION - ------------------------------------------- The parties acknowledge that a primary business of the Venture is the supply of Venture Products to end-users. To assist in supply of those Venture Products, Pioneer agrees to make its worldwide crop production resources available for assisting the Venture with the management of contracting with growers to produce Venture Products from Quality Trait Seed. The Parties shall share expertise, databases and know-how to assist in the management of the contract growers. ARTICLE 11 - REGULATORY RESPONSIBILITIES - ---------------------------------------- The Parties acknowledge that the Venture Products will be subject to different regulatory requirements in different countries. Pioneer shall bear all responsibility and cost for seeking, maintaining and enforcing regulatory approval for selling the Quality Trait Seed. The Venture shall bear all responsibility and cost for seeking, maintaining and enforcing all regulatory approvals necessary for selling the Venture Products. The Venture shall be responsible for the expenses associated with obtaining necessary approvals and non-objections for the sale of transgenic products. ARTICLE 12 - DISPUTE RESOLUTION - ------------------------------- Any dispute involving the application or interpretation of this Agreement shall be arbitrated in accordance with the rules of the American Arbitration Association in the City of Des Moines, Iowa, which arbitration shall be final and binding upon the Parties. ARTICLE 13 - MODIFICATIONS - -------------------------- The parties may agree to modifications to this Agreement. Any such modifications are enforceable only if agreed to in writing by both parties, except as set forth below. ARTICLE 14 - INDEMNIFICATION - ---------------------------- Pioneer shall indemnify and hold harmless the Venture pursuant to the terms of that separate agreement entered into between Pioneer and DuPont on even date herewith, and Pioneer and the Venture, by cross-reference of said separate agreement, incorporate it herein. ARTICLE 15 - NO WAIVER OF RIGHTS - -------------------------------- The failure of any party hereto at any time to enforce any of the terms, provisions or conditions of this Agreement shall not be construed as a waiver of the same or of the right of any party to enforce the same on any subsequent occasion. ARTICLE 16 - NOTICES - -------------------- Any notice required or permitted to be given to any party for all of the purposes hereof shall be mailed by registered mail, return receipt requested, or hand delivered, addressed as follows: To DuPont: E.I. du Pont de Nemours and Company DuPont Legal 1007 Market Street Wilmington, Delaware 19898 ATTENTION: General Counsel Telephone No.: 302-773-0177 Facsimile No.: 302-773-4679 To Pioneer: Pioneer Hi-Bred International, Inc. 700 Capital Square 400 Locust Street Des Moines, IA 50309 ATTENTION: General Counsel Telephone No.: 515-248-4800 Facsimile No.: 515-248-4844 To the Venture: Optimum Quality Grains 10700 Justin Drive Urbandale, IA 50322 or to such other address or addresses as any of the parties shall designate by notice given as herein required. Notices shall be effective upon receipt by the party to whom they are addressed. 7 ARTICLE 17 - TERM AND TERMINATION - --------------------------------- A. Unless terminated pursuant to this provision, this Agreement shall automatically renew from year to year so long as the Venture is in existence. B. Either party may terminate this Agreement for breach as the term is defined herein. For purposes of this Agreement, "breach" shall be defined to occur only if either party willfully fails to substantially comply with any material term of this Agreement (including any arbitration decision) after written notice from the non-breaching party and after one hundred eighty days (180) opportunity to remedy such breach. In case of any dispute over payments, the tender of such payments into an escrow with an independent third party subject to legal resolution of a dispute shall not constitute a breach. C. The Parties agree that this is not a guaranteed production contract and that due to the many risks and uncertainties in seed production, in addition to the provisions of Article 20, Force Majeure, failure of Pioneer to fulfill the demand for Quality Trait Seed for reasons beyond Pioneer's reasonable control shall not result in a breach of Pioneer's obligations under this Agreement. D. Should either Pioneer or DuPont terminate this Agreement, their rights and obligations shall be governed by Article IX of the Formation Agreement entered into between them on even date herewith and any subsequent modifications thereto. ARTICLE 18 - COMPLIANCE WITH LAWS - --------------------------------- A. Each party shall be responsible for complying with all applicable laws, regulations, court decrees, ordinances and other rules of the United States and of each state, territory, municipality or other political subdivision having or exercising jurisdiction in connection with the subject matter of this Agreement. B. If any party discovers any variance between any law and any action of a party hereto, it shall inform the other party of such variance promptly in writing. Each party shall indemnify and hold the other party harmless from any liability or penalty levied on that party for non-compliance with law by that party, third parties or any division of government. C. This Agreement shall be governed by the laws of the State of Iowa. ARTICLE 19 - SUBCONTRACTING AND ASSIGNMENT - ------------------------------------------ No party shall assign this Agreement or any license granted hereunder to any other party without the prior written consent of the other parties, which consent shall not be unreasonably withheld. However, any party may assign this Agreement to a subsidiary company, provided, however, that such party shall remain liable for the performance of its obligations under this Agreement by such parent or subsidiary. ARTICLE 20 - FORCE MAJEURE - -------------------------- No Party shall be liable to the other Party for loss or damage resulting from any delay or failure to perform its contractual obligations within the time specified due to acts of God, war, acts of the public enemy, riot, civil commotion, sabotage, federal, state or municipal action or regulation (including delays, failure or refusal by any regulatory or other agency to act on or grant permits, licenses or rate increases), strikes or other labor troubles (not related to Pioneer employees), fires, flood, drought or other adverse environmental conditions, or any other causes, contingencies or circumstances within or without of the United States not subject to either party's control, which prevent or hinder performance hereunder. ARTICLE 21 - INVALID PROVISIONS - ------------------------------- If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provisions shall be fully severable; this Agreement shall be construed and enforced as if 8 such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provisions or by its severance from this Agreement. ARTICLE 22- COMPLETE AGREEMENT - ------------------------------ This Agreement along with the L.L.C. Agreement, the Formation Agreement, the Research Alliance Agreement and any Ancillary Agreements constitutes the entire Agreement among the parties and supersedes and merges all prior agreements with respect to the subject matter discussed herein and any warranty, representation, promise or condition in connection therewith not expressly incorporated herein shall not be binding upon any party. No modification, extension or waiver of this Agreement or any of its provisions shall be binding unless in writing signed by a duly authorized representative of each of the parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. Pioneer HI-BRED INTERNATIONAL, Optimum Quality Grains, L.L.C. INC. (Pioneer) By: /s/ Charles S. Johnson By: /s/ William F. Kirk --------------------------- --------------------------- Name: Name: ------------------------- ------------------------- Title: Title: ------------------------ ------------------------ EX-99.(G)1 15 ANNUAL REPORT 8/31/96 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year ended August 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission File Number : 0-7908 PIONEER HI-BRED INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Iowa (State or other jurisdiction of incorporation or organization) 42-0470520 (I.R.S. Employer Identification No.) 700 Capital Square, 400 Locust, Des Moines, Iowa 50309 (Address of principal executive offices) (515) 248-4800 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock ($1.00 par value) New York Stock Exchange EDGARWATCH Page 1 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Title of class NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the Registrant as of October 9, 1996, was $5,127,129,984. As of October 9, 1996, 82,378,119 shares of the Registrant's Common Stock, $1.00 par value, were outstanding. EDGARWATCH Page 2 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE 1. Registrant incorporates by reference portions of the Pioneer Hi-Bred International, Inc. Annual Shareholders' Report for the year ended August 31, 1996. (Items 1 and 2 of Part I, Items 5, 6, 7 and 8 of Part II.) 2. Registrant incorporates by reference portions of the Pioneer Hi-Bred International, Inc. Proxy Statement for the annual meeting of shareholders on January 28, 1997. (Items 10, 11, 12 and 13 of Part III). PART I ITEM 1. BUSINESS The description of business contained in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. ITEM 2. PROPERTIES The description of properties contained in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS The description of legal proceedings contained within footnote 7 in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market information for the Registrant's Common Stock contained in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Selected financial data contained in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. EDGARWATCH Page 3 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations contained in the Annual Report to Shareholders for the year ended August 31, 1996 is incorporated herein by reference. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Registrant, together with the report thereon of KPMG Peat Marwick LLP contained in the Annual Report to Shareholders for the year ended August 31, 1996 are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Reference is made to registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14(a) not later than December 10, 1996; and the information responsive to the item is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Reference is made to registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14(a) not later than December 10, 1996; and the information responsive to the item is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Reference is made to registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14(a) not later than December 10, 1996; and the information responsive to the item is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Reference is made to registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14(a) not later than December 10, 1996; and the information responsive to the item is incorporated herein by reference. EDGARWATCH Page 4 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The consolidated financial statements of Pioneer Hi-Bred International, Inc. and subsidiaries filed are listed on page 6. (a) 2. Financial Statement Schedules The financial statement schedules of Pioneer Hi-Bred International, Inc. and subsidiaries filed are listed on page 6. (a) 3. Exhibits The exhibits to the Annual Report of Pioneer Hi-Bred International, Inc. filed are listed on page 9. (b) Reports on Form 8-K No report on Form 8-K was filed during the fourth quarter of the year ended August 31, 1996. EDGARWATCH Page 5 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES OF PIONEER HI-BRED INTERNATIONAL, INC. FOR THE FISCAL YEAR ENDED AUGUST 31, 1996 INDEX Financial Statements The following consolidated financial statements of Pioneer Hi-Bred International, Inc. and subsidiaries are incorporated by reference in Part II, Item 8: Independent Auditors' Report Consolidated Balance Sheets - August 31, 1996 and 1995 Consolidated Statements of Income - years ended August 31, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity - years ended August 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows - years ended August 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements
Page Financial Statement Schedules The following financial statement schedules of Pioneer Hi-Bred International, Inc. and subsidiaries are submitted in response to Part IV, Item 14: Independent Auditors' Report................................................ 7 Schedule II - Valuation and Qualifying Accounts............................. 8 Exhibits to the Annual Report............................................... 9 All other financial statement schedules have been omitted as not required, not applicable, or because all the data are included in the financial statements.
EDGARWATCH Page 6 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Independent Auditors' Report To the Shareholders Pioneer Hi-Bred International, Inc. Under date of October 4, 1996, we reported on the consolidated balance sheets of Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended August 31, 1996, as contained in the 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1996. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related 1996, 1995 and 1994 financial statement schedule II. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Des Moines, Iowa October 4, 1996 EDGARWATCH Page 7 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (In millions)
Column A Column B Column C Column D Column E - -------- -------- -------- -------- -------- Additions Balance At Charged To Balance Beginning Costs And Deductions At End Description Of Period Expenses (Recoveries)* Of Period Allowance for Doubtful Accounts: Year ended August 31, 1996....... $ 19 $ 5 $ 1 $ 23 ------- ------ ------ ------ Year ended August 31, 1995....... $ 21 $ 2 $ 4 $ 19 ------- ------ ------ ------ Year ended August 31, 1994....... $ 19 $ 5 $ 3 $ 21 ------- ------ ------ ------
* Represents accounts charged off as uncollectible, net of recoveries of bad debts. EDGARWATCH Page 8 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- INDEX Exhibits to Annual Report on Form 10-K Year Ended August 31, 1996 PIONEER HI-BRED INTERNATIONAL, INC.
Page Exhibit 3.1--Articles of Incorporation (Note 1)............................... 10 Exhibit 3.2--By-Laws (Note 2)................................................. 10 Exhibit 4.1--Articles of Incorporation (Note 1)............................... 10 Exhibit 4.2--By-Laws (Note 2)................................................. 10 Exhibit 4.3--Rights Agreement (Note 3)........................................ 10 Exhibit 4.4--Specimen of Company's Common Stock Certificate (Note 4).......... 10 Exhibit 10--Material Contracts .1 Stock Option Plan (Note 5)....................................... 10 .2 Deferred Compensation Plan (Note 6).............................. 10 .3 Annual Deferred Compensation Plan (Note 7)....................... 10 .4 Consulting Agreement with a Director (Note 8).................... 10 .5 Supplemental Executive Retirement Plan........................... 11-27 .6 Restricted Stock Plan - Performance Based........................ 28-36 .7 Management Reward Program - Performance Based.................... 37-44 Exhibit 11--Statement re: Computation of earnings per share.................. 45 Exhibit 13--Annual Report to Shareholders for the fiscal year ended August 31, 1996 .1 Description of the Company's business............................ 46-47 .2 Selected financial data.......................................... 48 .3 Consolidated net sales and operating income (loss) by product statement....................................................... 49 .4 Management's discussion and analysis of financial condition and results of operations................................................... 50-58 .5 Consolidated financial statements of the Registrant, together with the report thereon.................................................. 59-77 .6 Research and product development................................. 78 .7 Description of properties........................................ 79 .8 Market for the Registrant's common stock......................... 80 Exhibit 21--Subsidiaries of Registrant........................................ 81-84 Exhibit 23--Consents of experts and counsel................................... 85 Exhibit 27--Financial data schedule........................................... 86
See Notes for Exhibits to Annual Report on Form 10-K EDGARWATCH Page 9 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- INDEX Notes for Exhibits to Annual Report on Form 10-K Year Ended August 31, 1996 PIONEER HI-BRED INTERNATIONAL, INC. Note 1. Incorporated herein by reference to Exhibit 4.2 of the Company's Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927) Note 2. Incorporated herein by reference to Exhibit 4.3 of the Company's Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927) Note 3. Incorporated herein by reference to Exhibit 1 of the Company's Form 8-A/A-1, filed March 14, 1995 (file #95520632) Note 4. Incorporated herein by reference to Exhibit 4.5 of the Company's Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927) Note 5. Incorporated herein by reference to Exhibit 4.1 of the Company's Form S-8 Registration Statement, filed July 26, 1996 (file #333-08927) Note 6. Incorporated herein by reference to Exhibit 10.2 of the Company's 1993 Annual Report on Form 10-K, filed November 29, 1993 Note 7. Incorporated herein by reference to Exhibit 10.3 of the Company's 1993 Annual Report on Form 10-K, filed November 29, 1993 Note 8. Incorporated herein by reference to Exhibit 10.5 of the Company's 1995 Annual Report on Form 10-K, filed November 28, 1995 EDGARWATCH Page 10 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I Amendment and Restatement Section 1.1. Amendment and Restatement. Pioneer Hi-Bred International, Inc. hereby amends and restates the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan (the `Plan'). The amended and restated Plan shall apply only with respect to Participants who are employed by the Company or its Subsidiaries on or after the effective date of this amendment and restatement. Section 1.2. Effective Date. The effective date of the amended and restated Plan is March 14, 1989. Section 1.3. Purpose. The purpose of the Plan is to supplement the retirement benefits provided to selected executive employees under the Pioneer Hi-Bred International, Inc., Retirement Plan and to provide equitable retirement and survivor benefits for key executive employees, their surviving spouses, and Beneficiaries. ARTICLE II Definitions As used in this Plan, the following terms shall have the following meanings: Section 2.1. "Actuarial Equivalent" means a benefit having the same value as the benefit which such Actuarial Equivalent replaces. The determination of an Actuarial Equivalent shall be based on an annual interest rate assumption of eight percent (8%) and the 1984 Unisex Pension Mortality Table with the ages in said table set back one (1) year. Section 2.2. "Base Income" means the average of the Executive's Compensation in the last full Calendar Year prior to the Executive's Normal Retirement, Early Retirement, Death, or Disability determination, whichever occurs first, and the three immediately preceding Calendar Years. Section 2.3. "Beneficiary" means the person or persons designated pursuant to Section 4.9 by a Participant, or subsequent to the Participant's death, the Participant's spouse, to receive the benefits under this Plan if the Participant and the Participant's spouse do not live to receive benefits through the Term Certain Expiration Date. If such designation is not made, "Beneficiary" means the legal representative of the Participant or of the Participant's spouse, if a spouse survives the Participant. Section 2.4. "Board of Directors" means the Board of Directors of Pioneer Hi-Bred International, Inc. or a committee of the Board of Directors appointed to administer the Plan. EDGARWATCH Page 11 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 2.5. "Calendar Year" means the twelve-month period beginning January 1 and ending December 31. Section 2.6. "Change in Control" means (a) the acquisition, whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "1934 Act")), or of record, of securities of Pioneer Hi-Bred International, Inc. representing twenty-five percent (25%) or more in number of any class of its then outstanding voting securities by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), including any corporation or group of associated persons acting in concert, other than (I) the Company and/or (II) any employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company, including a trust established pursuant to any such plan, or (b) the nomination and election of twenty-five percent (25%) or more of the members of the Board of Directors of Pioneer Hi-Bred International, Inc., without recommendation of such Board of Directors. The ownership of record of twenty-five percent (25%) or more in number of any class of the then outstanding voting securities of Pioneer Hi-Bred International, Inc. by a person engaged in the business of acting as a nominee for unrelated beneficial owners shall not in and of itself be deemed to constitute a Change in Control. Section 2.7. "Company" means Pioneer Hi-Bred International, Inc., an Iowa corporation, and all wholly-owned subsidiaries of Pioneer Hi-Bred International, Inc. Section 2.8. "Compensation" means all amounts paid or allocated by the Company to the Executive for services rendered to the Company, including any bonuses, restricted stock grants valued on the date of grant) and any amounts which the Executive would have received but for the Executive's election to defer the compensation in return for the unsecured promise of the Company to make payments after retirement or other termination of employment. Notwithstanding the above definition, Compensation shall not include: (a) Company contributions to any qualified pension or profit-sharing plan. (b) Director's fees. (c) Amounts paid as reimbursement for expenses incurred on behalf of the Company. (d) Amounts includible in the income of the Executive due to personal use of Company automobiles, aircraft, or other facilities or services, or due to payment of travel expenses for the Executive's spouse. (e) Incidental benefits paid on behalf of the Executive such as hospitalization insurance, health and accident insurance and group life insurance. (f) Extraordinary and nonrecurring expenses such as severance pay, lump sum payments made to terminate an employment contract, and relocation expenses, including mortgage interest differential payments and relocation bonuses. (g) Dividends paid on restricted stock. Compensation shall include all amounts contributed under a salary reduction agreement by the Participant to a plan maintained by the Company pursuant to Section 401(k) or Section 125 of the Internal Revenue Code of 1986, as amended. EDGARWATCH Page 12 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 2.9. "Competitive Activities" means (a) engaging, directly or indirectly, whether as an employee, independent contractor, consultant, or otherwise, in a business similar to the business of the Company, during the period of the Executive's employment with the Company, and/or (b) owning, managing, operating, controlling, being employed by or having a financial interest in, or being connected in any manner with the ownership, management, operation, or conduct of any such similar business, provided that mere ownership (directly, indirectly or beneficially) of the stock of a corporation representing less than five percent (5%) of such corporation's outstanding stock shall not be considered a Competitive Activity. Section 2.10. "Date of Potential Change in Control" means the date as of which the Board of Directors determines that a Potential Change of Control has occurred under Section 5.2 of Article V. Section 2.11. "Disability" means permanent long-term disability for which the Executive would be entitled to disability benefits under any Company long-term disability plan. Such determination shall be made in the sole discretion of the Board of Directors and the decision of the Board of Directors shall be final. Section 2.12. "Early Retirement" means retirement prior to age 65 by a Participant who remains in Full-Time Employment until age 55 or, if later, the date on which the Participant completes five (5) years of service with the Company. Section 2.13. "Executive" means a key executive employee of the Company who is designated as such by the Board of Directors under Section 3.1. Section 2.14. "Full-Time Employment" means employment as a full-time salaried employee of the Company or its Subsidiaries, including any period of determined Disability. Section 2.15. "Integration Benefits" means the sum of (a) Social Security benefits, (b) retirement benefits provided by any jurisdiction outside the United States, whether coverage is mandatory or elective, (c) retirement or survivorship benefits received under any pension or profit sharing plan of the Company that qualifies for treatment under Section 401 of the Internal Revenue Code of 1986, as amended, but not including benefits received under a plan including a cash or deferred arrangement (within the meaning of Section 401(k) of the Internal Revenue Code of 1986, as amended) or an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended), And (d) retirement or survivorship benefits received under any pension or profit sharing plan of the Company maintained for the benefit of nonresident alien employees with no U.S. source income. For purposes of this Plan, "Social Security benefits" shall be deemed to be those benefits which would be payable to the Participant or, in the event of the Participant's death, the benefits which would be payable to the Participant's surviving spouse, at the Participant's Social Security retirement age. For purposes of this Plan, a Participant shall be deemed to have elected to receive any benefits the Participant is entitled to receive under any qualified plan in the form of 15-year certain and life annuity based on the actuarial assumptions contained in such qualified plan, or, if no actuarial assumptions are contained in such qualified plan, based upon the actuarial assumptions specified in the Pioneer Hi-Bred International, Inc. Retirement Plan. The retirement benefits provided by any jurisdiction outside the United States shall be deemed to be an amount certified by a consulting firm selected by the Company. Subject to the foregoing, the Participant's Integration Benefits shall be determined by the Corporate Human Resources Department as of the date of the Participant's Normal Retirement, Early Retirement, death, or Disability determination and shall not thereafter be adjusted on account of cost-of-living adjustments; or otherwise. EDGARWATCH Page 13 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 2.16. "Involuntary Termination of Employment" means (a) the termination of employment of a Participant by the Company other than Termination for Cause, (b) the resignation or retirement of a Participant for Stated Good Reason, or (c) in the case of a Participant who is in the Full-Time Employment of a domestic Subsidiary, either (I) the sale of a substantial portion of the assets of the Subsidiary within the meaning of Section 280G of the Internal Revenue Code of l986, as amended, or (II) the acquisition by an unrelated third party of ownership of more than fifty percent (50%) of the then outstanding stock, capital, or profits interest of the Subsidiary. The Board of Directors, in its sole discretion, shall determine whether the acquisition by an unrelated third party of ownership of an interest in a foreign subsidiary constitutes an Involuntary Termination of Employment. Section 2.17. "Letter of Credit" means one or more irrevocable agreements maintained by the Company under which the Minimum Amount is available for the account of the Company. Section 2.18. "Minimum Amount" means an amount that is no less than one hundred percent (100%) of the change-in-control benefits that would be provided under Section 4.8 of this Plan if each Participant were entitled to change-in-control benefits on the Date of Potential Change in Control. Section 2.19. "Named Fiduciary" means the Corporate Human Resources Department of Pioneer Hi-Bred International, Inc. Section 2.20. "Normal Retirement" means retirement by a Participant who remains in the employ of the Company until age 65 at any time on or after the Participant attains age 65. Section 2.21. "Participant" means an Executive who is designated as eligible to participate in this Plan by the Board of Directors. Section 2.22. "Plan" means the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan, as amended from time to time. Section 2.23. "Potential Change in Control" means (A) The execution by Pioneer Hi-Bred International, Inc. of a written agreement which, if consummated, would constitute a Change in Control. (B) A public announcement (including any filing with the Securities and Exchange Commission) by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act) including any corporation or group of associated firms acting in concert, other than (I) the Company and/or (II) any employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company including a trust established pursuant to such plan, of an intention to take or consider taking actions which, if consummated, would constitute a Change in Control. EDGARWATCH Page 14 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- (C) The acquisition, whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the 1934 Act), or of record, of securities of Pioneer Hi-Bred International, Inc. representing fifteen percent (15%) or more in number of any class of its then outstanding voting securities by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), including any corporation or group of associated persons acting in concert, other than (I) the Company and/or (II) an employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company, including a trust established pursuant to any such plan. For purposes of this Section 2.23(C), the ownership of record of fifteen percent (15%) or more in number of any class of the then outstanding voting securities of Pioneer Hi-Bred International, Inc. by a person engaged in the business of acting as a nominee for unrelated beneficial owners shall not in and of itself be deemed to constitute a Potential Change in Control. (D) The occurrence of any other event that the Board of Directors determines is a Potential Change in Control. Section 2.24. "Stated Good Reason" means a written determination by a Participant that he reasonably and in good faith cannot continue to fulfill the responsibilities for which he was employed. The Participant's determinations will be conclusively presumed to be reasonable and in good faith if, without the Participant's express written consent the Company (a) reduces the Participant's base salary or rate of compensation as in effect immediately prior to the Change in Control, or as the same may have been increased thereafter, (b) fails to continue any bonus plans in which the Participant was entitled to participate immediately prior to the Change in Control, substantially in the form then in effect, (c) fails to continue in effect any benefit or compensation plan in which the Participant is participating immediately prior to the Change in Control (or plans providing substantially similar benefits), (d) assigns to the Participants any duties inconsistent with the Participant's duties, responsibilities or status immediately prior to the Change in Control, or changes the Participant's reporting responsibilities, titles or offices, or (e) requires the Participant to change the location of his job or office, so that the Participant will be based at a location more than thirty (30) miles distant by public highway from the location of his job or office immediately prior to the Change in Control. Section 2.25. "Subsidiary" means a corporation in which a majority of the voting securities outstanding at the time is owned directly or indirectly by the Company and/or by one or more of its other subsidiaries, or a non-corporate entity in which a majority of the capital or profits interest is owned directly or indirectly by the Company and/or by one or more of its other subsidiaries. Section 2.26. "Target Pre-Retirement Survivor Benefit" means the product of the applicable percentage multiplied by the Participant's Base Income. Participant's Age at Date of Death Applicable Percentage Less than 50 years 75% 50 to less than 55 years 70% 55 to less than 60 years 65% 60 to less than 65 years 60% EDGARWATCH Page 15 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- However, for purposes of this definition, "Base Income" shall be the Participant's Compensation in the last Calendar Year completed prior to the Participant's death in which the Participant was not disabled, subject to bonus and restricted stock grant recomputations substituting a four-year average of incentive bonuses paid and restricted stock granted for such Calendar Year and the three preceding Calendar Years in lieu of the incentive bonus paid and restricted stock granted in that Calendar Year. Section 2.27. "Target Retirement Benefit" means the product of sixty percent (60%) and the Participant's Base Income. Section 2.28. "Term Certain Expiration Date" means the fifteenth anniversary of the event, retirement or death, which causes payment of benefits under the Plan to commence. Section 2.29. "Termination for Cause" means the termination of employment of a Participant as a direct result of an act or acts of dishonesty constituting a felony under the laws of the United States or the State of Iowa and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Company. An act or acts of dishonesty constituting a felony will be deemed to occur only if the act or acts constituting the felony are established either by (a) the specific admission of the Participant, or (b) a final nonappealable judgment of a court of competent jurisdiction. Section 2.30. "Trust" means the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan Trust established under the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan Trust Agreement. Section 2.31. "Trust Agreement" means the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan Trust Agreement. Section 2.32. "Trustee" means the banking organization named in the Trust to hold and administer money and property in accordance with the Trust Agreement. Section 2.33. "Trust Fund" means all money and property delivered to the Trustee by the Company under the Trust Agreement, all investments and reinvestments made therewith or proceeds thereof and all earnings and profits thereon, less all payments and charges authorized under the Trust Agreement. ARTICLE III Participation Section 3.1. Participation. The Board of Directors shall have the sole discretion, from time to time, to designate which Executives shall participate in this Plan. This designation shall be by resolution of the Board of Directors. EDGARWATCH Page 16 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- ARTICLE IV Benefits and Distributions Section 4.1. Normal Retirement Benefits. If a Participant remains in the Full-Time Employment of the Company until age 65, the Participant shall receive a normal retirement benefit. The amount of the Participant's annual normal retirement benefit shall be equal to the Target Retirement Benefit reduced by the Integration Benefits. The Participant's annual normal retirement benefit, as so determined, shall be divided by twelve (12) to determine the Participant's monthly normal retirement benefits. The Participant's monthly normal retirement benefits shall be paid on the first day of each month with benefit payments commencing on the first day of the month immediately following the month of such Participant's retirement. The Participant's normal retirement benefits shall be paid in the form of an annuity for the Participant's life. Section 4.2. Early Retirement Benefits. The Board of Directors may grant early retirement benefits to a Participant who is in Full-Time Employment provided the Participant has at least five years of service with the Company and is at least age 55. The Board of Directors, in its sole discretion, may provide that early retirement benefits begin at any time after the granting of Early Retirement rather than at age 65. The amount of the Participant's annual early retirement benefit shall be determined by the Board of Directors. The Participant's annual early retirement benefit, as so determined, shall be divided by twelve (12) to determine the Participant's monthly early retirement benefit. The Participant's monthly early retirement benefits shall be paid on the first day of each month with benefit payments commencing on the first day of the month determined by the Board of Directors as the date early retirement benefit payments shall commence. The Participant's early retirement benefits shall be paid in the form of an annuity for the Participant's life. Section 4.3. Post-Retirement Death Benefits. If a Participant dies after benefits become payable under Section 4.1 or Section 4.2, but before the Participant receives payment of normal or early retirement benefits for 180 months, the Participant's surviving spouse, or in the event the Participant's spouse does not survive him or such spouse dies prior to the Term Certain Expiration Date, the Participant's Beneficiary, shall be entitled to receive a post-retirement death benefit. The amount of the annual post-retirement death benefit shall be equal to the Participant's Target Retirement Benefit reduced by the amount of Integration Benefits. The annual post-retirement death benefit, as so determined, shall be divided by twelve (12) to determine the monthly post-retirement death benefits. The monthly post-retirement death benefits shall be paid on the first day of each month, with benefit payments commencing on the first day of the month immediately following the month of the Participant's death and continuing until the Term Certain Expiration Date. If the Participant's spouse survives the Term Certain Expiration Date, the Participant's spouse shall be entitled to receive a continuing post-retirement death benefit in an amount equal to two-thirds (2/3) of the Participant's Target Retirement Benefit reduced by the Integration Benefits. The surviving spouse's continuing post-retirement death benefits shall be paid in the form of an annuity for the life of the Participant's surviving spouse. EDGARWATCH Page 17 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 4.4. Pre-Retirement Survivor Benefits. If a Participant dies prior to age 65 but while in Full-Time Employment and if the Participant is survived by the participant's spouse, the Participant's spouse shall receive a pre-retirement survivor benefit. In the event the Participant's spouse does not survive him or the Participant's spouse survives but does not live until the Term Certain Expiration Date, the designated Beneficiary shall receive a pre-retirement survivor benefit. The amount of the annual pre-retirement survivor benefit payable to the Participant's surviving spouse shall be equal to the Target Pre-Retirement Survivor Benefit reduced by the Integration Benefits. The amount of the annual pre-retirement survivor benefit payable to a Beneficiary other than the Participant's surviving spouse shall be equal to the Target Pre-Retirement Survivor Benefit less Integration Benefits to which the Participant's spouse would have been entitled through the Term Certain Expiration Date. The annual pre-retirement survivor benefit, as so determined, shall be divided by twelve (12) to determine the monthly pre-retirement survivor benefit. The monthly pre-retirement survivor benefits shall be paid on the first day of each month, with benefit payments commencing on the first day of the month immediately following the month of the Participant's death and continuing until the Term Certain Expiration Date. Section 4.5. Termination of Employment Benefits. Except as provided in Section 4.8, if a Participant's employment terminates prior to age 65, either by the Company or by the Participant, and either with or without cause, no further amounts shall be paid under any provision of this Plan, unless the Board of Directors, in its sole discretion, shall provide that benefits will be paid regardless of the Participant's termination of employment, provided that death, Early Retirement and determined Disability shall not be deemed a termination of employment for purposes of this Section 4.5. Section 4.6. Lump Sum Payment. At any time, in the sole discretion of the Board of Directors, the Actuarial Equivalent of the future benefits due under the Plan on behalf of any recipient may be computed and paid in one lump sum. Section 4.7. Prohibition of Competitive Activities. Except as provided in Section 4.8, if a Participant engages in Competitive Activities, no further benefits shall be payable under any provision of this Plan. Section 4.8. Change-in-Control Benefits. (a) Notwithstanding any other provision of this Plan, in the event of the Involuntary Termination of Employment of a Participant within five (5) years following a Change in Control, the Participant shall receive change-in-control benefits. Such change-in-control benefits shall be paid in lieu of and not in addition to any other benefits payable under this Plan. (b) If, on the date of the Participant's Involuntary Termination of Employment, the sum of the Participant's age and years of service equals at least fifty-five (55), the amount of the Participant's change-in-control benefits shall be an amount equal to the lump sum present value, as of the date of the Participant's Involuntary Termination of Employment, of the monthly normal retirement benefits that would be payable under this Plan determined as if the Participant had (i) remained in Full-Time Employment until age 65, (ii) retired on such date, and (iii) received monthly normal retirement benefit payments for 180 months. In all other cases, in the event of the Involuntary Termination of Employment of a Participant, the amount of the Participant's change-in-control benefits shall be an amount equal to the lump sum present value as of the date of the Participant's Involuntary Termination of Employment of the monthly early retirement benefits that would be payable under this Plan determined as if the Participant had (i) remained in Full-Time Employment until EDGARWATCH Page 18 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- age 55 (or, if later, the date on which would have completed five (5) years of service), (ii) retired on such date and (iii) received monthly early retirement benefit payments for 180 months equal to The Actuarial Equivalent of the Participant's normal retirement benefits. (c) The Participant's change-in-control benefits shall be paid in a lump sum no later than sixty (60) days following the Participant's Involuntary Termination of Employment. In the event of the Participant's death following the date of the Participant's Involuntary Termination of Employment but prior to payment of the change-in-control benefits, the Participant's change-in-control benefits shall be paid to the Participant's spouse, or, in the event the Participant's spouse does not survive him, the Participant's Beneficiary. (d) For purposes of determining the present value of such normal or early retirement benefits for purposes of this Section 4.8, the interest rate assumption shall be the rate used by the Pension Benefit Guaranty Corporation to determine the present value of an immediate benefit upon plan termination as of the first day of the month immediately preceding the date of the Participant's Involuntary Termination of Employment. Section 4.9. Designation of Beneficiary. The Participant, or, subsequent to the Participant's death, the Participant's spouse may designate a beneficiary or beneficiaries, primary and contingent, to receive any post-retirement death benefits or pre-retirement survivor benefits payable under this Plan if the Participant and the Participant's spouse do not live to receive benefits through the Term Certain Expiration Date. Such designation shall be in writing, signed by the Participant or the Participant's spouse, as the case may be, and delivered to the Corporate Human Resources Department of the Company, to be effective when received by the Corporate Human Resources Department. The Participant, or the Participant's spouse, as the case may be, shall have the right to change such designation, without the consent of any prior beneficiary, by filing a new designation, in the same manner, with the Corporate Human Resources Department of the Company. Any such changes shall be deemed to revoke all prior designations, unless a contrary intention is expressly stated in the change of designation. In the event such designation is not made, any remaining payments to be paid under this Plan shall be paid to the legal representative of the Participant or of the Participant's spouse, if a spouse survives the Participant. Section 4.10. Facility of Payment. If the Board of Directors determines that a Participant, his spouse or Beneficiary is unable to care for his affairs and a legal representative has not been appointed for such person, the Board of Directors may (but shall not be required to) direct that any payments made hereunder shall be made to a spouse, parent, child, or other blood relative of such person, or to anyone found by the Board of Directors properly to have incurred expense for the support and maintenance of such Participant, his spouse or Beneficiary, so long as, under applicable law, such payments are permitted and discharge completely all liabilities of the Company under the Plan. Section 4.11. Taxes. The Company shall deduct from any distributions under this Plan the amount of any taxes required to be withheld from such distribution by any federal, state or local government. The Participants, their spouses, Beneficiaries and personal representatives shall bear any and all federal, state, local or other taxes imposed on amounts distributed under this Plan. EDGARWATCH Page 19 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- ARTICLE V Funding of Benefits Section 5.1. Notification. Immediately upon gaining knowledge that a Potential Change in Control has occurred or is likely to occur, a member or members of the Board of Directors shall notify the President of Pioneer Hi-Bred International, Inc. The notification shall be a written certification of such member or members to the President setting forth the facts upon which such knowledge is based. Section 5.2. Meeting of the Board of Directors. Upon receipt of the notification required by Section 5.1 of this Article V, the President or any two members of the Board of Directors shall call a special meeting of the Board of Directors to determine whether a Potential Change in Control has occurred. If the Board of Directors determines that a Potential Change in Control has occurred, the Board of Directors shall direct the appropriate officers of Pioneer Hi-Bred International Inc. to fund the Trust in accordance with Section 5.3 of this Article V. Section 5.3. Funding the Trust. On the Date of potential Change in Control, or as soon as is administratively feasible following the Date of Potential Change in Control, Pioneer Hi-Bred International, Inc. shall contribute to the Trust (a) a Letter of Credit in the Minimum Amount, or (b) cash or property equal in value to the Minimum Amount. In the event that Pioneer Hi-Bred International, Inc. funds the Trust with a Letter of Credit, the Board of Directors shall cause the Minimum Amount to be drawn and contributed to the Trust upon the occurrence of a Change in Control, or earlier in the discretion of the Board of Directors. Section 5.4. The Trust. The Trust Fund shall be held and administered for the sole purpose of providing deferred compensation to Participants in accordance with the provisions of this Plan and the Trust Agreement and defraying reasonable expenses of administration in accordance with the provisions of the Trust Agreement; provided that if (a) Pioneer Hi-Bred International, Inc. is unable to pay its debts as they mature or as they become due or (b) Pioneer Hi-Bred International, Inc. files or has filed against it any proceedings under the bankruptcy laws of the United States or the State of Iowa, the Trust Fund shall be used to satisfy the claims of the general creditors of Pioneer Hi-Bred International, Inc. ARTICLE VI Administration and Amendment of Plan Section 6.1. Authority of Board of Directors. The Plan shall be administered by the Board of Directors. 'The Board of Directors shall have plenary authority to select employees who are eligible to participate in the Plan, to make all determinations required under the Plan, to interpret the Plan, to decide all questions of fact arising under the Plan, to formulate rules and regulations covering the operation of the Plan and to make all other determinations necessary or desirable in the administration of the Plan. The decision of the Board of Directors on any questions concerning or involving the interpretation or administration of the Plan shall be final and conclusive. While this Plan is intended to supplement the benefits provided under the Pioneer Hi-Bred International, Inc. Retirement Plan, in interpreting or administering this Plan, the Board of Directors need not consider or be bound by any interpretation of the provisions of the Pioneer Hi-Bred International, Inc. Retirement Plan or the manner in which such plan is administered. EDGARWATCH Page 20 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 6.2. Claim for Benefits. Any claim for benefits shall be made in writing to the Named Fiduciary. The claim for benefits shall be reviewed by the Named Fiduciary and the Board of Directors. If any part of the claim is denied, the Named Fiduciary shall provide a written notice, within ninety (90) days after the receipt of the claim by the Named Fiduciary, setting forth: (a) the specific reasons for the denial; (b) specific reference to the provision of this Plan or any agreement entered into between the Participant and the Company upon which the denial is based; (c) any additional information the claimant should furnish to perfect the claim; and (d) the steps to be taken if a review of the denial is desired. If a claim is denied and a review is desired, the Participant (or the Participant's Beneficiary, as the case may be) shall notify the Named Fiduciary in writing within sixty (60) days. In requesting a review, the Participant or Beneficiary may review this Plan or any documents relating to it and submit any written issues and comments he may feel appropriate. In its sole discretion the Board of Directors shall then review the claim and provide a written decision within sixty (60) days. This decision shall state the specific reasons for the decision and shall include reference to specific provisions of the Plan or any agreement entered into between the Participant and the Company on which the decision is based. Section 6.3. Information Concerning Integration Benefits. The recipient of benefits under any provision of this Plan shall be required to inform the Company of any amount of Social Security benefits, retirement benefits provided by any jurisdiction outside the United States or any other amount which might affect benefits under this Plan, to be received by the recipient. If such information is requested by the Company, but adequate information is not received prior to five (5) days before the payment date of any payment dependent on the information requested, the benefit payment may be delayed, without interest, until ten (10) days after such information is received. Section 6.4. Amendment and Termination. The Plan may at any time be amended, modified or terminated by the Board of Directors. Prior to a Change in Control, no amendment, modification or termination shall, without the written consent of the affected Participant, spouse or Beneficiary, reduce the benefits any such person was receiving under this Plan. In the event of a Change in Control, no amendment, modification or termination shall, without the written consent of the affected Participant, spouse, or Beneficiary, reduce the benefits such person was receiving or the benefits that would be paid upon the Participant's retirement, death, or termination of employment, including the benefits that would be paid upon the Participant's Involuntary Termination of a Participant following a Change in Control, under the terms of the Plan immediately prior to the Change in Control. ARTICLE VII Miscellaneous Section 7.1. No Assignment. The right of a Participant (or Beneficiary, as the case may be) to receive any distribution under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, levy or charge the same shall be void; provided, however, that the right to receive payment is transferable by the laws of descent and distribution. EDGARWATCH Page 21 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 7.2. Unsecured Claim. The right of any Participant (or his Beneficiary or personal representative) to receive any distribution under the Plan (directly from the Company or through the Trust) shall be an unsecured claim against the general assets of the Company, and neither the Plan nor the Trust entitle a Participant (or his Beneficiary or personal representative) to a greater priority than the Company's general creditors. Assets, if any, which may be set aside by the Company for accounting purposes shall not in any way be held in trust for, or be subject to, any prior claims by the Participant or his Beneficiary. The Company shall have no duty whatsoever to purchase any assets for purposes of providing benefits under this Plan. The Company's promise to pay the benefits provided under this Plan shall be a contractual obligation that is not evidenced by notes or secured in any way. Section 7.3. No Rights in Life Insurance. If the Company elects to purchase one or more life insurance contracts to provide the Company with funds to make payments under this Plan, the Company shall at all times be the sole and complete owner and beneficiary of such contracts, and shall have the unrestricted right to use all amounts and to exercise all options and privileges thereunder without the knowledge or consent of the Participant, his Beneficiary, or any other person, and no Participant, Beneficiary, or person, other than the Company, shall have any right, title, or interest whatsoever in or to any such contract. The Participant shall cooperate with all reasonable requests made by the Company or any insurance carrier selected by the Company to determine whether the Participant is insurable at standard rates, including any requests made by the Company or such insurance carrier that the Participant submit to a medical examination, or provide other information relevant to a determination of whether the Participant is insurable at standard rates, including the Participant's current health status, health history of the Participant and any family members, and the activities engaged in by the Participant including dangerous or illegal activities. Section 7.4. No Contract of Employment. Nothing in this Plan shall be construed as a contract of employment between the Company and any Participant. Nothing in this Plan shall be deemed to constitute a contract for services between the Company and the Participant, and nothing contained in this Plan shall be deemed to give the Participant any right to continue furnishing services to the Company or the Company any right to demand such services. Except as provided in Section 4.8, nothing in this Plan shall be construed as a limitation of the right of the Company to discharge the Participant, with or without cause. Section 7.5. Binding Effect. This Plan shall be binding upon the Company, its successors and assigns, and upon the Participant, his spouse, his Beneficiary, and their heirs, legatees, executors and personal or legal representatives. Section 7.6. Gender; Headings. Any masculine pronoun shall include the feminine and the singular shall include the plural, and vice versa. The headings in this Plan are for convenience of reference only. Section 7.7. Severability. If any provision of this Plan is held to be illegal, invalid, or unenforceable, such illegality, invalidity, or unenforceability shall not affect the remaining provisions of this Plan, and such provisions shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never been inserted herein. Section 7.8. Governing Law. This Plan shall be governed by the laws of the State of Iowa without reference to the principles of conflicts of law therein. EDGARWATCH Page 22 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers. PIONEER HI-BRED INTERNATIONAL, INC. By: /s/ Thomas N. Urban ------------------------------- Thomas N. Urban President By: /s/Dale L. Porter --------------------------- Dale L. Porter Secretary TO: Corporate Human Resources Department Pioneer Hi-Bred International, Inc. Suite 700, Capital Square Des Moines, Iowa 50309 RE: Beneficiary Designation Gentlemen: Pursuant to Section 4.9 of the Pioneer Hi-Bred International, Inc. Supplemental Executive Retirement Plan, effective as amended and restated March 14, 1989, I hereby designate that benefits payable under Sections 4.4, 4.5, or 4.8(c) of the Plan be paid to the following person(s) in the indicated proportions (if none indicated, benefits shall be payable in equal proportion to each person designated): (Designated Beneficiaries) (Proportion) ========================= ============== ========================= ============== If any person is deceased at the time of any payment to be made under the Plan, the payment allocable to that person shall be made to the following person(s) in the indicated proportions (if none indicated, benefits shall be payable in equal proportion to each person designated): (Designated Beneficiaries) (Proportion) ========================== ============== ========================== ============== Notwithstanding any provision of the Plan and this designation to the contrary, in the event that my spouse survives me, he/she [shall] [shall not] have the right to revoke any designation of beneficiaries made herein and thereupon designate the person(s) to receive the benefits described in Sections 4.3, 4.4, or 4.7 of the Plan. This beneficiary designation shall remain in full force unless and until canceled or superseded by written notice executed by me and delivered to you before my death. Very truly, -------------------------- EDGARWATCH Page 23 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- AMENDMENT TO THE SERP 1) "Fiscal" replaces the word "Calendar" in Sections 2.2 and 2.26. 2) Section 2.5 be deleted in its entirety. 3) A new Section 2.7 should be added which shall read in its entirety as follows: Section 2.7 "Company Long-Term Disability Plan" means a group disability plan which is sponsored by the Company or one of its Subsidiaries and for which premiums are paid by the Company or one of its Subsidiaries or which is funded by the Company or one of its Subsidiaries without the payment of premiums by the Participant. It does not include a plan or a portion of the plan for which premiums are paid by the Participant. 4) The first sentence of Section 2.8 be deleted and replaced with the following: "Compensation" means all amounts paid or allocated by the Company to the Executive for services rendered to the Company, including any bonuses, restricted stock grants and any amounts which the Executive would have received but for the Executive's election to defer the compensation in return for the unsecured promise of the Company to make payments after retirement or other termination of employment. Restricted stock grants, bonuses and other compensation will be included as part of compensation for the Fiscal Year in which the service was rendered. Restricted Stock will be valued on the date of grant without regards to restrictions. 5) The following language in Section 2.12 should be deleted: "any Long-Term disability plan sponsored by the Company or a subsidiary" and replaced with: "Company Long-Term Disability Plan" 6) Capitalize Company Long Term Disability Plan in Section 2.11. 7) A new Section 2.12 should be added which reads as follows: Section 2.12. "Disability Retirement" means retirement of a participant who has a disability and who has requested disability retirement, and that is accepted and approved by the Board of Directors in its sole discretion prior to a participant reaching age 65. 8) Section 2.12 shall be deleted and replaced with the following: Section 2.12 "Early Retirement" means retirement accepted and approved by the Board of Directors in its sole discretion prior to a Participant reaching age sixty-five (65) who remains in Full Time Employment until age fifty-five (55), or if later, the date of which the Participant completes five (5) years of service with the Company. 9) A new Section 2.14 be added which shall read in its entirety as follows: Section 2.14 "Fiscal Year" means the 12 month period beginning September 1 and ending August 31. EDGARWATCH Page 24 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 10) The following should be included at the end of Section 2.14: "unless Disability Retirement is accepted and approved by the board of directors." 11) The second sentence of Section 2.15 shall be deleted and replaced with the following: For purposes of this Plan, "Social Security Benefits" shall be deemed to be zero until the Participant first begins receiving Social Security benefit payments. Thereafter, Social Security benefits shall equal the actual amount of Social Security benefits which the Participant receives when the Participant first begins receiving benefits. 12) The following should be included after "Subject to the foregoing" in the last sentence of Section 2.15: "and as set forth in Article IV." 13) The following sentence be added after the last sentence of 2.26: For purposes of the recomputation, restricted stock grants and bonuses will be included in Compensation for the Fiscal Year in which the services was rendered. Restricted stock will be valued on the date of grant without regards to restrictions. 14) The following shall be added after the end of the second sentence of Section 4.1: If necessary, the normal retirement benefit will be adjusted when the Participant begins receiving Social Security Benefits. 15) The first three sentences of Section 4.2 shall be deleted and replaced with the following: Section 4.2 Early Retirement Benefits. If early retirement is accepted and approved by the Board of Directors in its sole discretion, a Participant who is in Full Time Employment and has reached age fifty-five (55) and has five (5) years of service will receive an early retirement benefit. The amount of the Participant's early retirement benefit shall be equal to the Target Retirement Benefit reduced by the Integration Benefits. If necessary, the early retirement benefit will be adjusted when the Participant begins to receive Social Security benefits. 16) A new Section 4.3 should be added which reads as follows: Section 4.3. Disability Retirement Benefits. If the Participant so requests, and if Disability Retirement is accepted and approved by the Board of Directors in its sole discretion, a Participant who has a disability will receive a disability retirement benefit in lieu of any benefits that might be paid under Section 4.1 or 4.2. The amount of the Participant's disability retirement benefit shall be equal to the Target Retirement Benefit reduced by the Integration Benefit and the amount that the Participant is receiving under any Company Long-Term Disability Plan. EDGARWATCH Page 25 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Prior to being entitled to receive benefits described under clauses (c) and (d) of the first sentence of Section 2.15 because the Participant is receiving disability benefits, there will be no reduction for such benefits. After the Participant is entitled to receive benefits described under clauses (c) and (d) of the first sentence of Section 2.15, disability retirement benefits will be recalculated with a reduction for such benefits as described in Section 2.15. If necessary, the disability retirement benefit will be adjusted when the Participant begins to receive Social Security Benefits. It also will be adjusted based upon any adjustment in the benefits that are payable under any Company long term disability plan. The Participant's annual disability retirement benefit, as so determined shall be divided by twelve (12) to determine the Participant's monthly disability retirement benefits. The Participant's monthly disability retirement benefits shall be paid on the first day of each month with benefit payments commencing on the first day of the month immediately following the month Disability Retirement is approved. The Participant's disability retirement benefits shall be paid in the form of an annuity for the Participant's life. 17) The following language should be deleted from the first sentence of Section 4.3: "4.1 or Section 4.2 but before the Participant receives payment of normal or early retirement benefits for 180 months" and replaced with "4.1, Section 4.2 or Section 4.3 but before the Participant receives payment of normal, early or disability retirement benefits for 180 months," 18) The second sentence of Section 4.3 should be deleted and replaced with the following: The amount of annual post-retirement death benefits shall be equal to the annual benefit payable to the Participant under Section 4.1, 4.2 or 4.3 except as set forth below. Reductions for Social Security benefits and Company Long-Term Disability Plan payments will no longer be based upon what was paid to the Participant but will be adjusted based upon the amount of the benefits payable under a Company Long-Term Disability Plan or amount of Social Security benefits payable to the surviving spouse or other Beneficiary because of the Participant's death. If Participant was receiving disability retirement benefits, and the Participant did not receive benefits described under clauses (c) and (d) of the first sentence of Section 2.15, post-retirement death benefits will also be reduced by the payments to surviving spouse or the Participant's Beneficiary received from benefits described under clauses (c) and (d) of the first sentence of Section 2.15. 19) The following should be deleted from the fifth sentence of Section 4.3: "or the Participant's Target Retirement Benefit reduced by the Integration Benefits" and replaced by the following: "of the amount of annual post-retirement death benefits that the surviving spouse was receiving at the Term Certain Expiration Date." EDGARWATCH Page 26 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 20) The following should be added at the end of the third sentence of Section 4.4: "and the amount of benefits the surviving spouse receives under a Company Long-Term Disability Plan." 21) The following language should be deleted from the fourth sentence of Section 4.4: "to which the Participant's spouse would have been entitled through the Term Certain Expiration Date" and replaced with the following: "and the amount of benefits the Beneficiary receives under a Company long term disability plan." 22) Add the following at the end of Section 4.4: For the purposes of this Section only, the Social Security Benefits included in the Integration Benefits shall be the Social Security Benefits payable to the Surviving Spouse or other beneficiary because of the Participant's death. If necessary, the benefit will be adjusted based upon the amount of the benefits payable under a Company long term disability plan or amount of Social Security benefits payable to the surviving spouse or other Beneficiary. The monthly pre-retirement death benefits for Beneficiaries other than the surviving spouse should only be paid until the Term Certain Expiration Date. 23) In Section 4.5 replace "and determined Disability" with "Disability and Disability Retirement". 24) In the last sentence of Section 4.8(b) delete the following: "equal to the Actuarial Equivalent of the Participant's normal retirement benefits." 25) The following shall be added after the last sentence of Section 4.8(d): For the purposes of this Section 4.8, Social Security Benefits included in the Integration Benefits will be zero. 26) The following section be added at Section 4.12: Section 4.12 Benefits Calculations. If necessary, the Company will calculate a benefit based on estimated bonus, restricted stock awards and compensation. The estimates will be determined by the Company in its sole discretion. The Company will recalculate the benefits based on the actual amounts and will adjust the next payment so that that payment and all previous payments equal the amount the employee would have been entitled to if the employee had received his benefits based on the actual amount from the beginning of the payments. Thereafter, payments will be based on the actual amounts. 27) The following should replace "retirement" in the third sentence of Section 6.4 "Normal, Early or Disability Retirement". 28) In Sections 4.5 and 7.4, "Section 4.8" should be replaced with "Section 4.9". 29) The section numbers be renumbered as appropriate to reflect the above changes. EDGARWATCH Page 27 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. RESTRICTED STOCK PLAN -- PERFORMANCE BASED SECTION 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment. Pioneer Hi-Bred International, Inc. hereby establishes a stock reward plan for key management employees, as described herein, which shall be known as the PIONEER HI-BRED INTERNATIONAL, INC. RESTRICTED STOCK PLAN -- PERFORMANCE-BASED (hereinafter called the "Plan"). 1.2 Effective Date. The effective date of the Plan is September 1, 1995. 1.3 Purpose. The purpose of this Plan is to align the interests of key management employees with the long-term interest of shareholders through the ownership and retention of Company stock. SECTION 2. DEFINITIONS Whenever used herein, the following terms shall have the meanings set forth below: (a) "Base Salary" means a Participant's base annual salary as of August 31 of the Plan Year without reduction for contributions or deferrals to various plans. (b) "Board" means the Board of Directors of Pioneer Hi-Bred International, Inc. (c) "Change in Control" means (i) the acquisition, whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities and Exchange Act of 1934, as amended (the "1934 Act")), or of record, of securities of Pioneer Hi-Bred International, Inc. representing twenty-five percent (25%) or more in number of any class of its then outstanding voting securities by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), including any corporation or group of associated persons action in concert, other than (A) the Company and/or (B) any employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company, including a trust established pursuant to any such plan, or (ii) the nomination and election of twenty-five percent (25%) or more of the members of the Board of Directors of the Company without recommendation of such Board of Directors. The ownership of record of 25% or more in number of any class of the then outstanding voting securities of the Company by a person engaged in the business of acting as nominee for unrelated beneficial owners shall not in and of itself be deemed to constitute a Change in Control. (d) "CIC Participant" means an employee 1) who would have been eligible for a grant in respect of the Plan Year prior to the Plan Year in which the Change in Control occurs regardless of whether he or she was terminated after the Plan Year but before the grant or 2) who but for his or her termination, would have been eligible for a grant in respect of the Plan Year in which the Change in Control occurred. (e) "Committee" means the Compensation Committee of the Board or any successor Committee. (f) "Company" means Pioneer Hi-Bred International, Inc., an Iowa corporation, and any division or subsidiary thereof. (g) "Corporate Management Committee" means the Company's committee of executive officers selected by the chief executive officer or any successor committee. (h) "The Cumulative Three Years Earnings Per Share" means for a given Plan Year the sum of the Earnings Per Share for the Plan Year and the two previous Plan Years. Plan year for years prior to the effective date shall be the Company's fiscal year. EDGARWATCH Page 28 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- (i) "Earnings Per Share" means the after tax earnings per share of outstanding stock plus or minus adjustments to remove the impact of unusual or nonrecurring events. (j) "EPS Growth Percentage" means the percentage that corresponds to the Cumulative Three Years Earnings Per Share for the given Plan Year as shown on Attachment 1 or as may be modified prior to the Plan Year by the Compensation Committee. Minimum is 0% with no maximum. Interpolation of actual results is computed between table points. Points beyond 25% are calculated using the same methodology used in calculating the EPS Growth Percentage on Attachment 1. (k) "EPS Multiplier" means the multiplier as calculated in Section 5.2. (l) "Fair Market Value" of a share of Common Stock of the Company shall mean, with respect to the date in question, either (x) the average of the highest and lowest selling prices or (y) the closing sale price of such stock, as selected by the Committee; or if the Company's Common Stock is not quoted by NASDAQ, traded on a national exchange, or otherwise traded publicly, the value determined, in good faith, by the Committee. (m) "Involuntary Termination of Employment" means (a) the termination of employment of a CIC Participant by the Company other than Termination for Cause, (b) the resignation or retirement of a CIC Participant for Stated Good Reason, or (c) in the case of a CIC Participant who is in the full-time employment of a domestic Subsidiary, either (I) the sale of a substantial portion of the assets of the Subsidiary within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or (II) the acquisition by an unrelated third party of ownership of more than fifty percent (50%) of the then outstanding stock, capital, or profits interest of the Subsidiary. The Board of Directors, in its sole discretion, shall determine whether the acquisition by an unrelated third party of ownership of an interest in a foreign subsidiary constitutes an Involuntary Termination of Employment. (n) "Key Management Employee" means those employees eligible under Section 4. (o) "Operations Committee" means the Company Committee of officers responsible for various operations as selected by the chief executive officer or any successor committee. (p) "Outstanding Stock" means the weighted average daily stock outstanding without giving effect to the dilutive impact of outstanding options. (q) "Participant Pay Band" means that Pay Band for which the Participant is categorized pursuant to Section 5.3. (r) "Pay Band Target Percentage" means the Reward targets as a percent of Base Salary for a Pay Band or portion thereof as set forth in Section 5.4. (s) "Participant" means a Key Management Employee who is awarded and holds Restricted Stock pursuant to the Plan. (t) "Pay Band" means job evaluation categories I - VI. The Pay Band may be further divided or consolidated as necessary. (u) "Plan" means the Pioneer Hi-Bred International, Inc. Restricted Stock Plan -- Performance-Based, as amended from time to time. (v) "Plan Year" means the 12 month period beginning September 1 and ending August 31. (w) "Prior to the Plan Year" means either prior to or within the first ninety days of the Plan Year. (x) "Restricted Stock" means the common stock, $1.00 par value, of Pioneer Hi-Bred International, Inc. which is issued or granted pursuant to the Plan. (y) "Shares" means the common stock, $1 par value, of the Company. EDGARWATCH Page 29 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- (z) "Stated Good Reason" means a written determination by a CIC Participant that he reasonably and in good faith cannot continue to fulfill the responsibilities for which he was employed. This determination will be conclusively presumed to be reasonable and in good faith if, without the CIC Participant's express written consent, the Company (a) reduces the CIC Participant's base salary or rate of compensation as in effect immediately prior to the Change in Control, or as the same may have been increased thereafter, (b) fails to continue any bonus plans in which the CIC Participant was entitled to participate immediately prior to the Change in Control, substantially in the form then in effect, (c) fails to continue in effect any benefit or compensation plan in which the CIC Participant is participating immediately prior to the Change in Control (or plans providing substantially similar benefits), (d) assigns to the CIC Participants any duties inconsistent with the CIC Participant's duties, responsibilities or status immediately prior to the Change in Control, or changes the CIC Participant's reporting responsibilities, titles or offices, or (e) requires the CIC Participant to change the location of his job or office, so that the Participant will be based at a location more than thirty (30) miles distant by public highway from the location of his job or office immediately prior to the Change in Control. (aa) "Subsidiary" means a corporation in which the majority of the voting securities outstanding at the time is owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or by one or more of its other subsidiaries, or a non-corporate entity in which a majority of the capital or profits interest is owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or one or more of its other subsidiaries. (ab) "Termination for Cause" means the termination of employment of a CIC Participant as a direct result of an act or acts of dishonesty, constituting a felony under the laws of the United States or the State of Iowa and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Company. An act or acts of dishonesty constituting a felony will be deemed to occur only if the act or acts constituting the felony are established either by (a) the specific admission of the Participant or (b) a final noappealable judgment of a court of competent jurisdiction. SECTION 3. ADMINISTRATION 3.1 Administration. The Plan shall be administered by the Committee. The Committee shall have authority to make all determinations required under the Plan, to interpret the Plan, to decide questions of facts arising under the Plan, to formulate rules and regulations covering the operation of the Plan and to make all other determinations necessary or desirable in the administration of the Plan. The decisions of the Committee on any questions concerning or involving the interpretation or administration of the Plan shall be final and conclusive. 3.2 Delegation of Authority. The Committee may delegate to any officer of the Company its duties under the Plan pursuant to such conditions or limitations as the Committee may establish, except that only the Committee may administer the Plan for Participants who are subject to Section 16 of the Securities Exchange Act of 1934. SECTION 4. ELIGIBILITY To be eligible to participate in the Plan an individual must be on full-time, regular status on the United States or Canadian payroll. To be eligible to receive grants, such employee must be eligible as of the last day of the Plan Year and as of the date of the grant except as set forth below. Employees who meet the following conditions are also eligible to receive a grant: 1) eligible on the last day of the Plan Year, 2) before the date of the grant employment terminates because of normal retirement, death, or total and permanent disability, or employment terminates after early retirement is accepted and approved by the Committee, and 3) the employee is not terminated for cause as determined by the Committee prior to the date of the grants. This eligibility exception does not mean that grants of stock will be accelerated. Additionally, the employee must be in one of the Pay Bands a) I - III EDGARWATCH Page 30 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- (inclusive), b) IV with recommendation of the Corporate Officer to whom the employee's business unit reports and approval by the Operations Committee, or c) (as an exception) with the approval of the Corporate Management Committee. Prior to the Plan Year, the Committee may adjust which Pay Band an employee must be in to be eligible. Other employees of the Company or its affiliates approved by the Committee will also be eligible and entitled to grants including officers not on the United States or Canadian payroll. SECTION 5. GRANT 5.1 Nature of Goal. Grants will be based upon three-year EPS growth. 5.2 EPS Multipliers. The EPS Multiplier is that multiplier as set forth below, or as approved by the Committee Prior to the Plan Year, that corresponds to EPS Growth Percentage. EPS Growth Percentage Multiplier* 0% 0.00 1% 0.08 2% 0.17 3% 0.25 4% 0.33 5% 0.42 6% 0.50 7% 0.58 8% 0.67 9% 0.75 10% 0.83 11% 0.92 12% 1.00 13% 1.00 14% 1.00 15% 1.25 16% 1.40 17% 1.55 18% 1.70 19% 1.85 20% 2.00 21% 2.05 22% 2.10 23% 2.15 24% 2.20 25% 2.25 *Minimum is 0% with no maximum. Interpolation of actual results is computed between table points. Beyond 25% each 1% increase in the EPS Growth Percentage corresponds to an .05 increase in the multiplier. 5.3 Pay Band. Each employee is assigned or reassigned to a Pay Band. An appropriate Pay Band for an employee is determined by considering job factors such as: 1) impact, 2) complexity, 3) knowledge, skills and competencies, and 4) experience. EDGARWATCH Page 31 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 5.4 Pay Band Target Percent. The following table sets forth the targets as a percent of Base Salary for each respective Pay Band: Pay Band Target CEO 75% I 60% II 45-50%* III 25-40%* IV 10% *The exact Pay Band Target Percent will be determined prior to the Plan Year depending upon market data. Such Pay Band Target Percentage may be modified by the Committee Prior to the Plan Year. If a Key Management Employee moves from 1 eligible Pay Band or portion thereof to another in a Plan Year the Pay Band Target Percent will be adjusted pro rata for the portion of the year in each Pay Band. 5.5 Grant. a) Shares of the Restricted Stock will be granted under the Plan equal in value to i) EPS multiplier, multiplied by the Pay Band Target Percentage multiplied by Base Salary, or ii) such lesser value as the Committee shall determine in its sole discretion. b)The shares to be granted will be determined as of the grant date, or such other date approved by the Committee, based on the Fair Market Value of a share of Common Stock the trading day before the grant. Such value shall be without reference to any restrictions on transfer. Such grants will be made following the end of the Plan Year. c) The calculation in clause i) of Section 5.5(a), for a Key Management Employee who was eligible at the end of the Plan Year but not eligible during some period of the Plan Year will be reduced pro rata for the portion of the Plan Year he was not eligible. 5.6 Maximum. In no event will the reward be in excess of a maximum set for each Pay Band as approved by the Committee prior to the Plan Year but any such reward is subject to the overriding maximum reward described below. In no event will the maximum value of a reward (valued at the date of grant without regard to restrictions) to an individual employee under this Plan exceed three million dollars for a Plan Year. SECTION 6. COMMITTEE CERTIFICATION Before any grant is made the Committee must certify that the multiplier level was in fact reached and all other material terms of the Plan were satisfied. SECTION 7. CHANGE IN CONTROL BENEFITS 7.1 Benefits. Notwithstanding any other provision of this Plan, in the event of the Involuntary Termination of Employment of a CIC Participant within three (3) years following a Change in Control, the CIC Participant shall receive a cash amount equal to the Change in Control benefits. Such Change in Control benefits shall be paid in lieu of and not in addition to any other benefits for the Plan Year under this Plan. EDGARWATCH Page 32 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 7.2 Amount. The amount of the Change in Control benefit shall equal the amount calculated in clause a(i) of Section 5.5 (with no reduction) prorated for the portion of the Plan Year before Involuntary Termination of Employment of a CIC Participant and subject to the maximum set forth in the second sentence of Section 5.6. In addition, if the Involuntary Termination of Employment is after a Plan Year, but prior to a grant in respect of that Plan Year, in addition to the amount paid for the Plan Year in which the Involuntary Termination of Employment occurred, the CIC participant shall receive an amount equal to the calculation under clause a(i) of Section 5.5 (with no reduction) for the Plan Year prior to the Involuntary Termination subject to the maximum set forth in the second sentence of Section 5.6. 7.3 Amendment & Termination. No amendment or termination of the Plan, 1 year prior to or after a Change in Control, will affect the payments under this Section 7 for Involuntary Termination of Employment after the Change in Control. SECTION 8. STOCK SUBJECT TO THE PLAN 8.1 Number. The total number of Shares that may be granted under the Plan shall not exceed 1,750,000. These Shares may consist, in whole or in part, of authorized but unissued Shares or Shares reacquired by the Company, including without limitation, Shares purchased in the open market, and not reserved for any other purpose. 8.2 Reacquired Shares. If, at any time, Shares issued pursuant to the Plan shall have been reacquired by the Company in connection with the restrictions herein imposed on such shares, such reacquired Shares again shall become available for issuance under the Plan at any time prior to its termination. 8.3 Adjustment in Capitalization. In the event of any change in the outstanding Shares of the Company by reason of a stock dividend, stock split, recapitalization, merger, consolidation, combination, or exchange of shares or other similar corporate change, the aggregate number and kind of Shares issuable under this Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. SECTION 9. SHARES OF RESTRICTED STOCK 9.1 Grant of Shares of Restricted Stock. Awards of Restricted Stock to Participants shall be granted under a Restricted Stock Agreement between the Company and the Participant which shall provide that the shares subject to any such award shall be subject to such forfeiture and other conditions, including the provisions of Section 9.6 hereof, for such period of time as the Committee shall designate. 9.2 Transferability. Subject to Section 9.7 through 9.9 hereof, the shares of Restricted Stock granted to a Participant may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated as long as the shares are subject to forfeiture or other conditions as provided in the Plan, and as set forth in the Restricted Stock Agreement pursuant to which such shares were granted. 9.3 Removal of Restrictions. Except as otherwise provided herein, or as may be required by applicable law, shares of Restricted Stock covered by each Restricted Stock Agreement made under this Plan will become freely transferable by the Participant upon the expiration of a period of time following the date of grant as specified in terms of the Restricted Stock Agreement. EDGARWATCH Page 33 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 9.4 Other Restrictions. The Company may impose such other restrictions on any shares granted pursuant to this Plan as it may deem advisable, including, without limitation, restrictions on the transfer until all amounts owing to the Company are paid and any withholding relating to the Restricted Stock have been paid, and restrictions required by the federal securities laws, by the requirements of any stock exchange upon which such shares or shares of the same class are then listed and by any state securities laws applicable to such shares. 9.5 Legends and Escrow. In addition to any other legends or restrictions, the Company specifically reserves the right to place on each certificate or account representing shares of Restricted Stock a legend as follows: "The sales or other transfer of shares of stock represented by this certificate (account), whether voluntary, involuntary, or by operation of law, is subject to the restrictions on transfer and forfeiture conditions (which include the satisfaction of certain employment service requirements) set forth in the Pioneer Hi-Bred International, Inc. Restricted Stock Plan -- Performance-Based and in a Restricted Stock Agreement. A copy of such plan and agreement may be inspected at the offices of the Secretary of the Company." All shares of Restricted Stock shall be held by the Committee in escrow on behalf of the Participant awarded such shares, together with a Power of Attorney executed by the Participant, in form satisfactory to the Committee and authorizing the Company to transfer such shares as provided in the Restricted Stock Agreement, until such time as all restrictions imposed on such shares pursuant to the Plan and the Restricted Stock Agreement have expired or been earlier terminated. 9.6 Termination of Employment. In the event that, prior to the removal of restrictions on shares of Restricted Stock as contemplated by Section 9.3, a Participant's employment with the Company terminates for any reason other than normal retirement, death, total and permanent disability or early retirement accepted and approved by the Committee, then any shares subject to time period restrictions or forfeiture conditions at the date of such termination shall automatically be forfeited to the Company. A Participant shall not forfeit any rights to Restricted Stock previously granted to him, solely because he or she ceases to qualify as a Key Management Employee. 9.7 Normal Retirement, Death or Total, Permanent Disability and Early Retirement. In the event that, prior to the removal of restrictions on shares of Restricted Stock as contemplated by Section 9.3, a Participant's employment with the Company terminates because of normal retirement, death or total and permanent disability, any uncompleted portion of a time period restriction or forfeiture conditions, as set forth in the terms of the Restricted Stock Agreement, shall be waived by the Company. If early retirement is accepted and approved by the Committee in its sole discretion any uncompleted portion of a time period restriction or forfeiture condition, as set forth in the terms of the Restricted Stock Agreement, shall be waived. The shares released from such restrictions pursuant to this Section 9.7 thereafter shall be freely transferable by the Participant, subject to any applicable legal requirements. 9.8 Change in Control. Upon a Change in Control, all restrictions shall lapse on shares of Restricted Stock granted under this Plan. 9.9 Waiver at the Committee's Discretion. Notwithstanding the above, the Committee also may waive all restrictions on shares of Restricted Stock at any time, in its sole discretion. The shares released from such restrictions pursuant to this Section 9.9 thereafter shall be freely transferable by the Participant, subject to any applicable legal requirements. EDGARWATCH Page 34 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 9.10 Voting Rights. Participants shall have full voting rights with respect to shares of Restricted Stock. 9.11 Dividend Rights. Except as the Committee may otherwise determine, Participants shall have full dividend rights with any such dividends being paid currently. If all or part of a dividend is paid in shares of stock, the dividend shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock that are the basis for the dividend. 9.12 Security Interest in Shares of Restricted Stock. In connection with the execution of any Restricted Stock Agreement, the Committee may require that a Participant grants to the Company a security interest in the shares of Restricted Stock issued or granted pursuant to this Plan to secure the payment of any sums then owing or thereafter coming due to the Company, including income tax withholdings, to the Company by such Participant. This security interest shall continue until the shares of Restricted Stock are no longer held by the Committee in escrow on behalf of the Participant pursuant to Section 9.5 and are no longer subject to restrictions pursuant to the Plan. SECTION 10. WITHHOLDING OF TAXES The Company may require, as a condition to any grant under the Plan or to the release of any restrictions, security interest or escrow hereunder, that the Participant pay to the Company, in cash, any federal, state or local taxes of any kind required by law to be withheld with respect to any grant, vesting or delivery of Restricted Stock. The Committee, in its sole discretion, may permit Participants to pay such taxes a) through the withholding of Restricted Stock otherwise deliverable to such Participant in connection with such vesting or delivery or b) the delivery to the Company of Shares otherwise acquired by the Participant. The Restricted Stock withheld by the Company or Shares tendered to the Company for the satisfaction of tax withholding obligations under this section shall be valued in the same manner as used in computing the withholding taxes under applicable law. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a Participant any federal, state or local taxes of any kind required by law to be withheld with respect to any grant, vesting or delivery of Restricted Stock under the Plan, or to retain or sell without notice a sufficient number of the Restricted Stock granted or to be granted to such Participant to cover any such taxes, provided that the Company shall not sell any such Restricted Stock if such sale would be considered a sale by such Participant for purposes of Section 16 of the Exchange Act. SECTION 11. SHAREHOLDER APPROVAL This Plan will not be effective unless the shareholders approve the Plan by a majority of the vote in a separate shareholder vote. SECTION 12. AMENDMENT AND TERMINATION 12.1 Amendment. Except as set forth in Section 7.3, this Plan may be amended by the Board without shareholder approval except as otherwise required by the law. Any such amendment will not apply to the Plan Year in which such amendment was adopted or earlier Plan Years. 12.2 Termination. The Company reserves the right to terminate the Plan at any time by action of the Board except as set forth in Section 7.3. After a Change in Control any termination will not apply to the Plan Year in which such termination was adopted or any earlier Plan Year. EDGARWATCH Page 35 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- 12.3 Existing Restrictions. Neither amendment nor termination of this Plan shall affect any shares previously issued or any restrictions previously issued or any restrictions previously imposed on such shares pursuant to this Plan. SECTION 13. PROVISIONS APPLICABLE SOLELY TO INSIDERS Persons subject to Section 16 of the 1934 Act with respect to securities of the Company , may have to comply with additional rules imposed by the Company to ensure compliance with Section 16. SECTION 14 - MISCELLANEOUS 14.1 No Contract of Employment. Nothing in this Plan shall be construed as a contract of employment between the Company and any Participant. Nothing in this Plan shall be deemed to constitute a contract for services between the Company and a Participant, and nothing contained in the Plan shall be deemed to give a Participant any right to continue furnishing services to the Company or the Company any right to demand such services. Nothing in this Plan shall be construed as an elimination of the right of the Company to discharge a Participant, with or without cause. 14.2 Severability. If any provision of this Plan is held to be illegal, invalid, or unenforceable, such illegality, invalidity or unenforceability shall not affect the remaining provisions of this Plan, and such provision shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never been inserted. 14.3 Governing Law. This Plan shall be governed by the laws of the State of Iowa without reference to the principles of conflict of laws therein. Notwithstanding the foregoing, this Plan shall be administered as to constitute a plan of performance-based compensation under all applicable federal tax laws. PIONEER HI-BRED INTERNATIONAL, INC. By:/s/ Charles S. Johnson -------------------------- Charles S. Johnson President and CEO /s/ Jerry L. Chicoine - ----------------------- Jerry L. Chicoine Secretary EDGARWATCH Page 36 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. MANAGEMENT REWARD PROGRAM -- PERFORMANCE-BASED ARTICLE 1 - ESTABLISHMENT OF THE PLAN Section 1.1 - Establishment of the Plan The Company hereby establishes the Pioneer Hi-Bred International, Inc., Management Reward Program -- Performance- Based (the "Plan"). Section 1.2 - Effective Date The effective date of the Plan is September 1, 1995. Section 1.3 - Purpose The Plan is designed to focus management efforts on the earnings and return on equity of the company and to reward results achieved in relation to those goals. ARTICLE 2 - DEFINITIONS Section 2.1 - Base Salary Base Salary means a Participant's base annual salary as of August 31 of the Plan Year without reduction for contributions or deferrals to various plans. Section 2.2 - Board Board means the Board of Directors of Pioneer Hi-Bred International, Inc. Section 2.3 - Change in Control Change in Control means (i) the acquisition, whether directly, indirectly, beneficially (within the meaning of Rule 13d-3 of the Securities and Exchange Act of 1934, as amended (the "1934 Act")), or of record, of securities of Pioneer Hi-Bred International, Inc. representing twenty-five percent (25%) or more in number of any class of its then outstanding voting securities by any "person" (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), including any corporation or group of associated persons acting in concert, other than (A) the Corporation and/or (B) any employee pension benefit plan (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Corporation, including a trust established pursuant to any such plan, or (ii) the nomination and election of twenty-five percent (25%) or more of the members of the Board of the Corporation without recommendation of such Board. The ownership of record of 25% or more in number of any class of the then outstanding voting securities of the Corporation by a person engaged in the business of acting as nominee for unrelated beneficial owners shall not in and of itself be deemed to constitute a Change in Control. Section 2.4 - CIC Participant "CIC Participant" means an employee 1) who would have been eligible for a reward in respect of the Plan Year prior to the Plan Year in which the Change in Control occurs or 2) who but for his or her termination, would have been eligible for a reward in respect of the Plan Year in which the Change in Control occurred. EDGARWATCH Page 37 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 2.5 - Committee Committee means the Compensation Committee of the Board or any successor committee. Section 2.6 - Company Company means Pioneer Hi-Bred International, Inc., an Iowa Corporation and any division or Subsidiary thereof. Section 2.7 - Corporate Management Committee Corporate Management Committee means the Company's committee of executive officers selected by the chief executive officer or any successor committee. Section 2.8 - Earnings Per Share (EPS) Earnings Per Share means the after tax earnings per share of outstanding stock plus or minus adjustments to remove the impact of unusual or nonrecurring events. Section 2.9 - EPS Growth Percentage EPS Growth Percentage means the percentage that corresponds to the Earnings Per Share for the given Plan Year as shown on Attachment 1 or as may be modified prior to the Plan Year by the Compensation Committee. Minimum is 0% with no maximum. Interpolation of actual results is computed between table points. Points beyond 25% will be determined by the percentage the Earnings Per Share exceeds the Earnings Per Share set forth in the 13% row for the previous year. Section 2.10 - EPS Multiplier EPS Multiplier means the multiplier as calculated in Section 4.2(a). Section 2.11 - Involuntary Termination of Employment Involuntary Termination of Employment means (a) the termination of employment of a CIC Participant by the Company other than Termination for Cause, (b) the resignation or retirement of a CIC Participant for Stated Good Reason, or (c) in the case of a CIC Participant who is in the full-time employment of a domestic Subsidiary, either (I) the sale of a substantial portion of the assets of the Subsidiary within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, or (II) the acquisition by an unrelated third party of ownership of more than fifty percent (50%) of the then outstanding stock, capital, or profits interest of the Subsidiary. The Board, in its sole discretion, shall determine whether the acquisition by an unrelated third party of ownership of an interest in a foreign subsidiary constitutes an Involuntary Termination of Employment. Section 2.12 - Outstanding Stock Outstanding Stock means the weighted average daily stock outstanding without giving effect to the dilutive impact of outstanding options. Section 2.13 - Participants Participants means an employee who is eligible to participate in this Plan under Article 3. EDGARWATCH Page 38 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 2.14 - Participant Pay Band Participant Pay Band means that Pay Band for which the Participant is categorized pursuant to Section 4.4. Section 2.15 - Pay Band Pay Band means job evaluation categories I - VI. The Pay Bands may be further divided or consolidated as necessary. Section 2.16 - Pay Band Target Percentage Pay Band Target Percentage means the Reward targets as a percent of Base Salary for a Pay Band or portion thereof as set forth in Section 4.6. Section 2.17 - Plan Plan means Pioneer Hi-Bred International, Inc., Management Reward Program - -- Performance-Based, as amended from time to time. Section 2.18 - Plan Year Plan Year means the 12 month period beginning September 1 and ending August 31. Section 2.19 - Prior to the Plan Year Prior to the Plan Year means either prior to or within the first 90 days of the Plan Year. Section 2.20 - Return on Equity (ROE) Return on Equity (ROE) means net income over ending shareholders equity with adjustments to remove the impact of unusual or nonrecurring events. Section 2.21 - Reward Reward means the reward under this Plan. Section 2.22 - ROE Modifier ROE Modifier means the modifier as calculated in Section 4.2(b). Section 2.23 - Stated Good Reason Stated Good Reason means a written determination by a CIC Participant that he reasonably and in good faith cannot continue to fulfill the responsibilities for which he was employed. The CIC Participant's determinations will be conclusively presumed to be reasonable and in good faith if, without the CIC Participant's express written consent, the Company (a) reduces the CIC Participant's base salary or rate of compensation as in effect immediately prior to the Change in Control, or as the same may have been increased thereafter, (b) fails to continue any bonus plans in which the CIC Participant was entitled to participate immediately prior to the Change in Control, substantially in the form then in effect, (c) fails to continue in effect any benefit or compensation plan in which the CIC Participant is participating immediately prior to the Change in Control (or plans providing substantially similar benefits), (d) assigns to the CIC Participants any duties inconsistent with the CIC Participant's duties, responsibilities or status immediately prior to the Change EDGARWATCH Page 39 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- in Control, or changes the CIC Participant's reporting responsibilities, titles or offices, or (e) requires the CIC Participant to change the location of his job or office, so that the CIC Participant will be based at a location more than thirty (30) miles distant by public highway from the location of his job or office immediately prior to the Change in Control. Section 2.24 - Subsidiary Subsidiary means a corporation in which the majority of the voting securities outstanding at the time is owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or by one or more of its other subsidiaries, or a non-corporate entity in which a majority of the capital or profits interest is owned directly or indirectly by Pioneer Hi-Bred International, Inc. and/or one or more of its other subsidiaries. Section 2.25 - Termination for Cause Termination for Cause shall mean the termination of employment of a CIC Participant as a direct result of an act or acts of dishonesty, constituting a felony under the laws of the United States or the State of Iowa and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Company. An act or acts of dishonesty constituting a felony will be deemed to occur only if the act or acts constituting the felony are established either by (a) the specific admission of the Participant or (b) a final nonappealable judgment of a court of competent jurisdiction. ARTICLE 3 - ADMINISTRATION Section 3.1 - Administration The Plan shall be administered by the Committee. The Committee shall have authority to make all determinations required under the Plan, to interpret the Plan, to decide questions of facts arising under the Plan, to formulate rules and regulations covering the operation of the Plan and to make all other determinations necessary or desirable in the administration of the Plan. The decisions of the Committee on any questions concerning or involving the interpretation or administration of the Plan shall be final and conclusive. Section 3.2 - Delegation of Authority The Committee may delegate to any officer of the Company its duties under the Plan pursuant to such conditions or limitations as the Committee may establish, except that only the Committee may administer the plan for Participants who are subject to Section 16 of the Securities Exchange Act of 1934. ARTICLE 4 - ELIGIBILITY Section 4.1 - Eligibility To be eligible to participate in the Plan an individual must be on full-time, regular status on the United States or Canadian payroll. To be entitled to receive a reward such employee must be on such payroll as of the last day of the Plan year. Additionally, the employee must be in one of the following Pay Bands: a)I - IV (inclusive), b)V with approval of the corporate officer to whom the employee's business unit reports, or c)(as an exception) with the approval of the Corporate Management Committee. Prior to the Plan Year the Committee may adjust which pay band an employee must be in to be eligible. Other employees of the Company or its affiliates approved by the Committee will also be eligible and entitled to Rewards including officers not on the U.S. or Canadian payroll. EDGARWATCH Page 40 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 4.2 - Other Plans Participants are not eligible for profit sharing or any sales incentive program. Employees eligible for sales incentive programs are not eligible to participate in the Plan. ARTICLE 5 - REWARD Section 5.1 - Nature of Goal Rewards will be based upon EPS growth. Section 5.2 - Multipliers a) EPS Multiplier. The EPS Multiplier is that multiplier as set forth below, or as approved by the Committee Prior to the Plan Year, that corresponds to EPS Growth Percentage. EPS Growth Percentage Multiplier* 0% 0.00 1% 0.08 2% 0.17 3% 0.25 4% 0.33 5% 0.42 6% 0.50 7% 0.58 8% 0.67 9% 0.75 10% 0.83 11% 0.92 12% 1.00 13% 1.00 14% 1.00 15% 1.25 16% 1.40 17% 1.55 18% 1.70 19% 1.85 20% 2.00 21% 2.05 22% 2.10 23% 2.15 24% 2.20 25% 2.25 *Minimum is 0% with no maximum. Interpolation of actual results is computed between table points. Beyond 25% each 1% increase in the EPS Growth Percentage corresponds to an .05 increase in the multiplier. EDGARWATCH Page 41 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- b) ROE Modifier. ROE Modifier is that modifier as set forth below, or as approved by the Committee Prior to the Plan Year, that corresponds to Return on Equity. ROE Modifier* 16%** .80 17% .85 18% .90 19% .95 20% 1.00 21% 1.05 22% 1.10 23% 1.15 24%*** 1.20 *Minimum is .80 with a maximum of 1.20. Interpolation of actual results is computed between table points. **Less than or equal to ***Greater than or equal to Section 5.3 - Participant Pay Band Each employee is assigned or reassigned to a Pay Band. An appropriate Pay Band for an employee is determined by considering job factors such as: 1 impact, 2) complexity, 3) knowledge, skill and competencies, and 4) experience. Section 5.4 - Pay Band Target Percent The following table sets forth the targets as a percent of Base Salary for each respective Pay Band: Pay Band Target CEO 62% I 47% II 32-37%* III 12-27%* IV 5-12%* V 2-4%* Such Pay Band Target Percentage may be modified by the Committee Prior to the Plan Year. If a Key Management Employee moves from 1 eligible Pay Band or portion thereof to another in a Plan Year, the Pay Band Target Percentage will be adjusted pro rata for the portion of the year in each Pay Band. *The exact Pay Band Target Percent will be determined prior to the Plan Year depending upon market data. EDGARWATCH Page 42 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Section 5.5 - Reward a) The Reward equals i) EPS Multiplier, multiplied by ROE Modifier, multiplied by Pay Band Target Percentage, multiplied by Base Salary, or ii) such lesser amount the Committee shall determine in its sole discretion. b) The calculation in clause i) of Section 5.5(a), for an Eligible Employee who was eligible at the end of the Plan Year but not eligible during some period of the Plan Year will be reduced pro rata for the portion of the Plan Year he was not eligible. Section 5.6 - Maximum Reward The Reward received by a Participant will in no event exceed $3 million for a Plan Year. ARTICLE 6 - COMMITTEE CERTIFICATION Section 6.1 - Committee Certification Before any Reward is paid, the Committee must certify that the multiplier and modifier levels were in fact reached and all other material terms of the Plan were satisfied. ARTICLE 7 - PAYMENT Section 7.1 - Payment Participants will be paid their Reward less all applicable withholdings and deductions within 75 days following the Plan year. ARTICLE 8 - CHANGE IN CONTROL BENEFITS Section 8.1 - Benefits Notwithstanding any other provision of this Plan, in the event of the Involuntary Termination of Employment of a CIC Participant within three (3) years following a Change in Control, the CIC Participant shall receive Change in Control benefits. Such Change in Control benefits shall be paid in lieu of and not in addition to any other benefits for that Plan Year under this Plan. Section 8.2 - Amount The amount of the Change in Control benefit shall equal the amount calculated in clause a(i) of Section 5.5 (with no reduction) prorated for the portion of the Plan Year before Involuntary Termination of Employment of the CIC Participant. Section 8.3 - Amendment & Termination No amendment or termination of the Plan one year prior to or after a Change in Control will affect payments under this Article 8 for Involuntary Termination of Employment after a Change in Control. EDGARWATCH Page 43 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- ARTICLE 9 - SHAREHOLDER APPROVAL Section 9.1 - Shareholder Approval This Plan will not be effective unless the shareholders approve the Plan by a majority of the vote in a separate shareholder vote. ARTICLE 10 - AMENDMENT AND TERMINATION OF THE PLAN Section 10.1 - Amendment Except as set forth in Section 8.3 the Plan may be amended by the Board without shareholder approval except as otherwise required by law. Any such amendment will not apply to the Plan Year in which such amendment was adopted or earlier Plan Years. Section 10.2 - Termination The Company reserves the right to terminate the Plan at any time by action of the Board; except as set forth in Section 8.3. After a Change in Control any termination will not apply to the Plan Year in which such termination was adopted or any earlier Plan Year. ARTICLE 11 - MISCELLANEOUS Section 11.1 - No Contract of Employment Nothing in this Plan shall be construed as a contract of employment between the Company and any Participant. Nothing in this Plan shall be deemed to constitute a contract for services between a Company and a Participant, and nothing contained in the Plan shall be deemed to give a Participant any right to continue furnishing services to the Company or the Company any right to demand such services. Nothing in this Plan shall be construed as an elimination of the right of the Company to discharge a Participant, with or without cause. Section 11.2 - Severability If any provision of this Plan is held to be illegal, invalid, or unenforceable, such illegality, invalidity or unenforceability shall not affect the remaining provisions of this Plan, and such provision shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never been inserted. Section 11.3 - Governing Law This Plan shall be governed by the laws of the State of Iowa without reference to the principles of conflict of laws therein. Notwithstanding the foregoing, this Plan shall be administered as to constitute a plan of performance-based compensation under all applicable federal tax laws. PIONEER HI-BRED INTERNATIONAL, INC. By:/s/ Charles S. Johnson -------------------------------- Charles S. Johnson President and CEO /s/ Jerry L. Chicoine - ------------------------- Jerry L. Chicoine Secretary EDGARWATCH Page 44 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 11 PIONEER HI-BRED INTERNATIONAL, INC. COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share amounts)
Years Ended August 31, 1996 1995 1994 1993 1992 Number of shares of common stock outstanding at beginning of the period....... 83,487 86,215 89,442 90,274 90,829 Weighted average number of shares of common stock issued during the period...... 75 128 90 148 52 Weighted average number of shares of common stock purchased for the treasury during the period............. (408) (1,832) (884) (308) (92) -------- ------- ------- ------- ------- Weighted average number of shares of common stock outstanding during the period........................ 83,154 84,511 88,648 90,114 90,789 -------- ------- ------- ------- ------- Income before cumulative effect of changes in accounting principles......... $222,962 $182,590 $212,664 $137,453 $152,160 ------- ------- ------- ------- ------- Income before cumulative effect of changes in accounting principles per common share.............. $ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68 ------- ------- ------- ------- ------- Net income....................... $222,962 $182,590 $212,664 $120,484 $152,160 ------- ------- ------- ------- ------- Earnings per common share........ $ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68 ------- ------- ------- ------- -------
The common stock equivalents have not entered into the net income per share computations because they would not have a dilutive effect. EDGARWATCH Page 45 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- The Company's Business Pioneer Hi-Bred's business is the broad application of the science of genetics. Pioneer was founded in 1926 to apply newly discovered genetic techniques to hybridize corn. Today, the Company develops, produces, and markets hybrids of corn, sorghum, and sunflowers; and varieties of soybeans, alfalfa, wheat, and canola. Hybrids, crosses of two or more unrelated inbred lines, can be reproduced only by crossing the original parent lines. Thus, a grower must purchase new seed each year to obtain the original hybrid. Varietal crops, such as soybeans and wheat, will reproduce themselves with little or no genetic variation. Growers can save grain from the previous crop for planting. Growers are becoming increasingly aware of the advantages of purchasing "new" seed every year, although in times of cash-flow crisis, they may tend to forgo those advantages. Pioneer maintains the ownership of and controls the use of inbreds and varieties through patents and the Plant Variety Protection Act. Within the U.S., this essentially prohibits other parties from selling seed produced from those inbreds and varieties until such protection expires, usually well after the useful life of the seed. Outside of the U.S., the level of protection afforded varies from country to country according to local law and international agreement. Pioneer also applies for patents on new hybrids moving toward commercialization. The Company believes it is vital that products developed by its research programs remain proprietary. They must remain so in order to provide the economic return necessary to support continued research and product development, and to generate an adequate return to the Company's shareholders. Sales by Region - 1996 (in millions) Corn Soybeans Other Total North America............. $ 908 $ 160 $ 89 $ 1,157 Europe.................... $ 336 $ 4 $ 63 $ 403 Latin America............. $ 84 $ - $ 13 $ 97 Other Regions............. $ 49 $ - $ 15 $ 64 The Company's principal products are hybrid seed corn and soybean seed, which have accounted for approximately 89 percent of total net sales and substantially 100 percent of operating profits over the last five years. These products are expected to maintain a dominant role in the Company's results of operations for the foreseeable future. Approximately 67 percent of total 1996 sales were made within the U.S. and Canada (the North America region) and 23 percent in Europe. Our goal within developing nations is to aid the development of the existing seed markets and establish businesses that can grow and prosper. Two significant factors that determine the volume of seed sold and the related profit are government policies and weather. Government policies affect, among other things, crop acreage and commodity prices. Weather can affect commodity prices, product performance, the Company's seed field yields, and planting decisions made by farmers. Compared to hybrid seed, sales and profits from non-hybrid seed are more heavily dependent on commodity prices and the competition from farmer-saved seed. As a result, the margins are narrower and contributions are subject to year-to-year fluctuations. In North America, the majority of Pioneer brand seed is marketed through independent sales representatives, most of whom are also farmers. In areas outside of the traditional Corn Belt, seed products are often marketed through dealers and distributors who handle other agricultural supplies. Pioneer products are marketed outside North America through a network of subsidiaries, joint ventures, and independent producer-distributors. EDGARWATCH Page 46 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- The hybrid seed industry is characterized by intense competition. In 1996, Pioneer seed corn held an estimated market share of 44 percent in North America. The next six competitors held an estimated combined market share of 27 percent with the closest competitor holding approximately 10 percent. The remainder of the market is divided among more than 300 companies selling regionally. The Company's 1996 purchased soybean seed market share is estimated at 17 percent, highest in the industry. Pioneer has a leading market share position in most countries outside North America in which it operates. Significant markets in which the Company operates include: France, Italy, Germany, Hungary, Austria, Mexico, and Brazil. The Company's market share within these countries ranges form near 10 percent to more than 60 percent. Competition in the seed industry is based primarily on product performance and price. The Company's objective is to produce products which consistently out-perform the competition and so command a premium price. The Company has been successful competing on that basis and expects to continue to do so through its ongoing investment in research and product development. The future success of the Company depends heavily on the results of these research activities. Continued improvement in the performance of the Company's products is necessary to maintain profit margins and market share. The Company's research and product development activities are directed at products with significant market potential. Pioneer believes it possesses the largest single proprietary pool of germplasm in the world from which to develop new hybrid and varietal seed products. The majority of the Company's seed research is done through classical plant breeding techniques. However, the use of biotechnology is expected to have an impact on future results, both for Pioneer and the seed industry at large. Certain of our current products require government approval before commercialization. It is expected a larger number of our future products will also require such government approval. In the production of its commercial seed, the Company generally provides the parent seed stock, detasseling and roguing labor, and certain other production inputs. The balance of the labor, equipment, and inputs are supplied by independent growers. The Company believes the availability of growers, parent stock, and other inputs necessary to produce its commercial seed is adequate for planned production levels. Pioneer continues to pursue ISO 9000 certification and has 35 sites certified in six countries, including 19 production sites in the U.S. Certification with these standards will allow us to move product more easily from country to country. Pioneer brand microbial products include inoculants for high-moisture corn silage, hay, and other forages, and direct-fed microbial products for livestock. This product line is focused on the research and development of products containing naturally occurring microorganisms. The nutrition and industry markets (NIM) group is the worldwide focal point for addressing opportunities driven by the "end-use" markets. The primary mission of the NIM group is to ensure that Pioneer is the premier seed supplier in this end-use market segment. At August 31, 1996, the Company employed approximately 4,700 people worldwide. Because the seed business is highly seasonal, the Company's interim results will not necessarily indicate the results for the full year. Substantially all seed sales are made from late second quarter through the end of the third quarter (February 1 through May 31) of the fiscal year. Typically, the Company operates at a loss during the first and fourth quarters. Varying climatic conditions can change the earnings pattern between quarters. These conditions affect the delivery of seed and can cause a shift in sales between quarters. EDGARWATCH Page 47 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- SELECTED FINANCIAL DATA
Consolidated Ten-Year Financial History Years Ended August 31,1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ----------------------------------------------------------------------------------------------------------------- (In millions, except per share and statistical amounts) Summary Operations: Net Sales..................$1,721 $1,532 $1,479 $1,343 $1,262 $1,125 $ 964 $ 867 $ 759 $ 710 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Gross Profit...............$ 858 $ 760 $ 759 $ 700 $ 640 $ 549 $ 442 $ 391 $ 389 $ 349 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Restructuring and Settlements $ -- $ -- $ 45 $ (54) $ -- $ -- $ -- $ -- $ -- ===== ===== ===== ==== ===== ===== ===== ===== ===== $........................-- Income From Continuing Operations...............$ 223 $ 183 $ 213 $ 137 $ 152 $ 104 $ 73 $ 82 $ 84 $ 64 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Net Income.................$ 223 $ 183 $ 213 $ 120 $ 152 $ 104 $ 73 $ 98 $ 65 $ 54 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Per Common Share Data: Income From Continuing Operations...............$ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68 $ 1.15 $ 0.78 $ 0.86 $ 0.88 $ 0.67 Net Income.................$ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68 $ 1.15 $ 0.78 $ 1.03 $ 0.68 $ 0.56 Growth in Earnings Per Share*.................... 24.1% (10.0)% 56.9% (8.9)% 46.1% 47.4% (9.3)% (2.3)% 31.3% (20.2)% Dividends Declared.........$ 0.83 $ 0.71 $ 0.59 $ 0.50 $ 0.40 $ 0.39 $ 0.39 $ 0.36 $ 0.35 $ 0.26 Shareholders' Equity.......$12.36 $10.94 $10.22 $ 9.23 $ 8.86 $ 7.51 $ 7.00 $ 6.62 $ 6.04 $ 5.70 Balance Sheet Summary: Current Assets.............$ 784 $ 770 $ 742 $ 717 $ 703 $ 606 $ 538 $ 474 $ 450 $ 465 Net Property & Other Assets 638 523 511 504 513 480 468 440 414 401 ------ ------- ------- ------- ------- ------- ------- ------- ------- ------ Total Assets...............$1,422 $1,293 $1,253 $1,221 $1,216 $1,086 $1,006 $ 914 $ 864 $ 866 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Current Liabilities........$ 288 $ 280 $ 232 $ 261 $ 286 $ 295 $ 294 $ 221 $ 209 $ 228 Long-Term Debt............. 25 18 66 68 74 67 19 17 28 33 Other Long-Term Liabilities 91 82 74 67 57 43 44 49 50 ------ ------ ------ ------ ------ ------ ------ ------ ------ 59 Total Liabilities..........$ 404 $ 380 $ 372 $ 396 $ 417 $ 405 $ 357 $ 287 $ 287 $ 320 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Shareholders' Equity.......$1,018 $ 913 $ 881 $ 825 $ 799 $ 681 $ 649 $ 627 $ 577 $ 546 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Dividends Declared.........$ 69 $ 60 $ 52 $ 45 $ 36 $ 35 $ 36 $ 34 $ 33 $ 25 Average Shares Outstanding. 83.2 84.5 88.6 90.1 90.8 90.9 93.5 95.4 95.5 95.8 Other Statistics: Return on Ending Equity*... 21.9% 20.0% 24.1% 16.7% 19.0% 15.3% 11.2% 13.1% 14.6% 11.7% Return on Net Sales*....... 13.0% 12.0% 14.4% 10.2% 12.1% 9.3% 7.5% 9.4% 11.1% 9.0% Return on Ending Assets*... 15.7% 14.2% 17.0% 11.2% 12.5% 9.6% 7.2% 9.0% 9.8% 7.4% Gross Profit on Net Sales.. 49.9% 49.6% 51.3% 52.1% 50.7% 48.8% 45.8% 45.1% 51.2% 49.2% Dividends Declared as a % of Net Income............ 30.9% 32.8% 24.6% 37.4% 23.9% 33.8% 49.7% 34.7% 50.9% 46.2% Stock Price at August 31,..$55.13 $43.00 $31.25 $32.75 $26.50 $17.42 $13.25 $14.00 $11.75 $11.92 Market Capitalization at August 31, (in millions) $4,542 $3,590 $2,694 $2,929 $2,392 $1,579 $1,229 $1,326 $1,122 $1,142 Number of Employees........ 4,738 4,924 4,847 4,807 5,016 4,829 4,601 4,026 4,805 5,235
*Based on income from continuing operations before cumulative effect of accounting change EDGARWATCH Page 48 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Net Sales and Operating Income (Loss) by Product Years Ended August 31, 1996 % 1995 % 1994 % 1993 % 1992 % - ----------------------------------------------------------------------------------------------------------- (In millions, except per share amounts) NET SALES: Corn......................... $1,377 80.0 $1,227 80.0 $ 1,185 80.1 $1,077 80.2 $1,013 80.3 Soybeans..................... 164 9.5 145 9.5 128 8.7 116 8.6 109 8.6 Other........................ 180 10.5 160 10.5 166 11.2 150 11.2 140 11.1 ----- ----- ----- ----- ------ ----- ------ ---- ----- ----- Total Net Sales................. $1,721 100.0 $1,532 100.0 $ 1,479 100.0 $1,343 100.0 $1,262 100.0 ===== ===== ===== ===== ====== ===== ===== ===== ===== ===== OPERATING INCOME (LOSS): Corn......................... $ 410 29.8 $ 359 29.3 $ 383 32.3 $ 354 32.9 $ 317 31.3 ===== ===== ===== ==== ===== Soybeans..................... 16 9.8 9 6.2 7 5.5 7 6.0 8 7.3 ===== ===== ===== ==== ===== Other........................ (3) (1.6) (15) (9.4) (21)(12.6) (24)(16.0) (30) (21.4) ===== ==== ===== ===== ===== Restructuring and Settlements -- -- -- -- 45 3.0 (53) (3.9) -- -- ---- ===== ---- ==== ---- ===== ----- ==== ----- ===== Product Line Operating Income... $ 423 24.6 $ 353 23.0 $ 414 28.0 $ 284 21.1 $ 295 23.3 Indirect General and Administrative Expense...................... (76) (4.4) (73) (4.7) (68) (4.6) (59) (4.4) (52) (4.1) ----- ----- ----- ----- ------ ----- ----- ----- ----- ----- - ---- Operating Income................ $ 347 20.2 $ 280 18.3 $ 346 23.4 $ 225 16.7 $ 243 19.2 Financial Income (Expense)...... 7 0.4 11 0.7 3 0.2 (6) (0.4) (3) (0.2) ----- ----- ----- ----- ------ ----- ------ ---- ----- ----- Income Before Items Shown Below. $ 354 20.6 $ 291 19.0 $ 349 23.6 $ 219 16.3 $ 240 19.0 Income Taxes.................... (127) (7.4) (106) (6.9) (134) (9.1) (86) (6.4) (87) (6.9) Minority Interest and Other..... (4) (0.2) (2) (0.1) (2) (0.1) 4 0.3 (1) -- ----- ----- ----- ----- ------ ------ ----- ---- ----- ----- Income Before Cumulative Effect of Accounting Change............ $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 137 10.2 $ 152 12.1 Cumulative Effect of Accounting Change, Net.................. -- -- -- -- -- -- (17) (1.2) -- -- ----- ----- ----- ----- ------ ----- ------ ---- ----- ----- NET INCOME...................... $ 223 13.0 $ 183 12.0 $ 213 14.4 $ 120 9.0 $ 152 12.1 ===== ===== ===== ===== ====== ===== ===== ==== ===== ===== Income Per Common Share: Income Before Cumulative Effect of Accounting Change....... $ 2.68 $ 2.16 $ 2.40 $ 1.53 $ 1.68 Cumulative Effect Of Accounting Change, Net................ -- -- -- (.19) -- ----- ----- ------ ------ ----- Net Income................... $ 2.68 $ 2.16 $ 2.40 $ 1.34 $ 1.68 ===== ===== ====== ===== ===== Average Shares Outstanding...... 83.2 84.5 88.6 90.1 90.8
EDGARWATCH Page 49 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year Ended August 31, 1996, Compared to the Year Ended August 31, 1995 Pioneer once again achieved outstanding financial results, posting record earnings in 1996. After-tax earnings in 1996 were $223 million, on sales of $1.7 billion. After-tax earnings in 1995 totaled $183 million, on sales of $1.5 billion. Earnings per share were $2.68 in 1996, a 24 percent increase over 1995 earnings of $2.16 per share. Return on Ending Equity (ROE) was above the targeted level of 20 percent for the third consecutive year. At the same time, we continued to increase our investment in research and product development. Current year sales and earnings were positively impacted by strong corn sales in North America, Europe, Latin America, and Asia. Higher sales of soybeans and other products also contributed to the improvement in earnings. An estimated 11 percent increase in corn acreage was the primary driver for higher 1996 sales and operating income in North America. Corn acreage rose over 1995 levels as a result of changes in government programs and higher corn commodity prices. An increase in the average per-unit sales price of the Company's seed corn sold in North America also positively impacted 1996 sales revenue and operating income. Higher seed costs in North America partially offset this improvement. Operations outside North America also generated good earnings growth in 1996. Operating income in Europe improved as several countries experienced increases, either individually or in combination, in the three primary drivers: market size, market share, and sales price. Latin American and Asian operations also continued to grow, providing additional operating income over 1995 levels largely by capturing the benefits of larger markets. North American soybean operations had record results in 1996. Higher sales and operating income from a year earlier resulted from increased market size. In addition, wheat and sorghum operations also positively impacted current year operating income. Management is optimistic that 1997 will be another good year. North American corn acreage is expected to be similar to or slightly higher than 1996 levels. Higher commodity costs related to the 1996 crop will push per-unit seed corn cost of sales higher in 1997. However, the average seed corn sales price is expected to increase, which should keep overall margins similar to or better than 1996 levels. While results in regions outside North America are more difficult to predict, management believes that the Company is on target for future growth in these regions and will build on the record results of 1996. As we look forward, all indications point to continued strong financial performance. As always, uncertainties exist that could affect the Company's expectations, and fluctuations in expected results are likely as more information becomes available. Some of the important factors that could cause actual results to vary significantly from our expectations include weather, seed field yields, government programs/approvals, commodity prices, changes in corn acreage, intellectual property positions, product performance, customer preferences, currency fluctuations, and costs. Hybrid Seed Corn In 1996, seed corn operating income improved $51 million, or 14 percent, over last year. Operations within North America account for $20 million of the increase. European operations improved $25 million over 1995, with Latin America and Asia accounting for virtually all of the remaining improvement. EDGARWATCH Page 50 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Corn Net Sales and Product Line Operating Income
Increase Increase 1996 (Decrease) 1995 (Decrease) 1994 - --------------------------------------------------------------------------------------------------------- (In millions) NET SALES: North America.... $ 908 $ 100 12.4% $ 808 $ (38) (4.5)% $ 846 Europe........... 336 31 10.2% 305 84 38.0% 221 Latin America.... 84 18 27.3% 66 10 17.9% 56 Other regions.... 49 1 2.1% 48 (14) (22.6)% 62 ------ ------- ------ ----- ------ Total net sales..... $ 1,377 $ 150 12.2% $ 1,227 $ 42 3.5% $ 1,185 ====== ======= ===== ====== ====== ====== ====== OPERATING INCOME: North America.... $ 276 $ 20 7.8% $ 256 $ (21) (7.6)% $ 277 Europe........... 100 25 33.3% 75 6 8.7% 69 Latin America.... 21 3 16.7% 18 (1) (5.3)% 19 Other regions.... 13 3 30.0% 10 (8) (44.4)% 18 ------ ------- ------ ----- ------ Total operating income$ 410 $ 51 14.2% $ 359 $ (24) (6.3)% $ 383 ======= ======= ====== ====== ====== ====== ====== UNIT SALES: (80,000-kernel units) North America.... 12.1 1.2 11.4% 10.9 (0.9) (7.6)% 11.8 Europe........... 2.9 0.2 7.1% 2.7 0.5 23.1% 2.2 Latin America.... 1.3 0.4 30.5% 0.9 -- 3.5% 0.9 Other regions.... 1.1 0.1 14.7% 1.0 -- (5.9)% 1.0 ------ ------- ------ ----- ------ Total unit sales.... 17.4 1.9 12.0% 15.5 (0.4) (2.6)% 15.9 ====== ======= ===== ====== ====== ======= ====== ACRES: North America.... 82.7 8.5 11.4% 74.2 (7.8) (9.5)% 82.0 ====== ======= ===== ====== ====== ======= ======
Higher seed corn unit sales were the primary factor contributing to the North American improvement, principally the result of an increase in market size. Corn acreage in 1996 increased approximately 11 percent over the prior year. In 1995, government programs reduced the number of corn acres planted. In 1996, no government restrictions and higher commodity prices encouraged the planting of more corn acres. Although overall corn acreage rose in North America, extremely wet field conditions in the Ohio River Valley region prohibited corn acres from reaching our customers' original planting intentions. Some were forced to switch to soybeans or other crops, which reduced our margin opportunities in that region. In North America, current year seed corn unit sales increased approximately 1.2 million units, or 11 percent, over the previous year, the result of a world-class Pioneer sales and supply organization meeting the changing needs of customers. Sales of two key hybrids accounted for approximately 28 percent of the Company's 1996 and 1995 North American seed corn hybrid unit sales. North American operating income was also positively affected by an approximate one percent increase in the average seed corn selling price per unit. A shift by customers to higher-priced, better-performing premium hybrids was responsible for the increase. The 1996 list price for all hybrids remained unchanged from 1995. EDGARWATCH Page 51 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Higher corn seeding rates and replant units lead management to believe that the Company's 1996 seed corn market share will be approximately 44 percent, a slight decrease from the previous year. Market share declines occurred in some areas of the Northern Corn Belt after disappointing yields in that region in 1995. Those were partially offset by market share gains in other areas of North America. Management is confident that the new hybrids introduced in 1996 and those planned for 1997 will help regain market share. Higher seed costs also impacted current year results. The smaller crop harvested in 1995 compared to 1994 and higher commodity costs increased the average per-unit cost of sales approximately $1.00. Increased provisions for inventory reserves also impacted current year results. Provisions in 1996 were $2.22 per unit, compared to $1.31 per unit in 1995. The increase in 1996 was the result of reserving inventory for a few particular hybrids and the higher production cost of the 1995 seed crop. Operations in the Company's European region (Europe, CIS, Turkey, Australia, and Japan) and Latin America also played a significant role in the increase in seed corn operating income. Record unit sales of corn grain hybrids across all of Southern Europe accounted for virtually the entire increase in European operating income in 1996. Increased market size and market share in Spain and increased market share and price in Italy and Greece were the significant factors contributing to this improvement. Latin American operations improved principally the result of increased market size in Argentina due to a strong commodity price within the country. Worldwide research and product development expenses for corn totaled $90 million, a three percent increase over 1995, as the Company continued its emphasis on developing improved products for customers. The increase was due to the expansion of biotechnology projects, research collaborations, and trait and technology development. For 1996, Pioneer research efforts created 24 new corn hybrids for release to customers in North America. There are also 47 hybrids currently in the later stages of testing, which have average yields greater than the current leader package released in 1996. Pioneer is bringing new products to the market faster than before, with the goal to always provide greater benefit to our customers. Worldwide fixed selling and administrative expenses for corn increased $16 million, or nine percent, from 1995 levels. The major components of this increase were a greater emphasis on the efforts of our nutrition and industry markets (NIM) group and higher incentive compensation costs. Excluding these items, fixed selling and administrative expenses increased one percent over 1995. Variable selling costs (commissions and shipping costs) as a percentage of sales were comparable between the years. Soybean Seed The Company's second largest product in terms of revenue and operating income is soybean seed. Operations in North America account for virtually all of the worldwide soybean seed operating income. Growth of this product line over the last several years continues, as evidenced by the $5 million, or 44 percent, increase in North American operating income over a year ago. EDGARWATCH Page 52 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- North American Soybean Market Share 1996 1995 1994 ------------------------------------- 17.2% 17.5% 16.4% North American Soybean Acreage (in millions) 1996 1995 1994 ------------------------------------- 66.4 64.6 63.8 North American Soybean Unit Sales (in millions) 1996 1995 1994 ------------------------------------- 11.338 10.961 9.396 Unit sales in North America increased three percent, to a record 11.3 million units, the result of increased acreage. Current year list prices increased the average per-unit sales price, however, higher per-unit cost of sales, the result of higher commodity costs, offset most of the sales price improvement. Twenty-one new soybean varieties were introduced in 1996. Five of these varieties were resistant to the herbicide glyphosate -- the first large-scale release of soybean varieties developed by using a combination of gene transfer technology and traditional plant breeding. These new releases are evidence of the Company's goal to provide higher-yielding and more valuable products to customers. Other Products Other products operating results for 1996 improved $12 million over the prior year, resulting from the improvement of several products. Increased North American wheat acreage and increased North American sorghum acreage and price contributed to the current year improvement. Other Products Net Sales and Combined Product Line Operating (Loss)
Increase Increase 1996 (Decrease) 1995 (Decrease) 1994 - ----------------------------------------------------------------------------------------------------------- (In millions) NET SALES: Alfalfa............. $ 32 $ -- -- $ 32 $ -- -- $ 32 Sorghum............. 31 5 19.2% 26 3 13.0% 23 Wheat............... 25 7 38.9% 18 -- -- 18 Sunflower........... 22 3 15.8% 19 3 18.8% 16 Microbial products.. 28 1 3.7% 27 3 12.5% 24 Developing products. 42 4 10.5% 38 (15) (28.3)% 53 ------ ------- ------ ------ ------- Total net sales..... $ 180 $ 20 12.5% $ 160 $ (6) (3.6)% $ 166 ====== ======= ====== ====== ====== ======= ======= Total combined operating (loss).. $ (3) $ 12 $ (15) $ 6 $ (21) ====== ======= ====== ====== =======
EDGARWATCH Page 53 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- While these products as a whole operate at a loss, they provide the sales organization a complete lineup of seed products to meet the needs of our customers. As such, they support and contribute to the sales of the Company's two major products, seed corn and soybean seed. In addition, the prospects for some of these product lines to generate greater levels of operating profit in the near-term are promising. Corporate and Other Items Indirect general and administrative expenses increased $3 million, or four percent, in 1996. Higher incentive compensation costs were partially offset by decreases in several expense categories resulting from active fixed cost management. Translation gains in Mexico recorded in 1995 not matched by the same or similar items in the current year account for virtually all of the $4 million change in net financial income. The effective tax rate of 36 percent for 1996 was substantially unchanged from the 36.5 percent effective tax rate for 1995. The Company will be more affected by new patents, patent positions, and patent lawsuits in the future than it has been in the past. However, this is an area in which Pioneer has become increasingly active through its research, patenting, alliance, and monitoring activities. Pioneer believes that its current patent positions, technologies, germplasm, and sales force place the Company in a good position to freely develop and commercialize the products which will be necessary to effectively compete in the market place. Year Ended August 31, 1995, Compared to the Year Ended August 31, 1994 Hybrid Seed Corn Planted corn acreage had a significant impact on 1995 operating income in North America. Acreage planted to corn decreased ten percent from 1994. A major factor contributing to the acreage decrease was a change in the U.S. government set-aside program which required farmers participating in the 1995 feed grain program to keep their corn acres at 92.5 percent or less of their historical corn acreage base, down from 100 percent in 1994. In addition, high cotton prices induced some farmers in the South to switch acreage to cotton while wet conditions in the Corn Belt forced affected farmers to switch acreage from corn to other crops such as soybeans. Others were never able to plant a crop. As a result, the Company sold approximately 900,000 fewer units in 1995. Seed corn pricing was also a major factor in 1995 financial results. The average per-unit sales price increased three percent due to an increase in the list price of key hybrids and a higher-priced sales mix. The higher-priced sales mix occurred as customers shifted their purchases to higher-priced, better-performing hybrids, which are more profitable to growers and to Pioneer. The Company's 1995 seed corn market share approximated 45 percent - comparable to 1994. Maintaining market share was a challenge in a year when high levels of seed inventory throughout the industry led to aggressive competition. Our sales and supply management groups were able to use the flexibility of our product lineup to respond to the changing needs of customers, providing them with appropriate products when and where they were needed as growing conditions changed. EDGARWATCH Page 54 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Higher seed corn yields from the 1994 crop also provided positive results, reducing the average per unit cost of seed corn by $.80 per unit. Higher operational fixed costs and provisions for inventory losses offset $7 million of the improvements gained in production costs. Provisions for inventory reserves totaled $1.31 per unit in 1995 compared to $.93 per unit in 1994. Research expenses for corn in North America increased $11 million, or 18 percent, from 1994 levels. Planned growth in winter nursery costs and expansion of biotechnology projects were the main factors contributing to this increase. North American fixed selling and administrative expenses for seed corn decreased $4 million, or five percent, from 1994 levels, the result of lower performance incentive costs. Variable selling costs (commissions and shipping costs) as a percentage of sales in North America increased from 1994 because of additional expenses incurred shipping product to customers who switched seeds due to weather related problems. The Company's European region showed an increase in operating income from 1994. Approximately $11 million of this change was the result of the weakening of the U.S. dollar against certain European currencies. On a constant dollar basis, 1995 European operations provided a slight decrease in operating income from 1994. Italian operations posted gains in operating income over 1994, the result of lower production costs and fewer inventory writedowns. An increase in the average unit sales price, an increase in market size, and market share gain over 1994 also contributed to the improvement. In 1994, the Company acquired the remaining 65 percent interest in the French entity, which handled distribution and marketing of PioneerAE brand products. Increased sales and expenses were reported because the subsidiary was reflected in the 1995 financials on a consolidated basis for the first time. Overall, consolidated country operating income for France decreased due to fewer unit sales. Operating income in Hungary and Germany each decreased as unit sales declined and inventory writedowns increased. Mexico's operating income decreased due largely to the devaluation of the Mexican peso. Also, nearly 35 percent fewer acres were planted to seed corn in Northeast and Northwest regions because of drought, subsidy reductions, and NAFTA quotas. These factors reduced unit sales 25 percent. In Asia seed corn operating income in 1995 improved from 1994 levels. Increased market size and market share in the Philippines, increased market size in Indonesia, and cost savings contributed to the improvement in this region. Soybean Seed In 1995, North American operations accounted for virtually all of the worldwide soybean seed operating income. North American unit sales increased 17 percent from 1994, a result of market share gains and increased acreage. A continued recognition of the value associated with Pioneer brand soybeans provided for market share gains, as customers understood that planting Pioneer soybean seed, much like Pioneer seed corn, provides economic value. North American soybean acreage increased as poor weather conditions forced customers who planned to plant corn to switch to soybeans. Higher overall acreage and increased market share contributed $6 million more to operating income than in 1994. EDGARWATCH Page 55 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- The average sales price of soybean seed decreased approximately three percent from 1994 levels, the result of bulk sales and early payment discounts. However, contribution per unit remained the same because of lower cost of sales, the result of lower commodity costs. Increased investments in research and additional fixed selling and general and administrative expenses reduced operating income $4 million from 1994. Other Products Operating results for other products increased from those recorded a year ago. After allocation of fixed costs, these products as a whole were not profitable, however, they provide value beyond the financial bottom line. These products provide the sales organization a full line of seed products, significantly aiding in the sale of higher margin products. Corporate Items Indirect general and administrative expenses increased $5 million in 1995, a seven percent increase over 1994. The major components of this increase were personnel costs and increased charitable contributions. Net interest income for 1995 increased $2 million compared to a year ago because of higher interest rates earned on current year investments and decreased interest expense on lower levels of external borrowing. Net exchange gain increased $6 million from 1994 levels. The strengthening of certain European currencies against the U.S. dollar and translation gains in Mexico accounted for a majority of the improvement. A reduction in taxes on foreign earnings reduced the 1995 effective tax rate to 36.5 percent, compared to 38.5 percent in 1994. Restructuring and Settlements On July 13, 1994, the U.S. Circuit Court of Appeals affirmed a prior court's decision in the Company's lawsuit against Holden Foundation Seeds, Inc., awarding Pioneer damages for lost profits from the misappropriation of germplasm. In August, the Company received the settlement plus interest totaling $52 million. The Company also incurred $7 million of restructuring charges. Liquidity and Capital Resources Due to the seasonal nature of the agricultural seed business, the Company generates most of its cash from operations during the second and third quarters of the fiscal year. Cash generated during this time is used to pay the commercial paper borrowings and accounts payable, which are the Company's primary sources of credit during the first and fourth quarters of the fiscal year. Any excess funds available are invested, primarily in short-term commercial paper. Historically, the Company has financed growth through earnings. Cash provided by operating activities was $389 million in 1996, compared to $140 million and $331 million in 1995 and 1994, respectively. Collections on increased sales and lower inventory levels were largely responsible for the high levels of cash provided by operating activities for 1996. Higher inventory levels and a decrease in accounts payable and accrued expenses contributed to the decrease in cash provided by operating activities during 1995. Cash flow in 1994 was favorably impacted by the settlement and collection of damages on the Holden suit. EDGARWATCH Page 56 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Most of the Company's financing is done through the issuance of commercial paper in the U.S., backed by revolving and seasonal lines of credit. In addition, foreign lines of credit and direct borrowing agreements are relied upon to support overseas financing needs. Short-term debt at August 31, 1996, totaled $13 million, a $45 million decrease from 1995 and $1 million lower than 1994. Increased sales in 1996 and the collection of damages on the Holden suit during August of 1994 allowed for lower levels of borrowing during those periods. In 1996, short-term borrowings peaked at $238 million compared to $217 and $164 million in 1995 and 1994, respectively. At August 31, 1995, the Company had a $100 million private medium-term note program of which $50 million was available. The medium term note matured in February, 1996. In 1996, short-term domestic investments peaked at $234 million compared to $257 million and $326 million in 1995 and 1994, respectively. Short-term investments are made through a limited number of reputable institutions after evaluation of investment procedures and credit quality. Pioneer invests in only high-quality, short-term securities, primarily commercial paper. Individual securities must meet credit quality standards, and the portfolios are monitored to ensure diversification among issuers. Fiscal 1996 and 1997 Available Domestic Lines of Credit (in millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr ---------------------------------------------------- Revolving $ 200 $ 200 $ 200 $ 200 Seasonal 100 100 - - ---- ---- ----- ---- Total $ 300 $ 300 $ 200 $ 200 ==== ==== ===== ==== The Company believes the domestic lines of credit available in 1997 are sufficient to meet domestic borrowing needs. Revolving line of credit agreements expire August, 2001. The Company also has a seasonal revolving credit facility to meet peak borrowing needs which expires August, 1997. At year end, cash and cash equivalents totaled $99 million, up from $84 million at August 31, 1995. It is the Company's policy to repatriate excess funds outside the U.S. not required for operating capital or to fund asset purchases. Capital expenditures, including business and technology investments, were $164 million in 1996 compared to $86 million in 1995 and $79 million in 1994. In 1996, total expenditures were higher, principally due to expanded production capacity and technology acquisitions. Capital expenditures for 1997 are expected to approximate $125 million and are expected to be funded through earnings. Dividends paid in July of 1996 increased to $.23 per share, up 15 percent from the $.20 per share dividend paid the prior four quarters. The Company's dividend policy is to annually pay out 40 percent of a four-year rolling average of earnings. Annual Dividends Paid (in millions) 1994 1995 1996 ----------------------------- $ 52 $ 60 $ 69 During 1996, 1.5 million shares of the Company's stock were repurchased under a Board authorized repurchase plan at a total cost of $62 million. At August 31, 1996, authorized shares remaining to be purchased under the plan totaled 2.5 million. EDGARWATCH Page 57 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Effects of Inflation Inflation typically is not a major factor in the Company's operations. The cost of seed products is largely influenced by seed field yields and commodity prices which are not impacted by inflation. Costs normally impacted by inflation-wages, transportation, and energy-are a relatively small part of the total operations. APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS The table titled "Sales by Region - 1996" appears in The Company's Business of the Annual Report to Shareholders in the form of a bar graph. The table titled "North American Soybean Market Share" appears in the Management Discussion and Analysis of the Annual Report to Shareholders in the form of a bar graph The table titled "North American Soybean Average" appears in the Management Discussion and Analysis of the Annual Report to Shareholders in the form of a bar graph The table titled "North American Soybean Unit Sales" appears in the Management Discussion and Analysis of the Annual Report to Shareholders in the form of a bar graph The table titled "Fiscal 1996 and 1997 Available Domestic Lines of Credit" appears in the Management Discussion and Analysis of the Annual Report to Shareholders in the form of a bar graph The table titled "Annual Dividends Paid" appears in the Management Discussion and Analysis of the Annual Report to Shareholders in the form of a bar graph EDGARWATCH Page 58 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Independent Auditors' Report To the Shareholders Pioneer Hi-Bred International, Inc.: We have audited the accompanying consolidated balance sheets of Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended August 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Des Moines, Iowa October 4, 1996 EDGARWATCH Page 59 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Statements of Income Years Ended August 31, 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (In millions, except per share amounts) Net sales............................................. $ 1,721 $ 1,532 $ 1,479 ------ ------ ------ Operating costs and expenses: Cost of goods sold................................ $ 727 $ 642 $ 606 Research and product development.................. 136 130 114 Selling........................................... 382 354 335 General and administrative........................ 129 126 123 Restructuring and settlements..................... -- -- (45) ------ ------ ------ $ 1,374 $ 1,252 $ 1,133 ------ ------ ------ Operating income.................................. $ 347 $ 280 $ 346 Investment income..................................... 22 23 19 Interest expense...................................... (11) (13) (11) Net exchange gain (loss).............................. (4) 1 (5) ------ ------ ------ Income before items below......................... $ 354 $ 291 $ 349 Provision for income taxes............................ (127) (106) (134) Minority interest and other........................... (4) (2) (2) ------ ------ ------ Net income........................................ $ 223 $ 183 $ 213 ====== ====== ====== Net income per common share........................... $ 2.68 $ 2.16 $ 2.40 ====== ====== ====== Average shares outstanding............................ 83.2 84.5 88.6
See Notes to Consolidated Financial Statements. EDGARWATCH Page 60 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Balance Sheets ASSETS August 31, 1996 1995 - ----------------------------------------------------------------------------------------------------- (In millions) CURRENT ASSETS Cash and cash equivalents............................ $ 99 $ 84 Receivables: Trade............................................. 208 163 Other............................................. 35 46 Inventories.......................................... 382 426 Deferred income taxes................................ 58 49 Other current assets................................. 2 2 ------ ------ Total current assets.............................. $ 784 $ 770 ------ ------ LONG-TERM ASSETS........................................ $ 81 $ 41 ------ ------ PROPERTY AND EQUIPMENT Land and land improvements........................... $ 63 $ 61 Buildings............................................ 354 331 Machinery and equipment.............................. 512 481 Construction in progress............................. 56 37 ------ ------ $ 985 $ 910 Less accumulated depreciation........................ 475 438 ------ ------ $ 510 $ 472 ------ ------ INTANGIBLES............................................. $ 47 $ 10 ------ ------ $ 1,422 $ 1,293 ====== ======
See Notes to Consolidated Financial Statements. EDGARWATCH Page 61 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Balance Sheets LIABILITIES AND SHAREHOLDERS' EQUITY August 31, 1996 1995 - ----------------------------------------------------------------------------------------------------- (In millions) CURRENT LIABILITIES Short-term borrowings................................ $ 13 $ 58 Current maturities of long-term debt................. 12 53 Accounts payable, trade.............................. 89 58 Accrued compensation................................. 65 45 Income taxes payable................................. 63 23 Other................................................ 46 43 ------ ------ Total current liabilities......................... $ 288 $ 280 ------ ------ LONG-TERM DEBT.......................................... $ 25 $ 18 ------ ------ DEFERRED ITEMS Postretirement benefits.............................. $ 40 $ 37 Other................................................ 44 38 ------- ------- $ 84 $ 75 ------ ------ CONTINGENCIES MINORITY INTEREST IN SUBSIDIARIES....................... $ 7 $ 7 ------ ------ SHAREHOLDERS' EQUITY Capital stock: Preferred, authorized 10,000,000 shares; issued none $ -- $ -- Common, $1 par value; authorized 150,000,000 shares; issued 92,693,578 shares....................... 93 93 Additional paid-in capital........................... 23 18 Retained earnings.................................... 1,272 1,118 Unrealized gain on available-for-sale securities, net 11 -- Cumulative translation adjustment.................... (3) 1 ------ ------ $ 1,396 $ 1,230 Less: Cost of common shares acquired for the treasury, 1996 -- 10,304,700 shares; 1995 -- 9,206,749 shares. (364) (303) Unearned compensation............................. (14) (14) ------ ------ $ 1,018 $ 913 ------ ------ $ 1,422 $ 1,293 ====== ======
See Notes to Consolidated Financial Statements. EDGARWATCH Page 62 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Statements of Cash Flows Years Ended August 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ (In millions) CASH FLOWS FROM OPERATING ACTIVITIES Net income........................................ $ 223 $ 183 $ 213 Noncash items included in net income: Depreciation ................................. 65 61 60 Amortization.................................. 12 13 15 Restructuring of operations................... -- -- 3 Provision for doubtful accounts............... 5 2 5 (Gain) loss on disposal of assets............. (4) 1 2 Foreign currency exchange (gain) loss......... (4) 2 4 Other noncash items........................... 5 4 (8) Change in assets and liabilities, net: Receivables................................... (46) (20) (31) Inventories................................... 43 (68) 26 Accounts payable and accrued expenses......... 61 (39) 23 Income taxes payable ......................... 40 (8) 12 Other assets and liabilities.................. (11) 9 7 ------ ------ ------ Net cash provided by operating activities..... $ 389 $ 140 $ 331 ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of assets...................... $ 15 $ 6 $ 6 Payments received on notes receivable............. 12 6 9 Disbursements for notes receivable................ (2) (4) (6) Capital expenditures.............................. (116) (86) (79) Technology investments............................ (48) -- -- Other, net........................................ (5) (4) (8) ------ ------ ------ Net cash used in investing activities......... $ (144) $ (82) $ (78) ------ ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES Net short-term borrowings (payments).............. $ (42) $ 45 $ (47) Proceeds from long-term borrowings................ 1 5 3 Principal payments on long-term borrowings........ (55) (2) (5) Purchase of common stock.......................... (62) (100) (113) Cash dividends paid............................... (69) (60) (52) ------ ------ ------ Net cash used in financing activities......... $ (227) $ (112) $ (214) ------ ------ ------ Effect of foreign currency exchange rate changes on cash and cash equivalents.............. $ (3) $ 3 $ -- ------ ------ ------ Effect of change in year-end of the Company's international subsidiaries on cash and cash equivalents......... $ -- $ -- $ 4 ------ ------ ------ Net increase (decrease) in cash and cash equivalents................................. $ 15 $ (51) $ 43 Cash and cash equivalents, beginning.................. 84 135 92 ------ ------ ------ CASH AND CASH EQUIVALENTS, ENDING..................... $ 99 $ 84 $ 135 ====== ====== ======
See Notes to Consolidated Financial Statements. EDGARWATCH Page 63 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - --------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity Years Ended August 31, 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- (In millions) COMMON STOCK Balance, beginning and ending............................ $ 93 $ 93 $ 93 ------- ------ ------ ADDITIONAL PAID-IN CAPITAL Balance, beginning....................................... $ 18 $ 15 $ 13 Common stock issued from treasury for restricted stock plan 3 1 1 Tax benefits related to restricted stock plan......... 2 2 1 ------- ------ ------ Balance, ending.......................................... $ 23 $ 18 $ 15 ------- ------ ------ RETAINED EARNINGS Balance, beginning....................................... $ 1,118 $ 995 $ 835 Net income............................................ 223 183 213 Change in reporting period of international subsidiaries -- -- (1) Cash dividends on common stock (1996 -- $.83 per share; 1995 -- $.71 per share; 1994 -- $.59 per share).... (69) (60) (52) ------- ------ ------ Balance, ending.......................................... $ 1,272 $ 1,118 $ 995 ------- ------ ------ UNREALIZED GAIN ON AVAILABLE-FOR-SALE SECURITIES, NET Balance, beginning....................................... $ -- $ -- $ -- Current unrealized gain............................... 11 -- -- ------- ------ ------ Balance, ending.......................................... $ 11 $ -- $ -- ------- ------ ------ CUMULATIVE TRANSLATION ADJUSTMENT Balance, beginning....................................... $ 1 $ (3) $ (7) Current translation adjustment........................ (4) 4 4 ------- ------ ------ Balance, ending.......................................... $ (3) $ 1 $ (3) ------- ------ ------ TREASURY STOCK Balance, beginning....................................... $ (303) $ (207) $ (97) Purchase of common stock for the treasury (1996 --1,148,900 shares; 1995 -- 2,844,209 shares; 1994 -- 3,325,200 shares)(62) (100) (113) Common stock issued for restricted stock plan, net of forfeitures and stock used to satisfy withholding taxes (1996 -- 50,949 shares; 1995 -- 116,549 shares; 1994 -- 97,336 shares)..................................... 1 4 3 ------- ------ ------ Balance, ending.......................................... $ (364) $ (303) $ (207) ------- ------ ------ UNEARNED COMPENSATION Balance, beginning....................................... $ (14) $ (12) $ (12) Net additions of common stock to restricted stock plan (6) (8) (4) Amortization of unearned compensation................. 6 6 4 ------- ------ ------ Balance, ending.......................................... $ (14) $ (14) $ (12) ------- ------ ------ TOTAL SHAREHOLDERS' EQUITY AT YEAR END...................... $ 1,018 $ 913 $ 881 ======= ====== ======
See Notes to Consolidated Financial Statements. EDGARWATCH Page 64 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Business and Significant Accounting Policies Nature of business: The Company's business is the broad application of the science of genetics. Pioneer was founded in 1926 to apply newly discovered genetic techniques to hybridize corn. Today, the Company develops, produces, and markets hybrids of corn, sorghum, and sunflowers; varieties of soybeans, alfalfa, wheat, and canola; and microorganisms useful in crop and livestock production. Approximately 89 percent of the Company's total net sales are from the sale of hybrid seed and soybean seed within the regions of North America and Europe. Consolidation policy: The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Cash equivalents: The Company considers all liquid investments with a maturity at purchase of three months or less to be cash equivalents. Receivables: Receivables are stated net of an allowance for doubtful accounts of $23 million and $19 million at August 31, 1996 and 1995, respectively. Inventories: Inventories are valued at the lower of cost (first-in, first-out method) or market. Gains or losses on commodity hedging transactions are included as a component of inventory. Property and equipment: Property and equipment is recorded at cost, net of an allowance for loss on plant closings of $9 million at August 31, 1996 and 1995. Depreciation is computed primarily by the straight-line method over estimated service lives of two to forty years. EDGARWATCH Page 65 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Long-term assets: Certain long-term assets were classified as available-for-sale securities. No available-for-sale securities were owned at August 31, 1995. Available-for-sale securities held at August 31, 1996, consisted of an equity security with an original cost of $30 million and an unrealized gain of $17 million. Intangibles: Intangible assets are stated at amortized cost and are amortized by the straight-line method over one-to twenty-year periods, with the weighted-average amortization period approximating 12 years for the year ended August 31, 1996. Accumulated amortization of $36 million and $32 million at August 31, 1996 and 1995, respectively, have been netted against these assets. Basis of accounting: Subsidiary and asset acquisitions are accounted for by the purchase method. Translation of foreign currencies and foreign exchange hedging: All assets and liabilities in the balance sheets of foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at year-end exchange rates. Translation gains and losses are not included in determining net income but are accumulated as a separate component of shareholders' equity. However, for subsidiaries considered to be operating in highly inflationary countries and for certain other subsidiaries, the U.S. dollar is the functional currency, and translation gains and losses are included in determining net income. Foreign currency transaction gains and losses are included in determining net income. The Company uses a combination of forward foreign exchange contracts and foreign currency option contracts to hedge open foreign-denominated payables and receivables and also to hedge firm sales and purchase commitments with its foreign subsidiaries. Unrealized gains and losses on hedges of existing foreign-denominated payables or receivables are included in other assets or liabilities and are recognized in net exchange gain (loss) in conjunction with the revaluation of the foreign-currency-denominated transaction. Unrealized gains and losses related to qualifying hedges of firm sales and purchase commitments are deferred and recognized in income when the future sales or purchases are recognized, or immediately if the commitment is canceled. Option premiums paid are amortized to income over the life of the contract. Income taxes: Income taxes are computed in accordance with SFAS No. 109. Deferred income taxes have been provided on temporary differences in the financial statement and income tax bases of certain assets and liabilities. EDGARWATCH Page 66 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Deferred income taxes have not been provided on the undistributed earnings or the cumulative translation adjustment of the foreign subsidiaries to the extent the Company intends to reinvest such undistributed earnings indefinitely or to repatriate them only to the extent that no additional income tax liability is created. The cumulative amount of the undistributed net income and translation adjustment of such subsidiaries is approximately $172 million at August 31, 1996. The Company files consolidated U.S. federal income tax returns with its domestic subsidiaries; therefore, no deferred income taxes have been provided on the undistributed earnings of those subsidiaries. Pension plans: The Company's domestic and Canadian operations have defined benefit pension plans covering substantially all their employees. The plans provide benefits that are based on average monthly earnings of the employees. The funding policy is to contribute annually an amount to fund pension cost as actuarially determined by an independent pension consulting firm. Other postretirement benefits: The Company sponsors a health care plan and a life insurance plan which provide benefits to eligible retirees. The Company's contribution is based on age and years of service at retirement. The health insurance plan contains the cost-sharing features of coinsurance and/or deductibles. The life plan is paid for by the Company. Benefits under both plans are based on eligibility status for pension and length of service. Substantially all of the Company's U.S. and Canadian full-time employees may become eligible for these benefits upon reaching age 55 and having worked for the Company at least five years. Deferred executive compensation and supplemental retirement benefit plans: The estimated liability for the deferred executive compensation and supplemental retirement benefit plans is being accrued over the expected remaining years of active employment. Restricted stock and stock option plans: The Company has a restricted stock plan and a non-qualified stock option plan. The Company amortizes as compensation expense the cost of stock acquired for the restricted stock plan by the straight-line method over the five-year restriction period. No compensation expense is recorded under the non-qualified stock option plan. In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." This statement establishes a fair value-based method of accounting for stock-based compensation plans. While its adoption is encouraged for all stock-based plans, companies may continue applying the current accounting treatment prescribed by the provisions of APB Opinion No. 25 "Accounting for Stock Issued to Employees." Companies continuing to apply the provisions of APB Opinion No. 25 must, however, provide certain pro forma disclosures as if SFAS No. 123 were adopted for all stock-based compensation plans. The Company will retain the current accounting method for stock-based compensation plans and will provide the necessary disclosures as required in fiscal 1997. EDGARWATCH Page 67 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Other: In 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was issued. This statement requires the review of the recorded values of long-lived assets (including intangibles) when facts and circumstances indicate that the carrying values may not be recoverable. In addition, the statement requires certain adjustments for closing and sale costs to the carrying values of assets to be disposed. The Company will adopt SFAS No. 121 in fiscal 1997, as required. Management believes its adoption will not have a material effect on the carrying values of long-lived assets. Note 2. Inventories The composition of inventories is as follows:
August 31, 1996 1995 - ----------------------------------------------------------------------------------------------------- (In millions) Finished seed................................ $ 209 $ 280 Unfinished seed.............................. 163 140 Supplies and other........................... 10 6 ------ ------ $ 382 $ 426 ====== ======
Unfinished seed represents the Company's cost of parent seed, detasseling and roguing labor, and certain other production costs incurred by the Company to produce its seed supply. Much of the balance of the labor, equipment, and production costs associated with planting, growing, and harvesting the seed is supplied by independent growers, who contract specific acreage for the production of seed for the Company. The compensation of the independent growers is determined based upon yield, contracted acreage, and commodity prices. The commitment for grower compensation is accrued as seed is delivered to the Company. Accrued grower compensation was $11 million and $6 million at August 31, 1996 and 1995, respectively. The Company uses commodity futures and options to hedge grower compensation costs. At August 31, 1996 and 1995, the Company had futures contracts with brokers on notional quantities amounting to 17 million bushels and 7 million bushels, respectively for corn, and 6 million bushels and 5 million bushels, respectively for soybeans. At August 31, 1996, unrealized losses on these contracts were $2 million. Note 3. Current Borrowings, Lines of Credit, Long-Term Debt, and Guarantees At August 31, 1996, the Company had domestic lines of credit totaling $200 million available to be used as support for the issuance of the Company's commercial paper. There was no commercial paper outstanding at August 31, 1996. Commercial paper outstanding at August 31, 1995, was $43 million at a weighted average interest rate of 5.9 percent. EDGARWATCH Page 68 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- In addition, the Company's foreign subsidiaries have lines of credit and direct borrowing agreements totaling $44 million, substantially all of which are unsecured. At August 31, 1996, short-term borrowings of $13 million were outstanding under these lines of credit at a weighted average interest rate of 8.9 percent. At August 31, 1995, short-term borrowings of $15 million were outstanding under foreign subsidiary lines of credit at a weighted average interest rate of 17.8 percent. The long-term debt at August 31, 1996, bears interest at varying rates and requires annual principal payments through fiscal 2011. The maturities of long-term debt for the next five fiscal years, in millions, are as follows: $12, $6, $14, $0.3, and $1. The Company has guaranteed the repayment of principal and interest on certain obligations of Village Court Associates, an affiliated real estate venture. At August 31, 1996, such guarantees totaled approximately $23 million. Note 4. Income Taxes The provision for income taxes is based on income before income taxes as follows:
Years Ended August 31, 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------- (In millions) United States.............................. $ 266 $ 198 $ 272 Foreign.................................... 88 93 77 ------ ------ ------- $ 354 $ 291 $ 349 ====== ====== =======
The provision for income taxes is composed of the following components:
August 31, 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------- (In millions) Current: Federal................................ $ 83 $ 59 $ 101 State.................................. 11 10 15 Foreign................................ 44 36 29 ------ ------ ------- $ 138 $ 105 $ 145 ------ ------ ------- Deferred: Federal................................ $ (9) $ 4 $ (12) State.................................. (1) - (2) Foreign................................ (1) (3) 3 ------ ------ ------- $ (11) $ 1 $ (11) ------ ------ ------- $ 127 $ 106 $ 134 ====== ====== =======
EDGARWATCH Page 69 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at August 31, 1996 and 1995, are presented below:
August 31, 1996 1995 - --------------------------------------------------------------------------------------------------- (In millions) Deferred tax assets: Allowance for doubtful accounts............ $ 6 $ 6 Inventories................................ 33 23 Benefits/compensation...................... 35 32 Deferred profit............................ 8 10 Nondeductible reserves..................... 8 3 Net operating loss carryforwards........... 5 8 Other...................................... 7 7 ------ ------ Total gross deferred tax asset.......... $ 102 $ 89 Less valuation allowance................ (8) (11) ------ ------ Total deferred tax asset................ $ 94 $ 78 ------ ------ Deferred tax liabilities: Property and equipment..................... $ (46) $ (41) Unrealized gain on available-for-sale securities (6) -- Other...................................... -- (1) ------ ------ Total deferred tax liability............ $ (52) $ (42) ------ ------ Net deferred tax asset.................. $ 42 $ 36 ====== ======
The net operating loss carryforwards result from various international subsidiaries. The expiration of these net operating losses range from 1997 to indefinite. Utilization of these losses is dependent upon earnings generated in the respective subsidiaries. A valuation allowance for the losses and certain other items has been set up where appropriate. The net change in the total valuation allowance for the year ended August 31, 1996, was a decrease of $3 million. There was no change as of the end of August 31, 1995. Following is a reconciliation of the statutory U.S. Federal income tax rate to the Company's actual worldwide effective income tax rate:
Years Ended August 31, 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------- Statutory U.S. Federal income tax rate............. 35.0 % 35.0 % 35.0 % State income taxes, net of Federal income tax benefit 1.8 2.4 2.5 Effect of taxes on foreign earnings................ -- (0.9) 1.8 Foreign Sales Corporation.......................... (0.5) (0.7) (1.1) Other.............................................. (0.3) 0.7 0.3 ---- --- ---- Actual effective income tax rate............... 36.0 % 36.5 % 38.5 % ==== ==== ====
EDGARWATCH Page 70 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Note 5. Pension Plans and Other Postretirement Benefits Qualified pension plans: The components of pension expense relating to qualified defined benefit pension plans for the years ended August 31, 1996, 1995, and 1994, consisted of the following:
1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (In millions) Service cost................................... $ 7 $ 7 $ 6 Interest cost on projected benefit obligation.. 11 11 9 Actual return on plan assets................... (14) (12) (11) Net amortization and deferral.................. (1) (1) (1) ------ ------ ------ Pension expense............................ $ 3 $ 5 $ 3 ====== ====== ======
The following table sets forth the plans' funded status as of June 30, 1996 and 1995, respectively:
1996 1995 - ------------------------------------------------------------------------------------------------------------ (In millions) Actuarial present value of benefit obligations: Vested benefit obligation........................... $ 101 $ 96 ====== ====== Accumulated benefit obligation...................... $ 108 $ 102 ====== ====== Plan assets at fair value, primarily stocks and bonds... $ 179 $ 158 Projected benefit obligation............................ 153 147 ------ ------ Plan assets in excess of projected benefit obligation... $ 26 $ 11 Unrecognized net (gain)/loss............................ (11) 9 Unrecognized prior service cost......................... 2 2 Unrecognized transition asset, net (recognized over 16 years) (8) ------ (10) Pension asset....................................... $ 9 $ 12 ====== ======
Plan assets include common stock of the Company totaling $14 million and $11 million at June 30, 1996 and 1995, respectively. In determining the present value of benefit obligations, a discount rate of 8 percent was used in 1996 and 1995. The expected long-term rate of return on plan assets was 9 percent and the assumed rate of increase in compensation levels was 6.5 percent in both years. Non-qualified pension plans: The components of pension expense relating to non-qualified pension plans for the years ended August 31, 1996, 1995, and 1994, consisted of the following:
1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (In millions) Service cost................................... $ 1 $ 2 $ 1 Interest cost on projected benefit obligation.. 3 3 2 Net amortization and deferral.................. 1 1 1 ------ ------ ------ Pension expense............................ $ 5 $ 6 $ 4 ====== ====== ======
EDGARWATCH Page 71 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- The following table sets forth the plans' funded status as of August 31, 1996 and 1995, respectively:
1996 1995 - --------------------------------------------------------------------------------------------------- (In millions) Actuarial present value of benefit obligations: Vested benefit obligation.................. $ 16 $ 7 ====== ====== Accumulated benefit obligation............. $ 16 $ 8 ====== ====== Plans' assets at fair value.................... $ -- $ -- Projected benefit obligation................... 37 39 ------ ------ Plans' assets less than projected benefit obligation................................... $ (37) $ (39) Unrecognized net loss.......................... 4 10 Unrecognized prior service cost................ 11 11 Unrecognized transition asset, net............. 1 1 ------ ------ Pension liabilities........................ $ (21) $ (17) ====== ======
In determining the present value of benefit obligations, a discount rate of 8 percent was used in 1996 and 1995. The assumed rate of increase in compensation levels used was 8 percent in both years. Other postretirement benefit plans: The components of postretirement benefits cost expensed for the years ended August 31, 1996, 1995, and 1994, consisted of the following:
1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (In millions) Service cost -- benefits earned during the year.... $ 2 $ 2 $ 2 Interest cost on accumulated postretirement benefit obligation....................................... 3 2 3 Return on assets................................... -- -- -- Net amortization and deferral...................... -- -- 1 ------ ------ ------ Other postretirement benefits cost............. $ 5 $ 4 $ 6 ====== ====== ======
The following table sets forth the plans' funded status as of August 31, 1996 and 1995, respectively:
1996 1995 - ----------------------------------------------------------------------------------------------------------- (In millions) Accumulated postretirement benefit obligation: Retirees.............................................. $ (12) $ (12) Other fully eligible plans' participants.............. (8) (7) Other active plans' participants...................... (20) (17) ------ ------ $ (40) $ (36) Plans' assets at fair value........................... -- -- ------ ------ Accumulated postretirement benefit obligation in excess of plans' assets....................................... $ (40) $ (36) Unrecognized prior service cost....................... (1) (1) Unrecognized net loss................................. 1 -- ------ ------ Accrued postretirement benefits cost.............. $ (40) $ (37) ====== ======
EDGARWATCH Page 72 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- For 1996 and 1995, the discount rate used in determining the accumulated postretirement benefit obligation was 8 percent. A 9.5 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996. This rate was assumed to decrease gradually to 5.5 percent in year 2004 and remain at that level thereafter. A one-percentage-point increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation as of August 31, 1996, by approximately $7 million and the total of the service and interest cost components of net postretirement health care cost for the year then ended by approximately $1 million. Note 6. Commitments and Contingencies Pioneer has a development/license agreement with a third party granting Pioneer the right to develop and produce an elite Bt transgenic corn line which, when combined with other elite inbreds, would provide commercially viable yield levels, agronomic performance, and European corn borer (ECB) control. Under terms of the agreement, the Company is committed to compensate based upon 1) determination of commercial level ECB protection 2) regulatory approval and 3) the cumulative sale of specified quantities of licensed corn seed worldwide. The Company believes that all requirements for payment are likely to be met in fiscal 1997. Contingent payments under this agreement total $26 million, and will be amortized ratably over the expected cycle of the relevant products. Note 7. Legal Matters Since April, 1996, DeKalb Genetics Corporation ("DeKalb") has filed five lawsuits against Pioneer. The lawsuits allege that insect resistant corn products that use a Bt gene, and corn products resistant to a glufosinate herbicide, infringe on certain DeKalb patents. After reviewing the Company's intellectual property position, all of DeKalb's patent filings, and DeKalb's lawsuits, Pioneer believes DeKalb's claims are without merit. Pioneer has denied DeKalb's allegations and raised defenses that, if successful, would render DeKalb's patents invalid. Pioneer believes that disposition of the lawsuits will not have a materially adverse affect on the consolidated financial position and results of operations of the Company. Pioneer also does not expect delays in the introductions of advanced corn hybrids with insect and herbicide resistance because of these lawsuits. Note 8. Financial Instruments Foreign exchange: The Company uses foreign currency hedge instruments to manage the effect of exchange rate fluctuations on the U.S. dollar value of cash flows of foreign operations and the income effect of foreign-currency-denominated transactions. The primary financial instruments used are foreign exchange forward contracts, purchased foreign currency options, and cross currency swaps. In some countries, foreign currency hedge instruments are not available or are cost prohibitive. The exposures in these countries are addressed through managing net asset positions and borrowing in local currency, or investing in U.S. dollars. EDGARWATCH Page 73 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- While the hedge instruments are subject to risk of loss from exchange rate movement, we expect these losses would generally be offset by gains in the U.S. dollar value of foreign sales and/or cash flows. The Company does not trade these instruments with the objective of earning financial gains on the exchange rate price fluctuations alone, nor does it trade in currencies for which there are no underlying exposures. The notional amounts for contracts in place at August 31, 1996 and 1995, are shown in the following table in U.S. dollars. These contracts generally mature in less than one year.
August 31, 1996 1995 - -------------------------------------------------------------------------------------------------- (In millions) Forwards..................................... $ 79 $ 129 Options Purchased............................ 14 18 Swaps........................................ 26 34 ------ ------ $ 119 $ 181 ====== ======
At August 31, 1996, deferred unrealized gains and losses from hedging firm purchase and sale commitments, based on broker quoted prices, were $0.5 million and $6 million, respectively. Credit risk: The Company's financial instruments subject to credit risk are primarily trade accounts receivable, cash and cash equivalents, and foreign currency exchange contracts. The Company is exposed to credit risk of nonperformance by counterparties. Generally, the Company does not require collateral or other security to support customer receivables or foreign currency exchange contracts. The counterparties to the Company's hedge instruments are major financial institutions. The Company evaluates the creditworthiness of the counterparties to hedge instruments and has never experienced, nor does it anticipate, nonperformance by any of its counterparties. The Company had the following significant concentrations of trade accounts receivables, and cash and cash equivalents subject to credit risk:
August 31, 1996 1995 - ---------------------------------------------------------------------------------- (In millions) United States................................ $ 141 $ 92 Italy........................................ $ 57 $ 57 Brazil....................................... $ 19 $ 16 Argentina.................................... $ 11 $ 12 Central Europe............................... $ 9 $ 8
Within the U.S., the majority of the Company's business is conducted with individual farm operators located throughout the country. Outside the U.S., the majority of the Company's business is transacted with distributors and cooperatives, some being government sponsored. EDGARWATCH Page 74 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Fair value: The Company estimated the fair value of its financial instruments by discounting the expected future cash flows using the current interest rates which would apply to each class of financial instruments, except for foreign currency contracts for which quotes from brokers were used. The fair value of cash equivalents, receivables, short-term borrowings, long-term debt, and foreign currency contracts approximates carrying value at August 31, 1996. Note 9. Restructuring and Settlements On July 13, 1994, the U.S. Circuit Court of Appeals affirmed a prior court's decision in the Company's lawsuit against Holden Foundation Seeds, Inc., awarding Pioneer damages for lost profits from the misappropriation of germplasm. In August 1994, the Company received the settlement plus interest totaling approximately $52 million. The Company also incurred $7 million of restructuring charges. Note 10. Capital Stock Restricted stock plans: The Company has a restricted stock plan under which shares of the Company's common stock are held by the Company for officers and key employees. Such stock is subject to an agreement requiring forfeiture by the employee in the event of termination of employment within five years of the date of grant other than as a result of retirement, death, or disability. The maximum number of shares authorized for grant under this plan is 1,750,000 shares. No shares have been granted as of August 31, 1996. Under previous restricted stock plans, 824,899 shares of the Company's common stock are held for officers and key employees. The maximum number of shares authorized for grant under these plans is 5,250,000 shares, of which 2,157,323 had been granted as of August 31, 1996. Stock option plan: During 1996, the Company adopted a non-qualified stock option plan. The plan authorizes options covering three million shares of the Company's common stock. Options under the plan are exercisable one-third in each of years three, four, and five from the date of grant. The options expire after ten years from the date of grant. Options are forfeited upon termination for reasons other than retirement, death, or disability. During the year, options were granted covering 973,000 shares at an exercise price of $43 per share. All such options remain outstanding as of August 31, 1996. Voting rights: Generally, each share of common stock is entitled to five votes per share if the share has been beneficially owned continuously by the same person for a period of 36 consecutive months preceding the record date for the relevant shareholders' meeting. All other shares are entitled to one vote per share. EDGARWATCH Page 75 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Share repurchase: At August 31, 1996, authorized shares remaining to be purchased under a Board authorized repurchase plan approximated 2.5 million. Note 11. Geographic Data Certain financial information concerning the Company's domestic and foreign operations is as follows:
Years Ended August 31, 1996 1995 1994 - -------------------------------------------------------------------------------------------------- (In millions) Net sales (by source): United States.......................... $ 1,435 $ 1,271 $ 1,270 Europe................................. 387 349 249 Other.................................. 222 189 190 ------ ------ ------- Total sales.......................... $ 2,044 $ 1,809 $ 1,709 Less intergeographical sales, primarily United States....................... 323 277 230 ------ ------ ------- $ 1,721 $ 1,532 $ 1,479 ====== ====== ======= Operating income (by source): United States.......................... $ 334 $ 269 $ 341 Europe................................. 56 53 33 Other.................................. 33 31 40 ------ ------ ------- $ 423 $ 353 $ 414 Indirect general and administrative expense (76) (73) (68) ------ ------ ------ $ 347 $ 280 $ 346 ====== ====== ======= Identifiable assets at August 31: United States.......................... $ 701 $ 736 $ 668 Europe................................. 224 212 197 Other.................................. 244 210 201 ------ ------ ------- $ 1,169 $ 1,158 $ 1,066 Corporate.............................. 253 135 187 ------ ------ ------- $ 1,422 $ 1,293 $ 1,253 ====== ====== ======= Export Sales: Primarily Europe....................... $ 20 $ 15 $ 18 ====== ====== =======
Note 12. Unaudited Quarterly Financial Data Summarized unaudited quarterly financial data for 1996 is as follows:
Three Months Ended November 30 February 29 May 31 August 31 - -------------------------------------------------------------------------------------------------- (In millions, except per share amounts) Net sales.................. $ 92 $ 281 $ 1,168 $ 180 Gross profit............... $ 8 $ 107 $ 691 $ 52 Net income (loss).......... $ (49) $ 4 $ 303 $ (35) Net income (loss) per common share (1)....... $ (.59) $ .05 $ 3.64 $ (.42) Cash dividends per common share(1)........ $ .20 $ .20 $ .20 $ .23
EDGARWATCH Page 76 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Summarized unaudited quarterly financial data for 1995 is as follows:
Three Months Ended November 30 February 28 May 31 August 31 - -------------------------------------------------------------------------------------------------- (In millions, except per share amounts) Net sales.................. $ 69 $ 277 $ 1,049 $ 137 Gross profit............... $ 2 $ 104 $ 632 $ 21 Net income (loss).......... $ (48) $ 9 $ 272 $ (50) Net income (loss) per common share (1)....... $ (.57) $ .11 $ 3.23 $ (.59) Cash dividends per common share (1)....... $ .17 $ .17 $ .17 $ .20
(1) As a result of rounding, the total of the four quarters' earnings and cash dividends per share may not equal the earnings and cash dividends per share for the year. Note 13. Supplemental Cash Flow Information Certain financial information concerning the Consolidated Statements of Cash Flows is as follows:
Years Ended August 31, 1996 1995 1994 - -------------------------------------------------------------------------------------------------- (In millions) Cash payments: Interest............................... $ 14 $ 13 $ 13 Income taxes........................... $ 93 $ 117 $ 145 Noncash investing and financing activities: Intangibles acquired by the issuance of long-term debt........................... $ 20 $ -- $ --
EDGARWATCH Page 77 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- Research and Product Development At August 31, 1996, the Company employed 917 people who directly and indirectly engage in research and product development activities. Of these, 360 scientists performed research in the agricultural seed area and 11 in microbial cultures. Of the 360 scientists performing research in agricultural seeds, 52 are employed outside of North America and 121 are focused on biotechnology research. Total research expenditures for 1996 were $136 million. During the three fiscal years ended August 31, 1996, the Company expended the following amounts on research and product development: Years Ended August 31, 1996 1995 1994 - -------------------------------------------------------------------------------- (In millions) Corn........................... $ 90 $ 87 $ 75 Soybeans....................... 12 10 9 Other Products................. 34 33 30 ------ ------ ------ Total........................ $ 136 $ 130 $ 114 ====== ====== ====== Planned growth in biotechnology projects, research collaborations, and trait and technology development makes up most of the increase over 1995. The investment in research has increased yearly since 1973, supporting the Company's commitment to improving products through research and product development. Properties Pioneer owns and operates 22 commercial seed corn conditioning plants in North America. These plants are located in Illinois (4), Indiana (4), Iowa (8), Michigan (1), Nebraska (2), Texas (1), and Ontario, Canada (2). Seed corn, unlike commercial corn, must be harvested and dried before freezing temperatures can limit germination potential. Because of this, seed drying capacity is a critical factor. The dryers at the North American plants have a total capacity of two million bushels and, depending on factors such as seed moisture content, can be filled 11 times before fall weather presents a significant freeze risk. At normal capacity, the husking and sorting units at the North American plants can handle 54,580 bushels of ear corn per hour. In total, these plants have the capacity to condition 14,400 units per hour. In a normal year, seed conditioning is completed by early February. These plants have the facilities to store 10 million bushels of bulk seed and 15.6 million units of bagged seed corn, including cold storage for 7.4 million units. In North America, conditioning of other commercial PioneerAE brand seed is performed at a total of 17 plants, six of which also condition corn. Pioneer also owns interests in 24 commercial production plants in 21 countries outside North America. Parent seed is conditioned at nine locations in North America and at ten locations outside North America. Six of these facilities also condition commercial Pioneer brand seed. The Company's plant breeders conduct research at 50 stations in the U.S. and Canada. There are 28 stations which conduct research on corn; four of those conduct research on more than one crop. There are 22 stations which conduct research on seeds other than corn. One of these stations conducts research on more than one crop. In addition to these research efforts, Pioneer conducts seed research at 43 locations throughout the rest of the world. EDGARWATCH Page 78 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- In addition to the research stations, approximately 273,000 square feet of laboratory, greenhouse, and office space located in Johnston, Iowa are also devoted to plant breeding, biotechnology, and microbial product research. Additional production facilities for microbial products are located at Company-owned properties in Durant, Iowa and Buxtehude, Germany. A livestock nutrition farm, located in Sheldahl, Iowa conducts research for the nutrition and industry markets (NIM) group and for microbial products. Pioneer also owns 5,783 acres of agricultural land in the U.S. used primarily for research activities. Of this, 1,000 acres located in Johnston, Iowa are under commercial and residential development. As properties are developed, they are either sold or retained as equity projects. Company properties, substantially all of which are owned, were subject to aggregate encumbrances of $1 million on August 31, 1996. The Company believes that all properties, including machinery, equipment, and vehicles, are well maintained, suitable for their intended uses, and adequately insured. EDGARWATCH Page 79 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS On November 7, 1995, the Company's stock began trading on the New York Stock Exchange. Prior to that date, the Company's stock was traded in the National Association of Securities Dealers National Market System. The range of closing prices for these shares for the past two years follows: 1996 1995 ------------------------------------------------------------------- Quarter: High Low High Low First............. 57 3/8 42 3/4 35 1/4 30 Second............ 60 1/8 49 1/4 38 3/4 32 3/4 Third............. 57 51 1/4 39 1/4 32 1/2 Fourth............ 57 1/4 49 3/4 45 1/2 38 3/4 On August 31, 1996, there were approximately 3,900 accounts representing approximately 20,000 shareholders of the Company's 82,388,878 outstanding shares. Quarterly dividends paid for the years ended August 31, 1996 and 1995 are as follows: Cash Dividends Per Share 1996 1995 --------------------------------------------------------------- Quarter: First........................... $ .20 $ .17 Second.......................... $ .20 $ .17 Third........................... $ .20 $ .17 Fourth.......................... $ .23 $ .20 The stock of the Company became publicly traded in 1973 and quarterly dividends have been paid continuously since that time. It is anticipated that dividends will continue to be paid in the future. The Company's stock is included in the Standard & Poors Composite Stock Price Index. EDGARWATCH Page 80 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 21 PIONEER HI-BRED INTERNATIONAL, INC. SUBSIDIARIES OF THE REGISTRANT The following are all of the subsidiaries of the Registrant, and are included in its audited consolidated financial statements filed with its Annual Report on Form 10-K for the fiscal year ended August 31, 1996. Each subsidiary listed is wholly-owned by the Registrant or one of the Registrant's wholly owned subsidiaries, except as otherwise indicated. Place of Subsidiary Incorporation Subsidiaries of the Registrant: The Advantage Corp. USA Green Meadows, Ltd. USA Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico PHI Communications Company, Inc. USA PHI Financial Services, Inc. USA PHI Insurance Co. USA PHI Insurance Services, Inc. USA PHI Mexico, S.A. de C.V. (99%) Mexico PHI Specialty Products USA Pioneer Hi-Bred Australia, Pty. Ltd. Australia Pioneer Hi-Bred FSC Ltd. (0.45%) Jamaica Pioneer Hi-Bred Limited Canada Pioneer Hi-Bred Production, Ltd. Canada Pioneer Hi-Bred Puerto Rico, Inc. USA Pioneer Overseas Corporation USA Pioneer Sementes Ltda. (74.39%) Brazil Pioneer Vegetable Genetics, Inc. USA Semillas Pioneer Chile Ltda. (99.74%) Chile Semillas Pioneer, S.A. Spain EDGARWATCH Page 81 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Place of Subsidiary Incorporation Subsidiaries of Pioneer Overseas Corporation, a wholly owned subsidiary of the Registrant: Agri-Genetic Realty, Inc. (30%) Philippines Grainfield Co., Ltd. (35%) Thailand Hibridos Pioneer de Mexicanos S.A. de C.V. (96%) Mexico MISR Pioneer Seeds Company S.A.E. (80.39%) Egypt P. T. Pioneer Hibrida Indonesia (80%) Indonesia PartAgri SARL (50%) France PHI Genetics (Pty) Limited South Africa PHI Hi-Bred (Pty) Limited South Africa PHI Seeds Proprietary Ltd. (99.99%) Botswana Pioneer Argentina, S.A. Argentina Pioneer France Mais S.A. (99.44%) France Pioneer Genetique S.A.R.L. (99%) France Pioneer Hi-Bred Agricultural Technologies, Inc. Philippines Pioneer Hi-Bred Europe, Inc. USA Pioneer Hi-Bred FSC Ltd. (99.55%) Jamaica Pioneer Hi-Bred Italia S.p.A. (90%) Italy Pioneer Hi-Bred Japan Co., Ltd. (52%) Japan Pioneer Hi-Bred Korea, Inc. USA Pioneer Hi-Bred Magyarorszag Kft. (90%) Hungary Pioneer Hi-Bred Northern Europe GmbH Germany Pioneer Hi-Bred S.A.R.L. (99.8%) France Pioneer Hi-Bred Seeds Agro S.R.L. Romania Pioneer Hi-Bred Seeds, Inc. JV (95%) Ethiopia Pioneer Hi-Bred Sementes de Portugal, S.A. (99.96%) Portugal Pioneer Hi-Bred Thailand Co., Ltd. (94.5%) Thailand Pioneer Overseas Corporation (Thailand) Ltd. (99.96%) Thailand Pioneer Overseas Research Corporation USA Pioneer Pakistan Seed Limited (80%) Pakistan Pioneer Saaten GmbH Austria Pioneer Seed Company (Zimbabwe) (Private) Limited (95%) Zimbabwe Pioneer Seed Holding Nederland B.V. Netherlands Pioneer Seeds, Inc. USA Pioneer Semena Holding GmbH (99%) Austria Pioneer Sementes Ltda. (25.61%) Brazil Pioneer Sjeme D.o.o. (10%) Croatia Pioneer Tohumculuk A.S. (99.98%) Turkey Pioneer Trading Ltd. (51%) Turks & Caicos Semillas Hibridas Pioneer S.A. (75%) Colombia Semillas Pioneer Chile Ltda. (0.26%) Chile Semillas Pioneer de Venezuela C.A. Venezuela SPIC PHI Seeds Inc. (40%) India Swazi-American (PHI) Seeds, Ltd. (70%) Swaziland Ukranian-American Russian Zorya-Nasinnya (33.33%) Ukraine EDGARWATCH Page 82 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Place of Subsidiary Incorporation Subsidiaries of Green Meadows, Ltd., a wholly owned subsidiary of the Registrant: Green Meadows Development Board USA Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico Iowa India Investments Company Ltd. USA PHI Mexico, S.A. de C.V. (1%) Mexico Pioneer France Mais S.A. (0.08%) France Village Court, Inc. USA Subsidiaries of PHI Insurance Services, Inc., a wholly-owned subsidiary of the Registrant: Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico Pioneer Insurance Services, Inc. - An insurance Agency USA Subsidiary of Pioneer Genetique S.A.R.L., a wholly owned subsidiary of Pioneer Overseas Corporation and Pioneer Seeds, Inc.: Pioneer France Mais S.A. (.08%) France Subsidiaries of Pioneer Hi-Bred Europe, Inc., a wholly owned subsidiary of Pioneer Overseas Corporation: Pioneer Hi-Bred Magyarorszag Kft. (10%) Hungary Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal Pioneer Tohumculuk A.S. (0.01%) Turkey Subsidiary of Pioneer Hi-Bred Korea, Inc., a wholly owned subsidiary of Pioneer Overseas Corporation: Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal Subsidiaries of Pioneer Hi-Bred Limited, a wholly owned subsidiary of the Registrant: Pioneer France Mais S.A. (0.08%) France Pioneer Hi-Bred S.A.R.L. (0.20%) France Subsididary of Pioneer Overseas Research Corporation, a wholly owned subsidiary of Pioneer Overseas Corporation: Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal Subsidiaries of Pioneer Seed Holding Nederland B.V., a wholly owned subsidiary of Pioneer Overseas Corporation: Hellaseed S.A. (51%) Greece Pioneer France Mais S.A. (0.08%) France Pioneer Hi-Bred Slovakia S.R.O. Slovakia EDGARWATCH Page 83 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Place of Subsidiary Incorporation Subsidiaries of Pioneer Seeds, Inc., a wholly owned subsidiary of Pioneer Overseas Corporation: Hibridos Pioneer de Mexico S.A. de C.V. (1%) Mexico MISR Pioneer Seed Company S.A.E. (0.01%) Egypt P.T. Pioneer Hibrida Indonesia (20%) Indonesia PHI Seeds Proprietary Limited (0.01%) Botswana Pioneer France Mais S.A. (0.08%) France Pioneer Genetique S.A.R.L. (1%) France Pioneer Hi-Bred Italia S.p.A. (10%) Italy Pioneer Hi-Bred Sementes de Portugal S.A. (0.01%) Portugal Pioneer Semena Holding GmbH (1%) Austria Pioneer Sjeme D.o.o. (90%) Croatia Pioneer Tohumculuk A.S. (0.01%) Turkey EDGARWATCH Page 84 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 23 CONSENTS OF EXPERTS AND COUNSEL INDEPENDENT AUDITORS' CONSENT The Board of Directors Pioneer Hi-Bred International, Inc. We consent to incorporation by reference in the registration statement No. 333-08927 on Form S-8 of our report dated October 4, 1996, relating to the consolidated balance sheets of Pioneer Hi-Bred International, Inc. and subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows and related schedule for each of the years in the three-year period ended August 31, 1996, which report appears in the August 31, 1996, annual report on Form 10-K of Pioneer Hi-Bred International, Inc. /s/KPMG Peat Marwick LLP -------------------------- KPMG Peat Marwick LLP Des Moines, Iowa November 22, 1996 EDGARWATCH Page 85 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- EXHIBIT 27 FINANCIAL DATA SCHEDULE ARTICLE 5 MULTIPLIER 1,000,000 PERIOD-TYPE YEAR FISCAL-YEAR-END AUG-31-1996 PERIOD-END AUG-31-1996 CASH 43 SECURITIES 56 RECEIVABLES 266 ALLOWANCES 23 INVENTORY 382 CURRENT-ASSETS 784 PP&E 985 DEPRECIATION 475 TOTAL-ASSETS 1422 CURRENT-LIABILITIES 288 BONDS 0 PREFERRED-MANDATORY 0 PREFERRED 0 COMMON 93 OTHER-SE 925 TOTAL-LIABILITY-AND-EQUITY 1422 SALES 1721 TOTAL-REVENUES 1721 CGS 863 TOTAL-COSTS 863 OTHER-EXPENSES 511 LOSS-PROVISION 0 INTEREST-EXPENSE 11 INCOME-PRETAX 350 INCOME-TAX 127 INCOME-CONTINUING 223 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME 223 EPS-PRIMARY 2.68 EPS-DILUTED 2.68 EDGARWATCH Page 86 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized. (REGISTRANT) PIONEER HI-BRED INTERNATIONAL, INC. /s/ Charles S. Johnson ------------------------------------------------- (NAME AND TITLE) Charles S. Johnson, President and Chief Executive Officer and Director DATE November 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Charles S. Johnson ------------------------------------------------- (NAME AND TITLE) Charles S. Johnson, President and Chief Executive Officer and Director DATE November 22, 1996 /s/ Thomas N. Urban ------------------------------------------------- (NAME AND TITLE) Thomas N. Urban, Chairman of the Board of Directors DATE November 22, 1996 /s/ Jerry L. Chicoine ----------------------------------------------------- (NAME AND TITLE) Jerry L. Chicoine, Senior Vice President, Chief Financial Officer and Corporate Secretary to the Board DATE November 22, 1996 /s/ Dwight G. Dollison ----------------------------------------------------- (NAME AND TITLE) Dwight G. Dollison, Vice President and Treasurer DATE November 22, 1996 /s/ Brian G. Hart ----------------------------------------------------- (NAME AND TITLE) Brian G. Hart, Vice President and Corporate Controller DATE November 22, 1996 /s/ C. Robert Brenton ----------------------------------------------------- (NAME AND TITLE) C. Robert Brenton, Director DATE November 22, 1996 /s/ Dr. Pedro Cuatrecasas ----------------------------------------------------- (NAME AND TITLE) Dr. Pedro Cuatrecasas, Director DATE November 22, 1996 EDGARWATCH Page 87 of 88 PIONEER HI BRED INTERNATIONAL INC 10-K - -------------------------------------------------------------------------- /s/ Dr. Ray A. Goldberg ---------------------------------------------------- (NAME AND TITLE) Dr. Ray A. Goldberg, Director DATE November 22, 1996 /s/ Fred S. Hubbell ---------------------------------------------------- (NAME AND TITLE) Fred S. Hubbell, Director DATE November 22, 1996 /s/ Dr. F. Warren McFarlan ---------------------------------------------------- (NAME AND TITLE) Dr. F. Warren McFarlan, Director DATE November 22, 1996 /s/ Dr. Owen J. Newlin ---------------------------------------------------- (NAME AND TITLE) Dr. Owen J. Newlin, Director DATE November 22, 1996 /s/ Dr. Virginia Walbot ---------------------------------------------------- (NAME AND TITLE) Dr. Virginia Walbot, Director DATE November 22, 1996 /s/ H. Scott Wallace ---------------------------------------------------- (NAME AND TITLE) H. Scott Wallace, Director DATE November 22, 1996 /s/ Fred W. Weitz ---------------------------------------------------- (NAME AND TITLE) Fred W. Weitz, Director DATE November 22, 1996 /s/ Herman H.F. Wijffels ---------------------------------------------------- (NAME AND TITLE) Herman H.F. Wijffels, Director DATE November 22, 1996 /s/ Nancy Y. Bekavac ---------------------------------------------------- (NAME AND TITLE) Nancy Y. Bekavac, Director DATE November 22, 1996 /s/ Luiz Kaufmann ---------------------------------------------------- (NAME AND TITLE) Luiz Kaufmann, Director DATE November 22, 1996 EDGARWATCH Page 88 of 88 EX-99.(G)2 16 10-Q 5/31/97 - ------------------------------------------------------------------------------ PIONEER HI BRED INTERNATIONAL INC 10-Q - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Internet Financial Network PIONEER HI BRED INTERNATIONAL INC 10-Q 07/08/1997 Page 1 Internet Financial Network Smart Doc PIONEER HI BRED INTERNATIONAL INC Document 10-Q Filing Date: 07/08/1997 Exhibit List EX-27
Table Of Contents Document Sections PART I - FINANCIAL INFORMATION ...........................................................................3 CONSOLIDATED CONDENSED BALANCE SHEETS ....................................................................7 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ..........................................................10 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ..........................................................13 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS .....................................................15 PART II - OTHER INFORMATION ..............................................................................23 Item 6. - Exhibits and Reports on Form 8-K ...............................................................23 Full Contents 700 Capital Square, 400 Locust, Des Moines, Iowa 50309 ...................................................1 PART I - FINANCIAL INFORMATION ...........................................................................3 CONSOLIDATED CONDENSED BALANCE SHEETS ....................................................................7 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ..........................................................10 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ..........................................................13 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS .....................................................15 PART II - OTHER INFORMATION ..............................................................................23 Item 6. - Exhibits and Reports on Form 8-K ...............................................................23
PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-Q --------------------- X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ------- SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended May 31, 1997 OR ______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- Commission File Number : 0-7908 PIONEER HI-BRED INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Iowa 42-047052 - --------------------------------------------- --------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 700 Capital Square, 400 Locust, Des Moines, Iowa 50309 - ------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (515) 248-4800 ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 27, 1997 - ------------------------------ ----------------------------- Common Stock ($1.00 par value) 82, 222, 935 ================================================================================ EDGARWATCH Page 1 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. INDEX
PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets -- May 31, 1997, August 31, 1996, and May 31, 1996.............................. 3-4 Consolidated Condensed Statements Of Operations-- Three Months and Nine Months Ended May 31, 1997 and May 31, 1996............ 5 Consolidated Condensed Statements Of Cash Flows-- Nine Months Ended May 31, 1997 and May 31, 1996............................ 6 Notes to Consolidated Condensed Financial Statements............. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 8-13 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................. 14 Signatures................................................................ 15
EDGARWATCH Page 2 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in millions)
May 31, August 31, May 31, ASSETS 1997 1996 1996 ---------- ----------- -------- CURRENT ASSETS Cash and cash equivalents........... $ 183 $ 99 $ 227 Accounts and notes receivable, net.. 489 243 407 Inventories: Finished seed..................... 288 209 262 Unfinished seed................... 94 163 77 Other............................. 7 10 7 Deferred income taxes............... 59 58 47 Prepaid expenses and other current assets............................ 11 2 10 --------- -------- ------- Total current assets $ 1,131 $ 784 $ 1,037 LONG-TERM ASSETS........................ 87 81 90 PROPERTY AND EQUIPMENT, net of accumulated depreciation and allowances May 31, 1997 - $499 August 31, 1996 - $484 May 31, 1996 - $474................. 542 510 500 INTANGIBLES............................. 66 47 44 -------- -------- -------- $ 1,826 $ 1,422 $ 1,671 ======== ======== ========
See Notes to Consolidated Condensed Financial Statements. EDGARWATCH Page 3 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited, in millions)
LIABILITIES AND SHAREHOLDERS' May 31, August 31, May 31, EQUITY 1997 1996 1996 ----------- ---------- ------- CURRENT LIABILITIES Short-term borrowings................. $ 28 $ 13 $ 15 Current maturities of long-term debt.. 5 12 8 Accounts payable, trade............... 167 89 182 Accrued compensation.................. 52 65 47 Income taxes payable.................. 181 63 154 Other accruals........................ 49 46 51 -------- -------- -------- Total current liabilities........... $ 482 $ 288 $ 457 -------- -------- -------- LONG-TERM DEBT............................ $ 32 $ 25 $ 30 -------- -------- -------- DEFERRED ITEMS Postretirement benefits............... $ 42 $ 40 $ 39 Other................................. 46 44 43 -------- -------- -------- $ 88 $ 84 $ 82 -------- -------- -------- MINORITY INTEREST IN SUBSIDIARIES........ $ 7 $ 7 $ 7 -------- -------- -------- SHAREHOLDERS' EQUITY Preferred stock, no par value......... $ -- $ -- $ -- Common stock, $1 par value............ 93 93 93 Additional paid-in capital............ 41 23 20 Retained earnings..................... 1,499 1,272 1,326 Unrealized gain on available-for-sale securities, net..................... 17 11 16 Cumulative translation adjustment..... (13) (3) (5) -------- -------- -------- $ 1,637 $ 1,396 $ 1,450 Less: Cost of common shares acquired for the treasury........... (393) (364) (339) Unearned compensation............... (27) (14) (16) -------- -------- -------- $ 1,217 $ 1,018 $ 1,095 -------- -------- -------- $ 1,826 $ 1,422 $ 1,671 ======== ======== ========
See Notes to Consolidated Condensed Financial Statements. EDGARWATCH Page 4 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited, in millions)
Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 1997 1996 1997 1996 -------------------------- ---------------------- Net sales.......................... $ 1,288 $ 1,168 $ 1,642 $ 1,541 -------- -------- -------- -------- Operating costs and expenses: Cost of goods sold............... $ 513 $ 442 $ 700 $ 638 Research and product development. 40 35 103 97 Selling.......................... 189 187 305 306 General and administrative....... 31 26 96 93 -------- -------- -------- -------- $ 773 $ 690 $ 1,204 $ 1,134 -------- -------- -------- -------- Operating income................. $ 515 $ 478 $ 438 $ 407 Investment income.................. 7 7 16 16 Interest expense................... (2) (3) (6) (10) Net exchange and other gains (losses) (1) -- -- (1) -------- -------- -------- -------- Income before items shown below.......................... $ 519 $ 482 $ 448 $ 412 Provision for income taxes......... (187) (178) (161) (10) Minority interest and other........ -- (1) (2) (3) -------- -------- -------- -------- Net income....................... $ 332 $ 303 $ 285 $ 258 ======== ======== ======== ======== Income per common share*........... $ 4.04 $ 3.64 $ 3.46 $ 3.10 Dividends per common share*........ $ .23 $ .20 $ .69 $ .60 Weighted average number of common shares outstanding................ 82.2 83.1 82.3 83.3
* Not in millions See Notes to Consolidated Condensed Financial Statements. EDGARWATCH Page 5 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited, in millions)
Nine Months Ended May 31, May 31, 1997 1996 ----------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income....................................... $ 285 $ 258 Noncash items included in net income: Depreciation and amortization.................. 64 55 Gain on sale of available-for-sale securities.. (7) -- Other.......................................... 1 8 Net change in assets and liabilities............. (75) 130 -------- -------- Net cash provided by operating activities...... $ 268 $ 451 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................. $ (85) $ (76) Proceeds on sale of available-for-sale securities 17 -- Other............................................ (31) (48) -------- -------- Net cash used in investing activities.......... $ (99) $ (124) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments) proceeds on short-term borrowings. $ 17 $ (39) Purchase of treasury stock....................... (24) (37) Dividends paid................................... (57) (50) Principal payments on long-term borrowings....... (11) (54) -------- -------- Net cash used in financing activities.......... $ (75) $ (180) -------- -------- Effect of foreign currency exchange rate changes on cash and cash equivalents........................ $ (10) $ (4) -------- -------- Net increase in cash and cash equivalents....... $ 84 $ 143 Cash and cash equivalents, beginning............... 99 84 -------- -------- CASH AND CASH EQUIVALENTS, ENDING.................. $ 183 $ 227 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest................................ $ 5 $ 12 ======== ======== Income taxes............................ $ 54 $ 16 ======== ========
See Notes to Consolidated Condensed Financial Statements. EDGARWATCH Page 6 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PIONEER HI-BRED INTERNATIONAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present the financial position as of May 31, 1997 and 1996, and the results of operations and cash flows for the nine months ended May 31, 1997 and 1996. Because of the seasonal nature of the Company's business, the results of operations for the nine months ended May 31, 1997, may not be indicative of the results to be expected for the full year. 2. The Company has guaranteed the repayment of principal and interest on certain obligations of Village Court Associates, an affiliated real estate venture. At May 31, 1997, such guarantees totaled approximately $23 million. 3. Since April 1996, Dekalb Genetics Corporation ("DeKalb") has filed five lawsuits against Pioneer. The lawsuits allege that insect-resistant corn products that use a Bt gene, and corn products resistant to glufosinate herbicide, infringe on certain DeKalb patents. After reviewing the Company's intellectual property position, all of DeKalb's patent filings, and DeKalb's lawsuits, Pioneer believes DeKalb's claims are without merit. Pioneer has denied DeKalb's allegations and raised defenses that, if successful, would render DeKalb's patents invalid. Pioneer believes that disposition of the lawsuits will not have a materially adverse affect on the consolidated financial position and results of operations of the Company. Pioneer also does not expect delays in the introductions of advanced corn hybrids with insect and herbicide resistance because of these lawsuits. 4. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share" (SFAS 128), which is intended to simplify the earnings per share computation and increase comparability of earnings per share on an international basis. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997, and requires restatement of all prior period earnings per share data presented. The adoption of SFAS 128 is not expected to have a significant impact on the Company's financial statements. EDGARWATCH Page 7 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes, and with the Company's audited financial statements and notes for the fiscal year ended August 31, 1996. MATERIAL CHANGES IN FINANCIAL CONDITION: Due to the seasonal nature of the agricultural seed business, the Company generates most of its cash from operations during the second and third quarters of the fiscal year. Cash generated during this time is used to meet the cash needs of the period and to pay the commercial paper and accounts payable which are the Company's primary sources of financing during the first and fourth quarters of the fiscal year. Any excess funds are invested, primarily in short-term commercial paper. Most of the Company's financing is done through the issuance of commercial paper in the U.S., backed by revolving and seasonal lines of credit. In addition, foreign lines of credit and direct borrowing agreements are relied upon to support overseas financing needs. Short-term debt at May 31, 1997, consisted of $28 million in direct borrowings from foreign banks. During fiscal 1997, the Company has the following domestic lines of credit available: (in millions) ....... Revolving Seasonal Total ....... First quarter.. $200 $100 $300 Second quarter. $200 $100 $300 Third quarter.. $200 $ -- $200 Fourth quarter. $200 $ -- $200 Increased credit sales at May 31, 1997, contributed to the current year increase in accounts receivable when compared to prior year results. Property and equipment at May 31, 1997, increased over the same period a year earlier mainly due to the construction of additional production capacity in Latin America combined with other newly constructed facilities in Johnston, Iowa. At May 31 1997, intangibles increased from prior year levels due to payments associated with an agreement for the right to develop and produce elite Bt transgenic corn hybrids. EDGARWATCH Page 8 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- MATERIAL CHANGES IN RESULTS OF OPERATIONS: Due to the seasonality of the seed business, partial-year results and quarter-to-quarter comparisons are not always meaningful. Accordingly, such quarterly comparisons are not emphasized. Typically, most of the Company's revenue and operating profit are generated in the third quarter. Net income for the nine months ended May 31, 1997, was $285 million, or $3.46 per share, on sales of $1.642 billion, compared to net income of $258 million, or $3.10 per share, on sales of $1.541 billion for the first nine months of fiscal 1996. Nine months into fiscal 1997, the Company is on track for another year of record earnings and better than 20 percent return on equity. As usual, there is some uncertainty in predicting annual results. However, Northern Hemisphere seed corn operations are the most significant component of consolidated results, and with the third quarter just completed, more than 90 percent of projected annual sales are recorded and much is known about the three drivers of seed corn profitability - market share, market size, and price (net margin) per unit. Fiscal 1997 marks a time of significant transition for our North American seed corn product line. Depending on final corn acreage and seeding rates, the Company's share of the North American seed corn market is estimated to be approximately 42 percent to 42.5 percent. This is a decrease of approximately a point and one half to two points from 1996 levels. The Company introduced a number of new products this year targeted to replace hybrids that have in recent years dominated the North American seed corn market. Falling unit sales of these older hybrids are largely responsible for the estimated current year market share decrease. An expected increase in North American market size combined with an increase in net seed corn margin per unit will also impact current year results. Corn acreage in North America is projected to rise modestly above 1996 levels. And, although operating results in North America will be impacted by higher per-unit seed corn costs, the average seed corn selling price is expected to increase as well. The introduction of significant volumes of new products in fiscal 1997 is expected to increase the net selling price per unit in North America. The result should be higher current year per-unit seed corn margins of approximately $2 per unit. In response to the growing market demand for new genetics with targeted attributes, the Company introduced 27 new corn hybrids this year in North America. First year sales of these new hybrids are expected to reach nearly 600,000 units, four times more than any previous group of new product introductions. These new hybrids are expected to account for approximately 40 percent of next year's Pioneer seed corn sales in North America and will be the foundation for future market share. The most prominent demand for new genetic corn products this season was Bt-corn. Despite regulatory approval for its Bt-corn products coming late in the selling season, Pioneer sales representatives were able to place into the market more than 300,000 units of the new Bt-corn products introduced in 1997. Those units covered approximately 20 percent of the estimated North American Bt-corn acres planted in 1997. Because of the late start, the Company was unable to attain its normal market presence for these products. This lost opportunity also affected current year market share results. In total, eight Bt-corn hybrids were introduced in 1997. Management believes these new Bt-corn products incorporate the best genetics available and have stronger performance potential than any Bt-corn product released to date. The Company is in excellent position to grow its Bt-corn market share in 1998 due to good placement in the market of the 1997 Bt-corn sales, expected larger available supplies of these Bt-corn products, and an entire season in which to market them. EDGARWATCH Page 9 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- The demand for new genetics extends beyond Bt-corn products. The Company's continuous effort to expand and improve its germplasm base includes the testing of products with improved agronomic qualities, as well as value-added traits for livestock producers and other end-users. Only well-tested products that demonstrate reliable performance and value potential for our customers will be brought to the market. The Company will continue to be patient in its testing to provide new traits in the best genetics. While we believe this disciplined approach to product development has contributed to the recent decline in our market share, we are certain it best serves the long-term interests of our customers and shareholders. In addition, the Company continues to vigorously defend the value (price) of its new products with customers. Some competitors have sacrificed the value of these new technologies in an attempt to capture market share. The Company believes it is essential to protect the value of these new products, and also recognizes the challenge this creates in our efforts to protect and grow market share. Despite these recent challenges, management believes the Company is well positioned to grow market share in 1998. The 27 newly-introduced corn hybrids have performed very well in wide-area testing. Besides Bt-corn products, these new releases include hybrids with better disease resistance, as well as products for the rapidly growing high-oil corn market and new white and waxy corn hybrids for the starch industry. Our research indicates that this new lineup may be stronger than the one introduced in 1990, which drove the record-setting growth in sales and market share over the subsequent five years. Due to the Company's ability to quickly increase supply, these products should be widely available in 1998. There is also excitement surrounding soybean operations. Results in 1997 will reflect record sales and profits from our soybean business. Fueled by growth in acres, market share, and strong unit sales of glyphosate-resistant products, current year North American soybean unit sales will exceed seed corn unit sales. Given that glyphosate-resistant varieties are priced at a premium to our elite soybean varieties, they will significantly enhance soybean operating results. Although results in regions outside North America are more difficult to predict, on the whole, management believes the Company should post higher earnings from these operations as well. Europe, Mexico, Asia, Africa, and the Middle East will all post increases in operating income from a year ago. While Latin American operations are expected to fall below prior year results, the extent is unknown and will be determined by the volume of sales recorded in fourth quarter of the current year. In total, unit volumes outside North America are expected to grow, however, the strong dollar will likely dampen reported earnings from many of our foreign operations and increase non-operating financial expenses. As we look forward, all indications point to continued strong financial performance. However, uncertainties exist that could affect the Company's expectations, and fluctuations in expected results are likely as more information becomes available. Some of the important factors that could cause actual results to vary significantly from our expectations include weather, government programs/approvals, commodity prices, changes in corn acreage, intellectual property positions, product performance, customer preferences, currency fluctuations, and costs. Nine Months Ended May 31, 1997 compared to the Nine Months Ended May 31, 1996 Operating income for the first nine months of fiscal 1997 increased $31 million from the same period a year earlier. Additional seed corn units sales outside North America and increased North American soybean unit sales were the primary factors for the increase. EDGARWATCH Page 10 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- Net Sales and Operating Profit (Unaudited, in millions)
Quarter Ended Nine Months Ended May 31, May 31,Increase/ May 31, May 31, Increase/ 1997 1996 (Decrease) 1997 1996 (Decrease) ---------------------------------- ----------------------------------- Net sales: Corn: North America..... $ 768 $ 741 $ 27 $ 882 $ 853 $ 29 Europe............ 238 202 36 338 321 17 Other Regions..... 15 19 (4) 69 61 8 -------- -------- -------- -------- -------- -------- $ 1,021 $ 962 $ 59 $ 1,289 $ 1,235 $ 54 Soybeans............ 174 136 38 182 146 36 Other............... 93 70 23 171 160 11 -------- -------- -------- -------- -------- -------- Total net sales....... $ 1,288 $ 1,168 $ 120 $ 1,642 $ 1,541 $ 101 ======== ======== ======== ======== ======== ======== Operating profit : Corn................ $ 468 $ 448 $ 20 $ 443 $ 432 $ 11 Soybean............. 46 30 16 31 17 14 Other............... 20 15 5 22 13 9 -------- -------- -------- -------- -------- -------- Product line operating profit ........... $ 534 $ 493 $ 41 $ 496 $ 462 $ 34 Indirect general and administrative expenses........ (19) (15) (4) (58) (55) (3) -------- -------- ------- -------- -------- -------- Operating income...... $ 515 $ 478 $ 37 $ 438 $ 407 $ 31 ======== ======== ======== ======== ======== ======== Units delivered: Corn:............... North America..... 9.7 9.7 -- 11.3 11.3 -- Europe........... 2.1 1.7 0.4 3.0 2.8 0.2 Other Regions.... 0.2 0.4 (0.2) 1.2 1.0 0.2 -------- -------- -------- -------- -------- -------- 12.0 11.8 0.2 15.5 15.1 0.4 ======== ======== ======== ======== ======== ======== Soybean - North America 11.0 9.4 1.6 11.6 10.0 1.6 ======== ======== ======== ======== ======== ========
SEED CORN North America Operating profit in North America was virtually unchanged between years. Current year unit sales through third quarter are similar to those recorded in the previous year. Although seed price per unit increased compared to the prior year, higher costs offset most of the year-to-date improvement. Increased investment in research and product development also impacted current year results. EDGARWATCH Page 11 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- In 1997, the average net seed corn selling price per unit to customers in North America is expected to increase approximately seven percent from the introduction of several new elite products, which are priced at a premium, and an increase in list prices across the entire product line. During the current year, a change was made to the Company's commission program which eliminated some ties between commissions and quantity savings discount programs. As a result, reported net price for the first nine months of fiscal 1997 reflected an increase of approximately four percent due to an increase in reported quantity savings discounts. Reported net commission expense decreased accordingly. Net selling price per unit to customers, North American seed corn net margin per unit, and net compensation to sales representatives are essentially unaffected by this program change. Current year per-unit seed costs have increased, offsetting most of the unit sales price improvement. Higher commodity costs related to the 1996 crop has pushed per-unit seed corn cost of sales higher than what was recorded the previous year. Classical plant genetic improvement activities along with investments made to access technology which will help expand and improve the Company's germplasm base are increasing research and product development costs. As a result, research and product development costs for seed corn recorded to date have increased $8 million, or approximately 15 percent from a year ago. Annually, these costs are estimated to increase approximately 10 percent. Other Regions Seed corn operating results outside North America increased $12 million for the first nine months of fiscal 1997 compared to the same period in the previous year. European operations provided the largest impact, providing $21 million in additional operating income compared to a year ago. Strengthening of the U.S. dollar against European currencies had a significant negative impact on current year reported results. On a constant dollar basis, European operations improved $42 million for the current period over results recorded last year. The majority of the constant dollar increase was due to additional unit sales in Italy, Southern Europe, and Central Europe. Market size and market share increases, individually or in concert, played roles in these improvements. Current year-to-date Mexico operations have improved $3 million. Favorable weather conditions and improved water supply have resulted in increased year-to-date unit sales. Increased per-unit sales price also impacted current period results. These factors should improve annual operations over the prior year. Latin American operations decreased $11 million for the first nine months of 1997 compared to the same period a year ago. Production problems in Brazil have reduced our available supply of seed within certain areas of Central Latin America. Also impacting current year results were performance issues related to last season's top selling hybrid in Argentina, which has reduced year-to-date sales there. As a result, year-to-date unit sales are trailing those from the previous year. New and improved products for the region are in the pipeline and should be widely available as a result of production in North America. While this supply will be available, at a higher cost, for the region's current selling season, it is unknown whether it will be available in time for the early sales season which falls within fiscal 1997. Because of good planting conditions this year, the Company expects that a higher percentage of its annual Northern Hemisphere corn sales were recorded through the first three quarters of fiscal 1997 than in 1996. Therefore, on a worldwide basis, we expect fewer fourth quarter corn unit sales in fiscal 1997 than in 1996. EDGARWATCH Page 12 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- SOYBEANS Year-to-date soybean operating income improved over 75 percent from the prior year, almost entirely the result of record North American operations. Soybean operations continue to grow, and have improved on the record results reflected a year ago. All three primary drivers for operating income: market size, market share, and net unit price had positive impacts for soybean operations. Unit sales have increased over 15 percent, or approximately 1.6 million units, from 1996 levels, fueled by increased acreage and improved market share. Favorable commodity prices have resulted in additional acres planted to soybeans in the current year, while continued strong product performance contributed to market share gains. Net margin improved from a year ago despite higher commodity costs. An increase in list prices for the current year, combined with the sales price effect of glyphosate-resistant products which are sold at a premium, more than offset the increase in unit costs. OTHER PRODUCTS Other products current year operating results improved $9 million over those recorded a year earlier. Current period comparisons were impacted by the prior year liquidation of our specialty oils inventory and sale of our vegetable products line, which combined to improve current year operating results $4 million. Operating income for canola products improved $3 million from year ago results due to increased acreage and higher market share. Microbial product results also improved for the first three quarters of 1997 as strong performance of premium inoculant products pushed operating income $2 million higher. Year-to-date alfalfa, sunflower, and sorghum products improved from year ago results, as well. Decreased current year wheat sales in North America, the result of reduced acreage, lowered other products operating results $3 million from the same period last year. INDIRECT GENERAL AND ADMINISTRATIVE EXPENSES Current year indirect general and administrative expenses increased $3 million, or five percent, over 1996 levels. Increase general costs and higher legal expense, resulting from technology claims and disputes, were partially offset by the one-time effect of adopting FAS116 "Accounting for Contributions Made and Contributions Received" during 1996 not present in the current year. EDGARWATCH Page 13 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- NET FINANCIAL AND TAXES Current period net financial income for the first nine months of fiscal 1997 increased $5 million from what was recorded in the prior year. The retirement of the medium-term note program in February 1996, combined with a lower average level of short-term borrowing in the current year, reduced current period interest expense $4 million. A current year gain from the sale of one million shares of Mycogen Corp. stock improved net financial income $7 million, however, this was offset almost entirely by an increase in recorded net exchange losses principally due to the strengthening of the U.S. dollar against European currencies. Both of these items are included in net exchange and other gains (losses). The estimated fiscal 1997 worldwide tax rate of 36 percent reflected through the third quarter is the same as what was reflected on an annual basis for fiscal 1996. The worldwide effective tax rate reflected through the third quarter of fiscal 1996 was 36.5 percent. The effective tax rate reflected for the third quarter is based on all information available to date, however, the effective tax rate on an annual basis may vary from what is reflected in the current period. The level of profits generated in foreign countries with tax rates different from those in the United States and the impact from the repatriation of foreign earnings through the remainder of the year will influence the final reported effective tax rate. EDGARWATCH Page 14 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K a.Exhibits Financial Data Schedule (Exhibit 27). b.Reports on Form 8-K No reports on Form 8-K were filed with the Commission during the three months ended May 31, 1997. EDGARWATCH Page 15 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- PIONEER HI-BRED INTERNATIONAL, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIONEER HI-BRED INTERNATIONAL, INC. (Registrant) By /s/CHARLES S. JOHNSON ---------------------------------------- CHARLES S. JOHNSON Chairman, President, and Chief Executive Officer By /s/JERRY L. CHICOINE ---------------------------------------- JERRY L. CHICOINE Senior Vice President and Chief Financial Officer Dated: July 8, 1997 EDGARWATCH Page 16 of 17 PIONEER HI BRED INTERNATIONAL INC 10-Q - -------------------------------------------------------------------------------- ARTICLE 5 MULTIPLIER 1,000,000 PERIOD-TYPE 9-MOS FISCAL-YEAR-END AUG-31-1997 PERIOD-START SEP-01-1996 PERIOD-END MAY-31-1997 CASH 56 SECURITIES 127 RECEIVABLES 513 ALLOWANCES 24 INVENTORY 389 CURRENT-ASSETS 1131 PP&E 1034 DEPRECIATION 492 TOTAL-ASSETS 1826 CURRENT-LIABILITIES 482 BONDS 0 PREFERRED-MANDATORY 0 PREFERRED 0 COMMON 93 OTHER-SE 1124 TOTAL-LIABILITY-AND-EQUITY 1826 SALES 1642 TOTAL-REVENUES 1642 CGS 803 TOTAL-COSTS 803 OTHER-EXPENSES 401 LOSS-PROVISION 0 INTEREST-EXPENSE 6 INCOME-PRETAX 446 INCOME-TAX 161 INCOME-CONTINUING 285 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME 285 EPS-PRIMARY 3.46 EPS-DILUTED 3.46 EDGARWATCH Page 17 of 17 -----END PRIVACY-ENHANCED MESSAGE-----