<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/ / Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Monsanto Company
---------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
This proxy material is sent to you for your information as the holder of a
Monsanto stock option or as a participant in the Monsanto Employee Stock
Purchase Plan. You are not entitled, however, to vote any optioned shares or
shares under contract. If you were a record holder on February 26, 1996, as the
result of your having exercised your option or completed your payment for shares
under contract, you will receive a proxy card for those shares.
MONSANTO
-------------------------
Monsanto Company
800 N. Lindbergh Boulevard
St. Louis, Missouri 63167
(314) 694-1000
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1996
You are invited, as a stockholder of Monsanto Company, to be present or
represented by proxy at the Annual Meeting of Stockholders to be held in
K Building at the Company's World Headquarters, 800 North Lindbergh
Boulevard, St. Louis County, Missouri, on Friday, April 26, 1996, at
1:30 p.m. for the following purposes:
1. To elect twelve directors.
2. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the authorized shares of
Common Stock, $2 par value per share, from 200,000,000 to
___________ shares.
3. To consider and act upon the proposed Monsanto Management
Incentive Plan of 1996.
4. To consider and act upon the proposed Monsanto Executive Stock
Purchase Incentive Plan.
5. To ratify the appointment of Deloitte & Touche LLP as principal
independent auditors for the year 1996.
6. To transact such other business as may properly come before the
meeting.
Stockholders of the Company of record at the close of business on
February 26, 1996, are entitled to vote at the Annual Meeting of
Stockholders and all adjournments thereof. Since a majority of the
outstanding shares of stock of the Company which are entitled to vote at
the meeting must be represented to constitute a quorum, all stockholders
are urged either to attend the meeting or to be represented by proxy.
If you do not expect to attend the meeting in person, please mark, sign,
date, and return the accompanying proxy in the enclosed business reply
envelope. If you later find that you can be present or for any other
reason desire to revoke your proxy, you may do so at any time before the
voting.
St. Louis, Missouri
March [14], 1996
<PAGE> 3
TABLE OF CONTENTS TO THE PROXY STATEMENT
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Election of Directors (Proxy Item No. 1).................................................. 2
Stock Ownership of Management and Certain Beneficial Owners........................... 5
Board Meetings and Committees; Compensation of Directors.............................. 6
Executive Compensation................................................................ 9
Proposal to Amend the Company's Certificate of Incorporation to Increase the Authorized
Shares of Common Stock, $2 par value Per Share, from 200,000,000 to ___________ Shares
(Proxy Item No. 2)...................................................................... 17
Proposed Monsanto Management Incentive Plan of 1996 (Proxy Item
No. 3).................................................................................. 00
Proposed Monsanto Executive Stock Purchase Incentive Plan (Proxy Item No. 4).............. 00
Ratification of Independent Auditors (Proxy Item No. 5)................................... 00
General Information....................................................................... 00
Appendix A--Monsanto Management Incentive Plan of 1996.................................... A-1
Appendix B--Monsanto Executive Stock Purchase Incentive Plan.............................. B-1
</TABLE>
<PAGE> 4
MONSANTO COMPANY
800 N. LINDBERGH BOULEVARD
ST. LOUIS, MISSOURI 63167
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Monsanto Company of proxies to be voted at the Annual
Meeting of Stockholders on April 26, 1996, and at all adjournments thereof.
Only stockholders of record at the close of business on February 26, 1996, will
be eligible to vote at the meeting. Except for shares owned by the Company,
each share of Common Stock, $2 par value, outstanding on such record date will
be entitled to one vote. As of February 26, 1996, xxx,xxx,xxx shares of such
Common Stock were outstanding and entitled to vote. This Proxy Statement and
the accompanying form of proxy were first forwarded to stockholders on March
[14], 1996.
Unless you indicate to the contrary, the persons named in the accompanying
proxy will vote for
(1) the election as directors of the nominees named below;
(2) the proposal to amend the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock, $2 par value per share,
from 200,000,000 to ___________ shares;
(3) the proposed Monsanto Management Incentive Plan of 1996;
(4) the proposed Monsanto Executive Stock Purchase Incentive Plan; and
(5) the ratification of the appointment of Deloitte & Touche LLP as
principal independent auditors for the year 1996.
A plurality of the shares present at the meeting in person or by proxy is
required for the election of directors. A majority of the shares outstanding
and eligible to vote at the Annual Meeting is required to approve the amendment
to the Certificate of Incorporation. The affirmative vote of a majority of the
shares present at the meeting in person or by proxy is required to approve the
proposed Monsanto Management Incentive Plan of 1996 and the proposed Monsanto
Executive Stock Purchase Incentive Plan and to ratify the appointment of
auditors. Pursuant to the Company's By-Laws, abstentions and votes withheld by
brokers in the absence of instructions from street-name holders (broker
non-votes) have the same effect as votes cast against a particular proposal.
The proxy of a stockholder who is a participant in the Company's Dividend
Reinvestment Plan will also serve as an instruction to vote the shares held for
the account of the participant under this plan in the manner indicated on the
proxy. If a stockholder's proxy is not received, the shares held in that
account in the Dividend Reinvestment Plan will not be voted.
The Company's Savings and Investment Plan (SIP) and the Payroll Related
Employee Stock Ownership Plan (PAYSOP) permit plan participants to direct the
plan trustees how to vote the Common Stock of the Company allocated to their
accounts. Under the terms of the SIP trust agreement, the trustee will vote
unallocated and uninstructed shares in proportion to the shares with respect to
which instructions have been received. As to shares held in PAYSOP, the trustee
will not vote those shares of Common Stock for which participant voting
instructions have not been received.
1
<PAGE> 5
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
Twelve persons have been nominated to serve on the Board of Directors, each to
hold office until the next Annual Meeting or until a successor is elected and
has qualified or until his or her earlier death, resignation or removal. All
nominees are now directors of the Company and were elected by the stockholders
at the last Annual Meeting. Mr. Richard J. Mahoney, who served as Chairman,
President and Chief Executive Officer of the Company until his retirement in
March 1995 and as a director for more than 17 years, will not be standing for
reelection. In addition, Mr. Buck Mickel, who has served as a director of the
Company for 20 years and who has reached his 70th birthday, will not be
standing for reelection in accordance with the directors' tenure policy of the
Company.
<TABLE>
<C> <S> <C>
[PHOTO] ROBERT B. SHAPIRO PRINCIPAL OCCUPATION: CHAIRMAN, PRESIDENT, AND
CHIEF EXECUTIVE OFFICER, MONSANTO COMPANY
FIRST BECAME DIRECTOR: 1993
AGE: 57
Chairman, President and Chief Executive
Officer, Monsanto Company, since 1995;
President and Chief Operating Officer,
Monsanto Company, 1993-95; Executive Vice
President and Advisory Director, Monsanto
Company, and President, The Agricultural
Group of Monsanto Company, 1990-93.
Director: Citicorp; Silicon Graphics, Inc.;
Barnes-Jewish Hospital. Trustee: Washington
University. Member: The Business Council;
The Business Roundtable.
[PHOTO] JOAN T. BOK PRINCIPAL OCCUPATION: CHAIRMAN OF THE BOARD,
NEW ENGLAND ELECTRIC SYSTEM
FIRST BECAME DIRECTOR: 1987
AGE: 66
Chairman of the Board, New England Electric
System since 1984. Director: Avery Dennison
Corporation; John Hancock Mutual Life
Insurance Company; New England Electric
System and its subsidiaries Massachusetts
Electric Company, The Narragansett Electric
Company, and New England Power Company.
[PHOTO] ROBERT M. HEYSSEL PRINCIPAL OCCUPATION: CONSULTANT; PRESIDENT
EMERITUS, THE JOHNS HOPKINS HEALTH SYSTEM
FIRST BECAME DIRECTOR: 1988
AGE: 67
Consultant; President Emeritus, The Johns
Hopkins Health System since 1992; President
and Chief Executive Officer, The Johns
Hopkins Health System and The Johns Hopkins
Hospital, 1972-92. Professor, The Johns
Hopkins Schools of Medicine and Public
Health since 1971 and 1972, respectively.
Director: Signet Banking Corporation.
[PHOTO] GWENDOLYN S. KING PRINCIPAL OCCUPATION: SENIOR VICE
PRESIDENT, CORPORATE AND PUBLIC AFFAIRS, PECO
ENERGY COMPANY
FIRST BECAME DIRECTOR: 1993
AGE: 55
Senior Vice President, Corporate and Public
Affairs, PECO Energy Company (formerly
Philadelphia Electric Company) since 1992.
Commissioner, Social Security
Administration, 1989-92. Director: Adwin
Equipment Co., Adwin Realty Co.; Eastern
Pennsylvania Development Corp.; Lockheed
Martin Corp.
2
<PAGE> 6
[PHOTO] PHILIP LEDER PRINCIPAL OCCUPATION: CHAIRMAN, DEPARTMENT OF
GENETICS, HARVARD MEDICAL SCHOOL, AND SENIOR
INVESTIGATOR, HOWARD HUGHES MEDICAL INSTITUTE
FIRST BECAME DIRECTOR: 1990
AGE: 61
Chairman, Department of Genetics, Harvard
Medical School since 1980; John Emory
Andrus Professor of Genetics since 1980.
Senior Investigator, Howard Hughes Medical
Institute since 1986. Director: Genome
Therapeutics Corporation. Trustee: The
General Hospital Corporation; Massachusetts
General Hospital; The Charles A. Revson
Foundation; The Rockefeller University.
[PHOTO] HOWARD M. LOVE PRINCIPAL OCCUPATION: RETIRED CHIEF EXECUTIVE
OFFICER, NATIONAL INTERGROUP, INC.
FIRST BECAME DIRECTOR: 1977
AGE: 65
Chief Executive Officer, National
Intergroup, Inc., 1981-91; Honorary
Chairman, National Steel Corporation,
formerly a subsidiary of National
Intergroup, Inc., since 1990; Chairman and
Chief Executive Officer, 1984-90. Director:
AEA Investors; COMSAT Corp. Member: The
Business Council.
[PHOTO] FRANK A. METZ, JR. PRINCIPAL OCCUPATION: RETIRED SENIOR VICE
PRESIDENT, FINANCE AND PLANNING, AND CHIEF
FINANCIAL OFFICER, INTERNATIONAL BUSINESS
MACHINES CORPORATION
FIRST BECAME DIRECTOR: 1990
AGE: 62
Senior Vice President, Finance and
Planning, and Chief Financial Officer,
International Business Machines
Corporation, 1986-93; Director, 1991-93.
Director: Allegheny Power System, Inc.;
Norrell Corporation. Trustee and Chairman:
St. Luke's Roosevelt Hospital.
[PHOTO] JACOBUS F. M. PETERS PRINCIPAL OCCUPATION: RETIRED CHAIRMAN OF THE
EXECUTIVE BOARD AND CHIEF EXECUTIVE OFFICER,
AEGON N.V.
FIRST BECAME DIRECTOR: 1993
AGE: 64
Chairman of the Executive Board and Chief
Executive Officer, AEGON N.V., 1984-93.
Director: Kleinwort Endowment Policy Trust
Plc. Member of Supervisory Board: AEGON
N.V.; Amsterdam Company for Town
Restoration Ltd.; DAF Trucks N.V.; IBM
International Centre for Asset Management
N.V.; Koninklijke Pakhoed Holding N.V.;
Randstad Holding N.V.; SAMAS Group N.V.;
United Flower Auctions Aalsmeer.
3
<PAGE> 7
[PHOTO] NICHOLAS L. REDING PRINCIPAL OCCUPATION: VICE CHAIRMAN OF THE
BOARD, MONSANTO COMPANY
FIRST BECAME DIRECTOR: 1993
AGE: 61
Vice Chairman of the Board, Monsanto
Company since 1993; Advisory Director,
1986-92; Executive Vice President,
Environment, Safety, Health and
Manufacturing, 1990-93. Director: CPI
Corp.; Meredith Corporation; Multifoods
Corporation; The Keystone Center.
[PHOTO] JOHN S. REED PRINCIPAL OCCUPATION: CHAIRMAN, CITICORP AND
CITIBANK, N.A.
FIRST BECAME DIRECTOR: 1985
AGE: 57
Chairman and Chief Executive Officer,
Citicorp and Citibank, N.A. since 1984.
Director: Citicorp; Citibank, N.A.; Philip
Morris Companies, Inc. Trustee: Rand
Corporation. Member: The Business Council;
The Business Roundtable.
[PHOTO] WILLIAM D. RUCKELSHAUS PRINCIPAL OCCUPATION: CHAIRMAN,
BROWNING-FERRIS INDUSTRIES, INC.
FIRST BECAME DIRECTOR: 1985
AGE: 63
Chairman, Browning-Ferris Industries, Inc.,
since 1995; Chairman and Chief Executive
Officer, Browning-Ferris Industries, Inc.,
1988-95. Of Counsel, Perkins Coie since
1985. Administrator, Environmental
Protection Agency, 1983-85. Director:
Browning-Ferris Industries, Inc.; Cummins
Engine Co., Inc.; Nordstrom, Inc.;
Weyerhaeuser Company.
[PHOTO] JOHN B. SLAUGHTER PRINCIPAL OCCUPATION: PRESIDENT, OCCIDENTAL
COLLEGE
FIRST BECAME DIRECTOR: 1983
AGE: 61
President, Occidental College since 1988.
Director, National Science Foundation,
1980-82. Director: Atlantic Richfield
Company; Avery Dennison Corporation;
International Business Machines
Corporation; Northrop Grumman Corp. Member:
American Academy of Arts and Sciences;
National Academy of Engineering. Fellow:
American Association for the Advancement of
Science; Institute of Electrical and
Electronic Engineers.
</TABLE>
4
<PAGE> 8
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Information is set forth below regarding beneficial ownership of Common Stock
of the Company by (i) each person who is a director or nominee; (ii) each
executive officer named in the Summary Compensation Table on page 13; and (iii)
all directors and executive officers as a group. Except as otherwise noted,
each person has sole voting and investment power as to his or her shares. All
information is as of December 31, 1995.
<TABLE>
<CAPTION>
Shares of Shares Underlying
Common Stock Options Exercisable
Owned Directly Within 60
Name or Indirectly <Fa><Fb> Days <Fc> Total
---- ---------------------- ------------------- -----
<S> <C> <C> <C>
Joan T. Bok 2,491 -- 2,491
Richard W. Duesenberg 38,687<Fd> 246,800 285,487
Robert M. Heyssel 2,760<Fe> -- 2,760
Gwendolyn S. King 891 -- 891
Philip Leder 1,739 -- 1,739
Howard M. Love 3,957<Ff> -- 3,957
Richard J. Mahoney 179,178 736,000 915,178
Frank A. Metz, Jr. 1,991 -- 1,991
Buck Mickel 20,130 -- 20,130
Jacobus F. M. Peters 941 -- 941
Robert G. Potter 37,489<Fg> 189,478 226,967
Nicholas L. Reding 44,876<Fh> 292,400 337,276
John S. Reed 7,261 -- 7,261
William D. Ruckelshaus 2,922<Fi> -- 2,922
Robert B. Shapiro 52,097 368,267 420,364
John B. Slaughter 1,926<Fj> -- 1,926
Hendrik A. Verfaillie 18,302<Fk> 135,178 153,480
25 directors and executive 475,421<Fl> 2,513,280 2,988,701
officers as a group
<FN>
<Fa> Includes shares held under incentive and benefit plans: Mr. Duesenberg, 6,808; Mr. Mahoney,
9,770; Mr. Potter, 6,324; Mr. Reding, 7,621; Mr. Shapiro, 38,146; Mr. Verfaillie, 15,378; and
directors and executive officers as a group, 105,564. With respect to shares held under
incentive and benefit plans, employee directors and officers have sole voting power and no
current investment power.
<Fb> Includes the following shares received on varying dates as a portion of the non-employee
director annual retainer and restricted against sale as described on page 8: Mrs. Bok, 767
shares; Dr. Heyssel, 911 shares; Mrs. King, 845 shares; Dr. Leder, 649 shares; Mr. Love, 693
shares; Mr. Mahoney, 627 shares; Mr. Metz, 649 shares; Mr. Mickel, 425 shares; Mr. Peters, 941
shares; Mr. Reed, 668 shares; Mr. Ruckelshaus, 668 shares; and Dr. Slaughter, 693 shares. With
respect to such shares, non-employee directors have sole voting power and no current
investment power.
<Fc> The Securities and Exchange Commission deems a person to have beneficial ownership of all
shares which that person has the right to acquire within 60 days. The shares indicated
represent stock options granted under incentive plans. The shares under option cannot be
voted.
<Fd> Includes 5,941 shares owned by Mrs. Duesenberg.
<Fe> Includes 300 shares owned by Dr. Heyssel's wife.
<Ff> Includes 1,200 shares held in trusts in which Mr. Love has an income interest as to which he
expressly disclaims beneficial ownership.
<Fg> Includes 3,000 shares owned by Mr. Potter's wife as to which he expressly disclaims beneficial
ownership and 99 shares owned jointly by Mr. Potter and his wife.
5
<PAGE> 9
<Fh> Includes 26 shares owned by Mr. Reding's son.
<Fi> Includes 200 shares owned jointly by Mr. Ruckelshaus and his wife.
<Fj> Includes 133 shares owned by Dr. Slaughter's wife as to which he expressly disclaims
beneficial ownership.
<Fk> Includes 2,924 shares owned jointly by Mr. Verfaillie and his wife.
<Fl> Includes 5,343 shares as to which certain executive officers not named above have shared
voting and investment power; and 205 shares under contract pursuant to the Company's Employee
Stock Purchase Plan.
</TABLE>
The percentage of shares of outstanding Common Stock, including options
exercisable within 60 days of December 31, 1995, beneficially owned by all
directors and executive officers as a group is 2.62%. The percentage of such
shares beneficially owned by any director or nominee does not exceed 1%.
During 1995, three Form 4's to report two sales by Mr. Reding's daughter, and
two sales by his son, of a total of 225 shares of Common Stock of the Company
were inadvertently not filed with the Securities and Exchange Commission. In
addition, five Form 4's to report one open market purchase of 50 shares of
Common Stock of the Company and purchases of 4 additional shares through a
brokerage house's dividend reinvestment plan, all by Dr. Slaughter's wife in
1994 and 1995, were inadvertently not filed. These transactions have all now
been reported on Form 5's filed in February 1996.
--------------------------
The following table sets forth certain information regarding the only known
beneficial owner of more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
<S> <C> <C>
Oppenheimer Group, Inc. 6,569,590<Fa> 5.70%
Oppenheimer Tower
World Financial Center
New York, New York 10281
<FN>
<Fa> Based on a Schedule 13G filed with the Securities and Exchange Commission by Oppenheimer
Group, Inc., on behalf of itself and related companies and certain investment advisory
clients; power to vote and dispose of all 6,569,590 shares, including 6,534,938 shares (5.67%)
held by Oppenheimer Capital, is shared. Oppenheimer Group, Inc. and the related companies and
investment advisory clients disclaim beneficial ownership and shared voting and dispositive
power with respect to all 6,569,590 shares.
</TABLE>
BOARD MEETINGS AND COMMITTEES; COMPENSATION OF DIRECTORS
The Board of Directors met eight times during 1995. To assist the Board in
carrying out its duties, the Board has established an Executive Committee and
six functional committees with responsibilities in specific areas of Board
activity. All nominees attended 75% or more of the aggregate meetings of the
Board and of the Board Committees on which they served in 1995 except that, due
to unavoidable circumstances, Mr. Reed attended one meeting less than 75% of
such meetings. A description of each Committee and its current membership
follows.
AUDIT COMMITTEE
Members: Mr. Mickel, Chairman; Mmes. Bok and King, Dr. Heyssel, Mr.
Ruckelshaus, and Dr. Slaughter
6
<PAGE> 10
The Audit Committee is composed of non-employee directors and met four times in
1995. The Committee reviews and monitors the Company's internal accounting
controls, financial reports, accounting practices, and the scope and
effectiveness of the audits performed by the independent auditors and internal
auditors. The Committee also recommends to the full Board the appointment of
the Company's principal independent auditors and approves in advance all
significant audit and non-audit services provided by such auditors. The
Committee discusses audit and financial reporting matters with representatives
of the Company's financial management, its internal auditors, and its principal
independent auditors. The internal auditors and the principal independent
auditors meet with the Committee, with and without management representatives
present, to discuss the results of their examinations, the adequacy of the
Company's internal accounting controls, and the quality of the Company's
financial reporting. The Committee encourages the internal auditors and the
principal independent auditors to communicate directly with the Committee.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Members: Mrs. Bok, Chairman; Mrs. King, Mr. Ruckelshaus, and Dr. Slaughter
The Corporate Social Responsibility Committee met five times in 1995. The
Committee reviews and monitors the Company's performance as it affects
employees, communities, customers, and the environment and recommends Company
policies for consideration when appropriate. The Committee also identifies and
investigates emerging issues.
EXECUTIVE COMMITTEE
Members: Mr. Mahoney, Chairman; Dr. Leder, Mr. Shapiro, and Dr. Slaughter
The Executive Committee has the powers of the Board in directing the management
of the business and affairs of the Company in the intervals between meetings of
the Board (except for certain matters reserved for the Board). The matters
acted upon by the Executive Committee are typically of a routine nature; thus,
the Committee meets infrequently. During 1995 all actions were taken by
unanimous written consent after the Committee's review of proposals circulated
to the members. Actions of the Committee are reported at the Board's next
regular meeting.
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
Members: Mr. Love, Chairman; Dr. Heyssel, Messrs. Metz and Mickel
The Executive Compensation and Development Committee is composed of
non-employee directors and met six times in 1995. The Committee recommends to
the Board the establishment and modification of the Company's management
incentive plans. The Committee also administers and interprets the Company's
management incentive plans and approves the establishment, modification, and
termination of other executive compensation plans and agreements. The Committee
has delegated authority to a compensation committee composed of senior
management to make grants and awards under the incentive plans and to approve
and administer other compensation plans for all employees except executive
officers. The Committee also reviews plans for executive succession and
determines the salaries of all executive officers of the Company.
FINANCE COMMITTEE
Members: Mr. Reed, Chairman; Messrs. Love, Mahoney, Metz, and Peters
The Finance Committee met three times in 1995. The Committee reviews and
monitors the Company's financial planning and structure to insure compatibility
with the Company's requirements for growth and sound operation. The Committee
provides advice regarding the worldwide financing programs of the Company and
reviews specific financing plans as requested by management. The Committee
makes recommendations to the Board of Directors concerning the increase or
retirement of debt, issuance and repurchase
7
<PAGE> 11
of capital stock, foreign currency management, dividend policy, and commercial
and investment banking relationships.
NOMINATING COMMITTEE
Members: Mr. Mickel, Chairman; Dr. Heyssel, Messrs. Love and Metz
The Nominating Committee is composed of non-employee directors and met once in
1995. At its meeting in January 1996, it approved the slate of director
nominees in this Proxy Statement for submission to the Board. In addition, the
Committee considers candidates for the Board in case of retirements or other
vacancies. The Committee also develops internal criteria for the selection of
non-employee directors and criteria by which an evaluation of all directors is
made. In performing its responsibilities, the Committee consults with the
Chairman of the Board. This Committee will consider stockholder nominations,
which should be submitted in writing by year-end to the Company's Secretary.
PENSION AND SAVINGS FUNDS COMMITTEE
Members: Dr. Heyssel, Chairman; Dr. Leder, Messrs. Peters and Shapiro
The Pension and Savings Funds Committee met three times in 1995. The
Committee's specific responsibilities include approving the actuarial
assumptions and annual contributions for certain pension and benefit plans
(Plans), selecting trustees and investment managers for the Plans, and
establishing policies for the approval of related pension trust agreements and
other funding instruments. Although the professional trustees and investment
managers have primary investment responsibility with respect to these funds,
the Committee monitors the investment performance of the Plans and the
investment managers.
DIRECTORS' FEES AND OTHER ARRANGEMENTS
Employee directors receive neither retainers nor fees for attendance at Board
or Board Committee meetings. Non-employee directors receive an annual retainer
of $30,000 plus $1,300 per Board meeting attended. In addition, non-employee
chairmen of the Executive and the Nominating Committees receive $4,000 per
year, and non-employee chairmen of all other Board Committees receive $5,000
per year. Each other non-employee director serving as a member of Board
Committees receives $3,000 per year for each Board Committee on which such
director serves. Committee members, including chairmen, receive a fee of $1,300
per meeting attended, except that this fee is paid for attendance at only one
Committee meeting on the day of a Board meeting. Each non-employee director
receives $20,000 of the annual retainer in cash and the $10,000 balance in
Common Stock of the Company. The shares representing the Common Stock portion
of the annual retainer for a five-year period are transferred to each director
at the beginning of the period. These shares are, however, subject to
forfeiture to the Company unless ``earned out'' by the director through
continued service on the Company's Board during the five years. Thus, the
forfeiture condition is removed on one-fifth of the shares on the respective
dates of the five Annual Meetings following transfer of the shares if the
director is still serving on the Company's Board. Although the directors have
voting and dividend rights, none of the shares may be sold prior to the date of
the fifth such Annual Meeting so long as the director continues serving on the
Company's Board. Appropriate adjustments are made for directors whose
retirement will occur in less than five years.
In 1993, the Board adopted a guideline which provides that non-employee
directors should own Common Stock of the Company having a value of three times
the Board annual retainer by the fifth anniversary of their election to the
Board. This guideline is currently under review.
Non-employee directors do not participate in any of the Company's incentive,
stock option, pension, or benefit plans. The normal retirement date for
non-employee directors is the Annual Meeting following their 70th birthday.
Non-employee directors who retire with five or more years of service receive an
annual retirement benefit for life paid in cash and equal to the annual
retainer at the time of retirement. If the director dies within fifteen years
after retirement, a designated beneficiary will be entitled to receive the
8
<PAGE> 12
annual benefit for the remainder of the fifteen-year period. Reduced benefits
will be paid to a director who ceases for any reason to be a director with
fewer than five years of service and to a director who commences receiving
benefits prior to normal retirement. The Company purchases Company-owned life
insurance contracts on the lives of the non-employee directors. Thus, the cost
of this retirement benefit program, including a factor for use of money, should
be substantially recoverable through the proceeds of such insurance, depending
on realization of the assumptions as to mortality experience, policy dividends,
and other factors.
The Company has established a Directors' Charitable Contribution Program for
all non-employee directors of the Company which will be funded through life
insurance policies which have been purchased on each of the directors. Upon the
death of a director with five or more years of service, the Company will
contribute a total of $1,000,000 to one or more qualifying charitable
institutions recommended by the director. A reduced contribution will be made
upon the death of a director with fewer years of service. Directors derive no
direct financial benefit from this program since all charitable deductions
accrue to the Company.
The Company has a consulting agreement with Dr. Philip Leder, a director of the
Company, who provides consulting services and the benefit of his considerable
professional skills, knowledge, experience, and judgment in areas of interest
to the Company, particularly in the field of biological sciences. In 1995 Dr.
Leder received $122,000 under this contract.
EXECUTIVE COMPENSATION
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total stockholder return (assuming
reinvestment of dividends) with the cumulative total return of the Standard &
Poor's 500 Stock Index and the Standard & Poor's Chemical Index, both of which
include the Company.
<TABLE>
TOTAL RETURN TO STOCKHOLDERS
<CAPTION>
Measurement Period Monsanto Company S&P 500 S&P Chemical Index
- ------------------ ---------------- ------- ------------------
(Fiscal Year Covered)
- ---------------------
<S> <C> <C> <C>
Measurement Pt - 12/31/90 $100.0 $100.0 $100.0
FYE 12/31/91 144.0 130.3 130.4
FYE 12/31/92 126.8 140.3 142.9
FYE 12/31/93 167.7 154.3 159.9
FYE 12/31/94 166.3 156.4 185.2
FYE 12/31/95 297.6 215.0 242.3
</TABLE>
9
<PAGE> 13
REPORT OF THE EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
Policies and Objectives
The Executive Compensation and Development Committee of the Board of Directors
sets pay for executive officers, administers the Company's incentive plans, and
makes awards to executive officers under these incentive plans (as explained at
page 7 above). The purpose of these plans and the objectives of the Committee
are to:
* focus management on measurements of performance which create stockholder
value;
* recognize the contribution of each business unit to stockholder value;
* build an ownership mentality throughout the Company;
* encourage innovative approaches to the business;
* reward for results rather than on the basis of seniority, tenure, or other
entitlement;
* continue the emphasis on variable incentive compensation versus fixed or base
pay, particularly for senior executives; and
* create an environment that encourages taking higher risks with an opportunity
for higher reward.
In order to further these objectives, the compensation programs for all
Monsanto executives include three components: (1) base pay, (2) an annual
incentive program, and (3) a long-term incentive program. During 1995, base
salaries for the current executives named in the Summary Compensation Table on
page 13 and other senior executives were set at about the 75th percentile of
competitive companies in order to attract and retain truly superior executive
talent. Salaries have now been frozen by the Committee for a three to four year
period, except to recognize increased responsibility or major changes in
competitive pay levels. Annual bonuses for 1996 will be targeted at about the
75th percentile, consistent with the aggressive business goals which have been
set for the Company. Target long-term incentive compensation will continue to
be at about the 75th percentile. Levels of compensation at competitive
companies are derived from compensation surveys provided by independent
consultants covering several hundred chemical, pharmaceutical, food, and other
manufacturing companies (adjusted for company size differentials).
Current Incentive Programs
Annual Incentive Program. The annual incentive program adopted for the years
1994-1996 provides for cash awards to be determined shortly after the year
being measured. The awards, if any, can vary significantly from year to year
depending upon achievement of goals set at the beginning of the year for the
corporation (for corporate executives) and for the respective business units
(for unit executives), the individual's level of responsibility, and the
individual's personal performance.
For corporate executives, including the Chief Executive Officer, the principal
goal is set in terms of net income, with its critical importance to cash flow
and return on equity. A target award is set based on the net income goal; the
actual award is increased or decreased based on actual net income, subject to
discretionary adjustment for non-recurring events. The Committee may also
increase or decrease the award at its discretion based on downward or upward
deviations from a secondary goal set in terms of year-end capital employed.
``Capital employed'' consists of stockholders' equity and debt and is measured
by the relevant cost of capital. The Committee may also adjust the award in its
discretion based on four factors which do not have pre-set numerical scales:
performance compared to competitors (measured by such criteria as total
stockholder return, earnings per share, and return on equity), the impact of
the general economy, the balance achieved between long- and short-term
objectives, and the motivational impact of the award. A comparable procedure
based on unit net income and allocated capital employed is used for awards to
business unit executives.
10
<PAGE> 14
The major portion of the annual awards for 1994 and 1995 was paid in cash
shortly after the year being measured, but, to encourage sustained performance,
a percentage of the awards was withheld (15% for 1994 and 30% for 1995) and, in
accordance with the plan design, was subject to adjustment upward or downward
by pre-established percentages depending on sustained performance during the
1994-1996 period. Because performance was substantially above the goals for
1994 and 1995, amounts withheld for those years have been adjusted upward, and
together with 30% of the award for 1996, could be further adjusted upward if
1996 performance meets goals. Total amounts withheld are scheduled to be paid,
as adjusted, no later than March 1997.
For each year of the 1994-1996 cycle in which the Company achieves 20% or
better return on equity, funding for annual incentive awards will be increased
by an amount equal to 40% of the target awards described above. Awards
attributable to this additional funding will generally be payable as part of
the annual incentive program. No portion of the awards attributable to this
additional funding will be withheld.
Long-term Compensation. For the Chief Executive Officer and the other corporate
executives, long-term compensation consists of non-qualified stock options
granted for a designated three-year cycle. Options on additional shares may be
granted to reflect increased responsibility or a shift from business unit to
corporate responsibilities. Business unit executives normally receive stock
options annually. The current practice is to link all of these options to a
specific performance goal. Options granted in 1994 (along with an accelerated
grant of options in 1993) and 1995, were linked to the Company's 20% return on
equity goal. Because the Company achieved its 20% return on equity goal for
both 1994 and 1995, these options became exercisable in February 1995 and 1996.
Options granted to business unit executives for 1996 will become exercisable on
the ninth anniversary of the grant date or earlier if Monsanto achieves a
designated performance goal. The goal for 1996 will continue to be 20% return
on equity.
Business unit executives also participate in cash-based long-term incentive
programs focused on sustained performance against targets for their units over
a multi-year cycle. For all of the business units except Searle, performance is
measured primarily by the net income and capital employed of the unit, but also
based on the other criteria used by the Committee in determining annual
incentive awards. The Searle long-term plan uses annual grants of options on
``phantom'' shares of Searle which are valued annually.
The Committee also makes infrequent grants of restricted stock to individual
executives to motivate achievement of particular business objectives or to hire
or retain those individuals. None were made to the named executives in 1995.
1995 Compensation
Mr. Shapiro's salary was increased by the Committee in April 1995 to reflect
his becoming the Company's Chairman and Chief Executive Officer. His salary was
increased to $800,000 in November 1995 to position his base pay relative to
competitive levels consistent with the objectives discussed above. In addition,
this increase recognizes the Company's progress under his leadership in
restructuring its businesses and reducing costs and the increase in the share
price of the Company's common stock. As explained above, the salaries of Mr.
Shapiro and the other current named executives have now been frozen for three
to four years except to recognize increased responsibility or major changes in
competitive pay levels.
The Committee approved an annual incentive award of $1,235,600 for Mr. Shapiro
for 1995. This award includes $205,600 in recognition of the Company's
achievement of its 20% return on equity goal which, as noted above, increased
funding for annual awards. In accordance with the annual incentive program
designed to encourage sustained performance, the Committee withheld from his
total award $309,000 to be paid in 1997, subject to the adjustments described
above. Mr. Shapiro's annual incentive award is higher than the target award for
1995 because the Company's 1995 net income was substantially in excess of the
net income goal set by the Committee. This goal was set at a level which
required a substantial improvement in the Company's performance, coming after
achievement of an outstanding prior year. Thus this award reflects achievement
of increasingly difficult goals over both years. Many of the Company's business
units also
11
<PAGE> 15
substantially exceeded their net income and capital employed goals for 1995. In
making the award, the Committee also considered capital improvement,
performance against competitors, and the fact that net income and earnings per
share were the highest in the Company's history.
The Committee awarded Mr. Mahoney, who retired as Chairman and Chief Executive
Officer March 31, 1995, an annual incentive award of $428,300, which includes
$71,300 to recognize that the Company achieved for a second consecutive year
the 20% return on equity goal. This award also recognizes his contribution to
the success of the Company and its individual units as discussed above.
The awards to the other named corporate executives were also above target,
based on this strong net income performance as well as achievement of the 20%
return on equity goal.
All grants of options in 1995 were consistent with a schedule based on job
responsibilities. The Committee had previously approved this schedule after
considering data from competitive companies and its policy of targeting
long-term incentive compensation at the 75th percentile of competitive
companies. The Committee's grants of options to Mr. Shapiro recognized his
becoming Chairman and Chief Executive Officer, while the grants to Messrs.
Potter and Verfaillie reflected their moves to corporate positions.
Deductibility of Compensation
The Committee is complying with the requirements of Section 162(m) of the
Internal Revenue Code with respect to options and annual and long-term
incentive programs, as well as the limits approved by the Company's
stockholders at the 1994 Annual Meeting, in order to avoid losing the deduction
for compensation in excess of $1,000,000 paid to one or more of the executive
officers named in the Summary Compensation Table.
Management Stock Ownership Requirements
The Committee and management also believe that an important adjunct to an
incentive program is significant stock ownership by the senior executives.
Accordingly, the Committee has implemented stock ownership requirements for
approximately 30 executives as of January 1, 1996. Stock ownership levels to be
achieved within three years are four times salary for the Company's top
management group (currently seven, including the chief executive officer) and
two-and-one-half times salary for the other senior executives. Unexercised
stock options and shares received under Company benefit plans or as restricted
shares (other than by newly hired executives) are not counted in satisfying
these requirements. The Board has adopted a stock ownership guideline for
non-employee members of the Board of Directors which is described on page 8
and is currently under review.
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
Howard M. Love, Chairman
Robert M. Heyssel
Frank A. Metz, Jr.
Buck Mickel
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal sation Awards Options Payouts sation
Position Year Salary ($) Bonus ($)<F1> ($)<F2> ($)<F3> (#)<F4> ($)<F4> ($)<F5>
--------- ---- ---------- ------------- ------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. B. Shapiro 1995 685,417 1,235,600 -0- -0- 52,500 -0- 50,627
Chairman and CEO 1994 567,500 893,905 -0- -0- 123,333 560,000 42,956
and Director 1993 536,667 750,000 -0- 2,621,900 123,334 -0- 44,514
R. J. Mahoney 1995 237,500 428,300 -0- 50,043 -0- -0- 221,994<F6>
Chairman 1994 933,333 1,470,000 -0- -0- 275,000 -0- 103,887
and CEO (through 1993 900,000 1,188,000 -0- -0- -0- -0- 119,629
March 31, 1995) and
Director
R. W. Duesenberg 1995 410,000 600,500 -0- -0- -0- -0- 174,940<F7>
Senior Vice President, 1994 396,667 510,200 -0- -0- 53,333 -0- 44,395
Secretary and General 1993 379,583 425,000 -0- -0- 26,667 -0- 58,559
Counsel (through
December 31, 1995)
R. G. Potter 1995 470,834 807,926 -0- -0- 70,278 -0- 51,240
Executive Vice 1994 456,667 645,720 -0- -0- -0- 785,000 52,778
President 1993 440,833 550,000 -0- -0- 43,200 -0- 52,943
N. L. Reding 1995 515,000 869,200 -0- -0- -0- -0- 60,742
Vice Chairman of 1994 504,583 741,825 -0- -0- 93,333 -0- 56,421
the Board and 1993 485,833 600,000 -0- -0- 56,667 -0- 63,287
Director
H. A. Verfaillie 1995 393,333 715,200 -0- -0- 70,278 -0- 42,461
Executive 1994 320,000 459,650 -0- -0- -0- 500,000 39,295
Vice President 1993 246,667 315,000 -0- 786,570 35,400 -0- 26,502
<FN>
<F1> As described on page 11, 30% of the 1995 bonus amounts shown above
(excluding the portion attributable to achievement of 20% ROE) for each of
the named executives other than Mr. Mahoney and Mr. Duesenberg has been
withheld and will be paid, together with the adjustments described in the
Long-Term Incentive Plans Table on page 15, in March 1997, if approved by
the Executive Compensation and Development Committee (ECDC). Because of
the retirement of Mr. Mahoney and Mr. Duesenberg, this portion of their
bonuses was not withheld but was adjusted as described in the Table.
<F2> Applicable regulations set reporting levels for certain non-cash
compensation.
<F3> The values shown are as of the grant date. Dividends are paid or accrued
on restricted stock awards at the same rate as paid to all stockholders.
* Mr. Shapiro held 37,500 restricted shares having a value on December 31,
1995, of $4,558,613. These were the remaining restricted shares from an
award of 50,000 shares received on January 22, 1993, when the award had
a value of $2,621,900. In each of February 1995 and February 1996,
12,500 shares and the related dividends vested because the Company
achieved its 20% ROE goal for 1994 and 1995, respectively. An additional
12,500 of the restricted shares vest each year through 1997 in which the
Company consecutively achieves its 20% ROE goal. Failure to achieve 20%
ROE in any given year results in forfeiture of 12,500 shares then and of
6,500 shares in the subsequent year in which 20% ROE is achieved. Any
shares that fail to vest within five years from the date of the grant
are forfeited along with any related dividends.
* Mr. Mahoney held 627 restricted shares having a value on December 31,
1995, of $76,220. These shares were received as the stock portion of his
annual retainer as a non-employee director, as explained on page 8, on
April 1, 1995, when the shares had a value of $50,043. Three-fifths of
these shares will be forfeited on April 26, 1996, upon Mr. Mahoney's
retirement as a director.
13
<PAGE> 17
* Mr. Verfaillie held 12,500 restricted shares having a value on December
31, 1995, of $1,519,538. These were the remaining restricted shares from
an award of 15,000 shares received on January 22, 1993, when the award
had a value of $786,570. In February 1995, 2,500 shares and the related
dividends vested because the return on capital goal for his business
unit was achieved for 1994. In February 1996, 6,250 shares and the
related dividends vested because the Company achieved its 20% ROE goal
for 1995. The remaining 6,250 restricted shares will vest if the Company
achieves its 20% ROE goal for 1996. If the Company does not achieve this
goal in 1996, these shares will be forfeited along with any related
dividends.
* On December 31, 1995, no restricted shares were held by Mr. Duesenberg,
Mr. Potter, or Mr. Reding.
<F4> These columns reflect grants and payouts made under various option
programs and long-term incentive plans (LTIPs), respectively. No LTIP
payments were made in 1995.
<F5> Amounts shown for 1995 include contributions to thrift/savings plans as
follows: Mr. Shapiro, $28,788; Mr. Mahoney, $9,975; Mr. Duesenberg,
$17,220; Mr. Potter, $19,775; Mr. Reding, $21,630; and Mr. Verfaillie,
$16,520; split dollar life insurance premiums paid as follows: Mr.
Shapiro, $21,839; Mr. Mahoney, $71,598; Mr. Duesenberg, $42,853; Mr.
Potter, $31,465; Mr. Reding, $39,112; and Mr. Verfaillie, $25,941; and
costs for supplemental medical plans as follows: Mr. Mahoney, $156; and
Mr. Duesenberg, $540.
<F6> Includes $109,615 for accrued vacation pay at the time of Mr. Mahoney's
retirement in accordance with the Company's policy applicable to retirees
generally and $30,650 in non-employee director fees.
<F7> Includes $114,327 for accrued vacation pay at the time of Mr. Duesenberg's
retirement.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term<F1>
------------------------------------------------------------------------- ----------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name/Group Granted (#)<F2> Fiscal Year ($/Share) Date 0% ($) 5% ($) 10% ($)
---------- --------------- ------------ --------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
R. B. Shapiro 52,500 3.6% 78.813 02/23/05 -0- 2,606,740 6,578,915
R. J. Mahoney -0- -0-% N/A<F*> N/A -0- N/A N/A
R. W. Duesenberg -0- -0-% N/A N/A -0- N/A N/A
R. G. Potter 70,278 4.8% 78.813 02/23/05 -0- 3,489,457 8,806,724
N. L. Reding -0- -0-% N/A N/A -0- N/A N/A
H. A. Verfaillie 70,278 4.8% 78.813 02/23/05 -0- 3,489,457 8,806,724
- ------------------
All
Stockholders<F3> N/A N/A N/A N/A -0- 5,664,214,388 14,295,398,217
All Optionees
(approx. 1,200) 1,455,741 100% 78.813 <F4> -0- 72,280,729 182,422,792
Optionees' Gain as
% of All Stock-
holders' Gain N/A N/A N/A N/A -0- 1.3% 1.3%
<FN>
<F*> Not applicable.
<F1> The dollar amounts under these columns are the result of calculations at
0% and at the 5% and 10% rates set by the SEC and therefore are not
intended to forecast possible future appreciation, if any, of the stock
price of the Company. The Company did not use an alternative formula for a
grant date valuation, as the Company is not aware of any formula which
will determine with reasonable accuracy a present value based on future
unknown factors.
<F2> Exercisability of these options was conditioned upon attainment of the
Company's goal of 20% ROE, which was achieved for 1995.
14
<PAGE> 18
<F3> Gain for all stockholders was determined based on the approximate number
of shares outstanding as of February 24, 1995, the date when most of the
options were granted, at a price per share of $78.813.
<F4> Options expire on the tenth anniversary of the grant date.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- ------------------------------- ------------- ----------------- -------------- --------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#)<F1> FY-End ($)<F2>
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($)<F1> Unexercisable Unexercisable
---- ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C>
R. B. Shapiro 12,500 774,613 315,767/52,500 18,907,313/2,244,375
R. J. Mahoney 106,000 5,497,750 736,000/-0- 42,605,842/-0-
R. W. Duesenberg 4,200 197,665 246,800/-0- 15,794,672/-0-
R. G. Potter 20,000 1,448,140 115,600/73,878 8,374,085/3,257,735
N. L. Reding 10,800 599,065 292,400/-0- 16,765,660/-0-
H. A. Verfaillie -0- -0- 63,900/71,278 4,622,093/3,074,760
<FN>
<F1> The amounts in column (c) reflect the value of shares received on the
exercises of options granted in the years 1986-1989 at fair market values
ranging from $22.812 to $47.094.
<F2> Unexercised options shown in columns (d) and (e) reflect grants received
over an extended period of time.
</TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated future payouts under
Number of Performance non-stock
shares, or other price-based plans
units or period until ---------------------------------
other rights maturation Threshold Target Maximum
Name (#) or payout ($) ($) ($)
(a) (b)<F1> (c) (d) (e) (f)
---- ------------ ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
R. B. Shapiro N/A 2 years 123,600 185,400 185,400
R. J. Mahoney N/A N/A 42,840 42,840 42,840
R. W. Duesenberg N/A N/A 60,000 60,000 60,000
R. G. Potter N/A 2 years 81,975 122,963 122,963
N. L. Reding N/A 2 years 87,000 130,500 130,500
H. A. Verfaillie N/A 2 years 73,320 109,980 109,980
<FN>
<F1> Because net income and capital employed objectives for both the 1994 and
1995 performance years were exceeded, a sustained performance adjustment
of 40% has been made to the portion of the 1995 bonuses described in
footnote 1 to the Summary Compensation Table. Sustained performance
adjustment amounts are as follows: Mr. Shapiro, $123,600; Mr. Potter,
$81,975; Mr. Reding, $87,000; and Mr. Verfaillie, $73,320. The amount of
the sustained performance adjustment may be further increased by a
performance adjustment of 50% following the end of the 1996 performance
year if net income and capital employed objectives are again met or
exceeded. To achieve the target and maximum sustained adjustment amounts
shown above, performance targets must be met or exceeded in 1996. The
total of all adjustments for sustained performance relative to an
individual's cumulative incentive awards over the 1994-1996 performance
period will range from 20% to 25% of the awards actually paid for the
three-year period. Threshold payments in the table above assume that
performance targets are not met in 1996. Payment of any adjustment is
subject to final review by the ECDC and, if approved, will be made in
March 1997. Because of the retirement of Mr. Mahoney and Mr. Duesenberg,
the sustained performance adjustment ($42,840 and $60,000, respectively)
was paid together with their 1995 bonuses in March 1996.
</TABLE>
15
<PAGE> 19
PENSION PLANS
The following table illustrates the annual normal retirement benefits payable
under the Company's defined benefit pension plans applicable to Messrs.
Shapiro, Mahoney, Duesenberg, Potter, Reding and Verfaillie. The benefit levels
in the table assume retirement at age 65 and payment in the form of a single
life annuity.
<TABLE>
<CAPTION>
Remuneration Years of Service
- ------------ -------------------------------------------------------------------------------
5 10 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 28,000 $ 56,000 $ 84,000 $112,806 $142,806 $172,806 $ 202,806 $ 232,806
600,000 42,000 84,000 127,806 172,806 217,806 262,806 307,806 352,806
800,000 56,000 112,806 172,806 232,806 292,806 352,806 412,806 472,806
1,000,000 70,000 142,806 217,806 292,806 367,806 442,806 517,806 592,806
1,200,000 84,000 172,806 262,806 352,806 442,806 532,806 622,806 712,806
1,400,000 98,000 202,806 307,806 412,806 517,806 622,806 727,806 832,806
1,600,000 112,806 232,806 352,806 472,806 592,806 712,806 832,806 952,806
1,800,000 127,806 262,806 397,806 532,806 667,806 802,806 937,806 1,072,806
2,000,000 142,806 292,806 442,806 592,806 742,806 892,806 1,042,806 1,192,806
</TABLE>
Generally, compensation utilized for pension formula purposes includes salary
and annual bonus reported in columns (c) and (d) of the Summary Compensation
Table. However, the portion of the annual bonus attributable to achievement of
20% ROE, as described on page 11, is not included in the pension formula.
The annual normal retirement benefits payable under the Company's pension plans
to the executive officers named in the Summary Compensation Table are the
greater of 1.4% of average final compensation multiplied by years of service,
without reduction for Social Security or other offset amounts, or 1.5% of
average final compensation multiplied by years of service, less a 50% Social
Security offset. Average final compensation for purposes of these plans is the
greater of (a) average compensation received during the final 36 months of
employment or (b) average compensation received during the highest three of the
final five calendar years of employment.
Average final compensation and the respective years of service at Monsanto as
of December 31, 1995, are as follows: Mr. Shapiro, $1,269,712 (5.6 years); Mr.
Mahoney, $1,930,861 (32.8 years); Mr. Duesenberg, $776,167 (33.3 years); Mr.
Potter, $916,567 (30.1 years); Mr. Reding, $1,025,208 (40.3 years); and Mr.
Verfaillie, $603,945 (12.0 years). Mr. Shapiro also accrues a benefit under the
NutraSweet defined benefit pension plan described below which will be based on
his years of service at NutraSweet and his average final compensation at the
Company.
In addition to the retirement benefits for Mr. Verfaillie, based on his 12
years of service as a U. S. employee, Mr. Verfaillie is also eligible for
regular retirement benefits based on his 7.8 years of service as a non-U.S.
employee. In addition, he participates in Monsanto's regular, non-qualified
pension plan designed to protect retirement benefits for employees serving in
more than one country. However, his total retirement benefits from the combined
plans when considering his total service of 19.8 years are expected to be
generally comparable to the benefits shown in the table above.
The following table illustrates the annual normal retirement benefits payable
under the NutraSweet defined benefit pension plans applicable to Mr. Shapiro.
The benefit levels in the table assume retirement at age 65 and payment in the
form of a single life annuity.
<TABLE>
<CAPTION>
Remuneration Years of Service
- ------------ ----------------------------------------------------------
10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$1,000,000 $177,417 $266,125 $354,834 $443,542 $532,251 $532,251
1,200,000 213,417 320,125 426,834 533,542 640,251 640,251
1,400,000 249,417 374,125 498,834 623,542 748,251 748,251
</TABLE>
The annual normal retirement benefits payable to Mr. Shapiro under the
NutraSweet pension plan are (i) 1.8% of average final compensation (the average
compensation for the highest consecutive 60 of the last 120
16
<PAGE> 20
months of employment preceding retirement) multiplied by years of service (up
to a maximum of 30 years) less (ii) 1.67% of estimated annual Social Security
benefits at age 65 multiplied by years of service (up to a maximum of 30
years). Generally, compensation utilized for pension formula purposes includes
salary and bonus reported in columns (c) and (d) of the Summary Compensation
Table. However, the portion of the annual bonus attributable to achievement of
20% ROE, as described on page 11, is not included in the pension formula. Mr.
Shapiro's average final compensation under the pension formula, and years of
service at NutraSweet as of December 31, 1995, are $1,019,343 and 11.5 years.
Mr. Shapiro will be provided supplemental retirement benefits which recognize
his experience prior to employment by the Company. Subject to certain service
requirements, the Company will provide Mr. Shapiro with supplemental retirement
benefits equal to 12% of average final compensation. The supplemental
retirement benefits become vested in the event of a change of control of the
Company. The estimated annual supplemental benefits payable to Mr. Shapiro upon
retirement at normal retirement age are $251,113. Mr. Shapiro will also receive
the same Company contribution to the retiree medical plan as an eligible
retiree with 30 years of service. The value of this benefit will be determined
at retirement based on age, the premium paid for medical coverage and projected
premium cost increases.
CERTAIN AGREEMENTS
The Board has authorized agreements with the executive officers currently
employed by the Company who are named in the Summary Compensation Table
regarding a change of control of the Company. Under these agreements, the
Company will make an additional cash payment if, within three years following a
change in control of the Company (as defined in those agreements), the
individual's employment is terminated (other than for cause) or the individual
resigns for good reason such as a change in responsibilities, compensation, or
conditions of continued employment. Each of these individuals will receive an
amount up to two times annual base pay and, subject to certain adjustments, two
times his or her target annual bonus. The Company's Board has also authorized a
supplemental agreement to provide supplemental retirement benefits to be
applicable under the same change of control conditions to Mr. Shapiro and Mr.
Verfaillie, who are not yet eligible for unreduced early retirement benefits.
These supplemental benefits will equal the difference between what each would
have received under the Company's pension plans at the time of termination or
resignation (without reduction for early commencement of benefits) less actual
payments received under these plans. A cash medical allowance of $15,000 for
payment of medical insurance premiums will also be provided to Mr. Verfaillie
if he does not qualify for retiree medical coverage.
All benefits under these change of control agreements and supplemental
agreements will be reduced as necessary to be exempt from the excise tax and
the non-deductibility provision imposed by the Internal Revenue Code on certain
change of control payments except in those cases in which, notwithstanding the
Code, such reduction would be disadvantageous to the individual.
AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF
COMMON STOCK (PROXY ITEM NO. 2)
The Board of Directors believes that it is advisable to amend Article IV of the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock ($2 par value per share) from 200,000,000 to ___________ shares.
Accordingly, at its meeting held on February 23, 1996, the Board of Directors
adopted a resolution proposing that an amendment to the first paragraph of
Article IV of the Company's Certificate of Incorporation be presented to the
stockholders at the Annual Meeting for their approval. Such amendment
17
<PAGE> 21
would change only the number of authorized shares of Common Stock, and, if
approved by the stockholders, the first paragraph of Article IV would read in
its entirety as follows:
ARTICLE IV: CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is ___________ Ten Million (___________)
shares, to be divided into two classes consisting of (a) Ten Million
(10,000,000) shares of preferred stock without par value (hereinafter
designated ``Preferred Stock''), and (b) ___________________ (___________)
shares of common stock of a par value of $2 per share (hereinafter
designated ``Common Stock'').
As of the close of business on January 31, 1996, of the 200,000,000 shares of
Common Stock presently authorized by the Certificate of Incorporation,
117,432,285 shares were issued and outstanding,<F*> 46,961,909 shares were held
as treasury shares, and 14,450,292 shares were reserved for issuance under
stock option plans. Thus, a total of 178,844,486 (89.4%) of the Company's
authorized shares of Common Stock was issued or reserved for issuance. As of
the close of business on January 31, 1996, none of the Company's authorized
Preferred Stock was issued, but 700,000 (7.0%) of the Company's authorized
shares of Preferred Stock were reserved for issuance pursuant to the Preferred
Stock Purchase Rights Plan described below. Thus, as of the close of business
on January 31, 1996, there were authorized, unissued and unreserved 21,155,514
shares of Common Stock and 9,300,000 shares of Preferred Stock. If the
incentive plans recommended in Item Nos. 3 and 4 below are approved, a total of
- -------- (--%) of the Company's authorized shares of Common Stock will be
issued or reserved for issuance, and only -------- shares will remain
authorized, unissued and unreserved unless this proposal is approved. Adoption
of this proposal would increase the number of authorized, unissued and
unreserved shares of Common Stock by ___________.
The Board of Directors has concluded that there is not presently authorized a
sufficient number of shares of Common Stock to give the Company the ability to
react quickly to today's competitive, fast changing environment. Although the
Company has no present agreements or commitments for the issuance of any of
the additional shares that would be authorized by the Amendment, management is
planning to recommend to the Board of Directors at its April 26, 1996 meeting
a proposal to declare a stock split in the range of ___- or ___-for-one (in
the form of a stock dividend). The authorized shares of Common Stock not needed
for a stock split would provide the Company the necessary flexibility for other
actions the Company might wish to take relating to possible financing programs,
acquisitions, mergers, employee benefit plans, and other corporate purposes
without the expense and delay of a special stockholders' meeting to increase
authorized capital. No further action or authorization by the Company's
stockholders would be necessary prior to issuance of the additional shares
except as may be required by applicable law or regulatory agencies or by the
rules of any stock exchange on which the Company's securities may then be
listed. For example, the New York Stock Exchange, on which the Company's Common
Stock is listed, currently requires specific stockholder approval as a
prerequisite to listing shares in several instances, including acquisition
transactions where the issuance of shares could result in a 20% or greater
increase in the number of shares of Common Stock outstanding.
The additional shares for which authorization is sought would be identical with
the shares of Common Stock now authorized and outstanding. The Company's Common
Stock has no conversion, preemptive, or subscription rights and is not
redeemable.
[FN]
- --------
<F*>The number of shares issued and outstanding includes 1,400,920 shares held
in a grantor trust to satisfy compensation and benefit arrangements and
obligations, including issuance of shares upon the exercise of certain stock
options.
18
<PAGE> 22
The proposed increase in the number of authorized shares of Common Stock is not
intended to impede a change of control of the Company. Further, the Company is
not aware of any current efforts to acquire control of the Company. It should
be noted, however, that the additional shares could be issued in connection
with defending the Company against a hostile takeover bid. The issuance of
additional shares of Common Stock could have the effect of diluting earnings
and book value of outstanding shares of Common Stock, could be used to dilute
the stock ownership of a person or entity seeking to obtain control of the
Company, or could result in a private placement with purchasers who might side
with the Board of Directors if they chose to oppose a specific change of
control.
The Company is presently subject to certain provisions of its Certificate of
Incorporation and By-Laws that could under certain circumstances be construed
to have the effect of discouraging attempts, or making it more difficult, to
gain control of the Company. The Certificate of Incorporation of the Company
authorizes the Board of Directors to issue one or more series of Preferred
Stock up to a maximum of the 9,300,000 shares presently available and to fix
the numbers, designations, rights, preferences, privileges and limitations of
such series. The issuance of such series could have effects similar to those
described in the preceding paragraph. The Company's By-Laws limit the ability
to call a special meeting of stockholders and to nominate directors or propose
other proper business for consideration by stockholders at an annual meeting,
other than by inclusion in the Proxy Statement and form of proxy. These By-Laws
could have the effect of impeding a holder of the Company's shares from waging
a proxy contest for control of the Company.
The Company also has a Preferred Stock Purchase Rights Plan adopted in 1990 and
designed to protect stockholders in the event of an unsolicited attempt to
acquire the Company, whether through a gradual accumulation of shares in the
open market, a partial tender offer, or other abusive takeover tactics which
the Board believes are not in the best interests of stockholders. One of the
features of the Rights Plan provides, as adjusted for the 1990 stock split,
that if a person or group acquires beneficial ownership of 20% or more of the
Company's outstanding Common Stock, every two Rights will entitle their holder
(other than such acquiring person or members of such group) to purchase, at the
aggregate exercise price of the two Rights, the number of shares of the
Company's Common Stock having a market value at that time of twice such
aggregate exercise price. Furthermore, at any time after a person or group
acquires beneficial ownership of 20% or more (but less than 50%) of the
Company's Common Stock, the Board may, at its option, exchange part or all of
the Rights (other than Rights held by the acquiring person or group) for shares
of the Company's Common Stock on a one-share-for-every-two-Rights basis. The
increased number of authorized shares of Common Stock could be utilized to
satisfy the need for shares of Common Stock in the event of exercise of Rights
or an exchange for Rights as described above. However, as stated above, this is
not the Board's purpose in recommending the increase in authorized shares of
Common Stock.
Change of control provisions in the Company's incentive plans and in certain
individual agreements, including supplemental employee retirement agreements,
as well as change of control provisions applicable to $100,000,000 of the
Company's long-term debt, could have the effect of increasing the cost of any
attempt to gain control of the Company.
Financial statements are not material to the exercise of prudent judgment with
respect to the proposed amendment and are therefore omitted from this Proxy
Statement.
If the Amendment is approved by the stockholders, it will become effective upon
the filing of a Certificate of Amendment in accordance with the General
Corporation Law of Delaware.
--------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' THE PROPOSED AMENDMENT TO
ARTICLE IV OF THE CERTIFICATE OF INCORPORATION.
The affirmative vote of a majority of the shares outstanding and eligible to
vote at the Annual Meeting is required for the adoption of the proposed
amendment.
19
<PAGE> 23
APPROVAL OF MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996 (PROXY ITEM NO. 3)
The stockholders are asked to consider and vote on the adoption of the Monsanto
Management Incentive Plan of 1996 (1996 Plan) to replace the Monsanto
Management Incentive Plan of 1994 (1994 Plan) as well as the Searle/Monsanto
Stock Plan of 1994 and the NutraSweet/Monsanto Stock Plan of 1994
(collectively, Subsidiary Plans). The Board of Directors, upon recommendation
of its Executive Compensation and Development Committee (the Committee), has
adopted the 1996 Plan, subject to stockholder approval.
INTRODUCTION
The purpose of the 1996 Plan is to focus management on measures of performance
that create stockholder value, encourage innovative approaches to the business,
reward for results, encourage ownership by management of the Company's Common
Stock, and encourage taking higher risks with an opportunity for higher reward.
Under the 1996 Plan, the Company expects to continue its practice of making
stock options a significant part of the total compensation program for a broad
group of both mid-level and senior management employees. The Company believes
the continuing emphasis placed on management stock ownership has been an
important factor in enabling the Company to achieve the strong operating
results as well as the ___% increase in the price of the Company's
Common Stock in 1995. The closing price of the Company's Common Stock on
March 1, 1996, as reported in The Wall Street Journal, was $xxx.
1996 GRANTS
Premium Option Grants. Subject to stockholder approval of the 1996 Plan, the
Committee currently expects to grant in April premium priced options on
approximately 3,000,000 shares. Before an executive can exercise these options,
the price of the Company's Common Stock must appreciate to pre-established
prices higher than the price at the time of the grant. Thus, stockholders
must realize significant returns on their investment in order for management
to receive any gains on their options. An executive's per share gain upon
the exercise of the option is limited to the amount of the share
appreciation above the premium exercise price. Four premium exercise prices,
each applicable to a percentage of the grant, have been tentatively
established by the Committee based on the trading range of the Company's
Common Stock during recent months.
<TABLE>
<CAPTION>
Percent Premium Maximum Years to
of Grant Exercise Price Attain Exercise Price
-------- -------------- ---------------------
<S> <C> <C>
% $
% $
% $
% $
</TABLE>
The options, which will have a ten-year term from the date of grant, will be
forfeited if these pre-established prices are not attained within the
specified time period set for each price.
While the Committee has not yet determined the number of options to be
granted to any individual, these grants will be made to approximately 30 senior
executives, including the Chief Executive Officer and other current
executive officers. These executives will be at higher risk than other
optionees at Monsanto or their peers at other companies which grant
conventional stock options based on the market price at time of grant.
Because of this enhanced risk, the number of shares covered by these
options will be increased from grants for prior three-year cycles. Grants
to these executives in April 1996 are for the period 1997-1999, and would
have normally been granted in 1997.
Other Option Grants. For essentially all options other than the premium priced
options described above, the Company plans to continue the practice followed
since 1993 of linking the exercise of the options to the
20
<PAGE> 24
achievement of business targets, thus focusing management on measurements of
performance which create stockholder value. All of the options granted in
1994, as well as more than half of the options granted in 1993, became
exercisable upon the Company's achieving its 20% return on equity target for
1994. Similarly, the options granted in 1995 became exercisable upon the
Company's achieving its 20% return on equity target for 1995. Options
granted on February 22, 1996 under the 1994 Plan and the Subsidiary Plans
will become exercisable in 1997 upon the Company's achievement of its 20%
return on equity target for 1996. The Committee will establish a new
performance goal for 1997 and subsequent years.<F*> These February grants
were made as follows: all current executive officers as a group; xxx,xxx
shares; and all other employees, x,xxx,xxx shares. None of the named
executive officers received any grants in February. Had the 1996 Plan been
in effect, these grants would have been approximately the same. Grants at
comparable levels are anticipated under the 1996 Plan in 1997. No
determination has been made with respect to any other awards which may be
made under the 1996 Plan.
The Company is considering adoption of a plan which would permit grants of
approximately an equal number of non-qualified stock options to substantially
all employees not receiving grants under the 1996 Plan (approximately
25,000 employees). Such a plan would emphasize to these employees the
importance of share value to the Company's stockholders. While there has been
no decision to make such grants, if such a plan were adopted, it is
anticipated that approximately 2,500,000 additional shares would be covered
by those options.
MATERIAL FEATURES OF THE 1996 PLAN
The material features of the 1996 Plan are outlined below and are qualified by
reference to the terms of the plan, which is set forth in full in Appendix A.
The 1996 Plan is essentially the same as the 1994 Plan except that it covers
all participants covered by the 1994 Plan and the Subsidiary Plans.
Authorized Shares. The 1996 Plan authorizes the use of 9,250,000 shares of the
Company's Common Stock (subject to proportional adjustment in the event of a
stock split, stock dividend, or other change in capitalization) for grants of
non-qualified and incentive stock options, stock appreciation rights,
restricted stock awards, and bonus stock awards. Assuming approval of the 1996
Plan, no unused shares from the 1994 Plan or the Subsidiary Plans may be used
for awards on or after April 15, 1996.
Administration. The 1996 Plan is administered by the Committee, which is
composed of two or more non-employee directors. The Committee may delegate the
administration of the plan except as it relates to those officers subject to
the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934.
Eligible Employees. The Committee may grant awards under the plan to any
employee of the Company or its subsidiaries or associated companies. In
practice, awards are made to a group of approximately 1,200 management
employees. In any three-year period, the total number of shares for which
awards may be made to any one participant under this plan cannot exceed 15% of
the total number of shares for which awards may be made under the plan.
Stock Options. The Committee establishes the terms and conditions of the
options granted under the 1996 Plan, subject to certain limitations specified
in the plan. Under the 1996 Plan, the exercise price of any option granted must
be no less than the fair market value of the Common Stock at the grant date (or
such later date
[FN]
- --------
<F*>All of these performance based options become exercisable on the ninth
anniversary of the option grant date if they have not previously satisfied the
performance targets. A fixed exercise date prior to the end of the ten-year
term of the options is a condition to maintaining conventional accounting
treatment for options. Without the fixed date, changes in share price from the
option grant price multiplied by the number of shares under option would be
charged to earnings, potentially resulting in substantial fluctuations in
quarterly earnings even though there would have been no changes in the
Company's cash position and no payment to the optionee.
21
<PAGE> 25
as the Committee shall determine). Subsequent repricing of options to
decrease the exercise price is expressly prohibited.
The 1996 Plan expressly permits the Committee to include various terms in
options in order to enhance the linkage between stockholder and management
interests. These include escalation of the option price over the term of the
option, permitting participants to deliver shares of the Company's Common Stock
in payment of the exercise price, offering participants the opportunity to
elect to receive an option grant instead of a salary increase or bonus,
offering participants the opportunity to purchase options, and making the
exercise or vesting of options contingent on the satisfaction of performance
criteria. Like the 1994 Plan and the Subsidiary Plans, the 1996 Plan permits
the granting of dividend equivalent units in connection with option grants;
the Committee makes such grants only infrequently.
The 1996 Plan also provides that the term of any option granted may not exceed
10 years and, additionally, may not exceed 12 months following the termination
of employment unless the termination is the result of retirement, death, or
disability.
Options granted under the 1996 Plan are not transferable except by will, the
laws of descent and distribution, pursuant to a written beneficiary designation
or, in the case of a non-qualified option, pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code (Code), or in
circumstances permitted under Section 16 of the Securities Exchange Act of
1934. All stock options may be exercised during the holder's lifetime only by
the holder or the holder's guardian or legal representative.
Incentive stock options may be granted provided they meet the requirements of
the Code. The Company has no plans to grant incentive stock options.
Tax Consequences of Stock Options. No taxable income is realized by the
participant upon the grant of a non-qualified stock option, and no deduction is
then available to the Company. Upon exercise of the option, the excess of the
fair market value of the shares on the date of exercise over the option price
will be taxable to the participant and deductible by the Company. The tax basis
of shares acquired will be the fair market value on the date of exercise. For
shares held for more than one year following exercise of the option, the
participant will realize long-term capital gain or loss upon disposition.
No taxable income is realized by a participant and no tax deduction is
available to the Company upon either the grant or exercise of an incentive
stock option. If a participant holds the shares acquired upon the exercise of
an incentive stock option for more than one year after the stock option
exercise and more than two years after the date of the option grant (holding
period), the difference between the option price and the amount realized upon
the sale of the shares will be treated as long-term capital gain or loss and no
deduction will be available to the Company. If the shares are transferred
before the expiration of the holding period, the participant will realize
ordinary income, and the Company will be entitled to a deduction on a portion
of the gain, if any, equal to the difference between the option price and the
lesser of the fair market value of the shares on the date of exercise or the
amount realized on the disposition. Any further gain or loss will be taxable as
long-term or short-term capital gain or loss depending upon the holding period
before disposition. For shares held for more than one year, the participant
will realize long-term capital gain or loss upon disposition.
The Company believes that compensation received by participants on the exercise
of non-qualified options or the disposition of shares acquired upon the
exercise of any incentive stock options will be considered performance-based
compensation and thus not subject to the $1,000,000 limit on deductibility of
compensation under Section 162(m) of the Code.
Participants are responsible for the payment of all withholding taxes due in
connection with the exercise or disposition of a stock option or the vesting of
a restricted stock award. The Committee plans to continue its current practice
of allowing certain participants to direct the Company to withhold shares to be
issued on an option exercise or stock award to satisfy the withholding
obligation.
22
<PAGE> 26
Stock Appreciation Rights. The 1996 Plan authorizes the grant of stock
appreciation rights, but only in tandem with stock options. Any stock
appreciation right granted must be exercisable only to the same extent as the
related options. The Company has no stock appreciation rights currently
outstanding and no present plans to grant any such rights.
Restricted and Unrestricted Shares. The 1996 Plan authorizes the Committee to
use up to 1/2 of 1% of the outstanding shares (approximately xxx,xxx) for
restricted or unrestricted share grants. The Committee may set the terms and
conditions of restricted share awards including restrictions against sale,
transfer, or other disposition and may make the lapse of such restrictions
contingent on the achievement of performance goals. The Committee also may
grant an award of dividend equivalent units in connection with a restricted
share award.
Change of Control. Like the 1994 Plan and the Subsidiary Plans, the 1996 Plan
specifically authorizes the Committee to take such action as it determines to
be necessary or advisable, and fair and equitable to participants, with respect
to stock options, stock appreciation rights, and restricted share awards in the
event of a merger, consolidation, acquisition, sale or transfer of assets,
tender or exchange offer, or other reorganization in which the Company will not
survive as an independent, publicly owned company. Provisions regarding such
change of control situations have been incorporated in grants of stock options,
stock appreciation rights, and restricted stock grants under the 1994 Plan and
Subsidiary Plans, and the Committee expects to continue the incorporation of
such provisions in awards made under the 1996 Plan.
Amendments. The Board, upon recommendation of the Committee, can amend the 1996
Plan, but any of the following amendments would require the prior approval of
stockholders: (a) an amendment which would permit decreasing the option price
on any outstanding option; (b) an amendment which would require the approval of
stockholders under Section 16 of the Securities Exchange Act of 1934 or Section
422 of the Code; or (c) an amendment which would change the provisions of the
plan relating to amendments.
--------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' THE APPROVAL OF THE 1996 PLAN.
To be adopted, this proposal would require the affirmative vote of a majority
of the shares present in person or represented by proxy at the Annual Meeting.
If the stockholders do not approve the 1996 Plan, grants made under that plan
will be void, and shares remaining in the 1994 Plan and Subsidiary Plans will
be used for awards.
APPROVAL OF MONSANTO EXECUTIVE STOCK PURCHASE INCENTIVE PLAN (PROXY
ITEM NO. 4)
In February 1996, the Company's Board of Directors, upon recommendation of its
Executive Compensation and Development Committee (the Committee), adopted the
Monsanto Executive Stock Purchase Incentive Plan (the Plan), subject to
stockholder approval. The material features of the Plan are outlined below and
are qualified by reference to the terms of the Plan, which is set forth in full
in Appendix B.
INTRODUCTION
The initial participants in the Plan will be the approximately 30 senior
executives selected by the Committee to receive the premium option grants
described on page __. Participants will be offered the opportunity to purchase
a specified number (or range) of shares of the Company's Common Stock at
market price. This purchase will be fully financed by full-recourse
interest-bearing loans provided by the Company. Participants who purchase
Common Stock will also be eligible to receive a deferred cash incentive award.
Two-thirds of this award will be based on the Company's Common Stock
performance relative to the performance of the common stock of
corporations in the Standard & Poor's Industrials (the Index) over
the period which begins on
23
<PAGE> 27
the date of the participant's exercise of the Purchase Award (as hereinafter
defined) and ends on December 31, 2000 (the Performance Period).<F*> The
remaining one-third of this award will be based on the participant's
continued service with the Company subject to the achievement of cumulative
net income during the Performance Period. The maximum amount of the
incentive award which can be earned by a participant is equal to the amount
of the loan and accrued interest through the date the incentive award is
paid. This award is generally payable following the Performance Period. Any
incentive award must be applied towards repayment of the loan and accrued
interest.
PURPOSE OF THE PLAN
The Plan incorporates an important element of investment risk that generally is
not found in other executive incentive plans because participants in the Plan
share in both the upside and downside potential inherent in stock ownership by
purchasing a substantial amount of Common Stock using full-recourse loans. The
Plan is thus designed to promote the long-term growth and financial success of
the Company by strengthening the links between the Company's senior management
and stockholders. The Plan also offers participants the potential for
substantial financial incentives (in addition to potential appreciation in the
value of the Common Stock) based on continued service and long-term stock price
performance, but in a manner that also places such participants at risk in the
event of poor Company performance.
RIGHTS TO PURCHASE COMMON STOCK
Participants selected by the Committee, which consists of non-employee
directors, will receive rights to purchase a specified number (or range) of
shares of Common Stock of the Company (Purchase Awards) on a specified date
at the average of the high and low sales prices for the Common Stock as
reported on the New York Stock Exchange on such date. In the case of initial
participants in the Plan, this date is expected to be May 1, 1996. Purchase
Awards which are not exercised by a participant prior to the close of
business on the purchase date will be forfeited. The maximum number of shares
which can be issued under the Plan is 300,000 and the maximum number of shares
which may be purchased by any participant is 50,000, subject to proportionate
adjustment in the event of a stock split, stock dividend, or other change in
capitalization. As currently contemplated by the Committee, approximately 30
participants, including the Chief Executive Officer and other current
executive officers, will receive Purchase Awards on May 1, 1996 for a total
of _______ shares of Common Stock, subject to the approval of the Plan by the
Company's stockholders at the Annual Meeting.
FULL-RECOURSE COMPANY LOANS
In connection with the exercise of a Purchase Award, a participant in the Plan
will be entitled to receive from the Company a full-recourse interest-bearing
loan (the Purchase Loan) for the entire purchase price of the Common Stock.
Full-recourse loans require the borrower to be personally liable for the full
amount of the loan, regardless of the value of the shares purchased with the
proceeds of the loan. The Purchase Loan for each participant will mature on
December 31, 2003, and will accrue interest at the ``applicable federal rate''
(as determined by Section 1274(d) of the Internal Revenue Code) on the purchase
date for loans of such maturity, compounded annually. The applicable federal
rate as of January 1996 was 5.73%. In addition, Purchase Loans under the Plan
will be secured by a pledge of the shares of Common Stock acquired upon
exercise of the Purchase Award.
While interest on the Purchase Loans will accrue at the applicable federal
rate, interest will be payable during the performance period in an amount equal
to the cash dividends paid on the shares of Common
[FN]
- --------
<F*>For purposes of these comparisons, only those corporations with common
stock included in the Index at the beginning of the Performance Period
and at the end of the Performance Period will be included (the common
stock of each such corporation, an Index Stock). The performance of the
Common Stock and the Index Stocks will include reinvested dividends.
24
<PAGE> 28
Stock acquired upon exercise of the Purchase Award. Accrued but unpaid
interest on the Purchase Loans will be added to the principal balance of the
Purchase Loan.
Participants will be required to apply the proceeds of the deferred cash
incentives described below to prepay the Purchase Loans (including accrued
interest thereon). Following such prepayment, the balance of the Purchase
Loans, together with accrued and unpaid interest thereon, will generally be
payable in three equal annual installments (plus interest), beginning on
December 31, 2001. The payment of the Purchase Loan will be accelerated if a
participant's service is terminated prior to December 31, 2000 for any reason
other than retirement or following a Change of Control (as defined in the
Plan). In the event of retirement or a Change of Control, the Purchase Loan
must be repaid over a three-year period following such event. The Purchase
Loan may also be prepaid at any time at the participant's option.
The Common Stock will be pledged to secure the Purchase Loan, but the
participant will be permitted at any time to sell the Common Stock so pledged,
provided that the proceeds from such sale must be applied against the
outstanding balance of the Purchase Loan. However, the sale of the Common Stock
prior to January 1, 2001 will cause portions of the deferred cash incentive
award to be forfeited.
DEFERRED CASH INCENTIVES
Participants purchasing Common Stock pursuant to Purchase Awards will be
eligible for a deferred cash incentive award (the Deferred Award),
two-thirds of which is based on the Company's stock performance relative to
that of the Index Stocks (the Shareholder Return Incentive Award) as
measured over the Performance Period, and one-third of which is based on
service (the Service Incentive Award) with the Company or a subsidiary over
the Performance Period. Payment of the Service Incentive Award and the
Shareholder Return Incentive Award will not be made unless the Committee
certifies (the Committee Certification) that:
(i) with respect to the Shareholder Return Incentive Award, the Total
Shareholder Return of the Company (as hereinafter defined) is at or
above the 50th percentile of the Total Shareholder Returns of
the Index Stocks during the Performance Period (or, in the event of
a termination of service or Change of Control prior to December 31,
2000, from the beginning of the Performance Period through a date
approximately coinciding with the date of such termination of
service or Change of Control, as provided in the Plan); and
(ii) with respect to the Service Incentive Award, the Company has
positive Cumulative Net Income (as defined in the Plan) for the
period beginning with the fiscal year of the Company in which
a participant's Purchase Award is exercised and ending at the
end of the Performance Period (or, in the event of a termination
of service or Change of Control prior to December 31, 2000,
through the end of the year in which such termination of service
occurred or through the end of the year immediately preceding the
Change of Control, as the case may be).
The maximum combined Shareholder Return Incentive Award and Service
Incentive Award payable to participants will not exceed the original
principal amount of the Purchase Loan plus accrued but unpaid interest to
the date of payment of the awards (the Designated Loan Amount). The
Shareholder Return Incentive Award and the Service Incentive Award generally
will be paid within 30 days following the Committee Certification after the
end of the Performance Period or, if the participant's employment is
terminated or a Change of Control occurs prior to the end of the Performance
Period, within thirty days after the Committee Certification following such
event.
Shareholder Return Incentive Award. The Shareholder Return Incentive Award will
be based on the annual compounded growth rate in the Company's stock price
including reinvested dividends (Total Shareholder Return) relative to the Total
Shareholder Returns of the Index Stocks during the Performance Period (or such
shorter period as the Plan provides).
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<PAGE> 29
The portion of the Shareholder Return Incentive Award earned as a percentage of
the Designated Loan Amount at the time the award is paid will vary depending
upon the Company's level of performance (but will not exceed two-thirds of
the Designated Loan Amount). No Shareholder Return Incentive Award will be
earned if the Company's Total Shareholder Return is below the 50th percentile
of that of the Index Stocks during the Performance Period. The maximum
Shareholder Return Incentive Award (100%) will be earned if the Company's
Total Shareholder Return is at or above the 75th percentile of the Total
Shareholder Returns of the Index Stocks. Applying the Plan to the Company's
historical results for the five most recent five-year periods, ended
December 31, 1991 through December 31, 1995, there would have been no
Shareholder Return Incentive Award for two of those five-year periods,
awards of 50 2/3% and 52 2/3%, respectively, of the maximum Shareholder
Return Incentive Award for two of those periods, and an award of 100% of
the maximum Shareholder Return Incentive Award for the last period.
Service Incentive Award. Generally each participant in the Plan will receive a
Service Incentive Award equal to a percentage of the Designated Loan Amount
(not in excess of one-third of the Designated Loan Amount) at the time the
participant's Service Incentive Award is paid based upon the number of full
months of service with the Company during the Performance Period applicable to
the participant, subject to the Committee Certification as to Cumulative Net
Income. The Company's performance would have satisfied the Cumulative Net
Income requirement over the five most recent five-year periods ended December
31, 1991, through December 31, 1995.
Termination of Service--General. If a participant's service with the Company or
its subsidiaries is terminated prior to the end of the Performance Period by
the Company for Cause (as defined in the Plan), or by the participant (other
than due to death, disability, retirement or Constructive Termination or
following a Change of Control), the participant will not receive any
Shareholder Return Incentive Award. If the participant voluntarily terminates
employment (other than due to retirement, Constructive Termination (as defined
in the Plan) or following a Change of Control) after the first anniversary of
the exercise of the Purchase Award, the participant will receive a prorated
Service Incentive Award. However, any participant who (i) voluntarily
terminates employment (other than due to retirement or Constructive Termination
or following a Change of Control) or sells any shares of stock purchased under
the Plan, in each case prior to the first anniversary of the exercise of a
Purchase Award or (ii) is terminated prior to the end of the Performance Period
by the Company for Cause, will not receive any Service Incentive Award.
Termination of Service due to Death or Disability. If a participant's service
with the Company or its subsidiaries is terminated due to death or disability,
then the participant will receive a prorated Service Incentive Award and will
be eligible to receive a prorated Shareholder Return Incentive Award, if any,
based upon the Company's relative stock price performance through the date of
termination. In addition, if on the 30th day after the payment of any Deferred
Award following death or disability the amount outstanding on the Purchase Loan
exceeds the value on such date of the Common Stock pledged as security for the
Purchase Loan (after the after-tax proceeds of the Deferred Award have been
applied to reduce the outstanding Purchase Loan), the Company will make an
additional payment to reimburse the participant on an after-tax basis for such
excess amount, provided that in no event will such additional payments be made
unless a Committee Certification has been made with respect to the Service
Incentive Award nor will the aggregate payments made to the participant under
the Plan exceed the Designated Loan Amount.
Termination of Service due to Retirement. If a participant's service with the
Company or its subsidiaries is terminated due to retirement as defined by the
Committee, then the participant will receive a prorated Service Incentive Award
and will be eligible to receive a prorated Shareholder Return Incentive Award,
if any, based upon the Company's relative stock price performance through the
retirement date.
Other Terminations of Service. If a participant's employment is terminated
prior to the end of the Performance Period (i) by the Company without Cause or
(ii) by the employee after a Constructive Termination, then the participant
will receive a prorated Service Incentive Award and will be eligible to receive
a prorated
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<PAGE> 30
Shareholder Return Incentive Award, if any, based upon the Company's
relative stock price performance through the date of termination. If a
participant's service with the Company or its subsidiaries is terminated under
clauses (i) or (ii) above, and the amount outstanding on the Purchase Loan on
the 30th day after the payment of any Deferred Award following such termination
of service (after the after-tax proceeds of the Deferred Award have been
applied to reduce the outstanding Purchase Loan) exceeds the value on such date
of the Common Stock pledged as security for the Purchase Loan, then the Company
will make an additional payment to reimburse such participant on an after-tax
basis for such excess amount, provided that in no event will such additional
payments be made unless a Committee Certification has been made with respect to
a Service Incentive Award nor will such additional payment together with such
participant's Service Incentive Award exceed one-third of the Designated Loan
Amount.
Change of Control. If there is a Change of Control prior to the end of the
Performance Cycle, the participant will be entitled to receive a full Service
Incentive Award equal to one-third of the Designated Loan Amount. Additionally,
the participant will be eligible to receive the full Shareholder Return
Incentive Award, if any, as calculated based upon performance through the tenth
business day prior to the Change of Control, without any proration, payable
within 60 days after the Change of Control.
ACCOUNTING ASPECTS
For financial accounting purposes, neither the grant of a Purchase Award nor
the issuance of shares upon exercise of such Purchase Award will result in a
charge to the Company's earnings. However, the Deferred Award requires a charge
or credit to earnings each quarter for the appreciation or depreciation of the
prorated accrued Deferred Awards which it is anticipated will be paid. The
amount of such charge or credit will be a pro rata portion of the Service
Incentive Award (assuming positive Cumulative Net Income as of such quarter)
and a pro rata portion of the Shareholder Return Incentive Award based upon the
Company's Total Shareholder Return relative to the Total Shareholder Returns of
the Index Stocks as of such quarter. In addition, the accrued interest on the
Purchase Loans (whether or not payable at such time) will be credited to the
Company's earnings each quarter.
EFFECT OF THE PLAN UPON PARTICIPANTS
It is currently contemplated that Purchase Loans and Purchase Awards will be
granted to initial participants as follows:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
Executive Stock Purchase Incentive Plan
- ------------------------------------------------------------------------------------------------------------------------
Name and Position Number of Shares Purchase Loan <F1>
- ----------------- ---------------- ------------------
<S> <C> <C>
R. B. Shapiro, Chairman and CEO $
R. J. Mahoney, Chairman and CEO <F2> $
R. W. Duesenberg, Senior Vice President,
Secretary and General Counsel <F2> $
R. G. Potter, Executive Vice President $
N. L. Reding, Vice Chairman of the Board $
H. A. Verfaillie, Executive Vice President $
Executive officers as a group $
All other employees $
<FN>
- --------
<F1> Based upon the Common Stock's closing price of $ ______ on
March 1, 1996.
<F2> Mr. Mahoney's last day as an employee was March 31, 1995, and Mr.
Duesenberg's was December 31, 1995.
</TABLE>
27
<PAGE> 31
The discussion below of the effect of the Plan on participants is based on the
following assumptions: (i) the participant exercises a Purchase Award for 8,000
shares at a purchase price of $125 per share and receives a $1,000,000 Purchase
Loan; (ii) the interest rate on the Purchase Loan is 5.73% (the applicable
federal rate for January 1996); (iii) the combined federal and state income tax
rate is 40%; (iv) the dividend remains at $2.76 per share per year during the
Performance Period; (v) the participant continues in the service of the Company
for the entire Performance Period and there is positive Cumulative Net Income
(and the participant is thus entitled to the full Service Incentive Award); and
(vi) 0%, 50%, and 100% of the Shareholder Return Incentive Award is earned at
the end of the Performance Period, which corresponds to the Company's Total
Shareholder Return placing below the 50th percentile, in the 58.33rd
percentile, and in the 75th percentile or higher, respectively, of the Total
Shareholder Returns of the Index Stocks. The table below illustrates the
portion of the Deferred Award available to pay principal on a $1,000,000
Purchase Loan after taking into account income taxes due on the payment of a
Deferred Award and the payment of accrued interest on the Purchase Loan.
PORTION OF DEFERRED AWARD AVAILABLE TO PAY PRINCIPAL ON $1,000,000 PURCHASE
LOAN
<TABLE>
<CAPTION>
% of Shareholder Return Incentive
Award
---------------------------------
Award Payable 0% 50% 100%
------------- -- --- ----
<S> <C> <C> <C>
Deferred Award Received..................................... $ 392,574 $ 785,147 $ 1,177,721
Income Tax on Deferred Award................................ 157,029 314,059 471,088
After-Tax Deferred Award.................................... 235,544 471,088 706,633
Accrued Interest<F1>........................................ 177,721 177,721 177,721
After-Tax Deferred Award
Available to Pay Principal on the Purchase Loan......... 57,823 293,367 528,912
<FN>
- --------
<F1> Net of any interest paid during the Performance Period from dividends
received on the 8,000 shares acquired upon exercise of the Purchase Award.
Dividends are assumed to be paid on a quarterly basis. The table does not
take into account any tax deduction that may be available in respect of
such interest.
</TABLE>
One measure of the investment risk of the Plan to participants is to calculate
the market price of the Common Stock (the Break-even Price) at the end of the
Performance Period below which the value of the shares purchased together with
the After-Tax Deferred Award Available to Pay Principal on the Purchase Loan
(shown in the table above) is less than the principal balance of the Purchase
Loan. Based upon the assumptions described above, the Break-even Price of the
Common Stock at the end of the Performance Period is equal to the following
prices per share: $117.77 if no Shareholder Return Incentive Award is payable,
$88.33 if 50% of the maximum Shareholder Return Incentive Award is payable, and
$58.88 if 100% of the maximum Shareholder Return Incentive Award is payable. In
the event the market price of the Common Stock at the end of the Performance
Period exceeds the Break-even Price, the combined value of the After-Tax
Deferred Award Available to Pay Principal on the Purchase Loan (shown in the
table above) and the value of the shares purchased will exceed the principal
balance of the Purchase Loan by an amount equal to the number of shares
purchased times the excess of the market price over the Break-even Price
(before taking into account capital gains taxes, if any, payable upon any sale
of the shares, and tax deductions, if any, for interest paid on the Purchase
Loan). As noted above under ``Full-Recourse Company Loans,'' the balance of the
Purchase Loan remaining after applying the proceeds of the Deferred Award at
the end of the Performance Period, together with accrued and unpaid interest
thereon, will be payable in three equal annual installments (plus interest).
GENERAL PROVISIONS
The Plan shall become effective upon the approval by the stockholders of the
Company and will terminate on December 31, 2000 (the last day of the
Performance Period), provided that Deferred Awards and
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<PAGE> 32
Purchase Loans outstanding as of such date will not be affected or impaired
by the termination of the Plan. However, no Purchase Awards will be granted
after December 31, 1999. The Plan will be administered by the Committee.
The Plan is intended to qualify under Rule 16b-3 of the Securities Exchange Act
of 1934, as amended. If any of the terms or provisions of the Plan conflict
with the requirements of Rule 16b-3, then such terms and provisions shall be
deemed inoperative to the extent they so conflict with such requirements.
The Plan provides that the Board of Directors upon the recommendation of the
Committee may amend, suspend, or terminate the Plan at any time provided no
amendment, suspension or termination of the Plan may cause the Plan to fail to
meet the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or such successor rule as may hereinafter be in effect or
Section 162(m) of the Code or may, without the consent of the participant,
adversely affect such participant's rights under the Plan in any material
respect. In addition, the Plan provides that no such amendment shall be made
without the approval of the Company's stockholders to the extent such approval
is required by law or agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material tax consequences to the Company and
to the participants of the Plan, based upon the Code, Treasury regulations
thereunder, administrative rulings and court decisions as of the date hereof.
Tax Consequences to Participants. Assuming that the participants each make an
election under Section 83(b) of the Code within 30 days of purchasing Common
Stock (the Plan Stock) pursuant to a Purchase Award, no tax should be due on
such purchase. In the absence of a Section 83(b) election, participants who are
subject to Section 16(b) of the Securities Exchange Act of 1934 would be taxed
at ordinary income rates on the excess of the fair market value of the Plan
Stock (i.e., the average of the high and low prices for the Company's Common
Stock on the New York Stock Exchange) six months after the purchase date over
the amount paid for such Plan Stock, when the Section 16(b) restrictions lapse
and the Plan Stock becomes freely transferable. The following discussion
assumes that the participants will each make the election under Section 83(b)
of the Code.
Any dividends or distributions on the Plan Stock will be includable in the
participants' income to the extent made out of the Company's earnings and
profits, but such income will be offset by a corresponding payment on the
Purchase Loan to the extent of accrued interest. Vesting of the Deferred Awards
will not have tax consequences at such time. Participants will instead be taxed
at ordinary income rates on the Deferred Awards and other payments made
pursuant to the Plan when paid. If any accelerated payments and other payments
contingent upon a Change of Control under the Plan equal or exceed three times
a participating employee's average compensation in the preceding five years,
the amount of such payments that exceeds the employee's average taxable
compensation for the preceding five years (Excess Payments) will be subject to
an excise tax of 20%.
When the Plan Stock is sold, the sale will result in capital gain or loss
measured by the difference between the amount paid for the Plan Stock when
purchased by the participant and the amount realized upon sale. Such capital
gain or loss will be long-term if the participant held the Plan Stock for over
a year.
The participants will generally be able to deduct the interest that accrues on
the Purchase Loans subject to the limitations described below. The Purchase
Loans will be original issue discount (OID) loans and the interest on the
Purchase Loans will accrue on a ``constant yield to maturity'' basis. Under
these rules, increasingly greater amounts of OID will be deductible over
successive annual accrual periods over the term the Purchase Loans are
outstanding.
29
<PAGE> 33
The interest on the Purchase Loans will be ``investment interest'' and
therefore may only be deducted to the extent of each participant's net
investment income, including investment income relating to other investments
(i.e., the excess of investment income, including dividends and income from the
disposition of property held for investment, over expenses directly connected
with the production of such income). Investment interest that is not deducted
can be carried forward indefinitely. When the Plan Stock is sold, investment
interest that has been carried forward may be used to offset any gain realized
on such sale.
Tax Consequences to the Company. Assuming that the participants make a timely
election under Section 83(b) of the Code, no deduction will be available to the
Company upon the purchase of Plan Stock by participants. In the absence of a
Section 83(b) election, the Company will be able to deduct any amount
includable in the income of participants who are subject to restrictions under
Section 16(b) of the Securities Exchange Act of 1934 six months after purchase,
when the Plan Stock becomes freely transferable.
The Plan has been designed to qualify under Section 162(m) of the Code.
The Company will be able to deduct the Deferred Awards and other payments
pursuant to the Plan when made (unless there has been a Change of Control
which results in non-deductible Excess Payments).
The Company will include in its gross income the interest on the Purchase Loans
on the same constant yield to maturity basis referred to above.
--------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' THE APPROVAL OF THE PLAN.
To be adopted, this proposal would require the affirmative vote of a majority
of the shares present in person or represented by proxy at the Annual Meeting.
In the event the stockholders do not approve the Plan, all Purchase Awards
previously granted will be void.
RATIFICATION OF INDEPENDENT AUDITORS (PROXY ITEM NO. 5)
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as the principal independent auditors to
examine the consolidated financial statements of the Company and its
subsidiaries for the year 1996. Deloitte has acted in this capacity since 1932,
is knowledgeable about the Company's operations and accounting practices, and
is well qualified to act in the capacity of auditor.
Although this appointment is not required to be submitted to a vote of the
stockholders, the Board continues to believe it appropriate as a matter of
policy to request that the stockholders ratify the appointment of Deloitte as
principal independent auditors. If the stockholders should not ratify, the
Audit Committee will investigate the reasons for stockholder rejection and the
Board will reconsider the appointment.
A formal statement by representatives of Deloitte is not planned for the Annual
Meeting. However, as in past years, they are expected to be present at the
meeting and available to respond to appropriate questions.
--------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE AS PRINCIPAL INDEPENDENT AUDITORS FOR THE YEAR 1996.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting is required for ratification of this
appointment.
30
<PAGE> 34
GENERAL INFORMATION
For inclusion in the Company's Proxy Statement and form of proxy, any proposals
of stockholders intended to be presented at the 1997 Annual Meeting must be
received by the Company no later than November [14], 1996.
To nominate one or more directors and/or propose proper business from the floor
for consideration at the 1997 Annual Meeting, other than by inclusion in the
Proxy Statement and form of proxy pursuant to the preceding paragraph,
stockholders must provide written notice. Such notice should be addressed to
the Secretary and be received at the Company's World Headquarters not earlier
than January 26, 1997, and not later than February 25, 1997. The Company's
By-Laws set out specific requirements which such written notices must satisfy.
Copies of those requirements will be forwarded to any stockholder upon written
request.
The Board of Directors knows of no matter, other than those referred to in this
Proxy Statement, which will be presented at the meeting. However, if any other
matters properly come before the meeting or any of its adjournments, the person
or persons voting the proxies will vote in accordance with their best judgment
on such matters. Should any nominee for director be unwilling or unable to
serve at the time of the meeting or any adjournments thereof, the persons
named in the proxy will vote for the election of such other person for such
directorship as the Board of Directors may recommend, unless, prior to the
meeting, the Board has eliminated that directorship by reducing the size of
the Board. The Board is not aware that any nominee herein will be unwilling
or unable to serve as a director.
A stockholder who wishes to give a proxy to someone other than the Board's
proxy committee may strike out the names appearing on the enclosed form of
proxy, write in the name of any other person, sign the proxy, and deliver it to
the person whose name has been substituted.
The Company will bear the expense of preparing, printing, and mailing this
proxy material, as well as the cost of any required solicitation. The Company
has engaged Georgeson & Co., a proxy solicitation firm, to assist by mail or
telephone, in person, or otherwise in the solicitation of proxies. Georgeson's
fee is expected to be approximately $xx,xxx plus expenses. A few regular
employees may also participate in the solicitation, without additional
compensation. In addition, the Company will reimburse banks, brokerage firms,
and other custodians, nominees, and fiduciaries for reasonable expenses
incurred in forwarding proxy materials to beneficial owners of the Company's
stock and obtaining their proxies.
You are urged to mark, sign, date, and return your proxy promptly. You may
revoke your proxy at any time before it is voted; and if you attend the
meeting, as we hope you will, you may vote your shares in person.
March [14], 1996
31
<PAGE> 35
APPENDIX A
MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996
I. GENERAL PROVISIONS
1. PURPOSES
The Monsanto Management Incentive Plan of 1996 is designed to:
* focus management on measures of performance that create stockholder value,
* encourage innovative approaches to the business of the Company,
* reward for results,
* encourage ownership of Monsanto common stock by management, and
* encourage taking higher risks with an opportunity for higher reward.
This Incentive Plan shall be effective April 15, 1996 (``Effective Date''),
subject to the approval of this Incentive Plan by the stockholders of the
Company.
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).
``Award'' means any Stock Option, Stock Appreciation Right, Restricted Share,
unrestricted Share, dividend equivalent unit or other award granted under this
Incentive Plan.
``Board'' means Board of Directors of the Company.
``Committee'' means the ECDC, or its permitted delegate.
``Compensation Committee'' means one or more committees appointed by the ECDC
composed of one or more senior managers of the Company or a Subsidiary to whom
the ECDC may delegate its powers (or a portion thereof) to administer this
Incentive Plan pursuant to Section 3(a) of this Article I.
``ECDC'' means the Executive Compensation and Development Committee or such
other committee consisting of two or more members of the Board as may be
appointed by the Board to administer this Incentive Plan pursuant to Section
3(a) of this Article I.
``Company'' means Monsanto Company, a Delaware corporation.
``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.
``Incentive Plan'' means the Monsanto Management Incentive Plan of 1996, 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.
A-1
<PAGE> 36
``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.
``1984 Plan'' means the Monsanto Management Incentive Plan of 1984, as amended.
``1986 Plan'' means the Searle Monsanto Stock Option Plan of 1986, as amended.
``1988/I Plan'' means the Monsanto Management Incentive Plan of 1988/I, as
amended.
``1988/II Plan'' means the Monsanto Management Incentive Plan of 1988/II, as
amended.
``1991 Plan'' means the NutraSweet/Monsanto Stock Plan of 1991, as amended.
``1994 NutraSweet/Monsanto Plan'' means the NutraSweet/Monsanto Stock Plan of
1994, as amended.
``1994 Plan'' means the Monsanto Management Incentive Plan of 1994, as amended.
``1994 Searle/Monsanto Plan'' means the Searle/Monsanto Stock Plan of 1994, as
amended.
``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 a Stock Option or a Stock
Appreciation Right has been granted, a bonus commitment made or a bonus awarded
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 the Company 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.
``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. 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'' 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, a Stock Appreciation Right or an
Award of Shares (restricted or not), 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 the Company and
its Subsidiaries; and (ii) for the purpose of a Non-Qualified
A-2
<PAGE> 37
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
the Company and its Subsidiaries, or, if the Committee so determines, a change
of employment of a Participant within the group consisting of the Company, its
Subsidiaries and Associated Companies.
3. ADMINISTRATION
(a) This Incentive Plan shall be administered by 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
one or more Compensation Committees and may authorize further delegation by
the Compensation Committees to senior managers of the Company or its
Subsidiaries; provided that determinations regarding the timing, pricing,
amount and terms of any Award to a Reporting Person shall be made only by
the ECDC. No person shall be eligible or continue to serve as a member of
the ECDC unless such person is (i) a ``disinterested person'' within the
meaning of 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
and (ii) an ``outside director'' within the meaning of Section 162(m) of
The Internal Revenue Code of 1986, as may be amended from time to time, and
no person shall be eligible 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 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 provisions 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 Awards in the event of: 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 substantially all of the
assets of the Company to another corporation or any other person or entity;
a separation from the Company, including any spin-off or other distribution
to stockholders other than an ordinary cash dividend; a tender or exchange
offer for Shares made by any corporation, person or entity (other than the
Company); or other reorganization in which the Company 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 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 Participants, by including, amending or waiving terms and
conditions in 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
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.
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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 the Company of all or part of its assets, or a
separation from the Company, including any spin-off or other distribution to
stockholders other than an ordinary 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 the Company, or for shares of stock or other securities of
any other corporation; or (b) new, different or additional shares or other
securities of the Company 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 transferred 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;
shall in each case be appropriately adjusted 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.
5. SHARES AUTHORIZED
The total number of Shares for which awards may be granted under this Incentive
Plan shall not exceed 9,250,000 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; the provisions of Section 1(b) of
Article II of this Incentive Plan; and the provisions of Section 3(d) of
Article III 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 three-year period
15% 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 Options may be granted under this Option 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 Option grants under
this Option Plan without again being charged against the authorized Shares
set forth in Section 5 of Article I if not prohibited by Rule 16b-3 under
the Securities Exchange Act of 1934 (or any successor rule or provision).
Any amendment of any Option or 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.
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(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 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 if not prohibited by Rule 16b-3
under the Securities Exchange Act of 1934 (or any successor rule or
provision).
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
consideration 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 or Stock Appreciation Right shall not be
transferable by the Participant otherwise than by will, by the 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.
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
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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
and only to Eligible Participants, 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 April 14, 2006, 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 as defined by the Committee or total and
permanent disability as determined by the Committee, in which event
such period shall not exceed--
(A) in the case of an Option, the original term of the Option; and
(B) in the case of a Stock Appreciation Right, one year after such
retirement or disability or after resignation as an officer or
director of the Company, whichever shall last occur (unless
earlier terminated pursuant to Section 5(b) of this Article II);
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 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 the
Company.
(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:
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(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).
(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 as defined by the Committee or total and
permanent disability as determined by the Committee, in which event
such period shall not exceed--
(A) in the case of an Option, the original term of the Option; and
(B) in the case of a Stock Appreciation Right, one year after such
retirement or disability or after resignation as an officer or
director of the Company, whichever shall last occur (unless
earlier terminated pursuant to Section 5(b) of this Article II);
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 Incentive Plan, or under any other
incentive plan of the Company or its Subsidiaries which was approved by the
stockholders, 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) Except as 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, or under any
other incentive plan of the Company or its Subsidiaries which was approved
by the stockholders, 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
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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. The payments to be made, in whole or in
part, in cash upon the exercise of Stock Appreciation Rights by any officer
of the Company 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 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 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) the Company, 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 the Company 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 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 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 the
Company, 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
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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) the Company, 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 the Company
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 the Company, the
Subsidiaries or the Associated Companies without cause (as defined
by the Committee) or by the Participant 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 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 the
Company, 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 person who
is an 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 or 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 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 withholding of dividends, forfeitures or
resale to the Company, if any, as may be determined by the Committee. The
Committee and the Participant may designate the Company or one or more of
its employees to act as custodian or escrow for the certificates.
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(d) 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 a bonus 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 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.
7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS
(a) No cash dividends shall be paid on Shares which have been awarded but not
registered or delivered. 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 the
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.
III. MISCELLANEOUS PROVISIONS
1. Neither a Stock Option nor a 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
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employer or affect the right of his employer to terminate the employment of
any such person with or without cause.
3. 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.
4. This Incentive Plan and all actions taken hereunder shall be governed by the
laws of the State of Delaware.
5. 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 payment of any bonus 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.
IV. AMENDMENTS
1. The Board, upon recommendation of the Committee but not otherwise, may from
time to time amend or modify this Incentive Plan, including, but not limited
to, an amendment which would authorize the Committee to make Awards payable
in other securities or other forms of property of a kind to be determined by
the Committee, and such other amendments as may be necessary or desirable to
implement such Awards, or discontinue this Incentive Plan or any provision
thereof, provided that no amendments or modifications to this Incentive Plan
shall, without the prior approval of the stockholders normally entitled to
vote for the election of directors of the Company:
(a) permit the Company to decrease the Option price on any outstanding
Option;
(b) permit any change which would require the approval of stockholders
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 law, rule, regulation or other
provision 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 the Company shall, without the
written consent of the Participant, adversely affect any Stock Option or
Stock Appreciation Right theretofore granted or bonus commitment or bonus
award theretofore made to such Participant under this Incentive Plan.
V. INTERPRETATION
1. This Incentive Plan is not intended to and shall not affect any option or
stock appreciation right grant or bonus commitment or award under the 1984
Plan, the 1986 Plan, the 1988/I Plan, the 1988/II Plan, the 1991 Plan, the
1994 Plan, the 1994 Searle/Monsanto Plan, or the 1994 NutraSweet/Monsanto
Plan (or any
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other incentive plan of the Company, its Subsidiaries, and Associated
Companies). No stock options or stock appreciation rights or Awards of
Restricted or unrestricted Shares shall be granted under the 1994 Plan, the
1994 Searle/Monsanto Plan, or the 1994 NutraSweet/Monsanto Plan after April
14, 1996.
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; provided,
however, that no such Other Plan shall provide for the granting of options
or stock appreciation rights to purchase or receive the appreciation on the
shares of any class of stock of the Company, or the making of bonus
commitments or bonus awards payable in any class of stock of the Company,
which in either form or substance are comparable to those authorized under
this Incentive Plan, unless (i) such Other Plan is established or operated
in connection with the assumption by the Company or a Subsidiary of the
plans, options, stock appreciation rights, bonus commitments or bonus awards
of another corporation, or the substitution of an Other Plan or options,
stock appreciation rights, bonus commitments or bonus awards under such
Other Plan in lieu of the plans, options, stock appreciation rights, bonus
commitments or bonus awards of such other corporation, arising out of a
merger or consolidation with, or the acquisition of assets or stock of, such
other corporation, or other transaction described in Section 424(a) of the
Internal Revenue Code of 1986, as may be amended from time to time, as in
effect at the time, or (ii) such Other Plan provides for grants of options,
stock appreciation rights, bonus commitments or bonus awards to employees
substantially all of whom are not Participants.
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APPENDIX B
MONSANTO
EXECUTIVE STOCK PURCHASE INCENTIVE PLAN
1. PURPOSE
The Monsanto Executive Stock Purchase Incentive Plan (the ``Plan'') is intended
to promote the long-term growth and financial success of Monsanto Company (the
``Company'') in the interests of the Company and its stockholders and to
strengthen the link between management and stockholders by:
* providing senior executives of the Company and its Subsidiaries (as
hereinafter defined) with an opportunity to significantly increase their
ownership of Common Stock (as hereinafter defined) coupled with incentive
awards based in part on the performance of the Common Stock relative to the
Index Stocks (as hereinafter defined) and
* providing this opportunity in a manner that places senior executives at risk
in the event of poor Company performance.
2. DEFINITIONS
Except where the content otherwise indicates, the following definitions apply:
``Agreement'' means the written agreement entered into between the Company and
a Participant to carry out the Plan with respect to the Participant concerning
a particular Purchase Award in accordance with the Plan's terms and conditions.
The Agreements need not be identical and shall be in the form approved by the
Committee.
``Applied Dividends'' means cash dividends and other distributions paid in cash
on Common Stock purchased pursuant to a Purchase Award, net of any required tax
withholding, and used to prepay the Purchase Loan as required pursuant to
Section 7(c)(i).
``Average Market Price'' of a Security means, for a given period, the sum of
the Market Prices of such Security for each Trading Day in the relevant period
divided by the number of Trading Days in such period.
``Board'' means Board of Directors of the Company.
``Cause'' means (i) the willful and continued failure of the Participant to
perform substantially the Participant's duties with the Company or one of its
Subsidiaries (other than any such failure resulting from Disability), after a
written demand for substantial performance is delivered to the Participant by
the Board which specifically identifies the manner in which the Board believes
that the Participant has not substantially performed the Participant's duties,
(ii) the willful engaging by the Participant in illegal conduct or dishonesty
which is materially and demonstrably injurious to the Company, or (iii) the
conviction of the Participant of a felony involving moral turpitude.
For purposes of this definition, no act or failure to act, on the part of the
Participant, shall be considered ``willful'' unless it is done, or omitted to
be done, by the Participant in bad faith or without reasonable belief that the
Participant's action or omission was not inconsistent with the best interests
of the Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board or upon the instructions of a senior
officer of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and not inconsistent with the best interests of the
Company.
``Change of Control'' shall be deemed to have occurred if and when (i) any
``person'' (as such term is used in Sections 13(d) and 14(d)(2) of the 1934
Act) becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities, or (ii) individuals who were members of the Board
as of the Effective Date (the ``Incumbent
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Board'') shall cease to constitute at least a majority of the Board (provided
that any individuals whose nomination was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual was a member of the Incumbent Board, but
excluding for this purpose any individual whose initial assumption of office
occurs as a result of an actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board), or (iii) the
consummation of a reorganization, merger, consolidation or sale of all or
substantially all the assets of the Company or complete liquidation
(``Corporate Transaction''), excluding any such Corporate Transaction pursuant
to which (1) substantially all of the stockholders of the Company prior to the
Corporate Transaction will own more than 60% of the voting securities of the
corporation resulting from such Corporate Transaction in substantially the same
proportions as their ownership of Common Stock immediately prior to such
Corporate Transaction and (2) individuals who were members of the Incumbent
Board immediately prior to the approval of the agreement providing for the
Corporate Transaction will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction.
``Code'' means the Internal Revenue Code of 1986, as amended.
``Commission'' means the Securities and Exchange Commission.
``Committee'' means the Executive Compensation and Development Committee of the
Board or such other committee of the Board, composed of not less than two
persons who qualify as ``disinterested persons'' as defined in Rule
16b-3(c)(2), as promulgated by the Commission under the 1934 Act, or any
successor definition adopted by the Commission, and as ``outside directors''
within the meaning of Section 162(m) of the Code.
``Committee Certification'' means, with respect to the Service Incentive Award,
the certification of the Committee that the Company has positive Cumulative Net
Income, and with respect to the Shareholder Return Incentive Award, the
certification of the Committee as to the Comparative Performance Percentile and
that the Company is in the 50th Comparative Performance Percentile or higher.
The Committee shall meet to determine such certification not later than the
60th day following the end of the Final Fiscal Year with respect to such
Participant or, in the case of a Change of Control, not later than the later of
(i) the 60th day following the Final Fiscal Year or (ii) the 30th day following
the Change of Control.
``Common Stock'' means the Common Stock, $2 par value per share, of the
Company.
``Comparative Performance Percentile'' shall be calculated by (i) calculating
the Total Shareholder Return of each Index Stock; (ii) ranking the Index Stocks
according to Total Shareholder Return, (iii) ranking the Company amongst such
Index Stocks according to the Total Shareholder Return of the Company, (iv)
dividing (x) that number of Index Stocks with lower Total Shareholder Returns
than the Total Shareholder Return of the Company by (y) the number of Index
Stocks plus 1, and (v) multiplying such quotient by 100. For example, if (i)
there are 330 Index Stocks, and (ii) the Total Shareholder Return of the
Company is higher than that of 180 of the Index Stocks, then (iii) the Company
ranks in the 54.4th Comparative Performance Percentile.
``Constructive Termination'' means a Participant's voluntary Termination of
Service within a period of ninety (90) days following either (i) the 30th day
after the Company has received a notice from the Participant describing in
reasonable detail a material reduction or material adverse change in the
Participant's job responsibilities or title which has not been remedied by the
Company during such 30-day period, or (ii) a reduction of more than 20% in the
then sum of the Participant's base salary and target annual incentive
opportunities, other than a reduction which is part of a general cost reduction
affecting at least 80% of the officers of the Company, or in the case of a
Participant employed by a Subsidiary of the Company, 80% of the officers of
such Subsidiary. A transfer by the Company of a Participant from one Subsidiary
to another, or between the Company and any Subsidiary, shall not by itself
constitute a Constructive Termination unless it is accompanied by an event in
clause (i) or (ii) of the prior sentence.
``Cumulative Net Income'' means, with respect to each Participant's Service
Incentive Award, the sum of the net income (loss) as reported in the Company's
financial statements, but before taking into account any
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losses from discontinued operations, extraordinary gains or losses, the
cumulative effect of accounting changes, and any other unusual, non-recurring
gain or loss which is separately identified and quantified in the Company's
financial statements, including the accompanying notes to financial statements,
all being net of taxes, for each Fiscal Year beginning with the Fiscal Year in
which such Participant's Purchase Date occurs through and including the Final
Fiscal Year.
``Deferred Award'' means the opportunity to receive deferred cash incentive
payments pursuant to Section 8.
``Designated Loan Amount'' means, on any date, the original principal amount of
the Purchase Loan plus the Interest Spread.
``Designated Payment Date'' means the date designated by the Company for
payment of a Deferred Award, which date shall not be more than thirty (30) days
following the Committee Certification with respect to such Deferred Award but
in no event later than the March 31 following such Final Fiscal Year or, in the
case of a Change of Control, no later than sixty (60) days following the Change
of Control.
``Disability'' means the inability of the Participant to perform his or her
normal duties of employment as a result of incapacity as determined by the
Committee.
``Effective Date'' means the date the Plan is approved by the stockholders of
the Company.
``Final Fiscal Year'' means the earliest of (i) the Fiscal Year that includes
December 31, 2000, (ii) the Fiscal Year in which such Participant's Termination
of Service occurs or (iii) the last completed Fiscal Year prior to a Change of
Control.
``Final Measurement Period'' means the Fiscal Quarter beginning October 1,
2000; provided, however, that (i) for purposes of Sections 8(f)(ii) and
8(f)(v), the Final Measurement Period shall mean the last completed Fiscal
Quarter prior to the date of such Participant's Termination of Service and (ii)
for purposes of Section 8(g), the Final Measurement Period shall mean the ten
(10) Trading Days ending on the 10th Trading Day prior to the date of the
Change of Control.
``Fiscal Quarter'' means any of the three month periods beginning on January 1,
April 1, July 1, or October 1 of any year.
``Fiscal Year'' means the fiscal year of the Company.
``Index Stock'' means the common stock of any corporation (other than the
Company) included in the Market Index on each Trading Day during the Initial
Measurement Period and the Final Measurement Period.
``Initial Measurement Period'' means, with respect to each Participant, the
last completed Fiscal Quarter prior to such Participant's Purchase Date, except
that for those Participants whose Purchase Date occurs prior to July 1, 1996,
the Initial Measurement Period shall mean the period from February 1, 1996
through and including April 30, 1996.
``Interest Rate'' means the ``applicable federal rate'' in effect on the
Purchase Date for loans with a maturity of December 31, 2003 with interest
compounded annually, as determined by Section 1274(d) of the Code, compounded
annually.
``Interest Spread'' means, at the time of determination, interest accrued at
the Interest Rate on the Purchase Loan, reduced by Applied Dividends up to the
amount of interest accrued, and disregarding any optional prepayments on the
Purchase Loan permitted by Section 7(e)(iv).
``Market Index'' shall mean the Standard & Poor's Industrials, or in the event
such index is no longer available, such comparable stock market index as may be
selected by the Committee.
``Market Price'' with respect to a given Security shall mean, for any given
date (or in the event such date is not a Trading Day with respect to such
Security, the last Trading Day prior to such date), the closing sale
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price of such Security on such date, as reported as the New York Stock
Exchange-Composite Transactions for such day in The Wall Street Journal,
mid-west edition, or, if such Security ceases to be listed on such exchange, as
reported on the principal national securities exchange or national automated
stock quotation system on which such Security is traded or quoted.
``1934 Act'' means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission thereunder.
``Participant'' means each eligible employee of the Company or any of its
Subsidiaries who is designated by the Committee to receive a Purchase Award.
``Performance Period'' means, with respect to each Purchase Award, the period
of time beginning on the Purchase Date with respect to such Purchase Award and
ending on December 31, 2000.
``Purchase Award'' means an award to a Participant permitting such Participant
to purchase shares of Common Stock pursuant to Section 6 at the Purchase Price,
together with related Purchase Loan and Deferred Award rights upon exercise of
the Purchase Award.
``Purchase Date'' means the date a Participant purchases shares of Common Stock
pursuant to a Purchase Award.
``Purchase Loan'' means an extension of credit to the Participant by the
Company evidenced by the Purchase Note and secured by a pledge of the shares of
Common Stock purchased by the Participant.
``Purchase Note'' means a full recourse promissory note including the terms set
forth in Section 7(a).
``Purchase Price'' of the Common Stock means the average of the highest and
lowest sales prices of the Common Stock on the Purchase Date, as reported as
the New York Stock Exchange-Composite Transactions for such day, or if the
Common Stock was not traded on the New York Stock Exchange on such day then on
the next preceding day on which the Common Stock was traded, all as reported by
The Wall Street Journal, mid-west edition under the heading New York Stock
Exchange-Composite Transactions, or, if the Common Stock ceases to be listed on
such exchange, as reported on the principal national securities exchange or
national automated stock quotation system on which the Common Stock is traded
or quoted.
``Retirement'' shall be as defined by the Committee.
``Security'' shall mean the Common Stock or an Index Stock.
``Service'' means employment with the Company or its Subsidiaries.
``Service Incentive Award'' means the amount of cash, if any, payable to the
Participant pursuant to the service-based portion of the Deferred Award set
forth in Section 8(b).
``Shareholder Return Incentive Award'' means the amount of cash, if any,
payable to the Participant calculated pursuant to the performance-based portion
of the Deferred Award set forth in Section 8(c).
``Subsidiary'' means a 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).
``Tax Rate'' means, at the time of determination, the maximum marginal
effective combined federal and state tax rates on ordinary income or capital
gains, as the case may be, to which such individual is subject.
``Termination of Service'' means a Participant's termination of Service such
that he or she is no longer an employee of either the Company or any of its
Subsidiaries for any reason whatsoever.
``Total Purchase Price'' means, with respect to each Participant, the Purchase
Price multiplied by the number of shares of Common Stock purchased pursuant to
the Purchase Award.
``Total Shareholder Return'' of a Security shall be calculated by (i) assuming
that one share of such Security is purchased on the Purchase Date at the
Average Market Price of such Security during the Initial
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Measurement Period, (ii) assuming that additional shares (or fractions of
shares) of such Security are purchased upon the payment of dividends or other
distributions to holders of such Security on the initial share of such Security
and on shares accumulated through the assumed reinvestment of dividends and
other distributions at a price equal to the Market Price of such Security on
the date such dividends or distributions are paid, (iii) calculating the number
of shares (including fractions of shares) of such Security that would be
accumulated over the Performance Period (or such shorter period as provided in
the Plan), adjusting, as necessary, for any stock split or similar events, (iv)
multiplying the number of shares of such Security (including fractions of
shares) determined in clause (iii) by the Average Market Price during the Final
Measurement Period, and (v) determining the annual compound rate of growth
during the Performance Period (or such shorter period) based upon the value
determined in clause (i) and the value determined in clause (iv) for such
Security. For example, if the value determined for Common Stock in clause (i)
with respect to a Purchase Date of May 1, 1996 is $125 and the value determined
in clause (iv) with respect to the Final Measurement Period in the Performance
Period is $200, the Total Shareholder Return on the Common Stock for the
Performance Period beginning May 1, 1996 and ending December 31, 2000 would be
10.57%. To the extent any noncash dividend or distribution is made to holders
of a Security, the Committee shall, in its sole discretion, determine the fair
market value of such dividend or distribution, which amount shall be assumed to
be reinvested in the manner provided in clause (ii) above.
``Trading Day'' means, with respect to a Security, a day on which such Security
is publicly traded.
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Common Stock that may be issued under the
Plan shall not exceed 300,000 shares and no Participant shall be awarded a
Purchase Award with respect to more than 50,000 shares; provided, however, that
in the event that at any time after the Effective Date a stock dividend, stock
split, recapitalization, merger, consolidation, or other change in
capitalization, or a sale by the Company of all or part of its assets, or any
separation from the Company, including any spin-off or other distribution to
stockholders other than an ordinary cash dividend, results in (a) the
outstanding shares of Common Stock, 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 the Company, or for shares of stock or
other securities of any other corporation; or (b) new, different or additional
shares or other securities of the Company or of any other corporation being
received by the holders of outstanding shares of Common Stock, then the total
number of shares of Common Stock authorized under this Plan, and the maximum
number of shares with respect to which a Purchase Award may be awarded to a
participant, shall be appropriately adjusted by the Committee in its
discretion. Shares of Common Stock that have been included in a Purchase Award
but not exercised by a Participant on the Purchase Date may again be awarded
under the Plan.
4. TERM OF THE PLAN
The Plan shall become effective upon the approval by the stockholders of the
Company. Prior to the Effective Date, the Committee may, in its discretion,
grant or authorize the making of Purchase Awards under the Plan as if the
Effective Date had occurred, provided that the exercise of Purchase Awards so
granted or made shall be expressly subject to the occurrence of the Effective
Date. The Plan shall be terminated on December 31, 2000; provided, that
Deferred Awards and Purchase Loans outstanding as of such date shall not be
affected or impaired by the termination of the Plan; provided further that no
Purchase Awards will be granted after December 31, 1999.
5. ELIGIBLE EMPLOYEES
All officers of the Company and other key employees of the Company and its
Subsidiaries who, in the opinion of the Committee, can materially influence the
long-term performance of the Company and/or its Subsidiaries are eligible to
receive a Purchase Award. The Committee shall have the power and complete
discretion to select those eligible employees who are to receive Purchase
Awards.
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6. STOCK PURCHASE
(a) Grant of Purchase Award. The number of shares of the Common Stock
purchasable under a Purchase Award for any Participant and the Purchase
Date shall be determined by the Committee. The Committee shall, with
respect to each Purchase Award, give written notice prior to the Purchase
Date to each Participant receiving such Purchase Award stating (i) the
maximum and minimum number (which numbers may be identical) of shares of
Common Stock that may be purchased under the Purchase Award, (ii) the
Purchase Date and (iii) the Interest Rate and other terms pertaining to the
Purchase Loan.
(b) Exercise of Purchase Award. A Participant shall exercise a Purchase Award
by delivering to the Company on or prior to the Purchase Date (i) a notice
stating the number of shares (not less than the minimum number and not more
than the maximum number specified in the Purchase Award) such Participant
elects to purchase on the Purchase Date, and (ii) an executed Agreement,
Purchase Note and any other documents required pursuant to the Plan, or in
lieu of a Purchase Note, a Participant may deliver cash in the amount of
the Total Purchase Price for the shares of Common Stock purchased pursuant
to the Purchase Award in which case the Designated Loan Amount for purposes
of Section 8 shall be deemed to be such Total Purchase Price. Any
Participant who does not elect to purchase at least the minimum number of
shares under the Purchase Award on or prior to the Purchase Date shall
forfeit any rights under the Plan with respect to such Purchase Award,
including, without limitation, any right to receive a Purchase Loan or
Deferred Award related to such Purchase Award.
(c) Closing Time. The exercise of the Purchase Award, the delivery of the
Purchase Note and the issuance by the Company of the Common Stock purchased
pursuant to the Purchase Award shall be effective at 5:00 p.m., St. Louis
time, on the Purchase Date (the ``Closing Time''). After the Closing Time,
such Participant shall be deemed a stockholder of the Company and shall be
entitled (i) to dividends and distributions on such Common Stock owned or
pledged, (ii) to exercise all voting rights with respect to the Common
Stock, and (iii) subject to the terms of the Plan, the Purchase Loan and
related documents, to transfer the Common Stock. Notwithstanding anything
herein to the contrary, the Committee shall have the absolute right, in its
sole discretion, to revoke any Purchase Award, including, without
limitation, any right to receive a Purchase Loan or Deferred Award related
to such Purchase Award, prior to the Closing Time.
7. LOAN PROVISIONS
(a) General. The Company shall extend a Purchase Loan to a Participant upon
exercise of a Purchase Award subject to the terms and conditions set forth
in this Section 7. The original principal amount of the Purchase Loan shall
be equal to the Total Purchase Price. Such Purchase Loan shall be evidenced
by the Purchase Note with full recourse against the maker. The obligations
of each Participant under a Purchase Note shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not
be released, discharged or otherwise affected by any change in the
existence, structure or ownership of the Company, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Company or its assets or the market value of the Common Stock or any
resulting release or discharge of any obligation of the Company or the
existence of any claim, set-off or other rights which any Participant may
have at any time against the Company or any other person, whether in
connection with the Plan or with any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by separate
suit or counterclaim.
Notwithstanding anything to the contrary in this Section 7, the Company
shall not be required to make any Purchase Loan to a Participant if the
making of such Purchase Loan will (i) cause the Company to violate any
covenant or similar provision in any indenture, loan agreement or other
agreement, or (ii) violate any applicable federal, state or local law,
provided, that the failure to make such Purchase Loan shall be deemed to
revoke the exercise of the related Purchase Award unless otherwise
specified by the Participant.
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(b) Security. Payment of the Purchase Note shall be secured by a pledge of all
of the shares of Common Stock acquired by the Participant upon the exercise
of the Purchase Award to which the Purchase Loan relates. The Participant
shall effect such pledge by delivering to the Company (i) the certificate
or certificates for the shares of Common Stock acquired pursuant to the
Purchase Award, accompanied by a duly executed stock power in blank, (ii) a
properly executed stock pledge agreement, and (iii) such other documents as
may be required by the Committee. A Participant shall always have the right
to sell shares of Common Stock acquired pursuant to a Purchase Award
provided that (i) such sales must be made in open-market transactions or at
a price not less than the Market Price on the Trading Day prior to the date
of sale, (ii) the Company shall have a security interest in the proceeds of
such sale to the extent of any outstanding Purchase Loan, and (iii) the
proceeds of any such sale are utilized in the manner provided in Section
7(e)(iii). Prior to payment in full of the outstanding balance on the
Purchase Note (including accrued and unpaid interest), no shares of Common
Stock or other collateral pledged to the Company under the stock pledge
agreement shall be released except pursuant to Section 7(e)(iii).
(c) Interest. Interest on the principal balance of the Purchase Loan will
accrue annually, in arrears, at the Interest Rate. Except as provided in
subsections (e), (f) and (g) of this Section 7, (i) accrued interest shall
not be payable during the Performance Period but shall be added to the
principal balance of the Purchase Loan and (ii) interest that accrues after
the end of the Performance Period shall be paid annually in arrears.
(d) Term. The term of the Purchase Loan for any Participant shall begin on such
Participant's Purchase Date and, subject to prepayment as provided in
subsections (e), (f) and (g) of this Section 7, have a final maturity date
of December 31, 2003. The principal balance of the Purchase Loan (including
accrued but unpaid interest) outstanding after the prepayment pursuant to
Section 7(e)(ii) following the end of the Performance Period, if any (the
``Remaining Balance''), shall be payable in three equal annual installments
on the first, second and third anniversaries of the end of the Performance
Period, with the interest on the unpaid Remaining Balance payable annually,
in arrears, on each such anniversary.
(e) Prepayment Obligations Other than Termination of Service.
(i) Dividends and Distributions. To the extent the Participant receives
cash dividends or other distributions paid in cash on Common Stock
purchased under the Plan, the Participant shall prepay the Purchase
Loan by the full pre-tax amount, net of any required tax withholding
on such dividends or other distribution, of such dividend or
distribution received within ten (10) days of receipt.
(ii) Deferred Cash Incentive. To the extent the Participant receives any
Service Incentive Award or Shareholder Return Incentive Award under
Section 8 prior to the earlier of (i) Termination of Service due to
death, Disability, Constructive Termination or an involuntary
Termination of Service without Cause or (ii) the end of the
Performance Period, the Participant shall immediately prepay the
Purchase Loan by the full pre-tax amount of such award upon receipt
thereof. In the event the Participant receives any Service Incentive
Award or Shareholder Return Incentive Award under Section 8 after
the earlier of (i) Termination of Service due to death, Disability,
Constructive Termination or an involuntary Termination of Service
without Cause or (ii) the end of the Performance Period, the
Participant shall immediately prepay the Purchase Loan by the full
after-tax amount of such award upon receipt thereof, based upon the
Tax Rate.
(iii) Common Stock Sale. In the event a Participant sells shares of Common
Stock acquired under the Plan prior to the end of the Performance
Period, the Participant shall immediately prepay the Purchase Loan
by the full pre-tax amount of the proceeds of such sale of such
shares. In the event a Participant sells shares of Common Stock
acquired under the Plan after the end of the Performance Period, the
Participant shall immediately prepay the Remaining Balance by the
full after-tax amount of the proceeds of such sale of such shares,
based upon the Tax Rate. A transfer of a Participant's shares of
Common Stock to a revocable trust as to which the Participant
retains voting and investment power (which powers of revocation,
voting and investment may be shared
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with the Participant's spouse) or a transfer to joint ownership with
such Participant's spouse shall not be deemed a sale for purposes of
this Section 7(e)(iii) or Section 8(d), although such shares shall
remain pledged to secure the Purchase Loan pursuant to Section 7(b)
and, solely for the purposes of this Plan, shall be deemed to be
owned by the Participant.
(iv) Optional Prepayments. The Participant may prepay all or any portion
of the Purchase Loan at any time.
(v) Application of Prepayments. All prepayments made to the Company
pursuant to this Section 7(e) shall first be applied to pay accrued
interest on the Purchase Loan and then to reduce the principal
balance due on the Purchase Loan. Any prepayment of the Remaining
Balance shall be applied to the principal payments due thereon in
chronological order of maturity.
(f) Prepayment Obligations for Change of Control or Termination of Service
During the Performance Period. In the event of a Participant's Termination
of Service for any reason prior to the end of the Performance Period except
Retirement or following a Change of Control, any outstanding balance
(including accrued and unpaid interest) of the Purchase Loan shall be due
and payable on the later of (i) the 90th day following the Designated
Payment Date or (ii) the 90th day following the first date on which the
Participant may sell the Common Stock purchased under the Plan without
incurring liability under the federal securities laws, including Section 16
of the 1934 Act, (limited, in the case of Section 16, to liability relating
to purchases or sales of Common Stock or any derivative security occurring
prior to the Termination of Service).
Upon a Change of Control or Retirement prior to the end of the Performance
Period, any outstanding balance (including accrued and unpaid interest) of
the Purchase Loan (subject to any prepayments pursuant to Section 7(e))
shall become due and payable in three equal annual installments on the
first, second and third anniversaries of the date of such Change of Control
or Retirement, as the case may be. Interest on the unpaid principal balance
of such Purchase Loan during such three-year period shall accrue at the
Interest Rate and shall be payable annually, in arrears, on each such
anniversary.
(g) Prepayment Obligations for Termination of Service for Cause Following
Completion of the Performance Period. Upon a Termination of Service for
Cause following the end of the Performance Period, any outstanding balance
on the Purchase Loan (including any accrued and unpaid interest) shall
become due and payable on the later of (i) the 120th day following such
Termination of Service for Cause or (ii) the 90th day following the first
date on which the Participant may sell the Common Stock purchased under the
Plan without incurring liability under the federal securities laws,
including Section 16 of the 1934 Act, (limited, in the case of Section 16,
to liability relating to purchases or sales of Common Stock or any
derivative security occurring prior to the Termination of Service for
Cause).
8.DEFERRED AWARD; PAYMENTS OF SERVICE INCENTIVE AWARD AND
SHAREHOLDER RETURN INCENTIVE AWARD
(a) Deferred Award. The Company shall extend a Deferred Award to a Participant
upon exercise of a Purchase Award, subject to the terms and conditions set
forth in this Section 8. The maximum amount payable to any Participant
pursuant to a Deferred Award, consisting of a Service Incentive Award and a
Shareholder Return Incentive Award, shall equal the Designated Loan Amount
at the time such cash award payments are made. Notwithstanding any
provision of the Plan to the contrary, no Service Incentive Award or
Shareholder Return Incentive Award is payable under this Section 8 unless
there has been a Committee Certification with respect to such Service
Incentive Award or Shareholder Return Incentive Award.
(b) Service Incentive Award. The Service Incentive Award with respect to any
Purchase Award, which shall not be in excess of one-third of the Designated
Loan Amount on the Designated Payment Date, will be based on the
Participant's length of Service during the Performance Period, subject to
the Committee Certification. Except as otherwise set forth in Sections
8(d), 8(f) and 8(g), and subject to the Committee
B-8
<PAGE> 55
Certification, a Participant shall be entitled, at the time of payment
specified in Section 8(e), to a Service Incentive Award equal to (A)(i) the
number of full months in which a Participant remains in Service during the
Performance Period divided by (ii) the number of full months in such
Participant's Performance Period, multiplied by (B) 33 1/3% of the
Designated Loan Amount on the Designated Payment Date pursuant to Section
8(e).
(c) Shareholder Return Incentive Award. The Shareholder Return Incentive Award
with respect to a particular Purchase Award, which shall not be in excess
of two-thirds of the Designated Loan Amount on the Designated Payment Date,
will be based on the Comparative Performance Percentile, subject to the
Committee Certification. Except as set forth in Section 8(f), the portion
of the Shareholder Return Incentive Award earned as a percentage of the
Designated Loan Amount at the time such Shareholder Return Incentive Award
is made pursuant to Section 8(e) will vary in accordance with Table A that
follows:
<TABLE>
TABLE A
SHAREHOLDER RETURN INCENTIVE AWARD SCHEDULE
<CAPTION>
Shareholder Return
Incentive Award as a
Percentage of Designated
Comparative Performance Percentile Loan Amount
- ---------------------------------- -----------
<S> <C>
Below 50th............................................................................ 0%
50th.................................................................................. 16 2/3%
55th.................................................................................. 26 2/3%
60th.................................................................................. 36 2/3%
65th.................................................................................. 46 2/3%
70th.................................................................................. 56 2/3%
75th and Above........................................................................ 66 2/3%
<FN>
Note: Payments for performance between the listed percentiles will be
interpolated on a straight-line basis (e.g. Total Shareholder Return of
the Company at the 58th Comparative Performance Percentile will result in
a Shareholder Return Incentive Award equal to 32 2/3% of the Designated
Loan Amount on the Designated Payment Date).
</TABLE>
(d) Forfeiture Upon Premature Sale of Stock. The sale of any shares of Common
Stock acquired under a Purchase Award prior to the earliest of (i) a
Participant's Termination of Service, (ii) a transaction in connection with
a Change of Control, or (iii) the end of the Performance Period (such sale
being referred to herein as a ``premature sale''), shall cause the
forfeiture of such Participant's Shareholder Return Incentive Award. For
purposes of such Participant's Service Incentive Award, the premature sale
shall be treated the same as a voluntary Termination of Service under
Section 8(f)(i) on the date of such premature sale; provided that any such
payments to Participants shall be applied to prepay the Purchase Loan in
accordance with Section 7(e)(ii). A transfer of a Participant's shares of
Common Stock to a revocable trust as to which the Participant retains
voting and investment power (which powers of revocation, voting and
investment may be shared with the Participant's spouse) or a transfer to
joint ownership with such Participant's spouse shall not be deemed a sale
for purposes of this Section 8(d) and, solely for the purposes of this
Plan, such shares of Common Stock shall be deemed to be owned by the
Participant.
(e) Timing of Payment. Payment of any Service Incentive Award and/or
Shareholder Return Incentive Award shall be made on the Designated Payment
Date following the earlier of the end of the Performance Period, a
Termination of Service, a premature sale under Section 8(d) or a Change of
Control; provided, however, that any payment of a Service Incentive Award
or Shareholder Return Incentive Award shall be applied to prepay the
Purchase Loan in accordance with Section 7(e)(ii).
B-9
<PAGE> 56
(f) Treatment of a Termination of Service.
(i) Upon a Termination of Service prior to the end of the Performance
Period for any reason except death, Disability, Retirement,
Constructive Termination or an involuntary Termination of Service
without Cause, the Participant shall be entitled to the Service
Incentive Award but shall not be entitled to receive any Shareholder
Return Incentive Award; provided that in the event such Termination
of Service occurs prior to the first anniversary of the Purchase
Date or in the event such Termination of Service occurs at any time
during the Performance Period for Cause, the Participant shall not
be entitled to receive any Service Incentive Award.
(ii) Upon a Termination of Service prior to the end of the Performance
Period due to death, Disability, Constructive Termination or an
involuntary Termination of Service without Cause, the Participant
will be entitled to (i) the Service Incentive Award and (ii) a
potential payment under the Participant's Shareholder Return
Incentive Award based on the Comparative Performance Percentile as
measured from the Initial Measurement Period through and including
the Final Measurement Period, prorated according to the number of
full months that the Participant was in Service during such
Participant's Performance Period.
(iii) If a Participant's Termination of Service is due to death or
Disability and the aggregate Market Price on the thirtieth day after
the Designated Payment Date of the shares of Common Stock pledged as
of such date pursuant to Section 7(b), if any (together with the
fair market value of any non-cash distributions which are so
pledged), is less than the outstanding balance of the Purchase Loan
(including accrued and unpaid interest) on such date, then the
Company will pay to the Participant or such Participant's estate an
amount in cash equal to such shortfall (together with an amount
necessary for the reimbursement of any taxes payable by the
Participant as a result of any such additional payment to the
Participant); provided that the sum of any payments under this
Section 8(f)(iii) (including such reimbursement of taxes) together
with the payment of any Deferred Award on the Designated Payment
Date shall not exceed the Designated Loan Amount on the Designated
Payment Date; provided further that no payments shall be made under
this Section 8(f)(iii) unless there has been a Committee
Certification with respect to the Service Incentive Award payable on
the Designated Payment Date.
(iv) If a Participant's Termination of Service is due to Constructive
Termination or an involuntary Termination of Service without Cause
and the aggregate Market Price on the 30th day after the Designated
Payment Date of the shares of Common Stock pledged as of such date
pursuant to Section 7(b), if any (together with the fair market
value of any non-cash distributions which are so pledged), is less
than the outstanding balance of the Purchase Loan (including accrued
and unpaid interest) on such date, then the Company will pay to the
Participant an amount equal to such shortfall (together with an
amount for the reimbursement of any taxes payable by the Participant
as a result of any such additional payment to the Participant);
provided that the sum of any payments (including such reimbursement
of taxes) together with the payment of any Service Incentive Award
on the Designated Payment Date shall not exceed one-third of the
Designated Loan Amount on the Designated Payment Date; provided,
further, that no payments shall be made under this Section 8(f)(iv)
unless there has been a Committee Certification with respect to the
Service Incentive Award payable on the Designated Payment Date.
(v) Upon Retirement prior to the end of the Performance Period, the
Participant will be entitled to (i) the Service Incentive Award and
(ii) a potential prorated Shareholder Return Incentive Award based
on the Comparative Performance Percentile as measured from the
Initial Measurement Period through and including the Final
Measurement Period, prorated according to the number of full months
that the Participant was in Service during such Participant's
Performance Period.
(vi) In the event a Participant exercises a Purchase Award but either
does not enter into a Purchase Loan or subsequently prepays the
entire Purchase Loan pursuant to Section 7(e)(iv) prior to any
B-10
<PAGE> 57
Termination of Service, the amount of any payment by the Company
pursuant to Sections 8(f)(iii) or 8(f)(iv) shall be based upon
(subject to any maximum and other limitations set forth therein) the
excess, if any, of (i) the Total Purchase Price over (ii) the sum of
(x) the aggregate Market Price on the 30th day after the Designated
Payment Date of the shares of Common Stock purchased pursuant to a
Purchase Award and still owned by the Participant on such date
(together with the fair market value of any non-cash distributions
made to the Participant with respect to shares of Common Stock
acquired on the Purchase Date), (y) the proceeds of any sales of
shares of Common Stock acquired on the Purchase Date (which sales
must have been made in open-market transactions) sold after the date
of Termination of Service and prior to such 30th day, and (z) the
after-tax amount of any Shareholder Return Incentive Award and
Service Incentive Award paid to the Participant based on the Tax
Rate.
(g) Change of Control. Upon a Change of Control of the Company, the Participant
shall be entitled to (i) a Service Incentive Award equal to one-third of
the Designated Loan Amount on the Designated Payment Date following such
Change of Control, and (ii) the right to receive a potential Shareholder
Return Incentive Award without any proration based upon the Comparative
Performance Percentile as measured from the Initial Measurement Period
through and including the Final Measurement Period.
9. PLAN ADMINISTRATION
The Plan shall be administered by the Committee. If at any time no Committee
shall be in office, the functions of the Committee specified in the Plan shall
be exercised by the ``disinterested directors'' on the Board (as defined in
Rule 16b-3(c)(2) under the 1934 Act) who are also ``outside directors'' within
the meaning of Section 162(m) of the Code. Subject to the provisions of the
Plan, the Committee shall interpret the Plan and make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan in the manner and to the extent that the Committee deems desirable
to carry the Plan into effect. Deferred Awards under Section 8 are intended to
qualify as performance-based compensation within the meaning of Section 162(m)
of the Code, and these provisions shall be interpreted accordingly. Among other
things, the Committee shall have the authority, subject to the terms of the
Plan, to determine (i) the individuals to whom the Purchase Awards are granted,
(ii) the time or times the Purchase Awards are granted, (iii) the Purchase
Dates for such Purchase Awards, (iv) the basis for any Termination of Service,
including whether or not it was for Cause, Disability, Retirement or otherwise
(which determination shall be reasonable), (v) the calculation of Total
Shareholder Return, (vi) the Comparative Performance Percentile, (vii) the
Committee Certification, and (viii) the forms, terms and provisions of the
Agreement and any other documents under the Plan. Any action taken or
determination made by the Committee pursuant to this paragraph and the other
paragraphs of the Plan where the Committee is given discretion shall be final
and conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the entire
Committee. The Committee may consult with counsel, who may be counsel to the
Company, and such other advisors as the Committee may deem necessary and/or
desirable, and the members of the Committee shall not incur any liability for
any action taken in good faith in reliance upon the advice of counsel or any
other advisor.
10. AMENDMENT AND DISCONTINUANCE OF THE PLAN
The Board, upon the recommendation of the Committee, may amend, suspend or
terminate the Plan at any time, subject to the provisions of this Section 10.
No amendment, suspension or termination of the Plan may cause the Plan to fail
to meet the requirements of Rule 16b-3 promulgated under the 1934 Act or
Section 162(m) of the Code, or such successor rule as may hereinafter be in
effect or may, without the consent of the Participant, adversely affect such
Participant's rights under the Plan in any material respect. In addition, no
such amendment shall be made without the approval of the Company's stockholders
to the extent such approval is required by Rule 16b-3, law or agreement.
B-11
<PAGE> 58
11. MISCELLANEOUS PROVISIONS
(a) Unsecured Status of Claim. Participants and their beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests
or claims in any specific property or assets of the Company. No assets of
the Company shall be held under any trust for the benefit of Participants,
their beneficiaries, heirs, successors or assigns, or held in any way as
collateral security for the fulfillment of the Company's obligations under
the Plan.
Any and all of the Company's assets shall be, and shall remain, the general
unpledged and unrestricted assets of the Company. The Company's obligations
under the Plan shall be merely that of an unfunded and unsecured promise of
the Company to pay employee compensation benefits in the future.
(b) Employment Not Guaranteed. Nothing contained in the Plan nor any related
Agreement nor any action taken in the administration of the Plan shall be
construed as a contract of employment or as giving a Participant any right
to be retained in the Service of the Company.
(c) Nonassignability. No person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate
or convey in advance of actual receipt the deferred cash incentive, if any,
payable under the Plan, or any part thereof, or any interest therein, which
are, and all rights to which are, expressly declared to be unassignable and
nontransferable. No portion of the amounts payable shall, prior to actual
payment, be subject to seizure, attachment, lien or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law in
the event of the Participant's or any other person's bankruptcy or
insolvency. Any such transfer or attempted transfer in violation of the
preceding provisions shall be considered null and void. In addition, no
derivative security (as defined in Rule 16a-1(c), as promulgated by the
Commission under the 1934 Act, or any successor definition adopted by the
Commission) issued under the Plan shall be transferable by a Participant
(to the extent transferable under the Plan) other than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code, or Title I of the Employee Retirement Income
Securities Act of 1974 or the rules promulgated thereunder.
(d) Separability, Validity. This Plan is intended to qualify under Rule 16b-3
of the 1934 Act. If any of the terms or provisions of this Plan conflict
with the requirements of Rule 16b-3, then such terms and provisions shall
be deemed inoperative to the extent they so conflict with such
requirements. In the event that any provision of the Plan or any related
Agreement is held to be invalid, void or unenforceable, the same shall not
affect, in any respect whatsoever, the validity of any other provision of
the Plan or any related Agreement.
(e) Withholding Tax. The Company shall withhold from all benefits due under the
Plan an amount sufficient to satisfy any federal, state and local tax
withholding requirements.
(f) Applicable Law. The Plan and any related Agreements shall be governed in
accordance with the laws of the State of Delaware without regard to the
application of the conflicts of law provisions thereof. The obligation of
the Company with respect to the grant and exercise of Purchase Awards shall
be subject to all applicable laws, rules and regulations and such approvals
by any governmental agencies as may be required, including, without
limitation, the effectiveness of any registration statement required under
the Securities Act of 1933, as amended, and the rules and regulations of
any securities exchange on which the Common Stock may be listed.
(g) Inurement of Rights and Obligations. The rights and obligations under the
Plan and any related Agreements shall inure to the benefit of, and shall be
binding upon the Company, its successors and assigns, and the Participants
and their beneficiaries.
(h) Notice. All notices and other communications required or permitted to be
given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid,
as follows: (A) if to the Company--at its principal business address to the
attention of
B-12
<PAGE> 59
the Secretary; (B) if to any Participant--at the last address of the
Participant known to the sender at the time the notice or other
communication is sent.
(i) Exclusion from Pension and Other Benefit Plan Computation. By exercise of a
Purchase Award, each Participant shall be deemed to have agreed that such
Purchase Award and any Service Incentive Award and Shareholder Return
Incentive Award payable under Section 8 hereof, as applicable, is special
incentive compensation that will not be taken into account, in any manner,
as salary, compensation or bonus in determining the amount of any payment
under any pension, retirement or other employee benefit plan of the Company
or any of its Subsidiaries. In addition, each beneficiary of a deceased
Participant shall be deemed to have agreed that such Purchase Award and any
Service Incentive Award and Shareholder Return Incentive Award, as
applicable, will not affect the amount of any life insurance coverage, if
any, provided by the Company or any of its Subsidiaries on the life of the
Participant which is payable to such beneficiary under any life insurance
plan covering employees of the Company or any of its Subsidiaries.
B-13
<PAGE> 60
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
MONSANTO
<PAGE> 61
MONSANTO
PLACE: World Headquarters
800 N. Lindbergh Blvd.
St. Louis County, Mo.
Common Stock
PROXY
Annual
Meeting
1:30 P.M.
April 26, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert B. Shapiro, Nicholas L. Reding, and
Karl R. Barnickol, and each of them, with full power of substitution, proxies
to vote all shares of Common Stock of Monsanto Company which the undersigned is
entitled to vote at the 1996 Annual Meeting of Stockholders, and any
adjournments thereof, as specified upon the matters indicated on the reverse
side and in their discretion upon such other matters as may properly come
before the meeting.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN U.S.A.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED ``FOR'' ITEMS 1, 2, 3, 4, AND 5.
- ------------------- , 1996 ------------------------------------------ PLEASE
Date Please sign your name or names exactly as SIGN
printed hereon. When shares are held by
joint tenants, both should sign. Trustees
and other fiduciaries should so indicate
when signing.
<PAGE> 62
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' ITEMS 1, 2, 3, 4, AND 5.
1. Election of Directors / / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as to vote for all
written to the contrary nominees listed
below) below
R. B. Shapiro, J. T. Bok, R. M. Heyssel, G. S. King, P. Leder, H. M. Love,
F. A. Metz, Jr., J. F. M. Peters, N. L. Reding, J. S. Reed, W. D. Ruckelshaus,
and J. B. Slaughter.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in this space.)
2. Approval of Amendment to the Company's
Certificate of Incorporation to increase
the authorized shares of Common Stock. / / FOR / / AGAINST / / ABSTAIN
3. Approval of Monsanto Management Incentive
Plan of 1996. / / FOR / / AGAINST / / ABSTAIN
4. Approval of Monsanto Executive Stock
Purchase Incentive Plan. / / FOR / / AGAINST / / ABSTAIN
5. Ratification of Deloitte & Touche LLP
as principal independent auditors for
1996. / / FOR / / AGAINST / / ABSTAIN
PLEASE SIGN ON REVERSE SIDE.
<PAGE> 63
TO PARTICIPANTS IN: SAVINGS AND INVESTMENT PLAN (SIP) AND
PAYROLL RELATED EMPLOYEE STOCK OWNERSHIP PLAN
Participants may instruct the Trustee as to the manner in which Monsanto stock
held for their accounts and entitled to vote shall be voted at Stockholders'
meetings. The enclosed Notice of Annual Meeting of Stockholders and Proxy
Statement for Monsanto Company's 1996 Annual Meeting are being provided to you
by the Trustee. If you desire to instruct the Trustee in the voting of your
plan shares, you should fill in the reverse side of this voting form, date,
sign, and return this form in the enclosed envelope. No postage is required if
mailed in the U.S.A. The shares will be voted at the Annual Meeting to be held
at the Company's World Headquarters, 800 North Lindbergh Blvd., St. Louis
County, Missouri, on April 26, 1996 at 1:30 p.m., or at any adjournment
thereof.
THE TRUSTEE MUST RECEIVE THIS FORM ON OR PRIOR TO APRIL 22, 1996. THE TRUSTEE
WILL VOTE YOUR SHARES AS YOU DIRECT ONLY IF THE SIGNED FORM IS RECEIVED ON OR
PRIOR TO APRIL 22, 1996, AND YOU HAVE SPECIFIED YOUR DIRECTIONS HEREIN.
OTHERWISE, THE TRUSTEE WILL VOTE YOUR SIP SHARES IN PROPORTION TO THE VOTES OF
THE OTHER SIP PARTICIPANTS.
MONSANTO ------------------, 1996 -----------------------------
Date Signature
<PAGE> 64
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' ITEMS 1, 2, 3, 4, AND 5 AND TO
``GRANT AUTHORITY'' FOR ITEM 6.
1. Election of Directors / / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as written to vote for all
to the contrary below) nominees listed
below
R. B. Shapiro, J. T. Bok, R. M. Heyssel, G. S. King, P. Leder, H. M. Love,
F. A. Metz, Jr., J. F. M. Peters, N. L. Reding, J. S. Reed, W. D.
Ruckelshaus, and J. B. Slaughter.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in this space.)
2. Approval of Amendment to the Company's
Certificate of Incorporation to increase
the authorized shares of Common Stock. / / FOR / / AGAINST / / ABSTAIN
3. Approval of Monsanto Management
Incentive Plan of 1996. / / FOR / / AGAINST / / ABSTAIN
4. Approval of Monsanto Executive Stock
Purchase Incentive Plan. / / FOR / / AGAINST / / ABSTAIN
5. Ratification of Deloitte & Touche LLP
as principal independent auditors for
1996. / / FOR / / AGAINST / / ABSTAIN
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO ``GRANT AUTHORITY'' FOR ITEM 6.
6. In the Trustee's discretion, upon such other matters as may properly come
before the meeting.
/ / GRANT AUTHORITY / / WITHHOLD AUTHORITY
THE PROXY FOR WHICH YOUR INSTRUCTIONS ARE REQUESTED IS SOLICITED ON BEHALF OF
THE COMPANY'S BOARD OF DIRECTORS.
(Please sign on reverse side.)
<PAGE> 65
APPENDIX
1. The legend appearing at the top of the Notice of Annual Meeting of
Stockholders in the EDGAR filing appears in the printed document
vertically, in red along the left side of the Notice. The printed
document containing this legend will be distributed only to
participants in Monsanto's stock option plans and Employee Stock
Purchase Plan. The legend will not appear on documents delivered
to other stockholders.
2. On printed pages 2 through 4 of the proxy statement, the blank spaces
to the left of each director's biography designated by the word
"[PHOTO]", contain a 1-1/8 by 1-5/16 inch black and white
photograph of the respective director.
3. The Stock Price Performance Graph on printed page 9 of the proxy
statement is being transmitted in a format which can be processed
by EDGAR. As instructed, a paper copy of the proxy statement
containing this graph is being mailed to William L. Tolbert, Jr.,
Branch Chief.
4. The bullets on printed pages 10, 13, 14, A-1 and B-1 are represented
by asterisks in the EDGAR document.
5. On printed page __ of the proxy statement, "The Board of Directors
recommends a vote "FOR" the proposed amendment to Article IV of
the Certificate of Incorporation"; on printed page __ "The Board
of Directors recommends a vote "FOR" the approval of the 1996
Plan"; on printed page __ "The Board of Directors recommends a vote
"FOR" the approval of the Plan"; and on printed page __ "The Board of
Directors recommends a vote "FOR" the ratification of the appointment
of Deloitte as principal independent auditors for the year 1996" are
in bold-faced italic type.
6. On the back of the proxy card, "The Board of Directors
recommends a vote "FOR" items 1, 2, 3, 4, and 5" is in bold-face
type.
7. On the back of the voting instruction card, "The Board of Directors
recommends a vote "FOR" items 1, 2, 3, 4, and 5 and to "GRANT
AUTHORITY" for item 6." and "The Board of Directors recommends a vote
to "GRANT AUTHORITY" for item 6." are in bold-face type.
