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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
MONSANTO COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[MONSANTO LOGO]
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
APRIL 18, 2001
The Annual Meeting of Stockholders of Monsanto Company will be held in K
Building at the Company's Creve Coeur Campus, 800 North Lindbergh Boulevard, St.
Louis County, Missouri, on Tuesday, April 18, 2001, at 1:30 p.m. for the
following purposes:
1. to elect nine directors for terms expiring at the Annual Meeting of
Stockholders to be held in 2002;
2. to approve Phantom Share Agreements, including the material terms,
conditions and performance goals of such agreements, for purposes of
exempting payments under those agreements from the deduction limitation
of Section 162(m) of the Internal Revenue Code;
3. to approve the material terms of the performance goal used for
determining awards to certain executive officers under the Annual
Incentive Program for purposes of exempting payment of those awards from
the deduction limitation of Section 162(m) of the Internal Revenue Code;
4. to ratify the appointment of Deloitte & Touche LLP as principal
independent auditors for the year 2001; and
5. to transact such other business as may properly come before the meeting.
By Order of the Board of Directors,
MONSANTO COMPANY
/s/ R. WILLIAM IDE III
R. WILLIAM IDE III
Secretary
St. Louis, Missouri
March 16, 2001
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
POSTAGE PAID ENVELOPE PROVIDED. ALTERNATIVELY, YOU
MAY VOTE OVER THE INTERNET OR BY TELEPHONE.
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TABLE OF CONTENTS TO THE PROXY STATEMENT
PAGE NO.
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Questions and Answers
Proxy Statement............................................. 1
Information Regarding Board of Directors and Committees..... 4
Election of Directors (Proxy Item No. 1).................... 9
Approval of the Phantom Share Agreements (Proxy Item No.
2)........................................................ 9
Approval of Annual Incentive Program Performance Goal (Proxy
Item No. 3)............................................... 10
Ratification of Independent Auditors (Proxy Item No. 4)..... 11
Stock Ownership of Management and Certain Beneficial
Owners.................................................... 12
Executive Compensation...................................... 14
Committee Reports........................................... 19
Stock Price Performance Graph............................... 23
Certain Agreements.......................................... 24
Arrangements Between Monsanto And Pharmacia................. 25
Certain Other Information Regarding Management.............. 25
General Information......................................... 26
Appendices
Summary Description of Agreements Between Monsanto and
Pharmacia................................................. A
Audit and Finance Committee Charter......................... B
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QUESTIONS AND ANSWERS
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Q. WHEN AND WHERE IS THE ANNUAL MEETING?
We will hold the annual meeting of stockholders on Tuesday, April 18, 2001 at
1:30 p.m., local time, at K Building at the Company's Creve Coeur Campus, 800
North Lindbergh Boulevard, St. Louis, Missouri 63167. A map with directions to
the meeting can be found near the back of the proxy statement. We began mailing
the proxy statement and annual report on March 16, 2001.
Q. WHAT AM I BEING ASKED TO VOTE ON AT THE MEETING?
We are asking our stockholders to elect directors, approve Phantom Share
Agreements entered into by the Company and several of our officers, approve the
Annual Incentive Program performance goal for certain executive officers and to
ratify the appointment of our independent auditors.
Q. HOW DOES THE BOARD OF DIRECTORS OF MONSANTO RECOMMEND I VOTE ON THESE
PROPOSALS?
The board of directors recommends that you vote "FOR" all of the nominees for
director and "FOR" the other three specified proposals.
Q. WHO IS ENTITLED TO VOTE AT THE MEETING?
You are entitled to vote at the meeting if you owned shares as of the closing of
business on March 5, 2001, the record date for the meeting.
Q. WHAT VOTE OF THE STOCKHOLDERS IS NEEDED?
Each share of our common stock is entitled to one vote with respect to each
matter on which it is entitled to vote. Our directors are elected by a plurality
of votes, which means that the nominees who receive the greatest number of votes
will be elected. A majority of the shares present at the meeting in person or by
proxy is required for all other items.
Q. CAN I VOTE BY TELEPHONE OR OVER THE INTERNET?
Most stockholders have a choice of voting by using the telephone, over the
Internet or by completing a proxy card. Please read the instructions attached to
the proxy card or the information sent by your broker or bank. In addition,
please refer to your proxy card to see which options are available to you.
Q. WHAT DO I DO IF MY SHARES OF COMMON STOCK ARE HELD IN "STREET NAME" AT A BANK
OR BROKERAGE FIRM?
If your shares of common stock are held in street name by a bank or brokerage
firm as your nominee, your bank or broker will send you a separate package
describing the procedure for voting your shares. You should follow the
instructions provided by your bank or brokerage firm.
Q. WHAT HAPPENS IF I RETURN MY SIGNED PROXY CARD BUT FORGET TO INDICATE HOW I
WANT MY SHARES OF COMMON STOCK VOTED?
If you sign, date and return your proxy and do not mark how you want to vote,
your proxy will be counted as a vote "FOR" all of the nominees for directors,
and "FOR" the other three specified proposals. In addition, your proxy will be
voted in the discretion of the proxies with respect to such other business as
may properly come before the meeting.
Q. WHAT HAPPENS IF I DO NOT INSTRUCT MY BROKER HOW TO VOTE OR IF I MARK
"ABSTAIN" ON THE PROXY?
If you mark your proxy "abstain," your vote will have the same effect as a vote
against the proposal or the election of the applicable director. If you do not
instruct your broker how to vote, your broker will vote your shares for you at
his or her discretion. Broker non-votes have the same effect as votes cast
against a particular proposal.
Q. CAN I CHANGE MY VOTING INSTRUCTIONS BEFORE THE MEETING?
Yes. You can revoke your proxy at any time before it is exercised by timely
delivery of a properly executed, later-dated proxy (including an Internet or
telephone vote), by a written revocation of your proxy sent to the Secretary of
Monsanto or by voting at the meeting. The method by which you vote by a proxy
will in no way limit your right to vote at the meeting if you later decide to
attend in person. If your shares are held in the name of a bank or brokerage
firm, you must obtain a proxy, executed in your favor, from the bank or broker,
to be able to vote at the meeting.
Q. WILL I HAVE ACCESS TO THE PROXY STATEMENT OVER THE INTERNET?
No. However, most stockholders can elect to view future proxy statements and
annual reports over the Internet instead of receiving paper copies in the mail.
You can choose this option by marking the appropriate box on your proxy card or
by following the instructions provided if you vote over the Internet or by
telephone. Please read the instruction letter accompanying this proxy statement
for detailed information regarding these procedures. If you hold your shares
through a bank or broker, please refer to the information provided by that
entity.
Q. WHAT DO I NEED TO DO IF I PLAN ON ATTENDING THE MEETING IN PERSON?
If you plan on attending the meeting in person, please provide advance notice to
the Company either by checking the box on your proxy card or by following the
telephone or Internet instructions. In addition, you may provide notice to the
Company that you plan on attending in person by delivering written notice to the
Company's Secretary. If you hold your shares in street name through a bank or
broker, please bring identification and proof of ownership, such as an account
statement or letter from your bank or broker, for admittance. An admission list
containing the names of all of those planning to attend will be placed at the
registration desk at the entrance to the meeting, where you must check-in to
gain admittance to the meeting.
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MONSANTO'S ADDRESS
PROXY STATEMENT
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The board of directors of Monsanto Company is soliciting proxies from its
stockholders in connection with the Company's Annual Meeting of Stockholders on
April 18, 2001, and at any and all adjournments thereof. If you plan on
attending the meeting in person, please provide advance notice to the Company
either by checking the box on your proxy card or by following the telephone or
Internet instructions. In addition, you may provide notice to the Company that
you plan on attending in person by delivering written notice to the Company's
Secretary at 800 North Lindbergh Boulevard, St. Louis, Missouri 63167. If you
hold your shares in street name through a bank or broker, please bring
identification and proof of ownership, such as an account statement or letter
from your bank or broker, for admittance. An admission list containing the names
of all of those planning to attend will be placed at the registration desk at
the entrance to the meeting, where you must check-in to gain admittance to the
meeting.
Our predecessor was the agricultural products business of the former Monsanto
Company (we refer to the former Monsanto Company as "former Monsanto"). The
following table sets forth the chronological events occurring in 1999 and 2000
which resulted in our formation.
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DATE OF EVENT DESCRIPTION OF EVENT
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December 19, 1999 - Former Monsanto entered into a merger agreement with
Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn").
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February 9, 2000 - We were incorporated in Delaware as a wholly owned
subsidiary of former Monsanto under the name "Monsanto Ag
Company."
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March 31, 2000 - Effective date of merger of former Monsanto with Pharmacia
& Upjohn.
- In connection with the merger, (1) former Monsanto changed
its name from "Monsanto Company" to "Pharmacia Corporation"
(we refer to former Monsanto after its name change as
"Pharmacia"); (2) we changed our name to "Monsanto
Company;" and (3) Pharmacia & Upjohn became a wholly owned
subsidiary of former Monsanto.
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September 1, 2000 - We entered into agreements with Pharmacia related to the
transfer of the assets and liabilities of the business
operations of the former agricultural products division of
former Monsanto from Pharmacia to us. A summary
description of some of the agreements with Pharmacia is
attached at Appendix A.
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October 17-23, 2000 - We completed an initial public offering in which we sold
38,033,000 shares of our common stock. Pharmacia now owns
220,000,000 shares of our common stock, which represents
approximately 85.3% of the issued and outstanding shares
thereof.
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The Company is authorized to issue 1,520,000,000 shares of capital stock, of
which 1,500,000,000 shares are shares of common stock, $0.01 par value per
share, and 20,000,000 shares are shares of preferred stock, $0.01 par value per
share.
We first began mailing to all stockholders of record this proxy statement, the
accompanying form of proxy and the Company's 2000 Annual Report to Shareowners
on March 16, 2001.
Stockholders Entitled to Vote
You are entitled to vote (in person or by proxy) at the annual meeting if you
were a stockholder of record at the close of business on March 5, 2001. On March
5, 2001, 258,043,000 shares of our common stock were outstanding and entitled to
vote and no shares of our preferred stock were outstanding. There is no
cumulative voting with respect to the election of directors. Stockholders of
record are entitled to one vote per share on all matters.
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Proxies and Voting Procedures
Most stockholders have a choice of voting by completing a proxy card and mailing
it in the postage-paid envelope provided, by using a toll-free telephone number,
or over the Internet. Please refer to your proxy card or the information sent by
your broker or bank to see which options are available to you. Please be aware
that if you vote over the Internet, you may incur costs such as telephone and
Internet access charges for which you will be responsible. The Internet and
telephone voting facilities for stockholders of record will close at 4:00 p.m.
E.S.T. on April 17, 2001. The Internet and telephone voting procedures are
designed to authenticate stockholders by use of a control number and to allow
you to confirm that your instructions have been properly recorded.
You can revoke your proxy at any time before it is exercised by timely delivery
of a properly executed, later-dated proxy (including an Internet or telephone
vote), by delivering a written revocation of your proxy to our Secretary or by
voting at the meeting. The method by which you vote will in no way limit your
right to vote at the meeting if you later decide to attend in person. If your
shares are held in the name of a bank or brokerage firm, you must obtain a
proxy, executed in your favor, from the bank or broker, to be able to vote at
the meeting.
Your properly completed proxy will appoint Hendrik A. Verfaillie, Hugh Grant and
R. William Ide III as proxy holders, or your representatives, to vote your
shares. Your proxy permits you to direct the proxy holders to: (i) withhold your
votes from particular nominees for director; (ii) vote "for," "against," or
"abstain" from approval of the Phantom Share Agreements; and (iii) vote "for,"
"against," or "abstain" from approval of the material terms of the performance
goal used for determining awards to certain executive officers under the Annual
Incentive Program; and (iv) vote "for," "against," or "abstain" from the
ratification the appointment of Deloitte & Touche LLP as the Company's principal
independent auditors for the year 2001.
All shares entitled to vote and represented by properly completed proxies
received prior to the meeting and not revoked will be voted at the meeting in
accordance with your instructions. If you do not indicate how your shares are to
be voted on a matter, the shares represented by your properly completed proxy
will be voted as the board of directors recommends with respect to such matter.
As far as the Company knows, the only matters to be brought before the annual
meeting are those referred to in this proxy statement. As to any other matters
presented at the annual meeting, the persons named as proxies may vote your
shares in their discretion.
Required Vote
No business can be conducted at the annual meeting unless a majority of all
outstanding shares entitled to vote are either present in person or represented
by proxy at the meeting. A plurality of the shares present at the meeting in
person or by proxy is required for the election of directors. The affirmative
vote of a majority of the shares present at the meeting in person or by proxy is
required for all other items. Abstentions and votes withheld by brokers in the
absence of instructions from street-name holders (broker non-votes) have the
same effect as votes cast against a particular proposal.
Pharmacia's Vote
Pharmacia is the beneficial owner of approximately 85.3% of our outstanding
common stock. As a result, Pharmacia has the power to elect the nominees for
director, to approve the Phantom Share Agreements, to approve the material terms
of the performance goal used for determining awards to certain executive
officers under the Annual Incentive Program and to ratify the appointment of the
independent auditors. Pharmacia has agreed to vote in favor of the Phantom Share
Agreements and has indicated that it will vote its shares in favor of the
nominees, in favor of the material terms of the performance goal used for
determining awards to certain executive officers under the Annual Incentive
Program and in favor of the ratification of the independent auditors.
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Electronic Access to Proxy Materials and Annual Report
Most stockholders can elect to receive future proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail. If you
are a stockholder of record, you can choose this option and save the Company the
cost of producing and mailing these documents by marking the appropriate box on
your proxy card or by following the instructions provided if you vote over the
Internet or by telephone. Please read the instruction letter accompanying this
proxy statement for detailed information regarding these procedures. If you hold
your shares through a bank or broker, please refer to the information provided
by that entity for instructions on how to elect to receive future proxy
statements and annual reports over the Internet.
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INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
COMPOSITION OF BOARD OF DIRECTORS
Under the Company's Amended and Restated Certificate of Incorporation, generally
the number of directors of the Company is fixed, and may be increased or
decreased from time to time, by resolution of the board of directors. Currently,
the board has fixed the number of directors at nine members. Each board member
serves a one year term, each to hold office until the annual meeting to be held
in 2002 or until a successor is elected and has qualified or until his or her
earlier death, resignation or removal. Each nominee is currently a director of
the Company.
The ages, principal occupations, directorships held and other information as of
March 1, 2001, with respect to the nominees and directors of Monsanto are shown
below.
TO BE ELECTED FOR TERMS EXPIRING IN 2002:
PHOTO FRANK V. ATLEE III FRANK V. ATLEE III PRINCIPAL OCCUPATION: CHAIRMAN OF THE BOARD AND DIRECTOR,
MONSANTO COMPANY
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 60
Chairman of the board of directors, Monsanto Company, since June 2000; President of American
Cyanamid Company, 1993-January 1995; chairman of Cyanamid International, 1993-January 1995.
Director: Takeda Italia Farmaceutici S.p.A and Nereus Pharmaceuticals, Inc.
PHOTO HENDRIK A. HENDRIK A. VERFAILLIE PRINCIPAL OCCUPATION: PRESIDENT AND CHIEF EXECUTIVE OFFICER
VERFAILLIE AND DIRECTOR, MONSANTO COMPANY
FIRST BECAME DIRECTOR: FEBRUARY 2000
AGE: 55
President and Chief Executive Officer, Monsanto Company, since February 2000; President of
former Monsanto Company (now Pharmacia Corporation), 1997-March 2000; Chief Operating
Officer of former Monsanto Company (now Pharmacia Corporation), 1999-March 2000; Executive
Vice President and Advisory Director of former Monsanto Company (now Pharmacia Corporation),
1995-1997.
PHOTO HAKAN ASTROM HAKAN ASTROM PRINCIPAL OCCUPATION: SENIOR VICE PRESIDENT, STRATEGY AND
CORPORATE AFFAIRS, PHARMACIA CORPORATION
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 53
Senior Vice President, Strategy and Corporate Affairs, Pharmacia Corporation since 2000;
Chairman and Managing Director of Pharmacia & Upjohn AB, 1999-present; Senior Vice President
of Pharmacia AB, 1994-1995; after the 1995 merger of Pharmacia and Upjohn, Mr. Astrom was
responsible for Corporate Strategy and Investor Relations.
PHOTO CHRISTOPHERJ. CHRISTOPHER J. COUGHLIN PRINCIPAL OCCUPATION: EXECUTIVE VICE PRESIDENT AND CHIEF
COUGHLIN FINANCIAL OFFICER, PHARMACIA CORPORATION
FIRST BECAME DIRECTOR: MARCH 2000
AGE: 48
Executive Vice President and Chief Financial Officer, Pharmacia Corporation, since March
2000; Executive Vice President and Chief Financial Officer, Pharmacia & Upjohn Inc.,
1998-March 2000; President, Nabisco International, 1997-1998; Executive Vice President,
Nabisco Holdings Corp., 1996 to 1998; Chief Financial Officer, Nabisco Holdings Corp., 1996
to 1997. Director: AP Biotech.
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PHOTO MICHAEL KANTOR MICHAEL KANTOR PRINCIPAL OCCUPATION: PARTNER, MAYER, BROWN & PLATT
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 61
Partner, Mayer, Brown & Platt, a law firm, since 1997; U.S. Secretary of Commerce, 1996-97;
U.S. Trade Representative, 1993-96; National Chairman for the Clinton/Gore Presidential
Campaign, 1992; Partner, Manatt, Phelps, Phillips and Kantor, a law firm, 1975-92. Director:
former Monsanto Company (now Pharmacia Corporation), since 1997.
PHOTO GWENDOLYN S. KING GWENDOLYN S. KING PRINCIPAL OCCUPATION: PRESIDENT, PODIUM PROSE
FIRST BECAME DIRECTOR: FEBRUARY 2001
AGE: 60
President, Podium Prose, a speaker's bureau and speechwriting service founded in 2000;
Senior Vice President, Corporate and Public Affairs, PECO Energy Company (formerly
Philadelphia Electric Company), a diversified utility company, 1992-98; Commissioner, Social
Security Administration, 1989-92. Director: former Monsanto Company (now Pharmacia
Corporation), since 1993; Lockheed Martin Corp.; Marsh & McLennan Companies, Inc.
PHOTO C. STEVEN MCMILLAN C. STEVEN MCMILLAN PRINCIPAL OCCUPATION: PRESIDENT AND CHIEF EXECUTIVE OFFICER,
SARA LEE CORPORATION
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 55
President and Chief Executive Officer of Sara Lee Corporation, since July 2000; President of
Sara Lee Corporation, March 1997-December 1997; Chief Operating Officer, Sara Lee
Corporation, December 1997-June 2000; Executive Vice President, Sara Lee Corporation,
1993-1997. Director: Sara Lee Corporation, Pharmacia Corporation and Dynegy Inc.
PHOTO WILLIAM U. PARFET WILLIAM U. PARFET PRINCIPAL OCCUPATION: CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
MPI RESEARCH, INC.
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 54
Chairman and Chief Executive Officer of MPI Research, Inc., since 1999; Co-Chairman of MPI
Research, LLC, a pre-clinical toxicology and clinical pharmaceutical testing laboratory,
1995-1999; President and Chief Executive Officer, Richard Allan Medical Industries,
1993-1996. Director: CMS Energy Corporation; Stryker Corporation; Sybron International; and
Pharmacia Corporation.
PHOTO JOHN S. REED JOHN S. REED PRINCIPAL OCCUPATION: RETIRED CHAIRMAN, CITIGROUP, INC.
FIRST BECAME DIRECTOR: JUNE 2000
AGE: 62
Retired Chairman, Citigroup Inc., a commercial bank and financial services company; Chairman
and Co-Chief Executive Officer of Citigroup Inc., 1998-April 2000; Chairman and Chief
Executive Officer of Citicorp and Citibank, N.A., 1984-1998; Director: Philip Morris
Companies, Inc. Member: The Business Council.
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BOARD MEETINGS AND COMMITTEES
During 2000, the board of directors met four times and took five actions by
unanimous written consent. All incumbent directors attended 75% or more of the
aggregate meetings of the board and of the board committees on which they served
during the period they held office in 2000.
Our board of directors has the following five committees: (1) executive, (2)
people, (3) audit and finance, (4) public policy and (5) science and technology.
The membership and function of each committee are described below. Our entire
board of directors acts on nominations for directors, and therefore we do not
have a nominating committee.
EXECUTIVE COMMITTEE
Members: Messrs. AtLee, Coughlin and Verfaillie
Our executive committee has the powers of our board of directors in directing
the management of our business and affairs in the intervals between meetings of
our board of directors (except for certain matters otherwise delegated by our
board of directors, or which by statute, our certificate of incorporation or our
bylaws are reserved for our entire board of directors). Actions of the executive
committee are reported at the next regular meeting of our board of directors.
The executive committee did not meet or take action during 2000.
PEOPLE COMMITTEE
Members: Messrs. McMillan and Parfet and Ms. King
Our people committee recommends to our board of directors the establishment and
modification of our management incentive plans. Our people committee also
administers and interprets our management incentive plans and approves the
establishment, modification and termination of other compensation plans and
agreements. Our people committee has delegated authority to a committee composed
of senior management to make grants and awards under the incentive plans and to
approve and administer other compensation plans for all employees except
executive officers. Our people committee reviews plans for executive succession,
determines the compensation of all our executive officers and monitors our
performance as it affects employees, including issues such as diversity and
morale. During 2000, all matters reviewed by the people committee were also
considered and approved by the full board.
AUDIT AND FINANCE COMMITTEE
Members: Messrs. McMillan, Parfet and Reed
The audit and finance committee assists the Company's board of directors in
fulfilling its responsibility to oversee: (i) the Company's financial reporting
processes and systems of internal accounting and financial controls, (ii) the
selection of the Company's independent accountants, (iii) the independence and
performance of the Company's independent accountants and internal audit staff,
(iv) the scope and effectiveness of the annual independent audit of the
Company's financial statements, (v) the integrity of the Company's financial
statements and financial reports, and (vi) the compliance by the Company with
applicable legal, regulatory and corporate requirements. The committee's
oversight role is categorized in the committee's charter as covering (1)
financial reporting; (2) compliance oversight; and (3) financial oversight. A
complete description of the committee's responsibilities with respect to each
such category is set forth in the audit and finance committee's charter, which
was approved by our board of directors on September 20, 2000 and is attached as
Appendix B. The audit and finance committee met two times during 2000 and did
not take any actions by unanimous written consent.
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One of the requirements contained in the audit and finance committee charter is
that each committee member meet the standards set forth in the listing
requirements of the New York Stock Exchange ("NYSE") relating to independence.
Messrs. McMillan and Reed are independent as defined by the NYSE listing
requirements, in the case of Mr. Reed, based upon a determination by our board
that his business relationship with Citigroup, Inc. and its affiliates does not
interfere with his independent judgment. See "Certain Other Information
Regarding Management -- Transactions and Relationships" on page 25. Mr. Parfet
does not technically qualify as independent under the NYSE listing requirements.
However, under the independence standards of the NYSE listing requirements, Mr.
Parfet may be appointed to the audit and finance committee because our board of
directors has determined that, under exceptional and limited circumstances, in
its business judgment, membership of Mr. Parfet on the audit and finance
committee is required by the best interests of the Company and its stockholders
despite his brother, Donald R. Parfet, having been a senior vice president of
Pharmacia until his retirement in July 2000. In determining to permit Mr. Parfet
to serve on the audit and finance committee, the board of directors considered
the limited number of directors who are eligible to serve on the audit and
finance committee, Mr. Parfet's financial background and expertise, and his past
experience serving on the audit committee of Pharmacia & Upjohn. The Company has
certified, in writing, its determination regarding Mr. Parfet's independence to
the NYSE.
PUBLIC POLICY COMMITTEE
Members: Messrs. Astrom and Kantor and Ms. King
Our public policy committee reviews and monitors our performance as it affects
communities, customers and the environment. Our public policy committee also
identifies and investigates emerging issues related to the impact of the
Company's business on society, including issues relating to public acceptance of
biotechnology. The public policy committee met two times during 2000 and did not
take any actions by unanimous written consent in 2000.
SCIENCE AND TECHNOLOGY COMMITTEE
Members: Messrs. Coughlin, Kantor and Reed
Our science and technology committee reviews and monitors our science and
technology initiatives in areas such as information technology, technological
programs, research and agricultural biotechnology. Our science and technology
committee also identifies and investigates significant emerging science and
technology issues. The science and technology committee did not meet during
2000.
GOVERNANCE PROVISIONS
On certain matters with significant financial or strategic consequences, a
supermajority approval by at least 80% of our directors is required. These
matters include:
- transactions, capital expenditures, additional debt or other non-ordinary
course financial commitments, including litigation settlements, valued at $100
million or more, other than matters already approved as part of our annual
operating or capital budgets;
- any issuance or repurchase of equity securities or other equity interests,
except pursuant to employee stock options or stock appreciation rights or
under compensation plans approved by our board of directors, unless the
aggregate amount of equity interests issued or repurchased since the initial
public offering without supermajority approval would not exceed one percent of
our common stock outstanding on the date of such proposed issuance or
repurchase;
- approval of our annual operating and capital budgets and annual strategic
plan;
- selection, compensation and removal of our chief executive officer;
- any change in size of our board of directors; and
- any bylaw amendments.
No supermajority approval will be required for the items listed above if
Pharmacia were to own less than 50% of our common stock.
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COMPENSATION OF DIRECTORS
MONSANTO 2000 MANAGEMENT INCENTIVE PLAN
At the time of the initial public offering, we granted to each of our directors,
other than Ms. King, a stock option under the Monsanto 2000 Management Incentive
Plan to purchase 10,000 shares of our common stock at the initial public
offering price that vest in 5,000 share increments during 2002 and 2003. Upon
her appointment as a director in February 2001, we granted Ms. King a 10,000
share stock option at the fair market value of our stock on the date of the
grant having the same terms and provisions as the grants to the other directors.
The term of these options may not exceed 10 years and may be exercisable for a
shorter period as a result of a director's death or termination of service. See
footnote (1) to the "Option Grants in 2000" table at page 15 for a description
of the accelerated vesting of these options upon a "change of control" (as
defined in the plan).
NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
In addition, each of our directors who is not an employee of Pharmacia or us
receives an annual retainer pursuant to the Non-Employee Director Equity
Incentive Compensation Plan having a value of $110,000, with an additional
$10,000 paid to each committee chair and an additional $40,000 paid to the
chairman of our board of directors. Half of this compensation is payable in
deferred common stock, and the remainder is payable, at the election of each
director, in the form of non-qualified stock options, restricted common stock,
deferred common stock, current cash and/or deferred cash.
Deferred Common Stock. Deferred common stock means shares of our common stock
that are delivered at a specified time in the future. Under the plan, half of
the annual retainer for each non-employee director will automatically be paid in
the form of deferred common stock.
Non-Qualified Stock Options. Under the plan, the exercise price of any
non-qualified stock option will be the fair market value, as defined in the
plan, of our common stock on the grant date. The plan also provides that the
term of any options granted may not exceed 10 years. Options may be exercisable
for a shorter period as a result of a director's death or termination of
service. Options granted under the plan are not transferable except by will, the
laws of descent and distribution, or upon the holder's death pursuant to a
beneficiary designation. Only the holder or the holder's guardian or legal
representative may exercise all options during the holder's lifetime.
Restricted Stock. Restricted stock means shares of our common stock that vest
in accordance with specified terms after they are granted. Dividends and other
distributions with respect to restricted stock will be held in escrow to be
delivered with the restricted stock as it vests.
Cash/Deferred Cash. Under the plan, any portion of a non employee director's
annual retainer that is not paid in the form of deferred stock, options or
restricted stock will be paid in cash, either monthly during the term or on a
deferred basis, as elected by the director. Any deferred cash will be credited
to a cash account that will accrue interest at the average Moody's Baa Bond
Index Rate, as in effect from time to time.
Vesting of Options. Under the plan, the non-qualified options granted to a
non-employee director for the term to which the director was elected will vest
in installments on the last day of each plan year, but only if the director
remains a member of the board of directors on that day, based on the percentage
of the term that is included in the plan year. When a director's service
terminates before the last day of a plan year, a pro rata portion of the
director's options that otherwise would have vested on the last day of the plan
year will vest on the termination date, based on the percentage of the plan year
that elapsed before the termination date.
Vesting of Deferred Stock and Restricted Stock. Under the plan, the deferred
stock and any restricted stock granted to a non-employee director for the term
to which the director was elected will vest in installments on the last day of
each plan month, but only if the director remains a member of the board of
directors on that day, based on the percentage of the term that is included in
the plan month.
OTHER COMPENSATION ARRANGEMENTS
We have entered into a consulting agreement with Mr. AtLee covering the period
beginning on June 22, 2000 through the annual meeting of our stockholders
occurring in 2003. Under this agreement, Mr. AtLee has agreed to provide us with
consulting services as requested by our board or our chief executive officer,
including advice regarding policies, long-term strategies and general business
and industry issues.
8
14
Under this agreement, Mr. AtLee will earn a consulting fee of $400,000 per year,
less the amount of his retainer fees that he receives as a member of the board.
We will pay this fee to him at the termination of the consulting term, with
interest at the Moody's Baa Bond Index Rate, except as noted below. We will also
reimburse Mr. AtLee for expenses he incurs in providing his consulting services.
If the consulting term is terminated before our 2003 annual meeting as a result
of Mr. AtLee's death or permanent disability, or by us other than as a result of
Mr. AtLee's breach of the agreement, we will pay Mr. AtLee the fee he would have
earned through the date of our 2003 annual meeting of stockholders in a lump-sum
payment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the people committee is or has been an officer or
employee of the Company or any of its subsidiaries. In addition, none of the
members of the people committee had any relationships with the Company or any
other entity that require disclosure under the proxy rules and regulations
promulgated by the Securities and Exchange Commission ("SEC"). Mr. McMillan and
Ms. King, who serve on the Company's people committee, also serve as members of
Pharmacia's compensation committee.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The stockholders are asked to elect Messrs. AtLee, Verfaillie, Astrom, Coughlin,
Kantor, McMillan, Parfet and Reed, and Ms. King to one year terms as members of
our board of directors ending with the annual meeting to be held in 2002 or
until a successor is elected and has qualified or until his or her earlier
death, resignation or removal. Each nominee is currently a director of the
Company. For more information regarding the nominees for director, see
"Information Regarding Board of Directors and Committees" beginning at page 4
above.
The board does not contemplate that any of the nominees will be unable to stand
for election, but should any nominee become unavailable for election, all
proxies (except proxies marked to the contrary) will be voted for the election
of a substitute nominee nominated by the board.
------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL OF THE NOMINEES FOR DIRECTOR.
APPROVAL OF THE PHANTOM SHARE AGREEMENTS (PROXY ITEM NO. 2)
The stockholders are asked to consider and approve the Phantom Share Agreements
(including the performance goals) entered into by the Company and certain
executive officers for purposes of exempting payments under those agreements
from the deduction limitation of Section 162(m) of the Internal Revenue Code
("Code"). For a more detailed discussion regarding the terms and conditions of
the Phantom Share Agreements, see "Executive Compensation -- Long Term Incentive
Plans -- Awards in 2000" beginning at page 16.
Under Section 162(m) of the Code, stockholder approval is required to enable the
Company to obtain a deduction for awards paid under the Phantom Share Agreements
to any executive officer of the Company named in the Summary Compensation Table
at page 14 whose compensation for the taxable year is in excess of $1 million.
If stockholder approval is not obtained, no payments would be made, unless there
was a change of control before the 2001 annual meeting. Pharmacia, by signing
the Phantom Share Agreements, has approved their material terms and conditions
and agreed to vote its shares in favor of the Phantom Share Agreements at the
annual meeting. A vote in favor of this proposal will be treated as a vote to
approve the material terms of the performance goal of the Phantom Share
Agreements described above for purposes of the exemption from the limitations of
Section 162(m) of the Code.
9
15
The following table sets forth, as of March 1, 2001, the number of Monsanto
shares represented by the Phantom Share Agreements payable to the persons or
groups listed.
--------------------------------------------------------------------------
PHANTOM
NAME AND POSITION SHARES(1)
--------------------------------------------------------------------------
Hendrik A. Verfaillie
President and CEO 362,599
--------------------------------------------------------------------------
Hugh Grant
Executive Vice President and Chief Operating Officer 172,549
--------------------------------------------------------------------------
Robert T. Fraley, Ph.D.
Executive Vice President and Chief Technology Officer 177,163
--------------------------------------------------------------------------
Executive Group 712,311
--------------------------------------------------------------------------
Non-Executive Director Group 0
--------------------------------------------------------------------------
Non-Executive Employee Group 91,966
--------------------------------------------------------------------------
---------------
(1) As of March 1, 2001, the closing price per share of Monsanto's shares was
$32.40. Based on this value, the value of the Phantom Share accounts was
$11,748,208, $5,590,588 and $5,740,081 for Messrs. Verfaillie and Grant and
Dr. Fraley, respectively, $23,078,877 for the Executive Group and $2,979,698
for the Non-Executive Employee Group. The Phantom Share accounts have been
adjusted to reflect a dividend in the amount of nine cents per share paid on
February 1, 2001 for the fourth quarter of 2000.
------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PHANTOM SHARE AGREEMENTS
APPROVAL OF ANNUAL INCENTIVE PROGRAM PERFORMANCE GOAL (PROXY ITEM NO. 3)
The stockholders are asked to consider and approve the material terms of the
performance goal used for determining awards to certain executive officers under
the Annual Incentive Program established by the people committee.
Under Section 162(m) of the Code, stockholder approval of the material terms of
the performance goal used for determining awards to certain executive officers
under the Annual Incentive Program is required to enable the Company to obtain a
deduction for awards paid under the Annual Incentive Program to any executive
officer of the Company named in the Summary Compensation Table for a given year,
whose compensation for the taxable year is in excess of $1 million. If the
material terms of the performance goal used for determining awards under the
Annual Incentive Program for certain executive officers are approved by
stockholders, they will go into effect for fiscal year 2001. If approved, and
unless the material terms of the performance goal are subsequently changed, the
material terms of the performance goal used for determining awards to certain
executive officers under the Annual incentive Program established for Section
162(m) purposes will meet the stockholder requirements of Section 162(m) until
2006.
ANNUAL INCENTIVE PROGRAM
Eligible Participants. Certain executive officers, who will be chosen by the
Company each year based upon a determination as to who may appear in the Summary
Compensation Table and earn in excess of $1 million for that year (approximately
5 people per year), will be eligible for awards only upon attainment of the
objective performance goal referenced in the next paragraph.
Performance Goal. No later than the 90th day of each performance year, the
people committee will establish for certain eligible executive officers the
objective performance goal based on corporate net income for that performance
year. If the performance goal established for the performance year is attained,
the maximum proposed award amount for each such executive officer will equal
three-quarters of one percent (.75%) of corporate net income for the applicable
performance year (subject to reduction as described below). The committee must
certify the attainment of the applicable performance goal before an award is
paid.
10
16
Net Income. For purposes of determining attainment of the corporate performance
goal and the maximum award amount, net income is defined to exclude unusual
events, such as restructuring charges and the cumulative effect of accounting
changes required under generally accepted accounting principles, as
pre-determined by the committee.
Determination of Actual Awards. The committee may decrease the actual award
amount paid to certain executive officers for any performance year based on such
secondary goals and considerations as determined by the committee in its sole
discretion. In no event shall the actual amount awarded to such executive
officers with respect to any performance year exceed three-quarters of one
percent (.75%) of corporate net income for the applicable performance year.
Amendments. The committee cannot change the material terms of the performance
goal or the formula for computing the maximum award payable as described above,
without first obtaining stockholder approval.
A vote in favor of this proposal will be treated as a vote to approve each of
the material terms of the performance goal used for determining awards to
certain executive officers under the Annual Incentive Program described above
for purposes of the exemption from the limitations of Section 162(m) of the
Code. The affirmative vote of the majority of the shares present in person or
represented by proxy at the annual meeting is required for such approval.
The following table sets forth, as of March 1, 2001, the dollar value of the
amounts that were received by each of the following persons or groups under the
Annual Incentive Program relating to full fiscal year 2000.
--------------------------------------------------------------------------
NAME AND POSITION DOLLAR VALUES(1)
--------------------------------------------------------------------------
Hendrik A. Verfaillie
President and CEO $925,000
--------------------------------------------------------------------------
Hugh Grant
Executive Vice President and Chief Operating Officer $635,000
--------------------------------------------------------------------------
Robert T. Fraley, Ph.D.
Executive Vice President and Chief Technology Officer $460,000
--------------------------------------------------------------------------
Executive Group $2,020,000
--------------------------------------------------------------------------
Non-Executive Director Group $0
--------------------------------------------------------------------------
Non-Executive Employee Group $0
--------------------------------------------------------------------------
---------------
(1) Under the terms of the Annual Incentive Program, all awards are paid in
cash. The exact amounts payable in March 2002 to each executive relating to
2001 performance are not currently determinable.
------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
MATERIAL TERMS OF THE PERFORMANCE GOAL USED FOR DETERMINING AWARDS TO
CERTAIN EXECUTIVE OFFICERS UNDER THE ANNUAL INCENTIVE PROGRAM.
RATIFICATION OF INDEPENDENT AUDITORS (PROXY ITEM NO. 4)
The board of directors, upon the recommendation of the audit and finance
committee, has appointed Deloitte & Touche LLP as the principal independent
auditors to examine the consolidated financial statements of the Company and its
subsidiaries for the year 2001. Deloitte & Touche LLP has acted in this capacity
for former Monsanto and us since 1932, is knowledgeable about our operations and
accounting practices, and is well qualified to act in the capacity of auditor.
Although we are not required to submit this appointment to a vote of the
stockholders, the board continues to believe it appropriate as a matter of
policy to request that the stockholders ratify the appointment of Deloitte &
Touche LLP as principal independent auditors. If the stockholders do not ratify
the appointment, the audit and finance committee will investigate the reasons
for stockholder rejection and the board will reconsider the appointment. Even if
the appointment is ratified, the board and the audit and finance committee in
their discretion may direct the appointment of a different
11
17
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of the Company and its stockholders
and Pharmacia consents in writing to such appointment.
A formal statement by representatives of Deloitte & Touche LLP is not planned
for the annual meeting. However, Deloitte & Touche LLP representatives are
expected to be present at the meeting and available to respond to appropriate
questions. For a detailed listing of the fees expected to be billed to us by
Deloitte & Touche LLP for professional services in 2000, see "Committee
Reports -- Audit and Finance Committee Report" at page 22.
------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS PRINCIPAL
INDEPENDENT AUDITORS FOR THE YEAR 2001.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Information is set forth below regarding beneficial ownership of our common
stock and the common stock of Pharmacia, to the extent known to the Company, by
(i) each beneficial owner of more than 5% of the outstanding shares of common
stock of the Company; (ii) each person who is a director or nominee; (iii) each
executive officer named in the Summary Compensation Table on page 14; and (iv)
all directors and executive officers as a group. Except as otherwise noted, each
person has sole voting and investment power as to his or her shares. All
information is as of December 31, 2000, except as otherwise noted.
---------------------------------------------------------------------------------------------------------------------
MONSANTO PHARMACIA
----------------------------------------------------------------------------------------
SHARES SHARES
SHARES OF UNDERLYING UNDERLYING
COMMON OPTIONS SHARES OF OPTIONS
STOCK OWNED EXERCISABLE COMMON STOCK EXERCISABLE
DIRECTLY OR WITHIN OWNED DIRECTLY OR WITHIN
NAME INDIRECTLY(1) 60 DAYS(3) TOTAL INDIRECTLY(2)(4) 60 DAYS(3) TOTAL
---------------------------------------------------------------------------------------------------------------------
Pharmacia Corporation(5) 220,000,000 -- 220,000,000 -- -- --
---------------------------------------------------------------------------------------------------------------------
Frank V. AtLee III (8)12,333 -- 12,333 1,200 -- 1,200
---------------------------------------------------------------------------------------------------------------------
Hendrik A. Verfaillie(6) 300,100 -- 300,100 231,996 1,057,032 1,289,028
---------------------------------------------------------------------------------------------------------------------
Hakan Astrom 5,000 -- 5,000 12,178 322,180 334,358
---------------------------------------------------------------------------------------------------------------------
Christopher J. Coughlin 10,000 -- 10,000 35,748 440,300 476,048
---------------------------------------------------------------------------------------------------------------------
Michael Kantor 2,750 -- 2,750 3,000 21,818 24,818
---------------------------------------------------------------------------------------------------------------------
Gwendolyn S. King 1,000 -- 1,000 3,868 14,018 17,886
---------------------------------------------------------------------------------------------------------------------
C. Steven McMillan 10,250 -- 10,250 6,000 -- 6,000
---------------------------------------------------------------------------------------------------------------------
William U. Parfet 22,521 -- 22,521 (7)1,636,567 10,170 1,646,737
---------------------------------------------------------------------------------------------------------------------
John S. Reed 105,500 -- 105,500 91,947 29,630 121,577
---------------------------------------------------------------------------------------------------------------------
Steven L. Engelberg(6) 5,000 -- 5,000 33,937 611,267 645,204
---------------------------------------------------------------------------------------------------------------------
Robert T. Fraley,
Ph.D.(6) 100,000 -- 100,000 54,131 300,162 354,293
---------------------------------------------------------------------------------------------------------------------
Hugh Grant(6) 55,000 -- 55,000 1,947 199,596 201,543
---------------------------------------------------------------------------------------------------------------------
R. William Ide III(6) 2,500 -- 2,500 51,709 282,208 333,917
---------------------------------------------------------------------------------------------------------------------
All directors and
executive officers as a
group (22 persons) 681,454 -- 681,454 2,202,778 3,965,416 6,168,194
---------------------------------------------------------------------------------------------------------------------
---------------
(1) Includes the following shares of deferred common stock each non-employee
director of Monsanto is entitled to as compensation payable under our
Non-Employee Director Equity Incentive Compensation Plan as described on
page 8: Mr. AtLee, 7,333; Mr. Kantor, 2,750; Mr. McMillan, 2,750; Mr.
Parfet, 2,521; Mr. Reed, 5,500; and directors and executive officers as a
group, 20,854. As of December 31, 2000, the following shares of deferred
common stock for each non-employee director were vested and each such
director had sole voting and investment power over such vested shares: Mr.
AtLee, 4,667; Mr. Kantor, 1,750; Mr. McMillan, 1,750; Mr. Parfet, 1,604; Mr.
Reed, 3,500; and directors and executive officers as a group, 13,271.
(2) With respect to Pharmacia's equity incentive compensation plan for
non-employee directors, includes: (1) 2,200 shares of deferred common stock
Ms. King elected to receive as a stock fee; and (2) 1,325 stock equivalent
units Mr. Reed elected to receive in lieu of a cash fee.
12
18
(3) The SEC deems a person to have beneficial ownership of all shares which that
person has the right to acquire within 60 days. For purposes of this table,
the Company has used April 30, 2001 as the cut-off date, which is 60 days
after March 1, 2001. The shares indicated represent shares underlying stock
options granted under incentive plans. The shares underlying options cannot
be voted.
(4) For the following individuals, includes the indicated number of shares of
Pharmacia common stock held under former Monsanto's Savings and Investment
Plan: Mr. Verfaillie, 16,662; Mr. Engelberg, 1,137; Dr. Fraley, 9,176; Mr.
Grant, 1,444; Mr. Ide, 3,261; and directors and executive officers as a
group, 31,680. For the following individuals, includes the indicated number
of shares of Pharmacia common stock held under the Pharmacia & Upjohn
Savings Plan: Mr. Astrom, 682; Mr. Coughlin, 14,901; Mr. Parfet, 8,498; and
directors and executive officers as a group, 24,081. With respect to shares
held under both of these savings plans, the participants have sole
discretion as to voting and, within limitations provided by each respective
plan, investment of shares.
(5) Pharmacia exercises sole voting and investment power over the shares of
Monsanto common stock held by it. The address of Pharmacia is 100 Route 206
North, Peapack, New Jersey 07977. Messrs. Astrom and Coughlin are also
executive officers of Pharmacia. Messrs. Kantor, Parfet and McMillan and Ms.
King are directors of Pharmacia. These individuals disclaim beneficial
ownership of the shares of Monsanto common stock beneficially owned by
Pharmacia.
(6) Includes shares underlying options granted under former Monsanto's 1999
Premium Option Purchase Program, which is currently administered by
Pharmacia. Under this program, the officers were granted an opportunity to
purchase premium stock options from former Monsanto at $7.77 per share paid
through base salary or bonus reductions over a four-year period. The stock
options have a $75 exercise price per share of Pharmacia common stock,
became exercisable as of the effective date of the merger between former
Monsanto and Pharmacia & Upjohn and will expire if Pharmacia's common stock
does not reach a price of $75 per share within five years. The total number
of premium priced options under contract are: Mr. Verfaillie, 139,768; Mr.
Engelberg, 56,860; Dr. Fraley, 51,161; Mr. Grant, 49,874; Mr. Ide, 44,003
and directors and executive officers as a group, 341,666. The shares of
Pharmacia common stock underlying these options cannot be voted.
(7) Includes 1,071,850 shares of Pharmacia common stock held by various trusts
of which Mr. Parfet acts as trustee. Mr. Parfet disclaims beneficial
ownership of such shares.
(8) Includes 1,000 shares of Monsanto common stock held by Mr. AtLee's sons. Mr.
AtLee disclaims beneficial ownership of such shares.
The percentage of shares of outstanding common stock of each of the Company and
Pharmacia, including options exercisable within 60 days after March 1, 2001,
beneficially owned by any director or executive officer or by all directors and
executive officers as a group does not exceed 1%. The percentage of such shares
of Monsanto common stock beneficially owned by Pharmacia is approximately 85.3%.
13
19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
As discussed at the beginning of this proxy statement, our predecessor was the
agricultural products business of former Monsanto. We were incorporated in
Delaware on February 9, 2000 under the name "Monsanto Ag Company." On March 31,
2000, in connection with the merger of former Monsanto with Pharmacia & Upjohn,
we changed our name to "Monsanto Company." As of September 1, 2000, we entered
into agreements with Pharmacia, the surviving corporation of that merger,
providing, among other things, for the separation of our businesses from those
of Pharmacia (see Appendix A for a summary description of the material terms of
some of these agreements).
Accordingly, except as otherwise noted, the following table sets forth
information with respect to the compensation for the four months beginning
September 1, 2000 (the date of our separation from Pharmacia), received for
services rendered to the Company by the chief executive officer and each of the
other four most highly compensated executive officers of the Company as of the
end of 2000 (we refer to these five individuals as the "Named Executive
Officers").
----------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
OTHER RESTRICTED UNDER- ALL OTHER
NAME AND ANNUAL STOCK LYING LTIP COMPEN-
PRINCIPAL COMPEN- AWARDS OPTIONS PAYOUTS SATION
POSITION YEAR SALARY($)(1) BONUS($)(2) SATION($)(3) ($) (#) ($) ($)(4)
----------------------------------------------------------------------------------------------------------------------------------
HENDRIK A. VERFAILLIE 9/00-12/00 283,333 925,000 -- 0 1,066,670 0 78,796
President and CEO
----------------------------------------------------------------------------------------------------------------------------------
STEVEN L. ENGELBERG 9/00-12/00 133,333 463,000 -- 0 213,430 0 16,014
Senior V.P.
Government Affairs
----------------------------------------------------------------------------------------------------------------------------------
ROBERT T. FRALEY, PH.D. 9/00-12/00 150,000 460,000 -- 0 391,120 0 15,644
Executive V.P. and Chief
Technology Officer
----------------------------------------------------------------------------------------------------------------------------------
HUGH GRANT 9/00-12/00 183,333 635,000 -- 0 480,000 0 8,518
Executive V.P. and Chief
Operating Officer
----------------------------------------------------------------------------------------------------------------------------------
R. WILLIAM IDE III 9/00-12/00 133,333 484,250 -- 0 0 0 5,864
Senior V.P., Secretary
and General Counsel
----------------------------------------------------------------------------------------------------------------------------------
---------------
(1) Reflects salary earned for the four-month period beginning September 1,
2000.
(2) Reflects bonuses paid subsequent to our fiscal year 2000 for service
rendered in fiscal 2000, including service as an employee of former Monsanto
and Pharmacia. In the case of Messrs. Engelberg and Ide, the bonuses were
paid pursuant to contractual arrangements.
(3) Applicable regulations set reporting thresholds for certain non-cash
compensation if the aggregate amount is in excess of the lesser of $50,000
or 10% of the total annual salary and bonus reported for the Named Executive
Officers. The dollar value of such non-cash compensation for each of the
Named Executive Officers was less than the established reporting thresholds.
(4) Amounts for the period from September 1, 2000 through December 31, 2000
include contributions to thrift/savings plans as follows: Mr. Verfaillie,
$13,812; Mr. Engelberg, $5,800; Dr. Fraley, $6,575; Mr. Grant, $8,469; and
Mr. Ide, $5,815; split dollar life insurance premiums paid as follows: Mr.
Verfaillie, $5,303; Mr. Engelberg, $7,676; and Dr. Fraley, $2,955; the
employee portion of cash surrender value of split dollar life insurance as
follows: Mr. Verfaillie, $59,632; Mr. Engelberg, $2,489; and Dr. Fraley,
$6,065; and costs for travel accident plans for each of the Named Executive
Officers of $49.
14
20
OPTION GRANTS IN 2000
The following table sets forth certain information regarding awards of Monsanto
stock options to the Named Executive Officers in 2000. All of these awards were
granted during the period from September 1, 2000 through December 31, 2000. No
stock appreciation rights were granted to such persons during 2000.
-------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------------------------------------------------ VALUE AT ASSUMED RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME/DATE OF GRANT GRANTED (#) FISCAL YEAR ($/SHARE)(2) DATE 5% ($) 10% ($)
-------------------------------------------------------------------------------------------------------------------
Hendrik A. Verfaillie
October 17, 2000 1,066,670 4.7% 20.00 October 16, 2010 13,416,461 33,999,945
-------------------------------------------------------------------------------------------------------------------
Steven L. Engelberg
October 17, 2000 124,450 0.5% 20.00 October 16, 2010 1,565,319 3,966,825
December 7, 2000 88,890 0.4% 25.15 December 6, 2010 660,265 2,375,572
-------------------------------------------------------------------------------------------------------------------
Robert T. Fraley, Ph.D.
October 17, 2000 391,120 1.7% 20.00 October 16, 2010 4,919,465 12,466,891
-------------------------------------------------------------------------------------------------------------------
Hugh Grant
October 17, 2000 480,000 2.1% 20.00 October 16, 2010 6,037,388 15,299,928
-------------------------------------------------------------------------------------------------------------------
R. William Ide III -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------
---------------
(1) The options were granted under the Monsanto 2000 Management Incentive Plan.
Options were granted at 100% of the market price on the date of grant and
generally vest in 50% increments on March 15th of 2002 and 2003. The term of
these options may not exceed 10 years and may be exercisable for a shorter
period as a result of a participant's death or termination of service. The
options will vest in full if we undergo a change of control (as defined)
immediately following which Pharmacia does not own more than 50% of our
common stock. Similarly, such vesting will occur if a change of control of
Pharmacia occurs immediately following which it still owns more than 50% of
our common stock and one of the following occurs within one year thereafter:
(i) the participant's employment is terminated without cause or by the
participant for good reason, (ii) the employment of a majority of the
members of our leadership team is terminated without cause or for good
reason, (iii) our headquarters is relocated by more than 35 miles, or a
decision to effect such a relocation is publicly announced, or (iv) a
decision is announced that Pharmacia will dispose of its majority ownership
of our stock or otherwise take steps that will result in a change of control
of our company and such steps have not been approved by a majority of our
leadership team. Such accelerated vesting could result in a participant
being considered to receive "excess parachute payments" (as defined in
Section 280G of the Code), which payments are subject to a 20% excise tax
imposed on the participant. If so, the participant would generally be
entitled to be made whole for such excise tax under our excess parachute tax
indemnity plan, and we would not be able to deduct the excess parachute
payments or any such indemnity payments.
(2) The participants are allowed to pay the exercise price in cash, by
delivering shares of our common stock or by any other method designated by
the people committee.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and therefore are not intended to forecast
possible future appreciation, if any, of our stock price. The dollar amounts
reflect an assumed annualized growth rate, as indicated, in the market value
of our common stock from the date of grant to the end of the option term. We
did not use an alternative formula for a grant date valuation, as we are not
aware of any formula that will determine with reasonable accuracy a present
value based on future unknown or volatile factors.
15
21
AGGREGATED OPTION EXERCISES IN 2000 AND OPTION VALUES ON DECEMBER 31, 2000
The following table presents (i) the unexercised Monsanto stock options held by
each Named Executive Officer and (ii) the value of such in-the-money options as
of December 31, 2000, as if such in-the-money options were vested and
exercisable as of December 31, 2000. None of these individuals exercised any
Monsanto stock options held by such persons during 2000.
------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
SHARES UNEXERCISED OPTIONS AT UNEXERCISED IN-THE-MONEY
ACQUIRED DECEMBER 31, OPTIONS AT
ON VALUE 2000 DECEMBER 31, 2000
EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
------------------------------------------------------------------------------------------------------------
Hendrik A. Verfaillie 0 $0 0/1,066,670 $0/$7,200,023
------------------------------------------------------------------------------------------------------------
Steven L. Engelberg 0 $0 0/213,340 $0/$982,262
------------------------------------------------------------------------------------------------------------
Robert T. Fraley, Ph.D. 0 $0 0/391,120 $0/$2,640,060
------------------------------------------------------------------------------------------------------------
Hugh Grant 0 $0 0/480,000 $0/$3,240,000
------------------------------------------------------------------------------------------------------------
R. William Ide III 0 $0 0/0 $0/$0
------------------------------------------------------------------------------------------------------------
---------------
(1) Calculated by (A) determining the difference between (1) the average of the
high and low trading prices per share of the Company's common stock on
December 29, 2000 and (2) the exercise price of the option and (B)
multiplying such difference by the total number of shares under option, net
of the aggregate value of all option exercise proceeds.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 2000
We have entered into Phantom Share Agreements with Pharmacia and each of Messrs.
Verfaillie and Grant, Dr. Fraley and one other executive, pursuant to which each
of these executives agreed to the termination of his change-of-control
employment agreement with Pharmacia as of the closing of our initial public
offering. Under the change-of-control employment agreements, which were
triggered upon former Monsanto's merger with Pharmacia & Upjohn, each of these
executives would have been entitled to substantial severance benefits from
Pharmacia if his employment were terminated by his employer without cause or by
him for "good reason" during the three years following the merger. A termination
for "good reason" would have included a termination by the executive as a result
of adverse changes in the terms and conditions of his employment or for any
reason during the 30-day period beginning on the first anniversary of the
merger. In connection with the initial public offering, we replaced these
change-of-control employment agreements with the Phantom Share Agreements to
provide these key executives with a more powerful incentive to remain with us
for the long term and to build the value of our stock after the initial public
offering. The Phantom Share Agreements were designed to achieve these goals by
providing incentive pay tied to the performance of our common stock, generally
conditioned upon the executives' remaining employed by us or our affiliates
through October 1, 2002.
Each of the new Phantom Share Agreements became effective upon the close of the
initial public offering, at which time the executive's then current
change-of-control employment agreement was superseded.
At the time of the initial public offering, we credited to a phantom share
account for each executive a number of phantom shares of our common stock equal
to the cash severance and value of benefits continuation he would have received
as a result of the termination of his employment under his change-of-control
employment agreement, divided by the offering price.
16
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The following table sets forth the number of shares of our common stock
represented by the Phantom Share Agreements as of October 23, 2000, payable to
the persons listed.
-------------------------------------------------------------------------------------------------------------------------
NUMBER OF PERFORMANCE OR
PHANTOM SHARES OTHER PERIOD UNTIL
NAME (#)(1) MATURATION OR PAYOUT (2)(3)(4)
-------------------------------------------------------------------------------------------------------------------------
Hendrik A. Verfaillie 361,550 October 1, 2002
-------------------------------------------------------------------------------------------------------------------------
Steven L. Engelberg -- --
-------------------------------------------------------------------------------------------------------------------------
Robert T. Fraley, Ph.D. 176,650 October 1, 2002
-------------------------------------------------------------------------------------------------------------------------
Hugh Grant 172,050 October 1, 2002
-------------------------------------------------------------------------------------------------------------------------
R. William Ide III -- --
-------------------------------------------------------------------------------------------------------------------------
---------------
(1) This amount was determined based on the initial public offering price of $20
per share of Monsanto common stock. At that time, the dollar values
allocated to such phantom share accounts was $7,231,000 and $3,441,000 for
each of Messrs. Verfaillie and Grant, respectively, and $3,533,000 for Dr.
Fraley. The phantom share accounts will also be credited periodically with
deemed dividends, which will be treated as reinvested in additional phantom
shares, and will be adjusted as appropriate for stock splits, mergers, and
other corporate transactions affecting our common stock.
(2) The phantom share accounts will generally vest on October 1, 2002, generally
subject to: (i) achievement of the performance goal specified in the Phantom
Share Agreements that we have positive net income for 2001; and (ii) the
executive remaining employed by us or our affiliates through October 1,
2002. The phantom share accounts will also vest if: (i) the executive's
employment is terminated before December 31, 2001, without cause, for good
reason, or because of death or disability, whether or not the performance
goal has been met; or (ii) the executive's employment is terminated on or
after December 31, 2001 without cause, by the executive for good reason, or
because of death or disability and the performance goal has been met. In
addition, the phantom shares will vest if we undergo a change of control
before December 31, 2001 and the executive is still employed by us or our
affiliates as of that date. Similarly, such vesting will occur if a change
of control of Pharmacia occurs before December 31, 2001 and the executive is
still employed by us or our affiliates as of that date, and one of the
following occurs within one year thereafter: (i) the employment of a
majority of the members of our leadership team is terminated without cause
or by a majority of such members for good reason; (ii) our headquarters is
relocated by more than 35 miles, or a decision to effect such a relocation
is publicly announced; or (iii) a decision is announced that Pharmacia will
dispose of its majority ownership of our stock or otherwise take steps that
will result in a change of control of our company and such steps have not
been approved by a majority of our leadership team.
(3) Payment of the value of the phantom shares held in the account will be made
to the executive within 30 days after the last to occur of: (i) vesting of
the account; (ii) the date our people committee certifies achievement of the
performance goal if such certification is a condition to vesting; and (iii)
date of stockholder approval.
(4) When the phantom shares are paid, each phantom share holder will be entitled
to receive cash in the amount of the number of phantom shares allocated to
that person's account multiplied by the share value (as defined) as of the
date of vesting, however, the amount of such payment will not be less than
the initial value of that person's phantom share account.
PENSION PLANS
The Named Executive Officers (as well as other of our employees) are eligible
for retirement benefits payable under the former Monsanto tax-qualified and
non-qualified defined benefit pension plans currently sponsored by Pharmacia in
which Monsanto is a participating employer. We intend to establish our own cash
balance pension plan and non-qualified plans to provide benefits to our
employees beginning at a future date to be determined by Pharmacia. Our pension
plans will have the same basic features as the former Monsanto pension plans.
Effective January 1, 1997, the former Monsanto defined benefit pension plan was
amended. The former Monsanto non-qualified pension plan that provides benefits
to executives that cannot be provided under the former Monsanto qualified plan
because of limitations under federal tax law was similarly amended. The amended
former Monsanto defined benefit pension plans each consists of two accounts: a
"prior plan account" and a "cash balance account."
17
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The opening balance of the prior plan account was the lump sum value of the
executive's December 31, 1996 monthly retirement benefit earned at former
Monsanto prior to January 1, 1997 under the old defined benefit pension plan
described below, calculated using the assumption that the monthly benefit would
be payable at age 55 with no reduction for early payment. The formula used to
calculate the opening balance for employment with former Monsanto was the
greater of 1.4% (1.2% for employees hired by former Monsanto on or after April
1, 1986) of average final compensation multiplied by years of service, without
reduction for Social Security or other offset amounts, or 1.5% of average final
compensation multiplied by years of service, less a 50% Social Security offset.
Average final compensation for purposes of determining the opening balance was
the greater of (1) average compensation received during the 36 months of
employment prior to 1997 or (2) average compensation received during the highest
three of the five calendar years of employment prior to 1997.
For each year of the executive's continued employment with former Monsanto,
Pharmacia or us, the executive's prior plan account will be increased by 4% to
recognize that prior plan benefits would have grown as a result of pay
increases.
For each year that the executive is employed by former Monsanto, Pharmacia or us
after 1996, 3% of annual compensation in excess of the Social Security wage base
and a percentage (based on age) of annual compensation (salary and annual bonus)
will be credited to the cash balance account. The applicable percentages and age
ranges are: 3% before age 30, 4% for ages 30 to 39, 5% for ages 40 to 44, 6% for
ages 45 to 49, and 7% for age 50 and over. In addition, the cash balance account
of executives who earned benefits under former Monsanto's old defined benefit
pension plan will be credited each year (for up to 10 years based on prior years
of service with former Monsanto or Pharmacia), during which the executive is
employed after 1996, with an amount equal to a percentage (based on age) of
annual compensation. The applicable percentages and age ranges are: 2% before
age 30, 3% for ages 30 to 39, 4% for ages 40 to 44, 5% for ages 45 to 49, and 6%
for age 50 and over.
In addition to the retirement benefits for Messrs. Verfaillie and Grant based on
their years of service as our employee in the United States, Messrs. Verfaillie
and Grant are also eligible for regular retirement benefits based on their
respective years of service as our employee outside the United States. In
addition, Messrs. Verfaillie and Grant participate in Pharmacia's regular,
non-qualified pension plan designed to protect retirement benefits for employees
serving in more than one country. However, their total retirement benefits from
the combined plans, when considering their total service, are expected to be
generally comparable to the benefits described in this section.
Mr. Ide has an individual supplemental retirement arrangement with Pharmacia
under which Mr. Ide is entitled to a supplemental retirement benefit, subject to
certain conditions, which is designed to produce a total retirement benefit from
Pharmacia at age 65 comparable to that which a Pharmacia employee with 30 years
of service would receive (taking into account the value of any pension benefits
earned as an active employee of Pharmacia and of Monsanto and pension benefits
received from prior employers). We assumed all liabilities under this agreement.
Mr. Engelberg also has an individual supplemental retirement arrangement with
Pharmacia under which Mr. Engelberg is entitled to a supplemental retirement
benefit, subject to certain conditions, which is designed to produce an annual
retirement benefit from Pharmacia at age 65 equal to 45% of his average total
earnings, reduced by the amount of any benefit received under Pharmacia pension
and parity pension plans and by an additional amount. We assumed all liabilities
under this agreement.
The estimated annual benefits payable as a single life annuity beginning at age
65 (assuming that each executive officer remains employed by us until age 65 and
receives 4% annual compensation increases) are as follows: Mr. Verfaillie,
$799,352; Dr. Fraley, $708,969; Mr. Grant, $583,785; Mr. Ide, $353,505; and Mr.
Engelberg, $309,093.
18
24
COMMITTEE REPORTS
REPORT OF THE PEOPLE COMMITTEE ON EXECUTIVE COMPENSATION
The people committee is responsible for the establishment and oversight of
executive compensation policies and programs for the Company's executive
officers. It also approves, reviews and monitors the Company's executive
succession plan, and reviews and monitors the Company's performance as it
affects its people and the overall compensation policies for its people.
Under the terms of its charter, the committee is required to consist of two or
more members of the board of directors who, in the opinion of the board, are
independent of management and have no relationship to the Company that may
interfere with the exercise of their independence from the Company and its
management. Mr. McMillan was appointed to the committee in June 2000 and Ms.
King and Mr. Parfet were appointed to the committee in February 2001. Until the
appointment of Ms. King and Mr. Parfet, all matters reviewed by the committee
were also considered and approved by the full board of directors.
Compensation Policies
The overall objectives of the committee are to develop compensation policies and
practices that:
- align management's interests with the long-term interests of stockholders;
- encourage people to behave like owners of the business and reward them when
shareowner value is created;
- provide reward systems that are simple, credible and common across the
organization;
- promote creativity, innovation and calculated risk taking to achieve
outstanding business results;
- encourage people to continually improve their capabilities to deliver business
results;
- reward for results rather than on the basis of seniority, tenure, or other
entitlement;
- make the Company a great place to work in order to attract world class people
at all levels around the globe.
Components of Executive Compensation
In furtherance of these objectives, the compensation programs for all Company
executives include three components: (1) base pay, (2) an annual incentive
program, and (3) a long-term incentive program.
The levels of compensation at competitive companies were used for comparison in
establishing the Company's current executive compensation policies, compensation
programs and awards, and were derived from compensation surveys provided by an
outside consultant covering companies in the agricultural industry as well as
high performing companies in general industry of the same general size. The high
performing company group included companies whose three-year total shareowner
return was higher than the average. Only some of the companies comprising the
Company's peer group are reflected in the comparison. The philosophy underlying
each element of executive compensation is discussed below.
The annual and long-term compensation components of the program have been
designed to encourage executives to significantly increase shareowner value.
Annual incentive compensation for 2000 was based on net income, cash flow, and
key performance indicators, all of which affect shareowner value. Long-term
compensation is closely tied to providing outstanding returns for shareowners.
Base Pay. Base pay reflects the external market value of a particular role as
well as the experiences and qualifications that an individual brings to the
role. Base pay is generally targeted to the median of the market.
19
25
Annual Incentive Program. The Annual Incentive Program for all regular
employees, including executives, provides for cash awards that are determined
shortly after the end of the year being measured. These annual awards depend
upon the Company's achievement of goals set at the beginning of each year; the
individual's level of responsibility and, where applicable, performance of his
or her business or staff group; and the individual's personal performance.
The Annual Incentive Program for 2000 was designed to focus on the achievement
of key goals for the Company and included performance for the entire year. For
executives, including the chief executive officer, three performance goals were
established for 2000: net income; net operating cash flow; and key performance
indicators covering such items as product launches, biotech acceptance, and
successfully accomplishing the initial public offering. Full year financial
goals for net income and cash flow were established by the board in
consideration of the initial public offering. The annual incentive award pool
was determined based on actual results measured against these full year goals.
Each employee's annual incentive opportunity for 2000 was communicated in terms
of "outstanding" Company and individual performance as measured against goals
set for the year. However, actual award payouts could exceed payouts
communicated at the outstanding level if the Company's performance exceeded
outstanding or if the individual's performance merited a greater incentive.
Neither the incentive pool nor individual awards are capped.
For 2001, the Annual Incentive Program continues to apply to all employees,
including executives. Goals have been set for sales growth, earnings per share,
and cash flow. Individual incentive opportunities have been communicated at a
"target" level of performance as measured against goals, with award
opportunities at "outstanding" performance equal to two times that at target
performance. Neither the incentive pool nor individual awards are capped. Annual
incentives are generally targeted at the median of market for target performance
as measured against goals with upside opportunity for above target performance.
However, for the chief executive officer and other executive officers target
annual incentives will be below the market median if target performance is
achieved.
Long-term Incentive Program. Long-term incentive opportunity is delivered in
the form of stock options. Long-term compensation for executives is generally
targeted to be at or above the 75th percentile of the market.
In determining grants at the initial public offering, the Company utilized
competitive data from other companies that had undergone an initial public
offering. The long-term incentive opportunity for each individual is established
(based on the individual's role) by converting a percentage of base pay to stock
options using an estimated Black-Scholes value. Stock options for management
(approximately 1,800 people) were granted on October 17, 2000 (the date of the
initial public offering) and vest over a 30-month period: 50% in March 2002 and
50% in March 2003. The stock option grants are for a two-year period: 2001 and
2002. New hires receive stock option grants pro-rated over the two-year period.
Stock options for all other non-management employees were also granted on the
initial public offering date with the same vesting provisions.
Other Grants. The committee may also make infrequent grants of restricted stock
to individual executives to hire or retain those individuals or motivate
achievement of particular business objectives; however, no grants have been made
to date. Additional stock option grants may be made to hire or retain certain
individuals, reflect increased responsibility, or motivate the achievement of a
particular business objective. Mr. Engelberg received a stock option grant in
December 2000 to bring his compensation mix in line with that of other
executives. A cash incentive that had been guaranteed under his prior change of
control agreement with Pharmacia (that was triggered by the merger of former
Monsanto and Pharmacia & Upjohn) was forfeited in exchange for an additional
Company stock option grant.
20
26
Chief Executive Officer Compensation
Mr. Verfaillie's 2000 salary was set at $850,000 per annum in September 2000,
retroactive to June 1, 2000. The committee recommended an annual incentive award
of $925,000 for Mr. Verfaillie for 2000. The award was determined based on the
same criteria used for all employees eligible to participate in the Annual
Incentive Program and in recognition of the successful initial public offering.
For the year 2001, the annual incentive opportunity for Mr. Verfaillie has been
reduced in exchange for the higher risk, stock option grant (made at the time of
our initial public offering) that will more closely align his interests with
those of stockholders. He is also a party to a Phantom Share Agreement as
described at "Approval of the Phantom Share Agreements (Proxy Item No. 2)" and
"Executive Compensation -- Long Term Incentive Plans" at pages 9 and 16,
respectively. In the agreement, Mr. Verfaillie (along with Mr. Grant, Mr. Fraley
and one other executive) forfeited his right to a cash separation payment in
exchange for a retention award that will vest in October 2002, subject to
Monsanto being profitable in 2001. The award amount is based on Monsanto stock
performance.
2000 Compensation for Other Executives
The payment of cash awards for the other Named Executive Officers was based on
the same factors as for Mr. Verfaillie. The number of options granted to
executives at the initial public offering was calculated based on competitive
long-term incentive opportunities utilizing data from other companies that had
undergone an initial public offering. Company executive plans are designed to
achieve a long-term compensation opportunity at or above the 75th percentile for
senior executives in comparable positions in other companies. When the Company
performs at an outstanding level, total compensation may be at or above the 90th
percentile of the market.
Deductibility of Compensation
The goal of the committee is to comply with the requirements of Section 162(m)
of the Code, to the extent deemed practicable, with respect to options and
annual and long-term incentive programs, as well as the limits approved by the
Company's stockholders, in order to avoid losing the deduction for compensation
in excess of $1 million paid to one or more of the Named Executive Officers. We
have generally structured our compensation plans with the objective that amounts
paid under those plans and arrangements are tax deductible. However, the
committee may elect to provide compensation outside those requirements when it
deems appropriate to achieve its compensation objectives.
Management Stock Ownership Requirements
The committee and management also believe that an important adjunct to an
incentive program is significant stock ownership by the senior executives.
Accordingly, the committee has implemented stock ownership requirements for
approximately 25 executives. Stock ownership requirements are five times base
salary for the Company's chief executive officer; four times base salary for the
chief operating officer; three times salary for five other senior executives and
one times salary for an additional 19 executives. Unexercised stock options or
restricted shares are not counted in satisfying these requirements. The
committee has established target dates when each executive must meet stock
ownership requirements.
PEOPLE COMMITTEE
C. Steven McMillan, Chair
Gwendolyn S. King
William U. Parfet
February 21, 2001
21
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AUDIT AND FINANCE COMMITTEE REPORT
In fulfilling its responsibilities, the audit and finance committee, among other
things, has reviewed and discussed the audited financial statements contained in
the 2000 Annual Report on SEC Form 10-K with the Company's management and its
independent auditors. Management is responsible for the financial statements and
the reporting process, including the system of internal controls. The
independent auditors are responsible for expressing an opinion on the conformity
of those audited financial statements with accounting principles generally
accepted in the United States.
In addition, the audit and finance committee discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as amended, as well as the
auditors' independence from Monsanto and its management including the matters in
the written disclosures and letter required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees.
The Company expects to be billed an aggregate amount of $11.1 million by
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their
respective affiliates (which we collectively refer to as "Deloitte") for
professional services in 2000. The table below sets forth the components of this
aggregate amount.
---------------------------------------------------------------------------
DESCRIPTION OF PROFESSIONAL SERVICE AMOUNT PAID
---------------------------------------------------------------------------
AUDIT FEES - professional services rendered for the audit
of our annual financial statements for 2000 and for the
reviews of the financial statements included in our Form
10-Qs $1.5 million
---------------------------------------------------------------------------
FINANCIAL INFORMATION SYSTEMS AND IMPLEMENTATION
FEES - professional services in connection with financial
information system and implementation fees rendered in
2000 $0
---------------------------------------------------------------------------
ALL OTHER FEES - all other professional services rendered
in 2000, (including fees for corporate and expatriate tax
and assignment services of $5.7 million) $9.6 million
---------------------------------------------------------------------------
The audit and finance committee of the board of directors considers Deloitte's
provision of non-audit services compatible with it maintaining its independence.
In reliance on the reviews and discussions referred to above, the audit and
finance committee recommended to the board of directors (and the board of
directors has approved) that the audited financial statements be included in the
Company's Annual Report on SEC Form 10-K for the year ended December 31, 2000,
for filing with the SEC.
AUDIT AND FINANCE COMMITTEE
John S. Reed, Chair
C. Steven McMillan
William U. Parfet
February 21, 2001
22
28
STOCK PRICE PERFORMANCE GRAPH
The graph below compares, for the period beginning on October 17, 2000 through
the end of 2000, total stockholder return on the Company's common stock
(assuming reinvestment of dividends) with the cumulative total return of the
Standard & Poor's 500 Stock Index (a broad-based market index) and the
cumulative total return of a peer group index. Because we are involved in the
agricultural products and seeds and genomics businesses, no published peer group
accurately mirrors our portfolio of businesses. Accordingly, we created a peer
group index that includes Bayer AG ADR, Dow Chemical Company, DuPont (E.I.) de
Nemours and Company, BASF AG, Aventis S.A. and Syngenta AG. The peer group index
we created reflects the performance of Syngenta AG beginning with its creation
on November 13, 2000. These indices are included for comparative purposes only
and do not necessarily reflect management's opinion that such indices are an
appropriate measure of the relative performance of the stock involved, and are
not intended to forecast or be indicative of possible future performance of our
common stock.
TOTAL RETURN TO STOCKHOLDERSE
[PERFORMANCE GRAPH]
-------------------------------------------------------------------------------------------------------------------------
17-OCT-00 31-OCT-00 14-NOV-00 28-NOV-00 12-DEC-00 26-DEC-00 29-DEC-00
-------------------------------------------------------------------------------------------------------------------------
Monsanto Company (MON) 100 128 117 119 126 120 135
-------------------------------------------------------------------------------------------------------------------------
S&P 500 (SPX) 100 106 102 99 102 97 98
-------------------------------------------------------------------------------------------------------------------------
Peer Group Index (INDEX) 100 107 108 107 111 119 124
-------------------------------------------------------------------------------------------------------------------------
(1) The transfer of the business operations of the former agricultural products
division of former Monsanto from Pharmacia to us was effective as of
September 1, 2000 and shares of our common stock did not begin trading until
October 18, 2000. As a result, the cumulative total stockholder return on
our common stock over a five-year period cannot be provided.
23
29
CERTAIN AGREEMENTS
CHANGE-OF-CONTROL EMPLOYMENT AGREEMENTS
We have entered into change-of-control employment agreements with a number of
key executives including our Named Executive Officers except for Messrs.
Engelberg and Ide. These agreements have terms that initially end on June 30,
2001 and are automatically extended one year at a time, unless we give the
executive a notice that no extension will occur. If a change of control of
Monsanto occurs during the term of an agreement, or if a change of control of
Pharmacia occurs during the term at a time when Pharmacia owns more than 50
percent of our common stock, then the agreement becomes operative for a fixed
period.
The agreements provide generally that the executive's terms and conditions of
employment, including position, location, compensation and benefits, will not be
adversely changed during the three-year period after such a change of control.
If, during this three-year period, we terminate the executive's employment other
than for cause, death or disability, or the executive terminates for good
reason, or if we terminate the executive's employment without cause in
connection with or in anticipation of a change of control, the executive is
generally entitled to receive:
- a specified multiple of the executive's annual base salary plus an annual
bonus amount and an amount to reflect our employer matching contributions
under various savings plans,
- accrued but unpaid compensation,
- continued welfare benefits for a specified number of years,
- a lump sum payment having an actuarial present value equal to the additional
retirement plan benefits the executive would have received if he or she had
continued to be employed by us for a specified number of years,
- if the executive has reached age 50 at the conclusion of a specified number of
years following employment termination, receipt of lifetime retiree medical
benefits, and
- outplacement benefits.
The specified multiple and the specified number of years is three for Messrs.
Verfaillie and Grant, Dr. Fraley and two other executives and two for all other
executives covered by such agreements. In addition, the executive is generally
entitled to receive a payment in an amount sufficient to make him or her whole
for any federal excise tax on excess parachute payments.
Messrs. Engelberg and Ide are parties to change-of-control employment agreements
with Pharmacia, which provide similar benefits to those described above. These
agreements became effective on March 31, 2000, when the merger involving former
Monsanto and Pharmacia & Upjohn took place. Accordingly, if either of these
executives experiences a termination of employment without cause or for good
reason on or before March 31, 2003, he will be entitled to severance benefits
similar to those described above. In addition, he would receive the same
severance benefits if he chooses to terminate his employment for any reason
during April of 2001. We estimate that the cash severance benefits payable under
these agreements would be approximately $3,100,000 for Mr. Engelberg and
$4,500,000 for Mr. Ide. Pharmacia has retained all severance liabilities under
these agreements.
Mr. Ide has announced his intention to resign from his position as the Company's
general counsel during 2001. As a result, Mr. Ide will be entitled to the
severance benefits referred to above. In addition, Pharmacia has offered to pay
Mr. Ide a cash bonus in the amount of $400,000 if Mr. Ide remains on as the
Company's general counsel until March 30, 2001 and executes an appropriate
waiver. The bonus is not payable in the event of a termination for "cause" prior
to March 30, 2001. Moreover, Pharmacia has offered to pay Mr. Ide an additional
$400,000 in exchange for his services as a consultant to the Company for a
one-year period following his termination of employment with Monsanto, payable
in quarterly installments. Furthermore, on December 7, 2000, the Company's board
of directors/people committee, in recognition of Mr. Ide's willingness to
continue to serve, approved a bonus payment to Mr. Ide in the amount of $150,000
payable if Mr. Ide remains employed through June 1, 2001 or has been released by
the Company plus up to an additional $150,000 based on Mr. Ide's performance
during his transition from the general counsel position, subject to execution of
an appropriate release. Finally, during the period of Mr. Ide's continued
employment, the Company will continue to pay Mr. Ide's regular salary and a pro
rata portion of the annual incentive payment.
24
30
PHANTOM SHARE AGREEMENTS
We have entered into Phantom Share Agreements with Pharmacia and each of Mr.
Verfaillie, Mr. Grant, Dr. Fraley and one other executive, pursuant to which
each of these executives agreed to the termination of his change-of-control
employment agreement with Pharmacia as of the closing of the initial public
offering. For a more detailed description of the Phantom Share Agreements see
"Approval of the Phantom Share Agreements (Proxy Item No. 2) at page 9 and
"Executive Compensation -- Long-Term Incentive Plans -- Awards in 2000" at page
16.
EXCESS PARACHUTE TAX INDEMNITY PLAN
We have adopted the Excess Parachute Tax Indemnity Plan, which provides that if
any of our non-employee directors or any of our employees who is not a party to
a change of control employment agreement described above is subject to the
federal tax on excess parachute payments received in connection with a change of
control, we generally will pay him or her an amount to make him or her whole for
the tax, and will pay any legal fees he or she may incur to enforce his or her
rights under the plan or in connection with any Internal Revenue Service audit
related to the excise tax.
ARRANGEMENTS BETWEEN MONSANTO AND PHARMACIA
Prior to our initial public offering, we entered into agreements with Pharmacia,
as of September 1, 2000, providing for, among other things, the separation of
our businesses from those of Pharmacia. A summary description of the material
terms of these agreements, which include a separation agreement and other key
related agreements between us and Pharmacia can be found at Appendix A (which is
incorporated herein by reference). The full texts of these agreements were filed
with the SEC as exhibits to the registration statement relating to our initial
public offering.
CERTAIN OTHER INFORMATION REGARDING MANAGEMENT
TRANSACTIONS AND RELATIONSHIPS
Mr. Kantor is a partner at the law firm of Mayer, Brown & Platt, which provided
services to us and to former Monsanto in 2000 and has been retained to provide
services to us in 2001. The amount of legal fees paid by us to Mayer, Brown &
Platt during 2000 did not exceed five percent (5%) of such firm's gross revenues
for its applicable fiscal year.
Until his retirement in April 2000, Mr. Reed served as Chairman and Co-Chief
Executive Officer of Citigroup Inc., the parent company of Salomon Smith Barney
Inc., an investment banking firm, which provided services to former Monsanto in
1999 and has provided services to us and to Pharmacia in 2000, including in
connection with our initial public offering.
We have entered into a consulting agreement with Mr. AtLee that is described
above beginning at page 8 under "Information Regarding Board of Directors and
Committees -- Compensation of Directors".
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires all Company
executive officers, directors, and persons owning more than 10% of any
registered class of our capital stock to file reports of ownership and changes
in ownership with the SEC. Based solely on the reports received by us and on
written representations from reporting persons, we believe that all such persons
complied with all applicable filing requirements during 2000 except for (i) Mr.
Verfaillie, who inadvertently was late in filing one Form 4 to report one
transaction relating to his ceremonial purchase of the first 100 shares of our
common stock in the initial public offering; and (ii) Pharmacia, which filed its
Form 3 one day late.
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INDEBTEDNESS
The following executive officers received full-recourse, interest bearing loans
for the purchase price of former Monsanto common stock purchased pursuant to
former Monsanto's Executive Stock Purchase Plan. This plan has been terminated.
Following the merger these executive officers received cash awards under the
plan that were required to be used to repay the loans. However, these cash
awards did not cover the full amount due. The balance of the loans must be
repaid in three annual installments commencing March 31, 2001. The loans may
also be prepaid at any time at the executive officer's election. The amount
outstanding at December 31, 2000 is also the greatest amount of such
indebtedness at any time during the period beginning September 1, 2000 and
ending December 31, 2000.
---------------------------------------------------------------------------------------------------
AGGREGATE AGGREGATE
AMOUNT OF AMOUNT OF
INDEBTEDNESS AS INDEBTEDNESS AS
YEAR OF INTEREST OF DECEMBER 31, OF MARCH 1,
NAME LOAN RATE 2000 2001(1)
---------------------------------------------------------------------------------------------------
Hendrik A. Verfaillie 1996 6.36% $2,497,005 $ 0
---------------------------------------------------------------------------------------------------
Steven L. Engelberg 1996 6.36% $1,056,419 $664,632
---------------------------------------------------------------------------------------------------
Robert T. Fraley, Ph.D. 1996 6.36% $ 768,304 $462,966
---------------------------------------------------------------------------------------------------
R. William Ide III 1996 6.60% $1,124,168 $834,118
---------------------------------------------------------------------------------------------------
---------------
(1) Reflects loan balance after cash awards were used to repay the loans.
GENERAL INFORMATION
STOCKHOLDER PROPOSALS
Proposals Included in Proxy Statement
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's 2002 annual meeting and that stockholders
desire to have included in the Company's proxy materials relating to such
meeting must be received by the Company at its principal executive offices no
later than November 16, 2001, which is 120 calendar days prior to the
anniversary of this year's mailing date. Upon timely receipt of any such
proposal, the Company will determine whether or not to include such proposal in
the proxy statement and proxy in accordance with applicable regulations
governing the solicitation of proxies.
Proposals Not Included in Proxy Statement
If a stockholder wishes to present a proposal at the Company's annual meeting in
the year 2002 or to nominate one or more directors and the proposal is not
intended to be included in the Company's proxy statement relating to that
meeting, the stockholder must give advance written notice to the Company prior
to the deadline for such meeting determined in accordance with the Company's
by-laws. In general, the Company's by-laws provide that such notice should be
addressed to the Secretary and be received at the Company's Creve Coeur Campus
no less than 90 days nor more than 120 days prior to the first anniversary of
the preceding year's annual meeting. For purposes of the Company's 2002 annual
meeting, such notice must be received not later than January 18, 2002 and not
earlier than December 19, 2001. These time limits also apply in determining
whether notice is timely for purposes of rules adopted by the SEC relating to
the exercise of discretionary voting authority. The Company's by-laws set out
specific requirements that such written notices must satisfy. Any stockholder
filing a written notice of nomination for director must describe various matters
regarding the nominee and the stockholder, including such information as name,
address, occupation and shares held. Any stockholder filing a notice to bring
other business before a stockholder meeting must include in such notice, among
other things, a brief description of the proposed business and the reasons
therefor, and other specified matters. Copies of those requirements will be
forwarded to any stockholder upon written request.
26
32
OTHER INFORMATION
The board of directors knows of no matter, other than those referred to in this
proxy statement, which will be presented at the meeting. However, if any other
matters, including a stockholder proposal excluded from this proxy statement
pursuant to the rules of the SEC, properly come before the meeting or any of its
adjournments, the person or persons voting the proxies will vote in accordance
with their best judgment on such matters. Should any nominee for director be
unwilling or unable to serve at the time of the meeting or any adjournments
thereof, the persons named in the proxy will vote for the election of such other
person for such directorship as the board of directors may recommend, unless,
prior to the meeting, the board has eliminated that directorship by reducing the
size of the board. The board is not aware that any nominee herein will be
unwilling or unable to serve as a director.
The Company will bear the expense of preparing, printing, and mailing this proxy
material, as well as the cost of any required solicitation. Directors, officers
or employees of the Company may solicit proxies on behalf of the Company. We
have engaged Mellon Investor Services ("Mellon") to assist us in the
distribution and solicitation of proxies. We expect to pay Mellon approximately
$11,000 for these services plus expenses. In addition, the Company will
reimburse banks, brokerage firms, and other custodians, nominees, and
fiduciaries for reasonable expenses incurred in forwarding proxy materials to
beneficial owners of the Company's stock and obtaining their proxies.
You are urged to vote promptly by marking, signing, dating, and returning your
proxy card or by voting by telephone or over the Internet. You may revoke your
proxy at any time before it is voted; and if you attend the meeting, as we hope
you will, you may vote your shares in person.
By Order of the Board Directors,
MONSANTO COMPANY
/s/ R. WILLIAM IDE III
R. WILLIAM IDE III
Secretary
March 16, 2001
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34
APPENDIX A
SUMMARY DESCRIPTION OF AGREEMENTS BETWEEN MONSANTO AND PHARMACIA
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SEPARATION AGREEMENT
The separation agreement contains the key provisions relating to the separation
of our businesses from those of Pharmacia. The separation agreement identifies
the assets transferred to us by Pharmacia and the liabilities assumed by us from
Pharmacia. The separation agreement also describes when and how these transfers
and assumptions occurred. In addition, we have entered into additional
agreements with Pharmacia governing various interim and ongoing relationships
between Pharmacia and us following the separation date. These other agreements
include:
- a corporate agreement;
- a tax sharing agreement;
- an intellectual property transfer agreement;
- an employee benefits and compensation allocation agreement;
- a services agreement; and
- a campus lease.
Asset Transfer
Effective on September 1, 2000, which we refer to as the separation date,
Pharmacia transferred the following assets to us, except as provided in one of
the ancillary agreements:
- all assets reflected on our balance sheet as of June 30, 2000 or the
accounting records supporting our balance sheet, as adjusted by certain pro
forma adjustments, and all assets acquired by Pharmacia between June 30, 2000
and the separation date that would have been included on our balance sheet as
of June 30, 2000 had they been owned on June 30, 2000;
- all other assets primarily related to our business or the former agriculture
or chemical businesses of former Monsanto;
- the corporate offices in St. Louis, Missouri (Creve Coeur campus) and other
real property primarily used by our business;
- the subsidiaries, partnerships, joint ventures and other equity interests
primarily related to our business;
- all computers, desks, furniture, equipment and other assets used primarily by
Pharmacia employees who became our employees;
- any contingent gains that are primarily related to our business or the former
agriculture or chemical businesses of former Monsanto, or otherwise
specifically allocated to us;
- 57% of unknown contingent gains arising as of or prior to the separation date
that are not primarily related to our business, the former agriculture or
chemical businesses of former Monsanto, Pharmacia's business or former
Pharmacia businesses, which we expect would generally consist of unknown
corporate-level gains not primarily related to any of these businesses; and
- other assets agreed upon by Pharmacia and us.
APPENDIX A -- Page 1
35
Assumption Of Liabilities
Effective on the separation date, we assumed the following liabilities from
Pharmacia, except as provided in one of the ancillary agreements:
- all liabilities reflected on our balance sheet as of June 30, 2000 or the
accounting records supporting our balance sheet, as adjusted by certain pro
forma adjustments, and all liabilities of Pharmacia incurred or arising
between June 30, 2000 and the separation date that would have been included on
our balance sheet as of June 30, 2000 had they arisen or been incurred on or
prior to June 30, 2000;
- all other liabilities primarily related or arising primarily from (1) any
asset that is transferred to us pursuant to the separation, (2) our business,
(3) the former agriculture or chemical businesses of former Monsanto or (4)
the disposition of any of these former agriculture or chemical businesses;
- liabilities for worker's compensation or third party claims incurred prior to
the separation date at a site transferred to us pursuant to the separation;
- all liabilities for environmental remediation or other environmental
responsibilities related to our business and the former agriculture or
chemical businesses of former Monsanto, and all real property transferred to
us as part of our assets;
- all liabilities for products of our business or the former agriculture or
chemical businesses of former Monsanto sold to third parties;
- all liabilities relating to the approximately $500 million of medium-term bank
notes issued by former Monsanto to Brasil Ltda., and all liabilities relating
to the approximately $50 million of non-intercompany debt for which our
subsidiaries organized or operating outside the United States are the
obligors;
- all of our liabilities relating to a $1 billion, 364-day credit agreement and
a $500 million, five-year credit agreement;
- all liabilities of former Monsanto that were assumed by Solutia or any of its
subsidiaries on September 1, 1997 in connection with its spinoff from former
Monsanto, to the extent that Solutia fails to pay, perform or discharge these
liabilities;
- any contingent liabilities that are primarily related to our business or the
former agriculture or chemical businesses of former Monsanto, or otherwise
specifically allocated to us;
- 57% of unknown contingent liabilities arising as of or prior to the separation
date that are not primarily related to our business, the former agriculture or
chemical businesses of former Monsanto, Pharmacia's business or former
Pharmacia businesses, which we expect would generally consist of unknown
corporate-level liabilities not primarily related to any of these businesses;
and
- other liabilities agreed upon by Pharmacia and us.
Shared Contingent Gains And Liabilities
The separation agreement provides for the division of "shared" contingent gains
and liabilities, which are those contingent gains and liabilities arising as of
or prior to the separation date that are not primarily related to our business,
the former agriculture or chemical businesses of former Monsanto, Pharmacia's
business or former Pharmacia businesses.
Shared contingent gains and liabilities are allocated as follows:
- any benefit that may be received from any shared contingent gain will be
allocated 43% to Pharmacia and 57% to us. Pharmacia has the authority to
prosecute, settle or waive any shared contingent gain;
- any responsibility for any shared contingent liability, except for
environmental remediation, will be allocated 43% to Pharmacia and 57% to us,
adjusted for insurance proceeds and other offsetting amounts received by
either company. Pharmacia will assume the defense of, and may seek to settle
or compromise, any third party claim that is a shared contingent liability,
and any costs and expenses incurred will be included in the total amount of
the shared contingent liability;
- any shared contingent liability for environmental remediation or other
environmental responsibility will be borne by each company in proportion to
its respective contribution to the site giving rise to the shared contingent
liability; and
APPENDIX A -- Page 2
36
- Pharmacia and we will form a committee for the purpose of resolving issues
regarding shared contingent gains and liabilities.
Financing Arrangements
We and Pharmacia arranged a commercial paper facility prior to the closing of
the initial public offering, under which Pharmacia has issued assumable
commercial paper in the amount equal to the sum of approximately $1.8 billion
plus the net proceeds we receive from the initial public offering assuming no
exercise of the overallotment option, or $665 million. The proceeds of such
commercial paper obligations have been or will be used by Pharmacia to repay
Pharmacia indebtedness, a substantial portion of which was incurred in
connection with our acquisitions of seed companies, and for Pharmacia's general
corporate purposes. Pursuant to the separation agreement, we assumed all
liabilities under the commercial paper facility on the closing of the initial
public offering. We also assumed from Pharmacia on the separation date the
obligations relating to variable-rate, medium-term bank notes in the aggregate
principal amount of approximately $500 million, which mature in 2003 and had an
average interest rate of 5.5% as of June 30, 2000. In addition, on the
separation date, we indirectly assumed approximately $50 million of debt owed by
our subsidiaries.
The Ex-U.S. Plan and Delayed Transfers
The transfer of international assets and the assumption of international
liabilities were accomplished through agreements between international
subsidiaries. The separation agreement acknowledges that circumstances in some
jurisdictions outside of the United States may require the timing of part of the
international separation to be delayed past the separation date.
Indemnification
In general, under the separation agreement, we will indemnify Pharmacia and its
representatives and affiliates from all liabilities that we assumed under the
separation agreement, including, as of the closing of the initial public
offering, the indebtedness under the assumable commercial paper facility, and
any and all losses by Pharmacia or its representatives or affiliates arising out
of or due to our failure to pay, perform or discharge in due course these
liabilities. In general, Pharmacia will indemnify us and our representatives and
affiliates from all liabilities that Pharmacia retains under the separation
agreement and any and all losses by us or our representatives or affiliates
arising out of or due to Pharmacia's failure to pay, perform or discharge in due
course these liabilities. All indemnification amounts would be reduced by any
insurance proceeds and other offsetting amounts recovered by the indemnitee.
Access to Information
Under the separation agreement, the following terms govern access to
information:
- prior to or as promptly as practicable after the separation date, Pharmacia
will deliver to us all corporate books and records related to our business;
- from and after the separation date, subject to applicable confidentiality
provisions or restrictions, we and Pharmacia will each give the other
reasonable access and the ability to duplicate information developed or
obtained prior to the separation date within each company's possession
relating to the other's businesses, or for audit, accounting, claims,
intellectual property protection, litigation and tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations;
- after the separation date, we and Pharmacia will each use reasonable efforts
to provide assistance to the other for litigation and to make available to the
other employees for the purpose of consultation, or directors, officers, other
employees and agents as witnesses, in legal, administrative or other
proceedings;
- the company providing information, consultant or witness services under the
separation agreement will be entitled to reimbursement from the other for
reasonable expenses;
- we and Pharmacia will each retain all proprietary information in its
possession relating to the other's business for a period of time and if the
information is to be destroyed, the destroying company will give the other
company the opportunity to receive the information at the other company's
expense;
- we and Pharmacia will each agree not to disclose or otherwise waive any
privilege relating to it or to the other without consent, unless the privilege
relates solely to its own business, assets or liabilities; and
APPENDIX A -- Page 3
37
- from and after the separation date, Pharmacia and we will agree to hold in
strict confidence all information concerning or belonging to the other
obtained prior to the separation date or furnished pursuant to the separation
agreement, subject to applicable law.
Arbitration and Dispute Resolution
Under the separation agreement, if disputes arise between Pharmacia and us, the
following will occur:
- the parties will first attempt to resolve the dispute by direct discussions
and negotiation, including, if either party elects, among senior executives;
- if the parties cannot resolve their dispute within 30 days after notice
calling for negotiation among senior executives, the parties will attempt to
settle the dispute through mediation;
- if the dispute is not resolved within 60 days after initiation of mediation,
either party may demand that the dispute be resolved by binding arbitration;
and
- the parties will bear their own expenses and attorneys' fees in resolving the
dispute and will share equally the costs and expenses of any mediation or
arbitration.
No Representations And Warranties
Pursuant to the separation agreement, we understand and agree that Pharmacia did
not represent or warrant to us as to the assets to be transferred to us, the
liabilities to be assumed by us, our business, the former agriculture or
chemical businesses of former Monsanto, our balance sheet or as to any consents
or approvals required in connection with the consummation of the transactions
contemplated by the separation agreement. We took all assets "as is, where is"
and bear the economic and legal risk relating to conveyance of, and title to,
the assets.
Insurance
Under the terms of the separation agreement, our assets will include any and all
rights of an insured party, including rights of indemnity and the right to be
defended by or at the expense of the insurer and to receive insurance proceeds
with respect to all of our insured claims under insurance policies held by
either us or Pharmacia. Each company is responsible for its own deductibles,
self-insured retentions, retrospective premiums, claims handling and other
charges owed under the insurance policies.
Non-Competition Provisions
For a two-year period following the separation date, we will be obligated to
refrain from commercializing, by selling or transferring for sale or use by the
end user, products in the businesses retained by Pharmacia. For a two-year
period following the separation date, Pharmacia will be obligated to refrain
from commercializing products in the businesses transferred to us.
Expenses
Pharmacia will pay all reasonable and customary out-of-pocket costs and expenses
directly related to the preparation, execution and delivery of the separation
agreement and other agreements related to the separation, and the consummation
of the separation and our initial public offering. These costs and expenses
consist of fees and expenses of external advisors (including independent public
accountants, consultants and attorneys), expenses directly related to our
initial public offering (other than underwriting discounts and commissions),
transfer and other costs, registration and filing fees, printing and mailing
costs, and any other costs, fees or charges imposed by a governmental entity.
Other Agreements
If there is a conflict or inconsistency between the provisions of the separation
agreement and the provisions of any other agreement related to the separation,
the provisions of the separation agreement will control over the inconsistent
provisions of the other agreement as to matters within the scope of the
separation agreement.
APPENDIX A -- Page 4
38
CORPORATE AGREEMENT
The corporate agreement provides Pharmacia with continuing stockholder rights
with respect to us following the initial public offering, including preemptive
rights, registration rights and rights associated with Pharmacia's auditing
obligations.
Preemptive Rights
Under the terms of the corporate agreement, Pharmacia has a continuing
preemptive right to purchase common stock from us in order to allow Pharmacia to
own at least 80.1% of our outstanding equity and voting power on a fully diluted
basis. The exercise price for these shares would be at prevailing market prices
measured by the volume-weighted average for the 20 consecutive trading days
prior to notice of exercise or, in the case of a public offering of our common
stock for cash, a price per share equal to the initial public offering price
less underwriters' discounts and commissions. The preemptive right would
terminate in the event Pharmacia sells or disposes of its shares to reduce its
ownership interest of our outstanding equity and voting power to less than 80.1%
on a fully diluted basis.
Registration Rights
Under the corporate agreement, Pharmacia has the right to require us to register
for offer and sale all or a portion of our common stock held by Pharmacia, so
long as the common stock Pharmacia requires us to register in each case
represents at least 5% of the aggregate shares of common stock then issued and
outstanding. Pharmacia's registration rights terminate on the first date on
which Pharmacia ceases to hold at least 5% of our outstanding shares on a fully
diluted basis.
Piggy-Back Registration Rights
If we at any time intend to file on our behalf or on behalf of any of our
security holders a registration statement in connection with a public offering
of any of our securities on a form and in a manner that would permit the
registration for offer and sale of common stock held by Pharmacia, Pharmacia has
the right to include its shares of our common stock in such offering.
Unregistered Offerings
Under the terms of the corporate agreement, Pharmacia has the right to require
us to prepare an offering memorandum in connection with the offer and sale in an
unregistered offering of all or a portion of our common stock, but not less than
5% of our outstanding shares in any one offering, held by Pharmacia. Pharmacia's
rights and limitations with respect to such unregistered offerings are
comparable to those rights and limitations applicable to Pharmacia in registered
offerings. In addition, we have agreed to grant customary registration rights to
third parties who purchase our stock from Pharmacia in such an unregistered
offering.
Registration Expenses
We are responsible for the registration expenses in connection with the
performance of our obligations under the corporate agreement. Pharmacia is
responsible for all of the fees and expenses of counsel to Pharmacia, any
applicable underwriting discounts or commissions, and any transfer taxes.
Indemnification
Pursuant to the corporate agreement, we will indemnify Pharmacia against any
liabilities that may result from untrue statements or omissions in the
registration statement. Pharmacia will indemnify us against liabilities that
arise out of untrue statements or omissions in the registration statement based
on written information furnished by Pharmacia.
Auditing Practices
So long as Pharmacia is required or permitted to consolidate our results of
operations and financial position in Pharmacia's financial statements, the
companies agree to the following terms relating to auditing practices:
- we will not select a different independent accounting firm than Deloitte &
Touche LLP to serve as our independent certified public accountants without
Pharmacia's prior written consent;
APPENDIX A -- Page 5
39
- we will use reasonable best efforts to enable our auditors to (1) complete
their audit such that they will date their opinion on our audited annual
financial statements on the same date that Pharmacia's auditors date their
opinion on Pharmacia's audited annual financial statements, and (2) complete
their quarterly review procedures on our quarterly financial statements on the
same date that Pharmacia's auditors complete their quarterly review procedures
on Pharmacia's quarterly financial statements;
- we will provide to Pharmacia on a timely basis all information that Pharmacia
reasonably requires to meet its schedule for the preparation, printing, filing
and public dissemination of its annual and quarterly financial statements;
- we will authorize our auditors to make available to Pharmacia's auditors both
(1) the personnel who performed or will perform the annual audits and
quarterly reviews of our financial statements, and (2) work papers related to
the annual audits and quarterly reviews of our financial statements;
- we will provide Pharmacia's internal auditors with access to our books and
records; and
- we will give Pharmacia notice of any proposed significant changes in
accounting estimates or principles from those in effect on the separation
date.
No Discrimination
Under the terms of the corporate agreement, we agree that, for so long as
Pharmacia owns at least 50% of our outstanding common stock, we will not,
without the prior written consent of Pharmacia, take any action which has the
effect of restricting or limiting the ability of Pharmacia freely to sell,
transfer, assign, pledge or otherwise dispose of shares of our common stock or
would restrict or limit the rights of any transferee of Pharmacia as a holder of
our common stock. In addition, we agree that we will not, without the prior
written consent of Pharmacia, limit the legal rights of, or deny any benefit to,
Pharmacia as our stockholder in a manner not applicable to our stockholders
generally.
Accounting Treatment
Pursuant to the corporate agreement, we agree to refrain from taking any actions
that could adversely affect Pharmacia's ability to account for the recent merger
transaction involving former Monsanto and Pharmacia & Upjohn as a pooling of
interests.
TAX SHARING AGREEMENT
Following our initial public offering, the Company and some of our subsidiaries
will be included in Pharmacia's consolidated group for U.S. federal income tax
purposes (the "Pharmacia Federal Group") as well as in consolidated, combined,
unitary or other similar consolidated returns that include Pharmacia and its
subsidiaries for state and local income tax purposes (a "Pharmacia State
Group"). As of the separation date, Pharmacia and we entered into a tax sharing
agreement.
Pursuant to the tax sharing agreement, with respect to tax returns for any
taxable period in which we and any of our subsidiaries (collectively, the
"Monsanto Group") are included in the Pharmacia Federal Group or any Pharmacia
State Group, we generally will be obligated to pay to Pharmacia the amount of
taxes (including estimated taxes) that would be due and payable by us
determined, subject to adjustment by Pharmacia, as if the Monsanto Group filed
its own tax returns that did not include Pharmacia or other members of the
Pharmacia Federal Group or the Pharmacia State Group, as the case may be. If,
for any taxable period in which the Monsanto Group is included in the Pharmacia
Federal Group or any Pharmacia State Group, the Monsanto Group has a net
operating loss or tax credit that reduces the taxes of the Pharmacia Federal
Group or any Pharmacia State Group, as the case may be, below the amount that
would have been payable if the Monsanto Group had not incurred such loss or tax
credit, Pharmacia must pay to us the amount of the reduction in taxes
attributable to the loss or tax credit. We will be responsible for any taxes
with respect to tax returns that include only the Monsanto Group.
Pharmacia will be responsible for the preparation and filing of all tax returns
for any taxable period in which the Monsanto Group is included in the Pharmacia
Federal Group or any Pharmacia State Group. Pharmacia may elect at its
discretion to include the Monsanto Group in any Pharmacia State Group when
inclusion is not required by law. We will be responsible for the preparation and
filing of all tax returns that include only the Monsanto Group.
APPENDIX A -- Page 6
40
Pharmacia generally will have sole responsibility for, and control over, all
audits with respect to any tax return for the Pharmacia Federal Group and any
Pharmacia State Group and we generally will have sole responsibility for, and
control over, all audits with respect to all tax returns that include only the
Monsanto Group.
With respect to tax periods beginning on or after the separation date, in the
event of any adjustments to the tax returns of the Pharmacia Federal Group, any
Pharmacia State Group or the Monsanto Group, the liability of Pharmacia or us,
as the case may be, under the tax sharing agreement will be redetermined by
giving effect to such adjustment, and Pharmacia or we, as the case may be, will
be obligated to pay to the other party any differences between the original
liability and the redetermined liability.
With respect to tax periods beginning before the separation date, we are
responsible for tax liabilities attributable to DEKALB Genetics Corporation and
its subsidiaries. We will also be responsible for the tax liability arising from
transactions pursuant to which the Monsanto Group's pharmaceutical assets in
foreign jurisdictions are separated from the Monsanto Group's agricultural
assets in foreign jurisdictions ("Separation Transactions"). This liability will
be reduced by the present value of any tax asset created as a result of such
transactions. Except for the DEKALB tax liabilities, taxes attributable to
Separation Transactions and property and sales and use taxes attributable to our
assets or businesses, Pharmacia will be responsible for and will indemnify and
hold us harmless from all taxes incurred by any member of the Monsanto Group
prior to the separation date.
Pharmacia and we will provide each other all information and other assistance
reasonably requested by the other party in connection with the preparation and
filing of any tax return pursuant to the tax sharing agreement. Disputes arising
between Pharmacia and us relating to matters covered by the tax sharing
agreement are subject to resolution through third-party dispute resolution
provisions.
We will be included in the Pharmacia Federal Group for all taxable periods
during which Pharmacia beneficially owns at least 80% of the total voting power
and value of our outstanding common stock. Each member of a consolidated group
for U.S. federal income tax purposes is jointly and severally liable for the
U.S. federal income tax liability of each other member of the consolidated
group. As such, although the tax sharing agreement provides for the sharing of
liabilities between Pharmacia and us, during the period in which we are included
in the Pharmacia Federal Group, we could be liable for any U.S. federal income
tax liability that is incurred, but not discharged, by any other member of the
Pharmacia Federal Group.
EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT
The employee benefits and compensation allocation agreement sets forth the
agreement between Pharmacia and us as to the allocation of employees and their
compensation and benefits following the separation date.
In general, employees who work exclusively in the businesses being transferred
to us were transferred to us and our subsidiaries as of the separation date, and
employees who work exclusively in the businesses being retained by Pharmacia
remained with Pharmacia and its other subsidiaries. Outside the United States,
employees who work as staff employees supporting all of the businesses generally
were allocated to the primary businesses in each country, unless factors
dictated otherwise. In the United States, staff employees working in St. Louis,
Missouri generally were allocated to us and staff employees working in Chicago,
Illinois generally were assigned to Pharmacia, unless certain factors dictated
otherwise. In some cases, staff employees of Pharmacia working in St. Louis will
provide services to both Pharmacia and us under the services agreement. In some
cases, the staff employees assigned to one company will provide support services
to the other company under the services agreement. See "Services Agreement" in
this Appendix. For example, in the United States, the staff employees
transferred to us may continue to provide services to Pharmacia. Former
employees of former Monsanto who had been employed in the United States were
generally allocated to us if they retired before 1995. Former employees of
former Monsanto who had been employed outside the United States were generally
assigned to us if they either had been working primarily in the agricultural
business at the time they retired or were members of the corporate staff in
countries where the agricultural business was the primary business of former
Monsanto unless local law or other factors dictate otherwise.
We assumed responsibility for all obligations under any individual employment
letters or similar agreements between Pharmacia and employees who transferred to
us other than the severance liabilities under change-of-control employment
agreements between Pharmacia and each of Messrs. Engelberg and Ide and two other
executives. See "Certain Agreements -- Change-of-Control Employment Agreements"
beginning at page 24 of the body of the proxy statement. The employee benefits
and compensation allocation agreement provides that the severance benefits for
staff employees who are terminated within two years after our initial public
offering will be borne by Pharmacia.
APPENDIX A -- Page 7
41
In the United States, employees and former employees allocated to us continue to
participate in the former Monsanto Company Pension Plan, the related ERISA
Parity Pension Plan and the former Monsanto Company Supplemental Retirement
Plan, each of which will continue to be sponsored by Pharmacia for a period of
time following our initial public offering, and we will bear the costs of their
participation. The period of this continued participation will last until such
time as we are able to establish our own qualified pension plan with benefits
similar to those provided under the former Monsanto Company Pension Plan, and
obtain a determination letter from the Internal Revenue Service that the
qualified pension plan meets the requirements for tax qualification, or such
later date as Pharmacia may determine. When the continued participation of our
employees in the former Monsanto Company Pension Plan does cease, our new
pension plans will assume liability for the pension benefits of our employees
and the former employees allocated to us, as described above, and assets to fund
the liabilities under the qualified pension plan on an
accrued-benefits-obligation basis will be transferred from the trust for the
former Monsanto Company Pension Plan to the trust for our qualified pension
plan. If, at the time of the plan split, the assets of the Monsanto Company
Pension Plan have a value at least equal to its total accrued benefit
obligations, then our plan will receive assets having a value at least equal to
the accrued benefit obligation for the liabilities it assumes. If the Monsanto
Company Pension Plan has surplus assets in excess of its total accrued benefit
obligation, Pharmacia will determine whether to transfer any portion of the
surplus to our plan. If Pharmacia determines to transfer a portion of surplus
assets to our plan, the amount of surplus transferred will equal either:
- our proportionate share of the surplus, based upon the percentage of the total
accrued benefit obligations of the Monsanto Company Pension Plan that our plan
assumes, or
- the lesser of our proportionate share of the surplus or the amount of the
projected benefit obligation for the liabilities our plan assumes,
as determined by Pharmacia. If, at the time of the plan split, the assets of the
Monsanto Company Pension Plan have a value less than its total accrued benefit
obligations, then our plan will receive a proportionate share of those assets,
based upon the percentage of the total accrued benefit obligations of the
Monsanto Company Pension Plan that our plan assumes. Before this split takes
place, we will bear the costs of providing benefits to our employees and former
employees allocated to us under the former Monsanto Company Pension Plan.
We will establish a qualified savings and investment plan, which will be a
qualified defined contribution plan similar to the former Monsanto Company
Savings and Investment Plan, and a related nonqualified plan, which will be
similar to the former Monsanto Company ERISA Parity Savings and Investment Plan,
to provide benefits to our employees as of March 31, 2001, or as soon as is
administratively feasible after that date. The accounts of our employees under
the former Monsanto Company Savings and Investment Plan will be transferred to
our new plan. In connection therewith, a portion of the employee stock ownership
plan component of the former Monsanto Company Savings and Investment Plan also
will be transferred to our plan. Our qualified savings and investment plan will
assume a percentage of the debt obligations of the former Monsanto Company
Savings and Investment Plan, and receive the same percentage of the employer
securities financed by that debt, based upon the relative eligible pay of our
employees participating in the plan as compared to the Pharmacia employees
participating in the plan.
Pension plans maintained outside the United States in which both our employees
and those of Pharmacia participate will generally be divided between the two
companies. If such plans are funded, the assets will generally be split in
proportion to the relative projected benefit obligations of the two separate
plans, except to the extent otherwise required by law.
We have assumed sponsorship of all of former Monsanto's U.S. medical, life,
disability and other welfare benefit plans effective September 1, 2000, and
Pharmacia is a participating employer in those plans. Outside of the United
States, the company that is going to assume sponsorship of the benefit plans in
which both Pharmacia and our employees will participate will generally be
designated as the host company. Pharmacia will bear the cost of the continued
participation in the plans assumed by us by Pharmacia employees and by former
employees allocated to Pharmacia, and we will bear the costs of the continued
participation plans by our employees and by former employees allocated to us in
plans assumed by Pharmacia. There may be some deviations from these general
rules where appropriate because of local law or other local considerations.
Cost-sharing for the benefits provided to one company's employees by plans
sponsored by the other company generally will be based upon actual cost of
providing the benefits to each company's employees and former employees. In
addition, the employee benefits and compensation allocation agreement provides
that we and Pharmacia will share any costs or liabilities involving the former
Monsanto employee benefit plans and relating to compliance issues arising before
our initial public offering or, after such offering, if such issues involve the
plans in which we and Pharmacia both participate.
APPENDIX A -- Page 8
42
INTELLECTUAL PROPERTY TRANSFER AGREEMENT
The intellectual property transfer agreement, referred to as the "IPTA," is a
master agreement encompassing several agreements which allocates between
Pharmacia and us rights relating to patents, patent applications, invention
disclosures, unpatented technology (such as know-how), technology agreements,
trademarks, copyrights and other forms of intellectual property. The IPTA
generally provides that both parties agree not to disclose confidential
information of the other party. Further, each party agrees not to use the
information except when such use has been agreed to by the other party.
Patent Rights
Under the terms of the IPTA, Pharmacia assigned to us ownership of patents,
patent applications and invention disclosures directed to technology related
exclusively to the businesses transferred to us. If the technology is used by
both Pharmacia and us, but primarily by Pharmacia, such patents, patent
applications and invention disclosures were retained by Pharmacia and licensed
to us for use in our business field. If the technology is used by both Pharmacia
and us, but primarily by us, such patents, patent applications and invention
disclosures were assigned to us and a license provided to Pharmacia for use in
Pharmacia's business field.
The IPTA provides that both parties will assist each other in (1) the filing of
patent applications, (2) the prosecution of the patent applications and (3) any
patent litigation. Pharmacia shall bear the costs of transferring and securing
Monsanto's intellectual property rights under the IPTA. Either party may
prosecute certain patents and patent applications. If the party prosecuting the
patent or application is not the party that allowed the patent or application to
lapse, then the party that allowed the lapse will pay for the assignment and
transfer of the patent or patent application to the prosecuting party. Further,
the IPTA specifies that for a period of three years both parties will be
obligated to correct any bona fide error made in allocating the rights between
the parties.
We believe that all material patent rights necessary to conduct our business
will be either assigned or licensed to us by Pharmacia under the IPTA.
Unpatented Technology
Unpatented technology that relates exclusively to our business as of the
separation date was assigned to us. Unpatented technology used by both Pharmacia
and us, but primarily by Pharmacia, was retained by Pharmacia and licensed
royalty-free to us. Unpatented technology used by Pharmacia and us, but
primarily by us, was assigned to us and licensed royalty-free to Pharmacia.
Technology Agreements
Pharmacia has entered into numerous agreements with third parties relating to
patents, patent applications and/or technology. To the extent such agreements
can be identified as relating exclusively to us, and to the extent assignment is
allowed to be made, Pharmacia assigned to us such agreements relating
exclusively to our business. If the subject technology is used by both Pharmacia
and us, but primarily by us, such agreements were assigned to us and a license
provided to Pharmacia for use in Pharmacia's business field. In any case and to
the extent that the agreement is used by both businesses, we and Pharmacia will
continue to permit the agreement to be used by both businesses to the extent the
agreement allows. Royalty payments under these technology agreements will be
allocated between Pharmacia and us on a prorated basis, based on the use of the
technology.
Trademarks
Pharmacia assigned to us at the separation date trademarks used exclusively by
us. Pharmacia also assigned to us all marks relating to the Monsanto name, as
well as the block M and the Food, Health and Hope logo. We will provide a
license to Pharmacia, limited to six months, for Pharmacia to utilize
trademarks, including the Monsanto name, the block M and the Food, Health and
Hope logo. After six months, Pharmacia will no longer have the right to use
those trademarks.
Copyrights
Pharmacia assigned to us all copyrights that are primarily used in our business
as of the separation date.
APPENDIX A -- Page 9
43
First Right To Negotiate
Also, for two years after the separation date, we and Pharmacia will each be
obligated to offer the other a first right to negotiate a license for technology
developed after the separation date that has a use in the other's business
field. The term for initiating such negotiation will expire three years from the
separation date. Such negotiation will be conducted in good faith and will
reflect commercially reasonable license terms. Further, the financial terms of
such license will be no less favorable than financial terms granted to any third
party for the subject technology in a similar field of use.
SERVICES AGREEMENT
The services agreement governs the provision by Pharmacia to us and by us to
Pharmacia of support services, such as financial management, accounting, tax,
payroll, legal, investor relations, human resources administration, financial
transaction support, information technology, data processing, procurement, real
estate management and other general administrative functions. The terms of these
services are generally until December 31, 2001, subject to exceptions. We
anticipate that we will negotiate a new agreement with Pharmacia for the
continued provision of some of these services for some period after December 31,
2001, but we cannot guarantee that we will be able to do so.
During the four months beginning September 1, 2000, we provided services in the
amount of $261 million to Pharmacia. During the same period Pharmacia provided
services to us in the amount of $162 million. At December 31, 2000, we had a net
receivable balance of $99 million with Pharmacia.
CAMPUS LEASE
We currently lease from Pharmacia the premises occupied by us generally located
in Chesterfield, Missouri ("Premises") pursuant to a Lease Term Sheet ("Term
Sheet"). We contemplate entering into a Campus Lease Agreement ("Lease") with
Pharmacia covering the Premises, which we are in the process of negotiating
currently. Under the Lease, we will use the Premises for general office,
research and other purposes consistent with our current use of the Premises
under the Term Sheet. Both the Term Sheet and the Lease include use of common
areas, such as driveways, sidewalks, parking areas, loading areas and access
roads.
It is expected that the Lease will have a term of 15 years, commencing upon
execution. In the absence of an Event of Default (as defined in the Lease), we
would have the right to extend the Lease for up to two successive five-year
periods, upon one-year prior notice. If we complete a Major Capital Improvement
(as defined in the Lease), and no Event of Default has occurred, we would have
the right to extend the Lease for a 10-year period, upon one-year prior notice.
We would also have the right to terminate the Lease by notifying the Pharmacia
in writing three years before termination. In addition, if there is no uncured
Event of Default (as defined in the Lease), and we have elected to add an
Extension Area (as defined in the Lease) to the Premises, we would have the
right to extend the Lease for 12 consecutive five-year terms, subject to certain
terms and conditions.
We will pay our percentage of the Base Rent (as defined in the Lease) as well as
our percentage share of the costs of a basic set of services (as defined in the
Lease), property taxes, insurance costs, other taxes for personal property,
equipment or other property used in connection with providing the basic services
and other costs of maintaining the Premises, as well as other additional
services.
At Pharmacia's cost, Pharmacia may relocate the Premises with written notice to
us and our approval. We may not refuse the relocation if the new premises are
comparable in size, physical characteristics and our conforming uses of the
space.
ALLOCATION OF CORPORATE OPPORTUNITIES
Our certificate of incorporation provides that, unless otherwise provided in a
written agreement between us and Pharmacia, Pharmacia will have no duty to
refrain from engaging in the same or similar activities or lines of business as
our company engages in or proposes to engage in at the time of our initial
public offering, and, to the fullest extent permitted by law, neither Pharmacia
nor any officer or director of Pharmacia (except as provided below) will be
liable to us or our stockholders for breach of any fiduciary duty by reason of
any such activities of Pharmacia. In the event that Pharmacia acquires knowledge
of a potential transaction or matter which may be a corporate opportunity for
both Pharmacia and us, Pharmacia will, to the fullest extent permitted by law,
have no duty to communicate or offer such
APPENDIX A -- Page 10
44
corporate opportunity to us and will, to the fullest extent permitted by law,
not be liable to us or our stockholders for breach of any fiduciary duty as a
stockholder of our company by reason of the fact that Pharmacia pursues or
acquires such corporate opportunity for itself, directs such corporate
opportunity to another person, or does not communicate information regarding
such corporate opportunity to us.
In the event that one of our directors or officers who is also a director or
officer of Pharmacia acquires knowledge of a potential transaction or matter
which may be a corporate opportunity for both us and Pharmacia, such director or
officer will, to the fullest extent permitted by law, have fully satisfied the
fiduciary duty of such director or officer to us and our stockholders with
respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:
- a corporate opportunity offered to any person who is an officer of our
company, and who is also a director but not an officer of Pharmacia, will
belong to us;
- a corporate opportunity offered to any person who is a director but not an
officer of our company, and who is also a director or officer of Pharmacia,
will belong to us if such opportunity is expressly offered to such person in
his or her capacity as a director of our company, and otherwise will belong to
Pharmacia; and
- a corporate opportunity offered to any person who is an officer of both our
company and Pharmacia will belong to us if such opportunity is expressly
offered to such person in his or her capacity as an officer of our company,
and otherwise will belong to Pharmacia.
These corporate opportunities provisions will expire once Pharmacia owns less
than 20% of our common stock and once no person who is a director or officer of
our company is also a director or officer of Pharmacia.
APPENDIX A -- Page 11
45
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46
APPENDIX B
AUDIT AND FINANCE COMMITTEE CHARTER
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1. In accordance with the Company's By-Laws, there shall be a committee of the
Board of Directors to be known as the Audit and Finance Committee. The Audit
and Finance Committee's composition of at least three directors shall meet
the requirements of the Audit Committee Policy of the New York Stock
Exchange as in effect from time to time. Accordingly, all members of the
Committee shall be directors: (a) who, in the opinion of the Company's Board
of Directors, have no relationship to the Company that may interfere with
the exercise of their independence from the Company and its management; and
(b) who are financially literate or who are able to become financially
literate within a reasonable period of time after appointment to the Audit
and Finance Committee. In addition, at least one member of the Committee
shall have accounting or related financial management expertise.
2. The Audit and Finance Committee is appointed by the Board to assist the
Board in fulfilling its responsibility to oversee (a) the Company's
financial reporting processes and systems of internal accounting and
financial controls, (b) the selection of the Company's independent
accountants, (c) the independence and performance of the Company's
independent accountants and internal audit staff, (d) the scope and
effectiveness of the annual independent audit of the Company's financial
statements, (e) the integrity of the Company's financial statements and
financial reports, and (f) the compliance by the Company with applicable
legal and regulatory requirements and Pharmacia's Global Standards of
Business Conduct.
3. The Board of Directors and the Audit and Finance Committee recognize that
the Company's management is responsible for preparing the Company's
financial statements and that the independent accountants are responsible
for auditing those financial statements. Management, including its finance
and internal audit staffs, is responsible for the fair presentation of the
information set forth in such financial statements in conformity with
generally accepted accounting principles. The independent accountants'
responsibility is to provide their opinion, based on their audits, as to
whether the financial statements fairly present, in all material respects,
the financial position, results of operations and cash flows of the Company
in conformity with generally accepted accounting principles. It is not the
duty of the Audit and Finance Committee, or any of its members, to conduct
separate auditing or accounting reviews or to provide independent assurance
of the Company's compliance with applicable legal and regulatory
requirements or Pharmacia's Global Standards of Business Conduct but only to
provide general oversight of these matters.
4. In discharging its oversight role, the Audit and Finance Committee is
empowered to investigate any matter brought to its attention with full
access to all books, records, facilities and personnel of the Company and to
retain outside counsel, auditors or other experts to advise the Audit and
Finance Committee as determined necessary or appropriate from time to time.
Because the Board and the Audit and Finance Committee are to represent the
Company's shareholders, the Company's independent accountants are
accountable to the Board and the Audit and Finance Committee. The Audit and
Finance Committee may request that any officer or employee of the Company or
of the Company's independent accountants attend Audit and Finance Committee
meetings.
Financial Reporting
5. In performing its financial reporting oversight responsibilities, the
Committee shall:
a) Review and assess the adequacy of the Audit and Finance Committee's
charter annually and recommend any proposed changes to the Board for
approval.
b) Make recommendations to the Board with respect to the appointment,
and where deemed necessary, the replacement of the Company's
independent accountants.
APPENDIX B -- Page 1
47
c) Review and approve the timing and scope of the independent
accountants' audit examination and the related fees.
d) Review the audit results, including any material comments and
recommendations made by the Company's independent accountants and the
Company's responses thereto.
e) Review material changes in, and overall compliance with, accounting
and financial reporting requirements, policies and procedures.
f) Review and discuss the scope and effectiveness of the Company's
internal accounting and financial controls with the Company's
financial management and independent accountants.
g) Review the scope of internal auditing activities and any significant
internal audit findings.
h) Review with Company management and the independent accountants the
Company's audited financial statements to be included in its Annual
Report and review and consider with the independent accountants the
matters required to be discussed by Statement of Auditing Standards
No. 61.
i) Prior to the filing of each annual report on Form 10-K, the Chair of
the Audit and Finance Committee or the full Audit and Finance
Committee shall review and consider with the independent accountants
the Company's financial results to be included in such annual report
and any matters required to be discussed by Statement of Auditing
Standards No. 61.
j) Review and discuss management consulting services performed by the
independent accountants and the related fees and their impact on the
independent accountants' independence.
k) Obtain from the independent accountants, on an annual basis, a formal
written statement delineating all relationships between the
independent accountants and the Company consistent with Independence
Standards Board Standard Number 1, and review and discuss with the
independent accountants any such relationships and their impact on
the independent accountants' independence.
l) Provide any required reports to be included in the Company's proxy
statement.
m) Report to the Board on Audit and Finance Committee activities and
significant issues.
Compliance Oversight
6. In discharging its compliance oversight responsibilities, the Audit and
Finance Committee shall:
a) Obtain reports, at least annually, from the Company's Chief
Compliance Officer and the Chief Internal Auditor regarding the
Company and its subsidiaries' compliance with appropriate legal and
regulatory requirements and with Pharmacia's Global Standards of
Business Conduct.
b) Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable legal and regulatory
requirements and Pharmacia's Global Standards of Business Conduct,
and any significant findings of noncompliance.
c) Review annually the Company's information security program and the
specific policies, programs and practices employed to protect against
information misuse.
d) Review annually the Company's general risk management policies,
practices and procedures.
e) Review annually the quality of Monsanto Company's accounting policies
and procedures with the independent auditor.
APPENDIX B -- Page 2
48
Financial Oversight
7. In discharging its finance oversight responsibilities, the Audit and Finance
Committee shall:
a) Review and discuss the Company's financial plans, policies and
budgets to ensure their adequacy and soundness in providing for the
Company's current operations and long-term growth.
b) Review, discuss and make recommendations to the Board concerning
proposed equity, debt or other securities offerings and private
placements.
c) Review and make recommendations to the Board concerning its dividend
policy and dividends to be paid.
Employee Benefit Plans Investment Fiduciary Function
8. Perform all of the fiduciary functions of the Company with respect to the
control and management of the assets of each employee pension or welfare
benefit plan sponsored by the Company, excluding the management and control
of the operation and administration of such plans, to the extent that such
authority and responsibility is not otherwise reserved, assigned or
delegated to the Board of Directors, a committee thereof, or other
committee, individual or entity.
9. The Audit and Finance Committee shall meet at least four times per year.
Meetings will be held at the convenience of the members, but, preferably, in
advance of meetings of the Board of Directors. Minutes of each meeting shall
be kept.
10. The members and chair of the Audit and Finance Committee shall be appointed
by the Board of Directors at least annually.
APPENDIX B -- Page 3
49
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50
[MAP]
Directions from downtown St. Louis:
Take Interstate 64/Highway 40 west to Lindbergh Boulevard north. Take Lindbergh
Boulevard north about 2 1/2 miles to the Olive Boulevard west exit. Follow Olive
to the first traffic light. Turn left and immediately left again into Monsanto's
Creve Coeur Campus. Please follow the signs to the parking area and entrance to
Building K.
Directions from St. Louis International Airport (Lambert):
Take Interstate 70 west to Lindbergh Boulevard south. Take Lindbergh Boulevard
south about 6 miles to Olive Boulevard west exit. Follow to the first traffic
light. Proceed directly across the intersection and then immediately turn left
into Monsanto's Creve Coeur Campus. Please follow the signs to the parking area
and entrance to Building K.
51
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
[MONSANTO LOGO]
52
[FORM OF PROXY CARD]
[FRONT SIDE OF CARD]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MONSANTO COMPANY
The undersigned hereby appoints Hendrik A. Verfaillie, Hugh Grant and R. William
Ide III, and each of them, with power to act without the other and with power of
substitution, as proxies and attorneys-in-fact and hereby authorizes them to
represent and vote, as provided on the other side, all the shares of Monsanto
Company Common Stock which the undersigned is entitled to vote, and, in their
discretion, to vote upon such other business as may properly come before the
Annual Meeting of Stockholders, of the Company to be held April 18, 2001 or any
adjournment thereof, with all powers which the undersigned would possess if
present at the Meeting.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, BUT THE CARD IS SIGNED, THIS
PROXY CARD WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR
PROPOSAL 2, FOR PROPOSAL 3, FOR PROPOSAL 4 AND IN THE DISCRETION OF THE PROXIES
WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IF
THIS CARD IS SIGNED BUT THE BOX GRANTING THE CONSENT TO ELECTRONIC DELIVERY IS
NOT MARKED, THEN NO CONSENT NOR REVOCATION OF ANY PRIOR CONSENT WILL BE DEEMED
TO HAVE BEEN GRANTED OR MADE.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
--------------------------------------------------------------------------------
[BACK SIDE OF CARD]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3
AND 4.
FOR all WITHHELD
nominees AUTHORITY ITEM 2 - APPROVAL OF FOR AGAINST ABSTAIN
listed (except to vote for all PHANTOM
as marked to nominees SHARE [ ] [ ] [ ]
the contrary) listed AGREEMENTS
I. Election of Directors [ ] [ ]
Nominees: ITEM 3 - APPROVAL OF FOR AGAINST ABSTAIN
ANNUAL
01 Frank V. AtLee III INCENTIVE [ ] [ ] [ ]
02 Hendrik A. Verfaillie PROGRAM
03 Hakan Astrom PERFORMANCE
04 Christopher J. Coughlin GOAL
05 Michael Kantor
06 Gwendolyn S. King
07 C. Steven McMillan ITEM 4 - RATIFICATION OF FOR AGAINST ABSTAIN
08 William U. Parfet APPOINTMENT OF
09 John S. Reed INDEPENDENT [ ] [ ] [ ]
ACCOUNTANTS
WILL By checking the box to the right, I consent [ ]
ATTEND to future delivery of annual reports, proxy
If you plan to attend the Annual Meeting, [ ] statements, prospectuses and other materials
please mark the WILL ATTEND box and shareholder communications
electronically via the Internet at a webpage
which will be disclosed to me. I understand
that the Company may no longer distribute
printed materials to me from any future
shareholder meeting until such consent is
revoked. I understand that I may revoke my
consent at any time by contacting the
Company's transfer agent, Mellon Investor
Services LLC, Ridgefield Park, NJ and that
costs normally associated with electronic
delivery, such as usage and telephone
charges as well as any costs I may incur in
printing documents, will be my
responsibility.
SIGNATURE______________________ SIGNATURE________________________ DATE _________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
53
Appendix Provided Pursuant to Instruction 3 of Item 10 of Schedule 14A
FORM OF PHANTOM SHARE AGREEMENTS
PHANTOM SHARE AGREEMENT by and among Monsanto Company, a
Delaware corporation (the "Company"), Pharmacia Corporation, a Delaware
corporation formerly known as Monsanto Company ("Pharmacia"), which is the sole
shareholder of the Company, and ___________ (the "Executive"), dated as of the
___ day of ___________, 2000.
WHEREAS, the Executive is an executive employee of Pharmacia;
and
WHEREAS, Pharmacia and the Executive are parties to an
Employment Agreement dated as of ____, 199_ (the "Current Employment
Agreement"); and
WHEREAS, in connection with the separation of the agricultural
and pharmaceutical businesses of Pharmacia and its subsidiaries, the Executive
has agreed to become an employee of the Company; and
WHEREAS, in that connection, the Company, Pharmacia and the
Executive wish to replace the Current Employment Agreement with the new
arrangement provided for in this Phantom Share Agreement;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effect on Current Employment Agreement. (a) Effective
as of the date of the initial public offering of the Shares (the "Effective
Date"), the Current Employment Agreement shall be null and void and of no
further force or effect. If the initial public offering of the Shares does not
occur on or before March 31, 2001, [OR IF THE COMPANY PUBLICLY ANNOUNCES BEFORE
THAT DATE THAT IT IS NO LONGER CONTEMPLATING MAKING AN INITIAL PUBLIC OFFERING
OF THE SHARES,] then this Agreement shall be null and void and of no further
force or effect, and the Current Employment Agreement shall remain in effect.
(b) [VERFAILLIE: EFFECTIVE NO LATER THAN THE EFFECTIVE
DATE, THE EXECUTIVE SHALL BECOME THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AND
SHALL HAVE THE AUTHORITY, DUTIES AND RESPONSIBILITIES SET FORTH IN EXHIBIT A TO
THIS AGREEMENT AND THE BYLAWS OF THE COMPANY.] [OTHERS: EFFECTIVE NO LATER THAN
THE EFFECTIVE DATE, THE EXECUTIVE SHALL BECOME AN EMPLOYEE OF THE COMPANY.]
2. Grant of Phantom Shares. Effective as of the
Effective Date, the Company shall establish a bookkeeping account for the
Executive (the "Account"), to which it shall from time to time credit
hypothetical shares (the "Phantom Shares") of the common stock of the Company
(the "Shares"). The initial number of Phantom Shares (which may include a
fraction) credited to the Account shall equal the number of shares and fractions
thereof determined by dividing (i) $_____ [INSERT
54
100% OF WALKAWAY VALUE] (the "Initial Value") by (ii) the initial public
offering price of the Shares.
3. Adjustments to Account. Whenever a dividend or
distribution is declared with respect to the common stock of the Company with a
record date after the Effective Date and at a time when Phantom Shares remain in
the Account, an additional number of Phantom Shares shall be credited to the
Account equal to the number of shares and having a Share Value as of the payment
date for such dividend or distribution equal to the fair market value (as
determined by the Committee) of such dividend. In the event of any change in
corporate capitalization such as a stock split, any corporate transaction such
as a merger, consolidation, separation, spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of reorganization in Section 368 of
the Code), or any partial or complete liquidation of the Company, then
notwithstanding any other provision of this Incentive Plan, the Committee shall
make such substitution or adjustments in the aggregate number and kind of shares
represented by the Phantom Shares, if any, as it may determine to be appropriate
or necessary to preserve the value thereof.
4. Vesting, Forfeiture and Payment of Account. (a)
Performance Goal. As soon as reasonably practicable after December 31, 2001, the
Committee shall determine and certify whether or not the Performance Goal has
been met, and if it has not been met, then the Executive shall forfeit all
rights to the Account unless it has previously vested and been paid as provided
below in this Section 4.
(b) Vesting On October 1, 2002. If the Executive remains
an employee of the Company or any member of the Affiliated Group that includes
the Company as of October 1, 2002, and the Committee has certified that the
Performance Goal has been met, then the balance in the Account shall vest as of
April 1, 2003.
(c) Termination of Employment.
(i) The balance in the Account shall vest as of the
date of the termination of the Executive's employment with the Company and the
other members of the Affiliated Group that includes the Company, if such
termination is the result of the Executive's death, Disability, Termination
without Cause or Termination for Good Reason, and
(A) such death, Disability or Termination without
Cause occurs before December 31, 2001; or
(B) such death, Disability or Termination without
Cause occurs on or after December 31, 2001 but before October
1, 2002, and the Committee certifies that the Performance Goal
has been met.
2
55
(ii) The balance in the Account shall not vest if
the termination of the Executive's employment with the Company and the other
members of the Affiliated Group that includes the Company,
(A) occurs before December 31, 2001 for any other
reason than death, Disability, Termination without Cause, or
Termination for Good Reason; or
(B) occurs on or after December 31, 2001 but before
October 1, 2002, and the Committee fails to certify that the
Performance Goal has been met,
and then in either case the Executive shall forfeit all rights to the Account
unless it has previously vested and been paid as provided below in this Section
4.
(d) Change of Control. If there occurs a Monsanto Change
of Control before December 31, 2001 and the Executive remains an employee of the
Company or any member of the Affiliated Group that includes the Company as of
the date of the Monsanto Change of Control, the balance in the Account shall
vest on the date of the Monsanto Change of Control. If there occurs a Pharmacia
Change of Control before December 31, 2001 followed by a Second Trigger, and the
Executive remains an employee of the Company or any member of the Affiliated
Group that includes the Company as of the date of the Second Trigger, the
balance in the Account shall vest on the date of the Second Trigger.
(e) Payment of Account. Whenever the balance in the
Account vests as provided above, the Company shall pay to the Executive, in a
single lump sum cash payment, an amount equal to the number of Phantom Shares
credited to the Account times the Share Value, each determined as of the date of
vesting; provided, that if the Account has vested pursuant to Section 4(c), the
amount of such payment shall in no event be less than the Initial Value. Such
payment shall be made as soon as reasonably practicable, but in any event within
30 days, after the last to occur of (i) the date on which such vesting occurs,
(ii) the date on which the Committee certifies that the Performance Goal has
been met, if such certification is a condition to such vesting, and (iii) the
date on which the Company obtains the shareholder approval required by Section
5, unless such vesting occurs as a result of a Change of Control before the
First Annual Meeting.
5. Shareholder Approval. Notwithstanding any other
provision of this Agreement, the Executive shall have no right to any payments
pursuant to Section 4 of this Agreement or otherwise with respect to the Phantom
Shares and the Account, unless and until the shareholders of the Company have
approved the material terms and conditions hereof in a manner satisfying the
requirements of Section 162(m)(4)(C) for performance-based compensation;
provided, that such shareholder approval shall not be required if a Change of
Control occurs before the
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First Annual Meeting. The Company shall seek such approval at the First Annual
Meeting. By its signature below, Pharmacia hereby approves such terms and
conditions and agrees to vote its shares of the Company for such approval at the
First Annual Meeting.
6. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below.
Account: defined in Section 2.
Affiliated Group: a group of corporations (domestic and
foreign), partnership(s), joint venture(s), and other entities
that would constitute an affiliated group of corporations
within the meaning of Code Section 1504, if each such entity
were a domestic corporation, and for purposes of this
agreement, substituting 30% ownership in Section 1504(a)(2)(A)
for 80% ownership.
Agreement: this Phantom Share Agreement.
Board: the Board of Directors of the Company.
Change of Control: a Monsanto Change of Control or a Pharmacia
Change of Control.
Code: the Internal Revenue Code of 1986, as amended.
Company: defined in the first paragraph of this Agreement.
Committee: the Company's Board People Committee or such other
committee as may be designated by the Board; provided, that
the Committee must consist solely of two or more members of
the Board, each of whom qualifies as an "outside director" for
purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended.
Current Employment Agreement: defined in the second "WHEREAS"
clause of this Agreement.
Disability: Before a Change of Control, "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. After a
Change of Control, "Disability" shall be as defined in the
Executive's Change-of-Control Employment Security Agreement.
Effective Date: defined in Section 1.
Executive: defined in the first paragraph of this Agreement.
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First Annual Meeting: the first annual meeting of the
Company's shareholders that occurs after the Effective Date.
Initial Value: defined in Section 2.
Monsanto Change of Control: the happening of any of the events
described in subsections (a) through (d) below, if immediately
following such event, Pharmacia does not beneficially own a
majority of the then-outstanding Shares:
(a) the acquisition by any Person of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of either (1) the Requisite Common
Percentage of the then-outstanding Shares (the "Outstanding
Company Common Stock") or (2) the Requisite Voting Percentage
of 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, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change
of Control: (A) any acquisition directly from the Company; (B)
any acquisition by the Company or a Subsidiary of the Company;
(C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company, or a Subsidiary
of the Company; or (D) any acquisition by any corporation
pursuant to a transaction that complies with clauses (1), (2)
and (3) of subsection (d) of this definition;
(b) individuals who, as of the date of the initial
public offering of the Shares, constitute the Board (the
"Incumbent Board"), cease for any reason to constitute at
least a majority of the Board; provided, that any individual
becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
stockholders, 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;
(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, (1) all or
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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 that 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 owner-ship,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (2) no Person
(excluding the Company, a Subsidiary of the Company, any
corporation resulting from a Business Combination or any
employee benefit plan (or related trust) thereof) beneficially
owns, directly or indirectly, the Requisite Common Percentage
of the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the
Requisite Voting Percentage of the combined voting power of
the then-outstanding voting securities entitled to vote
generally in the election of directors of such corporation,
except to the extent that such ownership existed prior to the
Business Combination and (3) 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;
(d) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
Monsanto Leadership Team: those individuals who are,
immediately before a Pharmacia Change of Control, members of
the Monsanto Leadership Team or any successor group thereto.
Performance Goal: the Performance Goal is for the Company's
net income, as reported in the Company's audited U.S.
financial statements, but excluding (i) any items that are
identified in the Company's reports filed with the Securities
and Exchange Commission as unusual in nature or nonrecurring
(such as restructuring costs, items related to resolution of
litigation, and items related to mergers, acquisitions and
divestitures) and (ii) the cumulative effects of changes in
accounting methodology made after [INSERT DATE THE GOAL
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IS APPROVED BY THE COMMITTEE], to exceed zero for the period
January 1, 2001 through December 31, 2001.
Phantom Shares: defined in Section 2.
Pharmacia: defined in the first paragraph of this Agreement.
Pharmacia Change of Control: the happening of any of the
events described in subsections (a) through (d) below, if
immediately following such event, Pharmacia beneficially owns
a majority of the then-outstanding Shares:
(a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20 percent or more of either (1) the then-outstanding
shares of common stock of Pharmacia (the "Outstanding
Pharmacia Common Stock") or (2) the combined voting power of
the then-outstanding voting securities of Pharmacia entitled
to vote generally in the election of directors (the
"Outstanding Pharmacia Voting Securities"); provided, that for
purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from Pharmacia; (B) any acquisition by the Company,
Pharmacia, or a Subsidiary of either of them; (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company, Pharmacia, or a
Subsidiary of either of them; or (D) any acquisition by any
corporation pursuant to a transaction that complies with
clauses (1), (2) and (3) of subsection (c) of this definition;
(b) individuals who, as of the date of the initial
public offering of the Shares, constitute the Board of
Directors of Pharmacia (the "Incumbent Pharmacia Board"),
cease for any reason to constitute at least a majority of the
Pharmacia Board; provided, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by Pharmacia's stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Pharmacia Board shall be
considered as though such individual were a member of the
Incumbent Pharmacia 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 of Directors of
Pharmacia;
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(c) consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of Pharmacia or the
acquisition of assets or stock of another corporation (a
"Pharmacia Business Combination"), in each case, unless,
following such Pharmacia Business Combination, (1) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Pharmacia
Common Stock and Outstanding Pharmacia Voting Securities
immediately prior to such Pharmacia 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 Pharmacia Business Combination (including without
limitation a corporation that as a result of such transaction
owns Pharmacia or all or substantially all of Pharmacia's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Pharmacia Business Combination of
the Outstanding Pharmacia Common Stock and Outstanding
Pharmacia Voting Securities, as the case may be, (2) no Person
(excluding the Company, Pharmacia, a Subsidiary of either of
them, any corporation resulting from such Pharmacia Business
Combination or any employee benefit plan (or related trust)
thereof) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Pharmacia
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
Pharmacia Business Combination and (3) at least a majority of
the members of the board of directors of the corporation
resulting from such Pharmacia Business Combination were
members of the Incumbent Pharmacia Board at the time of the
execution of the initial agreement, or of the action of the
Board of Directors of Pharmacia, providing for such Pharmacia
Business Combination;
(d) approval by the stockholders of Pharmacia of a
complete liquidation or dissolution of Pharmacia;
Requisite Common Percentage: as of any given time, a
percentage equal to or greater than the higher of (A) 20
percent and (B) the percentage of the then-outstanding Shares
then beneficially owned by Pharmacia.
Requisite Voting Percentage: as of any given time, a
percentage equal to or greater than the higher of (A) 20
percent and (B) the percentage
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of the voting power of the then-outstanding voting securities
of the Company entitled to vote generally in the election of
directors then beneficially owned by Pharmacia.
Second Trigger: the occurrence, during the period of 180 days
immediately following a Pharmacia Change of Control, of one of
the following: (A) more than half of the members of the
Monsanto Leadership Team are terminated by the Company without
Cause or terminate their own employment for Good Reason, as
those terms are defined in their respective Change-of-Control
Employment Security Agreements; (B) the headquarters of the
Company is relocated by more than 50 miles from its location
immediately before the Pharmacia Change of Control, or a plan
to effect such a relocation is publicly announced; (C) it is
publicly announced that Pharmacia intends to take steps that
will result in its ceasing to beneficially own a majority of
the then-outstanding Shares or that would otherwise result in
a Monsanto Change of Control, and such steps have not
previously been approved by a majority of the members of the
Monsanto Leadership Team.
Share Value: with respect to any given date, the average of
the daily highest and lowest per-share sales prices for the
Shares during normal business hours on the New York Stock
Exchange for each of the ten consecutive trading days ending
with the immediately preceding date, or if the Shares were not
traded on the New York Stock Exchange on such date, then
ending with the next preceding date on which the Shares were
traded, all as reported by such source as the Committee may
select.
Shares: defined in Section 2.
Subsidiary: with respect to any entity, any corporation,
partnership, joint venture, limited liability company, or
other entity or enterprise of which the first entity 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 of comparable equity participation
and voting power.
Termination for Good Reason: Before a Change of Control,
"Termination for Good Reason" shall mean a termination of
employment by the Executive as a result of, and within 90 days
after the occurrence of, any of the following events: (i)
[VERFAILLIE ONLY: THE ASSIGNMENT TO THE EXECUTIVE OF ANY
DUTIES THAT ARE MATERIALLY INCONSISTENT IN ANY RESPECT WITH
THE EXECUTIVE'S POSITION AS CHIEF EXECUTIVE OFFICER AND HIS
DUTIES AND
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RESPONSIBILITIES AS SET FORTH IN EXHIBIT A AND THE BYLAWS OF
THE COMPANY] [OTHERS: A SUBSTANTIAL DIMINUTION IN THE
EXECUTIVE'S POSITION, AUTHORITY, DUTIES OR RESPONSIBILITIES
FROM THOSE IN EFFECT AS OF THE EFFECTIVE DATE], unless such
diminution is remedied by the Company within 30 days after
receipt of notice thereof given by the Executive; (b) any
reduction in the amount of, or failure to pay, the Executive's
current annual base salary or any reduction in the amount of,
or failure to pay, the Executive's other long-term aggregate
incentive compensation opportunities, perquisites or other
benefits, unless such reduction or failure is remedied by the
Company within 30 days after receipt of notice thereof given
by the Executive, or occurs as a result of a reduction that
affects all senior executives of the Company similarly; (c)
the Company's requiring the Executive to be based at any
office or location more than 35 miles from the office where
the executive is employed on the Effective Date or to be based
at a location other than the principal executive offices of
the Company. After a Change of Control, "Termination for Good
Reason" shall mean a termination of employment by the
Executive for Good Reason, as that term is defined in the
Executive's Change-of-Control Employment Security Agreement.
Termination Without Cause: Before a Change of Control,
"Termination Without Cause" shall mean termination of the
Executive's employment by the Company other than as a result
of: (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; (ii) the willful engaging by
the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company; or (iii)
the Executive's Disability. For purposes of this definition,
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.
Notwithstanding the
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foregoing, termination as a result of an even described in
clause (i) or (ii) above shall be deemed to be a "Termination
Without Cause" unless and until (A) the Executive has been
given the opportunity, on reasonable advance notice, to be
heard before the Board, together with counsel to the Executive
and (B) there shall have been delivered to the Executive a
copy of a resolution thereafter duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board (excluding the Executive, if the
Executive is a member of the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of conduct
described in either (i) or (ii) above, and specifying the
particulars thereof in detail. After a Change of Control
"Termination Without Cause" shall mean a termination of the
Executive's employment by the Company other than for Cause or
Disability, as those terms are defined in the Executive's
Change-of-Control Employment Security Agreement.
7. Miscellaneous. (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.
This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(b) The Company shall 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.
(c) 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
(d) 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:
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If to the Executive:
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
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.
(e) 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.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company and Pharmacia
have each caused these presents to be executed in its name on its behalf, all as
of the day and year first above written.
------------------------------------
[NAME OF EXECUTIVE]
MONSANTO COMPANY
By
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PHARMACIA CORPORATION
By
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