Xxxxxxx (X)0
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
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1.1. Definitions.
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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
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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
Xxxx-Xxxxx-Xxxxxx 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;
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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;
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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;
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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
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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.
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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.
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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
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2.1. Business Purpose.
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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.
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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
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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.
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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.
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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
Xxxxxxxx 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.
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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;
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(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 Xxxxx 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.
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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.
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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.
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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.
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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
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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.
000 Xxxxxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
Phone: (000) 000-0000
If to DuPont:
E. I. du Pont de Nemours and Company
DuPont Legal
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
Facsimile:(000) 000-0000
Phone: (000) 000-0000
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/ Xxxxx X. Xxxxxxxx
----------------------------------------
By:
-----------------------------------
Title:
---------------------------------
E. I. DU PONT DE NEMOURS AND COMPANY
/s/ X.X. Xxxx
----------------------------------------
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:
---------------------------------
