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SOLUTIA INC.
1997 STOCK-BASED INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Company a competitive
advantage in attracting, retaining and motivating officers and employees
and to provide the Company and its Subsidiaries and Associated Companies
with a stock plan providing incentives directly linked to the
profitability of the Company's businesses and increases in shareholder
value.
For purposes of the Plan, the following terms are defined as set
forth below:
a. "Associated Company" means any corporation (or partnership, joint
venture, or other enterprise), of which the Company owns or controls,
directly or indirectly, 10% or more, but less than 50% of the
outstanding shares of stock normally entitled to vote for the election
of directors (or comparable equity participation and voting power).
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, unrestricted share of Common Stock, dividend equivalent, interest
equivalent or other award granted under this Plan.
c. "Board" means the Board of Directors of the Company.
d. "Change in Control" and "Change in Control Price" have the
meanings set forth in Sections 9(b) and (c), respectively.
e. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
f. "Commission" means the Securities and Exchange Commission or any
successor agency.
g. "Committee" means the Executive Compensation and Development
Committee referred to in Section 2.
h. "Common Stock" means common stock, par value $0.01 per share, of
the Company.
i. "Company" means Solutia Inc., a Delaware corporation.
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j. "Compensation Committee" means one or more committees appointed by
the Executive Compensation and Development Committee composed of one or
more senior managers of the Company or a Subsidiary or Affiliated
Company to whom the Executive Compensation and Development Committee may
delegate its powers (or a portion thereof) to administer this Plan
pursuant to Section 2.
k. "Covered Employee" means a participant designated prior to the
grant of shares of Restricted Stock by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3) of the Code
in the year in which Restricted Stock is expected to be taxable to such
participant.
l. "Disability" means permanent and total disability as determined by
the Committee for purposes of the Plan.
m. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
n. "Fair Market Value" means, as of any given date, the average of
the highest and lowest sales prices of the Common Stock reported as the
New York Stock Exchange-Composite Transactions for such day, or if the
Common Stock was not traded on the New York Stock Exchange on such day,
then on the next preceding day on which the Common Stock was traded, all
as reported by The Wall Street Journal under the heading New York Stock
Exchange-Composite Transactions or by such other source as the Committee
may select.
o. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section
422 of the Code.
p. "Non-Employee Director" means a member of the Board who qualifies
as a Non-Employee Director as defined in Rule 16b-3(b)(3), as
promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission.
q. "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
r. "Qualified Performance-Based Award" means an Award of Restricted
Stock designated as such by the Committee at the time of grant, based
upon a determination that (i) the recipient is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the
year in which the Company would expect to be able to claim a tax
deduction with respect to such
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Restricted Stock and (ii) the Committee wishes such Award to qualify for
the Section 162(m) Exemption.
s. "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock. In the case
of Qualified Performance-Based Awards, (i) such goals shall be based on
the attainment of specified levels of one or more of the following
measures: earnings per share, sales, net profit after tax, gross profit,
operating profit, cash generation, economic value added, unit volume,
return on equity, change in working capital, return on capital or
shareholder return, and (ii) such Performance Goals shall be set by the
Committee within the time period prescribed by Section 162(m) of the
Code and related regulations.
t. "Plan" means the Solutia Inc. 1997 Stock-Based Incentive Plan, as
set forth herein and as hereinafter amended from time to time.
u. "Restricted Stock" means an Award granted under Section 7.
v. "Retirement" means retirement from employment with the Company, a
Subsidiary or an Associated Company as determined by the Committee for
purposes of an Award under the Plan.
w. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
x. "Section 162(m) Exemption" means the exemption from the limitation
on deductibility imposed by Section 162(m) of the Code that is set forth
in Section 162(m)(4)(C) of the Code.
y. "Stock Appreciation Right" means an Award granted under Section 6.
z. "Stock Option" means an Award granted under Section 5.
aa. "Subsidiary" means: (i) for the purpose of an Incentive Stock
Option, any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting
of the Incentive Stock Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain; and (ii) for the purposes of a
NonQualified Stock Option, a Stock Appreciation Right or Restricted
Stock Award, any corporation (or partnership, joint venture, or other
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enterprise) of which the Company owns or controls, directly or
indirectly, 50% or more of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).
bb. "Termination of Employment" means the termination of the
participant's employment with the Company and any Subsidiary or
Associated Company. A participant employed by a Subsidiary or an
Associated Company shall also be deemed to incur a Termination of
Employment if the Subsidiary or Associated Company ceases to be such a
Subsidiary or Associated Company, as the case may be, and the
participant does not immediately thereafter become an employee of the
Company or another Subsidiary or Associated Company. Temporary absences
from employment because of illness, vacation or leave of absence and
transfers among the Company and its Subsidiaries, or, if the Committee
so determines, among the group consisting of the Company, its
Subsidiaries and Associated Companies, shall not be considered
Terminations of Employment.
In addition, certain other terms used herein have definitions
given to them in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Executive Compensation and
Development Committee or such other committee of the Board as the Board
may from time to time designate (the "Committee"), which shall be
composed of not less than two Non-Employee Directors, each of whom shall
be an "outside director" for purposes of Section 162(m)(4) of the Code,
and shall be appointed by and serve at the pleasure of the Board.
The Committee shall have plenary authority to grant Awards
pursuant to the terms of the Plan or, in the Committee's discretion, in
connection with awards under other bonus plans or programs of the
Company, to officers and employees of the Company and its Subsidiaries
and Associated Companies.
Among other things, the Committee shall have the authority,
subject to the terms of the Plan:
(a) To select the officers and employees to whom Awards may from
time to time be granted;
(b) To determine whether and to what extent Incentive Stock
Options, NonQualified Stock Options, Stock Appreciation
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Rights and Restricted Stock, or any combination thereof, are to be
granted hereunder;
(c) To determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) To determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price
(subject to Section 5(a)) or base price, as applicable, any
vesting condition, restriction or limitation (which may be related
to the performance of the participant, the Company or any
Subsidiary or Associated Company) and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Common
Stock relating thereto, based on such factors as the Committee
shall determine;
(e) To modify, amend or adjust the terms and conditions of any
Award, at any time or from time to time, including but not limited
to Performance Goals; provided, however, that the Committee may
not adjust upwards the amount payable with respect to a Qualified
Performance-Based Award or waive or alter the Performance Goals
associated therewith;
(f) To determine under what circumstances an Award may be
settled in cash or Common Stock under Sections 5(g) and 6(d)(ii);
and
(g) To determine under what circumstances dividends, dividend
equivalents or interest equivalents with respect to an Award shall
be paid.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan
as it shall from time to time deem advisable, to interpret the terms and
provisions of the Plan and any Award issued under the Plan (and any
award certificate relating thereto) and to otherwise supervise the
administration of the Plan.
The Committee may act only by a majority of its members then in
office, except that the members thereof may delegate all or a portion of
the administration of the Plan to one or more Compensation Committees
and authorize further delegation by the Compensation Committees to
senior managers of the Company or its Subsidiaries (provided that no
such delegation may be made that would cause Awards or other
transactions under the Plan to cease to be exempt from Section 16(b) of
the Exchange Act or not to qualify for, or cease to qualify for, the
Section 162(m) Exemption).
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Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any
Award shall be made in the sole discretion of the Committee or such
delegate at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time thereafter.
All decisions made by the Committee or any appropriate delegate pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Plan participants.
Any authority granted to the Committee may also be exercised by
the full Board, except to the extent that the grant or exercise of such
authority would cause any Award or transaction to become subject to (or
lose an exemption under) the short-swing profit recovery provisions of
Section 16 of the Exchange Act or cause an award designated as a
Qualified Performance-Based Award not to qualify for, or to cease to
qualify for, the Section 162(m) Exemption. To the extent that any
permitted action taken by the Board conflicts with action taken by the
Committee, the Board action shall control.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available
for grant under the Plan shall not exceed 7,800,000. No participant may
be granted Awards covering in excess of 500,000 shares of Common Stock
in any calendar year. Shares subject to an Award under the Plan may be
authorized and unissued shares or may be treasury shares, or both.
If any shares of Restricted Stock are forfeited, or if any Stock
Option or Stock Appreciation Right terminates without being exercised,
or if any Stock Appreciation Right (whether granted alone or in
conjunction with a Stock Option) is exercised for cash, shares subject
to such Awards shall again be available for distribution in connection
with Awards under the Plan. Any forfeited shares of Restricted Stock
shall revert to the Company.
In the event of any change in corporate capitalization, such as a
stock split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution
of stock or property (without regard to the payment of any cash
dividends by the Company in the ordinary course) of the Company, any
reorganization (whether or not such reorganization
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comes within the definition of such term in Section 368 of the Code) or
any partial or complete liquidation of the Company, the Committee or
Board may make such substitution or adjustments in the aggregate number
and kind of shares reserved for issuance under the Plan, in the maximum
number of shares with respect to which any participant may be granted
Awards in any calendar year, in the number, kind and option price or
base price, as applicable, of shares subject to outstanding Stock
Options and Stock Appreciation Rights, in the number and kind of shares
subject to other outstanding Awards granted under the Plan and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion; provided, however, that the number
of shares subject to any Award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable
by the Company upon the exercise of any Stock Appreciation Right
associated with any Stock Option.
SECTION 4. ELIGIBILITY
Officers and employees of the Company, a Subsidiary or an
Associated Company who are responsible for or contribute to the growth
and profitability of the business of the Company, a Subsidiary or an
Associated Company are eligible to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options
and NonQualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee
Incentive Stock Options, NonQualified Stock Options or both types of
Stock Options (in each case with or without Stock Appreciation Rights);
provided, however, that grants hereunder are subject to the aggregate
limit on grants to individual participants set forth in Section 3.
Incentive Stock Options may be granted only to employees of the Company
and its subsidiaries (within the meaning of Section 424(f) of the Code).
To the extent that any Stock Option is not designated as an Incentive
Stock Option or, even if so designated, does not qualify as an Incentive
Stock Option, it shall constitute a NonQualified Stock Option.
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Stock Options shall be evidenced by option award certificates, the
terms and provisions of which may differ. An option award certificate
shall indicate on its face whether it is intended to be an award
certificate for an Incentive Stock Option or a NonQualified Stock
Option. The grant of a Stock Option shall occur on the date the
Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock
to be subject to such Stock Option to be granted to such individual and
specifies the terms and provisions of the Stock Option, or on such later
date as is specified by the Committee.
Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered nor shall any discretion or authority granted under
the Plan be exercised so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the optionee affected, to disqualify
any Incentive Stock Option under such Section 422.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms
and conditions as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the
Committee and set forth in the option award certificate, and shall
not be less than the Fair Market Value of the Common Stock subject
to the Stock Option on the date of grant. The option price per
share shall not be decreased thereafter except pursuant to Section 3
of this Plan.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more
than 10 years after the date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee.
If the Committee provides that any Stock Option is exercisable
only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on
such factors as the Committee may determine. In addition, the
Committee may at any time accelerate the exercisability of any
Stock Option.
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(d) Method of Exercise. Subject to the provisions of this
Section 5, Stock Options may be exercised, in whole or in part, at
any time during the option term by giving written notice of
exercise, or notice in accordance with such other procedures as
may be established from time to time, to the Company or its
designated agent specifying the number of shares of Common Stock
subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price in cash or by certified or cashier's check or such other
instrument as the Company may accept. If approved by the Committee,
payment, in full or in part, may also be made in the form of
unrestricted Common Stock already owned by the optionee of the same
class as the Common Stock subject to the Stock Option (based on the Fair
Market Value of the Common Stock on the date the Stock Option is
exercised); provided, however, that, in the case of an Incentive Stock
Option, the right to make a payment in the form of already owned shares
of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is
granted and provided, further, that, in the case of either an Incentive
Stock Option or a NonQualified Stock Option, such already owned shares
have been held by the optionee for at least six months at the time of
exercise.
In the discretion of the Committee, payment for any shares subject
to a Stock Option may also be made by delivering a properly executed
exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount
of sale or loan proceeds necessary to pay the purchase price, and, if
requested, by the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Company may enter
into agreements for coordinated procedures with one or more brokerage
firms.
In addition, in the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by instructing the
Company or its designated agent to withhold a number of such shares
having a Fair Market Value on the date of exercise equal to the
aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall have all of the rights of a
shareholder of the Company holding the class or series of Common Stock
that is subject to such Stock Option (including, if
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applicable, the right to vote the shares and the right to receive
dividends), when the optionee has given written notice of exercise, has
paid in full for such shares and, if requested, has given the representation
described in Section 12(a).
(e) Nontransferability of Stock Options. No Stock Option shall
be transferable by the optionee other than by will or by the laws
of descent and distribution, or, in the Committee's discretion,
pursuant to a written beneficiary designation. All Stock Options
shall be exercisable, subject to the terms of this Plan, only by
the optionee or guardian or legal representative or beneficiary of
the optionee, it being understood that the terms "holder" and
"optionee" include any such guardian, legal representative or
beneficiary.
(f) Termination of Employment. The Stock Option and its related
Stock Appreciation Right, if any, may be exercised in full or in
part from time to time within ten years from the date of the
grant, or such shorter period as may be specified by the Committee
in the award certificate, provided that in any event each shall
lapse and cease to be exercisable upon or within such period
following, Termination of Employment as shall have been determined
by the Committee and as specified in the Stock Option or Stock
Appreciation Right award certificate; provided, however, that such
period following Termination of Employment shall not exceed twelve
months unless employment shall have terminated:
(i) as a result of Retirement, Disability, or involuntary
termination without cause, in which event such period shall not
exceed the original term of the Stock Option; or
(ii) as a result of death, or death shall have occurred
following Termination of Employment and while the Stock Option or
Stock Appreciation Right was still exercisable, in which event
such period shall not exceed the original term of the Stock Option
or Stock Appreciation Right; and
provided, further, that such period following Termination of
Employment shall in no event exceed the original exercise period
of the Stock Option or related Stock Appreciation Right, if any.
(g) Cashing Out of Stock Option. On receipt of written notice
of exercise, the Committee may elect to cash out all or part of
the portion of the shares of Common Stock for which
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a Stock Option is being exercised by paying the optionee an
amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock over the option price times the
number of shares of Common Stock for which the Option is being
exercised on the effective date of such cash-out.
(h) Change in Control Cash-Out. Notwithstanding any other
provision of the Plan, during the 60-day period from and after a
Change in Control (the "Exercise Period"), unless the Committee
shall determine otherwise at the time of grant, an optionee shall
have the right, whether or not the Stock Option is fully exercisable
and in lieu of the payment of the exercise price for the shares of
Common Stock being purchased under the Stock Option and by giving
notice to the Company, to elect (within the Exercise Period) to
surrender all or part of the Stock Option to the Company and to
receive cash, within 30 days of such notice, in an amount equal to
the amount by which the Change in Control Price per share of Common
Stock on the date of such election shall exceed the exercise price
per share of Common Stock under the Stock Option (the "Spread")
multiplied by the number of shares of Common Stock granted under
the Stock Option as to which the right granted under this Section
5(k) shall have been exercised. Notwithstanding the foregoing, if
any right granted pursuant to this Section 5(k) would make a Change
in Control transaction ineligible for pooling-of-interests accounting
under APB No. 16 that but for the nature of such grant would otherwise
be eligible for such accounting treatment, the Committee shall have the
ability to substitute for the cash payable pursuant to such right
Common Stock with a Fair Market Value equal to the cash that would
otherwise be payable hereunder, or, in the case of Awards granted
under the Plan on or after May 1, 2000, if necessary to preserve
such accounting treatment, otherwise modify or eliminate such right.
SECTION 6. STOCK APPRECIATION RIGHT
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option
granted under the Plan. In the case of a NonQualified Stock
Option, such rights may be granted either at or after the time of
grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of
such Stock Option. In addition, Stock Appreciation Rights may be
granted without relationship to a
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Stock Option to employees residing in foreign jurisdictions, where
the grant of a Stock Option is impossible or impracticable because
of securities or tax laws or other governmental regulations.
(b) Freestanding Stock Appreciation Rights. A Stock
Appreciation Right granted without relationship to a Stock Option,
pursuant to Section 6(a), shall be exercisable as determined by
the Committee, but in no event after ten years from the date of
grant. The base price of a Stock Appreciation Right granted
without relationship to a Stock Option shall be the Fair Market
Value of a share of Common Stock on the date of grant. A Stock
Appreciation Right granted without relationship to a Stock Option
shall entitle the holder, upon receipt of such right, to a cash
payment determined by multiplying (i) the difference between the
base price of the Stock Appreciation Right and the Fair Market
Value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right, by (ii) the number of shares of Common
Stock as to which Stock Appreciation Right shall have been
exercised. A freestanding Stock Appreciation Right may be
exercised by giving written notice of exercise to the Company or
its designated agent specifying the number of shares of Common
Stock as to which such Stock Appreciation Right is being
exercised.
(c) Tandem Stock Appreciation Rights. A Stock Appreciation
Right granted in conjunction with a Stock Option may be exercised
by an optionee in accordance with Section 6(d) by surrendering the
applicable portion of the related Stock Option in accordance with
procedures established by the Committee. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(d). Stock
Options which have been so surrendered shall no longer be
exercisable to the extent the related Stock Appreciation Rights
have been exercised. A Stock Appreciation Right shall terminate
and no longer be exercisable upon the termination or exercise of
the related Stock Option.
(d) Terms and Conditions. Stock Appreciation Rights granted in
conjunction with a Stock Option shall be subject to such terms and
conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to
which they relate are exercisable in accordance with the
provisions of Section 5 and this Section 6.
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(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, equal to
the excess of the Fair Market Value of one share of Common Stock
over the option price per share specified in the related Stock
Option multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised.
(iii) Stock Appreciation Rights shall be transferable only
to permitted transferees of the underlying Stock Option in
accordance with Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation
Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 on the number of
shares of Common Stock to be issued under the Plan, but only to
the extent of the number of shares covered by the Stock
Appreciation Right at the time of exercise based on the value of
the Stock Appreciation Right at such time.
SECTION 7. BONUS SHARES AND RESTRICTED STOCK
(a) Administration. Awards of shares of Common Stock or
Restricted Stock may be made either alone or in addition to other
Awards granted under the Plan. In addition, a participant may
receive unrestricted shares of Common Stock or Restricted Stock in
lieu of certain cash payments awarded under other plans or
programs of the Company. The Committee shall determine the
officers and employees to whom and the time or times at which
grants of unrestricted shares of Common Stock and Restricted Stock
will be awarded, the number of shares to be awarded to any
participant (subject to the aggregate limit on grants to
individual participants set forth in Section 3 in the case of
Qualified Performance-Based Awards), the conditions for vesting,
the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in
addition to those contained in Section 7(c).
(b) Awards and Certificates. Awards of unrestricted shares of
Common Stock and Restricted Stock shall be evidenced in such
manner as the Committee may deem appropriate, including,
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book-entry registration or delivery of one or more stock
certificates to the participant, or, in the case of Restricted
Stock, a custodian or escrow agent. Any stock certificate issued
in respect of unrestricted shares or shares of Restricted Stock
shall be registered in the name of such participant. The
Committee may require that the stock certificates evidencing
shares of Restricted Stock be held in custody or escrow by the
Company or its designated agent until the restrictions thereon
shall have lapsed and that, as a condition of any Award of
Restricted Stock, the participant shall have delivered a stock
power, endorsed in blank, relating to the Common Stock covered by
such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be
subject to the following terms and conditions:
(i) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified Performance-
Based Award, in which event it shall condition the grant or
vesting, as applicable, of such Restricted Stock upon the
attainment of Performance Goals. If the Committee does not
designate an Award of Restricted Stock as a Qualified Performance-
Based Award, it may also condition the grant or vesting thereof
upon the attainment of Performance Goals. Regardless of whether
an Award of Restricted Stock is a Qualified Performance-Based
Award, the Committee may also condition the grant or vesting
thereof upon the continued service of the participant. The
conditions for grant or vesting and the other provisions of
Restricted Stock Awards (including without limitation any
applicable Performance Goals) need not be the same with respect to
each recipient. The Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the
foregoing restrictions; provided, however, that in the case of
Restricted Stock that is a Qualified Performance-Based Award, the
applicable Performance Goals have been satisfied.
(ii) Subject to the provisions of the Plan and the terms of
the Restricted Stock Award, during the period, if any, set by the
Committee, commencing with the date of such Award for which such
participant's continued service is required (the "Restriction
Period"), and until the later of (A) the expiration of the
Restriction Period and (B) the date the applicable Performance
Goals (if any) are satisfied, the participant shall not be permitted
to sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock; provided that the foregoing shall not prevent a
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participant from pledging Restricted Stock as security for a loan,
the sole purpose of which is to provide funds to pay the option
price for Stock Options.
(iii) Except as provided in this paragraph (iii) and
Sections 7(c)(i) and 7(c)(ii) and the terms of the Restricted
Stock Award, the participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a stockholder of
the Company holding the class or series of Common Stock that is
the subject of the Restricted Stock, including, if applicable, the
right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee under the applicable
terms of the Restricted Stock Award and subject to Section 12(e)
of the Plan, (A) cash dividends on the class or series of Common
Stock that is the subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional Restricted
Stock, held subject to the vesting of the underlying Restricted
Stock, or held subject to meeting Performance Goals applicable
only to dividends, and (B) dividends payable in Common Stock shall
be paid in the form of Restricted Stock of the same class as the
Common Stock with which such dividend was paid, held subject to
the vesting of the underlying Restricted Stock, or held subject to
meeting Performance Goals applicable only to dividends.
(iv) Except to the extent otherwise provided under the
applicable terms of the Restricted Stock Award and Sections
7(c)(i), 7(c)(ii), 7(c)(v) and 9(a)(ii), upon a participant's
Termination of Employment for any reason during the Restriction
Period or before the applicable Performance Goals are satisfied,
all shares still subject to restriction shall be forfeited by the
participant.
(v) Except to the extent otherwise provided in Section
9(a)(ii), in the event of a participant's Termination of
Employment by reason of Retirement, the Committee shall have the
discretion to waive, in whole or in part, any or all remaining
restrictions (other than, in the case of Restricted Stock with
respect to which a participant is a Covered Employee, satisfaction
of the applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability) with
respect to any or all of such participant's shares of Restricted
Stock.
(vi) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior
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forfeiture of the Restricted Stock, unlegended certificates for
such shares shall be delivered to the participant upon surrender
of the legended certificates, or the restrictions on such shares
shall be removed from the book-entry registration.
SECTION 8. DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS
(a) The Committee may provide that a participant to whom a Stock
Option has been awarded, which is exercisable in whole or in part
at a future time for shares of Common Stock (such shares, the
"Option Shares") shall be entitled to receive an amount per Option
Share, equal in value to the cash dividends, if any, paid per
share of Common Stock on issued and outstanding shares, as of the
dividend record dates occurring during the period between the date
of the Award and the time each such Option Share is delivered
pursuant to the exercise of such Stock Option. Such amounts
(herein called "dividend equivalents") may, in the discretion of
the Committee, be:
(i) paid in cash or shares of Common Stock from time to
time prior to or at the time of the delivery of such shares of
Common Stock or upon expiration of the Stock Option if it shall
not have been fully exercised (except that payment of the dividend
equivalents on an Incentive Stock Option may not be made prior to
exercise); or
(ii) converted into contingently credited shares of Common
Stock (with respect to which dividend equivalents shall accrue) in
such manner, at such value, and deliverable at such time or times,
as may be determined by the Committee.
Such shares of Common Stock (whether delivered or contingently credited)
shall be charged against the limitations set forth in Section 3.
(b) The Committee, in its discretion, may authorize payment of
interest equivalents on any portion of any Award payable at a
future time in cash, and interest equivalents on dividend
equivalents which are payable in cash at a future time.
SECTION 9. CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change in Control:
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(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to
have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of
the original grant.
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock shall lapse, and such Restricted Stock
shall become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(b) Definition of Change in Control. For purposes of Awards
granted under the Plan prior to May 1, 2000, a "Change in Control"
shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or group
(with the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either
(A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (1) any
acquisition directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any acquisition by
any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) of this Section 9; or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for
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this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets or stock of another entity (a
"Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such
Business Combination (including, without limitation, a entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any entity resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
entity resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
entity except to the extent that such ownership existed prior to
the Business Combination and (C) at least a majority of the
members of the board of directors of the entity resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
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(b)(1) Definition of Change in Control. For purposes of awards
granted under the Plan on or after May 1, 2000, a "Change in
Control" shall mean the happening of any of the following events:
(i) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the Outstanding Company Common
Stock or (B) the Outstanding Company Voting Securities; provided,
however, that, for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (1) any
acquisition directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any acquisition by
any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) of this Section 9; or
(ii) Individuals who constitute the Incumbent Board cease
for any reason to constitute a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual was a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a Business Combination, unless,
following such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial owners of
the Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 66% of the
then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
entity resulting from such Business Combination (including,
without limitation, an entity that as a result of such
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transaction, owns the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
entity resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such entity
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the entity resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such entity, except to the extent
that such ownership existed prior to the Business Combination, and
(C) at least a majority of the members of the board of directors
of the entity resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change
in Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Common Stock in any
transaction reported on the New York Stock Exchange Composite Tape
or other national exchange on which such shares are listed or on
NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result
of a tender or exchange offer or a Corporate Transaction, the
highest price per share of Common Stock paid in such tender or
exchange offer or Corporate Transaction; provided, however, that
in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common
Stock on the date such Incentive Stock Option or Stock
Appreciation Right is exercised. To the extent that the
consideration paid in any such transaction described above
consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the
Board.
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SECTION 10. AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which would
impair the rights of an optionee under any Award theretofore granted
without the optionee's or recipient's consent, except, in the case of
Awards granted before May 1, 2000, such an amendment made to cause the
Plan to qualify for any exemption provided by Rule 16b-3, or in the case
of Awards granted on or after May 1, 2000, such an amendment made to
cause the Plan to comply with applicable law, stock exchange rules, or
accounting rules. In addition, no such amendment shall be made without
the approval of the Company's shareholders to the extent such approval
is required by law or agreement.
The Committee may amend the terms of any Stock Option or other
Award theretofore granted, prospectively or retroactively, but no such
amendment shall cause a Qualified Performance-Based Award to cease to
qualify for the Section 162(m) Exemption or impair the rights of any
holder without the holder's consent except such an amendment made to
cause the Plan or Award to qualify for any exemption provided by Rule
16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and
accounting rules as well as other developments, and to grant Awards
which qualify for beneficial treatment under such rules without
stockholder approval.
SECTION 11. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded"
plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make
payments; provided, however, that unless the Committee otherwise
determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
SECTION 12. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and agree
with the Company in writing that such person is acquiring the
shares without a view to the distribution
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thereof. The certificates for such shares may include any legend,
or, in the case of book-entry registration any notation, which
the Committee deems appropriate to reflect any restrictions on
transfer.
Notwithstanding any other provision of the Plan or certificates
made pursuant thereto, the Company shall not be required to issue or
deliver any stock certificate or certificates for shares of Common
Stock, or account for such shares by book-entry registration, under the
Plan prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of
issuance, of such shares on the New York Stock Exchange,
Inc., or such other securities exchange as may at the time
be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares
of the Company under any state, federal or foreign law or
regulation, or the maintaining in effect of any such registration
or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable;
and
(3) Obtaining any other consent, approval, or permit from
any state or federal governmental agency or foreign
governmental body which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine
to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or
any Subsidiary or Associated Company from adopting other or
additional compensation arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any
right to continued employment, nor shall it interfere in any way
with the right of the Company or a Subsidiary or an Associated
Company to terminate the employment of any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal
income tax purposes with respect to any Award under the Plan, the
participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the
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payment of, any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount.
Unless otherwise determined by the Company, the minimum
withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise
to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or
arrangements, and the Company and its Subsidiaries or Associated
Companies shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it
deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3
for such reinvestment (taking into account then outstanding Stock
Options and other Awards).
(f) The Committee, in its sole discretion, may establish such
procedures as it deems appropriate for a participant to designate
a beneficiary to whom any amounts payable in the event of the
participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(g) In the case of a grant of an Award to any employee of a
Subsidiary or Affiliated Company, the Company may, if the
Committee so directs, issue or transfer the shares of Common
Stock, if any, covered by the Award to the Subsidiary or
Affiliated Company, for such lawful consideration as the Committee
may specify, upon the condition or understanding that the
Subsidiary or Affiliated Company will transfer the shares of
Common Stock to the employee in accordance with the terms of the
Award specified by the Committee pursuant to the provisions of the
Plan.
(h) The Plan and all Awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of
the State of Delaware, without reference to principles of conflict
of laws.
SECTION 13. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of September 1, 1997.
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SECTION 14.
Notwithstanding any other provision of the Plan, the Committee
shall have authority to determine for purposes of any Award that (a) is
outstanding as of the date that the Company sells any business, or its
interest in any business, to Monsanto Company and (b) is held by a
participant who in connection with such sale becomes an employee of
Monsanto Company (or a subsidiary or associated company of Monsanto
Company) rather than an employee of the Company (or a Subsidiary or
Associated Company of the Company), such change of employment shall not
constitute a Termination of Employment. With respect to any such Award
held by any such participant, Termination of Employment shall mean the
termination of the participant's employment with Monsanto Company, a
subsidiary of Monsanto Company, or an associated company of Monsanto
Company other than as the result of a transfer among such companies. A
participant employed by a subsidiary or an associated company of
Monsanto Company shall also be deemed to incur a Termination of
Employment if the subsidiary or associated company ceases to be such a
subsidiary or associated company of Monsanto Company, as the case may
be, and the participant does not immediately thereafter become an
employee of Monsanto Company or another subsidiary or associated company
of Monsanto Company. For purposes of this Section 14, a subsidiary of
Monsanto Company means any corporation (or partnership, joint venture,
or other enterprise) of which Monsanto Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of stock
normally entitled to vote for the election of directors (or comparable
equity participation and voting power), and an associated company of
Monsanto Company means any corporation (or partnership, joint venture,
or other enterprise), of which Monsanto Company owns or controls,
directly or indirectly, 10% or more, but less than 50% of the
outstanding shares of stock normally entitled to vote for the election
of directors (or comparable equity participation and voting power).
As amended 4/28/99 and 4/26/00
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