<PAGE> 1
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-2516
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MONSANTO COMPANY
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-0420020
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
800 NORTH LINDBERGH BLVD., ST. LOUIS, MISSOURI 63167
----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(314) 694-1000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING TWELVE MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),
AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90
DAYS. YES X NO
--- ----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
OUTSTANDING AT
CLASS MARCH 31, 1995
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COMMON STOCK, $2 PAR VALUE 114,214,294 SHARES
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Statement of Consolidated Income of Monsanto Company and
subsidiaries for the three months ended March 31, 1995 and 1994, the
Statement of Consolidated Financial Position as of March 31, 1995 and
December 31, 1994, the Statement of Consolidated Cash Flow for the
three months ended March 31, 1995 and 1994 and related Notes to
Financial Statements follow. In the opinion of management, these
unaudited consolidated financial statements contain all adjustments
necessary to present fairly the financial position, results of
operations and cash flows for the interim periods reported.
Unless otherwise indicated by the context, "Monsanto" means Monsanto
Company and consolidated subsidiaries, and "the Company" means Monsanto
Company only.
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
1995 1994
---- ----
<S> <C> <C>
Net Sales.................................................................................. $2,318 $2,001
Cost of Goods Sold......................................................................... 1,324 1,108
------ ------
Gross Profit............................................................................... 994 893
Marketing Expenses......................................................................... 296 276
Administrative Expenses.................................................................... 158 127
Technological Expenses..................................................................... 154 151
Amortization of Intangible Assets.......................................................... 25 20
------ ------
Operating Income........................................................................... 361 319
Interest Expense........................................................................... (42) (32)
Interest Income............................................................................ 11 6
Other Income (Expense)-Net................................................................. 7 1
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Income Before Income Taxes................................................................. 337 294
Income Taxes............................................................................... 108 100
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Net Income................................................................................. $ 229 $ 194
------ ------
Earnings per Share......................................................................... $ 2.02 $ 1.63
------ ------
Dividends per Share........................................................................ $ 0.63 $ 0.58
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Weighted Average Number of Common and Common Equivalent Shares (in millions)............... 113.7 118.7
------ ------
</TABLE>
1
<PAGE> 3
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................................................. $ 259 $ 507
Receivables, net of allowances of $53 in 1995 and $57 in 1994.............................. 2,144 1,530
Miscellaneous receivables and prepaid expenses............................................. 332 313
Deferred income tax benefit................................................................ 331 321
Inventories................................................................................ 1,423 1,212
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Total Current Assets................................................................... 4,489 3,883
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Property, Plant and Equipment................................................................ 7,982 7,555
Less Accumulated Depreciation................................................................ 4,900 4,738
------- -------
Net Property, Plant and Equipment.......................................................... 3,082 2,817
------- -------
Investments in Affiliates.................................................................... 301 279
Intangible Assets, net of accumulated amortization of $547 in 1995 and
$522 in 1994................................................................................ 1,823 1,134
Other Assets................................................................................. 780 778
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Total Assets................................................................................. $10,475 $ 8,891
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<CAPTION>
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Accounts payable........................................................................... $ 648 $ 629
Accrued liabilities........................................................................ 1,614 1,494
Short-term debt............................................................................ 1,028 312
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Total Current Liabilities.............................................................. 3,290 2,435
------- -------
Long-Term Debt............................................................................... 1,780 1,405
Deferred Income Taxes........................................................................ 71 65
Postretirement Liabilities................................................................... 1,350 1,341
Other Liabilities............................................................................ 762 697
Shareowners' Equity:
Common stock (authorized, 200,000,000 shares, par value $2)
Issued, 164,394,194 shares in 1995 and 1994.............................................. 329 329
Additional contributed capital........................................................... 853 849
Treasury stock, at cost (52,588,842 shares in 1995 and
52,859,031 shares in 1994).............................................................. (2,731) (2,744)
Reserve for ESOP debt retirement........................................................... (197) (199)
Net unrealized investment holding gains.................................................... 3 19
Accumulated currency adjustment............................................................ 146 33
Reinvested earnings........................................................................ 4,819 4,661
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Total Shareowners' Equity.............................................................. 3,222 2,948
------- -------
Total Liabilities and Shareowners' Equity.................................................... $10,475 $ 8,891
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</TABLE>
2
<PAGE> 4
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW
(DOLLARS IN MILLIONS)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
1995 1994
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net income................................................................................. $ 229 $ 194
Add income taxes........................................................................... 108 100
------- -----
Income before income taxes................................................................. 337 294
Adjustments to reconcile to Cash Used in Continuing Operations:
Income tax payments...................................................................... (36) (36)
Items that did not use (provide) cash:
Depreciation and amortization.......................................................... 146 137
Incremental SFAS No. 106 expenses...................................................... 12 13
Other.................................................................................. (9) 3
Working capital changes that provided (used) cash:
Accounts receivable.................................................................... (552) (419)
Inventories............................................................................ (107) (9)
Accounts payable and accrued liabilities............................................... (35) (164)
Other.................................................................................. 56 29
Other items.............................................................................. 73 (31)
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Total Cash Used in Operations................................................................ (115) (183)
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Investing Activities:
Property, plant and equipment purchases.................................................... (88) (67)
Acquisition of Kelco....................................................................... (1,062)
Investment payments........................................................................ (17) (57)
Investment and property disposal proceeds.................................................. 6 68
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Cash Used in Investing Activities............................................................ (1,161) (56)
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Financing Activities:
Net change in short-term financing......................................................... 1,116 294
Long-term debt proceeds.................................................................... 41
Long-term debt reductions.................................................................. (33) (39)
Treasury stock purchases................................................................... (58)
Dividend payments.......................................................................... (72) (67)
Other financing activities................................................................. 17 45
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Cash Provided by Financing Activities........................................................ 1,028 216
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Decrease in Cash and Cash Equivalents........................................................ (248) (23)
Cash and Cash Equivalents:
Beginning of year.......................................................................... 507 273
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End of period.............................................................................. $ 259 $ 250
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<FN>
The effect of exchange rate changes on cash and cash equivalents was
not material.
Cash payments for interest (net of amounts capitalized) were $42
million in 1995 and $31 million in 1994.
</TABLE>
3
<PAGE> 5
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
1. On February 20, 1995, Monsanto completed its acquisition of the
worldwide business of Kelco, the specialty chemicals division of Merck
and Co., Inc., for a purchase price of approximately $1,075 million.
The acquisition was accounted for as a purchase and, accordingly, the
results of operations for Kelco were included in the Statement of
Consolidated Income from the date of acquisition. The estimated fair
value of assets acquired and liabilities assumed totaled approximately
$1.15 billion and $75 million, respectively. The allocation of purchase
price is based on preliminary assumptions and is subject to revision.
The excess of the purchase price over the estimated fair value of net
assets acquired is being amortized over 30 years. On an unaudited,
proforma basis, assuming the acquisition of Kelco had occurred at the
beginning of 1994, net sales, net income and earnings per share for the
three months ended March 31, 1995 and 1994 would not have been
significantly different from the reported amounts.
In conjunction with the acquisition of Kelco, Monsanto issued
approximately $975 million in commercial paper. Monsanto has the
ability and intent to renew a certain portion of these obligations past
March 1996 and into future periods or replace these borrowings with
long- or intermediate-term debt. Accordingly, commercial paper balances
of $550 million as of March 31, 1995, have been classified as long-
term. On April 5, 1995, Monsanto issued $150 million in 8.20%
debentures due 2025. The proceeds were used to pay down commercial
paper balances related to the Kelco acquisition.
2. In December 1994, Monsanto agreed to merge its rubber chemicals
and instruments businesses with the rubber chemicals business of Akzo
Nobel N. V. to form a 50/50 joint venture. In the first quarter of
1995, final governmental approvals were granted and on April 12, 1995,
the joint venture, known as Flexsys, was formed. The joint venture
began operations on May 1, 1995. Accordingly, Monsanto's share of
Flexsys' earnings will be reflected in "Other income (expense)-net" in
the Statement of Consolidated Income after that date. Upon formation,
each partner agreed to bear one-time costs to integrate its
contribution into the operations of the joint venture. For Monsanto,
this cost totaled a pretax $40 million ($25 million aftertax, or $0.22
per share), primarily for the cost of workforce reductions related to
approximately 120 people, and for special termination benefits for
approximately 300 people transferring employment from Monsanto to the
joint venture. The charge related to this reserve was recorded in cost
of goods sold in the Statement of Consolidated Income.
3. In March 1995, Monsanto received payments arising from several
insurance-related settlements with Talegen Holdings, Inc. (previously
Crum and Forster, Inc.) and several related entities. The settlements
resulted in a $40 million gain ($25 million aftertax, or $0.22 per
share). The settlements were recorded in cost of goods sold in the
Statement of Consolidated Income.
4. Earnings per share were computed using the weighted average number
of common shares and common share equivalents outstanding each period
(113,689,795 and 118,689,732 in 1995 and 1994, respectively). Common
share equivalents (2,013,308 and 2,557,993 in 1995 and 1994,
respectively) consist of common stock issuable upon exercise of
outstanding stock options. Earnings per share assuming full dilution
were not significantly different from the primary amounts.
<TABLE>
5. Components of inventories at March 31, 1995 and December 31, 1994
were as follows:
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Finished goods............................................. $ 912 $ 751
Goods in process........................................... 318 285
Raw materials and supplies................................. 487 459
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Inventories, at FIFO cost.................................. 1,717 1,495
Excess of FIFO over LIFO cost.............................. (294) (283)
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Total.................................................... $1,423 $1,212
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</TABLE>
4
<PAGE> 6
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. On April 20, 1994, a federal court jury verdict was returned
against Monsanto in a lawsuit related to the MOTCO Superfund site in
La Marque, Texas. The lawsuit was brought by IT Corporation ("IT"), a
subsidiary of International Technology Corporation, claiming fraud,
negligent misrepresentation and breach of a contract calling for IT to
perform incineration and remediation work at the site. The verdict
awarded IT $52.8 million in compensatory damages, $28.6 million in
punitive damages and $2.6 million in attorneys' fees. On December 13,
1994, the federal trial judge set aside the jury's findings of fraud
and negligent misrepresentation but upheld the finding on breach of
contract. The court set aside the punitive damage award and reduced
the amount of compensatory damages to $43.8 million. On May 5, 1995,
the trial court entered judgment for IT in the amount of $63.2
million, representing the compensatory damages and $19.4 million in
prejudgment interest, and $2.6 million in attorneys' fees. The Company
believes, based on the advice of counsel, that it has meritorious
defenses to all of IT's claims. The Company will appeal the judgment
and will continue to defend this matter vigorously. No provision has
been made in the Company's consolidated financial statements with
respect to this matter.
Monsanto is a party to a number of lawsuits and claims, which it is
vigorously defending. Such matters arise out of the normal course of
business and relate to product liability, government regulation,
including environmental issues, and other issues. Certain of the
lawsuits and claims seek damages in very large amounts. While the
results of litigation cannot be predicted with certainty, management
believes, based upon the advice of Company counsel, that the final
outcome of such litigation will not have a material adverse effect on
Monsanto's consolidated financial position, profitability or liquidity
in any one year.
<TABLE>
7. Segment data for the three months ended March 31, 1995 and 1994
were as follows:
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------
1995 1994
-------------------------- --------------------------
OPERATING OPERATING
NET INCOME NET INCOME
SALES (LOSS) SALES (LOSS)
----- -------- ----- --------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products...................................... $ 753 $236 $ 635 $206
Chemicals.................................................. 974 95 853 85
Pharmaceuticals............................................ 386 17 343 8
Food Ingredients........................................... 205 28 170 33
Corporate.................................................. (15) (13)
------ ----- ------ -----
Total........................................................ $2,318 $361 $2,001 $319
------ ---- ------ ----
</TABLE>
As of February 1, 1995, Monsanto created a new organization structure
that assigns primary business responsibilities to individual business
units. As a result of those changes and the acquisition of Kelco,
Monsanto has realigned its segment structure. The Food Ingredients
segment now reflects the operations of the following business units:
NutraSweet Consumer Products, comprised of Equal(R), Canderel(R),
NutraSweet(R) Spoonful(TM) tabletop sweeteners, and other consumer
products; NutraSweet Ingredient, comprised of NutraSweet(R) brand
sweetener and other consumer products; and Kelco. The Pharmaceutical
segment reflects the operations of Searle, after the transfer of the
Canderel tabletop sweetener business to NutraSweet Consumer Products.
Segment information for prior periods has been reclassified to conform
to the current presentation.
Financial information for the first quarter of 1995 should not be
annualized. Monsanto's sales and operating income are historically
higher during the first half of the year, primarily because of the
concentration of generally more profitable sales from the Agricultural
Products segment in the first half of the year.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Note 7 of the Notes to Financial Statements indicates operating
results by operating unit, including the concentration of the generally
more profitable sales of Agricultural Products in the first half of the
year.
RESULTS OF OPERATIONS-FIRST QUARTER 1995 COMPARED WITH THE FIRST
QUARTER 1994
Net income for the first quarter of 1995 was $229 million, or $2.02
per share, compared with net income of $194 million, or $1.63 per
share, in the first quarter of last year. Net sales of $2,318 million
were 16 percent higher than the comparable figure in 1994.
Net sales for Agricultural Products were 19 percent higher compared
with those in the first quarter of 1994. Net sales in 1995 benefited
from higher worldwide sales volumes for Roundup(R) herbicide and from
sales of recently-introduced products, such as Posilac(R) bovine
somatotropin, and Harness(R) and Harness(R) Xtra herbicides. Operating
income in 1995 increased $30 million, or 15 percent, compared with
first-quarter 1994 results. Worldwide sales volumes for Roundup
herbicide improved significantly over the same period last year,
reflecting strong demand in most key worldwide markets. Sales and
operating income of the Solaris lawn-and-garden group decreased
modestly from those in the prior year, primarily because of the timing
of shipments to distributors. Sales and operating income of the
acetanilide family of products, which include Lasso(R) herbicide and
newly-introduced Harness and Harness Xtra herbicides, increased
slightly from those in the prior year.
Net sales for Chemicals increased 14 percent compared with those in
the same period last year as sales were strong for all key products.
Sales volumes improved over those in the first quarter of 1994
primarily because of increased demand in the North American and Western
European automotive markets. Sales benefited from higher selling
prices, primarily for plastics and fibers. Operating income improved 12
percent compared with operating income in the first quarter of 1994 and
benefited from higher sales volumes, improved worldwide capacity
utilization levels, and savings from continuing cost reduction efforts.
However, continued increases in the cost of key raw materials in 1995,
compared with those in the first quarter of 1994, more than offset the
effect of selected selling price increases.
Pharmaceutical net sales for the first quarter of 1995 were 13
percent higher than those in the same period last year, largely because
of increased sales of recently-introduced products, such as Ambien(R),
a short-term treatment for insomnia, and Daypro(R) and Arthrotec(R)
arthritis treatments. Operating income was $17 million for the first
quarter of 1995, compared with earnings of $8 million for the same
period in 1994. The growth in earnings was attributed principally to
sales of recently-introduced products, partially offset by higher new-
product introduction costs in 1995, compared with those in the first
quarter of 1994, for the launch of several products in European
markets.
Food Ingredient net sales increased 21 percent for 1995 compared with
the amounts for the first quarter of 1994. However, sales for the first
quarter of 1995 include sales from the Kelco business from the
acquisition date. After excluding these sales, net sales for Food
Ingredients were essentially the same as those for the first quarter of
1994. Aspartame sales volumes for the quarter decreased slightly
compared with those of last year's first quarter due primarily to lower
shipments to major customers in the United States, offset by growth in
volumes internationally. Sales of tabletop sweeteners increased
modestly over those in the first quarter of 1994, primarily because of
growth in international markets. Operating income was lower in 1995
because of lower aspartame volumes and from the timing of marketing
expenditures. Operating income benefited from the inclusion of Kelco's
earnings and from savings from cost reduction efforts.
For Monsanto, marketing and administrative expenses for the first
quarter of 1995 were higher than the comparable period in 1994,
primarily because of higher costs associated with various employee
incentive programs and the aforementioned new-product launch costs for
Pharmaceuticals. Interest expense increased because of higher short-
term debt levels in the first quarter of 1995 related to the Kelco
acquisition.
CHANGES IN FINANCIAL CONDITION-MARCH 31, 1995 COMPARED WITH DECEMBER
31, 1994
Working capital at March 31, 1995 decreased to $1,199 million from
$1,448 million at December 31, 1994, primarily because of higher short-
term debt related to the Kelco acquisition offset, in part, by a
seasonal
6
<PAGE> 8
increase in trade receivables. The current ratio was 1.4 at March 31,
1995 and 1.6 at year-end 1994. The percent of total debt to total
capitalization increased to 47 percent at quarter-end compared with 37
percent at year-end 1994, because of the increase in short-term debt.
The Statement of Consolidated Financial Condition at March 31, 1995,
reflects the estimated fair value of assets acquired and liabilities
assumed of Kelco, totaling approximately $1.15 billion and $75 million,
respectively. The allocation of purchase price is based on preliminary
assumptions and is subject to revision. The increase in intangibles is
primarily due to the excess of the Kelco purchase price over the
estimated fair value of net assets acquired.
Cash used in operations totaled a net $115 million in 1995, compared
with $183 million of net cash used in 1994 operations. The improvement
in cash flow resulted primarily from higher net income, offset by
higher seasonal working capital levels for Agricultural Products.
Investing activities in 1995 used $1,161 million, principally for the
purchase of Kelco. The increase in short-term financing was due
primarily to short-term debt incurred to finance the Kelco acquisition
and higher seasonal working capital levels for Agricultural Products.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's Report on Form 10-K for the year ended December 31,
1994, described a lawsuit filed by IT Corporation (IT), a remediation
contractor at the MOTCO site, an 11 acre waste site in La Marque,
Texas. On May 5, 1995, the trial court entered judgment for IT in the
amount of $63.2 million representing $43.8 million in compensatory
damages and $19.4 million in prejudgment interest, and $2.6 million in
attorneys' fees. The Company intends to appeal the judgment and will
continue to defend this matter vigorously. No provision for loss has
been made in the Company's consolidated financial statements.
The Company's Report on Form 10-K for the year ended December 31,
1994, described a number of product liability lawsuits arising out of
the sales by G. D. Searle & Co. ("Searle"), a subsidiary of the Company
acquired in 1985, of the Cu-7(R), an intrauterine device. As of May 1,
1995, there were approximately 42 cases pending in various U.S. state
and federal courts. Searle believes it has meritorious defenses and is
vigorously defending each of these lawsuits.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits-See the Exhibit Index at page 9 of this report.
(b) Reports on Form 8-K during the quarter ended March 31, 1995:
A Form 8-K as of February 17, 1995, was filed by the Company
regarding the purchase of the Kelco specialty chemicals division of
Merck & Co., Inc.
A Form 8-K/A as of February 17, 1995, was filed by the Company to
add the following financial statements and exhibits:
(i) Financial statements of Kelco, together with the related
Independent Auditors' Report, for the year ended December 31, 1994
(pages 2 through 11)
(ii) Unaudited Pro Forma Condensed Combined Statement of
Financial Position of Monsanto Company and Kelco as of December 31,
1994, including notes thereto (pages 12 and 13)
(iii) Unaudited Pro Forma Condensed Combined Statement of Income
of Monsanto Company and Kelco for the year ended December 31, 1994,
including notes thereto (pages 14 and 15)
(iv) Consent of Independent Auditors
(v) Consent of Counsel
7
<PAGE> 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MONSANTO COMPANY
---------------------------------
(Registrant)
BRUCE R. SENTS
......................................
Bruce R. Sents
Vice President and Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
Date: May 9, 1995
8
<PAGE> 10
<TABLE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
2 Omitted - Inapplicable
4 Omitted - Inapplicable
10 1. Searle Phantom Stock Option Plan of 1986, as amended in 1990, 1991, 1992 and 1995
2. Searle Monsanto Stock Option Plan of 1986, as amended in 1988, 1989, 1990, 1991 and 1995
3. Searle/Monsanto Stock Plan of 1994, as amended in 1995
4. G. D. Searle & Co. Supplemental Medical Reimbursement Plan, as amended in 1995
11 Omitted - Inapplicable; see Note 4 of Notes to Financial Statements on page 4
15 Omitted - Inapplicable
18 Omitted - Inapplicable
19 Omitted - Inapplicable
22 Omitted - Inapplicable
23 Consent of Company Counsel
24 Omitted - Inapplicable
27 Financial Data Schedule
99 Omitted - Inapplicable
</TABLE>
9
<PAGE> 11
APPENDIX TO FORM 10-Q
Throughout the narrative of the printed Form 10-Q, trademarks are
initially designated on each page by the letter "R" in a circle
or by the letters "TM".
<PAGE> 1
EXHIBIT 10.1
SEARLE PHANTOM STOCK OPTION PLAN OF 1986
ARTICLE I. GENERAL PROVISIONS
- ------------------------------
SECTION 1. Purposes. The SEARLE PHANTOM STOCK OPTION PLAN
--------
of 1986 ("Plan") is designed to attract and retain for the
Company and its Subsidiaries personnel of exceptional ability; to
motivate such personnel through added incentives to make a
maximum contribution to greater profitability; to develop and
maintain a highly competent management team; and to be
competitive with other pharmaceutical companies in the executive
compensation area.
SECTION 2. Definitions. Except where the context otherwise
-----------
indicates, the following definitions apply:
"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), but which is not a
Subsidiary.
<PAGE> 2
"Base Value" means the value per Share on the date of
the grant of an option with respect to a Share, as such
value is determined by the Committee pursuant to
Article II, Section 3(e). As of October 24, 1986, the
Base Value per Share is $10.53.
"Board" means Board of Directors of the Company.
"Committee" means the Executive Compensation and
Development Committee of the Board or any successor
committee ("ECDC"), such committee consisting of three
or more members of the Board as may be appointed by the
Board to administer this Plan, or such other body
(whether or not consisting of members of the Board) to
whom the ECDC or other Board Committee may delegate its
powers (or a part thereof) to administer this Plan.
"Company" means G. D. Searle & Co.
"Eligible Participant" means any regular full-time
employee (including any director who is an employee) of
the Company or a Subsidiary.
"Option" shall mean an option granted pursuant to this
Plan to receive the difference between the Base Value
and Surrender Value of a Share.
-2-
<PAGE> 3
"Participant" means an Eligible Participant to whom an
option has been granted.
"Phantom Share" or "Share" means a unit of value in the
Company created solely for purposes of calculating
payments to be made to Participants under this Plan,
Phantom Shares are not securities and neither the grant
nor the exercise of an option with respect to such
Phantom Shares will entitle a Participant to any rights
except the right to receive appreciation in the value
of such Phantom Shares, if any, as provided in this
Plan.
"Subsidiary" means any corporation (or partnership,
joint venture, or other enterprise) (i) 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) or
(ii) which the Company otherwise controls by contract
or any other means. "Control" means the power to
direct or cause the direction of the management and
policies of a corporation, partnership, joint venture,
or other enterprise.
"Surrender Value" means the most recent published value
per Share as of the date of exercise of an option with
respect to such Share, as such value is determined by
-3-
<PAGE> 4
the Committee pursuant to Article II, Section 3(e).
"Published" means that the notification to Participants
required by Article II, Section 3(d) has been given as
of the date of exercise of the applicable option.
"Termination of Employment" means the discontinuance of
employment of a Participant for any reason other than a
Transfer.
"Transfer" means a change of employment of a
Participant within the group consisting of the Company,
its Subsidiaries and Associated Companies, and Monsanto
Company, its subsidiaries, and associated companies.
SECTION 3. Administration
--------------
(a) This Plan shall be administered by the Committee, which
shall have the right to interpret this Plan and to
select the persons who are to receive options under
this Plan, including, without limitation, the
determination of the number of Shares to be subject to
and the form, terms, conditions and duration of each
option. All acts and decisions of the Committee with
respect to any questions arising in connection with the
administration and interpretation of this Plan,
including the severability of any and all of the
provisions hereof, shall be conclusive, final and
binding upon all Participants.
-4-
<PAGE> 5
(b) The Committee may adopt and amend, from time to time,
rules and regulations of general application for the
administration of this Plan, including terms and
conditions related to the receipt and exercise of
Options.
(c) Without limiting the foregoing (and notwithstanding any
other provisions of this Plan), the Committee is
authorized to take such action as it determines to be
necessary or advisable, and fair and equitable to
Participants, with respect to Options, in the event of:
a cash dividend paid by the Company, a merger of the
Company with, consolidation of the Company into, or the
acquisition of the Company by, another corporation; a
sale or transfer of all or any significant part of the
assets of the Company to another corporation or any
other person or entity; issuance or sale of common
stock of the Company (other than to the Company's
parent corporation, Monsanto Company, or its affiliated
corporations ("Monsanto")); or other reorganization in
which the Company will not survive as a separate
corporation. Such action may include (but shall not be
limited to) revising the number of Phantom Shares
subject to the Plan and/or outstanding options, or
establishing, amending or waiving the forms, terms,
conditions and duration of Options so as to provide for
earlier, later, extended or additional times for Share
valuations, Option exercises or payments, differing
-5-
<PAGE> 6
methods for calculating payments, alternate forms and
amounts of payment, or other modifications. The
Committee may take such actions pursuant to this
Section 3 by adopting rules and regulations of general
applicability to all Participants or to certain
categories of Participants, by including, amending or
waiving terms and conditions in Option grants, or by
taking action with respect to individual Participants.
The Committee may take such actions as part of the
grants or before or after the public announcement of
any such dividend, merger, consolidation, acquisition,
sale or transfer of assets, issuance or sale of shares
or other reorganization.
ARTICLE II. PLAN
- -----------------
SECTION 1. Phantom Shares.
--------------
(a) (i) Solely for purposes of valuations under this Plan,
there shall be deemed to be a total of 100,000,000
Phantom Shares outstanding at all times (subject
to any contrary determination pursuant to
Article I, Section 3(c)), whether or not Options
for the full amount thereof have been issued
hereunder.
(ii) The total number of Shares for which options may
be granted under this Plan to any one Eligible
Participant shall not exceed in the aggregate 5%
of the total number of Shares for which Options
may be granted under this Plan.
-6-
<PAGE> 7
(b) The total number of Shares for which Options may be
granted under this Plan shall not exceed 100,000,000
Shares; provided that, Shares as to which Options have
lapsed unexercised shall not be counted against such
total number.
SECTION 2. Incidents of Options.
--------------------
<TABLE>
(a) Each Option shall be granted subject to such terms and
conditions, if any, not inconsistent with this Plan, as
shall be determined by the Committee, including any
provisions as to continued employment as consideration
for the grant or exercise of such Option and any
provisions which may be advisable to comply with
applicable laws, regulations or rulings of any
governmental authority. Unless otherwise provided at
the time of any Option grant and except as otherwise
specifically provided in this Plan, Options shall only
be exercisable by a Participant as follows:
<CAPTION>
Percentage of Total Options
Option Exercise Dates Per Grant Exercisable
--------------------- ---------------------
<S> <C>
1. On and after twelve (12) 33 1/3%
months from the Option grant
date
2. On and after twenty-four (24) 66 2/3%
months from the Option grant
date
3. On and after thirty-six (36) 100%
months from the Option grant
date
</TABLE>
If the application of the foregoing vesting schedule
would result in appreciation on a fractional Share
-7-
<PAGE> 8
being payable upon the exercise of an Option, the
number of Options vested shall be rounded up to the
next full Share, but not to exceed in the aggregate the
original grant total.
(b) An Option shall not be transferable by the Participant
otherwise than by will or by the laws of descent and
distribution, and shall be exercisable during the
lifetime of the Participant only by him or her or by
his or her guardian or legal representative.
SECTION 3. Conditions of Options. The initial grant of
---------------------
Options under this Plan shall be made on October 24, 1986 and
additional Options may be granted to Eligible Participants at
such time or times determined by the Committee, subject to the
following terms and conditions (except as may be varied by the
Committee pursuant to Article II, Section 2):
(a) The Option may be exercised in full or in part from
time to time prior to Termination of Employment and
within ten (10) years from the date of the grant, or
such shorter period as may be specified by the
Committee in the respective grant, provided that
options exercisable as of the date of Termination of
Employment shall remain exercisable for a period of up
to three (3) months following Termination of Employment
(up to five (5) years if employment shall have
terminated as a result of total and permanent
-8-
<PAGE> 9
disability as determined by the Committee; retirement
pursuant to, and as defined in, the applicable pension
plan of the Company, its Subsidiary or Associated
Company; or death and up to twelve (12) months if
employment shall have terminated as a result of
involuntary termination due to conditions beyond the
employee's control); provided, further, that no such
period following Termination of Employment shall extend
the original exercise period of the Option.
(b) In the event of Termination of Employment due to
retirement (as defined in (a) above), death, total and
permanent disability (as determined by the Committee),
or involuntary termination due to conditions beyond the
employee's control, all Options granted more than
twelve (12) months prior to such event shall,
notwithstanding Article II, Section 2, become
immediately exercisable.
(c) The Base Value of a Share subject to an Option shall be
determined by the Committee on the date of the grant of
the Option, The Surrender Value of Shares subject to
Options shall be determined by the Committee from time
to time but in no event less frequently than once each
eighteen (18) months. The Committee may, in its sole
discretion, determine the Surrender Value on a more
frequent basis. Written notice (addressed as provided
in (d) below) of the date of any determination shall be
-9-
<PAGE> 10
given to all Participants not less than thirty (30)
days prior to such date.
(d) The applicable Base Value shall be shown on the
certificates or other documents issued at the time of
the grant of each Option, and notice of each Surrender
Value shall be delivered to Participants promptly
following determination by the Committee (but in no
event later than thirty (30) days following such
determination), addressed to each Participant's last
known residence as shown on the records of the Company.
(e) Base Values and Surrender Values shall be determined
based on the committees valuation of the Company which
in turn shall be based on such factors and methods as
the Committee shall deem appropriate. Such factors and
methods may, but need not, include use of appraisers,
investment banker analyses or other independent
sources, and may result in valuations different from
those which would be obtained using book value,
investment banker, appraised value or other methods
commonly used to value pharmaceutical companies. The
decision of the Committee as to such valuations of the
Company shall be final and binding on all Participants
and the Company. The Committee need not make known its
methods of valuation, nor need the Committee be
consistent from valuation to valuation in the methods
used. Each valuation of the Company shall be divided
-10-
<PAGE> 11
by 100,000,000 to yield the per Share Base Value or
Surrender Value, as applicable.
(f) Upon the exercise and surrender to the Company of an
Option, the Participant shall be entitled to receive
the amount, if any, by which the Surrender Value
exceeds the Base Value of the Shares subject to such
Option, less applicable withholding taxes.
(g) Each Option grant may include any other terms and
conditions not inconsistent with this Plan, as
determined by the Committee.
ARTICLE III. MISCELLANEOUS PROVISIONS
- --------------------------------------
SECTION 1. Transfer. No Option shall be transferable
--------
except as provided for herein in the case of death. If any
Participant makes such a transfer in violation hereof, any
obligation of the Company with respect to such Option shall
forthwith terminate.
SECTION 2. Continued Employment. Nothing in this Plan or
--------------------
any booklet or other document describing or referring to this
Plan shall be deemed to confer on any employee or Participant the
right to continue in the employ of his or her employer or affect
the right of his or her employer to terminate the employment of
any such person with or without cause.
-11-
<PAGE> 12
SECTION 3. Segregated Fund. Nothing contained herein shall
---------------
require the Company to segregate any monies from its general
funds, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant.
Each Participant is a general unsecured creditor of the Company.
SECTION 4. Governing Law. This Plan and all actions taken
-------------
hereunder shall be governed by the laws of the State of Illinois.
SECTION 5. Withholding. The Company may make such
-----------
provisions and take such steps as it may deem necessary or
appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold
in connection with any option or the exercise thereof.
ARTICLE IV. AMENDMENTS
- -----------------------
The Board, the ECDC or any other duly authorized committee of the
Board may from time to time amend this Plan, or discontinue this
Plan or any provision thereof, provided that no amendment to this
Plan shall, without the written consent of the Participant,
adversely affect any option theretofore granted to such
Participant under this Plan.
ARTICLE V. MISCELLANEOUS
- -------------------------
SECTION 1. Effective Date. The effective date of this Plan
--------------
shall be October 24, 1986.
-12-
<PAGE> 13
SECTION 2. Other Plans. This Plan is not intended to and
-----------
shall not preclude the establishment or operation by the Company
or any Subsidiary of any thrift, savings and investment,
achievement award, stock purchase, employee recognition or other
benefit plan or arrangement for any employees and any such other
plan may be authorized and payments made thereunder independently
of this Plan.
-13-
<PAGE> 1
EXHIBIT 10.2
SEARLE MONSANTO STOCK OPTION PLAN OF 1986
ARTICLE I. GENERAL PROVISIONS
SECTION 1. PURPOSES. The SEARLE MONSANTO STOCK OPTION PLAN
OF 1986 ("Plan") is designed to attract and retain for the
Company and its Subsidiaries personnel of exceptional ability; to
motivate such personnel through added incentives to make a
maximum contribution to greater profitability; to develop and
maintain a highly competent management team; and to be competi-
tive with other pharmaceutical companies in the executive compen-
sation area.
SECTION 2. DEFINITIONS. Except where the context otherwise
indicates, the following definitions apply:
"Associated Company" means any corporation (or partner-
ship, 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 partici-
pation and voting power), but which is not a Subsidiary.
"Board" means Board of Directors of the Company.
"Committee" means the Special Stock Option Grant
Committee and, to the extent delegated by the Special Stock
Option Grant Committee, the ECDC.
"Company" means Monsanto Company, a Delaware corpora-
tion.
"ECDC" means any Committee consisting of one or more
senior managers of the Company or its Subsidiaries, or its
permitted delegate.
"Effective Date" means October 24, 1986.
"Eligible Participant" means any officer or other
salaried employee (including a director who is a salaried
employee) of the Company or a Subsidiary.
"Fair Market Value" means, with respect to any given
day, the average of the highest and lowest sales prices of the
Shares reported as the New York Stock Exchange-Composite Trans-
actions for such day, or if the Shares were not traded on such
day, then on the next preceding day on which the Shares were
traded, all as reported by such source as the Committee may
select.
<PAGE> 2
-2-
"Monsanto" means Monsanto Company, a Delaware corpora-
tion.
"Participant" means an Eligible Participant to whom a
Stock Option, Stock Appreciation Right, or Restricted Stock Grant
(as those terms are hereinafter defined) has been granted.
"Restricted Shares" means Shares that were made subject
to restrictions in accordance with Article III of this Plan.
"Shares" means shares of $2 par value common stock of
Monsanto, and any shares of stock or other securities received as
a result of a Share adjustment as set forth in Section 4 of this
Article I.
"Special Stock Option Grant Committee" means the
Executive Compensation and Development Committee of the Board.
"Stock Appreciation Right" means a right referred to in
Section 4 of Article II of this Plan.
"Stock Appreciation Right Fair Market Value" or "SAR
Fair Market Value" shall mean a value established by the Commit-
tee for the exercise of a Stock Appreciation Right. If such
exercise occurs during any quarterly "window period" as specified
by Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended from time to time, or
any law, rule, regulation or other provision that may hereafter
replace such Rule, the Committee may establish a common value for
exercises during such window period.
"Stock Option" or "Option" means a non-qualified stock
option granted pursuant to this Plan.
"Subsidiary" means any corporation (or partnership,
joint venture, or other enterprise) (i) of which the Company owns
or controls, directly or indirectly, 50% or more of the outstand-
ing shares of stock normally entitled to vote for the election of
directors (or comparable equity participation and voting power)
or (ii) which the Company otherwise controls (by contract or any
other means). "Control" means the power to direct or cause the
direction of the management and policies of a corporation,
partnership, joint venture, or other enterprise.
"Termination of Employment" means the discontinuance of
employment of a Participant for any reason other than a Transfer.
"Transfer" means a change of employment of a Partici-
pant within the group consisting of the Company, its Subsidiaries
and Associated Companies and Monsanto, its subsidiaries and
associated companies.
<PAGE> 3
-3-
SECTION 3. ADMINISTRATION.
(a) This Plan shall be administered by the Special Stock
Option Grant Committee except that the Special Stock Option Grant
Committee may delegate a portion of the administration of this
Plan to the ECDC as set forth in paragraph (b) below.
(b) The Special Stock Option Grant Committee shall have the
exclusive right to interpret this Plan and to select the persons
who are to receive Stock Options, Stock Appreciation Rights and
Restricted Stock Grants under this Plan, including, without
limitation, the determination of the number of Shares to be
subject to and the form, terms, conditions and duration of each
Stock Option, Stock Appreciation Right and Restricted Stock Grant
and the amendment thereof, consistent with the provisions of this
Plan; provided, however, that the Special Stock Option Grant
Committee may delegate to the ECDC (and may authorize further
delegation by the ECDC to senior managers of the Company and its
Subsidiaries) the right to select those persons who are not offi-
cers or directors of Monsanto (as defined in Section 16(b) of the
Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission issued pursuant to such Act) who are to
receive Options, Stock Appreciation Rights and Restricted Stock
Grants under this Plan, including, without limitation, the
determination of the number of Shares to be subject to and the
form, terms, conditions and duration of each Option, Stock
Appreciation Right and Restricted Stock Grant granted to such
Participants (and the amendment thereof), consistent with the
provisions of this Plan, and to authorize payment in respect of
an Option (pursuant to Article II, Section 1(c)) or a Stock
Appreciation Right (pursuant to Article II, Section 4(c), (e) and
(f)), involving such a Participant. All acts and decisions of
the Committee with respect to any questions arising in connection
with the administration and interpretation of this Plan, includ-
ing the severability of any and all of the provisions hereof,
shall be conclusive, final and binding upon all Participants. No
person shall be eligible for the grant of an Award under this
Plan while serving as a member of the Special Stock Option Grant
Committee.
(c) The Committee may adopt and amend, from time to time,
rules and regulations of general application for the administra-
tion of this Plan, including terms and conditions related to the
receipt and exercise of Options, Stock Appreciation Rights and
Restricted Stock Grants. Such rules and regulations may include,
at the Committee's discretion, the provision by the Company of
loans for the purpose of financing the exercise of Options, and
the amount of taxes payable in connection therewith.
(d) Without limiting the foregoing Sections 3(a), (b) and
(c) of this Article I (and notwithstanding any other provisions
<PAGE> 4
-4-
of this Plan), the Committee is authorized to take such action as
it determines to be necessary or advisable, and fair and equit-
able to Participants, with respect to Options, Stock Appreciation
Rights and Restricted Stock Grants in the event of: a merger of
Monsanto with, consolidation of Monsanto into, or the acquisition
of Monsanto by, another corporation; a sale or transfer of all or
substantially all of the assets of Monsanto to another corpora-
tion or any other person or entity; a tender or exchange offer
for Shares made by any corporation, person or entity (other than
Monsanto); or other reorganization in which Monsanto will not
survive as an independent, publicly owned corporation. Such
action may include (but shall not be limited to) establishing,
amending or waiving the forms, terms, conditions and duration of
Stock Options, Stock Appreciation Rights and Restricted Stock
Grants so as to provide for earlier, later, extended or addition-
al times for exercise or payments, differing methods for calcu-
lating payments, alternate forms and amounts of payment, or other
modifications. The Committee may take such actions pursuant to
this Section 3(d) by adopting rules and regulations of general
applicability to all Participants or to certain categories of
Participants, by including, amending or waiving terms and condi-
tions in Option, Stock Appreciation Right and Restricted Stock
grants, or by taking action with respect to individual Partici-
pants. The Committee may take such actions as part of the grants
or before or after the public announcement of any such merger,
consolidation, acquisition, sale or transfer of assets, tender or
exchange offer or other reorganization.
SECTION 4. SHARE ADJUSTMENTS. In the event that at any
time or from time to time a stock dividend, stock split,
recapitalization, merger, consolidation, or other change in
capitalization, or a sale by Monsanto of all or part of its
assets, or any distribution to shareholders other than a cash
dividend results in (a) the outstanding Shares, or any securities
exchanged therefor or received in their place, being exchanged
for a different number or class of shares of stock or other
securities of Monsanto, or for shares of stock or other securi-
ties of any other corporation; or (b) new, different or addition-
al shares or other securities of Monsanto or of any other corpo-
ration being received by the holders of outstanding Shares, then:
(i) the limitation of 1,500,000 Shares set forth in
Section 1(a) of Article II and in Article III of this Plan;
(ii) the number and class of Shares (A) that may be
subject to Stock Options, Stock Appreciation Rights or Restricted
Stock Grants and (B) which have not been issued or transferred
under Stock Options, Stock Appreciation Rights or Restricted
Stock Grants; and
<PAGE> 5
-5-
(iii) the purchase price to be paid per Share under
unexercised Stock Options and the number of Shares to be trans-
ferred in settlement of outstanding Stock Appreciation Rights;
shall in each case be equitably adjusted as determined by the
Committee in its sole discretion.
ARTICLE II. PLAN
SECTION 1. OPTION SHARES.
(a) (i) The total number of Shares for which Options may
be granted under this Plan shall not exceed 1,500,000 Shares,
subject to: (A) the adjustments provided for in Section 4 of
Article I of this Plan; (B) the provisions of Section 1(b) of
this Article II; and (C) reduction by the number of shares
committed or awarded pursuant to Article III of this Plan. Such
Shares may be authorized but unissued Shares, or treasury Shares,
or both. Options may be granted for restricted or unrestricted
Shares.
(ii) The total number of Shares for which Options may
be granted under this Plan to any one Eligible Participant shall
not exceed in any one calendar year 5% of the total number of
Shares for which Options may be granted under this Plan, subject
to the adjustments provided for in Section 4 of Article I of this
Plan.
(b) In the event that any unexercised Stock Option granted
hereunder lapses or ceases to be exercisable for any reason other
than a surrender of the Option pursuant to Section 1(c) of this
Article II or the exercise of a Stock Appreciation Right under
Section 4 of this Article II, the Shares subject to such Option
shall again be available for Option grants under this Plan
without again being charged against the limitation of 1,500,000
Shares set forth in Section 1(a) of this Article II. Any amend-
ment of any Option or Stock Appreciation Right by the Committee
pursuant to Article I, Section 3 of this Plan shall not be
considered the grant of a new Option.
(c) In the event of Termination of Employment for death,
disability, hardship or unusual circumstances as determined by
the Committee, the Committee may, with the consent of the Parti-
cipant or his or her legal representative, authorize payment, in
cash or in Shares, or partly in cash and partly in Shares, as the
Committee may direct, of an amount equal to the difference at the
time between the Fair Market Value of the Shares subject to an
Option and the Option exercise price in consideration of the
surrender of the Option. In such an event the Shares subject to
the Option so surrendered shall be charged against the limita-
tions set forth in Section 1(a) of this Article II.
<PAGE> 6
-6-
SECTION 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION
RIGHTS.
<TABLE>
(a) Each Stock Option and Stock Appreciation Right shall be
granted subject to such terms and conditions, if any, not incon-
sistent with this Plan, as shall be determined by the Committee,
including any provisions as to continued employment as considera-
tion for the grant or exercise of such Option or Stock Appreci-
ation Right and any provisions which may be advisable to comply
with applicable laws, regulations or rulings of any governmental
authority. Unless otherwise provided at the time of any Option
grant and except as otherwise specifically provided in this Plan,
Options shall only be exercisable by a Participant as follows:
<CAPTION>
Percentage
of Total
Shares Per
Option Grant
Option Exercise Dates Exercisable
--------------------- ------------
<S> <C>
1. On and after twelve (12) months from
the Option grant date................... 33-1/3%
2. On and after twenty-four (24) months
from the Option grant date.............. 66-2/3%
3. On and after thirty-six (36) months
from the Option grant date.............. 100%
</TABLE>
If the application of the foregoing vesting schedule
would result in a fractional Share being issuable upon the
exercise of an Option, the number of Options vested shall be
rounded up to the next full Share, but not to exceed in the
aggregate the original grant total.
(b) A Stock Option or Stock Appreciation Right shall not be
transferable by the Participant otherwise than by will or by the
laws of descent and distribution, and shall be exercisable during
the lifetime of the Participant only by him or her or by his or
her guardian or legal representative.
SECTION 3. CONDITIONS OF OPTIONS. Options may be granted
to Eligible Participants at such time or times determined by the
Committee, subject to the following terms and conditions:
(a) The Option exercise price per Share shall be estab-
lished by the grant but shall not be less than 100% of the Fair
Market Value at the time of the grant (or such later date as the
Committee shall determine).
<PAGE> 7
-7-
(b) The Option and its related Stock Appreciation Right, if
any, may be exercised in full or in part from time to time prior
to Termination of Employment and within ten (10) years and thirty
(30) days from the date of the grant, or such shorter period as
may be specified by the Committee in the grant, provided that
Options or Stock Appreciation Rights exercisable as of the date
of Termination of Employment shall remain exercisable for a
period of up to three (3) months following Termination of Employ-
ment (up to five (5) years if Employment shall have terminated as
a result of total and permanent disability as determined by the
Committee or retirement pursuant to, and as defined in, the
applicable pension plan of the Company, its Subsidiary or Associ-
ated Company, and up to twelve (12) months in the event of
death); provided, further, that no such period following Termina-
tion of Employment shall extend the original exercise period of
the Option or the Stock Appreciation Right.
(c) In the event of Termination of Employment due to
retirement (as defined in (b) above), death or total and perma-
nent disability (as determined by the Committee), all Options or
Stock Appreciation Rights granted more than twelve (12) months
prior to such event shall, notwithstanding Article II, Section 2,
become immediately exercisable.
(d) The Option grant may include any other terms and
conditions not inconsistent with this Plan, as determined by the
Committee.
SECTION 4. CONDITIONS OF STOCK APPRECIATION RIGHTS. A
Stock Appreciation Right may be granted to an Eligible Partici-
pant in connection with (and only in connection with) an Option
granted under this Plan, subject to the following terms and
conditions:
(a) Such Stock Appreciation Right shall entitle a holder of
an Option within the period specified for the exercise of the
Option in the related Option grant to surrender the unexercised
Option (or a portion thereof) and to receive in exchange therefor
a payment in cash or Shares having an aggregate value equal to
the product of (i) the amount by which (A) the SAR Fair Market
Value of each Share exceeds (B) the Option price per Share, times
(ii) the number of Shares under the Option, or portion thereof,
which is surrendered.
(b) Each Stock Appreciation Right granted hereunder shall
be subject to the same terms and conditions as the related
Option. It shall be exercisable only to the extent such Option
is exercisable and shall terminate or lapse and cease to be
exercisable when the related Option terminates or lapses. The
Committee may grant Stock Appreciation Rights concurrently with
grants of Options or in connection with previously granted
<PAGE> 8
-8-
Options under this Plan which are unexercised and have not
terminated or lapsed. With respect to Stock Appreciation Rights
granted in connection with such previously granted Options, the
Committee shall provide that such Stock Appreciation Rights shall
not be exercisable until the holder completes six (6) months (or
such longer period as the Committee shall determine) of service
with the Company, a Subsidiary, or an Associated Company immedi-
ately following the date of the grant of such Stock Appreciation
Rights.
(c) The Committee shall have sole discretion to determine
in each case whether the payment will be in the form of all cash,
all Shares or any combination thereof. If payment is to be made
in Shares, the number of Shares shall be determined as follows:
the amount payable in Shares shall be divided by the SAR Fair
Market Value of Shares. The payments to be made, in whole or in
part, in cash upon the exercise of Stock Appreciation Rights by
any officer of Monsanto shall be made in accordance with the
provisions relating to the exercise of stock appreciation rights
of Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect at the time of such
exercise, or any law, rule, regulation or other provision that
may hereafter replace such Rule.
(d) Upon exercise of a Stock Appreciation Right, the number
of Shares subject to exercise under the related Option shall
automatically be reduced by the number of Shares represented by
the Option or portion thereof which is surrendered. To the
extent that a Stock Appreciation Right shall be exercised, any
Shares transferred upon such exercise shall not be charged
against the maximum limitations upon the grant of Options set
forth in the Plan under which such Option shall have been granted
but the Option in connection with which a Stock Appreciation
Right shall have been granted shall be deemed to have been
exercised for the purpose of such maximum limitations.
(e) The Committee shall have the sole discretion as to the
timing of any payment made in cash, Shares, or a combination
thereof upon exercise of Stock Appreciation Rights hereunder,
whether in a lump sum, in annual installments or otherwise
deferred and the Committee shall have sole discretion to deter-
mine whether such payments may bear amounts equivalent to inter-
est or cash dividends.
(f) For purposes of this Section 4 of Article II:
(i) "Unrelated Party" means any party or group of
parties acting together other than (A) Monsanto, its directors
and officers, or (B) any nominee holder for any stock exchange;
<PAGE> 9
-9-
(ii) "Offer" means any tender or exchange offer made by
an Unrelated Party for the Shares and shall be deemed to occur
upon the first purchase or exchange of such Shares;
(iii) "Change of Control" means any acquisition, benefi-
cially or otherwise, by any Unrelated Party of 25% or more of the
combined voting power of the common and preferred stock of
Monsanto and shall be deemed to occur upon the date that the
Unrelated Party attains control of said 25% or more of the
combined voting power;
(iv) "Change of Control Market Value" of the Shares
means the higher of --
(A) the value for which such Shares may be
exchanged or offered under any Offer pursuant to which Shares are
actually exchanged or purchased; or
(B) the Fair Market Value of such Shares on the
date of exercise of a Stock Appreciation Right.
Notwithstanding the foregoing provisions of this Section 4
of Article II and without limiting the provisions of Section 3 of
Article I of this Plan, in the event of an Offer or Change of
Control, a Participant holding an unexercised Stock Appreciation
Right may exercise such Stock Appreciation Right and elect to be
paid solely in cash in an amount equal to the difference between
the Option price and the Change of Control Market Value of the
Shares, unless within five (5) business days after receipt of
notification of such election by the Secretary of Monsanto, the
Committee acts to disapprove the cash election. Unless it acts
to disapprove, the Committee's consent shall be deemed to be
given at the close of business on the fifth business day after
the Secretary's receipt of notification of such election and
payment shall be made as soon as practicable after expiration of
such five (5) business day period. The election provided herein
shall apply only: (x) during the thirty (30) day period following
the first exchange or purchase of Shares pursuant to an Offer; or
(y) during the thirty (30) day period following the date on which
sufficient Shares are acquired to constitute a Change of Control.
ARTICLE III. RESTRICTED SHARES
The Committee may make awards of Restricted Shares to
Eligible Participants. The Committee shall have full discretion
to determine the terms and conditions of such awards. The total
number of Shares which may be used for such awards under this
Plan shall not exceed 1,500,000 Shares, subject to: (A) the
adjustments provided for in Section 4 of Article I of this Plan;
and (B) reduction by the number of Shares for which Stock Options
<PAGE> 10
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have been granted pursuant to Article II of this Plan (except as
provided in Section 1(b) of Article II).
Restricted Shares shall be subject to such terms and condi-
tions, including forfeiture, if any, and to such restrictions
against sale, transfer or other disposition as may be determined
by the Committee at the time a Non-qualified Option for the
purchase of Restricted Shares is granted, at the time a Stock
Appreciation Right to be settled with Restricted Shares is
granted, at the time of making a bonus award of Restricted Shares
or at any other time as reasonably determined by the Committee
(collectively a "Restricted Stock Grant"). Any new or additional
or different Shares or other securities resulting from any
adjustment of such Shares of the type described in Section 4 of
Article I shall be subject to the same terms, conditions, and
restrictions as the Restricted Shares prior to such adjustment.
The Committee may, in its discretion, remove, modify or
accelerate the release of restrictions on any Restricted Shares
in the event of hardship or disability of the Participant while
employed, in the event that the Participant ceases to be an
employee of the Company, a Subsidiary or Associated Company, as
the result of death or otherwise, in the event of a relocation of
a Participant to another country or for such other reasons as the
Committee may deem appropriate. In the event of the death of a
Participant following the transfer of Restricted Shares to him,
the legal representative of the Participant, the beneficiary
designated in writing by the Participant during his lifetime, or
the person receiving such Shares under his will or under the laws
of descent and distribution shall take such Shares subject to the
same restrictions, conditions and provisions in effect at the
time of his death, to the extent applicable.
ARTICLE IV. MISCELLANEOUS PROVISIONS
SECTION 1. TRANSFER. Neither a Stock Option nor a Stock
Appreciation Right shall be transferable except as provided for
herein in the case of death. If any Participant makes such a
transfer in violation hereof, any obligation of the Company with
respect to such Option or Stock Appreciation Right shall forth-
with terminate.
SECTION 2. CONTINUED EMPLOYMENT. Nothing in this Plan or
any booklet or other document describing or referring to this
Plan shall be deemed to confer on any employee or Participant the
right to continue in the employ of his or her employer or affect
the right of his or her employer to terminate the employment of
any such person with or without cause.
SECTION 3. SEGREGATED FUND. Nothing contained herein shall
require the Company to segregate any monies from its general
funds, or to create any trusts, or to make any special deposits
<PAGE> 11
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for any immediate or deferred amounts payable to any Participant,
nor require Monsanto to segregate any treasury Shares.
SECTION 4. GOVERNING LAW. This Plan and all actions taken
hereunder will be governed by the laws of the State of Illinois.
SECTION 5. WITHHOLDING. The Company may make such provi-
sions and take such steps as it may deem necessary or appropriate
for the withholding of any taxes which the Company is required by
any law or regulation of any governmental authority, whether
federal, state or local, domestic or foreign, to withhold in
connection with any Stock Option or the exercise thereof or any
Stock Appreciation Right or the exercise thereof.
ARTICLE V. AMENDMENTS
SECTION 1. AMENDMENT OR TERMINATION OF PLAN. The Board or
the Special Stock Option Grant Committee may, from time to time,
amend this Plan, or discontinue this Plan or any provision
thereof, provided that no amendments or modifications to this
Plan shall, without the prior approval of the shareholders
normally entitled to vote for the election of directors of
Monsanto:
(a) change the number of Shares for which Stock Options may
be granted, or the percentage thereof which may be made subject
to Options granted to any one Eligible Participant, as set forth
in Section 1(a) of Article II of this Plan;
(b) make any member of the Committee eligible for the grant
of a Stock Option, Stock Appreciation Right or Restricted Stock
Grant;
(c) limit or restrict the powers of the Committee with
respect to the administration of this Plan except as may be
required by any law, regulation or governmental order;
(d) materially increase the benefits accruing to Partici-
pants under this Plan;
(e) materially modify the requirements as to eligibility
for participation under the Plan; or
(f) change any of the provisions of this Article V.
SECTION 2. EFFECT ON OPTIONS OR STOCK APPRECIATION RIGHTS.
No amendment or discontinuance of this Plan or any provision
thereof shall, without the written consent of the Participant,
adversely affect any Stock Option, Stock Appreciation Right, or
Restricted Stock Grant theretofore granted to such Participant
under this Plan.
<PAGE> 12
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ARTICLE VI. MISCELLANEOUS
SECTION 1. OTHER PLANS. This Plan is not intended to and
shall not preclude the establishment or operation by the Company
or any Subsidiary of any thrift, savings and investment, achieve-
ment award, stock purchase, incentive, employee recognition or
other benefit plan or arrangement for any employees and any such
other plan may be authorized and payments made thereunder
independently of this Plan.
<PAGE> 1
EXHIBIT 10.3
SEARLE/MONSANTO STOCK PLAN OF 1994
I. GENERAL PROVISIONS
1. PURPOSES
The Searle/Monsanto Stock Plan of 1994 is designed:
* to attract, motivate and retain for the Company
and its Subsidiaries and Associated Companies
personnel of exceptional ability,
* to encourage ownership of Monsanto common stock by
management,
* to align management interests with those of
stockholders, and
* to provide a competitive executive compensation
program.
This Incentive Plan shall be effective February 1, 1994
("Effective Date"), subject to the approval of this
Incentive Plan by the stockholders of Monsanto Company.
2. DEFINITIONS
Except where the context otherwise indicates, the
following definitions apply:
"Associated Company" means any corporation (or partner-
ship, 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).
"Award" means any Stock Option, Stock Appreciation
Right, Restricted Share, unrestricted Share, dividend
equivalent unit, or other award awarded under this
Incentive Plan.
"Board" means Board of Directors of the Company.
"Committee" means the Executive Compensation and
Development Committee of the Board, or its permitted
delegate.
"Company" means Monsanto Company, a Delaware corporation.
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<PAGE> 2
"Eligible Participant" means any officer or other
salaried employee (including a director who is a
salaried employee) of the Company, a Subsidiary or an
Associated Company except that no Reporting Person shall
be an Eligible Participant.
"Incentive Plan" means the Searle/Monsanto Stock Plan of
1994, set forth herein.
"Fair Market Value" shall mean, with respect to any
given day, the average of the highest and lowest sales
prices of the Shares reported as the New York Stock
Exchange-Composite Transactions for such day, or if the
Shares were not traded on the New York Stock Exchange on
such day, then on the next preceding day on which the
Shares were traded, all as reported by The Wall Street
Journal, mid-west edition, under the heading New York
Stock Exchange-Composite Transactions or by such other
source as the Committee may select.
"Incentive Stock Option" or "Incentive Option" means an
option meeting the definition of that term as set forth
in Section 3 of Article II of this Incentive Plan.
"Monsanto" means Monsanto Company, a Delaware
corporation.
"Non-Qualified Stock Option" or "Non-Qualified Option"
means an option referred to in Section 4 of Article II of
this Incentive Plan.
"Participant" means an Eligible Participant to whom an
Award has been granted pursuant to this Incentive Plan.
"Reporting Person" means a person subject to the
reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 (or any law, rule,
regulation or other provision that may replace such
statute) with respect to Shares.
"Restricted Shares" means Shares that were made subject
to restrictions in accordance with Section 6 of Article
II of this Incentive Plan.
"Shares" means shares of common stock of Monsanto and
any shares of stock or other securities received as a
result of a Share adjustment as set forth in Section 4 of
this Article I.
"Stock Appreciation Right" means a right referred to in
Section 5 of Article II of this Incentive Plan.
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<PAGE> 3
"Stock Appreciation Right Fair Market Value" or "SAR
Fair Market Value" shall mean a value established by the
Committee for the exercise of a Stock Appreciation Right.
"Stock Option" or "Option" shall mean Incentive Stock
Options and/or Non-Qualified Stock Options.
"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 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 Non-Qualified Stock Option, an
Award of Shares (restricted or not), or a Stock
Appreciation Right, any corporation (or partnership,
joint venture, or other 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).
"Termination of Employment" means the discontinuance of
employment of a Participant for any reason other than a
Transfer.
"Transfer" means: (i) for the purpose of an Incentive
Stock Option, a change of employment of a Participant
within the group consisting of Monsanto and its
Subsidiaries; and (ii) for the purpose of a Non-Qualified
Stock Option, a Stock Appreciation Right or an Award of
Shares (restricted or not), a change of employment of a
Participant within the group consisting of Monsanto and
its Subsidiaries, or, if the Committee so determines, a
change of employment of a Participant within the group
consisting of Monsanto, its Subsidiaries and Associated
Companies.
3. ADMINISTRATION
(a) This Incentive Plan shall be administered by the
Executive Compensation and Development Committee
of the Board (the "ECDC"), except to the extent
the ECDC delegates administration pursuant to this
paragraph. The ECDC may delegate all or a portion
of the administration of this Incentive Plan to any
Committee consisting of one or more senior managers
of the Company or its Subsidiaries and may
authorize further delegation by such Committee
3
<PAGE> 4
to senior managers of the Company or its Subsidiaries.
No person shall be eligiable for the grant of an
Award under this Incentive Plan while serving as a
member of the ECDC.
(b) The Committee shall have the exclusive right to
interpret this Incentive Plan, to select from
among the Eligible Participants the persons who
are to receive Awards, and to act in all matters
pertaining to the granting of Awards under this
Incentive Plan including, without limitation, the
timing, pricing, amount and terms of any Award and
the amendment thereof consistent with the provi-
sions of this Incentive Plan. No Eligible
Participant shall have any right to be considered
for or to receive any Awards. All acts and
decisions of the Committee with respect to any
questions arising in connection with the
administration and interpretation of this Incentive
Plan, including the severability of any and all of
the provisions thereof, shall be conclusive, final
and binding upon all Eligible Participants.
(c) The Committee may adopt and amend from time to
time rules and regulations of general application
for the administration of this Incentive Plan.
(d) Without limiting the foregoing Sections 3(a), (b)
and (c) of this Article I (and notwithstanding any
other provisions of this Incentive Plan), the
Committee is authorized to take such action as it
determines to be necessary or advisable, and fair
and equitable to Participants, with respect to
Options, Stock Appreciation Rights, Awards of
Restricted Shares and other Awards in the event of:
a merger of Monsanto with, consolidation of
Monsanto into, or the acquisition of Monsanto by,
another corporation; a sale or transfer of all or
substantially all of the assets of Monsanto to
another corporation or any other person or entity,
a tender or exchange offer for Shares made by any
corporation, person or entity (other than
Monsanto); or other reorganization in which
Monsanto will not survive as an independent,
publicly-owned corporation. Such action may
include (but shall not be limited to)
establishing, amending or waiving the forms,
terms, conditions and duration of Stock Options,
Stock Appreciation Rights, Awards of Restricted
Shares and other Awards so as to provide for
earlier, later, extended or additional times for
exercise or payments, differing methods for
4
<PAGE> 5
calculating payments, alternate forms and amounts
of payment, accelerated release of restrictions or
other modifications. The Committee may take such
actions pursuant to this Section 3(d) by adopting
rules and regulations of general applicability to
all Participants or to certain categories of Parti-
cipants, by including, amending or waiving terms
and conditions in Option and Stock Appreciation
Right grants, other Awards (including, without
limitation, agreements with respect to Restricted
Shares), or by taking action with respect to
individual Participants. The Committee may take
such actions as part of the grants, commitments or
awards, or before or after the public announcement
of any such merger, consolidation, acquisition,
sale or transfer of assets, tender or exchange
offer or other reorganization.
4. SHARE ADJUSTMENTS
In the event that at any time or from time to time a
stock dividend, stock split, recapitalization, merger,
consolidation, or other change in capitalization, or a
sale by Monsanto of all or part of its assets, or any
distribution to stockholders other than a cash dividend
results in (a) the outstanding Shares, or any securities
exchanged therefor or received in their place, being
exchanged for a different number or class of shares of
stock or other securities of Monsanto, or for shares of
stock or other securities of any other corporation; or
(b) new, different or additional shares or other
securities of Monsanto or of any other corporation being
received by the holders of outstanding Shares, then:
(i) the total number of Shares authorized for Awards
under this Incentive Plan;
(ii) the number and class of Shares (A) that may be
subject to Stock Options or Stock Appreciation
Rights, (B) which have not been issued or trans-
ferred under outstanding Stock Options or Stock
Appreciation Rights, and (C) which have been
awarded but are undelivered under this Incentive
Plan; and
(iii) the purchase price to be paid per Share under
outstanding Stock Options and the number of Shares
to be transferred in settlement of outstanding
Stock Appreciation Rights;
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<PAGE> 6
shall in each case be equitably adjusted as determined by
the Committee in its discretion; provided, however, that
all adjustments made as the result of the foregoing in
respect of each Stock Option which is granted as an
Incentive Stock Option shall be made so that such Stock
Option shall continue to be an Incentive Stock Option as
defined in Section 422 of the Internal Revenue Code of
1986, as may be amended from time to time, or any
provisions that may hereafter be enacted in lieu thereof.
5. SHARES AUTHORIZED
The total number of Shares for which Awards may be
granted under this Incentive Plan shall not exceed
1,430,000 Shares. Notwithstanding the foregoing, the
total number of Shares that shall be available for
Awards of Restricted or unrestricted Shares shall be 1/2
of 1% of the total number of Shares outstanding. The
limitations in this Section 5 are subject to the
adjustments provided for in Section 4 of this Article I
and the provisions of Sections 1(b) and 1(d) of Article
II of this Incentive Plan.
The total number of Shares for which Awards may be
granted under this Incentive Plan to any one Eligible
Participant shall not exceed in any one calendar year 5%
of the total number of Shares for which Awards may be
made under this Incentive Plan, subject to the
adjustments provided for in Section 4 of this Article I.
II. AWARDS
1. SHARES USED FOR AWARDS
(a) The Shares for which Awards may be granted under
this Incentive Plan may be authorized but unissued
Shares, or treasury Shares, or both.
(b) In the event that any unexercised Stock Option
granted hereunder lapses or ceases to be
exercisable for any reason other than a surrender
of the Option pursuant to Section l(c) of this
Article II or the exercise of a Stock Appreciation
Right under Section 5 of this Article II, the
Shares subject to such Option shall again be
available for award without again being charged
against the authorized Shares set forth in Section
5 of Article I, provided the Participant whose
Stock Option has lapsed or ceased to be exercisable
has received no benefits of ownership from the
Shares. Any amendment of any Option or
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<PAGE> 7
Stock Appreciation Right by the Committee pursuant to
Article I, Section 3 of this Incentive Plan shall
not be considered the grant of a new Option for the
purpose of Section 5 of Article I.
(c) In the event of death or total and permanent
disability as determined by the Committee, the
Committee may, with the consent of the Participant,
his legal representative, or in the event of death,
a beneficiary designated in writing by the
Participant during his lifetime, authorize
payment, in cash or in Shares, or partly in cash
and partly in Shares, as the Committee may direct,
of an amount equal to the difference at the time
between the Fair Market Value of the Shares subject
to an Option and the Option price in consideration
of the surrender of the Option. In such an event
the Shares subject to the Option so surrendered
shall be charged against the limitations set forth
in Section 5 of Article I.
(d) In the event that any Restricted or unrestricted
Share Award or installment thereof ceases to be
payable for any reason, the Shares subject to such
Award shall again be available for award without
again being charged against the limitations on the
number of Shares set forth in Section 5 of Article
I, provided the Participant whose Award ceases to
be payable has received no benefits of ownership
from the Shares.
2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS
(a) An award of Stock Options or Stock Appreciation
Rights may be made at such time or times
determined by the Committee following the
Effective Date to any Eligible Participant, except
that Incentive Options may not be awarded to
employees of Associated Companies. Each Stock
Option and Stock Appreciation Right shall be
granted subject to such terms and conditions, if
any, not inconsistent with this Incentive Plan, as
shall be determined by the Committee, including any
provisions as to continued employment as consider-
ation for the grant or exercise of such Option or
Stock Appreciation Right, provisions as to
performance conditions and any provisions which may
be advisable to comply with applicable laws,
regulations or rulings of any governmental
authority.
(b) An Incentive Stock Option shall not be transferable
by the Participant except by will, by the
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<PAGE> 8
laws of descent and distribution, or pursuant to a
written beneficiary designation, and shall be
exercisable during the lifetime of the Participant
only by him or by his guardian or legal
representative. A Non-Qualified Stock Option or
Stock Appreciation Right shall not be transferable
except by will, by the laws of descent and
distribution, pursuant to a written beneficiary
designation, pursuant to a qualified domestic
relations order as defined by the Internal Revenue
Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act or the rules
thereunder, or in such circumstances as would not
result in the failure to comply with Rule 16b-3
under the Securities Exchange Act of 1934 (or any
successor rule or provision) if the transferor were
a Reporting Person.
(c) Shares purchased upon exercise of a Stock Option
shall be paid for in such amounts, at such times
and upon such terms as shall be determined by the
Committee and specified in the grant of the
Option. Without limiting the foregoing, the
Committee may establish payment terms for the
exercise of Stock Options which permit the
Participant to deliver Shares (or other evidence
of ownership of Shares satisfactory to the
Company), including, at the Committee's option,
Restricted Shares, with a Fair Market Value equal
to the Option price as payment.
(d) The Option price per share shall be established by
the grant and shall not be decreased thereafter
except pursuant to Section 4 of Article I of this
Incentive Plan.
(e) The Committee, in its discretion, may provide for
the escalation of the Option price per Share over
all or part of the term of the Option.
(f) The Committee, in its discretion, may offer
Participants the opportunity to elect to receive
an Option grant in lieu of a salary increase or a
bonus or may offer Participants the opportunity to
purchase Options for cash or such other
consideration as the Committee in its discretion
determines.
(g) The Committee, in its discretion, may require as a
condition to the grant or vesting of Options, the
deposit of Shares owned by the Participant
receiving such grant, and the forfeiture of such
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<PAGE> 9
Options, if such deposit is not made or maintained
during the required holding period. Such deposited
Shares may not be otherwise sold, pledged or
disposed of during the applicable holding period.
3. INCENTIVE OPTIONS
An Incentive Option shall be an "Incentive Stock Option"
as that term is defined in Section 422 of the Internal
Revenue Code of 1986, as may be amended from time to
time, as in effect at the time of the grant of any such
Option, or any statutory provision that may be enacted to
replace such Section. Each provision of this Incentive
Plan and of each Incentive Stock Option granted hereunder
shall be construed so that each such Option shall be an
Incentive Stock Option, and any provision thereof that
cannot be so construed shall be disregarded. Incentive
Stock Options shall be granted only to purchase
unrestricted Shares each of whom may be granted one or
more such Options at such time or times determined by the
Committee following the Effective Date until January 31,
2004, subject to the following conditions:
(a) The Option price per Share shall be set by the
grant but shall not be less than 100% of the Fair
Market Value at the time of the grant.
(b) The Option and its related Stock Appreciation
Right, if any, may be exercised in full or in part
from time to time within ten (10) years from the
date of the grant, or such shorter period as may be
specified by the Committee in the grant, 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
Option or Stock Appreciation Right; 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 pursuant to, and as
defined in an applicable pension plan of
Monsanto, its Subsidiary or Associated
Company or total and permanent disability as
determined by the Committee; or
(ii) as a result of death or death shall have
occurred following Termination of Employment
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<PAGE> 10
and while the Option or Stock Appreciation
Right was still exercisable; and
provided, further, that such period following
Termination of Employment shall in no event extend
the original exercise period of the Option or
related Stock Appreciation Right, if any.
(c) The aggregate Fair Market Value (determined at the
time the Option is granted) of the Shares with
respect to which Incentive Stock Options are first
exercisable during any calendar year by any
Eligible Participant shall not exceed $100,000;
however, if the Fair Market Value of Incentive
Stock Option Shares (at date of grant) exceeds
$100,000 in the calendar year in which Incentive
Stock Options are first exercisable, Shares with a
Fair Market Value at date of grant exceeding
$100,000 shall not be deemed to be Incentive Stock
Options.
(d) Incentive Stock Options shall be granted only to
an Eligible Participant who, at the time the
Option is granted, does not own stock possessing
more than 10% of the total combined voting power of
all classes of stock of Monsanto.
(e) Any other terms and conditions which the Committee
determines, upon advice of counsel, should be
imposed for the Option to qualify as an Incentive
Stock Option and any other terms and conditions not
inconsistent with this Incentive Plan as determined
by the Committee; including provisions making the
Shares subject to such Option Restricted Shares or
provisions making vesting or the ability to
exercise subject to performance conditions.
4. NON-QUALIFIED OPTIONS
One or more Options may be granted as Non-Qualified
Options to purchase unrestricted Shares or Restricted
Shares to an Eligible Participant at such time or times
determined by the Committee, following the Effective
Date, subject to the following terms and conditions:
(a) The Option price per Share shall be established by
the grant but shall not be less than 100% of the
Fair Market Value at the time of the grant (or such
later date as the Committee shall determine to be
the grant date).
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<PAGE> 11
(b) The Option and its related Stock Appreciation
Right, if any, may be exercised in full or in part
from time to time within ten (10) years from the
date of the grant, or such shorter period as may be
specified by the Committee in the grant, 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
Option or Stock Appreciation Right; 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 pursuant to, and as
defined in, the applicable pension plan of
Monsanto, its Subsidiary or Associated
Company or total and permanent disability as
determined by the Committee; or
(ii) as a result of death or death shall have
occurred following Termination of Employment
and while the Option or Stock Appreciation
Right was still exercisable; and
provided, further, that such period following
Termination of Employment shall in no event extend
the original exercise period of the Option or
related Stock Appreciation Right, if any.
(c) The Option grant may include any other terms and
conditions not inconsistent with this Incentive
Plan as determined by the Committee, including
provisions making the Shares subject to such
Option Restricted Shares or provisions making
vesting or the ability to exercise subject to the
satisfaction of performance conditions.
5. STOCK APPRECIATION RIGHTS
A Stock Appreciation Right may be granted to an Eligible
Participant in connection with (and only in connection
with) an Incentive Stock Option or a Non-Qualified
Option granted under this Plan, or under any other
incentive plan of Monsanto or its Subsidiaries which was
approved by the Monsanto shareholders, subject to the
following terms and conditions:
(a) Such Stock Appreciation Right shall entitle a
holder of an Option within the period specified
for the exercise of the Option in the related
Option grant to surrender the unexercised Option
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<PAGE> 12
(or a portion thereof) and to receive in exchange
therefor a payment in cash or Shares having an
aggregate value equal to the product of (i) the
amount by which (A) the SAR Fair Market Value of
each Share exceeds (B) the Option price per Share,
times (ii) the number of Shares under the Option,
or portion thereof, which is surrendered.
(b) Except as otherwise expressly provided herein,
each Stock Appreciation Right granted hereunder
shall be subject to the same terms and conditions
as the related Option. It shall be exercisable
only to the extent such Option is exercisable and
shall terminate or lapse and cease to be
exercisable when the related Option terminates or
lapses. The Committee may grant Stock
Appreciation Rights concurrently with grants of
Options or in connection with previously granted
Options under this Incentive Plan which are
unexercised and have not terminated or lapsed.
With respect to Stock Appreciation Rights granted
in connection with such previously granted
Options, the Committee shall provide that such
Stock Appreciation Rights shall not be exercisable
until the holder completes six (6) months (or such
longer period as the Committee shall determine) of
service with the Company, a Subsidiary, or an
Associated Company immediately following the date
of the grant of such Stock Appreciation Rights.
(c) The Committee shall have sole discretion to
determine in each case whether the payment will be
in the form of all cash, all Shares (which may, at
the Committee's discretion, be Restricted Shares),
or any combination thereof. If payment is to be
made in Shares, the number of Shares shall be
determined as follows: the amount payable in Shares
shall be divided by the SAR Fair Market Value of
Shares.
(d) Upon exercise of a Stock Appreciation Right, the
number of Shares subject to exercise under the
related Option shall automatically be reduced by
the number of Shares represented by the Option or
portion thereof which is surrendered. To the
extent that a Stock Appreciation Right shall be
exercised, any Shares transferred upon such
exercise shall not be charged against the maximum
limitations upon the grant of Options set forth in
this Incentive Plan under which such Option shall
have been granted but the Option in connection with
which a Stock Appreciation Right shall have been
granted shall be deemed to have been
12
<PAGE> 13
exercised for the purpose of such maximum
limitations.
(e) The Committee shall have sole discretion as to the
timing of any payment made in cash, Shares, or a
combination thereof upon exercise of Stock
Appreciation Rights hereunder, whether in a lump
sum, in annual installments or otherwise deferred
and the Committee shall have sole discretion to
determine whether such payments may bear amounts
equivalent to interest or cash dividends.
(f) For purposes of this paragraph 5(f) of Article II:
(i) "Unrelated Party" means any party or group of
parties acting together other than (A)
Monsanto, its directors and officers, or (B)
any nominee holder for any stock exchange;
(ii) "Offer" means any tender or exchange offer
made by an Unrelated Party for the Shares and
shall be deemed to occur upon the first
purchase or exchange of such Shares;
(iii) "Change of Control" means any acquisition,
beneficially or otherwise, by any Unrelated
Party of 25% or more of the combined voting
power of the common and preferred stock of
Monsanto and shall be deemed to occur upon
the date that the Unrelated Party attains
control of said 25% or more of the combined
voting power;
(iv) "Change of Control Market Value" of the Shares
means the higher of--
(A) the value for which such Shares may be
exchanged or offered under any Offer
pursuant to which Shares are actually
exchanged or purchased; or
(B) the Fair Market Value of such Shares on
the date of exercise of a Stock Appreci-
ation Right.
Notwithstanding the foregoing provisions of this
Section 5 of Article II and without limiting the
provisions of Section 3 of Article I of this
Incentive Plan, in the event of an Offer or Change
of Control, a Participant holding an unexercised
Stock Appreciation Right may exercise such Stock
Appreciation Right and elect to be paid solely in
cash in an amount equal to the difference between
13
<PAGE> 14
the Option price and the Change of Control Market
Value of the Shares, unless within five (5)
business days after receipt of notification of such
election by the Secretary of Monsanto, the
Committee acts to disapprove the cash election.
Unless it acts to disapprove, the Committee's
consent shall be deemed to be given at the close of
business on the fifth business day after the
Secretary's receipt of notification of such
election and payment shall be made as soon as
practicable after expiration of such five (5)
business day period. The election provided herein
shall apply only: (x) during the thirty (30) day
period following the first exchange or purchase of
Shares pursuant to an Offer; or (y) during the
thirty (30) day period following the date on which
sufficient Shares are acquired to constitute a
Change of Control.
(g) For purposes of this paragraph 5(g) of Article II:
(i) "Unrelated Party" means any party or group of
parties acting together other than (A)
Monsanto, its directors and officers, or (B)
any nominee holder for any stock exchange;
(ii) "Alternate Change of Control" means any
acquisition, beneficially or otherwise, by
any Unrelated Party of a percentage of the
combined voting power of the common and
preferred stock of Monsanto specified by the
Committee (but not less than 10%) and shall
be deemed to occur upon the date that the
Unrelated Party attains control of said
percentage of the combined voting power;
(iii) "Change of Control Termination of Employment"
means the termination of employment of a
Participant by Monsanto, the Subsidiaries or
the Associated Companies without cause (as
defined by the Committee) or by the Partici-
pant for good reason (as defined by the
Committee) within a period of time specified
by the Committee following an Alternate Change
of Control;
(iv) "Alternate Change of Control Market Value" of
the Shares means the Fair Market Value of such
Shares on the date of exercise of a Stock
Appreciation Right.
Notwithstanding the foregoing provisions of this
Section 5 of Article II and without limiting the
14
<PAGE> 15
provisions of Section 3 of Article I of this
Incentive Plan, in the event of an Alternate
Change of Control and a Change of Control
Termination of Employment, a Participant holding
an unexercised Stock Appreciation Right who is
selected by the Committee may exercise such Stock
Appreciation Right and elect to be paid solely in
cash in an amount equal to the difference between
the Option price and the Alternate Change of
Control Market Value of the Shares, unless within
five (5) business days after receipt of
notification of such election by the Secretary of
Monsanto, the Committee acts to disapprove the
cash election. Unless it acts to disapprove, the
Committee's consent shall be deemed to be given at
the close of business on the fifth business day
after the Secretary's receipt of notification of
such election and payment shall be made as soon as
practicable after expiration of such five (5)
business day period. The election provided herein
shall apply only during the thirty (30) day period
following a Change of Control Termination of
Employment.
6. BONUS SHARES AND RESTRICTED SHARES
(a) An Award of Shares or Restricted Shares may be
made at such time or times determined by the
Committee following the Effective Date to any
Eligible Participant. The Committee shall have
full discretion to determine the terms and
conditions of payment of any Award, including
without limitation, what part of such Award shall
be paid in unrestricted Shares and Restricted
Shares, the time or times of payment of any Award,
and the time or times of the lapse of the
restrictions on Restricted Shares.
(b) For the purpose of determining the number of
Shares to be used in payment of an Award, the
amount of the Award payable in Shares shall be
divided by the Fair Market Value of the Shares on
the date of the determination of the amount of the
Award by the Committee, or if the Committee so
directs, the date immediately preceding the date
the Award is paid.
(c) The portion of an Award payable in Restricted
Shares shall be paid at the time of the Award
either by book-entry registration or by delivering
to the Participant, or a custodian or escrow
designated by the Committee and the Participant, a
certificate or certificates for such Restricted
15
<PAGE> 16
Shares, registered in the name of such Participant.
The Participant shall have all of the rights of a
stockholder with respect to such Shares, subject to
such terms and conditions, including forfeitures or
resale to the Company, if any, as may be determined
by the Committee. The Committee and the
Participant may designate the Company, Monsanto or
one or more employees to act as custodian or escrow
for the certificates.
(d) The Committee, in its discretion, may require as a
condition to the grant of any Shares or Restricted
Shares, the deposit of Shares owned by the
Participant receiving such grant, and the
forfeiture of the Award of Shares or Restricted
Shares, if such deposit is not made or maintained
during any applicable restricted period. Such
deposited Shares may not be otherwise sold,
pledged or disposed of during any applicable
restricted period.
(e) Restricted Shares shall be subject to such terms
and conditions, including forfeiture, if any, and
to such restrictions against sale, transfer or
other disposition as may be determined by the
Committee at the time a Non-Qualified Option for
the purchase of Restricted Shares is granted, at
the time a Stock Appreciation Right to be settled
with Restricted Shares is granted or at the time
of making an Award of Restricted Shares. Any new
or additional or different Shares or other
securities resulting from any adjustment of such
Shares of the type described in Section 4 of
Article I shall be subject to the same terms,
conditions, and restrictions as the Restricted
Shares prior to such adjustment. The Committee
may, in its discretion, remove, modify or accel-
erate the release of restrictions on any
Restricted Shares in the event of hardship or
disability of the Participant while employed, in
the event that the Participant ceases to be an
employee of Monsanto, a Subsidiary or Associated
Company, as the result of death or otherwise, in
the event of a relocation of a Participant to
another country or for such other reasons as the
Committee may deem appropriate. In the event of
the death of a Participant following the transfer
of Restricted Shares to him, the legal
representative of the Participant, the beneficiary
designated in writing by the Participant during his
lifetime, or the person receiving such Shares under
his will or under the laws of descent and
distribution shall take such Shares subject to the
16
<PAGE> 17
same restrictions, conditions and provisions in
effect at the time of his death, to the extent
applicable.
7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS
(a) No cash dividends shall be paid on Shares which
have been awarded but not delivered or on Shares
subject to unexercised Options. The Committee may
provide, however, that a Participant to whom an
Option has been awarded which is exercisable in
whole or in part at a future time for Shares or a
Participant who has been awarded Shares payable in
whole or in part at a future time, shall be
entitled to receive an amount per Share, equal in
value to the cash dividends, if any, paid per Share
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 Share is delivered. Such amounts (herein
called "dividend equivalents") may, in the
discretion of the Committee, be:
(i) paid in cash or Shares either from time to
time prior to or at the time of the delivery
of such Shares or upon expiration of the
Option if it shall not have been fully
exercised (except that payment of dividend
equivalents on Incentive Options may not be
made prior to exercise); or
(ii) converted into contingently credited Shares
(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 (whether delivered or contingently
credited) shall be charged against the limitations
set forth in Section 5 of Article I.
(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.
(c) The Committee, in its discretion, may provide that
dividends paid on Restricted Shares shall, during
the applicable restricted period, be held by the
Company to be paid upon the lapse of restrictions
or to be forfeited upon forfeiture of the Shares.
17
<PAGE> 18
III. MISCELLANEOUS PROVISIONS
1. Neither a Stock Option nor Stock Appreciation Right
shall be transferable except as provided for herein. If
any Participant makes such a transfer in violation
hereof, any obligation of the Company with respect to
such Stock Option or Stock Appreciation Right shall
forthwith terminate.
2. Nothing in this Incentive Plan or any booklet or other
document describing or referring to this Incentive Plan
shall be deemed to confer on any employee or Participant
the right to continue in the employ of his employer or
affect the right of his employer to terminate the
employment of any such person with or without cause.
3. This Incentive Plan and all actions taken hereunder shall
be governed by the laws of the State of Delaware.
4. The Company may make such provisions and take such steps
as it may deem necessary or appropriate for the
withholding of any taxes which the Company is required by
any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to
withhold in connection with any Stock Option or the
exercise thereof, any Stock Appreciation Right or the
exercise thereof, or the grant of any other Award,
including, but not limited to, the withholding of cash or
Shares which would be paid or delivered pursuant to such
exercise or Award or another exercise or Award under this
Incentive Plan until the Participant reimburses the
Company for the amount the Company is required to
withhold with respect to such taxes, or cancelling any
portion of such Award or another Award under this
Incentive Plan in an amount sufficient to reimburse
itself for the amount it is required to so withhold, or
selling any property contingently credited by the Company
for the purpose of paying such award or another award
under this Incentive Plan, in order to withhold or
reimburse itself for the amount it is required to so
withhold. The Committee may permit a Participant (or any
beneficiary or other person authorized to act) to elect
to pay a portion or all of any amounts required or
permitted to be withheld to satisfy federal, state, local
or foreign tax obligations by directing the Company to
withhold a number of whole Shares which would otherwise
be distributed and which have a Fair Market Value
sufficient to cover the amount of such required or
permitted withholding taxes.
18
<PAGE> 19
IV. AMENDMENTS
1. The Board may from time to time amend or modify this
Incentive Plan, provided that no amendments or modifica-
tions to this Incentive Plan shall, without the prior
approval of the stockholders normally entitled to vote
for the election of directors of Monsanto:
(a) permit the Company to decrease the Option price on
any outstanding Option;
(b) permit any change which would require the approval
of stockholders of Monsanto under Section 16 of the
Securities Exchange Act of 1934 or the rules
thereunder or under Section 422 of the Internal
Revenue Code of 1986, or the rules thereunder (or
any laws, rules, regulations or other provisions
that may replace such statutes or rules); or
(c) change any of the provisions of this Article IV.
2. No amendment to or discontinuance of this Incentive Plan
or any provision thereof by the Board or the
stockholders of Monsanto shall, without the written
consent of the Participant, adversely affect any Stock
Option or Stock Appreciation Right theretofore granted or
other Award theretofore made to such Participant under
this Incentive Plan.
V. INTERPRETATION
1. Except as authorized herein with respect to Stock
Appreciation Rights, this Incentive Plan is not intended
to and shall not affect any option or stock appreciation
right grant or other award under any other incentive
plan of Monsanto, its Subsidiaries and Associated
Companies. No stock options, stock appreciation rights
or Restricted Share awards shall be granted under the
Searle Monsanto Stock Option Plan of 1986 after February
1, 1994.
2. This Incentive Plan is not intended to and shall not
preclude the establishment or operation by the Company or
any Subsidiary of (a) any thrift, savings and
investment, achievement award, stock purchase, employee
recognition or other benefit plan or arrangement for any
group of employees, or (b) any other incentive or bonus
plan or arrangement for any employees (hereinafter "Other
Plan"), and any such Other Plan may be authorized and
payments made thereunder independently of this Incentive
Plan.
19
<PAGE> 1
EXHIBIT 10.4
G. D. SEARLE & CO. SUPPLEMENTAL MEDICAL REIMBURSEMENT PLAN
----------------------------------------------------------
DESCRIPTION:
- -----------
The Supplemental Medical Reimbursement Plan is an insured plan
designed to reimburse eligible employees and their family members
for medical and dental expenses not payable under Searle's basic
health benefits programs. Such expenses include deductibles,
coinsurance and expenses in excess of reasonable and customary
(R&C) levels.
ELIGIBLE EXPENSES:
- -----------------
Generally, covered medical expenses will be those allowed as a
personal income tax deduction (under section 213 of the Internal
Revenue Code) to the extent that such expenses are not
reimbursable under any other insurance in force, including
Workers' Compensation or government programs. Note that cosmetic
surgery is not reimbursable.
DEPENDENTS:
- ----------
Eligible dependents will include all dependents who are covered
under the regular group medical plan.
MAXIMUM BENEFIT:
- ---------------
The maximum benefit per family will be $12,000 per calendar year,
for eligible out-of-pocket expenses incurred during that calendar
year.
ADMINISTRATION:
- --------------
This plan is insured by Aetna Insurance Company. Claims should
be submitted for coverage under the regular Flexcel medical or
dental plans. Anything not reimbursed under these plans will
automatically be submitted to the Supplemental Plan.
Any questions regarding the Plan should be directed to:
Mary Rose Arnold
Executive Benefits Administrator,
Human Resources
OOI-2, X-3697
<PAGE> 1
EXHIBIT 23
CONSENT OF COMPANY COUNSEL
I hereby consent to the incorporation by reference in Monsanto
Company's Registration Statements on Form S-8 (Nos. 2-36636, 2-76696,
2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707,
33-49717, 33-53363, 33-53365, and 33-53367) of the reference to Company
counsel in Note 6 to the Notes to Financial Statements in the Company's
Form 10-Q Report for the quarter ended March 31, 1995. In giving this
consent I do not thereby admit that I am within the category of persons
whose consent is required under Section 7 of the Securities Act of
1933.
RICHARD W. DUESENBERG
RICHARD W. DUESENBERG
General Counsel
Monsanto Company
Saint Louis, Missouri
May 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE
THREE MONTHS ENDED MARCH 31, 1995, AND THE STATEMENT OF CONSOLIDATED
FINANCIAL POSITION AS OF MARCH 31, 1995. SUCH INFORMATION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 259
<SECURITIES> 0
<RECEIVABLES> 2,144
<ALLOWANCES> 0
<INVENTORY> 1,423
<CURRENT-ASSETS> 4,489
<PP&E> 7,982
<DEPRECIATION> 4,900
<TOTAL-ASSETS> 10,475
<CURRENT-LIABILITIES> 3,290
<BONDS> 1,780
<COMMON> 329
0
0
<OTHER-SE> 2,893
<TOTAL-LIABILITY-AND-EQUITY> 10,475
<SALES> 2,318
<TOTAL-REVENUES> 2,318
<CGS> 1,324
<TOTAL-COSTS> 1,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42
<INCOME-PRETAX> 337
<INCOME-TAX> 108
<INCOME-CONTINUING> 229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 0
<FN>
RECEIVABLES ARE STATED NET OF ALLOWANCES OF $53.
</TABLE>
