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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-2516
MONSANTO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 43-0420020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 NORTH LINDBERGH BLVD., ST. LOUIS, MO. 63167
(Address of principal executive offices)
(Zip Code)
(314) 694-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class March 31, 1998
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Commons Stock, $2 par value 598,930,918 shares
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The Statement of Consolidated Income of Monsanto Company and subsidiaries for
the three months ended March 31, 1998 and 1997, the Statement of Consolidated
Financial Position as of March 31, 1998 and December 31, 1997, the Statement of
Consolidated Cash Flow for the three months ended March 31, 1998 and 1997 and
related Notes to Financial Statements follow. In the opinion of management,
these unaudited consolidated financial statements contain all adjustments
necessary to present fairly the financial position, results of operations and
cash flows for the interim periods reported.
Unless otherwise indicated by the context, "Monsanto" means Monsanto
Company and consolidated subsidiaries, and "the Company" means Monsanto Company
only. Unless otherwise indicated, "earnings per share" means diluted earnings
per share.
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(Dollars in millions, except per share)
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Net Sales $2,044 $1,875
Costs and Expenses:
Cost of Goods Sold 819 791
Selling, General and Administrative Expenses 535 447
Technological Expenses 279 202
Acquired In-Process Research and Development 101
Amortization of Intangible Assets 59 36
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Operating Income 352 298
Interest Expense (66) (29)
Interest Income 9 10
Other Income (Expense) - Net 1 10
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Income from Continuing Operations Before Income Taxes 296 289
Income Taxes 100 83
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Income from Continuing Operations 196 206
Income from Discontinued Operations 68
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Net Income $ 196 $ 274
------ ------
Basic Earnings per Share:
Continuing Operations $ 0.33 $ 0.35
Discontinued Operations 0.12
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Net Income $ 0.33 $ 0.47
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Diluted Earnings per Share:
Continuing Operations $ 0.32 $ 0.34
Discontinued Operations 0.11
----------- -------
Net Income $ 0.32 $ 0.45
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Dividends per Share $ 0.030 $ 0.150
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</TABLE>
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<PAGE>
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(Dollars in millions, except per share)
<CAPTION>
March 31, December 31,
1998 1997
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 117 $ 134
Receivables, net of allowances of $64 in 1998 and $63 in 1997 2,456 1,823
Miscellaneous receivables and prepaid expenses 638 692
Deferred income tax benefit 317 243
Inventories 1,491 1,374
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Total Current Assets 5,019 4,266
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Property, Plant and Equipment 4,848 4,701
Less Accumulated Depreciation 2,410 2,301
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Net Property, Plant and Equipment 2,438 2,400
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Investments in Affiliates 334 329
Intangible Assets, net of accumulated amortization 2,791 2,837
Other Assets 1,054 942
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Total Assets $ 11,636 $ 10,774
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<CAPTION>
LIABILITIES AND SHAREOWNERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 485 $ 480
Accrued liabilities 1,321 1,333
Short-term debt 2,348 1,726
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Total Current Liabilities 4,154 3,539
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Long-Term Debt 1,959 1,979
Deferred Income Taxes 70 97
Postretirement Liabilities 781 735
Other Liabilities 301 320
Shareowners' Equity:
Common stock (authorized: 1,000,000,000 shares, par value $2)
Issued: 821,970,970 shares in 1998 and 1997 1,644 1,644
Additional contributed capital 381 321
Treasury stock, at cost (223,040,052 shares in 1998
and 226,686,302 shares in 1997) (2,541) (2,570)
Reinvested earnings 5,149 4,973
Reserve for ESOP debt retirement (118) (123)
Accumulated other comprehensive income (144) (141)
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Total Shareowners' Equity 4,371 4,104
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Total Liabilities and Shareowners' Equity $ 11,636 $ 10,774
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</TABLE>
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<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOW
(Dollars in millions)
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Income from continuing operations $ 196 $ 206
Add income taxes - continuing operations 100 83
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Income from continuing operations before income taxes 296 289
Adjustments to reconcile to Cash Used in Continuing Operations:
Income tax refunds (payments) 37 (10)
Items that did not use (provide) cash:
Depreciation and amortization 137 103
Acquired in-process research and development expense 101
Working capital changes that provided (used) cash:
Accounts receivable (597) (606)
Inventories (83) 20
Accounts payable and accrued liabilities (231) (283)
Other (130) (138)
Pharmaceutical licensing and product rights sales 108
Other items (48) (79)
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Cash Used in Continuing Operations (511) (603)
Cash Used in Discontinued Operations (71)
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Total Cash Used in Operations (511) (674)
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Investing Activities:
Property, plant and equipment purchases (134) (119)
Acquisition of seed companies (277)
Acquisition and investment payments (27) (45)
Investment and property disposal proceeds 12 4
Discontinued Operations (7)
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Cash Used in Investing Activities (149) (444)
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Financing Activities:
Net change in short-term financing 522 1,155
Long-term debt proceeds 100 2
Long-term debt reductions (19) (48)
Dividend payments (18) (88)
Common stock issued under employee stock plans 58 37
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Cash Provided by Financing Activities 643 1,058
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Decrease in Cash and Cash Equivalents (17) (60)
Cash and Cash Equivalents:
Beginning of year 134 166
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End of period $ 117 $ 106
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</TABLE>
The effect of exchange rate changes on cash and cash equivalents was not
material.
3
<PAGE>
MONSANTO COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions)
1. On May 11, 1998, Monsanto announced a definitive merger agreement (the
"Merger Agreement") to acquire the remaining shares of DEKALB Genetics
Corporation ("DEKALB") that Monsanto did not already own. Under terms of
the Merger Agreement, a subsidiary of Monsanto will make a tender offer
(the "Offer") to acquire all of the common stock of DEKALB not owned by
Monsanto for $100 per share in cash. This Offer will be followed by a
merger in which any remaining common stock of DEKALB will be exchanged for
cash at the same price per share paid in the Offer. If the shares are not
accepted for purchase pursuant to the Offer by May 9, 1999, the Offer price
will be increased by 50 cents per share on the 10th day of each month,
starting on May 10, 1999, unless the Offer is earlier terminated in
accordance with its terms. If shares are accepted for purchase pursuant to
the Offer on or prior to May 9, 1999, the total cost to Monsanto of the
acquisition of all shares of DEKALB (including the acquisition in 1996 of
the shares Monsanto currently owns) will be approximately $2.5 billion. The
Merger Agreement has been filed as an Exhibit to Schedule 13D filed by
Monsanto with regard to the DEKALB common stock. It is anticipated that a
charge associated with the write-off of acquired in-process research and
development will be recorded in conjunction with this acquisition.
Also on May 11, 1998, Monsanto announced that it had entered into a
definitive agreement with Delta and Pine Land Company ("Delta and Pine
Land"), pursuant to which Delta and Pine Land would be merged with and into
Monsanto, with Monsanto surviving. This agreement is subject to the
approval of Delta and Pine Land's shareowners. Under terms of the
agreement, Delta and Pine Land's shareowners would be entitled to receive
0.8625 shares of Monsanto's common stock in exchange for each share of
Delta and Pine Land they hold. The exchange ratio may be adjusted if
Monsanto's average stock price rises or falls by more than 25 percent
during the period from signing until either Delta and Pine Land's
shareowners meet to vote on the merger or 90 days pass from the time of
signing, whichever comes first. A charge associated with the write-off of
acquired in-process research and development may be recorded in conjunction
with this merger.
Monsanto plans to finance these acquisitions with a combination of debt and
equity securities.
On May 14, 1998, Monsanto announced that it had signed a letter of intent
with Cargill Inc. to form a worldwide joint venture to create and market
new products enhanced through biotechnology for the grain processing and
animal feed markets. As of May 15, 1998, the filing date of this Form 10-Q,
the details of the agreement had not been finalized.
2. Effective January 1, 1998, Monsanto adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130").
FAS 130 establishes standards for reporting and display of comprehensive
income and its components in financial statements. Comprehensive income
includes all non-shareowner changes in equity and consists of net income,
foreign currency translation adjustments, unrealized gains and losses on
available-for-sale securities, and minimum pension liability adjustments.
Total comprehensive income for the three months ended March 31, 1998 and
1997 was:
March 31, March 31,
1998 1997
---- ----
Net income $ 196 $ 274
Other comprehensive loss (3) (88)
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Total comprehensive income $ 193 $ 186
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<PAGE>
3. Effective January 1, 1998, Monsanto adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" ("FAS 131"). FAS 131 establishes standards for
defining operating segments and reporting information about operating
segments in financial statements. It also establishes standards for related
disclosures about products, geographic areas and major customers. This
standard is not required to be applied to interim financial statements in
the year of adoption, but will be applied to Monsanto's annual 1998
financial statements. Monsanto's current reporting of segments and related
information is essentially in compliance with the provisions of FAS 131,
and any additional disclosure required by this statement is expected to be
minimal.
Also effective January 1, 1998, Monsanto adopted the American Institute of
Certified Public Accountants' Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use"
("SOP 98-1"). SOP 98-1 provides guidance on when costs incurred for
internal-use computer software are and are not capitalized. Monsanto's
previous accounting policies were essentially in compliance with the
provisions of this statement, therefore adoption of SOP 98-1 did not
have a material effect on the company's results of operations.
4. Basic earnings per share (EPS) from continuing operations were computed
using the weighted average number of common shares outstanding each period
(597.7 million in 1998 and 585.5 million in 1997). Diluted EPS from
continuing operations were computed taking into account the effect of
dilutive potential common shares (21.7 million in 1998 and 17.1 million in
1997). Dilutive potential common shares consist of outstanding stock
options. As of March 31, 1998, options to purchase approximately 40
million shares of common stock were outstanding, but they were not included
in the computation of diluted EPS because the exercise prices of the
options were greater than the average market price of the common shares.
These options expire from 2006 through 2008.
5
<PAGE>
5. Components of inventories at March 31, 1998 and December 31, 1997 were as
follows:
March 31, December 31,
1998 1997
---- ----
Finished goods $ 793 $ 762
Goods in process 291 265
Raw materials and supplies 450 390
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Inventories, at FIFO cost 1,534 1,417
Excess of FIFO over LIFO cost (43) (43)
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Total $1,491 $1,374
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6. On March 20, 1998, a jury verdict was returned against Monsanto in a
lawsuit filed in the California Superior Court. The lawsuit was brought by
Mycogen Corp., Agrigenetics Inc. and Mycogen Plant Sciences Inc. claiming
that Monsanto delayed providing access to certain gene technology under a
1989 agreement with Lubrizol Genetics Inc., a company which Mycogen Corp.
subsequently purchased. The jury awarded $174.9 million in future damages.
No provision has been made in Monsanto's consolidated financial statements
with respect to this verdict. The company intends to vigorously pursue all
available means to have this verdict set aside.
7. Monsanto is a party to a number of lawsuits and claims, which it is
vigorously defending. Such matters arise out of the normal course of
business and relate to a variety of issues. Certain of the lawsuits and
claims seek damages in very large amounts, or seek to restrict the
company's business activities. Although the results of litigation cannot be
predicted with certainty, management believes that the final outcome of
such litigation will not have a material adverse effect on Monsanto's
consolidated financial position, profitability or liquidity in any one
year, as applicable.
6
<PAGE>
8. Segment data for the three months ended March 31, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
------------------------- ------------------------
Net Operating Net Operating
Sales Income (Loss) Sales Income (Loss)
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Segment:
Agricultural Products $ 1,042 $ 291 $ 868 $ 176
Nutrition and Consumer Products 382 73 397 93
Pharmaceuticals 521 23 515 56
Corporate and Other 99 (35) 95 (27)
------- ----- ------ -----
Total $2,044 $ 352 $1,875 $ 298
------ ----- ------ -----
</TABLE>
Financial information for the first quarter of 1998 should not be
annualized. Monsanto's sales and operating income are historically higher
during the first half of the year, primarily because of the concentration
of generally more profitable sales from the Agricultural Products segment
in the first half of the year.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Note 8 of the Notes to Financial Statements indicates operating results by
operating unit, including the concentration of the generally more profitable
sales of Agricultural Products in the first half of the year.
Results of Operations--First Quarter 1998 Compared with First Quarter 1997
Net income and income from continuing operations totaled $196 million, or $0.32
per share, in the first quarter of 1998 compared with net income of $274
million, or $0.45 per share, and income from continuing operations of $206
million, or $0.34 per share, for the first quarter of 1997. Prior-year results
included an aftertax charge of $63 million, or 11 cents per share, for the
write-off of in-process research and development ("R&D") related to the
acquisition of the Asgrow Agronomics seed company ("Asgrow"). Excluding the
unusual charge from 1997 results, income from continuing operations would have
decreased $73 million, or $0.13 per share, in quarter-to-quarter comparisons.
The decrease was primarily attributable to increases in operating expenses and
interest costs, partially offset by the effect of higher sales. Sales grew $169
million, or 9 percent, primarily because of increased pharmaceutical partnering
revenues, higher licensing revenues from crops developed through biotechnology,
and the inclusion of sales from acquired seed companies. Selling, general and
administrative ("SG&A") and technological expenses rose in the first quarter of
1998 compared with expenses in the year-ago quarter, principally because of
increased expenses in the Agricultural Products and Pharmaceuticals segments.
SG&A expenses for the Agricultural products segment rose primarily because of
the inclusion in 1998 of SG&A expenses from the acquired seed companies. The
increase in selling expenses for Pharmaceuticals was caused primarily by
increased spending associated with the January 1998 launches of Arthrotec(R)
arthritis treatment in the United States and France and by higher expenses
related to the sales force which continued to expand in the first quarter of
1998 to take advantage of the strong pharmaceutical pipeline. Technological
expenses for the Agricultural Products segment grew primarily because of higher
spending on crop biotechnology initiatives, including genomics, and the
inclusion of technological expenses from the acquired seed companies.
Technological expenses for Pharmaceuticals grew as several new product
candidates continued to move through the final, more expensive stages of the
research and development approval process. Amortization of intangible assets
increased in the first quarter of 1998 principally because of the increase in
intangible assets related to seed company acquisitions made in 1997.
The increase in interest expense was caused by a greater amount of debt
outstanding during the first quarter of 1998 versus the comparable prior-year
quarter. The decline in other income was principally caused by higher exchange
losses primarily stemming from southeast Asia.
Net sales for the Agricultural Products segment increased $174 million, or 20
percent, in the first quarter of 1998, primarily because of higher licensing
revenues from crops developed through biotechnology, principally Roundup
Ready(R) soybeans and Bollgard(R) insect-protected cotton. Segment sales also
benefited from the inclusion of sales from seed companies Monsanto acquired
during 1997. Sales for the family of Roundup(R) herbicides in the first quarter
of 1998 were essentially flat compared with sales in the first quarter of 1997,
as increased volumes were offset by average price reductions. Roundup(R) volume
growth in the first quarter was lower than expected primarily because of adverse
weather conditions in many world areas, particularly the United States. The
adverse weather is expected to affect the timing of 1998 sales, but not the
overall volume, as sales that would have been expected to occur in the first
8
<PAGE>
quarter are now expected to occur in the second quarter. The decline in certain
southeast Asia economies also negatively affected Roundup(R) sales volumes and
prices. Operating income for Agricultural Products increased $115 million, or 65
percent, in the first quarter of 1998. However, operating income for the first
quarter of 1997 included $101 million of pretax charges for the write-off of
in-process R&D related to the acquisition of Asgrow. If these charges were
excluded, operating income would have increased $14 million, or 5 percent, in
quarter-to-quarter comparisons, as the effect of higher sales was partially
offset by increased SG&A, technological and amortization expenses. SG&A expenses
rose primarily because of the inclusion in 1998 of SG&A expenses from the
acquired seed companies. Technological expenses grew primarily because of higher
spending on crop biotechnology initiatives, including genomics, and the
inclusion of technological expenses from the acquired seed companies.
Amortization of intangible assets increased principally because of the increase
in intangible assets related to seed company acquisitions made in 1997.
Quarterly net sales for the Nutrition and Consumer Products segment declined 4
percent from sales in the year-ago first quarter primarily because of a
weather-related decrease in sales of lawn-and-garden products, partially offset
by increased sweetener sales. Sales of bulk aspartame, which includes
NutraSweet(R) sweetener, rose as both sales volumes and prices increased. Sales
of tabletop sweeteners also grew led by higher sales volumes of Equal(R)
sweetener. Operating income for the Nutrition and Consumer Products segment in
the first quarter of 1998 decreased $20 million, or 22 percent, versus the
comparable 1997 period because of the sales decline coupled with increased
expenses. Selling expenses rose principally because of launch expenses
associated with two new tabletop sweeteners, NutraSweet(R) and SweetMate(R), and
increased promotional expenses for lawn-and-garden products. Technological
expenses grew because of increased spending for nutrition programs, principally
neotame, a new high-intensity sweetener currently being reviewed for tabletop
use by the Food and Drug Administration.
Net sales for Pharmaceuticals totaled $521 million for the first quarter of
1998, a 1 percent increase over net sales in the comparable 1997 quarter. First
quarter 1998 net sales included partnering revenues of $100 million related to
an alliance for the co-promotion of Celebra(TM), a new arthritis treatment
currently under development. The increases in partnering revenues and in sales
of Arthrotec(R) arthritis treatment were nearly offset by lower sales of
Daypro(R) arthritis treatment, verapamil calcium channel blockers and Cytotec(R)
ulcer-preventive medication. Sales of Arthrotec(R) grew primarily because of
January 1998 launches in the United States and France. Heavy purchasing by drug
wholesalers at the end of 1997, in anticipation of price increases, affected the
timing of sales of Daypro(R), Covera-HS(R) calcium channel-blocker and
Cytotec(R). However, this timing shift is not expected to significantly affect
expected annual sales growth in these key products. Operating income for the
Pharmaceuticals segment declined $33 million, or 59 percent, in
quarter-to-quarter comparisons as increases in SG&A and technological expenses
more than offset the slight increase in net sales. Selling expenses rose
primarily because of increased spending associated with the Arthrotec(R)
launches and higher expenses related to the sales force which continued to
expand in the first quarter of 1998 to take advantage of the strong
pharmaceutical pipeline. Technological expenses grew as several new product
candidates continued to move through the final, more expensive stages of the
research and development approval process.
Changes in Financial Condition -- March 31, 1998 Compared with December 31, 1997
Working capital at March 31, 1998 increased to $865 million from $727 million at
December 31, 1997, primarily because of a seasonal increase in Agricultural
Products' trade receivables and inventories, partially offset by higher
short-term debt. The current ratio was 1.2 at both March 31, 1998 and at
year-end 1997. The percent of total debt to total capitalization increased to 50
percent at March 31, 1998 compared with 47 percent at December 31, 1997 because
of the seasonal increase in short-term debt.
9
<PAGE>
Operating activities used a net $511 million of cash in the first quarter of
1998, compared with $603 million of net cash used in continuing operations in
1997. The decrease in cash used in continuing operations resulted primarily from
the collection in the first quarter of 1998 of miscellaneous receivables related
to 1997 Pharmaceutical licensing and product rights sales. In addition, cash
used in continuing operations for the prior-year quarter included higher
employee incentive payouts for the final payment of a three-year incentive plan.
These positive effects on cash used in continuing operations for the first
quarter of 1998 compared with the first quarter of 1997 were partially offset by
higher inventories and a net decrease in non-cash expenses reflected in net
income, primarily related to the acquired in-process research and development
write-off in the first quarter of 1997. Investing activities in the first
quarter of 1998 used $149 million compared with $444 million in the comparable
prior-year quarter. Investing activities for the 1997 period included the
purchase of Asgrow Agronomics. Financing activities included the issuance of
$100 million of fixed-rate, medium-term notes with an average interest rate of
6.2 percent, due from 2005 to 2018. The net increase in short-term financing of
$522 million for the three months ended March 31, 1998 was primarily used to
fund Agricultural Products' higher seasonal working capital levels. This
increase was lower than the increase in short-term debt in the first quarter of
1997 primarily because of the absence of large acquisitions, the decrease in
cash used in continuing operations and lower dividend payments in the first
quarter of 1998.
On May 6, 1998, Monsanto filed a universal shelf registration with the U.S.
Securities and Exchange Commission for the issuance of up to $2 billion of
securities.
Year 2000 Update
Beginning in late 1996, Monsanto initiated the Global Year 2000 program to
ensure its infrastructure and information systems comply with the systems
requirements for the year 2000. The program includes the following phases:
identifying systems that need to be replaced or fixed; assessing the extent of
the work required; prioritizing the work and developing an action plan; and
implementing the action plan. In higher risk areas, the company also has
developed contingency action plans. Monsanto has essentially completed the first
three phases of the program, and is now primarily in the implementation phase.
The majority of systems, including all business critical systems, are expected
to comply with year 2000 requirements by the first quarter of 1999. Monsanto
also has contacted its major suppliers to assess their preparations for the year
2000. Similar contacts also are planned for major customers. The company
continues to evaluate the estimated costs associated with year 2000 compliance
based on actual experience. While the year 2000 efforts involve additional
costs, Monsanto believes, based on available information, that it will be able
to manage its year 2000 transition without any material adverse effect on its
business operations, financial position, profitability or liquidity.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Monsanto is exposed to market risk, including changes in interest rates,
currency exchange rates and commodity prices. To manage the volatility relating
to these exposures, the company enters into various derivative transactions.
Monsanto does not hold or issue derivative financial instruments for trading
purposes. For more information about how Monsanto manages specific risk
exposures, see the currency translation note, the inventory valuation note, and
the long-term debt note in Notes to Financial Statements in Monsanto's annual
report for the year ended December 31, 1997 ("1997 Annual Report"), incorporated
by reference in Monsanto's Annual Report on Form 10-K for the year ended
December 31, 1997 ("1997 Form 10-K").
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The tables under Market Risk Management in the Management's Discussion and
Analysis section of the 1997 Annual Report, incorporated by reference in the
1997 Form 10-K, provide information about the company's derivative instruments
and other financial instruments that are sensitive to changes in interest rates,
currency exchange rates and commodity prices. There have been no material
changes to the information provided in the tables in the 1997 Annual Report and
Form 10-K except as noted in the following paragraphs.
Interest rate risk sensitive financial instruments that appeared in the 1997
Annual Report and Form 10-K but were no longer outstanding at March 31, 1998
included $100 million of long-term, variable-rate debt due 2001, and $1,208
million of short-term, variable-rate debt, both denominated in U.S. dollars.
Significant interest rate risk instruments that were not outstanding at December
31, 1997, but that were outstanding at March 31, 1998 included $100 million of
long-term, fixed-rate debt with an average interest rate of 6.2 percent, due
after 2002, and $1,811 million of short-term, variable-rate debt with an average
interest rate of 5.6 percent due 1998. The fair value of both instruments
approximated their book values at March 31, 1998.
The table of significant currency exchange rate risk sensitive instruments that
appeared in the 1997 Annual Report and Form 10-K included forward contracts for
the purchase of Belgian francs with a notional amount of $103 million, a fair
value of $101 million, and an average exchange rate of 36.09 Belgian franc per
U.S. dollar. At March 31, 1998, Monsanto had forward contracts for the purchase
of Belgian francs with a notional amount and fair value of $53 million and an
average exchange rate of 37.469 Belgian franc per U.S. dollar.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Because of the size and nature of its business, Monsanto is a party to numerous
legal proceedings. Most of these proceedings have arisen in the ordinary course
of business and involve claims for money damages or seek to restrict the
Company's business activities. While the results of litigation cannot be
predicted with certainty, Monsanto does not believe these matters or their
ultimate disposition will have a material adverse effect on Monsanto's financial
position, profitability or liquidity in any one year, as applicable.
On May 19, 1995, Mycogen Plant Sciences Inc. and Agrigentics Inc., affiliates of
Mycogen Corporation, initiated suit in the U.S. District Court in California
against the company alleging infringement of U.S. Patent 5,380,831 involving
synthetic Bacillus thuringiensis ("Bt") genes and seeking damages and injunctive
relief. The District Court has granted motions dismissing virtually all of
Mycogen's patent claims on the basis that products containing Bt genes made
prior to January 1995 do not infringe the patent. The suit has been stayed by
the court pending further development in the related litigation pending in the
U.S. District Court in Delaware. The company has various meritorious defenses to
such claims, including non-infringement, lack of validity, prior invention and
collateral estoppel.
In June 1996, Mycogen Corporation, Agrigentics Inc. and Mycogen Plant Sciences,
Inc. filed suit against Monsanto in California State Superior Court in San
Diego, alleging damage by an alleged failure of Monsanto to license, under an
option agreement, technology relating to Bt corn and to glyphosate resistant
corn, cotton and canola. On September 9, 1996, Monsanto successfully demurred to
all claims but plaintiffs were permitted to amend to file a damage claim seeking
recovery under a theory of continuing breach. On October 20, 1997, the court
construed the contract as involving only a license to receive genes rather than
a license to receive germplasm. Jury trial of the remaining damage claim for
lost future profits from the alleged delay in performance ended March 20, 1998,
with a verdict against the company awarding damages totaling $174.9 million. The
case is now pending before the trial court on post trial motions to overturn the
award and, alternatively, to require a new trial. The company has numerous
meritorious defenses and grounds to overturn the award, including the
speculative nature of the damages for lost future profits, improper splitting of
the causes of action, lack of continuing breach, and trial error in directing a
verdict against the company on the issue of liability. Monsanto will continue to
vigorously litigate its position and will appeal if necessary.
Other information with respect to legal proceedings appears in the company's
Annual Report on Form 10-K for the year ended December 31, 1997.
12
<PAGE>
Item 5. OTHER INFORMATION
Disclosure Regarding Forward Looking Information. Under the Private
Securities Litigation Reform Act of 1995, companies are provided a "safe harbor"
for making forward-looking statements about the potential risks and rewards of
their strategies. Monsanto believes it's in the best interests of our
shareowners to use these provisions in discussing future events, as we do in
this Form 10-Q and other communications. These forward-looking statements
include our plans for growth; the potential for the development, regulatory
approval and public acceptance of new products from our pipeline; and other
factors that could affect Monsanto's future operations or financial position.
Monsanto's ability to achieve its goals depends on many known and
unknown risks and uncertainties, as well as on changes in general economic and
business conditions. These factors could cause the anticipated performance and
results of the company to differ materially from those described or implied in
such forward-looking statements.
Factors that could cause or contribute to such differences include, but
aren't limited to, Monsanto's ability to: generate cash flows or obtain
financing to fund its growth, including research and development; identify new
technologies and commercialize from that research innovative and competitive new
products worldwide; obtain regulatory approvals and gain consumer acceptance of
new products worldwide; secure and defend its intellectual property rights and,
when appropriate, license required technology; manufacture its products
competitively and cost effectively; manage its businesses in the face of adverse
weather or other environmental conditions; respond to challenges in
international markets, including changes in currency exchange rates, political
or economic conditions, and trade and regulatory matters; complete and integrate
appropriate acquisitions, strategic alliances and joint ventures; and manage
other factors as may be discussed in Monsanto's reports filed with the U.S.
Securities and Exchange Commission.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Exhibit Index at page 15 of this report.
(b) Reports on Form 8-K during the quarter ended March 31, 1998:
A Form 8-K as of January 23, 1998, was filed by the Company in
connection with the offering of its $100,000,000 Medium-Term Notes, Series D.
13
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MONSANTO COMPANY
-----------------------------
(Registrant)
/s/ Michael R. Hogan
-----------------------------
Vice President and Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
Date: May 15, 1998
14
<PAGE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit Number Description
2 Omitted - Inapplicable
3 Omitted - Inapplicable
4 Omitted - Inapplicable
10 1. Monsanto Management Incentive Plan of 1996, as amended
April 1997, July 1997, August 1997 and February 1998
2. Form of Non-Qualified Purchased And Year 2000 Premium
Stock Option Certificate
11 Omitted - Inapplicable; see Note 4 of Notes to Financial
Statements on page 5
15 Omitted - Inapplicable
18 Omitted - Inapplicable
19 Omitted - Inapplicable
22 Omitted - Inapplicable
23 Omitted - Inapplicable
24 Omitted - Inapplicable
27 Financial Data Schedule
99 Computation of the Ratio of Earnings to Fixed Charges for
Monsanto Company and Subsidiaries
15
EXHIBIT 10.1
MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996
As Amended April 25, 1997, July 25, 1997, August 18, 1997
and February 26, 1998 and
As Adjusted to Reflect Stock Split as of May 15, 1996
and Spin-off as of September 1, 1997
I. GENERAL PROVISIONS
1. PURPOSES
The Monsanto Management Incentive Plan of 1996 is designed to:
- - focus management on business performance that creates 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.
<PAGE>
"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.
"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.
<PAGE>
"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 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,
<PAGE>
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, separation, tender
or exchange offer or other reorganization.
4. SHARE ADJUSTMENTS
In the event that at any time or from time to time a stock dividend, stock
split, recapitalization, merger, consolidation, or other change in
capitalization, or a sale by 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 71,605,350 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.
<PAGE>
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.
(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
<PAGE>
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 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.
<PAGE>
(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:
(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
<PAGE>
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 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 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.
<PAGE>
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.
(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
<PAGE>
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 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
<PAGE>
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.
6. The Committee may grant Stock Options to Eligible Participants who
are foreign nationals or who are employed by the Company, a
Subsidiary, or an Associated Company outside of the United States of
America. In order to facilitate the granting of Stock Options, the
Committee may provide for special terms and conditions for grants to
employees who are foreign nationals or who are employed by the
Company, a Subsidiary, or an Associated Company outside of the United
States of America, as the Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or
custom in other countries in which the Company, a Subsidiary, or an
Associated Company operates or has employees. The Committee may also
provide for such substitutes for the Stock Options for employees who
are foreign nationals or who are employed by the Company, a
Subsidiary, or an Associated Company outside of the United States of
America as may be deemed necessary or appropriate by the Committee.
7. Notwithstanding any other provision of this Incentive Plan, for
purposes of any Award that is outstanding as of the date that the
Company spins off the Company's chemical businesses into a new
publicly traded company ("Chemicals") and is held by a Participant
who in connection with such spinoff becomes an employee of Chemicals
(or a subsidiary or associated company of Chemicals) rather than an
employee of the Company (or a Subsidiary or Associated Company of the
Company), such change of employment shall not constitute a
Termination of Employment. With respect to any such Award held by
such a Participant, Termination of Employment shall mean such
Participant's termination of employment with Chemicals other than a
Transfer, with Transfer defined as a change of employment of a
Participant within the group consisting of Chemicals and its
subsidiaries, or, if the Committee so determines, a change of
employment of a Participant within the group consisting of Chemicals,
its subsidiaries, and its associated companies. For purposes of this
section, a subsidiary of Chemicals means any corporation (or
partnership, joint venture, or other enterprise) of which Chemicals
owns or controls, directly or indirectly, 50% or more of the
outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting
power) and an associated company of Chemicals means any corporation
(or partnership, joint venture, or other enterprise), of which
Chemicals 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).
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:
<PAGE>
(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 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.
DocumentID120246v4 -6-
EXHIBIT 10.2
MONSANTO COMPANY
FORM OF
NON-QUALIFIED PURCHASED AND YEAR 2000
PREMIUM STOCK OPTION CERTIFICATE
(NOT TRANSFERABLE)
MONSANTO COMPANY, a Delaware corporation (the "Company"),
pursuant to action of Monsanto Company's People Committee (the "Committee")
hereby grants to ____________________ (the "Optionee")
(Employee ID ___________)
the following Non-Qualified Premium Stock Options (the "Options") to purchase
shares ("Shares") of its common stock, par value $2.00 per share (the "Common
Stock") (such Shares, the "Optioned Shares"):
Options to purchase Shares, which are granted in consideration of the
Optionee's agreement to pay a total of $ therefor (the "Purchase
Price") ($6.06 per Share being the "Per-Share Purchase Price"), as
more fully set forth in the Terms and Conditions set forth in this
Certificate (the "Purchased Options"); and
Additional Options (the "Year 2000 Options") to purchase ______
Shares.
The exercise price for the Optioned Shares shall be $75.328 per share, and the
Options shall be otherwise subject to the provisions of the Monsanto Management
Incentive Plan of 1996 (the "Plan") and to the Terms and Conditions set forth in
this Certificate, which constitute the entire understanding between the Company
and the Optionee with respect to the Options
Option granted on and this Certificate executed at St. Louis County, Missouri,
as of April 30, 1998 (the "Option Grant Date").
MONSANTO COMPANY
By:_______________________
<PAGE>
Terms and Conditions of Premium Stock Option
1. Definitions. The Purchased Options and the Year 2000 Options are referred to
collectively as the "Options." Other terms used herein and not otherwise defined
shall have the meanings set forth in the Plan, as may be amended from time to
time.
2. Option Term. The Options shall each have a term ending at the close of
business on the eighth anniversary of the Option Grant Date; provided, that such
term shall instead expire at the close of business on the fifth anniversary of
the Option Grant Date unless before such date, the Premium Target with respect
to such Options has been achieved or there has occurred a Change of Control; and
provided, further, that in the case of Year 2000 Options, such term shall end
earlier to the extent so provided in Section 4(c) below. The "Premium Target"
with respect to any Option shall be considered to have been achieved if and only
if the Fair Market Value of a Share has been equal to or greater than the
exercise price of the Option for at least ten consecutive trading days.
3. Purchased Options.
(a) The Purchased Options are granted in consideration of the Optionee's
election (a "Purchase Election") to pay the Purchase Price as set forth in
this Section 3(a). The Optionee may elect to pay the Purchase Price by
relinquishing a portion of the base salary and, if Optionee so elects,
annual incentive awards that would otherwise be payable to the Optionee
during the period from July 1, 1998, through June 30, 2000 (the "Purchase
Period" for the Purchased Options), with salary to be reduced on a pre-tax
basis from the salary that is to be paid to the Optionee during the
Purchase Period (on a pro rata basis from each salary payment unless an
alternate payment schedule in a form acceptable to the Company, which may
include pre-tax reduction of annual incentive awards, is specified in the
Purchase Election), so long as the Optionee does not experience a
Termination of Employment. The Optionee may also elect, at the time of
making the Purchase Election and at any time and from time to time
thereafter, to pay to the Company part or all of the Purchase Price to the
extent not already paid through reduction of the Optionee's base salary and
annual incentive awards, and the remaining unpaid Purchase Price (if any)
shall thereafter continue to be paid through reduction of the Optionee's
base salary and annual incentive awards over the remainder of the Purchase
Period (on a pro rata basis or in accordance with the alternate payment
schedule, if any, unless otherwise agreed by the Committee); provided, that
if the Optionee experiences a Termination of Employment, the Optionee shall
be permitted to make such payments of the Purchase Price to the Company
only until the close of business on the 30th day after such Termination of
Employment, unless the Committee expressly authorizes later payments; and
provided, further, that an Optionee who experiences a Termination of
Employment for cause (as determined by the Committee) before a Change of
Control shall not be permitted to make such payments after such Termination
of Employment.
(b) The Purchased Options shall become nonforfeitable as to a pro rata
portion of the Shares subject thereto as and when the Purchase Price is
paid (whether by the reduction of base salary, annual incentive awards,
direct payment to the Company, or a combination thereof). To the extent any
portion of the Purchase Price is not paid in accordance with Section 3(a)
above, a pro rata portion of the Purchased Options shall be forfeited.
(c) Each Purchased Option, the term of which has not previously expired
pursuant to Section 2 above and that has not previously been forfeited
<PAGE>
pursuant to Section 3(b) above, shall become exercisable on the latest of
(i) the date it becomes nonforfeitable pursuant to Section 3(b) above, (ii)
the first to occur of the first anniversary of the Option Grant Date and a
Change of Control, and (iii) the date the Premium Target is first achieved.
Once a Purchased Option becomes exercisable, it shall remain exercisable
for the remainder of its term, regardless of whether the Optionee has
experienced a Termination of Employment.
4. Year 2000 Options.
(a) The Year 2000 Options shall become nonforfeitable upon the achievement
of the Premium Target with respect to such Year 2000 Options during the
term of the Year 2000 Options. Notwithstanding the foregoing, if at the
time such Year 2000 Options would otherwise become nonforfeitable pursuant
to the foregoing sentence, less than 100 percent of the Purchased Options
have become nonforfeitable pursuant to Section 3(b) above, then only a
percentage of the Year 2000 Options, equal to the percentage of such
Purchased Options that have become nonforfeitable, shall become
nonforfeitable at that time, and thereafter the remainder of such Year 2000
Options shall become nonforfeitable on a pro rata basis as and when the
remainder of such Purchased Options become nonforfeitable.
(b) Each Year 2000 Option, the term of which has not previously expired
pursuant to Section 2 above or Section 4(c) below, shall become exercisable
on the later of (i) the date it becomes nonforfeitable pursuant to Section
4(a) above and (ii) the first to occur of the first anniversary of the
Option Grant Date and a Change of Control. Once a Year 2000 Option becomes
exercisable, it shall remain exercisable for the remainder of its term.
(c) Notwithstanding any other provision of this Certificate other than
Section 8, if the Optionee experiences a Termination of Employment, the
term of the Year 2000 Options shall expire no later than the close of
business on the date set forth below (depending upon the circumstances of
the Termination of Employment): (i) if the Optionee's Termination of
Employment is for cause, the date of such Termination of Employment; (ii)
if such Termination of Employment occurs as a result of the death, total
and permanent disability or retirement of the Optionee, the date provided
for in Section 2 of this Certificate; (iii) if such Termination of
Employment occurs as a result of the termination of the Optionee by the
Company and its Subsidiaries other than for cause, the first anniversary of
the date of such Termination of Employment; and (iv) if such Termination of
Employment occurs as a result of the voluntary resignation of the Optionee,
the date that is three months after the date of such Termination of
Employment. The determination of the reason for any Termination of
Employment for purposes of this Section 4(c) shall be made by the Committee
in the sole but not unreasonable exercise of its judgment.
(d) Method of Exercise; Payment of Taxes. Options shall be exercised by (a)
written notice given to the Company, or its designee (at the address
specified by the Company from time to time), signed by the Optionee (or in
the event of the Optionee's death, by the Optionee's legal representative
or transferee pursuant to Section 11 hereof), specifying which Options
(Purchased or Year 2000) are being exercised and the number of Shares as to
which the Options are being exercised, plus (b) payment to the Company in
full for the exercise price for the Shares so specified. Within a
reasonable time after exercise of the Options, the Company shall issue or
cause to be issued a stock certificate or certificates to the Optionee (or
in the event of the Optionee's death, to the Optionee's legal
representative or transferee pursuant to Section 11 hereof) representing
the Shares in respect of which the Option shall have been exercised and
shall pay all stamp taxes in respect thereof, provided that upon or prior
to the issuance of such certificate or certificates, provision (as
specified by the Company from time to time) shall be made by the Optionee
for the payment to the employer of any and all taxes which it shall be
required to withhold, in connection with the exercise of the Options, by
any law or regulation of any government, whether federal, state or local
<PAGE>
and whether domestic or foreign. Payment of such exercise price and of such
taxes may be made by delivery of Shares (or other evidence of ownership of
Shares satisfactory to the Company) with a Fair Market Value equal to the
Option price as payment.
5. Stockholder Status. The Optionee shall have no rights as a stockholder with
respect to any Optioned Shares unless and until the Optionee shall have become
the holder of record of such Shares and, subject to the provisions of Section 7
hereof, no adjustment shall be made for dividends, ordinary or extraordinary
(whether in cash or securities or other property), or other distributions, or
other rights in respect of such Shares as to which the record date is prior to
the date upon which the Optionee shall have become the holder of record thereof.
6. Share and Price Adjustment. In the event of any Share adjustments provided
for in Section 4 of Article I of the Plan, the number and class of Shares
subject to the Option (and not theretofore issued or transferred in respect
thereof), the price per Share and the Premium Target shall be adjusted in such
manner as the Committee may in its discretion deem equitable. The Company shall
notify the Optionee of any such adjustment and subject to Section 7, any such
adjustment, or failure to adjust (whether or not such notice is given), shall be
final and binding upon the Company and the Optionee for all purposes of the
Plan.
7. Change in Control. (a) For purposes of this Option, "Change in Control" means
the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (x) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common
Stock") or (y) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (A)
any acquisition directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C)
of subsection (iii) of this Section 7(a); or
(ii) Individuals who, as of the Option Grant Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets or stock of
another corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of
the individuals and entities who were the beneficial owners,
<PAGE>
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(b) Notwithstanding any other provision of this Certificate other than
Section 7(c) below, if there occurs a Change of Control: (i) all Options
that have not previously been forfeited and that are not then exercisable
shall become exercisable in full on the later of the date of the Change of
Control and the date they become nonforfeitable as provided above, but
without regard to whether the Premium Target has been or is achieved; and
(ii) the provisions of Section 4(c) shall cease to apply to the Year 2000
Options.
(c) Notwithstanding Section 7(b) above, if, as of the date of the Change of
Control, the Fair Market Value of a Share does not exceed the sum of the
per-share exercise price and the Per-Share Purchase Price of the Purchased
Options that are then outstanding, the Board may elect to cancel such
Purchased Options as of the date of the Change of Control, provided that
such cancellation shall be effective only if the Company pays the Optionee
an amount of cash equal to the amount of the Purchase Price previously paid
by the Optionee pursuant to Section 3 (a) above with respect to the
canceled Purchased Options.
(d) In the event of a Change of Control, unless the Options are canceled
pursuant to Section 7(c) above, the Committee shall be required to make
adjustments pursuant to Section 6 above to the extent necessary to ensure
that the Options are exercisable for common stock and/or other securities
in a manner no less favorable to the Optionee than an adjustment that would
satisfy the requirements of Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"), if such Section were applicable.
8. Employment and Termination. Neither the Options nor any provision hereof
shall confer any employment right on the Optionee or affect the right of the
Optionee's employer to terminate the employment of the Optionee at any time,
with or without cause or assigning a reason therefor, and grant of the Options
neither implies nor precludes the grant of a stock option in the future.
9. Options Subject to Law and Regulations. Each exercise of the Options shall be
subject to all requirements as to (a) the listing, registration or qualification
of the Optioned Shares upon any securities exchange on which Shares are listed
or under any applicable federal, state or other law, (b) the consent or approval
of any governmental body determined by the Company to be necessary or desirable
and (c) compliance with any economic stabilization or other government
regulation at the time in effect. Anything herein to the contrary
notwithstanding, the Options may not be exercised, in whole or in part, unless
and until the Company shall have been able to comply with all such requirements
and regulations free of any conditions not acceptable to the Company. As a
condition to the exercise of the Options, either in whole or in part, the
Optionee shall execute such documents and take such action as the Company in its
sole discretion deems necessary or advisable to assist the Company in compliance
with any such requirements, and the Optionee shall comply with all requirements
of any regulatory authority having control of supervision.
10. Fractional Shares. The Company shall not be required to issue any fractional
Shares pursuant to the Plan. The Committee may, at its discretion, provide for
the elimination of fractions or for the settlement thereof in cash.
11. Transferability of Options. The Options are not transferable by the Optionee
otherwise than by will, by the laws of descent and distribution or pursuant to a
written beneficiary designation and shall not be subject, in whole or in part,
to attachment, execution, levy or other similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Options
contrary to the provisions hereof, and the levy of any attachment or similar
process upon the Options, shall be null and void and without effect. The Options
shall be exercisable during the lifetime of the Optionee only by the Optionee or
by the guardian or legal representative of the Optionee acting in a fiduciary
capacity on behalf of the Optionee.
12. Amendment of Options for Accounting Changes. In the event the Company's
method of accounting for the Options changes in a manner that the Committee in
its discretion determines is detrimental to the Company, the Committee may
cancel the Options or amend them without the consent of the Optionee; provided,
that no such cancellation or amendment may be made in connection with, in
anticipation of, or after a Change of Control.
13. Governing Law. The validity, interpretation, performance and enforcement of
the Options shall be governed by the laws of the State of Delaware, determined
without regard to its conflict of law provisions (except for the Nonprobate
Transfers Law of Missouri to the extent applicable as determined by the
Committee).
14. Administration. Each and every provision of the Options shall be
administered, construed and interpreted so that the Options shall in all
respects conform to the provisions of the Plan, a copy of which has been
delivered to the Optionee, and any provision that cannot be so administered
shall be deemed appropriately modified, or, if necessary, disregarded. In no
event shall the Options be deemed to be Incentive Stock Options under Section
422 of the Code.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE
THREE MONTSH ENDED MARCH 31, 1998, AND THE STATEMENT OF CONSOLIDATED FINANCIAL
POSITION AS OF MARCH 31, 1998. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 117
<SECURITIES> 0
<RECEIVABLES> 2,456
<ALLOWANCES> 0
<INVENTORY> 1,491
<CURRENT-ASSETS> 5,019
<PP&E> 4,848
<DEPRECIATION> 2,410
<TOTAL-ASSETS> 11,636
<CURRENT-LIABILITIES> 4,154
<BONDS> 1,959
<COMMON> 1,644
0
0
<OTHER-SE> 2,727
<TOTAL-LIABILITY-AND-EQUITY> 11,636
<SALES> 2,044
<TOTAL-REVENUES> 2,044
<CGS> 819
<TOTAL-COSTS> 819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 296
<INCOME-TAX> 100
<INCOME-CONTINUING> 196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.32
<FN>
RECEIVABLES ARE STATED NET OF ALLOWANCES OF $64.
</FN>
</TABLE>
EXHIBIT 99
<TABLE>
MONSANTO COMPANY AND SUBSIDIARIES
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations
before provision for income taxes $296 $289* $366* $553* $645* $636 $427
Add
Fixed charges 80 43 236 172 178 140 141
Less capitalized interest (1) (1) (14) (9) (5) (4) (7)
Dividends from affiliated companies -- -- 4 6 3 2 5
Less equity income (add equity loss)
of affiliated companies (11) (15) (20) 42 (3) (4) (20)
------- ------- ------- ------ -------- -------- -------
Income as adjusted $364 $316 $572 $764 $818 $770 $546
==== ==== ==== ==== ==== ==== ====
Fixed charges
Interest expense $66 $29 $170 $119 $132 $100 $101
Capitalized interest 1 1 14 9 5 4 7
Portion of rents representative
of interest factor 13 13 52 44 41 36 33
----- ----- ------ ------ ------ ------ ------
Fixed charges $ 80 $ 43 $236 $172 $178 $140 $141
==== ==== ==== ==== ==== ==== ====
Ratio of earnings to fixed charges 4.55 7.35 2.42 4.44 4.60 5.50 3.87
==== ==== ==== ==== ==== ==== ====
<FN>
* Includes charges for acquired in-process research and development of $101
million for the three months ended March 31, 1997, and $684 million for the year
ended December 31, 1997, and charges for restructuring and other unusual items
of $376 million and $90 million for the years ended December 31, 1996 and 1995,
respectively. Excluding these unusual items, the ratio of earnings to fixed
charges would have been 9.70 for the three months ended March 31, 1997, and
5.32, 6.60 and 5.10 for the years ended December 31, 1997, 1996 and 1995,
respectively. The ratio was not materially affected by the restructuring and
other unusual items in 1994 and 1993.
</FN>
</TABLE>
