-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B3IhviE5HjeXMV6fipOTtak4K0A1udiX0x8vJt5n7A0KK5bACLcLNmT8dOgrCUIz GYkuJjd2a8ql9zdLsmFDlg== 0000950114-97-000268.txt : 19970520 0000950114-97-000268.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950114-97-000268 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONSANTO CO CENTRAL INDEX KEY: 0000067686 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 430420020 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02516 FILM NUMBER: 97606758 BUSINESS ADDRESS: STREET 1: 800 N LINDBERGH BLVD CITY: ST LOUIS STATE: MO ZIP: 63167 BUSINESS PHONE: 3146941000 MAIL ADDRESS: STREET 1: 800 NORTH LINDBERGH BLVD CITY: ST LOUIS STATE: MO ZIP: 63167 FORMER COMPANY: FORMER CONFORMED NAME: MONSANTO CHEMICAL CO DATE OF NAME CHANGE: 19711003 10-Q 1 MONSANTO COMPANY FORM 10-Q 1 =============================================================================== 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, 1997 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, MISSOURI 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 TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. OUTSTANDING AT CLASS MARCH 31, 1997 ----- -------------- COMMON STOCK, $2 PAR VALUE 591,583,208 SHARES -------------------------- ------------------ =============================================================================== 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Statement of Consolidated Income of Monsanto Company and subsidiaries for the three months ended March 31, 1997 and 1996, the Statement of Consolidated Financial Position as of March 31, 1997 and December 31, 1996, the Statement of Consolidated Cash Flow for the three months ended March 31, 1997 and 1996 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. MONSANTO COMPANY AND SUBSIDIARIES STATEMENT OF CONSOLIDATED INCOME (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
THREE MONTHS ENDED MARCH 31, ---------------------- 1997 1996 ------ ------ Net Sales.......................................................................... $2,574 $2,304 Cost of Goods Sold................................................................. 1,321 1,187 ------ ------ Gross Profit....................................................................... 1,253 1,117 Marketing Expenses................................................................. 325 327 Administrative Expenses............................................................ 185 196 Technological Expenses............................................................. 220 158 Acquired In-Process Research and Development....................................... 101 Amortization of Intangible Assets.................................................. 36 31 ------ ------ Operating Income................................................................... 386 405 Interest Expense................................................................... (43) (40) Interest Income.................................................................... 11 11 Other Income (Expense) - Net....................................................... 40 6 ------ ------ Income Before Income Taxes......................................................... 394 382 Income Taxes....................................................................... 120 122 ------ ------ Net Income......................................................................... $ 274 $ 260 ------ ------ Earnings per Share................................................................. $ 0.45 $ 0.43 ------ ------ Dividends per Share................................................................ $0.150 $0.138 ------ ------ Weighted Average Number of Common and Common Equivalent Shares (in millions)........................................... 602.6 598.4 ------ ------
1 3 MONSANTO COMPANY AND SUBSIDIARIES STATEMENT OF CONSOLIDATED FINANCIAL POSITION (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
MARCH 31, DECEMBER 31, 1997 1996 --------- ------------ ASSETS Current Assets: Cash and cash equivalents...................................................... $ 106 $ 166 Receivables, net of allowances of $75 in 1997 and $53 in 1996......................................................... 2,583 1,930 Miscellaneous receivables and prepaid expenses................................. 508 382 Deferred income tax benefit.................................................... 406 386 Inventories.................................................................... 1,563 1,476 ------- ------- Total Current Assets................................................... 5,166 4,340 ------- ------- Property, Plant and Equipment...................................................... 7,707 7,588 Less Accumulated Depreciation...................................................... 4,590 4,575 ------- ------- Net Property, Plant and Equipment.............................................. 3,117 3,013 ------- ------- Investments in Affiliates.......................................................... 627 652 Intangible Assets, net of accumulated amortization of $843 in 1997 and $807 in 1996................................................. 2,168 2,165 Other Assets....................................................................... 1,044 1,021 ------- ------- Total Assets....................................................................... $12,122 $11,191 ------- ------- LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities: Accounts payable............................................................... $ 694 $ 715 Accrued liabilities............................................................ 1,776 2,032 Short-term debt................................................................ 1,773 654 ------- ------- Total Current Liabilities.............................................. 4,243 3,401 ------- ------- Long-Term Debt..................................................................... 1,552 1,608 Deferred Income Taxes.............................................................. 65 50 Postretirement Liabilities......................................................... 1,522 1,508 Other Liabilities.................................................................. 913 934 Shareowners' Equity: Common stock (authorized: 850,000,000 shares, par value $2) Issued, 821,970,970 shares in 1997 and 1996................................ 1,644 1,644 Additional contributed capital............................................. 84 65 Treasury stock, at cost (235,740,687 shares in 1997 and 237,594,831 shares in 1996).......................................... (2,643) (2,661) Reserve for ESOP debt retirement............................................... (172) (174) Net unrealized investment holding gains........................................ 11 11 Accumulated currency adjustment................................................ (78) 10 Reinvested earnings............................................................ 4,981 4,795 ------- ------- Total Shareowners' Equity.............................................. 3,827 3,690 ------- ------- Total Liabilities and Shareowners' Equity.......................................... $12,122 $11,191 ------- -------
2 4 MONSANTO COMPANY AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOW (DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31 --------------------- 1997 1996 ------ ----- Increase (Decrease) in Cash and Cash Equivalents Operating Activities: Net income............................................................................... $ 274 $ 260 Add income taxes......................................................................... 120 122 ------ ----- Income before income taxes............................................................... 394 382 Adjustments to reconcile to Cash Used in Operations: Income tax payments.................................................................. (10) (103) Items that did not use (provide) cash: Depreciation and amortization.................................................... 148 146 Other............................................................................ (8) (7) Working capital changes that provided (used) cash: Accounts receivable.............................................................. (624) (528) Inventories...................................................................... (10) 14 Accounts payable and accrued liabilities......................................... (430) 19 Other............................................................................ (138) (48) Other items.......................................................................... 4 (128) ------ ----- Total Cash Used in Operations................................................................ (674) (253) ------ ----- Investing Activities: Property, plant and equipment purchases.................................................. (157) (133) Acquisition of seed companies............................................................ (227) Acquisition and investment payments...................................................... (95) (319) Investment and property disposal proceeds................................................ 35 102 ------ ----- Cash Used in Investing Activities............................................................ (444) (350) ------ ----- Financing Activities: Net change in short-term financing....................................................... 1,155 606 Long-term debt proceeds.................................................................. 2 109 Long-term debt reductions................................................................ (48) (133) Treasury stock purchases................................................................. (171) Dividend payments........................................................................ (88) (81) Common stock issued under employee stock plans........................................... 18 76 Other financing activities............................................................... 19 45 ------ ----- Cash Provided by Financing Activities........................................................ 1,058 451 ------ ----- Decrease in Cash and Cash Equivalents........................................................ (60) (152) Cash and Cash Equivalents: Beginning of year........................................................................ 166 297 ------ ----- End of period............................................................................ $ 106 $ 145 ------ -----
The effect of exchange rate changes on cash and cash equivalents was not material. Cash payments for interest (net of amounts capitalized) were $39 million in 1997 and $40 million in 1996. 3 5 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (DOLLARS IN MILLIONS, EXCEPT PER SHARE) 1. In the first quarter of 1997, Monsanto completed the acquisition of the Asgrow Agronomics ("Asgrow") seed business from Empresas La Moderna S. A. and acquired the remaining interest in a Brazilian foundation seed company for a combined purchase price of approximately $250 million. The acquisitions were accounted for as purchases and, accordingly, the results of operations for these companies were included in the Statement of Consolidated Income from the dates of acquisition. The estimated fair value of assets acquired and liabilities assumed totaled approximately $400 million and $150 million, respectively. The purchase price allocations are based upon preliminary assumptions and are subject to revision. Monsanto recorded an aftertax charge of $63 million, or $0.10 per share, in the first quarter of 1997, principally related to the write-off of acquired research from Asgrow. The amount of this write-off was determined by an independent valuation. Management does not believe that the technological feasibility of the acquired in-process technology has been established and that it has no alternative future uses. Accordingly, the amounts allocated to in-process research and technology are required to be expensed immediately under generally accepted accounting principles. In April 1997, Monsanto announced a definitive agreement to acquire the remaining shares of Calgene, Inc. ("Calgene") that Monsanto did not already own for $8.00 per share in cash, or approximately $240 million. Monsanto extended a tender offer for the remaining shares of Calgene that was conditioned upon the tender of a majority of the outstanding shares of Calgene not owned by Monsanto and certain other conditions. At the expiration of the tender offer on May 2, 1997, approximately 26.8 million shares were tendered. As a result, Monsanto now owns approximately 94 percent of the outstanding Calgene shares. Monsanto expects to acquire the remaining shares at the same $8.00 per share in cash. It is anticipated that a charge associated with acquired research will be recorded in conjunction with the acquisition of these shares. 2. Effective January 1, 1997, Monsanto adopted the American Institute of Certified Public Accountants' Statement of Position ("SOP") 96-1, "Environmental Remediation Liabilities." SOP 96-1 establishes authoritative guidance regarding the recognition, measurement and disclosure of environmental remediation liabilities. The primary change in Monsanto's accounting principles associated with the adoption of this SOP was an acceleration of the recognition of certain environmental remediation liabilities at operating facilities. As a result, Monsanto recorded an aftertax charge of $6 million, or $0.01 per share, in the first quarter of 1997. Additional aftertax charges in the range of $15 million to $20 million are anticipated in 1997 as the criteria for recording these liabilities are met. 3. Earnings per share were computed using the weighted average number of common shares and common share equivalents outstanding each period (602,615,901 and 598,410,185 in 1997 and 1996, respectively). Common share equivalents (17,105,134 and 17,709,740 in 1997 and 1996, respectively) consist of common stock issuable upon exercise of outstanding stock options. Earnings per share assuming full dilution were not significantly different from the primary amounts. In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"). Under this new standard, the presentation of primary and fully diluted earnings per share required by current standards is replaced by basic and diluted earnings per share. Basic earnings per share measures operating performance assuming no dilution from securities or contracts to issue common stock. Diluted earnings per share measures operating performance giving effect to the dilution that would occur when securities or contracts to issue common stock are exercised or converted. This statement is effective for Monsanto in 1997. Pro forma earnings per share computed under the provisions of FAS 128 would have been:
FOR THE THREE MONTHS ENDED MARCH 31, --------------------- 1997 1996 ----- ----- Basic earnings per share $0.47 $0.45 Diluted earnings per share $0.45 $0.43
4 6 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Components of inventories at March 31, 1997 and December 31, 1996 were as follows:
MARCH 31, DECEMBER 31, 1997 1996 --------- ------------ Finished goods.................................... $ 950 $ 888 Goods in process.................................. 341 334 Raw materials and supplies........................ 482 461 ------ ------ Inventories, at FIFO cost......................... 1,773 1,683 Excess of FIFO over LIFO cost..................... (210) (207) ------ ------ Total......................................... $1,563 $1,476 ------ ------
5. Monsanto is a party to a number of lawsuits and claims, which it is vigorously defending. Such matters arise out of the normal course of business and relate to product liability, government regulation, including environmental issues, and other issues. Certain of the lawsuits and claims seek damages in very large amounts. While the results of litigation cannot be predicted with certainty, management believes, based upon the advice of Company counsel, that the final outcome of such litigation will not have a material adverse effect on Monsanto's consolidated financial position, profitability or liquidity in any one year, as applicable. 6. Segment data for the three months ended March 31, 1997 and 1996 were as follows:
THREE MONTHS ENDED MARCH 31, ----------------------------------------------------------- 1997 1996 ------------------------ ------------------------ OPERATING OPERATING NET INCOME NET INCOME SALES (LOSS) SALES (LOSS) ------ --------- ------ --------- Segment: Agricultural Products...................... $1,067 $ 224 $ 825 $ 272 Chemicals.................................. 732 81 736 64 Pharmaceuticals............................ 515 55 477 60 Food Ingredients........................... 260 43 266 25 Corporate.................................. (17) (16) ------ ------ ------ ------ Total.......................................... $2,574 $ 386 $2,304 $ 405 ------ ------ ------ ------
Financial information for the first quarter of 1997 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Note 6 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 1997 COMPARED WITH THE FIRST QUARTER 1996 Net income for the first quarter of 1997 was $274 million, or $0.45 per share, compared with net income of $260 million, or $0.43 per share, in the first quarter of last year. As further discussed in Notes 1 and 2, first quarter results for 1997 included an aftertax charge of $63 million, or $0.10 per share, for acquired in-process research and development, principally related to the acquisition of Asgrow, and an aftertax charge of $6 million, or $0.01 per share associated with the adoption of SOP 96-1. Net sales of $2,574 million were 12 percent higher than the comparable figure in 1996. 5 7 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) Net sales for Agricultural Products increased 29 percent from net sales in the first quarter of 1996. All business units in the segment contributed to the increase in net sales. The increase was driven by significantly higher worldwide sales volumes of the family of Roundup(R) herbicides, with particularly strong volume gains in Latin America, the U. S. and Japan. The increased volume can be attributed principally to favorable weather conditions, on balance, in many key markets. In addition, certain marketing and incentive programs helped to support the sales increase. The sales increase also benefited from higher sales of lawn-and-garden products and higher sales of Posilac(R) bovine somatotropin. The consolidation of the results of operations for Asgrow and Calgene also contributed to the sales increase. Monsanto acquired a controlling interest in Calgene in November 1996. Prior to that time, Calgene was accounted for as an equity affiliate and its results were not consolidated. Operating income for Agricultural Products decreased 18 percent compared with first quarter operating income in 1996. However, as further described in Note 1, operating income includes $101 million of pretax charges for acquired in-process research and development, primarily associated with the acquisition of Asgrow. If these charges were excluded, operating income in the first quarter of 1997 would have increased 19 percent compared with operating income in the first quarter of 1996. In addition to the effect of higher sales volumes, operating income benefited from lower manufacturing costs. These positive factors were partially offset by higher marketing expenditures associated with product launches and higher biotechnology research and development spending. Net sales for Chemicals of $732 million were essentially even with net sales in the first quarter of 1996. The effects of overall higher selling prices were offset by lower sales volumes in the segment's growth business units. Operating income for Chemicals increased 27 percent versus the first quarter of 1996. However, as further discussed in Note 2, operating income includes $10 million of pretax charges associated with the adoption of SOP 96-1 for environmental reserves at operating locations. If this charge was excluded, operating income in the first quarter of 1997 would have increased 42 percent compared with a weak operating income performance in the same quarter last year. This increase in operating income was principally the result of higher sales volumes and lower manufacturing costs for Saflex(R) plastic interlayer. Higher sales of performance materials, primarily because of higher selling prices, as well as improved manufacturing performance for the fibers business, also contributed significantly to the increase in operating income. Pharmaceuticals' net sales for the first quarter of 1997 increased $38 million compared with net sales in the same period last year. The sales increase was the result of higher sales volumes and pricing. Sales of key products continued to drive performance. Combined sales of Daypro(R) and Arthrotec(R) arthritis treatments increased 22 percent in the first quarter of 1997 compared with the first quarter of last year, primarily because of higher sales volumes. First quarter sales of Ambien(R), a short-term treatment for insomnia, declined moderately compared to a very strong quarter in 1996, primarily because of the timing of wholesaler buying patterns. Operating income in the first quarter of 1997 for Pharmaceuticals declined slightly compared with the first quarter last year. The positive effect of the sales increase on operating earnings was offset by higher research and development expenses associated with new product candidates advancing to later and more expensive phases of development. In addition, last year's first quarter operating income benefited from cost-sharing alliances. Net sales for Food Ingredients decreased slightly in the first quarter of 1997 compared with sales for the first quarter last year. First quarter 1997 sales of tabletop sweeteners and aspartame declined from the same period last year, primarily because of lower sales volumes. These decreases were partially offset by higher sales volumes of biogum products. Operating income for Food Ingredients increased significantly in the first quarter of 1997 compared with operating income in the same period last year, primarily because of lower operating expenses. For Monsanto, technological expenses in the first quarter of 1997 were higher than the same period last year, principally because of higher research and development expenses in the Agricultural Products and Pharmaceuticals segments. "Other Income (Expense) - Net" increased primarily because of significantly higher earnings from the DeKalb Genetics Corporation and Flexsys, L.P. equity affiliates. In addition, "Other Income (Expense) - Net" in the first quarter last year included an aftertax charge of $8 million for Monsanto's share of the purchased research and development costs resulting from the equity investments in Calgene and DeKalb Genetics Corporation. 6 8 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) CHANGES IN FINANCIAL CONDITION -- MARCH 31, 1997 COMPARED WITH DECEMBER 31, 1996 Working capital at March 31, 1997 decreased slightly to $923 million from $939 million at December 31, 1996, primarily because of higher short-term debt, which was partially offset by a seasonal increase in Agricultural Products' trade receivables and lower accrued liabilities. The current ratio was 1.2 at March 31, 1997 compared to 1.3 at year-end 1996. The percent of total debt to total capitalization increased to 46 percent at quarter-end compared with 38 percent at year-end 1996, primarily because of the increase in short-term debt. The increase in "Net Property, Plant and Equipment" was primarily the result of the Asgrow acquisition. Operating activities used a net $674 million of cash in the first quarter of 1997, compared with $253 million of net cash used by operations in 1996. The increase in cash used in operations resulted primarily from higher seasonal working capital levels for Agricultural Products and significantly higher payouts associated with employee incentive programs. The increased incentive payouts included the final payment of certain deferred amounts related to the third year of a three-year incentive plan. Investing activities in 1997 used $444 million, which includes the acquisition of Asgrow. The increase in short-term financing was primarily used to fund Agricultural Products' higher seasonal working capital levels and the Asgrow acquisition. 7 9 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company's Report on Form 10-K for the year ended December 31, 1996, described a number of product liability lawsuits arising out of sales by G. D. Searle & Co., a subsidiary of the Company acquired in 1985, of the Cu-7(R), an intrauterine device. As of May 1, 1997, there were approximately seven cases pending in various U.S. state and federal courts and approximately 405 cases filed outside the United States (the vast majority in Australia). The Company's Report on Form 10-K for the year ended December 31, 1996, described a consent agreement with the U. S. Environmental Protection Agency ("EPA") regarding alleged violations of certain sections of the Resource Conservation and Recovery Act. The EPA has issued a Final Order approving the consent agreement. Without admitting liability, the Company paid a settlement of $105,515 pursuant to the consent agreement. The Company's Report on Form 10-K for the year ended December 31, 1996, described a consent agreement with the EPA regarding late reporting of information required under the Toxic Substances Control Act. On April 21, 1997, the EPA Environmental Appeals Board executed the consent order settling the matter for the remaining $352,000 liability. On March 20, 1997, the Georgia Environmental Protection Division ("EPD") issued a Notice of Violation and Proposed Consent Order alleging violations by the Company of certain sections of the Resource Conservation and Recovery Act. The alleged violations relate to the waste heat recovery units at the Company's NutraSweet(R) sweetener plant in Augusta, Georgia. EPD has proposed a penalty in the amount of $615,000. The Company has responded to the Notice of Violation and is vigorously challenging the allegations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits--See the Exhibit Index at page 9 of this report. (b) No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1997. 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) MICHAEL R. HOGAN ------------------------------------- Vice President and Controller (On behalf of the Registrant and as Principal Accounting Officer) Date: May 15, 1997 8 10 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 1. Omitted--Inapplicable 2. By-Laws of the Company, as amended effective April 25, 1997 4 Omitted--Inapplicable 10 1. Monsanto Management Incentive Plan of 1984, as amended in 1987, 1988, 1989 and 1997 2. Searle Monsanto Stock Option Plan of 1986, as amended in 1988, 1989, 1990, 1991, 1995 and 1997 3. Monsanto Management Incentive Plan of 1988/I, as amended in 1988, 1989, 1991, 1992 and 1997 4. Monsanto Management Incentive Plan of 1988/II, as amended in 1989, 1991, 1992 and 1997 5. Monsanto Management Incentive Plan of 1994, as amended in 1997 6. Searle/Monsanto Stock Plan of 1994, as amended in 1995 and 1997 7. Monsanto Management Incentive Plan of 1996, as amended in 1997 8. Minutes of Meeting of Executive Compensation and Development Committee regarding termination of Searle Phantom Stock Option Plan of 1986. 11 Omitted--Inapplicable; see Note 3 of Notes of Financial Statements on page 4 15 Omitted--Inapplicable 18 Omitted--Inapplicable 19 Omitted--Inapplicable 22 Omitted--Inapplicable 23 Consent of Company Counsel 24 Omitted--Inapplicable 27 Financial Data Schedule 99 Computation of the Ratio of Earnings to Fixed Charges for Monsanto Company and Subsidiaries
9 EX-3.2 2 BY-LAWS OF THE COMPANY AS AMENDED EFFECTIVE APRIL 25, 1997 1 MONSANTO COMPANY BY-LAWS As Amended April 25, 1997 OFFICES ------- 1. Registered The name of the registered agent of the Company is The Corporation Trust Company and the registered office of the Company shall be located in the City of Wilmington, County of New Castle, State of Delaware. 2. Other The Company shall have its General Offices in the County of St. Louis, State of Missouri, and may also have offices at such other places both within or without the State of Delaware as the Board of Directors may from time to time designate or the business of the Company may require. STOCKHOLDERS' MEETINGS ---------------------- 3. Annual Meeting An annual meeting of Stockholders shall be held on such day and at such time as may be designated by the Board of Directors for the purpose of electing Directors and for the transaction of such other business as properly may come before such meeting. Any previously scheduled annual meeting of the stockholders may be postponed by resolution of the Board of Directors upon public notice given on or prior to the date previously scheduled for such annual meeting of stockholders. 4. Business to be Conducted at Annual Meeting (a) At an annual meeting of stockholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the Company's notice of the meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Company who is a stockholder of record at the time of giving of the notice provided for in this By-Law, who shall be entitled to vote at such meeting and who shall have complied with the notice procedures set forth in this By-Law. 2 - 2 - (b) For business to be properly brought before an annual meeting by a stockholder pursuant to Section (a)(iii) of this By-Law, notice in writing must be delivered or mailed to the Secretary and received at the General Offices of the Company, not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder must be received not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of the annual meeting is first made. Such stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business to be brought before the annual meeting and the reasons for conducting such business at such meeting; (ii) the name and address, as they appear on the Company's books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class and number of shares of the Company's stock which are beneficially owned by the stockholder, and by the beneficial owner, if any, on whose behalf the proposal is made; and (iv) any material interest of the stockholder, and of the beneficial owner, if any, on whose behalf the proposal is made, in such business. (c) Notwithstanding anything in these By-Laws to the con- trary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this By-Law. The chairman of the meeting may, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with the provisions of this By-Law; and if he should so determine, he shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this By-Law, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and the rules and regulations thereunder with respect to the matters set forth in this By- Law. For purposes of these By-Laws, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Company with 3 - 3 - the Securities and Exchange Commission pursuant to Section 13, 14 or 15(b) of the Exchange Act. Nothing in this By-Law shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 5. Special Meetings Special meetings of stockholders for any proper purpose or purposes, unless otherwise provided by the law of Delaware, may be called by the Chairman of the Board or the President, or pursuant to resolution of the Board of Directors. Business transacted at a special meeting of stockholders shall be confined to the purpose or purposes of the meeting as stated in the notice of the meeting. Any previously scheduled special meeting of the stockholders may be postponed by resolution of the Board of Directors upon public notice given on or prior to the date previously scheduled for such special meeting of stockholders. 6. Place of Meetings All meetings of stockholders shall be held at the General Offices of the Company in the County of St. Louis, State of Missouri, unless otherwise determined by resolution of the Board of Directors. 7. Notice of Meetings Except as otherwise required by the law of Delaware, notice of each meeting of the stockholders, whether annual or special, shall, at least ten days but not more than sixty days before the date of the meeting, be given to each stock- holder of record entitled to vote at the meeting by mailing such notice in the United States mail, postage prepaid, addressed to him at his address as the same appears on the records of the Company. Such notice shall state the place, date and hour of the meeting, and in the case of a special meeting, shall also state the purpose or purposes thereof. 8. Nominations of Directors (a) Only persons who are nominated in accordance with the procedures set forth in these By-Laws shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Company who is a 4 - 4 - stockholder of record at the time of giving of the notice provided for in this By-Law, who shall be entitled to vote for the election of Directors at the meeting and who com- plies with the notice procedures set forth in this By-Law. (b) Nominations by stockholders shall be made pursuant to notice in writing, delivered or mailed to the Secretary and received at the General Offices of the Company (i) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting, provided, however, that in the event that the date of the meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder must be received not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of the meeting is first made; or (ii) in the case of a special meeting at which directors are to be elected, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the tenth day following the day on which public announcement of the date of the meeting and of the nominees proposed by the Board of Directors to be elected at such meeting is first made. In the case of a special meeting of stockholders at which directors are to be elected, stockholders may nominate a person or persons (as the case may be) for election only to such position(s) as are specified in the Company's notice of meeting as being up for election at such meeting. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, all information relating to such person that would be required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named as a nominee and to serving as a Director if elected); (ii) as to the stockholder giving the notice, the name and address, as they appear on the Company's books, of such stockholder and the class and number of shares of the Company's stock which are benefi- cially owned by such stockholder; and (iii) as to any beneficial owner on whose behalf the nomination is made, the name and address of such person and the class and number of shares of the Company's stock which are beneficially owned by such person. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. 5 - 5 - Notwithstanding anything in this By-Law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Company is increased and there is no public statement naming all the nominees for Director or specifying the size of the increased Board of Directors made by the Company at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the General Offices of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company. (c) No person shall be eligible for election as a Director of the Company unless nominated in accordance with the procedures set forth in these By-Laws. The chairman of the meeting may, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed in this By-Law; and if he should so determine, he shall so declare to the meeting, and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this By-Law, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this By-Law. 9. List of Stockholders (a) The Secretary of the Company shall prepare, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. (b) The stock ledger of the Company shall be the only evidence as to the stockholders entitled to vote in person or by proxy at any meeting of stockholders, or to exercise the rights in accordance with Delaware law to examine the stock ledger, the list required by this By-Law or the books 6 - 6 - and records of the Company. 10. Quorum The holders of a majority of the stock issued and outstand- ing and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at all meetings of the stock- holders, except as otherwise provided by the law of Delaware, by the Certificate of Incorporation or by these By-Laws. The stockholders present at any duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of sufficient stockholders to constitute the remaining stockholders less than a quorum. Whether or not a quorum is present, either the Chairman of the meeting or a majority of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which the requisite amount of voting stock shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. 11. Voting and Required Vote Subject to the provisions of the Certificate of Incorporation, each stockholder shall, at every meeting of stockholders, be entitled to one vote for each share of capital stock held by such stockholder. Subject to the provisions of the Certificate of Incorporation and Delaware law, Directors shall be chosen by the vote of a plurality of the shares present in person or represented by proxy at the meeting; and all other questions shall be determined by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting. Elections of Directors shall be by written ballot. 12. Proxies Each stockholder entitled to vote at a meeting of stock- holders may authorize another person or persons to act for him by proxy, provided the instrument authorizing such proxy to act shall have been executed in writing in the manner prescribed by law. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. 7 - 7 - 13. Inspectors of Election; Polls Before each meeting of stockholders, the Chairman of the Board or another officer of the Company designated by resolution of the Board of Directors shall appoint one or more inspectors of election for the meeting and may appoint one or more inspectors to replace any inspector unable to act. If any of the inspectors appointed shall fail to attend, or refuse or be unable to serve, substitutes shall be appointed by the Chairman of the meeting. Each inspector shall have such duties as are provided by law, and shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. The Chairman of the meeting shall fix and announce at the meeting the date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting. 14. Organization The Chairman of the Board of Directors, or in his absence, the President, one of the Vice Chairmen of the Board, if any, in such order as may be designated by the Chairman of the Board, in that order, or in the absence of each of them, a chairman chosen by a majority of the Directors present, shall act as chairman of the meetings of the stockholders. The order of business and the procedure at any meeting of stockholders shall be determined by the chairman of the meeting. BOARD OF DIRECTORS ------------------ 15. General Powers, Number, Term of Office The business of the Company shall be managed under the direction of its Board of Directors. The number of Direc- tors which shall constitute the whole Board shall be fixed, from time to time, by resolutions adopted by the Board, but shall not be less than three persons. Except as hereinafter provided, the Directors shall be elected at the annual meeting of stockholders and each Director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Directors need not be stockholders of the Company or residents of the State of Delaware. 16. Vacancies Any vacancy in the office of Director, whether by reason of death, resignation or removal from office, or resulting from an increase in the authorized number of Directors, or otherwise, may be filled by the affirmative vote of a majority of 8 - 8 - the Directors then in office, although less than a quorum, or by a sole remaining Director. Each such Director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. 17. Regular Meetings Following the annual meeting of stockholders, the first meeting of each newly elected Board of Directors may be held, without notice, on the same day and at the same place as such stockholders' meeting. The Board of Directors by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be given promptly to each director, as provided in Section 19 below, who was not present at the meeting at which such action was taken. 18. Special Meetings Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board of Directors or the President, or in the absence of each of them, by any Vice Chairman of the Board, in such order as may be designated by the Chairman of the Board, or by the Secretary at the written request of two or more Directors. 19. Notices Notice of any special meeting of the Board of Directors shall be addressed to each Director at his residence or business address and shall be sent to him by mail, electronic mail, telecopier, telegram or telex or telephoned or delivered to him personally. If such notice is sent by mail, it shall be sent not later than three days before the day on which the meeting is to be held. If such notice is sent by electronic mail, telecopier, telegram or telex, it shall be sent not later than 12 hours before the time at which the meeting is to be held. If such notice is telephoned or delivered personally, it shall be received not later than 12 hours before the time at which the meeting is to be held. Such notice shall state the time, place and purpose or purposes of the meeting. 20. Quorum One-third of the total number of Directors constituting the whole Board, but not less than two, shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such required number of 9 - 9 - Directors for a quorum is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. Except as otherwise specifically provided by the law of Delaware, the Certificate of Incorporation or these By-Laws, the act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. 21. Organization At each meeting of the Board of Directors, the Chairman of the Board or, in his absence, the President, or any Vice Chairman of the Board in such order as may be designated by the Chairman of the Board, in that order, or in the absence of each of them, a chairman chosen by a majority of the Directors present, shall act as chairman of the meeting, and the Secretary or, in his absence, an Assistant Secretary or any employee of the Company appointed by the chairman of the meeting, shall act as secretary of the meeting. 22. Resignations Any Director may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary of the Company. Such resignation shall take effect upon receipt thereof or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 23. Action Without a Meeting Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 24. Location of Books Except as otherwise provided by resolution of the Board of Directors and subject to the law of Delaware, the books of the Company may be kept at the General Offices of the Company and at such other places as may be necessary or convenient for the business of the Company. 10 - 10 - 25. Dividends Subject to the provisions of the Certificate of Incorporation and the law of Delaware, dividends upon the capital stock of the Company may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the Company's capital stock. 26. Compensation of Directors Directors shall receive such compensation and benefits as may be determined by resolution of the Board for their services as members of the Board and committees. Directors shall also be reimbursed for their expenses of attending Board and committee meetings. Nothing contained herein shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. 27. Additional Powers In addition to the powers and authorities by these By-Laws expressly conferred upon it, the Board of Directors may exercise all such powers of the Company and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. COMMITTEES OF DIRECTORS ----------------------- 28. Designation, Power, Alternate Members The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate an Execu- tive Committee and one or more additional committees, each committee to consist of two or more of the Directors of the Company. Any such committee, to the extent provided in said resolution or resolutions and subject to any limitations provided by law, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Company. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one or more of the members thereof is absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may 11 - 11 - unanimously appoint another Director to act at the meeting in the place of such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board; provided, however, that any committee member who ceases to be a member of the Board shall ipso facto cease to be a committee member. 29. Quorum, Manner of Acting At any meeting of a committee, the presence of one-third, but not less than two, of its members then in office shall constitute a quorum for the transaction of business; and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the committee. Each committee may provide for the holding of regular meetings, make provision for the calling of special meetings and, except as otherwise provided in these By-Laws or by resolution of the Board of Directors, make rules for the conduct of its business. 30. Minutes The committees shall keep minutes of their proceedings and report the same to the Board of Directors when required; but failure to keep such minutes shall not affect the validity of any acts of the committee or committees. ADVISORY DIRECTORS ------------------ 31. Advisory Directors The Board of Directors may, by resolution adopted by a majority of the whole Board, appoint such number of senior executives of the Company as Advisory Directors as the Board may from time to time determine. The Advisory Directors shall have such advisory responsibilities as the Chairman of the Board may designate and the term of office of such Advisory Directors shall be as fixed by the Board. OFFICERS -------- 32. Designation The officers of the Company shall be a Chairman of the Board, and a President, one of whom shall be designated by the Board of Directors as the Chief Executive Officer, one or more Vice Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors may also elect one or more Vice Chairmen of the Board, one or more Executive Vice Presidents, Senior Vice Presidents, Group Vice Presidents, Deputy and Assistant Secretaries, Deputy and Assistant Treasurers, Deputy and Assistant Controllers and such other 12 - 12 - officers as it shall deem necessary. Any number of offices may be held by the same person. The Chairman of the Board of Directors, the President and the Vice Chairmen of the Board shall be chosen from among the Directors. 33. Election and Term At its first meeting after each annual meeting of stockholders, the Board of Directors shall elect the officers of the Company and at any time thereafter the Board may elect additional officers of the Company, and each such officer shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Alternatively, at the last regular meeting of the Board of Directors prior to an annual meeting of stockholders, the Board of Directors may elect the officers of the Company, contingent upon the election of the persons nominated to be directors by the Board of Directors; and each such officer so elected shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. 34. Removal Any officer shall be subject to removal or suspension at any time, for or without cause, by the affirmative vote of a majority of the whole Board of Directors. 35. Resignations Any officer may resign at any time by giving written notice to the Chairman of the Board, the President or to the Secretary. Such resignation shall take effect upon receipt thereof or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 36. Vacancies A vacancy in any office because of death, resignation, removal or any other cause may be filled for the unexpired portion of the term by the Board of Directors. 37. Compensation The salaries of all vice presidents and higher ranking officers of the Company shall be fixed by the Executive Compensation and Development Committee of the Board of Directors. 13 - 13 - 38. Chairman of the Board The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors, except as may be otherwise required under the law of Delaware. He shall act in an advisory capacity with respect to matters of policy and other matters of importance pertaining to the affairs of the Company. He, alone or with the President, one or more of the Vice Chairmen of the Board, and/or the Secretary shall sign and send out reports and other messages which are to be sent to stockholders from time to time. He shall also perform such other duties as may be assigned to him by these By-Laws, the Board of Directors or, if applicable, the Chief Executive Officer. 39. President The President shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. He shall perform such other duties as may be assigned to him by these By-Laws, the Board of Directors or, if applicable, the Chief Executive Officer. 40. Chief Executive Officer The Chief Executive Officer shall have the general and active management and supervision of the business of the Company. He shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall also perform such other duties as may be assigned to him by these By-Laws or the Board of Directors. The Chief Executive Officer shall designate who shall perform the duties of the Chief Executive Officer in his absence. 41. Vice Chairmen of the Board The Vice Chairmen of the Board shall, in the absence of the Chairman of the Board and the President, and in such order as may be designated by the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. They shall perform such other duties as may be assigned to them by these By-Laws, the Board of Directors or the Chief Executive Officer. 42. Executive, Senior, Group and other Vice Presidents Each Executive Vice President, Senior Vice President, Group Vice President and each other Vice President shall perform the duties and functions and exercise the powers assigned to him by the Board of Directors or the Chief Executive Officer. 14 - 14 - 43. Secretary The Secretary shall attend all meetings of the Board of Directors and of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors and, when appropriate, shall cause the corporate seal to be affixed to any instruments executed on behalf of the Company. The Secretary shall also perform all duties incident to the office of Secretary and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chairman of the Board or the Chief Executive Officer. 44. Assistant Secretaries The Assistant Secretaries shall, during the absence of the Secretary, perform the duties and functions and exercise the powers of the Secretary. Each Assistant Secretary shall perform such other duties as may be assigned to him by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the Secretary. 45. Treasurer The Treasurer shall have the custody of the funds and securities of the Company and shall deposit them in the name and to the credit of the Company in such depositories as may be designated by the Board of Directors or by any officer or officers authorized by the Board of Directors to designate such depositories; disburse funds of the Company when properly authorized by vouchers prepared and approved by the Controller; and invest funds of the Company when authorized by the Board of Directors or a committee thereof. The Treasurer shall render to the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance, whenever requested, an account of all his transactions as Treasurer and shall also perform all duties incident to the office of Treasurer and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance. 15 - 15 - 46. Assistant Treasurers The Assistant Treasurers shall, during the absence of the Treasurer, perform the duties and functions and exercise the powers of the Treasurer. Each Assistant Treasurer shall perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance, the Vice President-Finance or the Treasurer. 47. Controller The Controller shall keep full and accurate account of receipts and disbursements in books of the Company and render to the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance, whenever requested, an account of all his transactions as Controller and of the financial condition of the Company. The Controller shall also perform all duties incident to the office of Controller and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance. 48. Assistant Controllers The Assistant Controllers shall, during the absence of the Controller, perform the duties and functions and exercise the powers of the Controller. Each Assistant Controller shall perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance, the Vice President-Finance or the Controller. COMPANY CHECKS, DRAFTS AND PROXIES ---------------------------------- 49. Checks, Drafts All checks, drafts or other orders for the payment of money by the Company shall be signed by such person or persons as from time to time may be designated by the Board of Directors or by any officer or officers authorized by the Board of Directors to designate such signers; and the Board of Directors or such officer or officers may determine that the signature of any such authorized signer may be facsimile. 50. Proxies Except as otherwise provided by resolution of the Board of Directors, the Chairman of the Board, the President, any Vice Chairman of the Board, any Vice President, the 16 - 16 - Treasurer and any Assistant Treasurer, the Controller and any Assistant Controller, the Secretary and any Assistant Secretary of the Company, shall each have full power and authority, in behalf of the Company, to exercise any and all rights of the Company with respect to any meeting of stockholders of any corporation in which the Company holds stock, including the execution and delivery of proxies therefor, and to consent in writing to action by such corporation without a meeting. CAPITAL STOCK ------------- 51. Stock Certificates Each holder of stock in the Company shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairman of the Board, the President, any Vice Chairman of the Board, any Executive Vice President, any Senior Vice President, any Group Vice President or any other Vice President, and by the Secretary or any Assistant Secretary of the Company certifying the number of shares owned by him in the Company. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he or it were such officer, transfer agent or registrar at the date of issue. 52. Record Ownership The Company shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, whether or not the Company shall have notice thereof, except as otherwise provided by the law of Delaware. 53. Record Dates (a) In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which shall not be 17 - 17 - more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. (b) In order that the Company may determine the stock- holders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board of Directors pursuant to the first sentence of this paragraph). If no record date has been fixed by the Board of Directors pursuant to the first sentence of this paragraph or otherwise within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the corpora- tion having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors, and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. (c) In the event of the delivery, in the manner provided by paragraph (b) of this By-Law, to the Company of the requisite written consent or consents to take corporate action, the Company may engage inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and any revocations with respect to such consents. For the purpose of permitting the inspectors to perform such review, no action by written 18 - 18 - consent without a meeting shall be effective until such date as the inspectors certify to the Company that the consents delivered to the Company in accordance with paragraph (b) of this By-Law represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this paragraph (c) shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). 54. Transfer of Stock Transfers of shares of stock of the Company shall be made only on the books of the Company by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or a transfer agent of the Company, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. 55. Lost, Stolen or Destroyed Certificates The Board of Directors may authorize a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost, stolen or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. 56. Terms of Preferred Stock The provisions of these By-Laws, including those pertaining to voting rights, election of Directors and calling of special meetings of stockholders, are subject to the terms, preferences, rights and privileges of any then outstanding class or series of Preferred Stock as set forth in the Certificate of Incorporation and in any resolutions of the 19 - 19 - Board of Directors providing for the issuance of such class or series of Preferred Stock; provided, however, that the provisions of any such Preferred Stock shall not affect or limit the authority of the Board of Directors to fix, from time to time, the number of Directors which shall constitute the whole Board as provided in Section 15 above, subject to the right of the holders of any class or series of Preferred Stock to elect additional Directors as and to the extent specifically provided by the provisions of such Preferred Stock. INDEMNIFICATION --------------- 57. Indemnification (a) The Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any claim, action, suit, or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a Director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, non-profit entity, or other enterprise, including service with respect to employee benefit plans, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person. The right to indemnification conferred in this By-Law shall be a contract right. Except as provided in paragraph (c) of this By-Law with respect to proceedings seeking to enforce rights to indemnification, the Company shall indemnify a person in connection with a proceeding initiated by such person or a claim made by such person against the Company only if such proceeding or claim was authorized by the Board of Directors of the Company. (b) The Company shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that if and to the extent -------- ------- required by law the payment of expenses incurred by any person covered hereunder in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by or on behalf of the affected person to repay all amounts advanced if it should ultimately be determined that such person is not entitled to be indemnified under this By-Law or otherwise. 20 - 20 - (c) If a claim for indemnification or payment of expenses under this By-Law is not paid in full within thirty days, or such other period as might be provided pursuant to contract, after a written claim therefor has been received by the Company, the claimant may file suit to recover the unpaid amount of such claim or may seek whatever other remedy might be provided pursuant to contract. In any such action the Company shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law. If successful in whole or in part, claimant shall be entitled to be paid the expense of prosecuting such claim. Neither the failure of the Company (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Company (including its Board of Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (d) Any determination regarding whether indemnification of any person is proper in the circumstances because such person has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware shall be made by independent legal counsel selected by such person with the consent of the Company (which consent shall not unreasonably be withheld). (e) The rights conferred on any person by this By-Law shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (f) Any repeal or modification of the foregoing provisions of this By-Law 57 shall not adversely affect any right or protection hereunder of any person with respect to any act or omission occurring prior to or at the time of such repeal or modification. 21 - 21 - MISCELLANEOUS ------------- 58. Corporate Seal The seal of the Company shall be circular in form, containing the words "Monsanto Company" and the word "Delaware" on the circumference surrounding the word "Seal." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 59. Fiscal Year The fiscal year of the Company shall begin on the first day of January in each year. 60. Auditors The Board of Directors shall select certified public accoun- tants to audit the books of account and other appropriate corporate records of the Company annually and at such other times as the Board shall determine by resolution. 61. Waiver of Notice Whenever notice is required to be given pursuant to the law of Delaware, the Certificate of Incorporation or these By-Laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of stockholders or the Board of Directors or a committee thereof shall constitute a waiver of notice of such meeting, except when the stockholder or Director attends such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or by these By-Laws. AMENDMENT TO BY-LAWS -------------------- 62. Amendments These By-Laws may be altered, amended or repealed by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote, cast at any annual or special meeting of the stockholders or by the affirmative 22 - 22 - vote of a majority of the whole Board of Directors at any regular or special meeting of the Board of Directors. ---------------------------- EMERGENCY BY-LAWS ----------------- These Emergency By-Laws, notwithstanding any different provision in the Certificate of Incorporation or By-Laws, shall be operative during any emergency resulting from an attack on the United States or on a locality in which the Company conducts its business or customarily holds meetings of the Board of Directors or its stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a committee thereof cannot be readily convened for action. These Emergency By-Laws shall cease to be operative upon termination of such emergency. During any such emergency: (a) A meeting of the Board of Directors or a committee thereof may be called by any officer or Director. Notice of the time and place of the meeting shall be given by the person calling the meeting to only such of the Directors as it may be feasible to reach at the time and by such means as may be feasible at the time. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting. (b) The officers or other persons designated on a list approved by the Board of Directors before the emergency, all in such order or priority and subject to such conditions and for such period of time (not longer than reasonably necessary after the termination of the emergency) as may be provided in the resolution approving the list, shall, to the extent required to constitute a quorum at any meeting of the Board of Directors during the emergency, be deemed Directors for such meeting. If at the time of the emergency the Board of Directors has not approved such a list of persons, then to the extent required to constitute a quorum at any meeting of the Board of Directors during the emergency, the officers of the Company who are present shall be deemed, in order of rank and within the same rank in order of seniority, Directors for such meeting. Two Directors (including persons deemed to be Directors) in attendance at the meeting shall constitute a quorum. (c) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, 23 - 23 - lines of succession in the event that during such an emergency any or all officers or agents of the Company shall for any reason be rendered incapable of discharging their duties. (d) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the General Offices or designate several alternative General Offices or regional offices, or authorize an officer, or officers, so to do. No officer, Director or employee acting in accordance with these Emergency By-Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders, but no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action taken prior to the time of such repeal or change. Any amendment of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. EX-10.1 3 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1984 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1984 (As Amended) [This Plan was originally approved by the Company's Stockholders on April 27, 1984. Amendments were approved by the Board of Directors on February 27, 1987, March 25, 1988, September 22, 1989 and April 25, 1997 and by the Stockholders on April 24, 1987.] 2 Monsanto Management Incentive Plan of 1984 (As Amended) I. General Provisions 1. Purposes The Monsanto Management Incentive Plan of 1984 is designed to attract and retain for the Company and its Subsidiaries personnel of exceptional ability; to motivate such personnel through added incentives to make a maximum contribution to greater profitability; to develop and maintain a highly competent management team; and to be competitive with other companies in the executive compensation area. This Incentive Plan is composed of (a) the 1984 Stock Option Plan and (b) the 1984 Performance Incentive Plan, and shall be effective January 1, 1984 ("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 out- standing shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Board" means Board of Directors of the Company. "Committee" means the Executive Compensation and Development Committee or such other committee consisting of three or more members of the Board as may be appointed by the Board to administer this Incentive Plan pursuant to Section 3(a) of this Article I. "Company" means Monsanto Company, a Delaware corporation. "Eligible Participant" means any officer or other salaried employee (including a director who is a salaried employee) of the Company or a Subsidiary. "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest prices of the Shares reported as 3 -2- the New York Stock Exchange-Composite Transactions for such day, or if the Shares were not traded on such day, then on the next preceding day on which the Shares were traded, all as reported by such source as the Committee may select. "Incentive Plan" means the Monsanto Management Incentive Plan of 1984, as amended, set forth herein. "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. "1974 Plan" means the Monsanto Management Incentive Plan of 1974, 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. "Option Plan" or "1984 Stock Option Plan" means the 1984 Stock Option Plan set forth in 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. "Performance Incentive Plan" or "1984 Performance Incentive Plan" means the bonus plan set forth in Article III of this Incentive Plan. "Performance Year" means the year or years for which a bonus is awarded or a bonus commitment is made under the 1984 Performance Incentive Plan. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Article IV 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. 4 -3- "Stock Appreciation Right" means a right referred to in Section 5 of Article II of this Incentive Plan. "Stock Appreciation Right Fair Market Value" or "SAR Fair Market Value" shall mean a value established by the Committee for the exercise of a Stock Appreciation Right. If such exercise occurs during any quarterly "window period" as specified by Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended from time to time, or any law, rule, regulation or other provision that may hereafter replace such Rule, the Committee may establish a common value for exercises during such window period. "Stock Option" or "Option" shall mean Incentive Stock Options and/or Non-Qualified Stock Options. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; and (ii) for the purposes of a Non- Qualified Stock Option, a Stock Appreciation Right, and the 1984 Performance Incentive Plan, 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 and the 1984 Performance Incentive Plan, a change of 5 -4- 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 Committee. No person shall be eligible or continue to serve as a member of such Committee unless such person is a "disinterested person" within the meaning of Rule l6b-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 no person shall be eligible for the grant of a Stock Option or Stock Appreciation Right, the receipt of a bonus commitment or the award of a bonus (including, without limitation, Restricted Shares) under this Incentive Plan while serving as a member of such Committee. (b) The Committee shall have the exclusive right to interpret this Incentive Plan, to select the persons who are to receive Stock Options, Stock Appreciation Rights, bonus commitments and bonus awards, and to act in all matters pertaining to the granting of Options, Stock Appreciation Rights, the making of bonus commitments and the awarding of bonuses under this Incentive Plan including, without limitation, the determination of the number of Shares to be subject to and the form, terms, conditions and duration of each Stock Option and Stock Appreciation Right, and the amount, form, terms and conditions of each bonus commitment and bonus award, and the amendment thereof consistent with the provisions of this Incentive Plan. 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 Participants. (c) The Committee may adopt 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 6 -5- Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Options, Stock Appreciation Rights, bonus commitments and bonus awards (including, without limitation, awards of Restricted Shares) in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corporation; a sale or transfer of all or substantially all of the assets of the Company to another corporation or any other person or entity, a 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, bonus commitments and bonus awards (including, without limitation, awards of Restricted Shares) 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 Option and Stock Appreciation Right grants, bonus commitments and bonus awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the grants, commitments or awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganization. 4. Share Adjustments In the event that at any time or from time to time a stock dividend, stock split, recapitalization, merger, consolidation, or other change in capitalization, or a sale by the Company of all or part of its assets, or any distribution to stockholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or 7 -6- 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 limitation of 2,000,000 Shares set forth in Section l(a) of Article II and Section 2(b) of Article III of 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 are subject to a bonus commitment or have been awarded but are undelivered under the 1984 Performance 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 equitably adjusted; 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 422A of the Internal Revenue Code of 1954, as amended from time to time, or any provisions that may hereafter be enacted in lieu thereof. II. 1984 Stock Option Plan 1. Option Shares (a) (i) The total number of Shares for which Options may be granted under this Option Plan shall not exceed 2,000,000 Shares, subject to: (A) the adjustments provided for in Section 4 of Article I of this Incentive Plan; (B) the provisions of Section l(b) of this Article II; and (C) reduction by the number of Shares committed or awarded pursuant to Article 8 -7- III of this Incentive Plan. Such Shares may be authorized but unissued, or treasury Shares, or both. (ii) The total number of Shares for which Options may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in the aggregate 5% of the total number of Shares for which Options may be granted under this Incentive Plan, subject to the adjustments provided for in Section 4 of Article I of this Incentive Plan. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section 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 limitation of 2,000,000 Shares set forth in Section 1(a) of this Article II. 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 1(a) of this Article II. (c) In the event of Termination of Employment or disability, hardship or unusual circumstances 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 1(a) of this Article II. 9 -8- 2. Incidents of Options and Stock Appreciation Rights (a) 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 and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. (b) A 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. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) No cash dividends shall be paid on Shares subject to unexercised Stock Options. The Committee may provide, however, that a Participant to whom an Option has been granted which is exercisable in whole or in part at a future time for Shares (including Restricted Shares) 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 grant and the time each such Share is delivered pursuant to exercise of such Stock Option or the related Stock Appreciation Right. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be: 10 -9- (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; or (ii) converted into contingently credited Shares (with respect to which dividend equivalents may 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 l(a) of this Article II. (e) The Committee, in its discretion, may authorize payment of interest equivalents on dividend equivalents which are payable in cash at a future time. 3. Incentive Options An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422A of the Internal Revenue Code of 1954, as 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 Option 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. The total number of Shares for which Incentive Stock Options may be granted under this Option Plan shall not exceed the total specified in Section l(a) of this Article II. 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 December 31, 1993, 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. 11 -10- (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 three months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee, in which event such period shall not exceed-- (A) in the case of an Option, the original term of the Option; and (B) in the case of a Stock Appreciation Right, one year after such retirement or disability or after resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) of this Article II); or (ii) as a result of death or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are first exercisable during any calendar year by any eligible Participant shall not exceed $100,000. 12 -11- (d) 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 Option Plan as determined by the Committee. 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. (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 and thirty (30) days from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that 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 three months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company 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 13 -12- resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) 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 shall meet all of the conditions, other than the date of issuance, of a "Restricted Stock Option" as defined in Section 424(b) of the Internal Revenue Code of 1954, as amended from time to time, as in effect at the time of grant of such Option, or any statutory provision that may be enacted to replace such Section. (d) The Option grant may include any other terms and conditions not inconsistent with this Option Plan as determined by the Committee, including provisions making the Shares subject to such Option Restricted Shares. 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 Option Plan or a Non-Qualified Option granted under the 1974 Stock Option Plan which constitutes part of the 1974 Plan, subject to the following terms and conditions: (a) Such Stock Appreciation Right shall entitle a holder of an Option within the period specified for the exercise of the Option in the related Option grant to surrender the unexercised Option (or a portion thereof) and to receive in exchange therefor a payment in cash or Shares having an aggregate value equal to the product of (i) the amount by which (A) the SAR Fair Market Value of each 14 -13- Share exceeds (B) the Option price per Share, times (ii) the number of Shares under the Option, or portion thereof, which is surrendered. (b) Each Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Option. It shall be exercisable only to the extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The Committee may grant Stock Appreciation Rights concurrently with grants of Options or in connection with previously granted Options under this Incentive Plan or the 1974 Stock Option Plan which are unexercised and have not terminated or lapsed. With respect to Stock Appreciation Rights granted in connection with such previously granted Options, the Committee shall provide that such Stock Appreciation Rights shall not be exercisable until the holder completes six (6) months (or such longer period as the Committee shall determine) of service with the Company, a Subsidiary, or an Associated Company immediately following the date of the grant of such Stock Appreciation Rights. (c) The Committee shall have sole discretion to determine in each case whether the payment will be in the form of all cash, all Shares (which may, at the Committee's discretion, be Restricted Shares), or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined as follows: the amount payable in Shares shall be divided by the SAR Fair Market Value of Shares. 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 l6b-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 15 -14- Appreciation Right shall be exercised, any Shares transferred upon such exercise shall not be charged against the maximum limitations upon the grant of Options set forth in the Plan under which such Option shall have been granted but the Option in connection with which a Stock Appreciation Right shall have been granted shall be deemed to have been exercised for the purpose of such maximum limitations. (e) The Committee shall have 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 16 -15- (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; 17 -16- (iii) "Change of Control Termination of Employment" means the termination of employment of a Participant by the Company, the Subsidiaries or the Associated Companies without cause (as defined by the Committee) or by the Participant for good reason (as defined by the Committee) within a period of time specified by the Committee following an Alternate Change of Control; (iv) "Alternate Change of Control Market Value" of the Shares means the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Alternate Change of Control and a Change of Control Termination of Employment, a Participant holding an unexercised Stock Appreciation Right who is selected by the Committee may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Alternate Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of the Company, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only during the thirty (30) day period following a Change of Control Termination of Employment. III. 1984 Performance Incentive Plan 1. Bonus Commitments and Awards (a) Bonus Commitments A commitment to award a bonus at a future date for all or part of any Performance Year may be made at such time or times determined 18 -17- by the Committee following the Effective Date to any person who is an Eligible Participant at the time of such commitment. The Committee shall have full discretion to determine the terms and conditions of the commitment including, without limitation, whether the corresponding bonus award shall be contingent upon the attainment of prescribed goals as to net earnings per share or other wise and provisions with respect to the rights of the Participant's legal representative in the event of his death. (b) Bonus Awards A bonus may be awarded at such time or times determined by the Committee following the Effective Date to any person who was an Eligible Participant during all or part of any Performance Year, payable either wholly in cash or wholly in Shares, or partially in cash and partially in Shares. 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 cash, unrestricted Shares and Restricted Shares, the time or times of payment of any award, and the time or times of the lapse of the restrictions on Restricted Shares. Any Eligible Participant may receive more than one bonus award for a Performance Year and any bonus award may be made pursuant to or without a prior commitment to make such award. 2. Bonus Shares--Source, Limit and Valuation (a) Shares used for bonus purposes may be authorized but unissued Shares, treasury Shares, or any combination thereof. Any Shares held by the Company for use under this Performance Incentive Plan shall, unless and until transferred in payment of an award in accordance with this Performance Incentive Plan, remain the property of the Company, irrespective of whether such Shares are entered in a special bonus account, and such Shares shall at all times be available, unless and until so transferred, for any corporate purpose. (b) The total number of Shares which may be awarded pursuant to bonus awards under this Performance Incentive Plan shall not exceed 2,000,000 shares, subject to: 19 -18- (i) the adjustments provided for in Section 4 of Article I of this Incentive Plan; and (ii) reduction by the number of Shares for which Stock Options have been granted pursuant to Article II of this Incentive Plan (except as provided in Section l(b) of said Article II). (c) 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. 3. Awards (a) Subject to the provisions of Section 3(f) of this Article III, bonus commitments and bonus awards may be made by the Committee at such time or times as may be determined by the Committee. The Committee may, in its discretion, allow any Participant who receives a bonus award or bonus commitment under this Incentive Plan to elect to defer payment of such award, or of any award to be made pursuant to such bonus commitment, in accordance with such terms and conditions and in such manner as the Committee may prescribe. Any amendment of any bonus commitment and bonus award by the Committee pursuant to Article I, Section 3 of this Incentive Plan shall not be considered the grant of a new bonus commitment or bonus award for purposes of Section 2(b) of this Article III. (b) Commitments to make payment on account of bonuses for a Performance Year may be made by the Committee in advance of the close of such Performance Year upon such terms and conditions as the Committee may determine. (c) The portion of a bonus award payable in cash or unrestricted Shares or both may, in the discretion of the Committee, be paid or delivered in whole or in part at such time or times and under such terms and conditions as may be determined by the Committee including, but not limited to, the following times: 20 -19- (i) in full at the time of the award; or (ii) in any number of annual installments, equal or unequal, during employment or following Termination of Employment; or (iii) in full after a period of time. (d) In the event that any bonus commitment or bonus award or installment thereof which is to be paid in Shares ceases to be payable for any reason, the Shares subject to such bonus commitment or bonus award shall again be available for bonus purposes without again being charged against the limitation of 2,000,000 Shares set forth in Section 2(b) of this Article III. (e) The portion of an award payable in Restricted Shares shall be paid at the time of the award 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 who shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including forfeitures or resale to the Company, if any, as may be determined by the Committee and to the restrictions and provisions pursuant to Article IV of this Incentive Plan. 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. (f) Anything in this Incentive Plan to the contrary notwithstanding, no bonus awards shall be made for any Performance Year during which no dividend on the outstanding Shares has been paid; bonus awards covering more than one Performance Year and made pursuant to a bonus commitment shall be reduced by the ratio of the number of such Performance Years during which no dividends were paid to the number of Performance Years covered by the bonus awards. 21 -20- 4. Dividends, Dividend Equivalents and Interest Equivalents (a) No cash dividends shall be paid on Shares which have been awarded but not delivered. The Committee may provide, however, that a Participant to whom a bonus has been awarded which is payable in whole or in part at a future time in Shares shall be entitled to receive an amount per Share, equal in value to the cash divi- dends, 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 (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 2(b) of this Article III. (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. 5. Death of Participant Following the death of a Participant, all unpaid cash awards and all undelivered unrestricted Share awards to such Participant hereunder, together with all dividend equivalents and interest equivalents, if any, payable in connection with any such award or awards, which have not been cancelled and which are not then cancellable shall be paid and delivered to his legal representative at the time or times provided for in the award unless the Committee shall otherwise direct. The Committee may, in its discretion, permit a Participant to designate a beneficiary or 22 -21- beneficiaries to receive such award or awards. Restricted Shares held by such Participant at the time of his death shall be governed by the provisions of Article IV of this Incentive Plan. IV. Restricted Shares 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, or for such other reasons as the Committee may deem appropriate 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, or in the event of a Transfer of the Participant requiring his relocation to another country. 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. V. Miscellaneous Provisions 1. Neither a Stock Option, Stock Appreciation Right, bonus commitment nor an unpaid bonus award or any installment thereof, shall be transferable except as provided for herein in the case of death. If any Participant makes such a transfer in violation hereof, any obligation of the Company shall forthwith terminate. 23 -22- 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 payment of all or any portion of such award or another award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or cancelling any portion of such award or another award under this Incentive Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Company for the purpose of paying such award or another award under this Incentive Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. 6. 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 24 -23- Associated Company of the Company), such change of employment shall not constitute a Termination of Employment. VI. 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 bonus commitments and bonus awards payable in other securities or other forms of property of a kind to be determined by the Committee, in addition to cash, unrestricted Shares and Restricted Shares, and such other amendments as may be necessary or desirable to implement such commitments and 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 stock- holders normally entitled to vote for the election of directors of the Company: (a) change the number of Shares for which Stock Options may be granted, or the percentage thereof which may be made subject to Options to any one Eligible Participant, as set forth in Section 1(a) of Article II of this Incentive Plan; (b) change the total number of Shares which may be awarded pursuant to bonus awards as provided for in Section 2(b) of Article III of this Incentive Plan; (c) make any member of the Committee eligible for the grant of a Stock Option, Stock Appreciation Right or a bonus commitment or a bonus award; (d) limit or restrict the powers of the Committee with respect to the administration of this Incentive Plan; (e) change the definition of an Eligible Participant for the purpose of an Incentive Stock Option or increase the limit or the value of Shares for which an Eligible Participant may be granted an Incentive Stock Option; 25 -24- (f) materially increase the benefits accruing to Participants under this Incentive Plan; (g) materially modify the requirements as to eligibility for participation in this Incentive Plan; or (h) change any of the provisions of this Article VI. 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. VII. Interpretation 1. Except as authorized herein with respect to Stock Appreciation Rights, this Incentive Plan is not intended to and shall not affect any option or stock appreciation right grant or bonus commitment or award under the 1974 Plan (or any other incentive plan of the Company, its Subsidiaries and Associated Companies). No stock options or stock appreciation rights shall be granted under the 1974 Plan after the Effective Date. No bonus commitments or bonus awards shall be made under the 1974 Plan after the Effective Date and no bonus commitments or bonus awards shall be made under this Incentive Plan with respect to Performance Years prior to the Effective Date hereof, except that bonus awards may be made under the 1974 Plan (a) with respect to Performance Years ending prior to the Effective Date or (b) pursuant to bonus commitments made on or prior to December 31, 1983. 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 26 -25- made thereunder independently of this Incentive Plan; provided, however, that (i) no director of the Company and no officer of the Company elected by the Board (other than assistant officers ) shall participate in any Other Plan, except the Monsanto Management Incentive Plan of 1988/I and (ii) no such Other Plan, other than a stock option plan for G. D. Searle & Co., the Monsanto Management Incentive Plan of 1988/I or the Monsanto Management Incentive Plan of 1988/II 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 1984 Incentive Plan, unless 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 425(a) of the Internal Revenue Code of 1954, as amended from time to time, as in effect at the time. EX-10.2 4 SEARLE MONSANTO STOCK OPTION PLAN OF 1986 1 SEARLE MONSANTO STOCK OPTION PLAN OF 1986 (As Amended Effective April 25, 1997) ARTICLE I. GENERAL PROVISIONS SECTION 1. PURPOSES. The SEARLE MONSANTO STOCK OPTION PLAN OF 1986 ("Plan") is designed to attract and retain for the Company and its Subsidiaries personnel of exceptional ability; to motivate such personnel through added incentives to make a maximum contribution to greater profitability; to develop and maintain a highly competent management team; and to be competi- tive with other pharmaceutical companies in the executive compen- sation area. SECTION 2. DEFINITIONS. Except where the context otherwise indicates, the following definitions apply: "Associated Company" means any corporation (or partner- ship, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity partici- pation and voting power), but which is not a Subsidiary. "Board" means Board of Directors of the Company. "Committee" means the Special Stock Option Grant Committee and, to the extent delegated by the Special Stock Option Grant Committee, the ECDC. "Company" means G. D. Searle & Co. "ECDC" means the Executive Compensation and Development Committee of the Board. "Effective Date" means October 24, 1986. "Eligible Participant" means any officer or other salaried employee (including a director who is a salaried employee) of the Company or a Subsidiary. "Fair Market Value" means, with respect to any given day, the average of the highest and lowest sales prices of the Shares reported as the New York Stock Exchange-Composite Trans- actions for such day, or if the Shares were not traded on such day, then on the next preceding day on which the Shares were traded, all as reported by such source as the Committee may select. "Monsanto" means Monsanto Company, a Delaware corpora- tion and the parent corporation of the Company. 2 -2- "Participant" means an Eligible Participant to whom a Stock Option, Stock Appreciation Right, or Restricted Stock Grant (as those terms are hereinafter defined) has been granted. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Article III of this Plan. "Shares" means shares of $2 par value common stock of Monsanto, and any shares of stock or other securities received as a result of a Share adjustment as set forth in Section 4 of this Article I. "Special Stock Option Grant Committee" means the committee consisting of three or more members as may be appointed by the Board to administer this Plan who may or may not be members of the Board, but who are "disinterested persons" within the meaning of Rule 16b-3 issued pursuant to the Securities Exchange Act of 1934, or any law, rule, regulation or other provision that may hereafter replace Rule 16b-3. "Stock Appreciation Right" means a right referred to in Section 4 of Article II of this Plan. "Stock Appreciation Right Fair Market Value" or "SAR Fair Market Value" shall mean a value established by the Commit- tee for the exercise of a Stock Appreciation Right. If such exercise occurs during any quarterly "window period" as specified by Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended from time to time, or any law, rule, regulation or other provision that may hereafter replace such Rule, the Committee may establish a common value for exercises during such window period. "Stock Option" or "Option" means a non-qualified stock option granted pursuant to this Plan. "Subsidiary" means any corporation (or partnership, joint venture, or other enterprise) (i) of which the Company owns or controls, directly or indirectly, 50% or more of the outstand- ing shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power) or (ii) which the Company otherwise controls (by contract or any other means). "Control" means the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture, or other enterprise. "Termination of Employment" means the discontinuance of employment of a Participant for any reason other than a Transfer. "Transfer" means a change of employment of a Partici- pant within the group consisting of the Company, its Subsidiaries 3 -3- and Associated Companies and Monsanto, its subsidiaries and associated companies. SECTION 3. ADMINISTRATION. (a) This Plan shall be administered by the Special Stock Option Grant Committee except that the Special Stock Option Grant Committee may delegate a portion of the administration of this Plan to the ECDC as set forth in paragraph (b) below. (b) The Special Stock Option Grant Committee shall have the exclusive right to interpret this Plan and to select the persons who are to receive Stock Options, Stock Appreciation Rights and Restricted Stock Grants under this Plan, including, without limitation, the determination of the number of Shares to be subject to and the form, terms, conditions and duration of each Stock Option, Stock Appreciation Right and Restricted Stock Grant and the amendment thereof, consistent with the provisions of this Plan; provided, however, that the Special Stock Option Grant Committee may delegate to the ECDC the right to select those persons who are not officers or directors of Monsanto (as defined in Section 16(b) of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission issued pursuant to such Act) who are to receive Options, Stock Appreciation Rights and Restricted Stock Grants under this Plan, including, without limitation, the determination of the number of Shares to be subject to and the form, terms, conditions and duration of each Option, Stock Appreciation Right and Restricted Stock Grant granted to such Participants (and the amendment thereof), consis- tent with the provisions of this Plan, and to authorize payment in respect of an Option (pursuant to Article II, Section 1(c)) or a Stock Appreciation Right (pursuant to Article II, Section 4(c), (e) and (f)), involving such a Participant. All acts and deci- sions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Plan, including the severability of any and all of the provisions hereof, shall be conclusive, final and binding upon all Parti- cipants. (c) The Committee may adopt and amend, from time to time, rules and regulations of general application for the administra- tion of this Plan, including terms and conditions related to the receipt and exercise of Options, Stock Appreciation Rights and Restricted Stock Grants. Such rules and regulations may include, at the Committee's discretion, the provision by the Company of loans for the purpose of financing the exercise of Options, and the amount of taxes payable in connection therewith. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Plan), the Committee is authorized to take such action as 4 -4- it determines to be necessary or advisable, and fair and equit- able to Participants, with respect to Options, Stock Appreciation Rights and Restricted Stock Grants in the event of: a merger of Monsanto with, consolidation of Monsanto into, or the acquisition of Monsanto by, another corporation; a sale or transfer of all or substantially all of the assets of Monsanto to another corpora- tion or any other person or entity; a tender or exchange offer for Shares made by any corporation, person or entity (other than Monsanto); or other reorganization in which Monsanto will not survive as an independent, publicly owned corporation. Such action may include (but shall not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, Stock Appreciation Rights and Restricted Stock Grants so as to provide for earlier, later, extended or addition- al times for exercise or payments, differing methods for cal- culating payments, alternate forms and amounts of payment, or other modifications. The Committee may take such actions pur- suant to this Section 3(d) by adopting rules and regulations of general applicability to all Participants or to certain catego- ries of Participants, by including, amending or waiving terms and conditions in Option, Stock Appreciation Right and Restricted Stock grants, or by taking action with respect to individual Participants. The Committee may take such actions as part of the grants or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganization. SECTION 4. SHARE ADJUSTMENTS. In the event that at any time or from time to time a stock dividend, stock split, recapitalization, merger, consolidation, or other change in capitalization, or a sale by Monsanto of all or part of its assets, or any distribution to shareholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of stock or other securities of Monsanto, or for shares of stock or other securi- ties of any other corporation; or (b) new, different or addition- al shares or other securities of Monsanto or of any other corpo- ration being received by the holders of outstanding Shares, then: (i) the limitation of 1,500,000 Shares set forth in Section 1(a) of Article II and in Article III of this Plan; (ii) the number and class of Shares (A) that may be subject to Stock Options, Stock Appreciation Rights or Restricted Stock Grants and (B) which have not been issued or transferred under Stock Options, Stock Appreciation Rights or Restricted Stock Grants; and 5 -5- (iii) the purchase price to be paid per Share under unexercised Stock Options and the number of Shares to be trans- ferred in settlement of outstanding Stock Appreciation Rights; shall in each case be equitably adjusted as determined by the Committee in its sole discretion. ARTICLE II. PLAN SECTION 1. OPTION SHARES. (a) (i) The total number of Shares for which Options may be granted under this Plan shall not exceed 1,500,000 Shares, subject to: (A) the adjustments provided for in Section 4 of Article I of this Plan; (B) the provisions of Section 1(b) of this Article II; and (C) reduction by the number of shares committed or awarded pursuant to Article III of this Plan. Such Shares may be authorized but unissued Shares, or treasury Shares, or both. Options may be granted for restricted or unrestricted Shares. (ii) The total number of Shares for which Options may be granted under this Plan to any one Eligible Participant shall not exceed in any one calendar year 5% of the total number of Shares for which Options may be granted under this Plan, subject to the adjustments provided for in Section 4 of Article I of this Plan. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section 1(c) of this Article II or the exercise of a Stock Appreciation Right under Section 4 of this Article II, the Shares subject to such Option shall again be available for Option grants under this Plan without again being charged against the limitation of 1,500,000 Shares set forth in Section 1(a) of this Article II. Any amend- ment of any Option or Stock Appreciation Right by the Committee pursuant to Article I, Section 3 of this Plan shall not be considered the grant of a new Option. (c) In the event of Termination of Employment for death, disability, hardship or unusual circumstances as determined by the Committee, the Committee may, with the consent of the Parti- cipant or his or her legal representative, authorize payment, in cash or in Shares, or partly in cash and partly in Shares, as the Committee may direct, of an amount equal to the difference at the time between the Fair Market Value of the Shares subject to an Option and the Option exercise price in consideration of the surrender of the Option. In such an event the Shares subject to the Option so surrendered shall be charged against the limita- tions set forth in Section 1(a) of this Article II. 6 -6- SECTION 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS. (a) Each Stock Option and Stock Appreciation Right shall be granted subject to such terms and conditions, if any, not incon- sistent with this Plan, as shall be determined by the Committee, including any provisions as to continued employment as considera- tion for the grant or exercise of such Option or Stock Appreci- ation Right and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. Unless otherwise provided at the time of any Option grant and except as otherwise specifically provided in this Plan, Options shall only be exercisable by a Participant as follows:
Percentage of Total Shares Per Option Grant Option Exercise Dates Exercisable --------------------- ------------ 1. On and after twelve (12) months from the Option grant date................... 33-1/3% 2. On and after twenty-four (24) months from the Option grant date.............. 66-2/3% 3. On and after thirty-six (36) months from the Option grant date.............. 100%
If the application of the foregoing vesting schedule would result in a fractional Share being issuable upon the exercise of an Option, the number of Options vested shall be rounded up to the next full Share, but not to exceed in the aggregate the original grant total. (b) A Stock Option or Stock Appreciation Right shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Participant only by him or her or by his or her guardian or legal representative. SECTION 3. CONDITIONS OF OPTIONS. Options may be granted to Eligible Participants at such time or times determined by the Committee, subject to the following terms and conditions: (a) The Option exercise price per Share shall be estab- lished by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant (or such later date as the Committee shall determine). 7 -7- (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time prior to Termination of Employment and within ten (10) years and thirty (30) days from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that Options or Stock Appreciation Rights exercisable as of the date of Termination of Employment shall remain exercisable for a period of up to three (3) months following Termination of Employ- ment (up to five (5) years if Employment shall have terminated as a result of total and permanent disability as determined by the Committee or retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associ- ated Company, and up to twelve (12) months in the event of death); provided, further, that no such period following Termina- tion of Employment shall extend the original exercise period of the Option or the Stock Appreciation Right. (c) In the event of Termination of Employment due to retirement (as defined in (b) above), death or total and perma- nent disability (as determined by the Committee), all Options or Stock Appreciation Rights granted more than twelve (12) months prior to such event shall, notwithstanding Article II, Section 2, become immediately exercisable. (d) The Option grant may include any other terms and conditions not inconsistent with this Plan, as determined by the Committee. SECTION 4. CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be granted to an Eligible Partici- pant in connection with (and only in connection with) an Option granted under this Plan, subject to the following terms and conditions: (a) Such Stock Appreciation Right shall entitle a holder of an Option within the period specified for the exercise of the Option in the related Option grant to surrender the unexercised Option (or a portion thereof) and to receive in exchange therefor a payment in cash or Shares having an aggregate value equal to the product of (i) the amount by which (A) the SAR Fair Market Value of each Share exceeds (B) the Option price per Share, times (ii) the number of Shares under the Option, or portion thereof, which is surrendered. (b) Each Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Option. It shall be exercisable only to the extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The Committee may grant Stock Appreciation Rights concurrently with grants of Options or in connection with previously granted 8 -8- Options under this Plan which are unexercised and have not terminated or lapsed. With respect to Stock Appreciation Rights granted in connection with such previously granted Options, the Committee shall provide that such Stock Appreciation Rights shall not be exercisable until the holder completes six (6) months (or such longer period as the Committee shall determine) of service with the Company, a Subsidiary, or an Associated Company immedi- ately following the date of the grant of such Stock Appreciation Rights. (c) The Committee shall have sole discretion to determine in each case whether the payment will be in the form of all cash, all Shares or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined as follows: the amount payable in Shares shall be divided by the SAR Fair Market Value of Shares. The payments to be made, in whole or in part, in cash upon the exercise of Stock Appreciation Rights by any officer of Monsanto shall be made in accordance with the provisions relating to the exercise of stock appreciation rights of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect at the time of such exercise, or any law, rule, regulation or other provision that may hereafter replace such Rule. (d) Upon exercise of a Stock Appreciation Right, the number of Shares subject to exercise under the related Option shall automatically be reduced by the number of Shares represented by the Option or portion thereof which is surrendered. To the extent that a Stock Appreciation Right shall be exercised, any Shares transferred upon such exercise shall not be charged against the maximum limitations upon the grant of Options set forth in the Plan under which such Option shall have been granted but the Option in connection with which a Stock Appreciation Right shall have been granted shall be deemed to have been exercised for the purpose of such maximum limitations. (e) The Committee shall have the sole discretion as to the timing of any payment made in cash, Shares, or a combination thereof upon exercise of Stock Appreciation Rights hereunder, whether in a lump sum, in annual installments or otherwise deferred and the Committee shall have sole discretion to deter- mine whether such payments may bear amounts equivalent to inter- est or cash dividends. (f) For purposes of this Section 4 of Article II: (i) "Unrelated Party" means any party or group of parties acting together other than (A) Monsanto, its directors and officers, or (B) any nominee holder for any stock exchange; 9 -9- (ii) "Offer" means any tender or exchange offer made by an Unrelated Party for the Shares and shall be deemed to occur upon the first purchase or exchange of such Shares; (iii) "Change of Control" means any acquisition, benefi- cially or otherwise, by any Unrelated Party of 25% or more of the combined voting power of the common and preferred stock of Monsanto and shall be deemed to occur upon the date that the Unrelated Party attains control of said 25% or more of the combined voting power; (iv) "Change of Control Market Value" of the Shares means the higher of -- (A) the value for which such Shares may be exchanged or offered under any Offer pursuant to which Shares are actually exchanged or purchased; or (B) the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 4 of Article II and without limiting the provisions of Section 3 of Article I of this Plan, in the event of an Offer or Change of Control, a Participant holding an unexercised Stock Appreciation Right may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of Monsanto, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only: (x) during the thirty (30) day period following the first exchange or purchase of Shares pursuant to an Offer; or (y) during the thirty (30) day period following the date on which sufficient Shares are acquired to constitute a Change of Control. ARTICLE III. RESTRICTED SHARES The Committee may make awards of Restricted Shares to Eligible Participants. The Committee shall have full discretion to determine the terms and conditions of such awards. The total number of Shares which may be used for such awards under this Plan shall not exceed 1,500,000 Shares, subject to: (A) the adjustments provided for in Section 4 of Article I of this Plan; and (B) reduction by the number of Shares for which Stock Options 10 -10- have been granted pursuant to Article II of this Plan (except as provided in Section 1(b) of Article II). Restricted Shares shall be subject to such terms and condi- tions, including forfeiture, if any, and to such restrictions against sale, transfer or other disposition as may be determined by the Committee at the time a Non-qualified Option for the purchase of Restricted Shares is granted, at the time a Stock Appreciation Right to be settled with Restricted Shares is granted, at the time of making a bonus award of Restricted Shares or at any other time as reasonably determined by the Committee (collectively a "Restricted Stock Grant"). Any new or additional or different Shares or other securities resulting from any adjustment of such Shares of the type described in Section 4 of Article I shall be subject to the same terms, conditions, and restritions as the Restricted Shares prior to such adjustment. The Committee may, in its discretion, remove, modify or accelerate the release of restrictions on any Restricted Shares in the event of hardship or disability of the Participant while employed, in the event that the Participant ceases to be an employee of the Company, a Subsidiary or Associated Company, as the result of death or otherwise, in the event of a relocation of a Participant to another country or for such other reasons as the Committee may deem appropriate. In the event of the death of a Participant following the transfer of Restricted Shares to him, the legal representative of the Participant, the beneficiary designated in writing by the Participant during his lifetime, or the person receiving such Shares under his will or under the laws of descent and distribution shall take such Shares subject to the same restrictions, conditions and provisions in effect at the time of his death, to the extent applicable. ARTICLE IV. MISCELLANEOUS PROVISIONS SECTION 1. TRANSFER. Neither a Stock Option nor a Stock Appreciation Right shall be transferable except as provided for herein in the case of death. If any Participant makes such a transfer in violation hereof, any obligation of the Company with respect to such Option or Stock Appreciation Right shall forth- with terminate. SECTION 2. CONTINUED EMPLOYMENT. Nothing in this Plan or any booklet or other document describing or referring to this Plan shall be deemed to confer on any employee or Participant the right to continue in the employ of his or her employer or affect the right of his or her employer to terminate the employment of any such person with or without cause. SECTION 3. SEGREGATED FUND. Nothing contained herein shall require the Company to segregate any monies from its general funds, or to create any trusts, or to make any special deposits 11 -11- for any immediate or deferred amounts payable to any Participant, nor require Monsanto to segregate any treasury Shares. SECTION 4. GOVERNING LAW. This Plan and all actions taken hereunder will be governed by the laws of the State of Illinois. SECTION 5. WITHHOLDING. The Company may make such provi- sions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option or the exercise thereof or any Stock Appreciation Right or the exercise thereof. SECTION 6. EFFECT OF SPINOFF. Notwithstanding any other provision of this Plan, for purposes of any award that is out- standing as of the date that the Company spins off the Company's chemical businesses into a new publicly traded company ("Che- micals") 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. ARTICLE V. AMENDMENTS SECTION 1. AMENDMENT OR TERMINATION OF PLAN. The Board or the Special Stock Option Grant Committee may, from time to time, amend this Plan, or discontinue this Plan or any provision thereof, provided that no amendments or modifications to this Plan shall, without the prior approval of the shareholders normally entitled to vote for the election of directors of Monsanto: (a) change the number of Shares for which Stock Options may be granted, or the percentage thereof which may be made subject to Options granted to any one Eligible Participant, as set forth in Section 1(a) of Article II of this Plan; (b) make any member of the Committee eligible for the grant of a Stock Option, Stock Appreciation Right or Restricted Stock Grant; (c) limit or restrict the powers of the Committee with respect to the administration of this Plan except as may be required by any law, regulation or governmental order; (d) materially increase the benefits accruing to Partici- pants under this Plan; 12 -12- (e) materially modify the requirements as to eligibility for participation under the Plan; or (f) change any of the provisions of this Article V. SECTION 2. EFFECT ON OPTIONS OR STOCK APPRECIATION RIGHTS. No amendment or discontinuance of this Plan or any provision thereof shall, without the written consent of the Participant, adversely affect any Stock Option, Stock Appreciation Right, or Restricted Stock Grant theretofore granted to such Participant under this Plan. ARTICLE VI. MISCELLANEOUS SECTION 1. OTHER PLANS. This Plan is not intended to and shall not preclude the establishment or operation by the Company or any Subsidiary of any thrift, savings and investment, achieve- ment award, stock purchase, incentive, employee recognition or other benefit plan or arrangement for any employees and any such other plan may be authorized and payments made thereunder independently of this Plan. EX-10.3 5 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/I 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/I (As Amended Effective April 25, 1997) [This Plan was originally approved by the Company's Stockholders on April 22, 1988. Amendments were approved by the Board of Directors on March 25, 1988, September 22, 1989, February 22, 1991, and April 25, 1997, and by the Stockholders at the April 26, 1991 Annual Meeting.] 2 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/I (AS AMENDED EFFECTIVE APRIL 25, 1997) I. GENERAL PROVISIONS 1. PURPOSES The Monsanto Management Incentive Plan of 1988/I is designed to attract and retain for the Company and its Subsidiaries and Associated Companies personnel of exceptional ability; to motivate such personnel through added incentives to make a maximum contribution to greater profitability; to develop and maintain a highly competent management team; and to be competitive with other companies in the executive compensa- tion area. This Incentive Plan is composed of (a) the 1988 Stock Option Plan and (b) the 1988 Bonus Plan, and shall be effective January 1, 1988 ("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 partner- ship, joint venture, or other enterprise), of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Board" means Board of Directors of the Company. "Bonus Plan" or "1988 Bonus Plan" means the bonus plan set forth in Article III of this Incentive Plan. "Committee" means the Executive Compensation and Development Committee or such other committee consist- ing of three 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 corpora- tion. "Eligible Participant" means any officer or other salaried employee (including a director who is a 3 -2- salaried employee) of the Company, a Subsidiary or an Associated Company. "Incentive Plan" means the Monsanto Management Incen- tive Plan of 1988/I, set forth herein. "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest 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 such 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. "1974 Plan" means the Monsanto Management Incentive Plan of 1974, as amended. "1984 Plan" means the Monsanto Management Incentive Plan of 1984, as amended. "1988/II Incentive Plan" means the Monsanto Management Incentive Plan of 1988/II. "Non-Qualified Stock Option" or "Non-Qualified Option" means an option referred to in Section 4 of Article II of this Incentive Plan. "Option Plan" or "1988 Stock Option Plan" means the 1988 Stock Option Plan set forth in 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. "Performance Year" means the year or years for which a bonus is awarded or a bonus commitment is made under the 1988 Bonus Plan. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Article IV of this Incentive Plan. 4 -3- "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 esta- blish a common value for exercises during such window period. "Stock Option" or "Option" shall mean Incentive Stock Options and/or Non-Qualified Stock Options. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corpora- tion 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, and the 1988 Bonus Plan, 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-Qual- 5 -4- ified Stock Option, a Stock Appreciation Right and the 1988 Bonus Plan, a change of employment of a Partici- pant 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 Associ- ated Companies. 3. ADMINISTRATION (a) This Incentive Plan shall be administered by the Committee. No person shall be eligible or continue to serve as a member of such Committee unless such person is a "disinterested person" within the meaning of Rule l6b-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 provi- sion that may hereafter replace such Rule, and no person shall be eligible for the grant of a Stock Option or Stock Appreciation Right, the receipt of a bonus commitment or the award of a bonus (including, without limitation, Restricted Shares) under this Incentive Plan while serving as a member of such Committee. (b) The Committee shall have the exclusive right to inter- pret this Incentive Plan, to select the persons who are to receive Stock Options, Stock Appreciation Rights, bonus commitments and bonus awards, and to act in all matters pertaining to the granting of Options, Stock Appreciation Rights, the making of bonus commitments and the awarding of bonuses under this Incentive Plan including, without limitation, the determination of the number of Shares to be subject to and the form, terms, conditions and duration of each Stock Option and Stock Appreciation Right, and the amount, form, terms and conditions of each bonus commitment and bonus award, and the amendment thereof consistent with the provi- sions of this Incentive Plan. No Eligible Participant shall have any right to be considered for or to receive any Stock Options, Stock Appreciation Rights, bonus commitments or bonus 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 conclu- sive, final and binding upon all Eligible Participants. 6 -5- (c) The Committee may adopt rules and regulations of general application for the administration of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Options, Stock Appreci- ation Rights, bonus commitments and bonus awards (including, without limitation, awards of Restricted Shares) in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corporation; a sale or transfer of all or substantially all of the assets of the Company to another corporation or any other person or entity, a 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, bonus commitments and bonus awards (including, without limitation, awards of Restricted Shares) 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 Parti- cipants, by including, amending or waiving terms and conditions in Option and Stock Appreciation Right grants, bonus commitments and bonus awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the grants, commitments or awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganiza- tion. 7 -6- 4. SHARE ADJUSTMENTS In the event that at any time or from time to time a stock dividend, stock split, recapitalization, merger, consolida- tion, or other change in capitalization, or a sale by the Company of all or part of its assets, or any distribution to stockholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of stock or other securities of 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 limitation of 4,400,000 Shares set forth in Section l(a) of Article II and Section 2(b) of Article III of this Incentive Plan; (ii) the number and class of Shares (A) that may be subject to Stock Options or Stock Appreciation Rights, (B) which have not been issued or trans- ferred under outstanding Stock Options or Stock Appreciation Rights, and (C) which are subject to a bonus commitment or have been awarded but are undelivered under the 1988 Bonus 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 equitably adjusted; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incen- tive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option as defined in Section 422A of the Internal Revenue Code of l986, as may be amended from time to time, or any provisions that may hereafter be enacted in lieu thereof. 8 -7- II. 1988 STOCK OPTION PLAN 1. OPTION SHARES (a) (i) The total number of Shares for which Options may be granted under this Option Plan shall not exceed 4,400,000 Shares, subject to: (A) the adjustments provided for in Section 4 of Article I of this Incentive Plan; (B) the provisions of Section l(b) of this Article II; and (C) reduction by the number of Shares committed or awarded pursuant to Article III of this Incentive Plan. Such Shares may be authorized but unissued, or treasury Shares, or both. (ii) The total number of Shares for which Options may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any one calendar year 15% of the total number of Shares for which Options may be granted under this Incentive Plan, subject to the adjustments pro- vided for in Section 4 of Article I of this Incentive Plan. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section 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 limitation of 4,400,000 Shares set forth in Section 1(a) of this Article II. 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 con- sidered the grant of a new Option for the purpose of Section 1(a) of this Article II. (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 represen- tative, or in the event of death, a beneficiary desig- nated in writing by the Participant during his life- time, 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 9 -8- subject to an Option and the Option price in considera- tion 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 1(a) of this Article II. 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS (a) 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 and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. (b) A 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 exer- cisable during the lifetime of the Participant only by him or by his guardian or legal representative. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) No cash dividends shall be paid on Shares subject to unexercised Stock Options. The Committee may provide, however, that a Participant to whom an Option has been granted which is exercisable in whole or in part at a future time for Shares (including Restricted Shares) 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 grant and the time each such Share is delivered pursuant to exercise of such Stock Option or 10 -9- the related Stock Appreciation Right. 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; or (ii) converted into contingently credited Shares (with respect to which dividend equivalents may 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 l(a) of this Article II. (e) The Committee, in its discretion, may authorize payment of interest equivalents on dividend equivalents which are payable in cash at a future time. 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422A 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 Option 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 December 31, 1997, 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 11 -10- 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 Termina- tion of Employment shall not exceed three months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company 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 Termina- tion of Employment shall in no event extend the origi- nal exercise period of the Option or related Stock Appreciation Right, if any. (c) The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are first exercisable during any calendar year by any Eligible Participant shall not exceed $100,000. 12 -11- (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 Option Plan as determined by the Committee. 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). (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 and thirty (30) days from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exer- cisable upon, or within such period following, Termina- tion of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company 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 13 -12- (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 Termina- tion of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The Option grant may include any other terms and conditions not inconsistent with this Option Plan as determined by the Committee, including provisions making the Shares subject to such Option Restricted Shares. 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 Option Plan, the 1988/II Incentive Plan, the 1984 Plan or the 1974 Plan, subject to the following terms and conditions: (a) Such Stock Appreciation Right shall entitle a holder of an Option within the period specified for the exercise of the Option in the related Option grant to surrender the unexercised Option (or a portion thereof) and to receive in exchange therefor a payment in cash or Shares having an aggregate value equal to the product of (i) the amount by which (A) the SAR Fair Market Value of each Share exceeds (B) the Option price per Share, times (ii) the number of Shares under the Option, or portion thereof, which is surrendered. (b) Each Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the 14 -13- 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 Option Plan, the 1988/II Incentive Plan, the 1984 Plan or the 1974 Plan which are unexer- cised 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 l6b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect at the time of such exercise, or any law, rule, regulation or other provision that may hereafter replace such Rule. (d) Upon exercise of a Stock Appreciation Right, the number of Shares subject to exercise under the related Option shall automatically be reduced by the number of Shares represented by the Option or portion thereof which is surrendered. To the extent that a Stock Appreciation Right shall be exercised, any Shares transferred upon such exercise shall not be charged against the maximum limitations upon the grant of Options set forth in the 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. 15 -14- (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 Appreci- ation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Offer or Change of Control, a Participant holding an unexercised Stock Appreciation Right may exercise such Stock Appreciation Right and 16 -15- 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 acquisi- tion, 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 follow- ing 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. 17 -16- 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 notifica- tion 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 Employ- ment. III. 1988 BONUS PLAN 1. BONUS COMMITMENTS AND AWARDS (a) Bonus Commitments A commitment to award a bonus at a future date for all or part of any Performance Year may be made at such time or times determined by the Committee following the Effective Date to any person who is an Eligible Parti- cipant at the time of such commitment. The Committee shall have full discretion to determine the terms and conditions of the commitment including, without limita- tion, whether the corresponding bonus award shall be contingent upon the attainment of prescribed goals and provisions with respect to the rights of the Parti- cipant upon Termination of Employment. 18 -17- (b) Bonus Awards A bonus may be awarded at such time or times determined by the Committee following the Effective Date to any person who was an Eligible Participant during all or part of any Performance Year, payable either wholly in cash or wholly in Shares, or partially in cash and partially in Shares. 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 cash, unrestricted Shares and Restricted Shares, the time or times of payment of any award, and the time or times of the lapse of the restrictions on Restricted Shares. Any Eligible Participant may receive more than one bonus award for a Performance Year and any bonus award may be made pursuant to or without a prior commitment to make such award. 2. BONUS SHARES--SOURCE, LIMIT AND VALUATION (a) Shares used for bonus purposes may be authorized but unissued Shares, treasury Shares, or any combination thereof. Any Shares held by the Company for use under this Bonus Plan shall, unless and until transferred in payment of an award in accordance with this Bonus Plan, remain the property of the Company, irrespective of whether such Shares are entered in a special bonus account, and such Shares shall at all times be avail- able, unless and until so transferred, for any cor- porate purpose. (b) The total number of Shares which may be awarded pur- suant to bonus awards under this Bonus Plan shall not exceed 4,400,000 Shares, subject to: (i) the adjustments provided for in Section 4 of Article I of this Incentive Plan; and (ii) reduction by the number of Shares for which Stock Options have been granted pursuant to Article II of this Incentive Plan (except as provided in Section l(b) of said Article II). (c) 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 19 -18- Value of the Shares on the date of the determination of the amount of the award by the Committee. 3. AWARDS (a) Subject to the provisions of Section 3(f) of this Article III, bonus commitments and bonus awards may be made by the Committee in such amount and at such time or times as may be determined solely by the Committee. An Eligible Participant shall have no right to be considered for or to receive any bonus commitment or bonus award. The Committee may, in its discretion, allow any Participant who receives a bonus award or bonus commitment under this Incentive Plan to elect to defer payment of such award, or of any award to be made pursuant to such bonus commitment, in accordance with such terms and conditions and in such manner as the Committee may prescribe. Any amendment of any bonus commitment and bonus award by the Committee pursuant to Article I, Section 3 of this Incentive Plan shall not be considered the grant of a new bonus commitment or bonus award for purposes of Section 2(b) of this Article III. (b) Commitments to make payment on account of bonuses for a Performance Year may be made by the Committee in advance of the close of such Performance Year upon such terms and conditions as the Committee may determine. (c) The portion of a bonus award payable in cash or unrestricted Shares or both may, in the discretion of the Committee, be paid or delivered in whole or in part at such time or times and under such terms and condi- tions as may be determined by the Committee including, but not limited to, the following times: (i) in full at the time of the award; or (ii) in any number of annual installments, equal or unequal, during employment or following Termination of Employment; or (iii) in full after a period of time. (d) In the event that any bonus commitment or bonus award or installment thereof which is to be paid in Shares ceases to be payable for any reason, the Shares subject to such bonus commitment or bonus award shall again be 20 -19- available for bonus purposes without again being charged against the limitation of 4,400,000 Shares set forth in Section 2(b) of this Article III. (e) The portion of an award payable in Restricted Shares shall be paid at the time of the award 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 who shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including forfei- tures or resale to the Company, if any, as may be determined by the Committee and to the restrictions and provisions pursuant to Article IV of this Incentive Plan. 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. (f) Anything in this Incentive Plan to the contrary not- withstanding, no bonus awards shall be made for any Performance Year during which no dividend on the outstanding Shares has been paid; bonus awards covering more than one Performance Year and made pursuant to a bonus commitment shall be reduced by the ratio of the number of such Performance Years during which no dividends were paid to the number of Performance Years covered by the bonus awards. 4. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVA- LENTS (a) No cash dividends shall be paid on Shares which have been awarded but not delivered. The Committee may provide, however, that a Participant to whom a bonus has been awarded which is payable in whole or in part at a future time in Shares shall be entitled to receive an amount per Share, equal in value to the cash divi- dends, 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 21 -20- (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 2(b) of this Article III. (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 equiva- lents on dividend equivalents which are payable in cash at a future time. 5. DEATH OF PARTICIPANT Following the death of a Participant, all unpaid cash awards and all undelivered unrestricted Share awards to such Participant hereunder, together with all dividend equiva- lents and interest equivalents, if any, payable in connec- tion with any such award or awards, which have not been cancelled and which are not then cancellable shall be paid and delivered to his legal representative at the time or times provided for in the award unless the Committee shall otherwise direct. The Committee may, in its discretion, permit a Participant to designate a beneficiary or benefici- aries to receive such award or awards. Restricted Shares held by such Participant at the time of his death shall be governed by the provisions of Article IV of this Incentive Plan. IV. RESTRICTED SHARES Restricted Shares shall be subject to such terms and condi- tions, including forfeiture, if any, and to such restric- tions 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, 22 -21- 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, condi- tions and provisions in effect at the time of his death, to the extent applicable. V. MISCELLANEOUS PROVISIONS 1. Neither a Stock Option, Stock Appreciation Right, bonus commitment nor an unpaid bonus award or any installment thereof, shall be transferable except as provided for herein in the case of death. If any Participant makes such a transfer in violation hereof, any obligation of the Company 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 Partici- pant the right to continue in the employ of his employer or affect the right of his employer to termi- nate 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, 23 -22- 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 payment of all or any portion of such award or another award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or cancelling any portion of such award or another award under this Incentive Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Company for the purpose of paying such award or another award under this Incentive Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. 6. 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. VI. 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 bonus commitments and bonus awards payable in other securities or other forms of property of a kind to be determined by the Committee, in addition to cash, unrestricted Shares and Restricted Shares, and such other amendments as may be necessary or desirable to implement such commitments and 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 stock- holders normally entitled to vote for the election of directors of the Company: 24 -23- (a) change the number of Shares for which Stock Options may be granted, or the percentage thereof which may be made subject to Options to any one Eligible Participant, as set forth in Section 1(a) of Article II of this Incentive Plan; (b) change the total number of Shares which may be awarded pursuant to bonus awards as provided for in Section 2(b) of Article III of this Incentive Plan; (c) make any member of the Committee eligible for the grant of a Stock Option, Stock Appreciation Right or a bonus commitment or a bonus award; (d) limit or restrict the powers of the Committee with respect to the administration of this Incentive Plan; (e) change the definition of an Eligible Participant for the purpose of an Incentive Stock Option or increase the limit or the value of Shares for which an Eligible Participant may be granted an Incentive Stock Option; (f) materially increase the benefits accruing to Participants under this Incentive Plan; (g) materially modify the requirements as to eligib- ility for participation in this Incentive Plan; or (h) change any of the provisions of this Article VI. 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. VII. INTERPRETATION 1. Except as authorized herein with respect to Stock Appreciation Rights, this Incentive Plan is not intended to and shall not affect any option or stock appreciation right grant or bonus commitment or award under the 1974 Plan, the 1984 Plan or the 1988/II 25 -24- Incentive Plan (or any other incentive plan of the Company, its Subsidiaries and Associated Companies). No stock options or stock appreciation rights shall be granted under the 1984 Plan after September 15, 1988. No bonus commitments or bonus awards shall be made under the 1984 Plan after the Effective Date and no bonus commitments or bonus awards shall be made under this Incentive Plan with respect to Performance Years prior to January 1, 1988, except that bonus awards may be made under the 1984 Plan (a) with respect to Perfor- mance Years ending prior to January 1, 1988 or (b) pursuant to bonus commitments made on or prior to December 31, 1987. 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 (herein- after "Other Plan"), and any such Other Plan may be authorized and payments made thereunder independently of this Incentive Plan; provided, however, that (i) no director of the Company and no officer of the Company elected by the Board (other than assistant officers) shall participate in any Other Plan, other than the 1984 Plan, and (ii) no such Other Plan, other than the 1984 Plan, a stock option plan for G. D. Searle & Co., a stock option plan for The NutraSweet Company and the 1988/II Incentive 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 commit- ments 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 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 corpora- 26 -25- tion, or other transaction described in Section 425(a) of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time. EX-10.4 6 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/II 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/II (As Amended Effective April 25, 1997) [This Plan was originally approved by the Company's Stockholders on April 22, 1988. Amendments were approved by the Board of Directors on September 22, 1989, February 22, 1991, and April 25, 1997 and by the Stockholders at the april 26, 1991 Annual Meeting.] 2 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1988/II (AS AMENDED EFFECTIVE APRIL 25, 1997) I. GENERAL PROVISIONS 1. PURPOSES The Monsanto Management Incentive Plan of 1988/II is designed to attract and retain for the Company and its Subsidiaries and Associated Companies personnel of excep- tional ability; to motivate such personnel through added incentives to make a maximum contribution to Company objec- tives; and to be competitive with other companies. This Incentive Plan is composed of (a) the 1988 Stock Option Plan and (b) the 1988 Bonus Plan, and shall be effective January 1, 1988 ("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 partner- ship, joint venture, or other enterprise), of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Board" means Board of Directors of the Company. "Bonus Plan" or "1988 Bonus Plan" means the bonus plan set forth in Article III of this Incentive Plan. "Committee" means the ECDC and, to the extent delegated by the ECDC, one or more Unit Compensation Committees. "Company" means Monsanto Company, a Delaware corpora- tion. "ECDC" means the Executive Compensation and Development Committee or such other committee consisting of three 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. "Eligible Participant" means any employee of the Company, a Subsidiary or an Associated Company. 3 -2- "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest 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 such source as the Committee may select. "Incentive Plan" means the Monsanto Management Incen- tive Plan of 1988/II, set forth herein. "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. "1988/I Incentive Plan" means the Monsanto Management Incentive Plan of 1988/I. "Non-Qualified Stock Option" or "Non-Qualified Option" means an option referred to in Section 4 of Article II of this Incentive Plan. "Option Plan" or "1988 Stock Option Plan" means the 1988 Stock Option Plan set forth in Article II of this Incentive Plan. "Participant" means an Eligible Participant to whom a Stock Option has been granted, a bonus commitment made or a bonus awarded pursuant to this Incentive Plan. "Performance Year" means the year or years for which a bonus is awarded or a bonus commitment is made under the 1988 Bonus Plan. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Article IV 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. 4 -3- "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 corpora- tion 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 and the 1988 Bonus Plan, 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 and the 1988 Bonus Plan, 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. "Unit Compensation Committee" means one or more commit- tees appointed by the ECDC composed of management employees 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. 3. ADMINISTRATION (a) This Incentive Plan shall be administered by the ECDC. The ECDC may delegate all or a portion of the adminis- tration of this Incentive Plan to one or more Unit Compensation Committees. No person serving as a member 5 -4- of the Committee shall be eligible for the grant of a Stock Option, the receipt of a bonus commitment or the award of a bonus (including, without limitation, Restricted Shares) under this Incentive Plan while serving as a member of such Committee. (b) The Committee shall have the exclusive right to inter- pret this Incentive Plan, to select the persons who are to receive Stock Options, bonus commitments and bonus awards, and to act in all matters pertaining to the granting of Options, the making of bonus commitments and the awarding of bonuses under this Incentive Plan including, without limitation, the determination of the number of Shares to be subject to and the form, terms, conditions and duration of each Stock Option, and the amount, form, terms and conditions of each bonus commitment and bonus 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 Stock Options, bonus commitments or bonus 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 conclu- sive, final and binding upon all Eligible Participants. (c) The Committee may adopt rules and regulations of general application for the administration of all or any portion of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Options, bonus commit- ments and bonus awards (including, without limitation, awards of Restricted Shares) in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corpora- tion; 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 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 6 -5- not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, bonus commitments and bonus awards (including, without limitation, awards of Restricted Shares) 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 Partici- pants or to certain categories of Participants, by including, amending or waiving terms and conditions in Option grants, bonus commitments and bonus awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the grants, commitments or awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganiza- tion. 4. SHARE ADJUSTMENTS In the event that at any time or from time to time a stock dividend, stock split, recapitalization, merger, consolida- tion, or other change in capitalization, or a sale by the Company of all or part of its assets, or any distribution to stockholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of stock or other securities of 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 limitation of 7,900,000 Shares set forth in Section l(a) of Article II and Section 2(b) of Article III of this Incentive Plan; (ii) the number and class of Shares (A) that may be subject to Stock Options, (B) which have not been issued or transferred under outstanding Stock Options, and (C) which are subject to a bonus 7 -6- commitment or have been awarded but are undelivered under the 1988 Bonus Plan; and (iii) the purchase price to be paid per Share under outstanding Stock Options; shall in each case be equitably adjusted; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incen- tive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option as defined in Section 422A of the Internal Revenue Code of 1986, as may be amended from time to time, or any provisions that may hereafter be enacted in lieu thereof. II. 1988 STOCK OPTION PLAN 1. OPTION SHARES (a) (i) The total number of Shares for which Options may be granted under this Option Plan shall not exceed 7,900,000 Shares, subject to: (A) the adjustments provided for in Section 4 of Article I of this Incentive Plan; (B) the provisions of Section l(b) of this Article II; and (C) reduction by the number of Shares committed or awarded pursuant to Article III of this Incentive Plan. Such Shares may be authorized but unissued, or treasury Shares, or both. (ii) The total number of Shares for which Options may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any one calendar year 15% of the total number of Shares for which Options may be granted under this Incentive Plan, subject to the adjustments pro- vided for in Section 4 of Article I of this Incentive Plan. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section l(c) 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 limitation of 7,900,000 Shares set forth in Section 1(a) of this Article II. Any amendment of any Option by the Committee pursuant to Article I, Section 8 -7- 3 of this Incentive Plan shall not be considered the grant of a new Option for the purpose of Section 1(a) of this Article II. (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 represen- tative, or in the event of death, a beneficiary desig- nated in writing by the Participant during his life- time, 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 considera- tion 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 1(a) of this Article II. 2. INCIDENTS OF OPTIONS (a) Each Stock Option 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 and any provisions which may be advis- able to comply with applicable laws, regulations or rulings of any governmental authority. (b) A Stock Option shall not be transferable by the Parti- cipant 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. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), with a Fair Market Value equal to the Option price as payment. 9 -8- (d) No cash dividends shall be paid on Shares subject to unexercised Stock Options. 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422A 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 Option 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 December 31, 1997, 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 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; provided, however, that such period following Termination of Employment shall not exceed three months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee, in which event such period shall not exceed the original term of the Option; or (ii) as a result of death or death shall have occurred following Termination of Employment 10 -9- and while the Option was still exercisable; and provided, further, that such period following Termina- tion of Employment shall in no event extend the original exercise period of the Option. (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. (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 Option Plan as determined by the Committee. 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). (b) The Option may be exercised in full or in part from time to time within ten (10) years and thirty (30) days from the date of the grant, or such shorter period as may be specified by the Committee in the grant, pro- vided 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; provided, however, that such period following Termina- 11 -10- tion of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee, in which event such period shall not exceed the original term of the Option; or (ii) as a result of death or death shall have occurred following Termination of Employment and while the Option was still exercisable; and provided, further, that such period following Termina- tion of Employment shall in no event extend the original exercise period of the Option. (c) The Option grant may include any other terms and conditions not inconsistent with this Option Plan as determined by the Committee, including provisions making the Shares subject to such Option Restricted Shares. III. 1988 BONUS PLAN 1. BONUS COMMITMENTS AND AWARDS (a) Bonus Commitments A commitment to award a bonus at a future date for all or part of any Performance Year may be made at such time or times determined by the Committee following the Effective Date to any person who is an Eligible Parti- cipant at the time of such commitment. The Committee shall have full discretion to determine the terms and conditions of the commitment including, without limita- tion, whether the corresponding bonus award shall be contingent upon the attainment of prescribed goals and provisions with respect to the rights of the Partici- pant upon Termination of Employment. 12 -11- (b) Bonus Awards A bonus may be awarded at such time or times determined by the Committee following the Effective Date to any person who was an Eligible Participant during all or part of any Performance Year, payable either wholly in cash or wholly in Shares, or partially in cash and partially in Shares. 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 cash, unrestricted Shares and Restricted Shares, the time or times of payment of any award, and the time or times of the lapse of the restrictions on Restricted Shares. Any Eligible Participant may receive more than one bonus award for a Performance Year and any bonus award may be made pursuant to or without a prior commitment to make such award. 2. BONUS SHARES--SOURCE, LIMIT AND VALUATION (a) Shares used for bonus purposes may be authorized but unissued Shares, treasury Shares, or any combination thereof. Any Shares held by the Company for use under this Bonus Plan shall, unless and until transferred in payment of an award in accordance with this Bonus Plan, remain the property of the Company, irrespective of whether such Shares are entered in a special bonus account, and such Shares shall at all times be avail- able, unless and until so transferred, for any cor- porate purpose. (b) The total number of Shares which may be awarded pur- suant to bonus awards under this Bonus Plan shall not exceed 7,900,000 Shares, subject to: (i) the adjustments provided for in Section 4 of Article I of this Incentive Plan; and (ii) reduction by the number of Shares for which Stock Options have been granted pursuant to Article II of this Incentive Plan (except as provided in Section l(b) of said Article II). (c) 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 13 -12- Value of the Shares on the date of the determination of the amount of the award by the Committee. 3. AWARDS (a) Subject to the provisions of Section 3(f) of this Article III, bonus commitments and bonus awards may be made by the Committee in such amount and at such time or times as may be determined solely by the Committee. An Eligible Participant shall have no right to be considered for or to receive any bonus commitment or bonus award. The Committee may, in its discretion, allow any Participant who receives a bonus award or bonus commitment under this Incentive Plan to elect to defer payment of such award, or of any award to be made pursuant to such bonus commitment, in accordance with such terms and conditions and in such manner as the Committee may prescribe. Any amendment of any bonus commitment and bonus award by the Committee pursuant to Article I, Section 3 of this Incentive Plan shall not be considered the grant of a new bonus commitment or bonus award for purposes of Section 2(b) of this Article III. (b) Commitments to make payment on account of bonuses for a Performance Year may be made by the Committee in advance of the close of such Performance Year upon such terms and conditions as the Committee may determine. (c) The portion of a bonus award payable in cash or unrestricted Shares or both may, in the discretion of the Committee, be paid or delivered in whole or in part at such time or times and under such terms and condi- tions as may be determined by the Committee including, but not limited to, the following times: (i) in full at the time of the award; or (ii) in any number of annual installments, equal or unequal during employment or following Termination of Employment; or (iii) in full after a period of time. (d) In the event that any bonus commitment or bonus award or installment thereof which is to be paid in Shares ceases to be payable for any reason, the Shares subject to such bonus commitment or bonus award shall again be 14 -13- available for bonus purposes without again being charged against the limitation of 7,900,000 Shares set forth in Section 2(b) of this Article III. (e) The portion of an award payable in Restricted Shares shall be paid at the time of the award 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 who shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including forfei- tures or resale to the Company, if any, as may be determined by the Committee and to the restrictions and provisions pursuant to Article IV of this Incentive Plan. 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. (f) Anything in this Incentive Plan to the contrary not- withstanding, no bonus awards shall be made for any Performance Year during which no dividend on the outstanding Shares has been paid; bonus awards covering more than one Performance Year and made pursuant to a bonus commitment shall be reduced by the ratio of the number of such Performance Years during which no dividends were paid to the number of Performance Years covered by the bonus awards. 4. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVA- LENTS (a) No cash dividends shall be paid on Shares which have been awarded but not delivered. The Committee may provide, however, that a Participant to whom a bonus has been awarded which is payable in whole or in part at a future time in Shares shall be entitled to receive an amount per Share, equal in value to the cash divi- dends, 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 15 -14- (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 2(b) of this Article III. (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 equiva- lents on dividend equivalents which are payable in cash at a future time. 5. DEATH OF PARTICIPANT Following the death of a Participant, all unpaid cash awards and all undelivered unrestricted Share awards to such Participant hereunder, together with all dividend equiva- lents and interest equivalents, if any, payable in connec- tion with any such award or awards, which have not been cancelled and which are not then cancellable shall be paid and delivered to his legal representative at the time or times provided for in the award unless the Committee shall otherwise direct. The Committee may, in its discretion, permit a Participant to designate a beneficiary or benefici- aries to receive such award or awards. Restricted Shares held by such Participant at the time of his death shall be governed by the provisions of Article IV of this Incentive Plan. IV. RESTRICTED SHARES Restricted Shares shall be subject to such terms and condi- tions, including forfeiture, if any, and to such restric- tions 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 or at the time of making a bonus award of Restricted Shares. Any new or additional or different Shares or other secur- ities 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 16 -15- 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, or 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. V. MISCELLANEOUS PROVISIONS 1. Neither a Stock Option, bonus commitment nor an unpaid bonus award or any installment thereof, shall be transferable except as provided for herein in the case of death. If any Participant makes such a transfer in violation hereof, any obligation of the Company 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 Partici- pant the right to continue in the employ of his employer or affect the right of his employer to termi- nate 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 or the payment of any bonus award, 17 -16- including, but not limited to, the withholding of payment of all or any portion of such award or another award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or cancelling any portion of such award or another award under this Incentive Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Company for the purpose of paying such award or another award under this Incentive Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. 6. 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. VI. AMENDMENTS 1. The Board, upon recommendation of the ECDC 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 bonus commitments and bonus awards payable in other securities or other forms of property of a kind to be determined by the ECDC, in addition to cash, unrestricted Shares and Restricted Shares, and such other amendments as may be necessary or desirable to implement such commitments and 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 stock- holders normally entitled to vote for the election of directors of the Company: (a) change the number of Shares for which Stock Options may be granted, or the percentage thereof which may be made subject to Options to any one 18 -17- Eligible Participant, as set forth in Section 1(a) of Article II of this Incentive Plan; (b) change the total number of Shares which may be awarded pursuant to bonus awards as provided for in Section 2(b) of Article III of this Incentive Plan; (c) make any member of the Committee eligible for the grant of a Stock Option or a bonus commitment or a bonus award under this Incentive Plan; (d) change the definition of an Eligible Participant for the purpose of an Incentive Stock Option or increase the limit or the value of Shares for which an Eligible Participant may be granted an Incentive Stock Option; or (e) change any of the provisions of this Article VI. 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 theretofore granted or bonus commitment or bonus award theretofore made to such Participant under this Incentive Plan. VII. 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 or the 1988/I Incentive Plan (or any other incentive plan of the Company, its Subsidiaries and Associated Companies). 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 (herein- after "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, other than the 1984 Plan, the 1988/I 19 -18- Incentive Plan, a stock option plan for G. D. Searle & Co., or a stock option plan for The NutraSweet Company, 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 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 425(a) of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time. EX-10.5 7 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1994 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1994 (As Amended April 25, 1997) 2 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1994 AS AMENDED APRIL 25, 1997 I. GENERAL PROVISIONS 1. PURPOSES The Monsanto Management Incentive Plan of 1994 is designed: * to attract, motivate and retain for the Company and its Subsidiaries and Associated Companies personnel of exceptional ability, * to encourage ownership of Monsanto common stock by management, * to align management interests with those of stockholders, and * to provide a competitive executive compensation program. This Incentive Plan shall be effective February 1, 1994 ("Effective Date"), subject to the approval of this Incentive Plan by the stockholders of the Company. 2. DEFINITIONS Except where the context otherwise indicates, the following definitions apply: "Associated Company" means any corporation (or partner- ship, joint venture, or other enterprise), of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Award" means any Stock Option, Stock Appreciation Right, Restricted Share, unrestricted Share, dividend equivalent unit or other award granted under this Incentive Plan. "Board" means Board of Directors of the Company. "Committee" means the ECDC, or its permitted delegate. "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 1 3 Board to administer this Incentive Plan pursuant to Section 3(a) of this Article I. "Company" means Monsanto Company, a Delaware corporation. "Eligible Participant" means any officer or other salaried employee (including a director who is a salaried employee) of the Company, a Subsidiary or an Associated Company. "Incentive Plan" means the Monsanto Management Incen- tive Plan of 1994, set forth herein. "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest sales prices of the Shares reported as the New York Stock Exchange-Composite Transactions for such day, or if the Shares were not traded on the New York Stock Exchange on such day, then on the next preceding day on which the Shares were traded, all as reported by The Wall Street Journal, mid-west edition, under the heading New York Stock Exchange-Composite Transactions or by such other source as the Committee may select. "Incentive Stock Option" or "Incentive Option" means an option meeting the definition of that term as set forth in Section 3 of Article II of this Incentive Plan. "1984 Plan" means the Monsanto Management Incentive Plan of 1984, 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. "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. 2 4 "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 esta- blish a common value for exercises during such window period. "Stock Option" or "Option" shall mean Incentive Stock Options and/or Non-Qualified Stock Options. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corpora- tion 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-Qual- 3 5 ified 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. "Unit 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. 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 Unit Compensation Committees and may authorize further delegation by the Unit 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 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 provi- sion that may hereafter replace such Rule, 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 4 6 Incentive Plan, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Eligible Participants. (c) The Committee may adopt and amend from time to time rules and regulations of general application for the administration of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Awards in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corporation; a sale or transfer of all or substan- tially all of the assets of the Company to another corporation or any other person or entity, a tender or exchange offer for Shares made by any corporation, person or entity (other than the Company); or other reorganization in which the Company will not survive as an independent, publicly-owned corporation. Such action may include (but shall not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, Stock Appreciation Rights, Awards of Restricted Shares and other Awards so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, accelerated release of restrictions or other modifications. The Committee may take such actions pursuant to this Section 3(d) by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in Awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the Awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganization. 5 7 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 any distribution to stockholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of stock or other securities of 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 trans- ferred under outstanding Stock Options or Stock Appreciation Rights, and (C) which have been awarded but are undelivered under this Incentive Plan; and (iii) the purchase price to be paid per Share under outstanding Stock Options and the number of Shares to be transferred in settlement of outstanding Stock Appreciation Rights; shall in each case be equitably adjusted as determined by the Committee in its discretion; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incentive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, or any provisions that may hereafter be enacted in lieu thereof. 5. SHARES AUTHORIZED The total number of Shares for which awards may be granted under this Incentive Plan shall not exceed 3,000,000 Shares; provided that if during the term of this Incentive Plan the Company repurchases shares of Common Stock, on the open market or otherwise and in compliance with the rules and regulations of the Securities and Exchange Commission, additional Shares 6 8 may be used for awards up to the lesser of (a) 2,820,000 and (b) the number of Shares repurchased. Notwithstanding the foregoing, the total number of Shares that shall be available for Awards of Restricted or unrestricted Shares shall be 1/2 of 1% of the total number of Shares outstanding. The limitations in this Section 5 are subject to the adjustments provided for in Section 4 of this Article I; the provisions of Section 1(b) of Article II of this Incentive Plan; and the provisions of Section 3(d) of Article III of this Incentive Plan. The total number of Shares for which Awards may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any three-year period 15% of the total number of Shares for which Awards may be made under this Incentive Plan, subject to the adjustments provided for in Section 4 of this Article I. II. AWARDS 1. SHARES USED FOR AWARDS (a) The Shares for which Options may be granted under this Option Plan may be authorized but unissued Shares, or treasury Shares, or both. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section l(c) of this Article II or the exercise of a Stock Appreciation Right under Section 5 of this Article II, the Shares subject to such Option shall again be available for Option grants under this Option Plan without again being charged against the authorized Shares set forth in Section 5 of Article I, provided the Participant whose Stock Option has lapsed or ceased to be exercisable has received no benefits of ownership from the Shares. Any amendment of any Option or Stock Appreciation Right by the Committee pursuant to Article I, Section 3 of this Incentive Plan shall not be con- sidered 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 Partici- pant, his legal representative, or in the event of death, a beneficiary designated in writing by the Participant during his lifetime, authorize 7 9 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, provided the Participant whose Award ceases to be payable has received no benefits of ownership from the Shares. 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS (a) An Award of Stock Options or Stock Appreciation Rights may be made at such time or times determined by the Committee following the Effective Date to any Eligible Participant, except that Incentive Options may not be awarded to employees of Associated Companies. Each Stock Option and Stock Appreciation Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Incentive Plan, as shall be determined by the Committee, including any provisions as to continued employment as 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 transferrable 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 8 10 Act or the rules thereunder, or in such circumstances as would not result in the failure to comply with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision) if the transferor were a Reporting Person. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) The Option price per share shall be established by the grant and shall not be decreased thereafter except pursuant to Section 4 of Article I of this Incentive Plan. (e) The Committee, in its discretion, may provide for the escalation of the Option price per Share over all or part of the term of the Option. (f) The Committee, in its discretion, may offer Participants the opportunity to elect to receive an Option grant in lieu of a salary increase or a bonus or may offer Participants the opportunity to purchase Options for cash or such other consideration as the Committee in its discretion determines. 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time of the grant of any such Option, or any statutory provision that may be enacted to replace such Section. Each provision of 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 9 11 by the Committee following the Effective Date until January 31, 2004, subject to the following conditions: (a) The Option price per Share shall be set by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant. (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time within ten (10) years from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exercisable upon, or within such period following, Termination of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, an applicable pension plan of the Company, its Subsidiary or Associated Company 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. 10 12 (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 11 13 specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of the Company, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee, in which event such period shall not exceed-- (A) in the case of an Option, the original term of the Option; and (B) in the case of a Stock Appreciation Right, one year after such retirement or disability or after resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) of this Article II); or (ii) as a result of death or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The Option grant may include any other terms and conditions not inconsistent with this Incentive Plan as determined by the Committee, including provisions making the Shares subject to such Option Restricted Shares or provisions making vesting or the ability to exercise subject to the satisfaction of performance conditions. 5. STOCK APPRECIATION RIGHTS A Stock Appreciation Right may be granted to an Eligible Participant in connection with (and only in connection with) an Incentive Stock Option or a Non- Qualified Option granted under this Incentive Plan, or under any other incentive plan of the Company or its Subsidiaries which was approved by the stockholders, subject to the following terms and conditions: 12 14 (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 unexer- cised 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 13 15 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-- 14 16 (A) the value for which such Shares may be exchanged or offered under any Offer pursuant to which Shares are actually exchanged or purchased; or (B) the Fair Market Value of such Shares on the date of exercise of a Stock Appreci- ation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Offer or Change of Control, a Participant holding an unexercised Stock Appreciation Right may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between 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; 15 17 (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 Partici- pant for good reason (as defined by the Committee) within a period of time specified by the Committee following an Alternate Change of Control; (iv) "Alternate Change of Control Market Value" of the Shares means the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the 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 and Restricted Shares, the time or times of payment 16 18 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 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 accel- erate the release of restrictions on any Restricted Shares in the event of hardship or disability of the Participant while employed, in the event that the Participant ceases to be an employee of 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 17 19 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, condi- tions and provisions in effect at the time of his death, to the extent applicable. 7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVA- LENTS (a) No cash dividends shall be paid on Shares which have been awarded but not 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. 18 20 (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 Partici- pant the right to continue in the employ of his employer or affect the right of his employer to termi- nate the employment of any such person with or without cause. 3. Nothing contained herein shall require the Company to segregate any monies from its general funds, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant. 4. This Incentive Plan and all actions taken hereunder shall be governed by the laws of the State of Delaware. 5. The Company may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option or the exercise thereof, any Stock Appreciation Right or the exercise thereof, or the payment of any bonus award, including, but not limited to, the withholding of cash or Shares which would be paid or delivered pursuant to such exercise or award or another exercise or award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or cancelling any portion of such award or another award under this Incentive Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Company for the purpose of paying such award or another award under this Incentive Plan, in order to withhold or reimburse itself for the amount it is 19 21 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. 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. IV. AMENDMENTS 1. The Board, upon recommendation of the Committee but not otherwise, may from time to time amend or modify this Incentive Plan, including, but not limited to, an amendment which would authorize the Committee to make Awards payable in other securities or other forms of property of a kind to be determined by the Committee, and such other amendments as may be necessary or desirable to implement such Awards, or discontinue this Incentive Plan or any provision thereof, provided that no amendments or modifications to this Incentive Plan shall, without the prior approval of the stockholders normally entitled to vote for the election of directors of the Company: (a) permit the Company to decrease the Option price on any outstanding Option; (b) permit any change which would require the approval of stockholders under Section 16 of the Securities Exchange Act of 1934 or the rules thereunder or under Section 422 of the Internal Revenue Code of 1986, or the rules thereunder (or any law, rule, regulation or other provision that may replace such statutes or rules); or (c) change any of the provisions of this Article IV. 20 22 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. Except as authorized herein with respect to Stock Appreciation Rights, this Incentive Plan is not intended to and shall not affect any option or stock appreciation right grant or bonus commitment or award under the 1984 Plan, the 1988/I Plan or the 1988/II 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 either the 1988/I Plan or the 1988/II Plan after February 1, 1994. 2. This Incentive Plan is not intended to and shall not preclude the establishment or operation by the Company or any Subsidiary of (a) any thrift, savings and investment, achievement award, stock purchase, employee recognition or other benefit plan or arrangement for any group of employees, or (b) any other incentive or bonus plan or arrangement for any employees (herein- after "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, other than a plan for G. D. Searle & Co. and a plan for The NutraSweet Company, 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 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 21 23 Revenue Code of 1986, as may be amended from time to time, as in effect at the time. 22 EX-10.6 8 SEARLE/MONSANTO STOCK PLAN OF 1994 1 SEARLE/MONSANTO STOCK PLAN OF 1994 (As Amended April 25, 1997) 2 SEARLE/MONSANTO STOCK PLAN OF 1994 AS AMENDED APRIL 25, 1997 I. GENERAL PROVISIONS 1. PURPOSES The Searle/Monsanto Stock Plan of 1994 is designed: * to attract, motivate and retain for the Company and its Subsidiaries and Associated Companies personnel of exceptional ability, * to encourage ownership of Monsanto common stock by management, * to align management interests with those of stockholders, and * to provide a competitive executive compensation program. This Incentive Plan shall be effective February 1, 1994 ("Effective Date"), subject to the approval of this Incentive Plan by the stockholders of Monsanto Company. 2. DEFINITIONS Except where the context otherwise indicates, the following definitions apply: "Associated Company" means any corporation (or partner- ship, joint venture, or other enterprise), of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Award" means any Stock Option, Stock Appreciation Right, Restricted Share, unrestricted Share, dividend equivalent unit, or other award awarded under this Incentive Plan. "Board" means Board of Directors of the Company. "Committee" means the Executive Compensation and Development Committee of the Board, or its permitted delegate. "Company" means G. D. Searle & Co. 1 3 "Eligible Participant" means any officer or other salaried employee (including a director who is a salaried employee) of the Company, a Subsidiary or an Associated Company except that no Reporting Person shall be an Eligible Participant. "Incentive Plan" means the Searle/Monsanto Stock Plan of 1994, set forth herein. "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest sales prices of the Shares reported as the New York Stock Exchange-Composite Transactions for such day, or if the Shares were not traded on the New York Stock Exchange on such day, then on the next preceding day on which the Shares were traded, all as reported by The Wall Street Journal, mid-west edition, under the heading New York Stock Exchange-Composite Transactions or by such other source as the Committee may select. "Incentive Stock Option" or "Incentive Option" means an option meeting the definition of that term as set forth in Section 3 of Article II of this Incentive Plan. "Monsanto" means Monsanto Company, a Delaware corporation. "Non-Qualified Stock Option" or "Non-Qualified Option" means an option referred to in Section 4 of Article II of this Incentive Plan. "Participant" means an Eligible Participant to whom an Award has been granted pursuant to this Incentive Plan. "Reporting Person" means a person subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 (or any law, rule, regulation or other provision that may replace such statute) with respect to Shares. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Section 6 of Article II of this Incentive Plan. "Shares" means shares of common stock of Monsanto and any shares of stock or other securities received as a result of a Share adjustment as set forth in Section 4 of this Article I. "Stock Appreciation Right" means a right referred to in Section 5 of Article II of this Incentive Plan. 2 4 "Stock Appreciation Right Fair Market Value" or "SAR Fair Market Value" shall mean a value established by the Committee for the exercise of a Stock Appreciation Right. "Stock Option" or "Option" shall mean Incentive Stock Options and/or Non-Qualified Stock Options. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corpora- tion in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; and (ii) for the purposes of a Non-Qualified Stock Option, an Award of Shares (restricted or not), or a Stock Appreciation Right, any corporation (or partnership, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Termination of Employment" means the discontinuance of employment of a Participant for any reason other than a Transfer. "Transfer" means: (i) for the purpose of an Incentive Stock Option, a change of employment of a Participant within the group consisting of Monsanto and its Subsidiaries; and (ii) for the purpose of a Non-Qual- ified Stock Option, a Stock Appreciation Right or an Award of Shares (restricted or not), a change of employment of a Participant within the group consisting of Monsanto and its Subsidiaries, or, if the Committee so determines, a change of employment of a Participant within the group consisting of Monsanto, its Subsidiaries and Associated Companies. 3. ADMINISTRATION (a) This Incentive Plan shall be administered by the Executive Compensation and Development Committee of the Board (the "ECDC"), except to the extent the ECDC delegates administration pursuant to this paragraph. The ECDC may delegate all or a portion of the administration of this Incentive Plan to any Committee consisting of one or more senior managers of the Company or its Subsidiaries. 3 5 (b) The Committee shall have the exclusive right to interpret this Incentive Plan, to select from among the Eligible Participants the persons who are to receive Awards, and to act in all matters pertaining to the granting of Awards under this Incentive Plan including, without limitation, the timing, pricing, amount and terms of any Award and the amendment thereof consistent with the provi- sions of this Incentive Plan. No Eligible Participant shall have any right to be considered for or to receive any Awards. All acts and decisions of the Committee with respect to any questions arising in connection with the administration and interpretation of this Incentive Plan, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Eligible Participants. (c) The Committee may adopt and amend from time to time rules and regulations of general application for the administration of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Options, Stock Appreciation Rights, Awards of Restricted Shares and other Awards in the event of: a merger of Monsanto with, consolidation of Monsanto into, or the acquisition of Monsanto by, another corporation; a sale or transfer of all or substantially all of the assets of Monsanto to another corporation or any other person or entity, a tender or exchange offer for Shares made by any corporation, person or entity (other than Monsanto); or other reorganization in which Monsanto will not survive as an independent, publicly-owned corporation. Such action may include (but shall not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, Stock Appreciation Rights, Awards of Restricted Shares and other Awards so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for 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 4 6 all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in Option and Stock Appreciation Right grants, other Awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the grants, commitments or awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, tender or exchange offer or other reorganization. 4. SHARE ADJUSTMENTS In the event that at any time or from time to time a stock dividend, stock split, recapitalization, merger, consolidation, or other change in capitalization, or a sale by Monsanto of all or part of its assets, or any distribution to stockholders other than a cash dividend results in (a) the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of stock or other securities of Monsanto, or for shares of stock or other securities of any other corporation; or (b) new, different or additional shares or other securities of Monsanto or of any other corporation being received by the holders of outstanding Shares, then: (i) the total number of Shares authorized for Awards under this Incentive Plan; (ii) the number and class of Shares (A) that may be subject to Stock Options or Stock Appreciation Rights, (B) which have not been issued or trans- ferred under outstanding Stock Options or Stock Appreciation Rights, and (C) which have been awarded but are undelivered under this Incentive Plan; and (iii) the purchase price to be paid per Share under outstanding Stock Options and the number of Shares to be transferred in settlement of outstanding Stock Appreciation Rights; shall in each case be equitably adjusted as determined by the Committee in its discretion; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incentive Stock Option shall be made so that such Stock Option shall continue to be an 5 7 Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, or any provisions that may hereafter be enacted in lieu thereof. 5. SHARES AUTHORIZED The total number of Shares for which Awards may be granted under this Incentive Plan shall not exceed 1,430,000 Shares. Notwithstanding the foregoing, the total number of Shares that shall be available for Awards of Restricted or unrestricted Shares shall be 1/2 of 1% of the total number of Shares outstanding. The limitations in this Section 5 are subject to the adjustments provided for in Section 4 of this Article I and the provisions of Sections 1(b) and 1(d) of Article II of this Incentive Plan. The total number of Shares for which Awards may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any one calendar year 5% of the total number of Shares for which Awards may be made under this Incentive Plan, subject to the adjustments provided for in Section 4 of this Article I. II. AWARDS 1. SHARES USED FOR AWARDS (a) The Shares for which Awards may be granted under this Incentive Plan may be authorized but unissued Shares, or treasury Shares, or both. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section l(c) of this Article II or the exercise of a Stock Appreciation Right under Section 5 of this Article II, the Shares subject to such Option shall again be available for award without again being charged against the authorized Shares set forth in Section 5 of Article I, provided the Participant whose Stock Option has lapsed or ceased to be exercisable has received no benefits of ownership from the Shares. Any amendment of any Option or 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. 6 8 (c) In the event of death or total and permanent disability as determined by the Committee, the Committee may, with the consent of the Partici- pant, his legal representative, or in the event of death, a beneficiary designated in writing by the Participant during his lifetime, authorize payment, in cash or in Shares, or partly in cash and partly in Shares, as the Committee may direct, of an amount equal to the difference at the time between the Fair Market Value of the Shares subject to an Option and the Option price in consideration of the surrender of the Option. In such an event the Shares subject to the Option so surrendered shall be charged against the limitations set forth in Section 5 of Article I. (d) In the event that any Restricted or unrestricted Share Award or installment thereof ceases to be payable for any reason, the Shares subject to such Award shall again be available for award without again being charged against the limitations on the number of Shares set forth in Section 5 of Article I, provided the Participant whose Award ceases to be payable has received no benefits of ownership from the Shares. 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS (a) An award of Stock Options or Stock Appreciation Rights may be made at such time or times determined by the Committee following the Effective Date to any Eligible Participant, except that Incentive Options may not be awarded to employees of Associated Companies. Each Stock Option and Stock Appreciation Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Incentive Plan, as shall be determined by the Committee, including any provisions as to continued employment as 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 shall not be trans- ferable by the Participant except 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 7 9 Stock Appreciation Right shall not be transferable except by will, by the laws of descent and distribution, pursuant to a written beneficiary designation, pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act or the rules thereunder, or in such circumstances as would not result in the failure to comply with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision) if the transferor were a Reporting Person. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) The Option price per share shall be established by the grant and shall not be decreased thereafter except pursuant to Section 4 of Article I of this Incentive Plan. (e) The Committee, in its discretion, may provide for the escalation of the Option price per Share over all or part of the term of the Option. (f) The Committee, in its discretion, may offer Participants the opportunity to elect to receive an Option grant in lieu of a salary increase or a bonus or may offer Participants the opportunity to purchase Options for cash or such other consideration as the Committee in its discretion determines. (g) The Committee, in its discretion, may require as a condition to the grant or vesting of Options, the deposit of Shares owned by the Participant receiving such grant, and the forfeiture of such Options, if such deposit is not made or maintained during the required holding period. Such deposited Shares may not be otherwise sold, pledged or disposed of during the applicable holding period. 8 10 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time of the grant of any such Option, or any statutory provision that may be enacted to replace such Section. Each provision of this Incentive Plan and of each Incentive Stock Option granted hereunder shall be construed so that each such Option shall be an Incentive Stock Option, and any provision thereof that cannot be so construed shall be disregarded. Incentive Stock Options shall be granted only to purchase unrestricted Shares each of whom may be granted one or more such Options at such time or times determined by the Committee following the Effective Date until January 31, 2004, subject to the following conditions: (a) The Option price per Share shall be set by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant. (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time within ten (10) years from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exercisable upon, or within such period following, Termination of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in an applicable pension plan of Monsanto, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee; or (ii) as a result of death or death shall have occurred following Termination of Employment 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. 9 11 (c) The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are first exercisable during any calendar year by any Eligible Participant shall not exceed $100,000; however, if the Fair Market Value of Incentive Stock Option Shares (at date of grant) exceeds $100,000 in the calendar year in which Incentive Stock Options are first exercisable, Shares with a Fair Market Value at date of grant exceeding $100,000 shall not be deemed to be Incentive Stock Options. (d) Incentive Stock Options shall be granted only to an Eligible Participant who, at the time the Option is granted, does not own stock possessing more than 10% of the total combined voting power of all classes of stock of Monsanto. (e) Any other terms and conditions which the Committee determines, upon advice of counsel, should be imposed for the Option to qualify as an Incentive Stock Option and any other terms and conditions not inconsistent with this Incentive Plan as determined by the Committee; including provisions making the Shares subject to such Option Restricted Shares or provisions making vesting or the ability to exercise subject to performance conditions. 4. NON-QUALIFIED OPTIONS One or more Options may be granted as Non-Qualified Options to purchase unrestricted Shares or Restricted Shares to an Eligible Participant at such time or times determined by the Committee, following the Effective Date, subject to the following terms and conditions: (a) The Option price per Share shall be established by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant (or such later date as the Committee shall determine to be the grant date). (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 10 12 specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement pursuant to, and as defined in, the applicable pension plan of Monsanto, its Subsidiary or Associated Company or total and permanent disability as determined by the Committee; or (ii) as a result of death or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The Option grant may include any other terms and conditions not inconsistent with this Incentive Plan as determined by the Committee, including provisions making the Shares subject to such Option Restricted Shares or provisions making vesting or the ability to exercise subject to the satisfaction of performance conditions. 5. STOCK APPRECIATION RIGHTS A Stock Appreciation Right may be granted to an Eligible Participant in connection with (and only in connection with) an Incentive Stock Option or a Non- Qualified Option granted under this Plan, or under any other incentive plan of Monsanto or its Subsidiaries which was approved by the Monsanto shareholders, subject to the following terms and conditions: (a) Such Stock Appreciation Right shall entitle a holder of an Option within the period specified for the exercise of the Option in the related Option grant to surrender the unexercised Option (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. 11 13 (b) Except as otherwise expressly provided herein, each Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Option. It shall be exercisable only to the extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The Committee may grant Stock Appreciation Rights concurrently with grants of Options or in connection with previously granted Options under this Incentive Plan which are unexercised and have not terminated or lapsed. With respect to Stock Appreciation Rights granted in connection with such previously granted Options, the Committee shall provide that such Stock Appreciation Rights shall not be exercisable until the holder completes six (6) months (or such longer period as the Committee shall determine) of service with the Company, a Subsidiary, or an Associated Company immediately following the date of the grant of such Stock Appreciation Rights. (c) The Committee shall have sole discretion to determine in each case whether the payment will be in the form of all cash, all Shares (which may, at the Committee's discretion, be Restricted Shares), or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined as follows: the amount payable in Shares shall be divided by the SAR Fair Market Value of Shares. (d) Upon exercise of a Stock Appreciation Right, the number of Shares subject to exercise under the related Option shall automatically be reduced by the number of Shares represented by the Option or portion thereof which is surrendered. To the extent that a Stock Appreciation Right shall be exercised, any Shares transferred upon such exercise shall not be charged against the maximum limitations upon the grant of Options set forth in this Incentive Plan under which such Option shall have been granted but the Option in connection with which a Stock Appreciation Right shall have been granted shall be deemed to have been 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 12 14 and the Committee shall have sole discretion to determine whether such payments may bear amounts equivalent to interest or cash dividends. (f) For purposes of this paragraph 5(f) of Article II: (i) "Unrelated Party" means any party or group of parties acting together other than (A) Monsanto, its directors and officers, or (B) any nominee holder for any stock exchange; (ii) "Offer" means any tender or exchange offer made by an Unrelated Party for the Shares and shall be deemed to occur upon the first purchase or exchange of such Shares; (iii) "Change of Control" means any acquisition, beneficially or otherwise, by any Unrelated Party of 25% or more of the combined voting power of the common and preferred stock of Monsanto and shall be deemed to occur upon the date that the Unrelated Party attains control of said 25% or more of the combined voting power; (iv) "Change of Control Market Value" of the Shares means the higher of-- (A) the value for which such Shares may be exchanged or offered under any Offer pursuant to which Shares are actually exchanged or purchased; or (B) the Fair Market Value of such Shares on the date of exercise of a Stock Appreci- ation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Offer or Change of Control, a Participant holding an unexercised Stock Appreciation Right may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of Monsanto, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the 13 15 Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only: (x) during the thirty (30) day period following the first exchange or purchase of Shares pursuant to an Offer; or (y) during the thirty (30) day period following the date on which sufficient Shares are acquired to constitute a Change of Control. (g) For purposes of this paragraph 5(g) of Article II: (i) "Unrelated Party" means any party or group of parties acting together other than (A) Monsanto, its directors and officers, or (B) any nominee holder for any stock exchange; (ii) "Alternate Change of Control" means any acquisition, beneficially or otherwise, by any Unrelated Party of a percentage of the combined voting power of the common and preferred stock of Monsanto specified by the Committee (but not less than 10%) and shall be deemed to occur upon the date that the Unrelated Party attains control of said percentage of the combined voting power; (iii) "Change of Control Termination of Employment" means the termination of employment of a Participant by Monsanto, the Subsidiaries or the Associated Companies without cause (as defined by the Committee) or by the Partici- pant for good reason (as defined by the Committee) within a period of time specified by the Committee following an Alternate Change of Control; (iv) "Alternate Change of Control Market Value" of the Shares means the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the 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 14 16 the Option price and the Alternate Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of Monsanto, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only during the thirty (30) day period following a Change of Control Termination of Employment. 6. BONUS SHARES AND RESTRICTED SHARES (a) An Award of Shares or Restricted Shares may be made at such time or times determined by the Committee following the Effective Date to any Eligible Participant. The Committee shall have full discretion to determine the terms and conditions of payment of any Award, including without limitation, what part of such Award shall be paid in unrestricted Shares and Restricted Shares, the time or times of payment of any Award, and the time or times of the lapse of the restrictions on Restricted Shares. (b) For the purpose of determining the number of Shares to be used in payment of an Award, the amount of the Award payable in Shares shall be divided by the Fair Market Value of the Shares on the date of the determination of the amount of the Award by the Committee, or if the Committee so directs, the date immediately preceding the date the Award is paid. (c) The portion of an Award payable in Restricted Shares shall be paid at the time of the Award either by book-entry registration or by delivering to the Participant, or a custodian or escrow designated by the Committee and the Participant, a certificate or certificates for such Restricted Shares, registered in the name of such Participant. The Participant shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including forfeitures or resale to the Company, if any, as may be determined by the Committee. The Committee and the Participant may designate the 15 17 Company, Monsanto or one or more employees to act as custodian or escrow for the certificates. (d) The Committee, in its discretion, may require as a condition to the grant of any Shares or Restricted Shares, the deposit of Shares owned by the Participant receiving such grant, and the forfeiture of the Award of Shares or Restricted Shares, if such deposit is not made or maintained during any applicable restricted period. Such deposited Shares may not be otherwise sold, pledged or disposed of during any applicable restricted period. (e) Restricted Shares shall be subject to such terms and conditions, including forfeiture, if any, and to such restrictions against sale, transfer or other disposition as may be determined by the Committee at the time a Non-Qualified Option for the purchase of Restricted Shares is granted, at the time a Stock Appreciation Right to be settled with Restricted Shares is granted or at the time of making an Award of Restricted Shares. Any new or additional or different Shares or other securities resulting from any adjustment of such Shares of the type described in Section 4 of Article I shall be subject to the same terms, conditions, and restrictions as the Restricted Shares prior to such adjustment. The Committee may, in its discretion, remove, modify or accel- erate the release of restrictions on any Restricted Shares in the event of hardship or disability of the Participant while employed, in the event that the Participant ceases to be an employee of Monsanto, a Subsidiary or Associated Company, as the result of death or otherwise, in the event of a relocation of a Participant to another country or for such other reasons as the Committee may deem appropriate. In the event of the death of a Participant following the transfer of Restricted Shares to him, the legal representative of the Participant, the beneficiary designated in writing by the Participant during his lifetime, or the person receiving such Shares under his will or under the laws of descent and distribution shall take such Shares subject to the same restrictions, conditions and provisions in effect at the time of his death, to the extent applicable. 16 18 7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVA- LENTS (a) No cash dividends shall be paid on Shares which have been awarded but not delivered or on Shares subject to unexercised Options. The Committee may provide, however, that a Participant to whom an Option has been awarded which is exercisable in whole or in part at a future time for Shares or a Participant who has been awarded Shares payable in whole or in part at a future time, shall be entitled to receive an amount per Share, equal in value to the cash dividends, if any, paid per Share on issued and outstanding Shares, as of the dividend record dates occurring during the period between the date of the Award and the time each such Share is delivered. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be: (i) paid in cash or Shares either from time to time prior to or at the time of the delivery of such Shares or upon expiration of the Option if it shall not have been fully exercised (except that payment of dividend equivalents on Incentive Options may not be made prior to exercise); or (ii) converted into contingently credited Shares (with respect to which dividend equivalents shall accrue) in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee. Such Shares (whether delivered or contingently credited) shall be charged against the limitations set forth in Section 5 of Article I. (b) The Committee, in its discretion, may authorize payment of interest equivalents on any portion of any Award payable at a future time in cash, and interest equivalents on dividend equivalents which are payable in cash at a future time. (c) The Committee, in its discretion, may provide that dividends paid on Restricted Shares shall, during the applicable restricted period, be held by the Company to be paid upon the lapse of restrictions or to be forfeited upon forfeiture of the Shares. 17 19 III. MISCELLANEOUS PROVISIONS 1. Neither a Stock Option nor Stock Appreciation Right shall be transferable except as provided for herein. If any Participant makes such a transfer in violation hereof, any obligation of the Company with respect to such Stock Option or Stock Appreciation Right shall forthwith terminate. 2. Nothing in this Incentive Plan or any booklet or other document describing or referring to this Incentive Plan shall be deemed to confer on any employee or Partici- pant the right to continue in the employ of his employer or affect the right of his employer to termi- nate the employment of any such person with or without cause. 3. This Incentive Plan and all actions taken hereunder shall be governed by the laws of the State of Delaware. 4. The Company may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option or the exercise thereof, any Stock Appreciation Right or the exercise thereof, or the grant of any other Award, including, but not limited to, the withholding of cash or Shares which would be paid or delivered pursuant to such exercise or Award or another exercise or Award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or cancelling any portion of such Award or another Award under this Incentive Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Company for the purpose of paying such award or another award under this Incentive Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. The Committee may permit a Participant (or any beneficiary or other person authorized to act) to elect to pay a portion or all of any amounts required or permitted to be withheld to satisfy federal, state, local or foreign tax obligations by directing the Company to withhold a number of whole Shares which would otherwise be distributed and which have a Fair Market Value sufficient to cover the amount of such required or permitted withholding taxes. 18 20 5. 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. IV. AMENDMENTS 1. The Board may from time to time amend or modify this Incentive Plan, 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 Monsanto: (a) permit the Company to decrease the Option price on any outstanding Option; (b) permit any change which would require the approval of stockholders of Monsanto under Section 16 of the Securities Exchange Act of 1934 or the rules thereunder or under Section 422 of the Internal Revenue Code of 1986, or the rules thereunder (or any laws, rules, regulations or other provisions that may replace such statutes or rules); or (c) change any of the provisions of this Article IV. 2. No amendment to or discontinuance of this Incentive Plan or any provision thereof by the Board or the stockholders of Monsanto shall, without the written consent of the Participant, adversely affect any Stock Option or Stock Appreciation Right theretofore granted or other Award theretofore made to such Participant under this Incentive Plan. V. INTERPRETATION 1. Except as authorized herein with respect to Stock Appreciation Rights, this Incentive Plan is not intended to and shall not affect any option or stock appreciation right grant or other award under any other incentive plan of Monsanto, its Subsidiaries and Associated Companies. No stock options, stock appreciation rights or Restricted Share awards shall be granted under the Searle Monsanto Stock Option Plan of 1986 after February 1, 1994. 19 21 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 (herein- after "Other Plan"), and any such Other Plan may be authorized and payments made thereunder independently of this Incentive Plan. 20 EX-10.7 9 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996 As Amended April 25, 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. "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 A-1 2 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. A-2 3 "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. A-3 4 (c) The Committee may adopt and amend from time to time rules and regulations of general application for the administration of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Awards in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corporation; a sale or transfer of all or substantially all of the assets of the Company to another corporation or any other person or entity; a separation from the Company, including any spin-off or other distribution to stockholders other than an ordinary cash dividend; a tender or exchange offer for Shares made by any corporation, person or entity (other than the Company); or other reorganization in which the Company will not survive as an independent, publicly-owned corporation. Such action may include (but shall not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, Stock Appreciation Rights, Awards of Restricted Shares and other Awards so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, accelerated release of restrictions or other modifications. The Committee may take such actions pursuant to this Section 3(d) by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in Awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the Awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, 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; A-4 5 shall in each case be appropriately adjusted by the Committee in its discretion; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incentive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time. 5. SHARES AUTHORIZED The total number of Shares for which awards may be granted under this Incentive Plan shall not exceed 9,250,000 Shares. Notwithstanding the foregoing, the total number of Shares that shall be available for Awards of Restricted or unrestricted Shares shall be 1/2 of 1% of the total number of Shares outstanding. The limitations in this Section 5 are subject to the adjustments provided for in Section 4 of this Article I; the provisions of Section 1(b) of Article II of this Incentive Plan; and the provisions of Section 3(d) of Article III of this Incentive Plan. The total number of Shares for which Awards may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any three-year period 15% of the total number of Shares for which Awards may be made under this Incentive Plan, subject to the adjustments provided for in Section 4 of this Article I. II. AWARDS 1. SHARES USED FOR AWARDS (a) The Shares for which Options may be granted under this Option Plan may be authorized but unissued Shares, or treasury Shares, or both. (b) In the event that any unexercised Stock Option granted hereunder lapses or ceases to be exercisable for any reason other than a surrender of the Option pursuant to Section l(c) of this Article II or the exercise of a Stock Appreciation Right under Section 5 of this Article II, the Shares subject to such Option shall again be available for Option grants under this Option Plan without again being charged against the authorized Shares set forth in Section 5 of Article I if not prohibited by Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision). Any amendment of any Option or Stock Appreciation Right by the Committee pursuant to Article I, Section 3 of this Incentive Plan shall not be considered the grant of a new Option for the purpose of Section 5 of Article I. (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). A-5 6 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS (a) An Award of Stock Options or Stock Appreciation Rights may be made at such time or times determined by the Committee following the Effective Date to any Eligible Participant, except that Incentive Options may not be awarded to employees of Associated Companies. Each Stock Option and Stock Appreciation Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Incentive Plan, as shall be determined by the Committee, including any provisions as to continued employment as consideration for the grant or exercise of such Option or Stock Appreciation Right, provisions as to performance conditions and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. (b) An Incentive Stock Option or Stock Appreciation Right shall not be transferable by the Participant otherwise than by will, by the laws of descent and distribution, or pursuant to a written beneficiary designation, and shall be exercisable during the lifetime of the Participant only by him or by his guardian or legal representative. A Non-Qualified Stock Option or Stock Appreciation Right shall not be transferable except by will, by the laws of descent and distribution, pursuant to a written beneficiary designation, pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act or the rules thereunder, or in such circumstances as would not result in the failure to comply with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision) if the transferor were a Reporting Person. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) The Option price per share shall be established by the grant and shall not be decreased thereafter except pursuant to Section 4 of Article I of this Incentive Plan. (e) The Committee, in its discretion, may provide for the escalation of the Option price per Share over all or part of the term of the Option. (f) The Committee, in its discretion, may offer Participants the opportunity to elect to receive an Option grant in lieu of a salary increase or a bonus or may offer Participants the opportunity to purchase Options for cash or such other consideration as the Committee in its discretion determines. 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time of the grant of any such Option, or any statutory provision that may be enacted to replace such Section. Each provision of 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 A-6 7 granted one or more such Options at such time or times determined by the Committee following the Effective Date until April 14, 2006, subject to the following conditions: (a) The Option price per Share shall be set by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant. (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time within ten (10) years from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exercisable upon, or within such period following, Termination of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement as defined by the Committee or total and permanent disability as determined by the Committee, in which event such period shall not exceed-- (A) in the case of an Option, the original term of the Option; and (B) in the case of a Stock Appreciation Right, one year after such retirement or disability or after resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) of this Article II); or (ii) as a result of death, or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are first exercisable during any calendar year by any Eligible Participant shall not exceed $100,000; however, if the Fair Market Value of Incentive Stock Option Shares (at date of grant) exceeds $100,000 in the calendar year in which Incentive Stock Options are first exercisable, Shares with a Fair Market Value at date of grant exceeding $100,000 shall not be deemed to be Incentive Stock Options. (d) Incentive Stock Options shall be granted only to an Eligible Participant who, at the time the Option is granted, does not own stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. (e) Any other terms and conditions which the Committee determines, upon advice of counsel, should be imposed for the Option to qualify as an Incentive Stock Option and any other terms and conditions not inconsistent with this Incentive Plan as determined by the Committee; including provisions making the Shares subject to such Option Restricted Shares or provisions making vesting or the ability to exercise subject to performance conditions. A-7 8 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 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) A-8 9 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; A-9 10 (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; A-10 11 (iv) "Alternate Change of Control Market Value" of the Shares means the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Alternate Change of Control and a Change of Control Termination of Employment, a Participant holding an unexercised Stock Appreciation Right who is selected by the Committee may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Alternate Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of the Company, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only during the thirty (30) day period following a Change of Control Termination of Employment. 6. BONUS SHARES AND RESTRICTED SHARES (a) An Award of Shares or Restricted Shares may be made at such time or times determined by the Committee following the Effective Date to any person who is an Eligible Participant. The Committee shall have full discretion to determine the terms and conditions of payment of any Award, including without limitation, what part of such Award shall be paid in unrestricted Shares or Restricted Shares, the time or times of payment of any Award, and the time or times of the lapse of the restrictions on Restricted Shares. (b) For the purpose of determining the number of Shares to be used in payment of an Award, the amount of the Award payable in Shares shall be divided by the Fair Market Value of the Shares on the date of the determination of the amount of the Award by the Committee, or if the Committee so directs, the date immediately preceding the date the Award is paid. (c) The portion of an Award payable in Restricted Shares shall be paid at the time of the Award either by book-entry registration or by delivering to the Participant, or a custodian or escrow designated by the Committee and the Participant, a certificate or certificates for such Restricted Shares, registered in the name of such Participant. The Participant shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including withholding of dividends, forfeitures or resale to the Company, if any, as may be determined by the Committee. The Committee and the Participant may designate the Company or one or more of its employees to act as custodian or escrow for the certificates. (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 A-11 12 adjustment. The Committee may, in its discretion, remove, modify or accelerate the release of restrictions on any Restricted Shares in the event of hardship or disability of the Participant while employed, in the event that the Participant ceases to be an employee of the Company, a Subsidiary or Associated Company, as the result of death or otherwise, in the event of a relocation of a Participant to another country or for such other reasons as the Committee may deem appropriate. In the event of the death of a Participant following the transfer of Restricted Shares to him, the legal representative of the Participant, the beneficiary designated in writing by the Participant during his lifetime, or the person receiving such Shares under his will or under the laws of descent and distribution shall take such Shares subject to the same restrictions, conditions and provisions in effect at the time of his death, to the extent applicable. 7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS (a) No cash dividends shall be paid on Shares which have been awarded but not registered or delivered. The Committee may provide, however, that a Participant to whom an Option has been awarded which is exercisable in whole or in part at a future time for Shares or a Participant who has been awarded Shares payable in whole or in part at a future time, shall be entitled to receive an amount per Share, equal in value to the cash dividends, if any, paid per Share on issued and outstanding Shares, as of the dividend record dates occurring during the period between the date of the award and the time each such Share is delivered. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be: (i) paid in cash or Shares either from time to time prior to or at the time of the delivery of such Shares or upon expiration of the Option if it shall not have been fully exercised (except that payment of the dividend equivalents on Incentive Options may not be made prior to exercise); or (ii) converted into contingently credited Shares (with respect to which dividend equivalents shall accrue) in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee. Such Shares (whether delivered or contingently credited) shall be charged against the limitations set forth in Section 5 of Article I. (b) The Committee, in its discretion, may authorize payment of interest equivalents on any portion of any Award payable at a future time in cash, and interest equivalents on dividend equivalents which are payable in cash at a future time. (c) The Committee, in its discretion, may provide that dividends paid on restricted Shares shall, during the applicable restricted period, be held by the Company to be paid upon the lapse of restrictions or to be forfeited upon forfeiture of the Shares. III. MISCELLANEOUS PROVISIONS 1. Neither a Stock Option nor a Stock Appreciation Right shall be transferable except as provided for herein. If any Participant makes such a transfer in violation hereof, any obligation of the Company with respect to such Stock Option or Stock Appreciation Right shall forthwith terminate. A-12 13 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 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. 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. 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 A-13 14 stockholders normally entitled to vote for the election of directors of the Company: (a) permit the Company to decrease the Option price on any outstanding Option; (b) permit any change which would require the approval of stockholders under Section 16 of the Securities Exchange Act of 1934 or the rules thereunder or under Section 422 of the Internal Revenue Code of 1986, or the rules thereunder (or any law, rule, regulation or other provision that may replace such statutes or rules); or (c) change any of the provisions of this Article IV. 2. No amendment to or discontinuance of this Incentive Plan or any provision thereof by the Board or the stockholders of the Company shall, without the written consent of the Participant, adversely affect any Stock Option or Stock Appreciation Right theretofore granted or bonus commitment or bonus award theretofore made to such Participant under this Incentive Plan. V. INTERPRETATION 1. This Incentive Plan is not intended to and shall not affect any option or stock appreciation right grant or bonus commitment or award under the 1984 Plan, the 1986 Plan, the 1988/I Plan, the 1988/II Plan, the 1991 Plan, the 1994 Plan, the 1994 Searle/Monsanto Plan, or the 1994 NutraSweet/Monsanto Plan (or any 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, A-14 15 bonus commitments or bonus awards to employees substantially all of whom are not Participants. A-15 EX-10.8 10 MINUTES OF EXECUTIVE COMP. & DEVELOP. COMMITTEE MEETING 1 EXCERPT OF MINUTES OF MEETING EXECUTIVE COMPENSATION & DEVELOPMENT COMMITTEE FEBRUARY 27, 1997 . . . . After ten years of operation, management recommends the termination of the Searle Phantom Stock Option Plan in light of the new organization structure designed to spin off the chemicals business and create a life sciences organization of which Searle will be a part. To terminate the plan for the 223 participants, management recommends cash awards for the embedded value up to $56 per option, and the grant of Monsanto Stock Options (approximately 2.5 million options) for the value from $56 to $60. . . . . . The Committee, after discussion and unanimous consent, approved the termination of the Searle Phantom Stock Option Plan, and the cash awards and grant of Monsanto Stock Options as outlined in Exhibit I. . . . . EX-23 11 CONSENT OF EXPERT 1 EXHIBIT 23 CONSENT OF COMPANY COUNSEL I hereby consent to the incorporation by reference in Monsanto Company's Registration Statements on Form S-8 (Nos. 2-36636, 2-76696, 2-90152, 33-13197, 33-21030, 33-39704, 33-39705, 33-39706, 33-39707, 33-49717, 33-53363, 33-53365, 33-53367, 333-02783, 333-02961, and 333-02963) and on Form S-3 (No. 33-60189) of the reference to Company counsel in Note 5 to the Notes to Financial Statements in the Company's Form 10-Q Report for the quarter ended March 31, 1997. In giving this consent I do not thereby admit that I am within the category of persons whose consent is required under Section 7 of the Securities Act of 1933. R. William Ide III General Counsel Monsanto Company Saint Louis, Missouri May 15, 1997 EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF MARCH 31, 1997. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1997 MAR-31-1997 106 0 2,583 0 1,563 5,166 7,707 4,590 12,122 4,243 1,552 1,644 0 0 2,183 12,122 2,574 2,574 1,321 1,321 0 0 43 394 120 274 0 0 0 274 0.45 0 RECEIVABLES ARE STATED NET OF ALLOWANCES OF $75.
EX-99 13 COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 99 MONSANTO COMPANY AND SUBSIDIARIES COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------- --------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ------ ------ ---- ----- Income from continuing operations before provision for income taxes.............. $394 $382 $540 $1,087 $ 895 $729 $(174) Add Fixed charges............... 56 52 232 245 182 184 231 Less capitalized interest..... (1) (1) (14) (11) (10) (12) (16) Dividends from affiliated companies........ -- 2 14 9 2 5 5 Less equity (income) loss of affiliated companies.......... (23) 9 24 (17) (21) (20) (1) ---- ---- ---- ------ ------ ---- ----- Income as adjusted $426 $444 $796 $1,313 $1,048 $886 $ 45 ==== ==== ==== ====== ====== ==== ===== Fixed charges Interest expense.............. $ 43 $ 40 $171 $ 190 $ 131 $129 $ 169 Capitalized interest.......... 1 1 14 11 10 12 16 Portion of rents representative of interest factor...................... 12 11 47 44 41 43 46 ---- ---- ---- ------ ------ ---- ----- Fixed charges............. $ 56 $ 52 $232 $ 245 $ 182 $184 $ 231 ==== ==== ==== ====== ====== ==== ===== Ratio of earnings to fixed charges....................... 7.61 8.54 3.43 5.36 5.76 4.82 0.19 ==== ==== ==== ====== ====== ==== ===== - ------- Includes restructuring and other unusual items of $716 million and $699 million in 1996 and 1992, respectively. Excluding restructuring and other unusual items, the ratio of earnings to fixed charges would have been 6.52 and 3.22 in 1996 and 1992, respectively. The ratio was not materially affected by the restructuring and other unusual items in 1995, 1994 and 1993.
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