-----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, ERJhvjmImjt57h59j5DvVFbOm9jxKoOSGrboBlNXZtoPT2zIlqn9j/FA7aVLVudT fjXxoVnyemecVc8H4lSVBg== 0000950114-97-000493.txt : 19971117 0000950114-97-000493.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950114-97-000493 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-02516 FILM NUMBER: 97719770 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 SEPTEMBER 30, 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 SEPTEMBER 30, 1997 ----- ------------------ COMMON STOCK, $2 PAR VALUE 592,986,510 SHARES - -------------------------- ------------------ =============================================================================== 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The Statement of Consolidated Income of Monsanto Company and subsidiaries for the three months and nine months ended September 30, 1997 and 1996, the Statement of Consolidated Financial Position as of September 30, 1997 and December 31, 1996, the Statement of Consolidated Cash Flow for the nine months ended September 30, 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 NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------- ---------------- 1997 1996 1997 1996 ------ ------ ------ ------ Net Sales................................................................. $1,724 $1,442 $5,694 $4,901 Costs and Expenses: Cost of Goods Sold........................................................ 685 613 2,342 2,007 Selling, General and Administrative Expenses.............................. 512 429 1,466 1,355 Technological Expenses.................................................... 264 192 718 494 Acquired In-Process Research & Development................................ 436 609 Amortization of Intangible Assets......................................... 43 32 114 94 ------ ------ ------ ------ Operating Income (Loss)................................................... (216) 176 445 951 Interest Expense.......................................................... (42) (29) (111) (94) Interest Income........................................................... 13 14 36 39 Other Income (Expense)--Net............................................... (28) (27) (1) 1 ------ ------ ------ ------ Income (Loss) from Continuing Operations Before Income Taxes.............. (273) 134 369 897 Income Taxes.............................................................. (106) 27 80 252 ------ ------ ------ ------ Income (Loss) from Continuing Operations.................................. (167) 107 289 645 Income from Discontinued Operations....................................... 34 63 176 150 ------ ------ ------ ------ Net Income (Loss)......................................................... $ (133) $ 170 $ 465 $ 795 ------ ------ ------ ------ Earnings (Loss) per Share: Continuing Operations................................................... $(0.28) $ 0.18 $ 0.47 $ 1.08 Discontinued Operations................................................. 0.05 0.10 0.29 0.25 ------ ------ ------ ------ Total................................................................. $(0.23) $ 0.28 $ 0.76 $ 1.33 ------ ------ ------ ------ Dividends per Share....................................................... $0.160 $0.150 $0.470 $0.438 ------ ------ ------ ------ Weighted Average Number of Common and Common Equivalent Shares (in millions)............................................................... 609.6 597.9 ------ ------
1 3 MONSANTO COMPANY AND SUBSIDIARIES STATEMENT OF CONSOLIDATED FINANCIAL POSITION (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents.................................................. $ 184 $ 166 Trade receivables, net of allowances of $52 in 1997 and $47 in 1996........ 2,176 1,515 Miscellaneous receivables and prepaid expenses............................. 488 286 Deferred income tax benefit................................................ 306 282 Inventories................................................................ 1,187 1,183 Chemicals Discontinued Operations.......................................... 908 ------- ------- Total Current Assets............................................... 4,341 4,340 ------- ------- Property, Plant and Equipment.................................................. 4,570 4,428 Less Accumulated Depreciation.................................................. 2,307 2,333 ------- ------- Net Property, Plant and Equipment.......................................... 2,263 2,095 ------- ------- Investments in Affiliates...................................................... 319 257 Intangible Assets, net of accumulated amortization............................. 2,685 2,166 Other Assets................................................................... 767 664 Non-Current Assets--Chemicals Discontinued Operations.......................... 1,715 ------- ------- Total Assets................................................................... $10,375 $11,237 ------- ------- LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities: Accounts payable........................................................... $ 420 $ 479 Accrued liabilities........................................................ 1,268 1,431 Short-term debt............................................................ 2,060 654 Chemicals Discontinued Operations.......................................... 837 ------- ------- Total Current Liabilities.......................................... 3,748 3,401 ------- ------- Long-Term Debt................................................................. 1,507 1,608 Deferred Income Taxes.......................................................... 149 102 Postretirement Liabilities..................................................... 668 594 Other Liabilities.............................................................. 340 509 Non-Current Liabilities--Chemicals Discontinued Operations..................... 1,333 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......................................... 199 65 Treasury stock, at cost (228,984,460 shares in 1997 and 237,594,831 shares in 1996)...................................... (2,584) (2,661) Reserve for ESOP debt retirement........................................... (123) (174) Net unrealized investment holding gains.................................... 9 11 Accumulated currency adjustment............................................ (166) 10 Reinvested earnings........................................................ 4,984 4,795 ------- ------- Total Shareowners' Equity.......................................... 3,963 3,690 ------- ------- Total Liabilities and Shareowners' Equity...................................... $10,375 $11,237 ------- -------
2 4 MONSANTO COMPANY AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOW (DOLLARS IN MILLIONS)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1997 1996 ---- ---- Increase (Decrease) in Cash and Cash Equivalents Operating Activities: Income from Continuing Operations...................................................... $ 289 $ 645 Add income taxes--continuing operations................................................ 80 252 ------ ------ Income from continuing operations before income taxes.................................. 369 897 Adjustments to reconcile to Cash Provided by Continuing Operations: Income tax payments................................................................ (109) (244) Items that did not use (provide) cash: Depreciation and amortization expense.......................................... 350 296 Acquired in-process research and development expense........................... 609 Other.......................................................................... (104) 20 Working capital changes that provided (used) cash: Accounts receivable............................................................ (662) (566) Inventories.................................................................... 50 6 Accounts payable and accrued liabilities....................................... (166) (20) Other.......................................................................... (63) 29 Other items........................................................................ (173) 51 ------ ------ Cash Provided by Continuing Operations..................................................... 101 469 Cash Provided by (Used in) Discontinued Operations......................................... (109) 141 ------ ------ Total Cash Provided by (Used in) Operations................................................ (8) 610 Investing Activities: Property, plant and equipment purchases................................................ (458) (308) Seed company acquisitions and investments.............................................. (1,237) (163) Other acquisitions and investments..................................................... (358) (463) Investments and property disposal proceeds............................................. 16 150 Discontinued Operations................................................................ (44) (148) ------ ------ Cash Used in Investing Activities.......................................................... (2,081) (932) ------ ------ Financing Activities: Net change in short-term financing..................................................... 2,406 489 Long-term debt proceeds................................................................ 13 115 Long-term debt reductions.............................................................. (97) (164) Treasury stock purchases............................................................... (253) Dividend payments...................................................................... (276) (255) Common stock issued under employee stock plans......................................... 97 123 Cash transferred to Solutia............................................................ (75) Other financing activities............................................................. 39 92 ------ ------ Cash Provided by Financing Activities...................................................... 2,107 147 ------ ------ Increase (Decrease) in Cash and Cash Equivalents........................................... 18 (175) Cash and Cash Equivalents: Beginning of year...................................................................... 166 297 ------ ------ End of period.......................................................................... $ 184 $ 122 ------ ------ The effect of exchange rate changes on cash and cash equivalents was not material.
3 5 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) 1. In December 1996, the Board of Directors ("Board") approved a plan to spin off the company's chemicals business to shareowners by means of the distribution of shares of a newly-formed, wholly-owned subsidiary, later named Solutia Inc. ("Solutia"). Effective August 12, 1997, the Board declared a dividend on September 1, 1997, to shareowners of record on August 20, 1997 of one share of Solutia common stock and one preferred share purchase right of Solutia for every five shares of Monsanto common stock, subject to certain conditions, including shareholder approval. Shareowners approved the spin off at a special meeting held August 18, 1997, and the spin off became effective September 1, 1997. As a result of the spin off, Monsanto's financial statements have been restated to present the results of operations, cash flows and financial position of the chemicals business as discontinued operations. Discontinued operations also include certain other operations of the company's chemicals business which have been sold. Operating results for discontinued operations were:
FOR THE FOR THE THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------- ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales...................... $487 $734 $1,943 $2,158 ---- ---- ------ ------ Income Before Income Taxes..... $ 50 $ 97 $ 266 $ 239 Income Taxes................... 16 34 90 89 ---- ---- ------ ------ Net Income..................... $ 34 $ 63 $ 176 $ 150
Interest expense of $10 million and $14 million for the third quarter of 1997 and 1996, respectively, and $39 million and $40 million for the nine months ended September 30, 1997 and 1996, respectively, has been allocated to the operating results of Solutia based on debt assumed by Solutia. To consummate the spin off, Monsanto contributed certain assets to Solutia, and Solutia assumed certain liabilities of Monsanto beginning June 1, 1997. In addition to the assets and liabilities reported in the Statement of Consolidated Financial Position as discontinued operations as of December 31, 1996, the assets contributed to Solutia and liabilities assumed by Solutia included a joint venture interest in Monsanto's elemental phosphorus business, cash of $75 million, short-term debt of $1,000 million, and long-term ESOP notes and debentures of $29 million. The excess of the liabilities assumed by Solutia over the assets contributed to Solutia as of September 1, 1997 of approximately $120 million increased Monsanto's shareowners' equity. The amount may be adjusted based upon the final determination of the net liabilities assumed. In connection with the spin off, various agreements entered into by the Company and Solutia allocated responsibility between them for various debts, liabilities and obligations. These agreements provide that Solutia will indemnify the Company for the liabilities assumed by Solutia pursuant to such agreements. 2. In the first quarter of 1997, Monsanto completed the acquisitions 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 $310 million and $60 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 $0.11 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 believes that the technological 4 6 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) feasibility of the acquired in-process technology has not 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 May 1997, Monsanto completed its acquisition of the remaining shares of Calgene, Inc. ("Calgene") that Monsanto did not already own for $8.00 per share in cash, or approximately $267 million. In conjunction with this acquisition, Monsanto recorded a $72 million aftertax charge ($72 million pretax), or $0.11 per share, in the second quarter of 1997 for acquired in-process research and development. This charge was not tax effected because the transaction was a stock acquisition rather than an asset purchase. The estimated fair value of the assets acquired and liabilities assumed totaled approximately $300 million and $33 million, respectively. The purchase price allocations are based upon preliminary assumptions and are subject to revision. The amount of this write-off was determined by an independent valuation. Management believes that the technological feasibility of the acquired in-process technology has not 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 September 1997, Monsanto completed the acquisitions of Holden's Foundation Seeds, Inc. ("Holden's") and Corn States Hybrid Service, Inc. ("Corn States") for a combined purchase price of approximately $1.0 billion. 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 totaled approximately $1.0 billion. The purchase price allocations are based upon preliminary assumptions and are subject to revision. In conjunction with the acquisition, Monsanto recorded an aftertax charge of $270 million, or $0.45 per share, in the third quarter of 1997 for the write-off of acquired in-process research and development. The amount of this write-off was determined by an independent valuation. Management believes that the technological feasibility of the acquired in-process technology has not been established and that it has no alternative future uses. Accordingly, the amounts allocated to in-process research and development are required to be expensed immediately under generally accepted accounting principles. 3. Earnings per share were computed using the weighted average number of common shares and common share equivalents outstanding each period (609,574,104 and 597,931,214 in 1997 and 1996, respectively). Common share equivalents (20,898,878 and 17,642,386 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 Standard 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 for financial statements issued after December 15, 1997. Pro forma earnings per share computed under the provisions of FAS 128 would have been:
FOR THE FOR THE THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------- -------------- 1997 1996 1997 1996 ---- ---- ---- ---- Basic earnings (loss) per share from continuing operations.............. $(0.29) $0.18 $0.49 $1.11 Diluted earnings (loss) per share from continuing operations.............. $(0.28) $0.18 $0.47 $1.08
5 7 MONSANTO COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Components of inventories at September 30, 1997 and December 31, 1996 were as follows:
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ Finished goods................................ $ 575 $ 630 Goods in process.............................. 268 287 Raw materials and supplies.................... 389 333 ------ ------ Inventories, at FIFO cost..................... 1,232 1,250 Excess of FIFO over LIFO cost................. (45) (67) ------ ------ Total..................................... $1,187 $1,183 ------ ------
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 a variety of issues. Certain of the lawsuits and claims seek damages in very large amounts, or seek to restrict the Company's business activities. 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 and nine months ended September 30, 1997 and 1996 were as follows:
THREE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------------------- 1997 1996 ------------------------ ------------------------ OPERATING OPERATING NET INCOME NET INCOME SALES (LOSS) SALES (LOSS) ----- --------- ----- --------- Segment: Agricultural Products...................... $ 672 $(295) $ 556 $100 Nutrition & Consumer....................... 342 37 336 55 Pharmaceuticals............................ 605 77 498 48 Corporate & Other.......................... 105 (35) 52 (27) ------ ------ ------ ---- Total.......................................... $1,724 $(216) $1,442 $176 ------ ------ ------ ---- NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------------------- 1997 1996 ------------------------ ------------------------ OPERATING OPERATING NET INCOME NET INCOME SALES (LOSS) SALES (LOSS) ----- --------- ----- --------- Segment: Agricultural Products...................... $2,603 $ 268 $2,128 $674 Nutrition & Consumer....................... 1,148 139 1,182 214 Pharmaceuticals............................ 1,633 147 1,430 145 Corporate & Other.......................... 310 (109) 161 (82) ------ ----- ------ ---- Total.......................................... $5,694 $ 445 $4,901 $951 ------ ----- ------ ----
In 1997, Monsanto created a new organizational structure that transferred various businesses among segments. After the spin off of Solutia on September 1, 1997, the company is reporting under the new organizational structure. Segment information for 1997 and 1996 has been reclassified to conform to the current presentation. Financial information for the first nine months of 1997 and 1996 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. 6 8 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--THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996 Monsanto recorded a net loss for the third quarter of 1997 of $133 million, or $0.23 per share, compared with net income of $170 million, or $0.28 per share, in the year-ago quarter. The loss from continuing operations for the third quarter of 1997 was $167 million, or $0.28 per share, compared to income from continuing operations of $107 million, or $0.18 per share, in the third quarter of last year. As further discussed in Note 2, third quarter results for 1997 included an aftertax charge of $270 million, or $0.45 per share, for acquired in-process research and development related to the acquisitions of Holden's and Corn States. Net sales of $1,724 million were 20 percent higher than the comparable figure in 1996. Net sales for Agricultural Products increased 21 percent versus sales for the same period last year to $672 million. Net sales in the third quarter of 1997 benefited from higher sales volumes of the family of Roundup(R) herbicides. The increased sales reflected continued strong worldwide demand, with significant gains in Brazil, Argentina and the United States. The higher sales in the United States reflected increased applications of Roundup(R) herbicides on Roundup Ready(R) soybeans and cotton, and the effect of a sales rebate program targeting fall Roundup(R) applications in selected markets. In addition, quarterly sales benefited from the inclusion of Asgrow sales. Operating income for the segment declined $395 million from the prior year. However, as further discussed in Note 2, operating income included a $436 million pretax charge for acquired in-process research and development associated with the acquisitions of Holden's and Corn States. If this charge was excluded, operating income in the third quarter of 1997 would have increased 41 percent compared to operating income in the third quarter of 1996, primarily due to higher sales and lower manufacturing costs. Nutrition & Consumer sales of $342 million increased 2 percent versus the prior-year third quarter as a result of higher aspartame, biogum and algin sales volumes, partially offset by lower lawn and garden and tabletop sweetener sales volumes. Operating income for the third quarter of 1997 decreased 33 percent to $37 million primarily as a result of increased technology spending on new product development and reduced sales of tabletop sweeteners. Pharmaceutical net sales for the quarter increased $107 million, or 21 percent, versus the third quarter of 1996 to $605 million. The increase in net sales was primarily the result of sales of certain product rights totaling $49 million and higher sales volumes for key products. Combined third quarter sales of Ambien(R), a short-term treatment for insomnia, Daypro(R) and Arthrotec(R) arthritis treatments, and Covera-HS(R) cardiovascular treatment increased 26 percent versus sales of these products in the third quarter of last year. Operating income in the third quarter of 1997 of $77 million increased $29 million versus the third quarter of 1996, due to higher sales partially offset by increased technology and marketing expenses. Research and development spending increased versus the prior-year third quarter as four additional new product candidates have moved into the later, more expensive phase III clinical trials. In addition, marketing expenses rose due to preparations for launching new products in 1998. Third-quarter 1997 sales for the Corporate & Other segment increased significantly versus the prior-year quarter primarily due to the inclusion of sales from Calgene's tomato business in the 1997 period. 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. The segment recorded a third-quarter operating loss of $35 million in 1997 compared to a loss of $27 million in the 1996 third quarter. The increased operating loss in quarter-to-quarter comparisons was primarily due to increased spending on growth initiatives. For Monsanto, technological expenses for the third quarter of 1997 were higher than the comparable period in 1996, primarily due to the aforementioned increases in research and development expenses in the Nutrition & Consumer and Pharmaceuticals segments. The increase in selling, general, and administrative expenses for Monsanto in the third quarter of 1997 over those in the third quarter of last year resulted, in part, because of the addition of administrative expenses associated with Asgrow and Calgene. Expenses for these businesses were not part of Monsanto's consolidated administrative expense totals in 1996. In addition, selling, general and administrative expenses increased due to the aforementioned increase in marketing expenses in the Pharmaceuticals segment. 7 9 Interest expense increased $13 million in quarter-to-quarter comparisons due to a greater amount of short-term debt outstanding. The effective tax rate of 39 percent for the third quarter of 1997 was higher than the comparable period last year primarily because of the effect of the Holden's acquisition and increased benefits from the reinstatement of the research and development tax credit. RESULTS OF OPERATIONS--FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS 1996 Net income for the first nine months of 1997 was $465 million, or $0.76 per share, versus net income of $795 million, or $1.33 per share, for the comparable prior-year period. Year-to-date 1997 income from continuing operations totaled $289 million, or $0.47 per share, compared with income from continuing operations of $645 million, or $1.08 per share, in the first nine months of last year. As further discussed in Note 2, results for the first nine months of 1997 included aftertax charges totaling $405 million, or $0.67 per share, for acquired in-process research and development, principally related to the Asgrow, Calgene, Holden's and Corn States acquisitions. Net sales of $5,694 million were 16 percent higher than the comparable figure in 1996. Net sales for Agricultural Products increased 22 percent to $2,603 million during the first nine months of 1997 compared to the same period in 1996. The increase in net sales was primarily the result of higher worldwide sales volumes of Roundup(R) herbicide. The sales increase also reflected higher sales of crops developed through biotechnology including Roundup Ready(R) soybeans and cotton, Bollgard(R) insect-protected cotton and Yieldgard(R) corn. In addition, year-to-date sales benefited from the inclusion of Asgrow sales. Year-to-date 1997 operating income decreased $406 million versus results for the first nine months of 1996. However, as further described in Note 2, operating income included $558 million of pretax charges for acquired in-process research and development, primarily associated with the acquisitions of Asgrow, Calgene's cotton business, Holden's and Corn States. If these charges were excluded, operating income for the first nine months of 1997 would have increased $152 million, or 23 percent, compared to the same 1996 period, primarily due to higher sales and lower manufacturing costs. Nutrition & Consumer net sales decreased 3 percent in the first nine months of 1997 versus the comparable 1996 period primarily due to lower sales volumes of tabletop sweeteners. These decreases were partially offset by higher sales volumes of biogum products. Year-to-date 1997 operating income decreased $75 million, or 35 percent, compared to the same period last year. However, as further described in Note 2, operating income included $51 million of pretax charges for acquired in-process research and development associated with the acquisition of Calgene's oils business. Operating income for the first nine months of 1997 was also negatively affected by lower sales volumes and increased technology spending associated with new product development. Pharmaceuticals' net sales for the first nine months of 1997 increased $203 million, or 14 percent, over net sales in the same period last year. The increase is primarily attributable to higher sales volumes of Ambien(R), Daypro(R) and Arthrotec(R). In the first nine months of 1997, sales of these products increased 22 percent over sales for the same period in 1996. Sales also benefited from the sale of certain product rights totaling $49 million. Operating income for the first nine months of 1997 was essentially flat. The effect of higher sales was offset by increased research and development expenses, associated with new product candidates advancing to later and more expensive phases of development, and higher marketing expenses, related to preparations for launching new products in 1998. In addition, operating income in the first nine months of last year benefited from cost-sharing alliances. Year-to-date 1997 sales for the Corporate & Other segment increased significantly versus the first nine months of 1996 primarily due to the inclusion of sales from Calgene's tomato business in the 1997 period. 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. The segment recorded an operating loss of $109 million for the nine months ending September 30, 1997, compared to a loss of $82 million in the year-ago period. The increased operating loss was primarily due to increased spending on growth initiatives. For Monsanto, technological expenses for the first nine months of 1997 were higher than the comparable period in 1996, primarily because of increased research and development expenses in all segments, particularly Pharmaceuticals. Year-to-date 1997 interest expense increased $17 million versus the year-ago nine-month period due to a greater amount of short-term debt outstanding. The effective tax rate of 22 percent for the first nine months of 1997 was lower than the same period last year primarily due to the reinstatement of the research and development tax credit. 8 10 CHANGES IN FINANCIAL CONDITION--SEPTEMBER 30, 1997 COMPARED WITH DECEMBER 31, 1996 Working capital at September 30, 1997 decreased to $593 million from $939 million at December 31, 1996, primarily because of an increase in short-term debt partially offset by a seasonal increase in trade receivables. The current ratio was 1.2 at September 30, 1997 and 1.3 at year-end 1996. The percent of total debt to total capitalization increased to 47 percent at September 30, 1997 versus 38 percent at year-end 1996, primarily because of the increase in short-term debt. The increase in intangible assets at September 30, 1997 was primarily due to the Holden's acquisition. Cash provided by continuing operations totaled a net $101 million for the nine months ended September 30, 1997, compared with $469 million for the same 1996 period. The decrease in cash flow from continuing operations resulted primarily from higher sales-related working capital requirements 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 $2.1 billion, principally for the acquisitions of Asgrow, Calgene, Holden's and Corn States. The increase in short-term financing was primarily used to finance acquisition activity and higher working capital levels for Agricultural Products. 9 11 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company's Report on Form 10-K for the year ended December 31, 1996, and the Company's Report on Form 10-Q for the quarter ended March 31, 1997, described a number of product liability lawsuits arising out of sales by G. D. Searle & Co. ("Searle"), a subsidiary of the Company acquired in 1985, of the Cu-7(R), an intrauterine device. As of May 1, 1997, there were approximately seven cases pending in various U.S. state and federal courts and approximately 400 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 number of related actions brought in federal and/or state court, against Searle and numerous other defendants, based on the practice of providing discounts or rebates to managed-care organizations and certain other large purchasers. An agreement reached by several defendants, not including Searle, to settle the federal class action case, was approved by the trial judge on June 21, 1996. Though certain members of the class objected to the settlement and appealed, the U.S. Court of Appeals for the Seventh Circuit denied the appeal and finalized the settlement on May 30, 1997. The Company's Report on Form 10-Q for the quarter ended March 31, 1997, described a Notice of Violation issued by the Georgia Environmental Protection Division ("EPD") alleging certain violations by the Company. EPD originally proposed a penalty in the amount of $615,000, but has since reduced the amount to $220,000. The parties are still in the process of negotiating a final settlement. The Company's Report on Form 10-K for the year ended December 31, 1996, and its report on Form 10-Q for the quarter ended June 30, 1997, described a number of lawsuits relating to the Brio Superfund site near Houston, Texas, and to the Company's former plant site in Anniston, Alabama. In connection with the spin off of the Company's chemicals business as described in Note 1 of the Notes to Financial Statements, Solutia has assumed the liabilities for these legal proceedings. As a result, although the Company remains the named defendant, Solutia is now responsible for these proceedings and will indemnify the Company for costs, expenses and judgments arising from this litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Special Meeting of stockholders on August 18, 1997, four matters were submitted to a vote of stockholders. 1. A proposal to approve the spin off of the Company's chemicals business was submitted to a vote of stockholders. The Board recommended a vote for the proposal. A total of 412,705,860 votes were cast in favor of this proposal, a total of 12,069,851 votes were cast against it, 3,552,008 votes were counted as abstentions, and 47,091,462 were counted as broker non-votes. 2. A proposal to amend the Company's Restated Certificate of Incorporation was submitted to a vote of stockholders. The Board recommended a vote for the proposal. A total of 316,849,705 votes were cast in favor of this proposal, a total of 106,008,812 votes were cast against it, 5,453,304 votes were counted as abstentions, and 47,107,360 were counted as broker non-votes. 10 12 3. The following directors were elected to the following classified terms (or until a successor is elected and has qualified):
VOTES VOTES "WITHHOLD NAME "FOR" AUTHORITY" FOR TERM EXPIRING AT THE 1999 ANNUAL MEETING: Robert B. Shapiro 432,932,801 42,486,380 Robert M. Heyssel 433,131,734 42,287,447 Philip Leder 431,589,292 43,829,889 Jacobus F. M. Peters 433,081,826 42,337,355 FOR TERM EXPIRING AT THE 2000 ANNUAL MEETING: Michael Kantor 431,524,573 43,894,608 Gwendolyn S. King 432,859,399 42,559,782 John S. Reed 398,922,511 76,496,670
The following directors are continuing current terms expiring at the 1998 Annual Meeting: Nicholas L. Reding, John E. Robson and William D. Ruckelshaus. 4. A proposal to amend the Monsanto Management Incentive Plan of 1996 was submitted to a vote of stockholders. The Board recommended a vote for the proposal. A total of 365,682,473 votes were cast in favor of this proposal, a total of 102,527,543 votes were cast against it, 7,209,165 votes were counted as abstentions. Brokers were permitted to vote on the election of directors and on the proposal to amend the Monsanto Management Incentive Plan of 1996 in the absence of instructions from street-name holders; therefore there were no broker non-votes with respect to those matters. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits--See the Exhibit Index at page 13 of this report. (b) Report on Form 8-K during the quarter ended September 30, 1997: A Form 8-K as of September 1, 1997, was filed by the Company regarding the spin off of the Company's chemicals business to its stockholders, by means of the distribution of shares of a newly-formed, wholly-owned subsidiary named Solutia Inc. 11 13 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: November 14, 1997 12 14 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 2 1. Distribution Agreement by and between Monsanto Company and Solutia Inc., as of September 1, 1997, plus identification of contents of omitted schedules and exhibits and agreement to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request (incorporated herein by reference to Exhibit 2.1 of the Company's Form 8-K filed September 16, 1997) 3(i) Restated Certificate of Incorporation of Monsanto Company, as of October 28, 1997 (ii) Monsanto Company By-Laws, as amended September 26, 1997 4 Omitted--Inapplicable 10 1. Employee Benefits and Compensation Allocation Agreement between Monsanto Company and Solutia Inc., dated as of September 1, 1997 (incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K filed September 16, 1997) 2. Tax Sharing and Indemnification Agreement dated as of September 1, 1997, by and between Monsanto Company and Solutia Inc. (incorporated herein by reference to Exhibit 99.2 of the Company's Form 8-K filed September 16, 1997) 3. Monsanto Company Non-Employee Director Deferred Compensation Plan 4. Monsanto Company Non-Employee Director Equity Incentive Compensation Plan 5. Excerpt of Resolutions of Monsanto Company Board of Directors Regarding Directors' Compensation, adopted by Unanimous Consent effective August 4, 1997 6. Monsanto Management Incentive Plan of 1996 as amended April 25, 1997, July 25, 1997 and August 18, 1997 7. Form of Employment Agreement for Executive Officers 11 Omitted--Inapplicable; see Note 3 of Notes to Financial Statements on page 5 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
13 EX-3.(I) 2 RESTATED CERTIFICATE OF INCORPORATION 1 RESTATED CERTIFICATE OF INCORPORATION OF MONSANTO COMPANY Monsanto Company, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the Corporation is Monsanto Company and the name under which the Corporation was originally incorporated was Monsanto Chemical Company. The date of filing its original Certificate of Incorporation with the Secretary of State was April 19, 1933. 2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this Corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. The text of the Certificate of Incorporation, as amended or supplemented heretofore, is hereby restated without further amendments or changes to read as herein set forth in full: ARTICLE I: NAME The name of the Corporation shall be Monsanto Company. ARTICLE II: PRINCIPAL OFFICE AND AGENT The principal office of the Corporation in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, and the name and address of its resident agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware. ARTICLE III: OBJECTS AND PURPOSES The nature of the business of the Corporation or objects or purposes proposed to be transacted, promoted or carried on by the Corporation are as follows: To manufacture, compound, refine, buy, sell and in every other way deal in the following: chemicals and allied products, petroleum, electronics, nucleonics, textiles and compounds and products of all types produced from any of the foregoing, either alone or in conjunction with other materials; to conduct scientific 2 and technological research; and to perform other activities and functions related to any of the foregoing. To refine, market, distribute and transport crude oil, or petroleum and all of its products; to locate, purchase, lease, sublease, develop, or otherwise acquire, and to sell, mortgage or otherwise dispose of, lands containing or believed to contain petroleum, oil, natural gas, and any other mineral, whether similar or dissimilar, or any one or more of them, and to drill or prospect for or produce the same; to purchase, lease, or otherwise acquire, and to sell, mortgage or otherwise dispose of, developed or producing oil, gas and other mineral properties or the products of such oil, gas and other minerals; to purchase, produce, refine, sell and distribute petroleum, gas and other minerals, and all of the products and by-products thereof; to buy, sell or otherwise dispose of, and manufacture all kinds of illuminating, burning and heating oils, and gasoline, naphtha, lubricants, greases, waxes and all other products and by-products of petroleum; to act as broker or agent for others in all of said acts. To construct, build, purchase, acquire, own, equip, maintain, operate, mortgage, or create liens upon, turn to account, lease, sell, convey or otherwise dispose of, any and all real estate, houses, factories, refineries, mills, smelters, buildings or construction of any nature, plants, manufactories machinery works, tanks, tank cars, reservoirs, docks, piers, wharves, bulkheads, heat, light and power installations, roads, trams, railroads, spur tracks, loading racks, ditches, flumes, steamboats, vessels, pipelines, pumping stations and any other means or methods of land or water transportation, bridges, canals, storage works, water works and appurtenances, appliances and conveniences thereto of every kind and character whatsoever, to the extent that the same are or may be authorized by the statutes under which this Corporation is incorporated and by the laws of any jurisdiction wherein any such works are located. To manufacture, refine, reduce, treat, separate, convert, store, transport, buy, sell, distribute, trade and deal in, and otherwise turn to account, all grades and kinds of asphaltum, petroleum and petroleum distillates, natural and artificial gas, casinghead gasoline, sulphur, paints, oils, dyes, varnishes, carbon and hydrocarbon products and all other substances of every nature whatsoever, whether the same be by-products of the business specified herein, or otherwise, and whether the same be in crude or in manufactured or refined forms, which the Corporation may advantageously manufacture, trade, or otherwise deal in, in connection with the conduct of the business as specified herein. To design, construct, build, purchase, equip, own, control, operate, maintain, sell, lease and otherwise acquire or dispose of filling stations of every kind, nature and description, and in connection therewith to purchase, sell, vend, distribute and generally deal in and with, either at wholesale or retail, or both, gasoline, kerosene, fuel oil, lubricating oils, greases and automobile supplies and accessories of all kinds. 2 3 To manufacture fuel, power producing, illuminating, and all other kinds of gas from coal, petroleum, maltha, asphaltum and from any other substances of any nature from which gas may be produced either under any existing process or any process hereafter discovered, and to supply the same for fuel, power, lighting and any and all other purposes of every nature whatsoever both to public and private consumers. To acquire, own and operate such machinery, apparatus and appliances as may be necessary, proper or incidental to the mining, production and development of lands for petroleum, oil, natural gas and other minerals, or for any of the purposes for which this Corporation is organized. To manufacture, purchase or otherwise acquire, own, mortgage, pledge, sell, assign and transfer, or otherwise dispose of, to invest, trade, deal in and deal with goods, wares and merchandise and real and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of, letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade marks and trade names, relating to or useful in connection with any business of this Corporation. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of shares of the capital stock of, or any bonds, securities or evidences of indebtedness created by any other corporation or corporations organized under the laws of this state or any other state, country, nation or government, and while the owner thereof to exercise all the rights, powers and privileges of ownership, including the right vote thereon. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof. To borrow or raise moneys for any of the purposes of the Corporation and, from time to time, without limit as to amount, to draw, make, accept, endorse, 3 4 execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation, whether at the time owned, or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the Corporation for its corporate purposes. To purchase, hold, sell, and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly. To make donations for the public welfare or for charitable, scientific or educational purposes. To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, Colony or Country. In general, to carry on the foregoing or any other business in connection with the foregoing, directly in the name of this Corporation or indirectly through subsidiaries or affiliates, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the act herein referred to, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this Certificate of Incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes. ARTICLE IV: CAPITAL STOCK The total number of shares of all classes of stock which the Corporation shall have authority to issue is 1,010,000,000 shares, to be divided into two classes consisting of (a) ten million (10,000,000) shares of preferred stock without par value (hereinafter designated "Preferred Stock"), and (b) one billion (1,000,000,000) 4 5 shares of common stock of a par value of $2 per share (hereinafter designated "Common Stock"). SECTION I PREFERRED STOCK The Preferred Stock may be issued from time to time in one or more series with such distinctive serial designations, at such price or prices and for such other consideration as may be fixed by the Board of Directors. The Preferred Stock of all series shall be in all respects entitled to the same preferences, rights and privileges and subject to the same qualifications, limitations and restrictions, except that different series of Preferred Stock may vary with respect to those provisions as shall be determined and fixed by the Board of Directors as hereinafter provided in this Section I. All the shares of any one series shall be alike in every particular. In no event shall any share of any series of Preferred Stock be entitled to more than one vote. The Board of Directors is hereby expressly empowered, subject to the other provisions of this Article IV, to determine and fix by resolution or resolutions providing for the issuance of such series: (a) The number of shares to constitute each such series and the designation thereof; (b) The voting powers, full, limited or contingent, if any, to which holders of shares of any series of Preferred Stock shall be entitled; (c) The dividend rate or rates, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes or series of stock, and whether such dividends shall be cumulative or non-cumulative; (d) Whether or not the shares of such series shall be redeemable and, if redeemable, the redemption price and the terms and conditions thereof; (e) The amount, if any, which the shares of any such series shall be entitled to receive before any distribution or payment shall be made to holders of the Common Stock, in the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, or of any proceedings resulting in any distribution of all, or substantially all, of its assets to its stockholders; provided, however, that the sale of all, or substantially all, of the property and assets of the Corporation to, or the merger or consolidation of the Corporation into or with, any other company shall not be deemed to be a 5 6 liquidation, dissolution or winding up within the meaning of this subdivision (e); (f) Whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares and, if such funds are established, the annual amount thereof and the terms and provisions relative to the operation thereof; (g) Whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class of stock of the Corporation and, if convertible or exchangeable, the conversion price or prices or rate or rates of conversion or exchange and such other terms and conditions of conversion or exchange as shall be stated in said resolution or resolutions; and (h) Such other designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as it may deem advisable and as shall be stated in said resolution or resolutions. SECTION II PROVISIONS APPLICABLE TO ALL CLASSES OF STOCK Each holder of Common Stock shall have one vote on all matters voted upon by stockholders for each share of such stock held by him. Except as otherwise expressly provided by law or by the Board of Directors pursuant to Section I of this Article IV, the holders of Common Stock shall have the sole voting power. No holder of any of the shares of the capital stock of the Corporation shall be entitled as of right to purchase or subscribe for any unissued or reacquired stock of any class, or any additional shares of any class to be issued by reason of any increase of any class of the authorized capital stock of the Corporation, or any securities convertible into stock of any class, but any such unissued or reacquired stock or such additional authorized issue of any stock or issue of convertible securities may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion. If it seems desirable so to do, the Board of Directors of the Corporation may from time to time issue scrip for fractional shares of stock. Such scrip shall not confer upon the holder thereof any right to dividends or any voting or other rights of a stockholder of the Corporation; but the Corporation shall from time to time, within such time as the Board of Directors may determine, or without limit of time if the Board of Directors so determines issue one or more whole shares of stock upon the surrender of scrip for fractional shares aggregating the number of whole shares issuable in respect of the scrip so surrendered provided that the scrip so 6 7 surrendered shall be properly endorsed for transfer if in registered form. The scrip may also, at the option of the Board of Directors, provide that at the option of the Board of Directors there may be sold by the Corporation at public or private sale at any time on or after any determined date, in such manner and on such terms as the Board of Directors may in its absolute discretion determine, the number of shares of stock of the Corporation in respect of which such scrip certificates are then outstanding, and thereafter and until an expiration date fixed by the Board of Directors the bearers of such scrip certificates, upon surrender thereof at the office or agency of the Corporation, shall be entitled to receive their proper proportion of the net proceeds of such sale but without interest, and on and after the date of such sale shall be entitled to no other rights in respect of such scrip certificates. The Board of Directors shall have the power at any time or from time to time (without any action by the stockholders of the Corporation) to create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Corporation, rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes or of any series of any class or classes, such rights or options to be evidenced by or in such instrument or instruments as shall be approved by the Board of Directors. The terms upon which, the time or times (which may be limited or unlimited in duration), at or within which and the price or prices at which any such shares may be purchased from the Corporation upon the exercise of any such right or option, shall be such as shall be fixed and stated in the resolution or resolutions adopted by the Board of Directors providing for the creation and issue of such rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing such rights or options. In the absence of actual fraud in the transaction, the judgment of the Board of Directors as to the consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive. Shares of capital stock of the Corporation of any class or classes hereby or hereafter authorized, and any rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes or of any series of any class or classes, may be issued by the Corporation from time to time for such consideration (but if the same be par value stock then at not less than the par value thereof) as may be fixed from time to time by the Board of Directors. The Board of Directors shall have authority as provided by statute, to determine that only a part of the consideration which shall be received by the Corporation for any of the shares of its capital stock which it shall issue from time to time shall be capital. The Corporation shall be entitled to treat the person in whose name any 7 8 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 Corporation shall have notice thereof, save as may be expressly provided by the laws of the State of Delaware. Pursuant to authority granted by this Article IV, the Board of Directors adopted a resolution creating a series of Preferred Stock, without par value, and stated the designation and number of shares, and fixed the preferences, rights and privileges of the shares of such series, and the qualifications, limitations or restrictions thereof, as set forth in a Certificate of Designations of Series A Junior Participating Preferred Stock of Monsanto Company filed with the Secretary of State of the State of Delaware, which is attached hereto as Exhibit A and incorporated herein by reference. ARTICLE V: CAPITAL The amount of capital with which the Corporation will commence business is One Thousand Dollars ($1,000.00). ARTICLE VI: DURATION The Corporation is to have perpetual existence. ARTICLE VII: LIABILITY OF STOCKHOLDERS The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatever. ARTICLE VIII: DIRECTORS Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation which shall constitute the whole Board shall be not less than 5 nor more than 20. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by resolution of a majority of the whole Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall have a term expiring at the annual meeting of stockholders to be held in 1998, another class shall have a term expiring at the annual meeting of stockholders to be held in 1999, and another class shall have a term expiring at the annual meeting of stockholders to be held in 2000. 8 9 Members of each class shall hold office until their successors are elected and qualified. At each annual meeting of the stockholders of the Corporation, commencing with the 1998 annual meeting, (a) directors elected to succeed those directors whose terms then expire shall be elected at such meeting to hold office for a term expiring at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (b) only if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created. Directors need not be stockholders. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, or by a sole remaining director, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article VIII. For purposes of the Certificate of Incorporation, "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. ARTICLE IX: LIABILITY OF DIRECTORS A director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted 9 10 under the Delaware General Corporation Law as the same exists or may hereafter be amended. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to or at the time of such repeal or modification. ARTICLE X: POWERS OF BOARD OF DIRECTORS In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized: To make, alter or repeal the By-Laws of the Corporation, subject to the power of the stockholders of the Corporation to adopt, amend or repeal the By-Laws; provided, however, that with respect to the powers of the stockholders to adopt, amend and repeal the By-Laws, notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any series of Preferred Stock required by law, this Certificate of Incorporation or any Preferred Stock designation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then outstanding Voting Stock, voting together as a single class, shall be required for stockholders to adopt, amend or repeal any provision of the By-Laws. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with the preceding sentence. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose or to abolish any such reserve in the manner in which it was created. By resolution or resolutions, passed by a majority of the whole Board, to designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such 10 11 committee or committees shall have such name or names as may be stated in the By-Laws of the Corporation, or as may be determined from time to time by resolution adopted by the Board of Directors. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, the Board of Directors shall have power and authority to sell, lease or exchange all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interests of the Corporation. The Corporation may in its By-Laws confer powers upon its Board of Directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon it by statute. A director and a member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officials, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any committee thereof, or in relying in good faith upon other records of the Corporation. No contract or other transaction of the Corporation shall be affected by the fact that any of the directors of the Corporation are in any way interested in or connected with any other party to such contract or transaction, or are themselves parties to such contract or transaction, provided that at the meeting of the Board of Directors or of the committee thereof authorizing or confirming such contract or transaction there shall be present a quorum of directors not so interested or connected, and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Any contract or act that shall be approved or ratified by the vote of the holders of a majority of the capital stock of the Corporation having voting power which is represented in person or by proxy at any annual meeting of stockholders or at any special meeting called for that purpose, among others, of considering the approval or ratification of the acts of officers and/or directors (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon the Corporation and upon all of its stockholders as though it had been approved or ratified by every stockholder of the Corporation. 11 12 ARTICLE XI: ACTION BY STOCKHOLDERS Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing in lieu of a meeting of such stockholders. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article XI. ARTICLE XII: MISCELLANEOUS PROVISIONS Both stockholders and directors shall have power, if the By-Laws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware, and to keep the books of this Corporation (subject to the provisions of the statutes), outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors, or as provided in the By-Laws. The amount of the authorized stock of any class or classes of the Corporation may be increased or decreased at any time by the affirmative vote of the holders of a majority of the stock entitled to vote. The Corporation reserves the right to create and issue one or more kinds or classes or series of stock with such designations, preferences, redemption or dividend provisions and voting powers or restrictions or qualifications thereof or other such differences as shall be stated or expressed in any certificate, amendatory of its Certificate of Incorporation, duly authorized, executed, recorded and filed in the manner now or hereafter prescribed by the laws of the State of Delaware, and further reserves the right to amend, alter, change or repeal any provision contained in this Certificate, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights herein conferred upon the stockholders except as otherwise herein expressly provided are granted subject to this reservation. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 to Title 8 of the Delaware Code, or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a 12 13 majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. 4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Monsanto Company has caused this Certificate to be signed by R. William Ide, III, its Senior Vice President, General Counsel and Corporate Secretary this 28th day of October, 1997. MONSANTO COMPANY By: /s/ R. William Ide, III ----------------------- R. William Ide, III Senior Vice President, General Counsel and Secretary 13 14 EXHIBIT A THIS CERTIFICATE OF DESIGNATIONS, FILED WITH THE DELAWARE SECRETARY OF STATE ON FEBRUARY 5, 1990, RELATES TO THE COMPANY'S PREFERRED STOCK PURCHASE RIGHTS PLAN AND HAS THE EFFECT OF AMENDING THE CERTIFICATE OF INCORPORATION. CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of MONSANTO COMPANY (Pursuant to Section 151 of the Delaware General Corporation Law) _______________________________________________________ Monsanto Company, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Company"), hereby certifies that the following resolution was adopted by the Board of Directors of the Company as required by Section 151 of the General Corporation Law at a meeting duly called and held on January 26, 1990: RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of this Company (hereinafter called the "Board of Directors" or the "Board") by the provisions of the Certificate of Incorporation, as amended, the Board of Directors hereby creates a series of Preferred Stock, without par value (the "Preferred Stock"), of the Company and hereby states the designation and number of shares, and fixes the preferences, rights and privileges of the shares of such series, and the qualifications, limitations or restrictions thereof (in addition to the preferences, rights and privileges and the qualifications, limitations and restrictions set forth in the Certificate of Incorporation, as amended, which are applicable to Preferred Stock of all series and to all classes of stock of the Company) as follows: Series A Junior Participating Preferred Stock: Section 1. Designation and Amount. The shares of such series shall be ---------------------- designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 700,000. Such number of shares may be increased or decreased by resolution of the A-1 15 Board of Directors; provided, that no decrease shall reduce the number of -------- shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. --------------------------- (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock of par value of $2 per share (the "Common Stock"), of the Company, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the twelfth day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. A-2 16 (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred ------------- Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event; provided, however, that in no event shall any share of Series A Preferred Stock have more than one vote per share. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company. A-3 17 (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. A-4 18 Section 5. Reacquired Shares. Any shares of Series A Preferred Stock ----------------- purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any -------------------------------------- liquidation, dissolution or winding up of the Company, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall -------------------------- enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the A-5 19 outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock ------------- shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with ---- respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Company's Preferred Stock. Section 10. Amendment. The Certificate of Incorporation of the Company --------- shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Company by its Vice President and attested by its Assistant Secretary this 29th day of January, 1990. /s/ J. H. Hinshaw ---------------------------------------- J. H. Hinshaw, Vice President Attest: /s/ J. R. Bley, Jr. - ----------------------------- Assistant Secretary A-6 EX-3.(II) 3 BY-LAWS 1 MONSANTO COMPANY BY-LAWS As adopted September 26, 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. (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 2 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. 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 the Securities and Exchange Commission pursuant to Section 13, 14 or 15(b) of the Exchange Act. (c) Notwithstanding anything in these By-Laws to the contrary, 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 the chairman should so determine, the chairman 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. 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 notice by public announcement 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 2 3 than sixty days before the date of the meeting, be given to each stockholder of record entitled to vote at the meeting by mailing such notice in the United States mail, postage prepaid, addressed to such stockholder at such stockholder's 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 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 complies 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 beneficially 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 3 4 stockholder's notice of nomination which pertains to the nominee. 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 the chairman should so determine, the chairman 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 identity of the stockholders entitled (i) to vote in person or by proxy at any meeting of stockholders, or (ii) to exercise the rights in accordance with Delaware law to examine the stock ledger, the list required by this By-Law or the books and records of the Company. 10. Quorum The holders of a majority of the stock issued and outstanding 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 stockholders, 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 render the remaining stockholders less than a quorum. 4 5 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 stockholders may authorize another person or persons to act for such stockholder 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. 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 such person's 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 the Chairman's absence, (i) the President, if a member of the Board of Directors, (ii) one of the Vice Chairmen of the Board who is a member of the Board of Directors, if any, in such order as may be designated by the Chairman of the Board, in that order, or (iii) in the absence of each of them, a chairman chosen by a majority of the Directors present, shall act as 5 6 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. 15. No Stockholder Action by Written Consent Any action required or permitted to be taken by the stockholders of the Company must be effected at a duly called annual or special meeting of stockholders of the Company and may not be effected by any consent in writing in lieu of a meeting of such stockholders. BOARD OF DIRECTORS ------------------ 16. General Powers, Number, Term of Office The business of the Company shall be managed under the direction of its Board of Directors. Subject to the rights of the holders of any series of preferred stock, without par value, of the Company ("Preferred Stock") to elect additional directors under specified circumstances, the number of directors of the Company which shall constitute the whole Board shall be not less than five nor more than 20. The exact number of directors within the minimum and maximum limitation specified in the preceding sentence shall be fixed from time to time exclusively by resolution of a majority of the whole Board. The Directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall have a term expiring at the annual meeting of stockholders to be held in 1998, another class shall have a term expiring at the annual meeting of stockholders to be held in 1999, and another class shall have a term expiring at the annual meeting of stockholders to be held in 2000. Members of each class shall hold office until their successors are elected and qualified. At each annual meeting of the stockholders of the Company commencing with the 1998 annual meeting, (1) directors elected to succeed those directors whose terms then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, and (2) only if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created. Directors need not be stockholders of the Company or residents of the State of Delaware. 17. Vacancies Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, or by a sole remaining director, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at 6 7 which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director. 18. 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. 19. 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 a majority of the Directors. 20. Notices Notice of any special meeting of the Board of Directors shall be addressed to each Director at such Director's residence or business address and shall be sent to such Director by mail, electronic mail, telecopier, telegram or telex or telephoned or delivered to such Director 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. 21. 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 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. 7 8 22. Organization At each meeting of the Board of Directors, the Chairman of the Board or, in the Chairman's absence, (i) the President, if a member of the Board of Directors, (ii) one of the Vice Chairmen of the Board who is a member of the Board of Directors, if any, in such order as may be designated by the Chairman of the Board, in that order, or (iii) 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 the Secretary's absence, an Assistant Secretary or any employee of the Company appointed by the chairman of the meeting, shall act as secretary of the meeting. 23. 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. 24. Removal Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class. For purposes of these By-Laws, "Voting Stock" shall mean the outstanding shares of capital stock of the Company entitled to vote generally in the election of directors. 25. 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. 26. 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. 27. 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, 8 9 in property, or in shares of the Company's capital stock. 28. 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. 29. 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 ----------------------- 30. Designation, Power, Alternate Members The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate an Executive 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 they constitute a quorum, may 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 automatically cease to be a committee member. 31. 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, 9 10 except as otherwise provided in these By-Laws or by resolution of the Board of Directors, make rules for the conduct of its business. 32. 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 ------------------ 33. 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 -------- 34. 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 Vice Chairmen, 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 officers as it shall deem necessary. Any number of offices may be held by the same person. The Chairman of the Board of Directors shall be chosen from among the Directors. 35. 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 the officer's successor is elected and qualified or until the officer's 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 the officer's successor is elected and qualified or until the officer's earlier death, resignation or removal. 10 11 36. 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. 37. 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. 38. 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. 39. Compensation The People Committee of the Board of Directors shall fix the salaries of all employees of the Company who are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 or any successor statute, rule or provision, and other members of executive management designated by such committee. 40. 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. The Chairman shall act in an advisory capacity with respect to matters of policy and other matters of importance pertaining to the affairs of the Company. The Chairman, 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. The Chairman shall also perform such other duties as may be assigned to the Chairman by these By-Laws, the Board of Directors or, if applicable, the Chief Executive Officer. 41. President The President, if a member of the Board of Directors, shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. The President shall perform such other duties as may be assigned to the President by these By-Laws, the Board of Directors or, if applicable, the Chief Executive Officer. 42. Chief Executive Officer The Chief Executive Officer shall have the general and active management and supervision of the business of the Company. The Chief Executive Officer shall 11 12 see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall also perform such other duties as may be assigned to the Chief Executive Officer 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 the Chief Executive Officer's absence. 43. Vice Chairmen of the Board The Vice Chairmen of the Board, if a member of the Board of Directors, 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. 44. 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 such officer by the Board of Directors or the Chief Executive Officer. 45. 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. The Secretary 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 the Secretary by these By-Laws, the Board of Directors, the Chairman of the Board or the Chief Executive Officer. 46. 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 such Assistant Secretary by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the Secretary. 47. 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 12 13 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 transactions as Treasurer and shall also perform all duties incident to the office of Treasurer and such other duties as may be assigned to the Treasurer by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance. 48. 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 the Assistant Treasurer by the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance, the Vice President-Finance or the Treasurer. 49. Controller The Controller shall serve as the principal accounting officer of the Company and 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 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 the Controller by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance. 50. 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 such officer 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 ---------------------------------- 51. 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. 13 14 52. 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 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 ------------- 53. 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 such holder 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 such person were such officer, transfer agent or registrar at the date of issue. 54. 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. 55. Record Dates 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 more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. 14 15 56. 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 the registered holder's 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. 57. 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 the owner's 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. 58. 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 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 16 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 --------------- 59. 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 the person, or a person for whom he or she 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 15 16 (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. (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 the claimant 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 59 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. 16 17 MISCELLANEOUS ------------- 60. 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. 61. Fiscal Year The fiscal year of the Company shall begin on the first day of January in each year. 62. Auditors The Board of Directors shall select certified public accountants 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. 63. 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 -------------------- 64. Amendments Notwithstanding any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any series of Preferred Stock of the Corporation required by law, the Certificate of Incorporation or any Preferred Stock designation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding Voting Stock (as defined in the Certificate of Incorporation), voting together as a single class, shall be required for the stockholders to amend or repeal the By-Laws or to adopt new By-Laws. The By-Laws may also be amended or repealed and new By-Laws may be adopted by the affirmative vote of a majority of the whole Board of Directors at any regular or special 17 18 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, 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 18 19 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. 19 EX-10.3 4 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN 1 THE MONSANTO COMPANY NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN 1. NAME OF PLAN. This plan shall be known as the "The Monsanto Company Non-Employee Director Deferred Compensation Plan" and is hereinafter referred to as the "Plan." 2. PURPOSES OF PLAN. The purposes of the Plan are to enable Monsanto Company, a Delaware corporation (the "Company"), to retain qualified persons to serve as Directors, and to replace the vested benefits of currently active Directors under the Monsanto Company Non-Employee Directors Retirement Plan (the "Retirement Plan") with interests in the equity of the Company or in a deferred cash account. 3. EFFECTIVE DATE AND TERM. The Plan shall be effective as of the date of the Chemicals Distribution (as defined in Section 4 below) (the "Effective Date"). The Plan shall remain in effect until terminated by action of the Board, or until all Participants have received all amounts to which they are entitled hereunder, if earlier. 4. DEFINITIONS. The following terms shall have the meanings set forth below: "Annual Meeting" means an annual meeting of the shareholders of the Company. "Beneficiary" has the meaning set forth in Section 7(d). 2 "Cash Account" has the meaning set forth in Section 6(a). "Change of Control" means any of the following events: (a) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act") (a "Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) Individuals who, as of the date hereof, constitute the Board of Directors (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or -2- 3 (c) Approval by the stockholders of the Company of a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another corporation (a "Business Combination"), or, if consummation of such Business Combination is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial -3- 4 agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. "Change of Control Consideration" means (i) the amount of any cash, plus the value of any securities and other noncash consideration, constituting the most valuable consideration per share of Common Stock paid to any shareholder in the transaction or series of transactions that results in a Change of Control or (ii) if no consideration per share of Common Stock is paid to any shareholder in the transaction or series of transactions that results in a Change of Control, the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control. To the extent that such consideration consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined by the Committee in good faith. "Chemicals" means the Company's newly formed chemicals subsidiary. "Chemicals Distribution" means the distribution to the holders of Common Stock of the stock of Chemicals. The "Committee" means the committee that administers the Plan, as more fully defined in Section 13. "Common Stock" means the Company's common stock, par value $2.00 per share. "Common Stock Value" means the excess of (i) the average of the daily high and low trading prices on the New York Stock Exchange for the Monsanto Common Stock with due bills on each of the five trading days prior to the date of the Chemicals Distribution over (ii) one-fifth of the average of the daily high and low trading prices on the New York Stock Exchange for the common stock of Chemicals on a when-issued basis on each of such five trading days. -4- 5 The "Company" has the meaning set forth in Section 2. "Deferral Account" means a bookkeeping account maintained by the Company for a Director representing the Director's interest in the stock units or cash credited to such account pursuant to Section 6. "Deferred Delivery Election" has the meaning set forth in Section 7(a). "Delivery Election" has the meaning set forth in Section 7(a). "Director" means an individual who is a non-employee member of the Board of Directors of the Company. The "Dividend Equivalent" for a given dividend or distribution means a number of shares of Common Stock having a Value, as of the date such Dividend Equivalent is credited to a Stock Unit Account, equal to the amount of cash, plus the fair market value on the date of distribution of any property, that is distributed with respect to one share of Common Stock pursuant to such dividend or distribution; such fair market value to be determined by the Committee in good faith. The "Effective Date" has the meaning set forth in Section 3. "Immediate Payment Election" has the meaning set forth in Section 7(a). The "Initial Amount" has the meaning set forth in Section 6(a). The "Interest Rate" means Moody's Baa Bond Index Rate, as in effect from time to time. "IRA Election" means an election to receive distributions under the Plan in annual installments beginning on the Starting Date, over a period of years equal to the life expectancy of the Participant or joint life expectancy of the Participant and his or her spouse (if any), as elected by the Participant, such life expectancy to be determined as of the Starting Date. "Keogh Election" means an election to receive distributions under the Plan in annual installments beginning on the Starting Date, over a period of years equal to the life expectancy of the Participant or joint life -5- 6 expectancy of the Participant and his or her spouse (if any), as elected by the Participant, such life expectancy to be determined as of the Starting Date and redetermined as of each anniversary thereof. "Participant" has the meaning set forth in Section 5. "Retirement Plan" has the meaning set forth in Section 2. "Single Sum Election" means an election to receive distributions under the Plan in a single payment on the Starting Date. "Stock Unit Account" has the meaning set forth in Section 6(a). "Starting Date" has the meaning set forth in Section 7(a). "Term Certain Election" means an election to receive distributions under the Plan in annual installments over a specified number of years beginning on the Starting Date, provided, that in the case of a Stock Unit Account, -------- such number of years may not exceed ten, and in the case of a Cash Account, such number of years may not exceed the Participant's life expectancy determined as of the Starting Date. The "Termination Date" for a Participant is the date his or her service as a Director terminates for any reason. The "Value" of a share of Common Stock as of the last day of a given Plan Year shall mean the average (rounded to the nearest cent) of the monthly average for each of the full calendar months during such Plan Year of the means between the reported high and low sale prices of a share of Common Stock on the New York Stock Exchange composite tape (or, if the Common Stock is not listed on such exchange, on any other national securities exchange on which the Common Stock is listed) for each trading day during each such calendar month. If the Common Stock is not traded on any national securities exchange, the Value of the Common Stock shall be determined by the Committee in good faith. -6- 7 "Vested Benefit" has the meaning set forth in Section 6(a). 5. ELIGIBLE PARTICIPANTS; INITIAL ELECTIONS. Each individual who is a Director on the last business day before the Effective Date and has a vested benefit in the Retirement Plan as of that date shall be a participant ("Participant") in the Plan. 6. ACCOUNTS; CREDITS. (a) Except as provided in Section 7(b) below, the Company shall maintain a Deferral Account for each Participant, which shall be a "Stock Unit Account" or a "Cash Account," as elected by the Participant on or before August 15, 1997, in accordance with procedures established by the Committee. Each Participant's Deferral Account shall initially be credited with an amount (the "Initial Amount") having a value on the last business day before the Effective Date equal to the amount of the Participant's vested benefit under the Retirement Plan as of the Effective Date (the "Vested Benefit"). The amounts of such Vested Benefits shall be determined by Towers Perrin based upon information supplied by the Company. (b) If a Participant's Deferral Account is a Cash Account the Initial Amount shall be a cash amount, and shall accrue interest on the balance therein at the Interest Rate, such interest to be credited at least monthly. (c) If a Participant's Deferral Account is a Stock Unit Account, the Initial Amount credited to such account pur- -7- 8 suant to such account pursuant to Section 6(a) shall take the form of stock units representing shares of Common Stock determined by dividing (i) the amount of the Participant's Vested Benefit by (ii) the Common Stock Value. Whenever a dividend is paid or other distribution made with respect to the Common Stock, each Stock Unit Account shall be credited with a number of shares of Common Stock having a Value equal to (i) the number of stock units in such Stock Unit Account as of the record date for such dividend or distribution multiplied by (ii) the Dividend Equivalent for such dividend or other distribution. Notwithstanding the foregoing, no amounts shall be credited to any Stock Unit Account as a result of the Chemicals Distribution, because the amounts initially credited to the Stock Unit Accounts are being determined based upon the ex-dividend trading value of the Common Stock with respect to the Chemicals Distribution. The stock units credited to the Stock Unit Accounts pursuant to this Section 6 may represent fractional as well as whole shares of Common Stock. (d) As soon as practicable after the Effective Date, the Committee shall cause each Participant to be notified in writing of the value of his or her Vested Benefit and, in the case of Participants who have elected Stock Unit Accounts, the average price described in clause (ii) of the preceding sentence, -8- 9 and the number of stock units credited to his or her Stock Unit Account. 7. DELIVERY OF ACCOUNT BALANCES. (a) Each Participant shall be provided the opportunity to elect, in accordance with procedures established by the Committee, the manner in which his or her interest in the Plan will be distributed on or after his or her Termination Date (each such election, a "Delivery Election"). Such Delivery Election may call for delivery in a single sum or in installments on or beginning on the later of (i) the Termination Date or (ii) the date which is six months after the Delivery Election is made (an "Immediate Payment Election") or for deferred delivery in a single sum or in installments (a "Deferred Delivery Election" on or beginning on a specified date (in either case, the date on which delivery is to be made or is to begin is referred to as the "Starting Date"). The Starting Date for a Deferred Delivery Election must be on or after the third anniversary of the Termination Date; provided, that in no event shall the -------- Starting Date for a Deferred Delivery Election be later than the later of (i) the Participant's 73rd birthday and (ii) the third anniversary of the Termination Date. Each Delivery Election shall specify whether it is a Single Sum Election, a Term Certain Election, a Keogh Election, or an IRA Election; provided, that Keogh Elections and IRA Elections may only be made in - -------- -9- 10 connection with Deferred Delivery Elections made with respect to Cash Accounts. (b) Notwithstanding any other provision of this Plan, a Participant who makes an Immediate Payment Election and who ceases to be a Director and becomes a director of Chemicals in connection with the Chemicals Distribution shall not be credited with a Deferral Account, but shall receive a cash lump sum payment equal to the value of his or her Vested Benefit as soon as practicable after the Effective Date. (c) The stock units in a Participant's Stock Unit Account or the cash in a Participant's Cash Account, as applicable, shall be delivered on or beginning on the Starting Date in accordance with the Participant's Delivery Election. If the Participant's Deferral Account is a Stock Unit Account, such delivery shall be made in the form of stock representing a number of Common Shares equal to the number of stock units as and when they are to be delivered. If any such stock units or cash are to be delivered after the Participant has died or become legally incompetent, they shall be delivered to the Participant's Beneficiary or legal guardian, as the case may be, in accordance with the foregoing; provided, that if a Participant who has made -------- a Keogh Election dies before beginning to receive or receiving all of his or her distributions, the entire balance in his or her Deferral Account shall be distributed to his or her Beneficiary immedi- -10- 11 ately. References to a Participant in this Plan shall be deemed to refer to the Participant's Beneficiary or legal guardian, where appropriate. (d) Participants shall be provided with the opportunity to designate, in accordance with procedures to be established by the Committee, the person or persons ("Beneficiaries") who will receive distributions of his or her interests in the Plan upon the death of the Participant (a "Beneficiary Designation"). Once made, a Beneficiary Designation or Delivery Election may be superseded by another Beneficiary Designation or Delivery Election (as applicable) or revoked in writing by the Participant. However, in order for any initial or superseding Delivery Election or revocation thereof to be valid, it must be received by the Committee before the Participant's Termination Date. In the case of multiple Beneficiary Designations, Delivery Elections and/or revocations by any Participant, the most recent valid Beneficiary Designation, Delivery Election or revocation (as applicable) in effect as of the date of death or Termination Date, as applicable, shall be controlling. If a Participant does not have a valid Beneficiary Designation in effect as of the date of his or her death, his or her Beneficiary shall be his or her estate. If a Participant does not have a valid Delivery Election in effect as of his or her Termination Date, he or she shall be deemed to have made an Immediate Payment Election. -11- 12 8. SHARE CERTIFICATES; VOTING AND OTHER RIGHTS. The shares delivered to a Participant pursuant to Section 7 above shall be issued in the name of the Participant, and the Participant shall be entitled to all rights of a shareholder with respect to Common Stock for all such shares issued in his or her name, including the right to vote the shares, and the Participant shall receive all dividends and other distributions paid or made with respect thereto. 9. GENERAL RESTRICTIONS. (a) Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any shares of Common Stock under the Plan prior to fulfillment of all of the following conditions: (i) Listing or approval for listing upon official notice of issuance of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be a market for the Common Stock; (ii) Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable. -12- 13 (b) Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements for the Participants. 10. NUMBER AND SOURCE OF SHARES AVAILABLE. Subject to adjustment pursuant to Section 11 below, 75,000 shares of Common Stock may be issued under the Plan. Shares of Common Stock issuable under the Plan shall be taken from treasury shares of the Company or purchased on the open market. 11. CHANGE IN CAPITAL STRUCTURE; CHANGE OF CONTROL. (a) In the event that there is, at any time after the Board adopts the Plan, any change in the Common Stock by reason of any stock dividend, stock split, combination of shares, exchange of shares, warrants or rights offering to purchase Common Stock at a price below its fair market value, reclassification, recapitalization, merger, consolidation, spin-off or other change in capitalization of the Company, other than the Chemicals Distribution, appropriate adjustment shall be made in the number and kind of shares or other property subject to the Plan and the number and kind of shares or other property held in the Stock Unit Accounts (taking into account whether any Dividend Equivalent is credited to the Stock Unit Accounts in connection therewith), and any other relevant provisions of the Plan by the Committee, whose determination shall be binding and conclusive on all persons. -13- 14 (b) Without limiting the generality of the foregoing, and notwithstanding any other provision of this Plan, in the event of a Change of Control, the Company shall immediately pay to each Participant in a cash lump sum (i) the Change of Control Consideration multiplied by the number of stock units in such Participant's Stock Unit Account immediately before such Change of Control, or (ii) the cash balance in such Participant's Cash Account, as applicable, and the Plan shall be terminated. Notwithstanding the foregoing, if the payment of cash with respect to Stock Unit Accounts pursuant to the preceding sentence would make a Change in Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for such cash Common Stock or other equity securities with a Value equal to the amount of such cash. (c) If the shares of Common Stock credited to the Stock Unit Accounts are converted pursuant to this Section 11 into another form of property, references in the Plan to the Common Stock shall be deemed, where appropriate, to refer to such other form of property, with such other modifications as may be required for the Plan to operate in accordance with its purposes. Without limiting the generality of the foregoing, references to delivery of certificates for shares of Common Shares shall be -14- 15 deemed to refer to delivery of cash and the incidents of ownership of any other property held in the Stock Unit Accounts. 12. ADMINISTRATION; AMENDMENT. (a) The Plan shall be administered by a committee consisting of the Chief Financial Officer, the General Counsel and the Corporate Vice President -- Human Resources of the Company (or the holder of any successor officer position thereto) (the "Committee"), which shall have full authority to construe and interpret the Plan, to establish, amend and rescind rules and regulations relating to the Plan, and to take all such actions and make all such determinations in connection with the Plan as it may deem necessary or desirable, including without limitation the determination of life expectancies and other assumptions and information to be used in determining the effect of Installment Delivery Elections. (b) The Board may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company, and it may terminate the Plan at any time. 13. MISCELLANEOUS. (a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company's shareholders or to limit the rights of the shareholders to remove any Director. (b) The Company shall have the right to require, prior to the issuance or delivery of any cash or shares of Common Stock pursuant to the Plan, that a Director make arrangements satisfac- -15- 16 tory to the Committee for the withholding of any taxes required by law to be withheld with respect to the issuance or delivery of such cash or shares, including without limitation by the withholding of shares that would otherwise be so issued or delivered, by withholding from any other payment due to the Director, or by a cash payment to the Company by the Director. 14. GOVERNING LAW. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware. -16- EX-10.4 5 NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE COMPENSATION PLAN 1 THE MONSANTO COMPANY NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE COMPENSATION PLAN 1. NAME OF PLAN. This plan shall be known as the "The Monsanto Company Non-Employee Director Equity Incentive Compensation Plan" and is hereinafter referred to as the "Plan." 2. PURPOSES OF PLAN. The purposes of the Plan are to enable Monsanto Company, a Delaware corporation (the "Company"), to retain qualified persons to serve as Directors by providing for their compensation and permitting them to elect to defer a portion thereof, and to further align the interests of Directors with the interests of shareholders of the Company by providing them with equity-based compensation. 3. EFFECTIVE DATE AND TERM. The Plan shall be effective as of September 1, 1997 (the "Effective Date"). The Plan shall remain in effect until terminated by action of the Board, or until all Participants have received all amounts to which they are entitled hereunder, if earlier. 4. DEFINITIONS. The following terms shall have the meanings set forth below: "Annual Meeting" means an annual meeting of the shareholders of the Company. "Annual Retainer Amount" has the meaning set forth in Section 6(a). "Beneficiaries" has the meaning set forth in Section 7(b)(iii). 2 "Beneficiary Designation" has the meaning set forth in Section 7(b)(iii). "Board" means the Board of Directors of the Company. "Cash Account" has the meaning set forth in Section 7(a). The "Committee" means the committee that administers the Plan, as more fully defined in Section 12. "Common Stock" means the Company's common stock, par value $2.00 per share. The "Company" has the meaning set forth in Section 2. "Current Cash" has the meaning set forth in Section 6(a). "Deferral Account" means a bookkeeping account maintained by the Company for a Director representing the Director's interest in the stock units or cash credited to such account pursuant to Sections 6 and 7. "Deferred Cash" has the meaning set forth in Section 6(a). "Deferred Delivery Election" has the meaning set forth in Section 7(b)(i). "Deferred Stock" means shares of Common Stock credited to a Stock Unit Account pursuant to Section 6(d)(iii) and Section 7 and later delivered pursuant to Section 7. "Delivery Election" has the meaning set forth in Section 7(b)(i). "Director" means an individual who is a non-employee member of the Board. The "Dividend Equivalent" for a given dividend or distribution means a number of shares (or fractions of a share) of Common Stock having a Value, as of the date such Dividend Equivalent is credited to a Stock Unit Account, equal to the amount of cash, plus the fair market value on the date of distribution of any property, that is distributed with respect to one share of Common Stock pursuant to such dividend or distribution; -2- 3 such fair market value to be determined by the Committee in good faith. The "Effective Date" has the meaning set forth in Section 3. "Elective Amount" has the meaning set forth in Section 6(a). "Exchange Act" means the Securities Exchange Act of 1934. "Grant Date" has the meaning set forth in Section 6(b). "Immediate Payment Election" has the meaning set forth in Section 7(b)(i). The "Interest Rate" for a calendar year means the average Moody's Baa Bond Index Rate, as in effect from time to time. "IRA Election" means an election to receive distributions from a Deferral Account in annual installments beginning on the Starting Date, over a period of years equal to the life expectancy of the Participant or joint life expectancy of the Participant and his or her spouse (if any), as elected by the Participant, such life expectancy to be determined as of the Starting Date. "Keogh Election" means an election to receive distributions from a Deferral Account in annual installments beginning on the Starting Date, over a period of years equal to the life expectancy of the Participant or joint life expectancy of the Participant and his or her spouse (if any), as elected by the Participant, such life expectancy to be determined as of the Starting Date and redetermined as of each anniversary thereof. "Options" has the meaning set forth in Section 6(a). "Participant" has the meaning set forth in Section 5. "Periodic Election" has the meaning set forth in Section 6(a). "Plan" has the meaning set forth in Section 1. "Plan Year" means the period from the Effective Date through the day before the date of the Company's 1998 -3- 4 Annual Meeting and each subsequent period beginning on the date of an Annual Meeting and ending on the day before the date of the next Annual Meeting. "Required Option Amount" has the meaning set forth in Section 6(a). "Restricted Stock" means shares of Common Stock granted in accordance with Section 6(d)(ii). "Section" means a section of the Plan except where otherwise specifically indicated. "Single Sum Election" means an election to receive distributions under the Plan in a single payment on the Starting Date. "Starting Date" has the meaning set forth in Section 7(b)(i). "Stock Unit Account" has the meaning set forth in Section 7(a). "Tax Withholding Election" has the meaning set forth in Section 7(e). "Tax Withholding Percentage" has the meaning set forth in Section 7(e). "Term" means the term of years for which a Participant has been elected a Director. "Term Certain Election" means an election to receive distributions from a Deferral Account in annual installments over a specified number of years beginning on the Starting Date, provided, that in -------- the case of a Stock Unit Account, such number of years may not exceed ten, and in the case of a Cash Account, such number of years may not exceed the Participant's life expectancy determined as of the Starting Date. The "Termination Date" for a Participant is the date his or her service as a Director terminates for any reason. The "Value" of a share of Common Stock as of a particular date shall mean the average (rounded to the nearest cent) of the means between the reported high and low sale prices of a share of Common Stock on the New York Stock Exchange Composite Tape (or, if the Common Stock -4- 5 is not listed on such exchange, on any other national securities exchange on which the Common Stock is listed) on that date or, if that date is not a trading day, on the most recent trading day preceding such date. If the Common Stock is not traded on any national securities exchange, the Value of the Common Stock shall be determined by the Committee in good faith. 5. ELIGIBLE PARTICIPANTS. Each individual who is a Director on the Effective Date or becomes a Director thereafter while the Plan is in effect shall be a participant ("Participant") in the Plan. 6. DIRECTOR COMPENSATION. (a) GENERAL. In consideration for his or her services as a Director, each Participant shall receive compensation having a total annual value (the "Annual Retainer Amount") equal to $100,000 in the case of a Participant who serves as the Chair of a committee of the Board and $90,000 for all other Participants (which amount shall be pro-rated for partial years, as applicable); provided, that -------- the Annual Retainer Amount for the Participants listed on Schedule I hereto for the Terms indicated on Schedule I shall be reduced as set forth on Schedule I to take account of the previously granted restricted stock being earned by such Participants; and provided, further, that the Board -------- ------- may specify different Annual Retainer Amounts from time to time. Such compensation for each Term shall be provided as follows: (i) half of such compensation (the "Required Option Amount") shall take the form of options to purchase Common Stock ("Options"), as more fully set forth in Sec- -5- 6 tion 6(b); and (ii) the other half of the Annual Retainer Amount (the "Elective Amount") shall take the form of (A) additional Options, as more fully set forth in Section 6(b), (B) cash paid currently ("Current Cash") or deferred cash ("Deferred Cash"), as more fully set forth in Sec tion 6(c), or (C) Restricted Stock or Deferred Stock, as more fully set forth in Section 6(d), or a combination thereof. Each Participant shall be provided with the opportunity, in accordance with procedures established by the Committee from time to time, to make an election with respect to each Term during which he or she is a Participant (a"Periodic Election") specifying what percentages, in increments of one percentage point, of the Elective Amount for such Term will be provided to the Participant in the form of Options, Current Cash, Deferred Cash, Restricted Stock and Deferred Stock. Each Periodic Election for a particular Term shall be filed with the Committee at least 30 days before the beginning of such Term; provided, -------- that the Periodic Elections for Terms beginning before the Effective Date shall be made on or before November 20, 1997 (and such Periodic Elections shall relate only to the Annual Retainer Amounts paid with respect to service after the Effective Date); and provided, further, that, -------- ------- with respect to an individual who becomes a Participant after the Effective Date, the Periodic Election for such Participant's first Term shall be filed with the Committee no later than 30 days after the first day of such Term. If a Participant fails to make a timely Periodic Election -6- 7 with respect to any Term, he or she shall be deemed to have elected to receive the entire Elective Amount in the form of Current Cash. (b) OPTIONS. (i) Each Participant shall be granted, for each of his or her Terms ending after the Effective Date, Options having a value on the applicable Grant Date (as defined below) determined by the Committee in accordance with the Black-Scholes option valuation method, equal to the sum of (A) the Required Option Amount for the Term and (B) the portion of the Elective Amount for the Term that the Participant has elected to receive in the form of Options. The effective date of each such grant (the "Grant Date") shall be the first day of the applicable Term; provided, that -------- in the case of the first grant to those individuals who are Participants on the Effective Date, the Grant Date shall be November 21, 1997. Each Option shall be evidenced by an agreement, shall have a per-share exercise price equal to the Value of a share of Common Stock on the Grant Date and shall have the other terms and conditions set forth below in this Section 6(b). (ii) The Options granted to a Participant on a particular Grant Date shall vest in installments on the last day of each Plan Year ending during the Term for which they were granted, pro rata based upon the percentage of the Term that is included in such Plan Year, but in each case only if the Partici- -7- 8 pant remains a Director on the last day of such Plan Year; provided, that if a -------- Participant's Termination Date occurs other than on the last day of a Plan Year, a pro rata portion of the installment of the Participant's then-unvested Options that would otherwise have vested as of the last day of the Plan Year during which such Termination Date occurs, based on the percentage of such Plan Year that occurs on or before such Termination Date, shall instead vest on the Termination Date; and provided, further, that the number of shares with respect -------- ------- to which Options vest on a particular day shall be rounded to the nearest whole number of shares, if necessary to avoid vesting with respect to a fractional share. (iii) Each Option that vests in accordance with the foregoing shall be exercisable from and after the later of the date of such vesting and the first anniversary of the Grant Date, through the earlier of (A) the tenth anniversary of the Grant Date and (B) in the case of the Participant's death during or after his or her service as a Director, the first anniversary of the date of death, in the case of the Participant's removal from the Board before the end of any Term, the Termination Date, and in all other cases, the fifth anniversary of the Participant's Termination Date. Any Options held by a Participant that have not become vested as of the Participant's Termination Date shall terminate on the Termination Date. -8- 9 (iv) Subject to the limitations of this Section 6(b), Options may be exercised, in whole or in part, by giving written notice of exercise to the Company specifying the number of shares of Common Stock subject to the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Company may accept. Payment, in full or in part, may also be made in the form of unrestricted Common Stock already owned by the Participant, based on the Value of the Common Stock on the date the Option is exercised; provided, that such already owned shares -------- have been held by the Participant for at least six months at the time of exercise. Payment for any shares subject to a Stock Option may also be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. No shares of Common Stock shall be issued pursuant to the exercise of Options until full payment therefor has been made. (v) No Option shall be transferable by the Participant other than by will or by the laws of descent and distribution. All Options shall be exercisable, subject to the terms of this Section 6(b), only by the Participant, the guardian or -9- 10 legal representative of the Participant, or any person to whom such Option is transferred pursuant to the preceding sentence, it being understood that references to the Participant shall be deemed, where appropriate, to refer to such guardian, legal representative or other transferee. (c) CASH. The portion, if any, of the Elective Amount for a particular Term that the Participant elects to have paid in Current Cash shall be paid, and the portion, if any, of the Elective Amount for a particular Term that the Participant elects to have paid in Deferred Cash shall be credited to a Cash Account maintained by the Company pursuant to Section 7 below, in each case in installments on the last day of each Plan Year that ends during the Term for which it is paid or credited (as applicable), pro rata based upon the percentage of the Term that is included in such Plan Year, but in each case only if the Participant remains a Director on that day. If a Participant's Termination Date occurs other than on the last day of a Plan Year, a pro rata portion of the installment of any Current Cash and any Deferred Cash that would otherwise have been paid or credited, as applicable, as of the last day of the Plan Year during which such Termination Date occurs, based upon the percentage of such Plan Year that occurs on or before such Termination Date, shall instead be paid or credited, as applicable, on the Termination Date. -10- 11 (d) STOCK. (i) The portion, if any, of the Elective Amount for a particular Term that the Participant elects to have provided in Restricted Stock, shall be issued as of the first day of such Term in the name of the Participant in the form of a number of shares of Common Stock having a Value, as of the first day of such Term, equal to the amount of such portion. Such shares shall be forfeitable and nontransferable, and shall be held in escrow for the Participant, until they vest in accordance with the provisions of Section 6(d)(iii). Dividends and other distributions with respect to Restricted Stock that has not yet vested as of the record date therefor shall be held in escrow, and shall vest and be delivered, together with the related Restricted Stock. (ii) The portion, if any, of the Elective Amount for a particular Term that the Participant elects to have provided in Deferred Stock shall be provided by crediting to a Stock Unit Account maintained by the Company pursuant to Section 7, a number of stock units representing hypothetical shares of Common Stock having a Value, as of the first day of such Term, equal to the amount of such portion. Such Deferred Stock shall vest as set forth in Section 6(d)(iii). (iii) Any Restricted Stock and Deferred Stock provided to a Participant for a particular Term shall vest in installments on the last day of each Plan Year that ends during the -11- 12 Term for which they were granted, pro rata based upon the percentage of the Term that is included in such Plan Year, but only if the Participant remains a Director on such day; provided, that if a Participant's Termination Date occurs -------- other than on the last day of a Plan Year, a pro rata portion of the installment of the Participant's then-unvested Restricted Stock and Deferred Stock that would otherwise have vested as of the last day of the Plan Year during which such Termination Date occurs, based on the percentage of such Plan Year that occurs on or before such Termination Date, shall instead vest on the Termination Date; and provided, further, that the number of shares -------- ------- with respect to which Restricted Stock and/or Deferred Stock vests on a particular day shall be rounded to the nearest whole number of shares, if necessary to avoid vesting with respect to a fractional share. (e) Notwithstanding any other provision of the Plan, each Participant shall be permitted to make an election (a "Tax Withholding Election") in connection with each Periodic Election to have a percentage of (i) the shares of Common Stock delivered to him pursuant to the exercise of Options, (ii) any Restricted Stock, and/or (iii) any Deferred Stock, as applicable, delivered in the form of cash to enable him or her to pay the taxes due with respect thereto. If a Participant makes a Tax Withholding Election with respect to Options, then as and when such Options are exercised, a percentage of the Common Stock purchased in such -12- 13 exercise, equal to the "Tax Withholding Percentage" (as defined below), shall be withheld by the Company, and the Company shall instead pay to such Participant any amount of cash equal to the Value, as of the date of exercise, of the withheld Common Stock. If a Participant makes a Tax Withholding Election with respect to Restricted Stock, then as and when such Restricted Stock vests, a percentage of such Restricted Stock, equal to the Tax Withholding Percentage, shall be withheld by the Company, and the Company shall instead pay to such Participant an amount of cash equal to the Value, as of the date of vesting, of the withheld Restricted Stock. If a Participant makes a Tax Withholding Election with respect to Deferred Stock, then as and when such Deferred Stock is delivered to the Participant (or the Participant's Beneficiary) pursuant to Section 7, a percentage of such Deferred Stock, equal to the Tax Withholding Percentage, shall be withheld by the Company, and the Company shall instead pay to such Participant (or such Beneficiary) an amount of cash equal to the Value, as of the date of delivery, of the withheld Deferred Stock. The "Tax Withholding Percentage" means the percentage of the value of the Common Stock, Restricted Stock or Deferred Stock, as applicable, that would be required to be withheld by the Company under all applicable federal, state, local and other tax laws, if the Participant were an employee of the Company. -13- 14 7. (a) DEFERRAL ACCOUNTS. The Company shall maintain one or two Deferral Accounts for each Participant who makes a Periodic Election to receive Deferred Cash or Deferred Stock, consisting of a "Stock Unit Account" and/or a "Cash Account," as applicable, and shall make credits thereto as provided in Section 6 and this Section 7. Whenever a dividend is paid or other distribution made with respect to the Common Stock, each Stock Unit Account shall be credited with a number of shares of Common Stock having a Value, as of the date such dividend is paid or such distribution is made, equal to (i) the number of stock units in such Stock Unit Account as of the record date for such dividend or distribution multiplied by (ii) the Dividend Equivalent for such dividend or other distribution. The shares so credited with respect to Deferred Stock that has not vested as of the record date for the dividend or distribution shall vest as and when such Deferred Stock vests. Each Cash Account shall accrue interest on the balance therein at the Interest Rate, to be credited and compounded monthly. (b) DELIVERY OF ACCOUNT BALANCES. (i) Each Participant shall be provided the opportunity to elect, in accordance with procedures established by the Committee, the manner in which his or her Deferral Account balances will be distributed on or after his or her Termination Date (each such election, a "Delivery Election"). A separate Delivery Election may be made -14- 15 with respect to each amount of cash credited to a Cash Account pursuant to a single Periodic Election and each amount of stock units credited to a Stock Unit Account pursuant to a single Periodic Election. Each such Delivery Election may call for delivery in a single sum or in installments on or beginning on the later of (i) the Termination Date or (ii) the date which is six months after the Delivery Election is made (an "Immediate Payment Election") or for deferred delivery in a single sum or in installments (a "Deferred Delivery Election") on or beginning on a specified date (in either case, the date on which delivery is to be made or is to begin is referred to as the "Starting Date"). The Starting Date for a Deferred Delivery Election must be on or after the third anniversary of the Termination Date; provided, that in no event shall the Starting Date for -------- a Deferred Delivery Election be later than the later of (i) the Participant's 73rd birthday and (ii) the third anniversary of the Termination Date. Each Delivery Election shall specify whether it is a Single Sum Election, a Term Certain Election, a Keogh Election, or an IRA Election; provided, that Keogh -------- Elections and IRA Elections may only be made in connection with Deferred Delivery Elections made with respect to amounts credited to Cash Accounts. (ii) The stock units in a Participant's Stock Unit Account and/or the cash in a Participant's Cash Account, as applicable, shall be delivered on or beginning on the Starting Date in accordance with the Participant's applicable Delivery -15- 16 Elections. In the case of deliveries from a Stock Unit Account, except as provided in Section 6(e), such delivery shall be made in the form of stock representing a number of shares of Common Stock equal to the number of stock units as and when they are to be delivered; provided, that if the number of -------- shares to be delivered on any particular date included a fractional share, such number of shares shall be rounded down to the nearest whole number, and if such delivery is the last to be made to the Participant, the Company shall pay the Participant cash in an amount equal to the Value of such fractional share on the date of delivery. If any such stock units or cash are to be delivered after the Participant has died or become legally incompetent, they shall be delivered to the Participant's Beneficiary or legal guardian, as the case may be, in accordance with the foregoing; provided, that if a Participant who has made a -------- Keogh Election dies before beginning to receive or receiving all of his or her distributions, the entire balance in his or her Deferral Account to which such Keogh Election applies shall be distributed to his or her Beneficiary immediately. References to a Participant in this Plan shall be deemed to refer to the Participant's Beneficiary or legal guardian, where appropriate. (iii) Participants shall be provided with the opportunity to designate, in accordance with procedures to be established by the Committee, the person or persons ("Beneficiar- -16- 17 ies") who will receive distributions of his or her interests in the Plan upon the death of the Participant (a "Beneficiary Designation"). Once made, a Beneficiary Designation or Delivery Election may be superseded by another Beneficiary Designation or Delivery Election (as applicable) or revoked in writing by the Participant. However, in order for any initial or superseding Delivery Election or revocation thereof to be valid, it must be received by the Committee before the Participant's Termination Date, and it shall in any event be subject to the approval of the Board or of a committee of the Board if the Committee determines that such approval is required in order for such Delivery Election and/or transactions resulting therefrom to be exempt under Rule 16b-3 under Section 16 of the Exchange Act. In the case of multiple Beneficiary Designations, Delivery Elections and/or revocations by any Participant, the most recent valid Beneficiary Designation, Delivery Election or revocation (as applicable) in effect as of the date of death or Termination Date, as applicable, shall be controlling. If a Participant does not have a valid Beneficiary Designation in effect as of the date of his or her death, his or her Beneficiary shall be his or her estate. If a Participant does not have a valid Delivery Election in effect as of his or her Termination Date with respect to any portion of his or her Cash Account or Stock Unit Account, he or she shall be deemed to have made an Immediate Payment Election with respect to such portion. -17- 18 8. DELIVERY OF SHARES; VOTING AND OTHER RIGHTS. The shares delivered to a Participant pursuant to Section 6 or 7 above shall be issued in the name of the Participant, and the Participant shall be entitled to all rights of a shareholder with respect to Common Stock for all such shares issued in his or her name, including the right to vote the shares, and the Participant shall receive all dividends and other distributions paid or made with respect thereto from and after the date of such issuance, except as specifically provided in Section 6(d)(i). 9. GENERAL RESTRICTIONS. (a) Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any shares of Common Stock under the Plan prior to fulfillment of all of the following conditions: (i) Listing or approval for listing upon official notice of issuance of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be a market for the Common Stock; (ii) Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable. -18- 19 (b) Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements for the Participants. (c) Except as specifically provided in the Plan with respect to Beneficiary Designations, no Participant or Beneficiary shall have the right to assign, pledge or otherwise dispose of his or her interest in any Deferral Account, nor shall the interest of a Participant or Beneficiary therein be subject to garnishment, attachment, transfer by operations of law, or any legal process. (d) The Plan is intended to constitute an unfunded plan for incentive and deferred compensation of Directors, and the rights of Directors with respect to Deferral Accounts under the Plan shall be those of general creditors of the Company. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments, so long as the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. 10. NUMBER AND SOURCE OF SHARES AVAILABLE. Subject to adjustment pursuant to Section 11, 500,000 shares of Common Stock may be issued under the Plan. Shares of Common Stock issuable under the Plan shall be taken from treasury shares of the Company or purchased on the open market. If any shares of Restricted -19- 20 Stock or Deferred Stock are forfeited, or if any Option terminates without having been exercised, the shares subject thereto shall again be available under the Plan. 11. CHANGE IN CAPITAL STRUCTURE; CHANGE OF CONTROL. (a) In the event that there is, at any time after the Board adopts the Plan, any change in the Common Stock by reason of any stock dividend, stock split, combination of shares, exchange of shares, warrants or rights offering to purchase Common Stock at a price below its fair market value, reclassification, recapitalization, merger, consolidation, spin-off or other change in capitalization of the Company, appropriate adjustment shall be made in the number and kind of shares or other property subject to the Plan and the number and kind of shares or other property held in the Stock Unit Accounts (taking into account whether any Dividend Equivalent is credited to the Stock Unit Accounts in connection therewith), and any other relevant provisions of the Plan by the Committee, whose determination shall be binding and conclusive on all persons. Without limiting the generality of the foregoing, the Committee shall, to the greatest extent possible, make such adjustments so that Deferred Stock in Stock Unit Accounts under the Plan is treated in the same manner as actual shares of Common Stock. (b) If the shares of Common Stock credited to the Stock Unit Accounts are converted pursuant to this Section 11 -20- 21 into cash or another form of property, references in the Plan to the Common Stock shall be deemed, where appropriate, to refer to such cash or other form of property, with such other modifications as may be required for the Plan to operate in accordance with its purposes. Without limiting the generality of the foregoing, references to delivery of certificates for shares of Common Stock shall be deemed to refer to delivery of cash and the incidents of ownership of any other property held in the Stock Unit Accounts. 12. ADMINISTRATION; AMENDMENT. (a) The Plan shall be administered by a committee consisting of the Chief Financial Officer, the General Counsel and the Corporate Vice President -- Human Resources of the Company (or the holder of any successor officer position thereto) (the "Committee"), which shall have full authority to construe and interpret the Plan, to establish, amend and rescind rules and regulations relating to the Plan, and to take all such actions and make all such determinations in connection with the Plan as it may deem necessary or desirable, including without limitation the determination of life expectancies and other assumptions and information to be used in determining the effect of Delivery Elections. (b) The Board may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company, and it may terminate the Plan at any time. -21- 22 13. MISCELLANEOUS. (a) Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company's shareholders or to limit the rights of the shareholders to remove any Director. (b) The Company shall have the right to require, prior to the issuance or delivery of any cash or shares of Common Stock pursuant to the Plan, that a Director make arrangements satisfactory to the Committee for the withholding of any taxes required by law to be withheld with respect to the issuance or delivery of such cash or shares, including without limitation by the withholding of shares that would otherwise be so issued or delivered, by withholding from any other payment due to the Director, or by a cash payment to the Company by the Director. 14. GOVERNING LAW. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware. -22- 23 THE MONSANTO COMPANY NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN SCHEDULE I ---------------------------------------------------------- As provided in Section 6(a) of the Plan, the Annual Retainer Amount for the following Participants shall be reduced in the amounts set forth below to take account of the previously granted restricted stock being earned by such Participants:
Annual Retainer for year(s) ending at Director Amount reduction the Annual Meeting in - --------------------------------------------------------------------------------- Robert M. Heyssel $10,000 1998 Gwendolyn S. King $10,000 1998 Philip Leder $10,000 1998 and 1999 John S. Reed $ 5,000 1998, 1999 and 2000 John E. Robson $ 5,000 1998, 1999, 2000 and 2001 William D. Ruckelshaus $ 5,000 1998, 1999 and 2000
-23- EX-10.5 6 EXCERPT OF RESOLUTIONS 1 EXCERPT OF RESOLUTIONS OF MONSANTO COMPANY BOARD OF DIRECTORS ADOPTED BY UNANIMOUS CONSENT EFFECTIVE AUGUST 4, 1997 WHEREAS, the Board has determined that it is in the best interests of the Company and its shareholders to terminate the Monsanto Company Non-Employee Directors Retirement Plan (the "Directors Retirement Plan") with respect to currently active non-employee directors, to close the Charitable Contribution Program established by resolution of the Board of Directors effective April 1, 1992 (the "Charitable Contribution Program") to new participants, and to provide compensation to certain non-employee directors for their Board service during the period from April 25, 1997 to the date of the distribution ("Distribution") to the holders of shares of the Company's common stock, $2.00 par value ("Common Stock") of the outstanding stock in the Company's newly formed Chemicals subsidiary ("Chemicals") (the date of such distribution herein referred to as the "Distribution Date") because of the suspension to such directors in April 1997 of grants of restricted stock that normally would have constituted a portion of their annual retainer and/or the forfeiture of restricted stock that will not be earned out by them because of their resignation from the Company's Board of Directors effective as of the Distribution Date; and WHEREAS, in connection with such termination of the Directors Retirement Plan it is necessary to make provision for the vested benefits of active non-employee directors under such plan on terms and conditions substantially as presented to this Board at its meeting on July 25, 1997; NOW, THEREFORE, BE IT RESOLVED, that the Board hereby adopts, subject to the Distribution, the Monsanto Company Non-Employee Director Deferred Compensation Plan (the "Deferred Compensation Plan") substantially in the form set forth in Exhibit A attached hereto. .......... FURTHER RESOLVED, that, subject to the Distribution, the Charitable Contribution Program be amended, effective as of the Distribution Date, such that from and after the Distribution Date, no non-employee director who is not, as of such date, a participant in the Charitable Contribution Program, and no individual who becomes a non-employee director after such date, shall be entitled to become a participant therein. FURTHER RESOLVED, that, subject to, and as soon as practicable following, the Distribution Date, the Company will make to each of the seven directors... whose grant of restricted stock was suspended in April 1997 2 2 because of the anticipated Distribution a cash payment equal to the sum of (a) the dollar amount of the portion of the restricted stock which the director would have normally received in April 1997 but for the suspension and which would have been earned out on the date of the 1998 Annual Meeting of Shareholders (the "Dollar Amount") divided by a fraction the numerator of which is the number of months of Board service (to the nearest whole month) during the period from April 25, 1997 to the Distribution Date (the "Service Period") and the denominator of which is twelve; (b) the number of shares of Common Stock that is equal to the Dollar Amount divided by the Fair Market Value of a share of Common Stock on April 25, 1997 (with any resulting fractional shares rounded up to the next higher whole number) multiplied by a fraction the numerator of which is the number of months (to the nearest whole month) during the Service Period and the denominator of which is twelve (the product of such calculation hereinafter referred to as the "Service Period Shares") times the increase in Fair Market Value in one share of Common Stock during the Service Period; and (c) the cash dividends to which a holder of record of the number of Service Period Shares would have become entitled during the Service Period. "Fair Market Value" with respect to any given day means the average of the highest and lowest sales prices of the Common Stock reported as the New York Stock Exchange-Composite Transactions for such day by The Wall Street Journal. FURTHER RESOLVED, that, subject to, and as soon as practicable following, the Distribution Date, the Company will make to each of the four directors who will resign from the Company's Board effective as of the Distribution Date to become directors of Chemicals ... a cash payment equal to the Fair Market Value of a share of Common Stock on the last trading day immediately prior to the Distribution Date times the number of shares of previously granted restricted stock which such director would have earned out during the period from the 1997 Annual Meeting of Shareholders to the 1998 Annual Meeting of Shareholders multiplied by a fraction the numerator of which is the number of months of Board service (to the nearest whole month) during the Service Period and the denominator of which is twelve. FURTHER RESOLVED, that the appropriate officers and assistant officers of the Company be, and each of them acting alone, is hereby further authorized and empowered to do or cause to be done any and all further acts and things, including the execution and delivery in the name and on behalf of the Company and under its corporate seal of any agreements, certificates, instruments and documents, as such officer may, with the advice of counsel, deem necessary or desirable to carry out the purpose and intent of these resolutions and to comply with all legal requirements relating thereto. EX-10.6 7 MANAGEMENT INCENTIVE PLAN 1 MONSANTO MANAGEMENT INCENTIVE PLAN OF 1996 As Amended April 25, 1997, July 25, 1997 and August 18, 1997 and As Adjusted to Reflect Stock Split as of May 15, 1996 and Spin-off as of September 1, 1997 I. GENERAL PROVISIONS 1. PURPOSES The Monsanto Management Incentive Plan of 1996 is designed to: * focus management on business performance that creates stockholder value, * encourage innovative approaches to the business of the Company, * reward for results, * encourage ownership of Monsanto common stock by management, and * encourage taking higher risks with an opportunity for higher reward. This Incentive Plan shall be effective April 15, 1996 ("Effective Date"), subject to the approval of this Incentive Plan by the stockholders of the Company. 2. DEFINITIONS Except where the context otherwise indicates, the following definitions apply: "Associated Company" means any corporation (or partnership, joint venture, or other enterprise), of which the Company owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Award" means any Stock Option, Stock Appreciation Right, Restricted Share, unrestricted Share, dividend equivalent unit or other award granted under this Incentive Plan. "Board" means Board of Directors of the Company. "Committee" means the ECDC, or its permitted delegate. "Compensation Committee" means one or more committees appointed by the ECDC composed of one or more senior managers of the Company or a Subsidiary to whom the ECDC may delegate its powers (or a portion thereof) to administer this Incentive Plan pursuant to Section 3(a) of this Article I. "ECDC" means the Executive Compensation and Development Committee or such other committee consisting of two or more members of the Board as may be appointed by the Board to administer this Incentive Plan pursuant to Section 3(a) of this Article I. "Company" means Monsanto Company, a Delaware corporation. "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. A-1 2 "Incentive Plan" means the Monsanto Management Incentive Plan of 1996, set forth herein. "Fair Market Value" shall mean, with respect to any given day, the average of the highest and lowest sales prices of the Shares reported as the New York Stock Exchange-Composite Transactions for such day, or if the Shares were not traded on the New York Stock Exchange on such day, then on the next preceding day on which the Shares were traded, all as reported by The Wall Street Journal, mid-west edition, under the heading New York Stock Exchange-Composite Transactions or by such other source as the Committee may select. "Incentive Stock Option" or "Incentive Option" means an option meeting the definition of that term as set forth in Section 3 of Article II of this Incentive Plan. "1984 Plan" means the Monsanto Management Incentive Plan of 1984, as amended. "1986 Plan" means the Searle Monsanto Stock Option Plan of 1986, as amended. "1988/I Plan" means the Monsanto Management Incentive Plan of 1988/I, as amended. "1988/II Plan" means the Monsanto Management Incentive Plan of 1988/II, as amended. "1991 Plan" means the NutraSweet/Monsanto Stock Plan of 1991, as amended. "1994 NutraSweet/Monsanto Plan" means the NutraSweet/Monsanto Stock Plan of 1994, as amended. "1994 Plan" means the Monsanto Management Incentive Plan of 1994, as amended. "1994 Searle/Monsanto Plan" means the Searle/Monsanto Stock Plan of 1994, as amended. "Non-Qualified Stock Option" or "Non-Qualified Option" means an option referred to in Section 4 of Article II of this Incentive Plan. "Participant" means an Eligible Participant to whom a Stock Option or a Stock Appreciation Right has been granted, a bonus commitment made or a bonus awarded pursuant to this Incentive Plan. "Reporting Person" means a person subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 (or any law, rule, regulation or other provision that may replace such statute) with respect to Shares. "Restricted Shares" means Shares that were made subject to restrictions in accordance with Section 6 of Article II of this Incentive Plan. "Shares" means shares of common stock of the Company and any shares of stock or other securities received as a result of a Share adjustment as set forth in Section 4 of this Article I. "Stock Appreciation Right" means a right referred to in Section 5 of Article II of this Incentive Plan. "Stock Appreciation Right Fair Market Value" or "SAR Fair Market Value" shall mean a value established by the Committee for the exercise of a Stock Appreciation Right. If such exercise occurs during any quarterly "window period" as specified by Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended from time to time, or any law, A-2 3 rule, regulation or other provision that may hereafter replace such Rule, the Committee may establish a common value for exercises during such window period. "Stock Option" or "Option" shall mean Incentive Stock Options and/or Non-Qualified Stock Options. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; and (ii) for the purposes of a Non-Qualified Stock Option, a Stock Appreciation Right or an Award of Shares (restricted or not), any corporation (or partnership, joint venture, or other enterprise) of which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). "Termination of Employment" means the discontinuance of employment of a Participant for any reason other than a Transfer. "Transfer" means: (i) for the purpose of an Incentive Stock Option, a change of employment of a Participant within the group consisting of the Company and its Subsidiaries; and (ii) for the purpose of a Non-Qualified 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 A-3 4 severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Eligible Participants. (c) The Committee may adopt and amend from time to time rules and regulations of general application for the administration of this Incentive Plan. (d) Without limiting the foregoing Sections 3(a), (b) and (c) of this Article I (and notwithstanding any other provisions of this Incentive Plan), the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Awards in the event of: a merger of the Company with, consolidation of the Company into, or the acquisition of the Company by, another corporation; a sale or transfer of all or substantially all of the assets of the Company to another corporation or any other person or entity; a separation from the Company, including any spin-off or other distribution to stockholders other than an ordinary cash dividend; a tender or exchange offer for Shares made by any corporation, person or entity (other than the Company); or other reorganization in which the Company will not survive as an independent, publicly-owned corporation. Such action may include (but shall not be limited to) establishing, amending or waiving the forms, terms, conditions and duration of Stock Options, Stock Appreciation Rights, Awards of Restricted Shares and other Awards so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, accelerated release of restrictions or other modifications. The Committee may take such actions pursuant to this Section 3(d) by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in Awards (including, without limitation, agreements with respect to Restricted Shares), or by taking action with respect to individual Participants. The Committee may take such actions as part of the Awards, or before or after the public announcement of any such merger, consolidation, acquisition, sale or transfer of assets, 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 A-4 5 (iii) the purchase price to be paid per Share under outstanding Stock Options and the number of Shares to be transferred in settlement of outstanding Stock Appreciation Rights; shall in each case be appropriately adjusted by the Committee in its discretion; provided, however, that all adjustments made as the result of the foregoing in respect of each Stock Option which is granted as an Incentive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time. 5. SHARES AUTHORIZED The total number of Shares for which awards may be granted under this Incentive Plan shall not exceed 71,605,350 Shares. Notwithstanding the foregoing, the total number of Shares that shall be available for Awards of Restricted or unrestricted Shares shall be 1/2 of 1% of the total number of Shares outstanding. The limitations in this Section 5 are subject to the adjustments provided for in Section 4 of this Article I; the provisions of Section 1(b) of Article II of this Incentive Plan; and the provisions of Section 3(d) of Article III of this Incentive Plan. The total number of Shares for which Awards may be granted under this Incentive Plan to any one Eligible Participant shall not exceed in any three-year period 15% of the total number of Shares for which Awards may be made under this Incentive Plan, subject to the adjustments provided for in Section 4 of this Article I. 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 A-5 6 on the number of Shares set forth in Section 5 of Article I if not prohibited by Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision). 2. INCIDENTS OF OPTIONS AND STOCK APPRECIATION RIGHTS (a) An Award of Stock Options or Stock Appreciation Rights may be made at such time or times determined by the Committee following the Effective Date to any Eligible Participant, except that Incentive Options may not be awarded to employees of Associated Companies. Each Stock Option and Stock Appreciation Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Incentive Plan, as shall be determined by the Committee, including any provisions as to continued employment as consideration for the grant or exercise of such Option or Stock Appreciation Right, provisions as to performance conditions and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. (b) An Incentive Stock Option or Stock Appreciation Right shall not be transferable by the Participant otherwise than by will, by the laws of descent and distribution, or pursuant to a written beneficiary designation, and shall be exercisable during the lifetime of the Participant only by him or by his guardian or legal representative. A Non- Qualified Stock Option or Stock Appreciation Right shall not be transferable except by will, by the laws of descent and distribution, pursuant to a written beneficiary designation, pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act or the rules thereunder, or in such circumstances as would not result in the failure to comply with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule or provision) if the transferor were a Reporting Person. (c) Shares purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee and specified in the grant of the Option. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver Shares (or other evidence of ownership of Shares satisfactory to the Company), including, at the Committee's option, Restricted Shares, with a Fair Market Value equal to the Option price as payment. (d) The Option price per share shall be established by the grant and shall not be decreased thereafter except pursuant to Section 4 of Article I of this Incentive Plan. (e) The Committee, in its discretion, may provide for the escalation of the Option price per Share over all or part of the term of the Option. (f) The Committee, in its discretion, may offer Participants the opportunity to elect to receive an Option grant in lieu of a salary increase or a bonus or may offer Participants the opportunity to purchase Options for cash or such other consideration as the Committee in its discretion determines. 3. INCENTIVE OPTIONS An Incentive Option shall be an "Incentive Stock Option" as that term is defined in Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time of the grant of any such Option, or any statutory provision that may be enacted to replace such Section. Each provision of this Incentive Plan and of each Incentive Stock Option granted A-6 7 hereunder shall be construed so that each such Option shall be an Incentive Stock Option, and any provision thereof that cannot be so construed shall be disregarded. Incentive Stock Options shall be granted only to purchase unrestricted Shares and only to Eligible Participants, each of whom may be granted one or more such Options at such time or times determined by the Committee following the Effective Date until April 14, 2006, subject to the following conditions: (a) The Option price per Share shall be set by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant. (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time within ten (10) years from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exercisable upon, or within such period following, Termination of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement as defined by the Committee or total and permanent disability as determined by the Committee, in which event such period shall not exceed-- (A) in the case of an Option, the original term of the Option; and (B) in the case of a Stock Appreciation Right, one year after such retirement or disability or after resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) of this Article II); or (ii) as a result of death, or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are first exercisable during any calendar year by any Eligible Participant shall not exceed $100,000; however, if the Fair Market Value of Incentive Stock Option Shares (at date of grant) exceeds $100,000 in the calendar year in which Incentive Stock Options are first exercisable, Shares with a Fair Market Value at date of grant exceeding $100,000 shall not be deemed to be Incentive Stock Options. (d) Incentive Stock Options shall be granted only to an Eligible Participant who, at the time the Option is granted, does not own stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. (e) Any other terms and conditions which the Committee determines, upon advice of counsel, should be imposed for the Option to qualify as an Incentive Stock Option and any other terms and conditions not inconsistent with this Incentive Plan as determined by the Committee; A-7 8 including provisions making the Shares subject to such Option Restricted Shares or provisions making vesting or the ability to exercise subject to performance conditions. 4. NON-QUALIFIED OPTIONS One or more Options may be granted as Non-Qualified Options to purchase unrestricted Shares or Restricted Shares to an Eligible Participant at such time or times determined by the Committee, following the Effective Date, subject to the following terms and conditions: (a) The Option price per Share shall be established by the grant but shall not be less than 100% of the Fair Market Value at the time of the grant (or such later date as the Committee shall determine to be the grant date). (b) The Option and its related Stock Appreciation Right, if any, may be exercised in full or in part from time to time within ten (10) years from the date of the grant, or such shorter period as may be specified by the Committee in the grant, provided that in any event each shall lapse and cease to be exercisable upon, or within such period following Termination of Employment as shall have been determined by the Committee and as specified in the Option or Stock Appreciation Right; provided, however, that such period following Termination of Employment shall not exceed twelve months unless employment shall have terminated: (i) as a result of retirement as defined by the Committee or total and permanent disability as determined by the Committee, in which event such period shall not exceed-- (A) in the case of an Option, the original term of the Option; and (B) in the case of a Stock Appreciation Right, one year after such retirement or disability or after resignation as an officer or director of the Company, whichever shall last occur (unless earlier terminated pursuant to Section 5(b) of this Article II); or (ii) as a result of death, or death shall have occurred following Termination of Employment and while the Option or Stock Appreciation Right was still exercisable; and provided, further, that such period following Termination of Employment shall in no event extend the original exercise period of the Option or related Stock Appreciation Right, if any. (c) The Option grant may include any other terms and conditions not 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-8 9 (a) Such Stock Appreciation Right shall entitle a holder of an Option within the period specified for the exercise of the Option in the related Option grant to surrender the unexercised Option (or a portion thereof) and to receive in exchange therefor a payment in cash or Shares having an aggregate value equal to the product of (i) the amount by which (A) the SAR Fair Market Value of each Share exceeds (B) the Option price per Share, times (ii) the number of Shares under the Option, or portion thereof, which is surrendered. (b) Except as expressly provided herein, each Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Option. It shall be exercisable only to the extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The Committee may grant Stock Appreciation Rights concurrently with grants of Options or in connection with previously granted Options under this Incentive Plan, or under any other incentive plan of the Company or its Subsidiaries which was approved by the stockholders, which are unexercised and have not terminated or lapsed. With respect to Stock Appreciation Rights granted in connection with such previously granted Options, the Committee shall provide that such Stock Appreciation Rights shall not be exercisable until the holder completes six (6) months (or such longer period as the Committee shall determine) of service with the Company, a Subsidiary, or an Associated Company immediately following the date of the grant of such Stock Appreciation Rights. (c) The Committee shall have sole discretion to determine in each case whether the payment will be in the form of all cash, all Shares (which may, at the Committee's discretion, be Restricted Shares), or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined as follows: the amount payable in Shares shall be divided by the SAR Fair Market Value of Shares. The payments to be made, in whole or in part, in cash upon the exercise of Stock Appreciation Rights by any officer of the Company shall be made in accordance with the provisions relating to the exercise of stock appreciation rights of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect at the time of such exercise, or any law, rule, regulation or other provision that may hereafter replace such Rule. (d) Upon exercise of a Stock Appreciation Right, the number of Shares subject to exercise under the related Option shall automatically be reduced by the number of Shares represented by the Option or portion thereof which is surrendered. To the extent that a Stock Appreciation Right shall be exercised, any Shares transferred upon such exercise shall not be charged against the maximum limitations upon the grant of Options set forth in this Incentive Plan under which such Option shall have been granted but the Option in connection with which a Stock Appreciation Right shall have been granted shall be deemed to have been exercised for the purpose of such maximum limitations. (e) The Committee shall have sole discretion as to the timing of any payment made in cash, Shares, or a combination thereof upon exercise of Stock Appreciation Rights hereunder, whether in a lump sum, in annual installments or otherwise deferred and the Committee shall have sole discretion to determine whether such payments may bear amounts equivalent to interest or cash dividends. (f) For purposes of this paragraph 5(f) of Article II: A-9 10 (i) "Unrelated Party" means any party or group of parties acting together other than (A) the Company, its directors and officers, or (B) any nominee holder for any stock exchange; (ii) "Offer" means any tender or exchange offer made by an Unrelated Party for the Shares and shall be deemed to occur upon the first purchase or exchange of such Shares; (iii) "Change of Control" means any acquisition, beneficially or otherwise, by any Unrelated Party of 25% or more of the combined voting power of the common and preferred stock of the Company and shall be deemed to occur upon the date that the Unrelated Party attains control of said 25% or more of the combined voting power; (iv) "Change of Control Market Value" of the Shares means the higher of-- (A) the value for which such Shares may be exchanged or offered under any Offer pursuant to which Shares are actually exchanged or purchased; or (B) the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Offer or Change of Control, a Participant holding an unexercised Stock Appreciation Right may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of the Company, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only: (x) during the thirty (30) day period following the first exchange or purchase of Shares pursuant to an Offer; or (y) during the thirty (30) day period following the date on which sufficient Shares are acquired to constitute a Change of Control. (g) For purposes of this paragraph 5(g) of Article II: (i) "Unrelated Party" means any party or group of parties acting together other than (A) the Company, its directors and officers, or (B) any nominee holder for any stock exchange; (ii) "Alternate Change of Control" means any acquisition, beneficially or otherwise, by any Unrelated Party of a percentage of the combined voting power of the common and preferred stock of the Company specified by the Committee (but not less than 10%) and shall be deemed to occur upon the date that the Unrelated Party attains control of said percentage of the combined voting power; (iii) "Change of Control Termination of Employment" means the termination of employment of a Participant by the Company, the Subsidiaries or the Associated Companies without cause (as defined by the Committee) or by the Participant for good reason (as defined by the Committee) within a period of time A-10 11 specified by the Committee following an Alternate Change of Control; (iv) "Alternate Change of Control Market Value" of the Shares means the Fair Market Value of such Shares on the date of exercise of a Stock Appreciation Right. Notwithstanding the foregoing provisions of this Section 5 of Article II and without limiting the provisions of Section 3 of Article I of this Incentive Plan, in the event of an Alternate Change of Control and a Change of Control Termination of Employment, a Participant holding an unexercised Stock Appreciation Right who is selected by the Committee may exercise such Stock Appreciation Right and elect to be paid solely in cash in an amount equal to the difference between the Option price and the Alternate Change of Control Market Value of the Shares, unless within five (5) business days after receipt of notification of such election by the Secretary of the Company, the Committee acts to disapprove the cash election. Unless it acts to disapprove, the Committee's consent shall be deemed to be given at the close of business on the fifth business day after the Secretary's receipt of notification of such election and payment shall be made as soon as practicable after expiration of such five (5) business day period. The election provided herein shall apply only during the thirty (30) day period following a Change of Control Termination of Employment. 6. BONUS SHARES AND RESTRICTED SHARES (a) An Award of Shares or Restricted Shares may be made at such time or times determined by the Committee following the Effective Date to any person who is an Eligible Participant. The Committee shall have full discretion to determine the terms and conditions of payment of any Award, including without limitation, what part of such Award shall be paid in unrestricted Shares or Restricted Shares, the time or times of payment of any Award, and the time or times of the lapse of the restrictions on Restricted Shares. (b) For the purpose of determining the number of Shares to be used in payment of an Award, the amount of the Award payable in Shares shall be divided by the Fair Market Value of the Shares on the date of the determination of the amount of the Award by the Committee, or if the Committee so directs, the date immediately preceding the date the Award is paid. (c) The portion of an Award payable in Restricted Shares shall be paid at the time of the Award either by book-entry registration or by delivering to the Participant, or a custodian or escrow designated by the Committee and the Participant, a certificate or certificates for such Restricted Shares, registered in the name of such Participant. The Participant shall have all of the rights of a stockholder with respect to such Shares, subject to such terms and conditions, including withholding of dividends, forfeitures or resale to the Company, if any, as may be determined by the Committee. The Committee and the Participant may designate the Company or one or more of its employees to act as custodian or escrow for the certificates. (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 A-11 12 securities resulting from any adjustment of such Shares of the type described in Section 4 of Article I shall be subject to the same terms, conditions, and restrictions as the Restricted Shares prior to such adjustment. The Committee may, in its discretion, remove, modify or accelerate the release of restrictions on any Restricted Shares in the event of hardship or disability of the Participant while employed, in the event that the Participant ceases to be an employee of the Company, a Subsidiary or Associated Company, as the result of death or otherwise, in the event of a relocation of a Participant to another country or for such other reasons as the Committee may deem appropriate. In the event of the death of a Participant following the transfer of Restricted Shares to him, the legal representative of the Participant, the beneficiary designated in writing by the Participant during his lifetime, or the person receiving such Shares under his will or under the laws of descent and distribution shall take such Shares subject to the same restrictions, conditions and provisions in effect at the time of his death, to the extent applicable. 7. DIVIDENDS, DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS (a) No cash dividends shall be paid on Shares which have been awarded but not registered or delivered. The Committee may provide, however, that a Participant to whom an Option has been awarded which is exercisable in whole or in part at a future time for Shares or a Participant who has been awarded Shares payable in whole or in part at a future time, shall be entitled to receive an amount per Share, equal in value to the cash dividends, if any, paid per Share on issued and outstanding Shares, as of the dividend record dates occurring during the period between the date of the award and the time each such Share is delivered. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be: (i) paid in cash or Shares either from time to time prior to or at the time of the delivery of such Shares or upon expiration of the Option if it shall not have been fully exercised (except that payment of the dividend equivalents on Incentive Options may not be made prior to exercise); or (ii) converted into contingently credited Shares (with respect to which dividend equivalents shall accrue) in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee. Such Shares (whether delivered or contingently credited) shall be charged against the limitations set forth in Section 5 of Article I. (b) The Committee, in its discretion, may authorize payment of interest equivalents on any portion of any Award payable at a future time in cash, and interest equivalents on dividend equivalents which are payable in cash at a future time. (c) The Committee, in its discretion, may provide that dividends paid on restricted Shares shall, during the applicable restricted period, be held by the Company to be paid upon the lapse of restrictions or to be forfeited upon forfeiture of the Shares. III. MISCELLANEOUS PROVISIONS 1. Neither a Stock Option nor a Stock Appreciation Right shall be transferable except as provided for herein. If any Participant makes such a transfer in violation hereof, any obligation of the A-12 13 Company with respect to such Stock Option or Stock Appreciation Right shall forthwith terminate. 2. Nothing in this Incentive Plan or any booklet or other document describing or referring to this Incentive Plan shall be deemed to confer on any employee or Participant the right to continue in the employ of his employer or affect the right of his employer to terminate the employment of any such person with or without cause. 3. Nothing contained herein shall require the Company to segregate any monies from its general funds, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant. 4. This Incentive Plan and all actions taken hereunder shall be governed by the laws of the State of Delaware. 5. The Company may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option or the exercise thereof, any Stock Appreciation Right or the exercise thereof, or the payment of any bonus award, including, but not limited to, the withholding of cash or Shares which would be paid or delivered pursuant to such exercise or award or another exercise or award under this Incentive Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or 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 spin off becomes an employee of Chemicals (or a subsidiary or associated company of Chemicals) rather than an employee of the Company (or a Subsidiary or Associated Company of the Company), such change of employment shall not constitute a Termination of Employment. With respect to any such Award held by such a Participant, Termination of Employment shall mean such Participant's termination of employment with Chemicals other than a Transfer, with Transfer defined as a change of employment of a Participant within the group consisting of Chemicals and its subsidiaries, or, if the Committee so determines, a change of employment of a Participant within the group consisting of Chemicals, its subsidiaries, and its associated companies. For purposes of this section, a subsidiary of Chemicals means any corporation (or partnership, joint venture, or other enterprise) of which Chemicals owns or controls, directly A-13 14 or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power) and an associated company of Chemicals means any corporation (or partnership, joint venture, or other enterprise), of which Chemicals owns or controls, directly or indirectly, 10% or more, but less than 50% of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power). IV. AMENDMENTS 1. The Board, upon recommendation of the Committee but not otherwise, may from time to time amend or modify this Incentive Plan, including, but not limited to, an amendment which would authorize the Committee to make Awards payable in other securities or other forms of property of a kind to be determined by the Committee, and such other amendments as may be necessary or desirable to implement such Awards, or discontinue this Incentive Plan or any provision thereof, provided that no amendments or modifications to this Incentive Plan shall, without the prior approval of the stockholders normally entitled to vote for the election of directors of the Company: (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 A-14 15 Plan"), and any such Other Plan may be authorized and payments made thereunder independently of this Incentive Plan; provided, however, that no such Other Plan shall provide for the granting of options or stock appreciation rights to purchase or receive the appreciation on the shares of any class of stock of the Company, or the making of bonus commitments or bonus awards payable in any class of stock of the Company, which in either form or substance are comparable to those authorized under this Incentive Plan, unless (i) such Other Plan is established or operated in connection with the assumption by the Company or a Subsidiary of the plans, options, stock appreciation rights, bonus commitments or bonus awards of another corporation, or the substitution of an Other Plan or options, stock appreciation rights, bonus commitments or bonus awards under such Other Plan in lieu of the plans, options, stock appreciation rights, bonus commitments or bonus awards of such other corporation, arising out of a merger or consolidation with, or the acquisition of assets or stock of, such other corporation, or other transaction described in Section 424(a) of the Internal Revenue Code of 1986, as may be amended from time to time, as in effect at the time, or (ii) such Other Plan provides for grants of options, stock appreciation rights, bonus commitments or bonus awards to employees substantially all of whom are not Participants. A-15 EX-10.7 8 EMPLOYMENT AGREEMENT 1 Form of Employment Agreement for Executive Officers, Pursuant to Resolutions Adopted by Monsanto Company Board of Directors on April 25, 1997 EMPLOYMENT AGREEMENT AGREEMENT by and between Monsanto Company, a Delaware corporation (the "Company"), and ------------------------- (the "Executive"), dated as of the --- day of -------, 1997. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the ------------------- first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated by the Company prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each 2 annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) An "Alternative Change of Control" shall mean a Change of Control as defined in Section 2, except that the references in such definition to "20%" shall be deemed to be references to "50%." 2. Change of Control. For the purpose of this Agreement, a "Change ----------------- of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent 2 3 Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3 4 3. Employment Period. The Company hereby agrees to continue the ----------------- Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period (the "Employment Period") commencing on the Effective Date and ending on the earlier of the third anniversary of such date and the first day of the month following the month in which the executive attains age 65 (the Executive's "Normal Retirement Date"). 4. Terms of Employment. (a) Position and Duties. (i) During the ------------------- ------------------- Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location, unless the Executive is on international assignment on the Effective Date and is relocated as a result of the Executive's being repatriated pursuant to the terms of his international assignment agreement as in effect before the Effective Date. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. 4 5 (b) Compensation. (i) Base Salary. During the Employment Period, ------------ ----------- the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Bonuses. In addition to Annual Base Salary, the Executive ------- shall be awarded the following bonuses. For each fiscal year ending during the Employment Period, the Executive shall be awarded an annual bonus (the "Annual Bonus") in cash at least equal to the average of the Executive's bonuses under the Company's Annual Incentive Program, or any comparable bonus under any predecessor or successor plan(s), for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. In addition, during the Employment Period, the Executive shall be entitled to participate in all long-term and other incentive plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable) less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to 5 6 other peer executives of the Company and its affiliated companies. (iii) Savings and Retirement Plans. During the Employment ---------------------------- Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. Without limiting the generality of the foregoing, the Company and its affiliated companies shall continue to honor any individual agreements between any of them and the Executive regarding the provision of supplemental retirement benefits such as (but not limited to) post-retirement income and/or welfare benefits (each of which is hereafter referred to as an "Individual SERP"). [INSERT REFERENCES TO SPECIFIC AGREEMENTS WHERE APPLICABLE.] (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive -------- shall be entitled to receive prompt reimbursement 6 7 for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the --------------- Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, ------------------------ the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall -------- be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The ------------------------- ------------------- Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may 7 8 give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's long-term disability for purposes of any reasonable occupation as determined under the Company's disability plan that is applicable to the Executive. (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is 8 9 provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the ----------- Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date, unless the Executive is on international assignment on the Effective Date and the relocation is as a result of the Executive's being repatriated pursuant to the terms of his international assignment agreement as in effect before the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. 9 10 Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of an Alternative Change of Control shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause, --------------------- or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; ------------------------------------------- ----------- Other Than for Cause, Death or Disability. If, during the Employment Period, - ----------------------------------------- the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: 10 11 A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) the lesser of three and the number of years and fractions thereof remaining between the Date of Termination and the Executive's Normal Retirement Date (such lesser number, the "Multiplier") and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and C. an amount equal to the difference between (a) the aggregate benefit under the Monsanto Pension Plan and any successor thereto, and any other qualified defined benefit retirement plans of the Company and its affiliated companies in which the Executive participates (collectively, the "Retirement Plan") and the Monsanto Company ERISA Parity Pension Plan, the Monsanto Company Supplemental Retirement Plan, and any successors thereto, any other "top hat," excess or supplemental defined benefit retirement plans of the Company and its affiliated companies in which the Executive participates, and any Individual SERP (collectively, the "SERP") which the Executive would have accrued (whether or not vested) if the Executive's employment had continued for a number of years after the Date of Termination equal to the Multiplier, and (b) the actual vested benefit, if any, of the Executive under the Retirement Plan and the SERP, determined as of the Date of Termination (with the foregoing amounts to be computed on an actuarial present value basis, based on the assumption that the 11 12 Executive's compensation during such period of deemed continued employment after the Date of Termination was that required by Section 4(b)(i) and Section 4(b)(ii), and using actuarial assumptions no less favorable to the Executive than the most favorable of those in effect for purposes of computing benefit entitlements under the Retirement Plan and the SERP at any time from the day before the Effective Date) through the Date of Termination; (ii) for a number of years after the Executive's Date of Termination equal to the Multiplier, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and for purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of a number of years after the Date of Termination equal to the Multiplier and to have retired on the last day of such period; (iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). 12 13 (b) Death. If the Executive's employment is terminated by reason of ----- the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by ---------- reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment --------------------------------- shall be terminated for Cause during the 13 14 Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall ------------------------- prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Notwithstanding the foregoing, from and after the Effective Date, the compensation and benefits provided for pursuant to Sections 5, 8 and 9 hereof shall be in lieu of any severance or separation pay or benefits to which the Executive might otherwise be entitled under any plan, program, policy or arrangement of the Company and its affiliates. 8. Full Settlement; Legal Fees. The Company's obligation to make --------------------------- the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of 14 15 the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt 15 16 of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, 16 17 (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any 17 18 interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. As used herein, "Confidential ------------------------ Information" means all technical and business information of the Company and its Subsidiaries, whether patentable or not, which is of a confidential, trade secret and/or proprietary character and which is either developed by the Executive (alone or with others) or to which the Executive has had access during the Executive's employment. "Confidential Information" shall also include confidential evaluations of, and the confidential use or non-use by the Company or any Subsidiary of, technical or business information in the public domain. The Executive shall use the Executive's best efforts and diligence both during and after employment by the Company to protect the confidential, trade secret and/or proprietary character of all Confidential Information. The Executive shall not, directly or indirectly, use (for the Executive or another) or disclose any Confidential Information, for so long as it shall remain proprietary or protectible as confidential or trade secret information, except as may be necessary for the performance of the Executive's duties with the Company. The Executive shall deliver promptly to the Company, at the termination of the Executive's employment, or at any other time at the Company's request, without retaining any copies, all documents and other material in the Executive's possession relating, directly or indirectly, to any Confidential Information. Each of the Executive's obligations in this Section shall also apply to the confidential, trade secret and proprietary information learned or acquired by the Executive during the Executive's employment from others with whom the Company or any Subsidiary has a business relationship. The Executive understands that the Executive is not to disclose to the Company or any Subsidiary, or use for its benefit, any of the confidential, trade secret or proprietary information of others, including any of the Executive's former 18 19 employers. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and ---------- without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------------- 19 20 If to the Company: ----------------- 800 North Lindbergh Boulevard St. Louis, Missouri 63167 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. Upon its execution by both parties hereto, this Agreement shall supersede the Key Executive Employment Agreement previously entered into by the Executive and the Company. From and after the Effective Date this Agreement shall supersede any prior employment agreement between the parties, but shall have no effect on any Individual SERP or on the Executive's rights under any plan, program, policy or practice provided by the Company or any of its affiliated companies except as specifically provided in Section 7 above. 20 21 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ----------------------------------- [Executive] MONSANTO COMPANY By --------------------------------- 21 EX-23 9 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, 333-02963, 333-33531, and 333-38599) 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 September 30, 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 November 14, 1997 14 EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF CONSOLIDATED INCOME OF MONSANTO COMPANY AND SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND THE STATEMENT OF CONSOLIDATED FINANCIAL POSITION AS OF SEPTEMBER 30, 1997. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1997 SEP-30-1997 184 0 2,176 0 1,187 4,341 4,570 2,307 10,375 3,748 1,507 1,644 0 0 2,319 10,375 5,694 5,694 2,342 2,342 0 0 111 369 80 289 176 0 0 465 0.76 0 RECEIVABLES ARE STATED NET OF ALLOWANCES OF $52.
EX-99 11 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)
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, -------------- ---------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- Income from continuing operations before provision for income taxes.............. $369 $ 897 $553 $645 $636 $427 $(213) Add Fixed charges................. 159 134 175 181 145 151 197 Less capitalized interest..... (13) (7) (9) (5) (4) (7) (11) Dividends from affiliated companies........ 2 6 14 9 2 5 5 Less equity income (add equity loss) of affiliated companies..................... (18) (4) 24 (17) (21) (20) (1) ---- ------ ---- ---- ---- ---- ----- Income as adjusted.......... $499 $1,026 $757 $813 $758 $556 $ (23) ==== ====== ==== ==== ==== ==== ===== Fixed charges Interest expense.............. $111 $ 94 $119 $132 $100 $101 $ 140 Capitalized interest.......... 13 7 9 5 4 7 11 Portion of rents representative of interest factor...................... 35 33 47 44 41 43 46 ---- ------ ---- ---- ---- ---- ----- Fixed charges............... $159 $ 134 $175 $181 $145 $151 $ 197 ==== ====== ==== ==== ==== ==== ===== Ratio of earnings to fixed charges....................... 3.14 7.67 4.33 4.49 5.23 3.68 ==== ====== ==== ==== ==== ==== ===== - ------- Earnings were inadequate to cover fixed charges by $220 million. Includes charges for acquired in-process research and development, restructuring and other unusual items of $609 million for the nine months ended September 30, 1997, and $376 million and $579 million for the years ended December 31, 1996 and 1992, respectively. Excluding these unusual items, the ratio of earnings to fixed charges would have been 6.97, 6.47, and 2.82 in 1997, 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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