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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-12
Pharmacia
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(Name of Registrant as Specified in Its Charter)
Pharmacia
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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)(4) 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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[PHARMACIA LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 2001
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You are invited to the Annual Meeting of Shareholders of Pharmacia
Corporation to be held at the Radisson Plaza Hotel, 100 W. Michigan Avenue,
Kalamazoo, Michigan on Tuesday, April 17, 2001, at 1:00 p.m. (EDT). The meeting
will include remarks by the Chairman and Chief Executive Officer and consider
the following matters:
1. The election of five directors for a term of three years;
2. The management proposals described in the Proxy Statement;
3. The shareholder proposals described in the Proxy Statement; and
4. Such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 5, 2001 are
entitled to vote at the Annual Meeting.
PLEASE PROMPTLY VOTE YOUR SHARES BY ONE OF THE FOLLOWING METHODS:
(1) COMPLETE AND RETURN THE ENCLOSED PROXY CARD;
(2) CALL 1-800-840-1208 AND FOLLOW INSTRUCTIONS;
(3) LOG ON TO HTTP://WWW.PROXYVOTING.COM/PHA AND FOLLOW INSTRUCTIONS; OR
(4) FOLLOW THE INSTRUCTIONS PROVIDED BY YOUR BANK OR BROKER IF YOUR SHARES
ARE HELD INDIRECTLY.
If you wish to attend the meeting in person, please provide advance notice to
the Company by checking the box on your proxy card, by indicating your desire to
attend when you vote by telephone or Internet, or by writing to the Secretary,
Pharmacia Corporation, 100 Route 206 North, Peapack, New Jersey 07977. The
Company may refuse to admit persons who were not shareholders on March 5, 2001.
Peapack, New Jersey
March 16, 2001
/s/ Don W. Schmitz
Secretary
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PHARMACIA CORPORATION
PROXY STATEMENT
The Board of Directors of Pharmacia Corporation ("Pharmacia" or the "Company")
is requesting your proxy to vote the shares of Common Stock of the Company you
owned on March 5, 2001 at the Annual Meeting of Shareholders. The Annual Meeting
will be held at 1:00 p.m. (EDT) on April 17, 2001 at the Radisson Plaza Hotel in
Kalamazoo, Michigan.
Pharmacia was created through the merger (the "Merger") of Monsanto Company
("former Monsanto") and Pharmacia & Upjohn, Inc. ("P&U"). The parties announced
the intention to merge on December 19, 1999 and closed the Merger on March 31,
2000. In the Merger, former Monsanto was renamed Pharmacia and P&U became a
subsidiary of Pharmacia. Shares of former Monsanto stock are now Pharmacia
shares and shares of P&U Common Stock have been converted into Pharmacia shares.
References to the Company or Pharmacia prior to March 31, 2000 refer to former
Monsanto. After the Merger, Pharmacia created a new agricultural subsidiary,
which was also named Monsanto Company to facilitate recognition of the business
by the Company's agricultural customers ("new Monsanto"). On October 23, 2000,
approximately 15% of the shares of new Monsanto were sold to the public in an
initial public offering ("IPO"). Shares of the new Monsanto have no relationship
to shares of the Company and may not be voted at this Annual Meeting of
Shareholders.
Only shareholders of record of the Company's Common Stock at the close of
business on March 5, 2001 are entitled to vote at the Annual Meeting and will
have one vote for each share owned. This Proxy Statement, the accompanying form
of proxy and the 2000 Annual Report to Shareholders, were first forwarded to
shareholders on March 16, 2001.
As of March 5, 2001, 1,299,799,632 shares of Company Common Stock were
outstanding and entitled to vote. In addition, on March 5, 2001, 6,492 shares of
the Company's Convertible Perpetual Preferred Stock were held by the P&U
Employee Stock Ownership Trust pursuant to the P&U Employee Savings Plan. These
shares have total votes equivalent to 11,203,379 shares of the Company's Common
Stock.
Unless you vote to the contrary, the proxies will vote FOR the election of the
Board nominees named below, FOR each of the management proposals, AGAINST each
of the shareholder proposals, and in their discretion on any other matters
properly coming before the meeting. Any shareholder giving a proxy has the right
to revoke it at any time before it is voted at the meeting.
A shareholder who wishes to give a proxy to someone other than the persons
designated by the Board may strike out the names appearing on the enclosed form
of proxy, write in the name of any other person, sign the proxy, and deliver it
to the person whose name has been substituted.
A plurality of the total shares represented at the meeting in person or by
proxy is required for the election of directors. The affirmative vote of a
majority of the shares represented at the meeting in person or by proxy is
required to adopt the management proposals and shareholder proposals. Pursuant
to the Company's By-Laws, abstentions and votes withheld by brokers in the
absence of instructions from beneficial holders (broker nonvotes) have the same
effect as votes cast against a management or shareholder proposal.
The proxy of a shareholder who is a participant in the Company's Dividend
Reinvestment Plan ("DRP") will also vote the shares held in his or her DRP
account in the manner indicated on the proxy. If a shareholder's proxy is not
received, the shares held in his or her DRP account will not be voted.
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Participants in the Company's Savings and Investment Plan, the P&U Employee
Savings Plan (P&U Stock Fund and ESOP), and the Solutia Inc. Savings and
Investment Plan may direct the trustees of these plans how to vote the shares
allocated to their accounts under such plans. If a participant is also a
shareholder of record, his or her proxy will vote the shares held in his or her
account both directly and through these plans in the same manner. The terms of
the plans' trust agreements provide that the trustees will vote the shares held
under the trusts which have not been allocated to participant accounts or for
which no instructions were timely received in the same proportion as the shares
voted by participants.
The Company pays for preparing and distributing this proxy material, as well
as the cost of soliciting and tabulating votes. The Company uses D.F. King, a
proxy solicitation firm, to assist in this process for a fee of $20,000 plus
expenses. The Company will reimburse banks, brokers, custodians, nominees, and
fiduciaries for reasonable expenses incurred by them in forwarding proxy
materials to beneficial owners of the Company's Common Stock and obtaining their
proxies. Representatives of Mellon Investor Services, LLC, the Company's
transfer agent, will act as Inspectors of Election at the Annual Meeting.
Most shareholders 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. If you
hold your shares through a bank or broker, please refer to the information
provided by that entity.
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ITEM 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of five directors each
with terms expiring at successive Annual Meetings of Shareholders. One class of
directors is elected at the Annual Meeting each year to hold office for a
three-year term or until a successor is duly elected and qualified. All current
directors first became members of the Board of Directors of Pharmacia
Corporation upon the effective date of the Merger. Robert B. Shapiro and John S.
Reed resigned from the Board of Directors on February 21, 2001. As a result,
acting pursuant to the Company's By-Laws, the Board reduced the size of the
Board from seventeen to fifteen directors, moved Gwendolyn S. King from the
class of directors serving until the 2003 Annual Meeting to the class serving
until the 2002 Annual Meeting in order to balance the number of directors in
each class and changed the membership on some Board committees.
Except where the authority to do so has been withheld, all proxies will be
voted to elect M. Kathryn Eickhoff, Fred Hassan, Philip Leder, Berthold
Lindqvist and William D. Ruckelshaus as directors. Each nominee is currently a
director of the Company and was a director of either former Monsanto or P&U
before the Merger. All of the directors of P&U, except Mr. Hassan and Mr.
McMillan, were also directors of its predecessor companies.
The Company expects each nominee to be able to serve if elected. Should any
nominee become unavailable for election, all proxies (except proxies marked to
the contrary) will be voted for the election of a substitute candidate nominated
by the Board, unless the Board chooses to reduce the number of directors serving
on the Board.
The following provides the principal occupations for the past five years, age,
and directorships held as of March 5, 2001 for each nominee and other members of
the Board continuing in office.
NOMINEES FOR ELECTION FOR A TERM EXPIRING AT THE ANNUAL MEETING OF SHAREHOLDERS
IN 2004:
M. KATHRYN EICKHOFF PRINCIPAL OCCUPATION: PRESIDENT, EICKHOFF ECONOMICS
INCORPORATED
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 62
President, Eickhoff Economics Incorporated, an economic consulting firm, since 1987;
formerly Associate Director for Economic Policy, United States Office of Management and
Budget. Director: AT&T Corp. and Tenneco Automotive Inc. Member: the Conference of
Business Economists; the Economic Club of New York; the National Association of
[M. KATHRYN EICKHOFF
PHOTO]
Business Economists; and the Forum Club of Southwest Florida.
FRED HASSAN PRINCIPAL OCCUPATION: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, PHARMACIA CORPORATION
FIRST BECAME DIRECTOR OF P&U: 1997
AGE: 55
Chairman of the Board since February 21, 2001; President and Chief Executive Officer,
Pharmacia Corporation since the Merger in March 2000; President and Chief Executive
Officer, P&U from May 1997; Executive Vice President and Director of American Home
Products Corporation, 1995 to 1997. Director: Avon Products, Inc.
[FRED HASSAN PHOTO]
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[PHILIP LEDER PHOTO]
PHILIP LEDER PRINCIPAL OCCUPATION: CHAIRMAN, DEPARTMENT OF GENETICS,
HARVARD MEDICAL SCHOOL, AND SENIOR INVESTIGATOR, HOWARD
HUGHES MEDICAL INSTITUTE
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1990
AGE: 66
Chairman, Department of Genetics, Harvard Medical School since 1980; John Emory Andrus
Professor of Genetics since 1980; Senior Investigator, Howard Hughes Medical Institute
since 1986. Director: Genome Therapeutics Corporation. Trustee: The General Hospital
Corporation; The Hadassah Medical Organization; Massachusetts General Hospital; and The
Charles A. Revson Foundation.
[BERTHOLD LINDQVIST
PHOTO]
BERTHOLD LINDQVIST PRINCIPAL OCCUPATION: RETIRED PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF GAMBRO AB
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 62
President and Chief Executive Officer of Gambro AB, a global medical technology
company, from 1984 to 1998. Director: Probi AB; Novotek AB; Trelleborg AB; Munters AB;
and Securitas AB.
[WILLIAM. RUCKELSHAUS
PHOTO]
WILLIAM D. RUCKELSHAUS PRINCIPAL OCCUPATION: PRINCIPAL, MADRONA INVESTMENT GROUP
L.L.C.
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1985
AGE: 68
Principal, Madrona Investment Group L.L.C., a venture capital group, since 1996;
Chairman, Browning-Ferris Industries, Inc., a waste management and recycling company,
1995 to 1999; Chairman and Chief Executive Officer, Browning-Ferris Industries, Inc.,
1988 to 1995; Of Counsel, Perkins Coie, a law firm, 1985 to 1988; Administrator, U.S.
Environmental Protection Agency, 1983 to 1985. Director: Coinstar, Inc.; Cummins Engine
Co., Inc.; Nordstrom, Inc.; Solutia Inc.; and Weyerhaeuser Company.
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DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2002:
GWENDOLYN S. KING PRINCIPAL OCCUPATION: PRESIDENT, PODIUM PROSE
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1993
AGE: 60
President, Podium Prose, a speaker's bureau company founded in 2000; Senior Vice
President, Corporate and Public Affairs, PECO Energy Company (formerly Philadelphia
Electric Company), a diversified utility company, 1992 to 1998; Commissioner, Social
Security Administration, 1989 to 1992. Director: Lockheed Martin Corp.; Marsh &
[GWENDOLYN S. KING McLennan Companies, Inc.; and Monsanto Company.
PHOTO]
C. STEVEN MCMILLAN PRINCIPAL OCCUPATION: PRESIDENT AND CHIEF EXECUTIVE
OFFICER, SARA LEE CORPORATION
FIRST BECAME DIRECTOR OF P&U: 1998
AGE: 55
President and Chief Executive Officer, Sara Lee Corporation, a consumer goods company,
since July, 2000; President and Chief Operating Officer of Sara Lee Corporation, 1997
to July 2000; Executive Vice President, Sara Lee Corporation, 1993 to 1997. Director:
Sara Lee Corporation; Monsanto Company; and Dynegy Inc.
[C. STEVEN MCMILLAN
PHOTO]
WILLIAM U. PARFET PRINCIPAL OCCUPATION: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, MPI RESEARCH INC.
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 54
Chairman and Chief Executive Officer, MPI Research Inc., a preclinical toxicology and
clinical pharmaceutical testing laboratory since 1999 and Co-Chairman of MPI Research
Inc. from 1995 to 1999; President and Chief Executive Officer of Richard-Allen
Medical, a worldwide manufacturer of surgical products, 1993 to 1996. Director:
[WILLIAM U. PARFET
PHOTO]
Monsanto Company; CMS Energy Corporation; the Financial Accounting Foundation; Stryker
Corporation; Sybron International; and Flint Ink Corporation.
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[JACOBUS F.M. PETERS
PHOTO]
JACOBUS F.M. PETERS PRINCIPAL OCCUPATION: RETIRED CHAIRMAN OF THE EXECUTIVE
BOARD AND CHIEF EXECUTIVE OFFICER, AEGON N.V.
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1993
AGE: 69
Chairman of the Executive Board and Chief Executive Officer, AEGON N.V., an insurance
company, 1984 to 1993. Director: Dresdner Endowment Policy Trust Plc.; and Chairman of
Supervisory Board, Bank Dutch Municipalities; Amsterdam Company for Town Restoration;
Randstad Holding N.V.; SAMAS Group; and KEMA. Member of Supervisory Board: AEGON N.V.
and Gilde Investment Funds.
[ULLA REINIUS PHOTO]
ULLA REINIUS PRINCIPAL OCCUPATION: PRESIDENT, FINANSFAKTA R. AB
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 63
President, Finansfakta R. AB, a publisher and consultant on corporate governance, since
1989. Director: Swedish Association for Share Promotion; the Swedish State Pension Fund
No. 4; and the Royal Swedish Opera. Member: Ethical Advisory Board of the Swedish
County Pension Funds.
DIRECTORS SERVING UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2003:
[FRANK C. CARLUCCI
PHOTO]
FRANK C. CARLUCCI PRINCIPAL OCCUPATION: CHAIRMAN, THE CARLYLE GROUP
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 70
Chairman, The Carlyle Group, a merchant bank, since 1994; U.S. Secretary of Defense
from 1987 to 1989. Chairman: Neurogen Corporation and Nortel Networks Corporation.
Director: Ashland, Inc.; KAMAN Corporation; The Quaker Oats Company; SunResorts, Ltd,
N.V.; and Texas Biotechnology Corporation. Member: Board of Trustees for RAND
Corporation, a nonprofit entity.
[MICHAEL KANTOR PHOTO]
MICHAEL KANTOR PRINCIPAL OCCUPATION: PARTNER, MAYER, BROWN & PLATT
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1997
AGE: 61
Partner, Mayer, Brown & Platt, a law firm, since 1997; U.S. Secretary of Commerce, 1996
to 1997; U.S. Trade Representative, 1993 to 1996; National Chairman for the
Clinton/Gore Campaign, 1992. Director: Monsanto Company and Korea First Bank.
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[OLOF LUND PHOTO]
OLOF LUND PRINCIPAL OCCUPATION: CHAIRMAN, TIETOENATOR CORPORATION
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 70
Chairman, TietoEnator Corporation, an information technology company, since 1999;
President and Chief Executive Officer, Celsius Industrier AB, a defense manufacturing
company, 1984 to 1997. Chairman: SIAR Foundation; the Swedish Financial Accounting
Standards Council. Director: FPG/AMFK; the Federation of Swedish Industries. Member:
Royal Academy of War Sciences.
[JOHN E. ROBSON PHOTO]
JOHN E. ROBSON PRINCIPAL OCCUPATION: SENIOR ADVISOR, ROBERTSON STEPHENS
FIRST BECAME DIRECTOR OF FORMER MONSANTO: 1996
AGE: 70
Senior Advisor, Robertson Stephens, an investment banking firm, since 1993;
Distinguished Faculty Fellow, Yale University School of Management and Visiting Fellow,
The Heritage Foundation, 1993; Deputy Secretary of the U.S. Department of the Treasury,
1989 to 1992; Dean, Emory University Business School, 1986 to 1989; President and Chief
Executive Officer, G.D. Searle & Co., 1985 to 1986. Director: Northrop Grumman Corp.;
and ProLogis Trust.
[BENGT SAMUELSSON PHOTO]
BENGT SAMUELSSON PRINCIPAL OCCUPATION: PROFESSOR OF MEDICAL AND
PHYSIOLOGICAL CHEMISTRY, KAROLINSKA INSTITUTE
FIRST BECAME DIRECTOR OF P&U: 1995
AGE: 66
Professor of Medical and Physiological Chemistry, Karolinska Institute, a university
and medical research facility, since 1972; former President, Karolinska Institute, from
1983 to 1995. Nobel Laureate in Physiology or Medicine in 1982 and current Chairman of
the Nobel Foundation. Director: Svenska Handelsbanken; Pyrosequencing AB; Nicox, S.A.,
Valborne, France. Member: Royal Swedish Academy of Sciences; the American Academy of
Arts and Sciences; the Association of American Physicians; Adacemie des Sciences,
Paris; the U.S. National Academy of Sciences; and the Royal Society, London.
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STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock of the
Company and of new Monsanto by (i) each person who is a director or nominee;
(ii) each executive officer named in the Summary Compensation Table on page 18;
and (iii) all directors and executive officers as a group. Except as otherwise
noted, each person has sole voting and investment power as to his or her shares.
All information is as of March 5, 2001.
PHARMACIA MONSANTO
--------------------------------------------------- -----------------
SHARES OF SHARES OF
COMMON STOCK SHARES UNDERLYING COMMON STOCK
OWNED DIRECTLY OPTIONS EXERCISABLE OWNED DIRECTLY
NAME OR INDIRECTLY WITHIN 60 DAYS(J) TOTAL(1) OR INDIRECTLY(2)
---- -------------- ------------------- ---------- -----------------
Goran Ando(a)(d)................. 27,528 285,500 313,028 0
Frank C. Carlucci(b)............. 31,593 10,170 41,763 12,000
M. Kathryn Eickhoff(b)........... 10,642 3,570 14,212 500
Fred Hassan(d)(e)................ 666,742 2,023,000 2,689,742 10,000
Michael Kantor................... 3,000 21,818 24,818 3,000
Gwendolyn S. King................ 3,868 14,018 17,886 1,000
Philip Leder..................... 9,050 26,326 35,376 9,900
Berthold Lindqvist............... 2,281 10,170 12,451 0
Olof Lund........................ 2,727 10,170 12,897 0
C. Steven McMillan............... 6,000 0 6,000 10,500
Philip Needleman(c).............. 209,203 966,497 1,175,700 2,000
William U. Parfet(b)(d)(f)....... 1,637,790 10,170 1,647,960 22,750
Jacobus F. M. Peters(g).......... 4,705 16,827 21,532 10,000
Ulla Reinius..................... 2,281 10,170 12,451 0
John E. Robson(b)(h)............. 6,094 23,532 29,626 4,000
Timothy G. Rothwell(d)........... 18,707 358,378 377,085 2,000
William D. Ruckelshaus(b)........ 16,847 21,644 38,491 10,000
Bengt Samuelsson(b).............. 5,374 3,570 8,944 0
Robert B. Shapiro................ 31,894 1,251,276 1,283,170 55,000
Hendrik A. Verfaillie(c)(i)...... 232,021 1,057,032 1,289,053 300,100
Pharmacia Corporation(k)......... 0 0 0 220,000,000
25 directors and executive
officers as a group (a)(b)(c)
(d)(e)(f)(g)(h)(i)(j)(k)....... 3,016,846 7,556,825 10,573,671 472,250
-------------------------
(a) Includes 6,906 shares representing deferred compensation payable in stock
which are held in trust with respect to which Dr. Ando has sole voting
power.
(b) Includes the following number of shares representing deferred directors'
fees payable in stock which are held in trust with respect to which the
individual has shared voting power: Mr. Carlucci, 30,434; Ms. Eickhoff,
3,370; Mr. Parfet, 1,137; Mr. Robson, 999; and Mr. Ruckelshaus, 999.
(c) Includes shares held under the Company's Savings and Investment Plan
("SIP"): Dr. Needleman, 3,481; Mr. Verfaillie, 16,647; and directors and
executive officers as a group, 20,128. With respect to shares held under
the SIP, the individuals have sole discretion as to voting and, within
limitations provided by the SIP, investment of shares. With respect to
shares held under other benefit and incentive plans, the executive officers
have sole voting power and no current investment power.
(d) Includes the following number of shares or share equivalents credited under
the P&U Employee Savings Plan with respect to which the individual has sole
voting power: Dr. Ando, 3,367; Mr. Hassan, 4,017; Mr. Parfet, 8,584; Mr.
Rothwell, 1,650.
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(e) Includes 4,400 shares held by Mr. Hassan's wife.
(f) Includes 1,071,850 shares held in trust over which Mr. Parfet shares voting
and/or dispositive power in his capacity as trustee over various trusts.
(g) Mr. Peters purchased new Monsanto shares on the open market because he was
not eligible to participate in new Monsanto's offer to Pharmacia directors
to purchase up to 10,000 shares at the IPO price. (See "Directors' Fees and
Other Arrangements" on page 12.)
(h) Includes 2,379 shares owned jointly by Mr. Robson and his wife.
(i) Includes 150,374 shares owned jointly by Mr. Verfaillie and his wife.
(j) The U.S. Securities and Exchange Commission ("SEC") deems a person to have
beneficial ownership of all shares which that person has the right to
acquire within 60 days, including by the exercise of stock options.
(k) Pharmacia owns approximately 85.3% of the shares outstanding of new
Monsanto and exercises sole voting and investment power over the shares of
common stock of new Monsanto held by it. Mr. Verfaillie is also an
executive officer of new Monsanto. Messrs. Kantor, Parfet, Reed and
McMillan are directors of new Monsanto. These individuals disclaim
beneficial ownership of the shares of common stock beneficially owned by
Pharmacia.
(1) The percentage of shares of outstanding Common Stock of the Company,
including shares underlying options exercisable within 60 days, beneficially
owned by all directors and executive officers as a group does not exceed 1%.
The percentage of such shares beneficially owned by any director, nominee or
executive officer does not exceed 1%.
(2) No options of new Monsanto are currently exercisable. The percentage of
shares of outstanding new Monsanto Common Stock, beneficially owned by all
directors and executive officers as a group, does not exceed 1%. The
percentage of such shares beneficially owned by any director, nominee or
executive officer does not exceed 1%.
BOARD MEETINGS AND COMMITTEES;
COMPENSATION OF DIRECTORS
During 2000, the Board of Directors of former Monsanto met two times, and the
Board of Directors of the Company met four times. All incumbent directors
attended more than 95% of the aggregate meetings of the Board and of the Board
Committees on which they served during the period they held office in 2000.
The Company's Board of Directors currently has the following Committees, all
of which, except the Executive Committee, are composed exclusively of
nonemployee directors.
EXECUTIVE COMMITTEE
Members: Mr. Hassan, Chair; Messrs. Carlucci, Lindqvist, Robson, Ruckelshaus
and Dr. Leder
The Executive Committee generally has the powers of the Board in directing the
management of the Company when a meeting of the full Board cannot be arranged.
The Committee did not meet in 2000.
COMPENSATION COMMITTEE
Members: Mr. Carlucci, Chair; Ms. King and Messrs. McMillan and Ruckelshaus
The Compensation Committee reviews and approves the establishment,
modification and termination of the Company's major compensation and benefit
plans and agreements. The Committee also evaluates the performance of the Chief
Executive Officer and other executive officers of the Company, sets their
salaries, makes grants and awards to them under the Company's compensation plans
and approves other matters related to executive compensation. The Committee met
six times in 2000.
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Members: Mr. Ruckelshaus, Chair; Messrs. Kantor, Lindqvist and Parfet
The Nominating and Corporate Governance Committee reviews and recommends the
size and composition of the Board, nominates candidates for election as
directors and annually evaluates the performance of the Board. The Committee
also reviews and recommends Board Committee charters, members and chairpersons.
In addition, the Committee nominates individuals for election as officers of the
Company and reviews management succession plans. Finally, the Committee reviews
corporate governance policies and practices. The Committee will consider
director nominees recommended by shareholders that meet the timeliness and other
requirements of the Company's By-Laws and applicable law. Any such
recommendations should be made in writing to the Secretary, Pharmacia
Corporation, 100 Route 206 North, Peapack, NJ 07977. The Committee met three
times in 2000.
PUBLIC ISSUES AND SOCIAL RESPONSIBILITY COMMITTEE
Members: Ms. King, Chair; Messrs. Kantor, Lund and Robson
The Public Issues and Social Responsibility Committee reviews and monitors the
Company's performance as it affects communities, customers, and the environment.
The Committee also identifies and investigates emerging issues that will affect
the Company's impact on society. The Committee met four times in 2000.
SCIENCE AND TECHNOLOGY COMMITTEE
Members: Dr. Samuelsson, Chair; Dr. Leder, and Messrs. Parfet and Peters
The Science and Technology Committee reviews and monitors the Company's
science and technology initiatives in research and development, information
technology, global supply, biotechnology and similar areas. The Committee also
identifies and discusses significant emerging science and technology issues. The
Committee met three times in 2000.
AUDIT AND FINANCE COMMITTEE
Current Members: Mr. Peters, Chair; Ms. Eickhoff, Ms. Reinius and Mr. Robson
During 2000 and through the February 2001 meeting, Messrs. Reed and Peters and
Ms. Eickhoff and Ms. Reinius were members of the Audit and Finance Committee and
issued the report set forth below. After the February meeting of the Board of
Directors, Mr. Reed resigned, Mr. Peters assumed the chairmanship of the
Committee, and Mr. Robson was appointed to the Committee. The Company's Board of
Directors determined that both the current and former members of the Committee
are independent as that term is defined by the New York Stock Exchange and free
from any relationship that would interfere with the exercise of their
independent judgment. The Committee's composition and functioning conforms to
applicable requirements of the New York Stock Exchange and the U.S. Securities
and Exchange Commission. The Company's internal auditors and the independent
accountants meet periodically with the Audit and Finance Committee, with and
without management representatives present, to discuss the results of their
examinations, the adequacy of the Company's internal accounting controls, and
the integrity of the Company's financial reporting. The Audit and Finance
Committee also reviews the Company's financial policies to ensure the Company's
sound operation and long-term growth. A copy of the Committee's charter is
attached as Annex A. The Committee met five times in 2000.
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AUDIT AND FINANCE COMMITTEE REPORT
This report reviews actions taken with respect to year 2000 financials and
other year 2000 activities and is submitted by the directors who were on the
Audit and Finance Committee during the relevant time period.
The Audit and Finance Committee reviews the Company's financial reporting
process on behalf of the Board of Directors. 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. Management represented to the Committee
that the Company's consolidated financial statements were prepared in accordance
with generally accepted accounting principles. In fulfilling its
responsibilities, the Committee reviewed and discussed the audited financial
statements contained in the 2000 Annual Report on SEC Form 10-K with the
Company's management and the independent auditors. The Committee relied without
independent verification on the information provided to them and on the
representations made by management and the independent accountants.
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. In addition, the Audit and
Finance Committee has discussed with the independent auditors, the auditors'
independence from the Company and its management including the matters in the
written disclosures and the letter from the auditors that is required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees.
In reliance on the reviews and discussions referred to above, the Audit and
Finance Committee recommended, and the Board of Directors approved, including
the audited financial statements in the Company's Annual Report on SEC Form 10-K
for the year ended December 31, 2000.
ALL INDEPENDENT ACCOUNTANT FEES
The Company paid $18,895,000 to PricewaterhouseCoopers LLP, its independent
accountant, for all professional services rendered in 2000.
AUDIT FEES
The Company paid PricewaterhouseCoopers LLP $4,329,000 for professional
services rendered in connection with the audit of the Company's annual financial
statements and for reviews of the financial statements included in the Company's
Form 10-Qs for 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not retain PricewaterhouseCoopers LLP for professional
services rendered in connection with financial information systems design and
implementation.
ALL OTHER FEES
The Company paid PricewaterhouseCoopers LLP $14,566,000 for all other
professional services rendered in 2000, including tax services ($3,395,000),
management consulting services ($6,034,000), accounting and due diligence
services for mergers and acquisitions ($2,461,000), employee benefit plan
audits, control reviews and other miscellaneous services ($2,676,000).
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The Audit and Finance Committee of the Board considers that the provision of
these services is compatible with maintaining the independence of
PricewaterhouseCoopers LLP.
AUDIT AND FINANCE COMMITTEE
J.S. Reed, Chair M.K. Eickhoff U. Reinius J.F.M. Peters
February 20, 2001
DIRECTORS' FEES AND OTHER ARRANGEMENTS
Annual compensation for nonemployee members of the Board of Directors consists
of a retainer fee of $50,000 and either 2,200 shares of Company Common Stock or
a stock option grant of 6,600 shares of Company Common Stock having an exercise
price equal to the fair market value of such stock on the date of grant and a
term of ten years. Each nonemployee chairperson of a Board committee receives an
additional annual fee of $20,000. Directors are permitted to defer all or part
of their fees in Company Common Stock or cash until they leave the Board. There
are no additional fees for attending meetings or serving on regular Board
committees.
Mr. Hassan, as Chairman of the Board and Chief Executive Officer, receives no
additional compensation for serving as Chairman of the Board, Chairman of the
Executive Committee or as a member of the Board.
Ms. King and Messrs. Kantor, McMillan and Parfet also serve on the new
Monsanto Board of Directors and receive an annual retainer fee having a value of
$110,000, with an additional $10,000 paid to Messrs. Kantor and McMillan as
committee chairs. Half of this compensation is payable in deferred Monsanto
common stock and the remainder is payable, at the election of each director, in
the form of nonqualified stock options, restricted common stock, deferred common
stock, or current or deferred cash. At the time of the IPO, Messrs. Kantor,
McMillan and Parfet were granted a stock option to purchase 10,000 shares of
Monsanto's common stock at the IPO offering price of $20/share vesting in 5,000
share increments in 2002 and 2003. New Monsanto granted Ms. King a 10,000 share
stock option having the same terms and provisions as the grants to other
directors upon her appointment to the new Monsanto Board of Directors in
February, 2001. Directors of new Monsanto who are employees of Pharmacia do not
receive compensation for serving on the Board of Directors of new Monsanto.
Directors who were U.S. citizens were offered the opportunity to purchase up
to 10,000 shares of new Monsanto at the offering price in the initial public
offering. Because the public offering was not registered outside the U.S.,
directors who were not U.S. citizens were unable to take advantage of this
opportunity.
TRANSACTIONS AND RELATIONSHIPS WITH DIRECTORS
Mr. Kantor is a partner at the law firm of Mayer, Brown & Platt, which
provided services to the Company in 2000 and has been retained to provide
services to new Monsanto in 2001. The amount of legal fees paid by the Company
to Mayer, Brown & Platt during 2000 did not exceed five percent (5%) of such
firm's gross revenues for its applicable fiscal year.
Mr. Parfet is Chairman and Chief Executive Officer of MPI Research Inc., which
provided services to the Company in 2000 and is providing services to the
Company in 2001. Total fees paid by the Company to MPI Research Inc. for 2000
were approximately $539,250.
Mr. Robson is Senior Advisor of Robertson Stephens, which provided investment
advisory services to the Company in 2000 and is expected to provide services to
the Company in 2001.
Dr. Samuelsson is Professor of Medical and Physiological Chemistry, Karolinska
Institute. The Company provides research grants and other business-related
funding to the Institute.
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EXECUTIVE COMPENSATION
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
Since the Merger did not occur until March 31, 2000, shares of Pharmacia
Corporation did not begin trading until April 3, 2000. As a result, the
cumulative total shareholder return on the Company Common Stock of the merged
entity over a five-year period cannot be provided. However, at the close of the
first trading day after the Merger was publicly announced, December 20, 1999,
the total market capitalization of the two companies was $48.1 billion; on March
31, 2000, the effective date of the Merger, the total market capitalization of
the Company was approximately $63.7 billion; and on March 5, 2001, the date of
share information in this Proxy Statement, the total market capitalization of
the Company was approximately $69.7 billion.
The graph below shows the total shareholder return (assuming reinvestment of
dividends) on the former Monsanto's Common Stock from December 31, 1995 until
March 31, 2000, and on the Company's Common Stock from April 3, 2000 through
December 31, 2000, with the cumulative total return of the Standard & Poor's 500
Stock Index and the cumulative total return of a peer group. Because former
Monsanto was involved in the pharmaceutical, chemical and agricultural
businesses, and no published peer group accurately reflected former Monsanto's
business mix during the five years prior to the Merger, former Monsanto measured
its total shareholder return compared to a group of companies that as a whole
reflected the business mix of former Monsanto. Because Pharmacia continues in
the pharmaceutical business and, through its ownership in new Monsanto, the
agricultural business, and since Pharmacia stock has only been publicly traded
since April 3, 2000, Pharmacia has continued to use the former Monsanto peer
group. This peer group index includes AstraZeneca plc, Aventis, Bayer AG ADR,
Dow Chemical Company, E.I. DuPont de Nemours and Company, and Novartis AG. 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 Company's Common Stock, and are not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
CUMULATIVE TOTAL RETURN
BASED UPON AN INITIAL INVESTMENT OF $100 ON DECEMBER 31, 1995
WITH DIVIDENDS REINVESTED
[GRAPH]
PHARMACIA * S&P 500 INDEX PEER GROUP
----------- ------------- ----------
Dec-95 100.00 100.00 100.00
Dec-96 161.63 122.96 141.31
Dec-97 194.13 163.98 189.96
Dec-98 220.07 210.85 212.86
Dec-99 164.65 255.21 211.83
Dec-00 284.99 231.98 244.15
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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
The overall goal of the Compensation Committee is to develop compensation
policies and practices that encourage and reward executive efforts to create
shareholder value through achievement of corporate objectives, business
strategies and performance goals. This is accomplished by blending cash and
equity compensation and by aligning the interests of executives with those of
shareholders generally.
There are certain principles to which the Committee adheres in structuring the
compensation package for each of the executive officers. They are as follows:
Long-Term and At-Risk Focus: The major portion of compensation for senior
executive officers is composed of long-term, at-risk pay to align management
with the long-term interests of shareholders. Over time, the Committee expects
that less emphasis will be placed on base salary, annual cash incentives and
employee benefits.
Equity-Based: Equity-based plans comprise the major part of the at-risk
portion of total compensation, which is intended to instill ownership and
long-term strategic thinking and link compensation to corporate performance and
the interests of shareholders generally. Consistent with this philosophy, the
Compensation Committee established Stock Ownership Guidelines for officers and
other key employees of the Company. The Committee annually reviews each
executive officer's ownership interest as it relates to the guidelines.
Market Competitiveness: Total compensation is targeted at the upper end of
the second highest quartile of total compensation of a group of similar global,
research-based pharmaceutical companies with headquarters in the United States
[American Home Products Corporation, Bristol-Myers Squibb Company, Eli Lilly and
Company, Johnson & Johnson, Merck & Company, Inc., Pfizer Inc. and
Schering-Plough Corporation (the "Comparator Group")]. In addition, the
Committee considered, without particular weighting, other large,
high-performing, general industry companies that the Committee believes are
relevant to assure competitiveness of the overall compensation package. These
comparator groups were selected as the groups of companies competing for
employment of the same key executives. The Comparator Group is different from
the group of combined pharmaceutical, chemical and agricultural companies
previously used by former Monsanto and continued by Pharmacia to measure stock
performance over a five year period as shown in the graph set forth on page 13.
The compensation for the executive officers of new Monsanto is set by the new
Monsanto Board. Over time, the level of the Company's competitiveness in total
compensation will be based heavily on the Company's stock price performance
relative to the Comparator Group. Clearly superior performance should result in
actual total compensation levels within the top quartile of the Comparator
Group.
COMPONENTS OF EXECUTIVE COMPENSATION
The four primary components of executive compensation are:
- Base salary
- Annual incentives
- Long-term incentives
- Employee benefits
Each category is offered to key executives in various combinations, structured
in each case to meet varying business objectives. The philosophy underlying each
element of executive compensation is discussed below.
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Base Salaries: All executive base salaries, including Mr. Hassan's, are based
on several factors:
- Competitive labor market position determined from market surveys
- Level of job responsibility
- Individual and team performance
These factors are not weighted, and the Compensation Committee bases salary
increases on an assessment of the above factors. The Committee's objective is to
ensure base salaries are competitive at or near the median of the Comparator
Group. Base salaries above the median may be necessary, in some cases, to
attract and retain key talent. Officer performance ratings and base salary
increases are reviewed by the Committee annually.
Annual Incentives: Target annual cash incentives and specific performance
criteria are established each year for executive officers with the actual payout
based on the extent to which the performance criteria are met. Annual incentives
are "targeted" at the median of the Comparator Group, with above-average and
superior performance resulting in actual payouts above the median of the
Comparator Group. Below a threshold level of performance, no awards may be
granted under the plan. The weightings may be adjusted to take into account
unusual circumstances. For 2000, the actual award was based on growth in
revenue, growth in earnings per share, and individual performance. These
performance measures were exceeded, and, accordingly, the actual payouts were
above the median.
Long-Term Incentives: Long-term equity-based compensation, in the form of
stock options and restricted stock, comprises the largest portion of the total
compensation package for executive officers. In any given year, an executive
officer may be offered stock options and/or restricted stock. Long-term
incentives are targeted within the second highest quartile of the Comparator
Group, with superior performance resulting in long-term compensation within the
top quartile of the Comparator Group.
Stock Options: Stock options provide executives with the opportunity
to buy Company Common Stock, increase their equity in the Company and share
in the appreciation in the value of the stock. The Committee grants stock
options annually with ten-year terms at an exercise price equal to the fair
market value on the date of grant. The stock options have value based on
the level of stock price appreciation over the market price on the date of
grant. This provides an incentive for executives to create wealth for the
shareholders and rewards them in proportion to the gain received by other
shareholders. Stock option awards generally vest ratably over a three-year
period for retention purposes. Grants for the executive officers, including
Mr. Hassan, were based on a comparison to the Comparator Group.
Restricted Stock: Restricted stock is used to focus executives on the
long-term performance of the Company and to serve as a retention device for
high potential and key employees. Restricted stock awards generally vest
over a three-year period and are normally not granted on an annual basis.
Some restricted stock awards will only vest upon the attainment of specific
Company performance measures.
Employee Benefits: Employee benefits offered to key executives are designed
to be competitive and provide a "safety-net" of protection against the financial
catastrophes that can result from illness, disability or death, and to provide a
reasonable level of retirement income based on years of service with the
Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
To ensure Mr. Hassan's long-term commitment to P&U, the P&U Board entered into
an employment agreement with Mr. Hassan in 1999 which secured his services as
Chief Executive Officer of P&U for a period of five years. Importantly, the 1999
agreement also required Mr. Hassan
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to serve as Chief Executive Officer of any successor to P&U (if elected by the
successor's Board), without receiving any additional compensation, severance pay
or accelerated vesting of the restricted stock granted under his agreement. This
was less favorable than the terms provided to other P&U executive officers in
the event of a change-in-control of P&U.
As disclosed in prior proxy statements, in consideration for Mr. Hassan
accepting the terms of his 1999 employment agreement, the agreement provided
that Mr. Hassan would receive 200,000 restricted shares in 1999 (which would not
vest until his retirement unless otherwise decided by the Board), a stock option
of 150,000 shares to be received in early 2000 which would vest in stages based
on stock price appreciation or upon a change-in-control, and a regular annual
stock option grant of 350,000 shares to be received in early 2000 at the same
time stock options were granted to other P&U executive officers. Upon the
merger, the P&U shares were converted into shares of the Company at the exchange
rate of 1.19. As a result, these shares are now equivalent to 238,000, 178,500
and 416,500 shares of Company Common Stock, respectively. These stock awards
were granted to Mr. Hassan pursuant to his 1999 employment agreement for his
continued service as Chief Executive Officer of P&U.
Effective upon the Merger, the Company's Board appointed Mr. Hassan Chief
Executive Officer and assumed his P&U employment agreement, the result of which
was to continue the same compensation that P&U paid Mr. Hassan and without
requiring the payment of any special change-in-control compensation.
As disclosed in prior proxy statements, when the Company's Board reviewed
compensation for the new executive team after the Merger, the Board decided that
Mr. Hassan should receive additional equity compensation at the same time as the
Company's other executive officers. As a result, in 2000, Mr. Hassan received a
founders stock option grant of 500,000 shares (as part of a grant to key
executives as retention awards and vesting ratably over a three-year period) and
a target grant of 300,000 founders performance shares eligible to be earned, in
the range of 0% to 125% of target, on December 31, 2004 based on the Company's
total shareholder return and the Company's total shareholder return as it
relates to the Comparator Group, or upon a change-in-control of the Company,
each with the same terms provided to other executive officers.
The Board also adjusted Mr. Hassan's 2000 base salary to $1,300,000, and his
target incentive compensation award for 2000 to $1,300,000 to reflect the added
responsibility as CEO of the combined Company. All performance objectives
established for Mr. Hassan's 2000 incentive compensation -- growth in revenue,
growth in earnings per share and individual performance -- were exceeded. As a
result of this superior performance, his success in quickly and effectively
integrating the prior companies' businesses after the Merger and his important
contributions in representing the Company to external audiences, Mr. Hassan's
actual incentive payout for 2000 was $2,005,600.
The 2001 compensation for Mr. Hassan was established by the Committee based on
an analysis of his past performance as CEO of the Company and P&U, a review of
comparable compensation for chief executive officers of the Comparator Group and
application of the compensation policies described above.
The Board evaluates the performance of the Company's Chief Executive Officer
at least annually based upon both the Company's financial performance and the
extent to which the strategic and business goals established for the Company are
met.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The U.S. Internal Revenue Code limits to $1 million the corporate tax
deduction for compensation paid to certain executive officers, unless the
compensation meets the U.S. Internal Revenue Code requirements for qualified
performance-based compensation. The Committee believes that the
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stock options granted to the Company's executive officers in 2000 and, under
most circumstances, the performance shares granted in 2000 will be deductible.
Payments under the annual incentive plan for the year 2000 may not be fully
deductible under the U.S. Internal Revenue Code. The Company is requesting
shareholder approval for its new annual incentive plan, in order to make
payments under the annual plan fully deductible under the U.S. Internal Revenue
Code starting in the year 2001. The Committee intends to structure the Company's
annual and long-term incentive plans to maximize the deductibility of
compensation. The Committee, however, reserves the authority to award
nondeductible compensation in such circumstances as it deems appropriate and in
the best interests of the Company.
CONCLUDING STATEMENT
This Committee believes the executive compensation policies and programs
described in this report serves the best interest of the shareholders.
Compensation delivered to executives is intended to be linked to and
commensurate with Company performance and with shareholder expectations. The
Committee believes that the results of the compensation philosophy described in
this report should be measured over a period of time sufficient to determine
whether compensation strategy and philosophy development is aligned with and
responsive to shareholder expectations.
COMPENSATION COMMITTEE
F.C. Carlucci, Chair G.S. King C.S. McMillan W.D. Ruckelshaus
February 20, 2001
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board of Directors of
Monsanto, P&U or Pharmacia were officers or employees of such companies. Mr.
McMillan and Ms. King who serve on the Company's Compensation Committee also
serve as members of new Monsanto's People Committee. None of the executive
officers of the Company has served on the board of directors or compensation
committee of another company at any time during which an executive officer of
such other company served on the Company's Board of Directors or the
Compensation Committee.
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SUMMARY COMPENSATION TABLE
Under the rules of the U.S. Securities and Exchange Commission, the Company is
required to report the compensation earned in 2000 and the two prior years for
Mr. Shapiro who served as Chief Executive Officer of former Monsanto prior to
the Merger, and for Mr. Hassan, who served as Chief Executive Officer of the
Company after the Merger, and for the next four most highly compensated
executive officers of the Company during 2000.
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------------------------------------------------------------ --------------------------------------------------
AWARDS PAYOUTS
----------------------- --------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION DURING 2000 YEAR ($) ($) ($)(2) ($) (#) ($) ($)(4)
-----------------------------------------------------------------------------------------------------------------------------
F. Hassan(1) 2000 1,250,006 2,005,600 51,499 0 1,095,000 0 183,654
President and CEO, 1999 1,114,688 1,901,400 0 12,012,501(3) 476,000 0 50,883
Pharmacia 1998 1,050,000 1,176,000 103,116 0 357,000 0 37,000
R.B. Shapiro(5) 2000 225,000 0 0 0 14,379,734
CEO, 1999 850,000 1,440,000 61,207 0 394,064 0 120,185
Former Monsanto 1998 800,000 800,000 0 0 0 101,070
P. Needleman 2000 675,000 761,000 0 0 125,000 $380,000(6) 774,313
Senior Executive Vice 1999 550,000 1,100,000 0 0 96,005 0 105,221
President, 1998 495,833 700,000 0 0 193,588 0 67,761
Chief Scientific Officer
and Chairman, Research and
Development
H. A. Verfaillie(7) 2000 754,487 925,000 0 0 0(7) 0 2,099,760
Executive Vice President 1999 650,000 900,000 0 0 222,115 0 138,932
and CEO, Monsanto 1998 600,000 810,000 0 0 0 72,439
Agricultural Operations
T. G. Rothwell 2000 778,257 901,300 0 0 244,000 0 79,201
Executive Vice President 1999 756,000 756,730 0 0 119,000 0 51,783
and President, Global 1998 676,552 600,300 325,000 687,969(8) 261,800 0 42,333
Country Operations
G.A. Ando 2000 716,184 691,700 0 0 244,000 0 114,734
Executive Vice President 1999 695,730 648,170 53,387 0 119,000 0 29,320
and President, Research 1998 662,600 523,274 69,754 0 297,500 0 20,533
and Development
-------------------------
(1) Information is presented for Mr. Hassan, who became Chief Executive Officer
of the Company effective upon the Merger. Mr. Hassan's compensation includes
equity awards that were granted to him by P&U as consideration for entering
into a five-year employment agreement in 1999 that, among other things,
required Mr. Hassan to serve as Chief Executive Officer of any successor to
P&U (if elected by the successor's Board of Directors) without additional
compensation, any change-in-control severance pay or accelerated vesting of
restricted stock granted under such agreement.
(2) Applicable regulations set reporting levels for certain noncash
compensation. For Mr. Hassan, the 1998 amounts presented in this column
include, among other things, relocation allowance and moving expenses,
amounts for reimbursement of taxes and related grossups for income taxes in
excess of those that would have been incurred in his home country, and
amounts paid to Mr. Hassan's home country's social security system while he
was employed in the U.K. by P&U. This column includes an amount representing
personal use of Company aircraft in 2000 for Mr. Hassan of $37,499 and in
1999 for Mr. Shapiro of $36,938. For Mr. Rothwell, the 1998 amount reflects
a cash bonus paid to compensate for the loss of bonus from his prior
employer, and the 1998 amount for Dr. Ando includes $16,249 in relocation
expenses.
(3) Under the terms of Mr. Hassan's 1999 employment agreement with P&U he
received 200,000 restricted shares of P&U Common Stock in 1999 (converted
effective upon the Merger to
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238,000 shares of Company Common Stock), which are included in the table at
the fair market value on date of grant and which will vest on the first day
of the month following retirement, provided such date is not prior to
December 1, 2004, or otherwise as approved by the Board. At December 31,
2000, the market value of these shares was $14,518,000. Dividends are paid
on these restricted shares.
(4) Amounts shown for 2000 include: contributions to savings plans for Mr.
Hassan, $150,654; Mr. Shapiro, $12,180; Dr. Needleman, $147,437; Mr.
Verfaillie, $137,766; Mr. Rothwell $39,282; and Dr. Ando $96,246; split
dollar life insurance premiums for Mr. Hassan $33,000; Mr. Shapiro, $25,200;
Dr. Needleman, $20,460; Mr. Verfaillie, $7,817; Mr. Rothwell $39,000; and
Dr. Ando $18,200; performance match payments on deferred bonus awards for
Mr. Verfaillie, $40,123, and Dr. Needleman, $35,840. For Mr. Shapiro, the
2000 amount also includes $360,000 for services provided as senior advisor
to the Chief Executive Officer pursuant to a consulting agreement between
the Company and Mr. Shapiro, $8,800,799 he received from former Monsanto
upon his retirement which was effective as of the Merger, $46,367 paid upon
a change-in-control under former Monsanto's medical, dental and AD&D plans,
and $5,135,188 paid upon a change-in-control under former Monsanto's stock
purchase incentive plan. For Mr. Verfaillie, the 2000 amount also includes a
$1,854,373 cash award paid upon a change-in-control under former Monsanto's
stock purchase incentive plan and $59,632 for the employee portion of the
cash surrender value of split dollar life insurance, and $49 in costs for
new Monsanto's executive travel accident plan. For Dr. Needleman, the 2000
amount also includes a $570,576 cash award paid upon a change-in-control
under former Monsanto's stock purchase incentive plan (see "Other
Information Regarding Management -- Indebtedness" on page 26).
(5) Information is presented for Mr. Shapiro, who was Chairman and Chief
Executive Officer of former Monsanto before the Merger. He was Chairman of
the Board of Pharmacia until February 21, 2001.
(6) Prior to February 1997, Dr. Needleman participated in the Searle Phantom
Stock Option Plan of 1986, which gave participants the opportunity to
receive the appreciation in the value of a hypothetical share of Common
Stock of G.D. Searle & Co., now a wholly-owned subsidiary of the Company.
When the Searle plan was terminated in 1997, Dr. Needleman was credited with
a combination of cash and options on Common Stock representing the current
and future anticipated appreciation of the units. The amount shown
represents a payout in connection with the terminated Searle plan.
(7) All compensation for Mr. Verfaillie since September, 2000 has been paid by
new Monsanto. Mr. Verfaillie did not receive any Pharmacia stock options but
received a stock option grant for 1,066,670 new Monsanto shares at a grant
price of $20.
(8) Mr. Rothwell commenced employment on January 23, 1998. Under the terms of
Mr. Rothwell's employment agreement with P&U, in order to replace equity
compensation awards received from his prior employer that he forfeited by
joining P&U, he received 18,500 restricted shares of such company's Common
Stock (converted effective upon the Merger to 22,015 shares of Company
Common Stock), which are included in the table at the fair market value on
date of grant. All compensation was paid by P&U, of which Mr. Rothwell was
Executive Vice President and President, Global Pharmaceutical Operations
prior to the Merger.
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STOCK OPTION GRANTS IN 2000
GRANT DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------------------------------------------ -------------
(A) (B) (D) (E) (F)
NUMBER OF (C)
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1)(2) FISCAL YEAR ($/SHARE) DATE VALUE($)(3)
---- ---------- ------------ --------- ---------- -------------
F. Hassan............................. 178,500 1.29 37.3 1/03/10 2,120,000
416,500 3.00 41.2 2/14/10 5,470,000
500,000 3.60 51.6 6/01/10 8,980,000
R.B. Shapiro.......................... NA
P. Needleman.......................... 125,000 .90 51.6 6/01/10 2,250,000
H.A. Verfaillie(4).................... 0
T.G. Rothwell(5)...................... 119,000 .86 41.2 2/14/10 1,560,000
1,291(5) .01 51.6 1/25/08 20,000
1,292(5) .01 51.6 2/24/08 20,000
125,000 .90 51.6 6/01/10 2,250,000
G. Ando............................... 119,000 .86 41.2 2/14/10 1,560,000
125,000 .90 51.6 6/01/10 2,250,000
-------------------------
(1) Option grants for named executive officers who received grants in 2000 from
the Company were granted at 100% of the market price on the date of grant
and generally become exercisable in installments of 33 1/3% per year on each
of the first through third anniversaries of the grant date. The options have
a term of ten years and will vest in full upon a change-in-control of the
Company. Option grants to Messrs. Hassan and Rothwell and Dr. Ando by P&U
vested upon the Merger.
(2) Options in respect of 150,000 shares (which were intended to have vested
upon attainment of specified performance criteria) and 350,000 shares (which
were intended to vest ratably over three years) granted to Mr. Hassan by P&U
pursuant to his 1999 employment agreement were converted into options to
purchase 178,500 shares and 416,500 shares of Company Common Stock effective
as of the Merger. Mr. Rothwell and Dr. Ando each received option grants in
respect of 100,000 shares (which were intended to vest ratably over three
years) from P&U prior to the Merger that were converted into options to
purchase 119,000 shares of Company Common Stock effective as of the Merger.
(3) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. Accordingly, there is no assurance that the value realized
by an executive, if any, will be at or near the value estimated by the
Black-Scholes model. Future compensation resulting from option grants is
based solely on the performance of the Company's stock price. The following
weighted-average assumptions were made for purposes of calculating the
original Grant Date Present Value for options granted by the Company: an
option term of ten years, average volatility of 26.0%, dividend yield of
1.0%, a risk-free interest rate of 6.75%, a projected exercise period of 5.0
years and no additional value for reloaded stock options. The following
assumptions were made for purposes of calculating the original Grant Date
Present Value for options granted by P&U: an option term of ten years,
average volatility of 24.8%, dividend yield of 1.98%, a risk-free interest
rate of 6.75%, a projected exercise period of 5.0 years and no additional
value for reloaded stock options.
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(4) Mr. Verfaillie did not receive any Pharmacia stock options but received a
grant of 1,066,670 stock options of new Monsanto at a grant price of $20.00
and an expiration date of October 16, 2010.
(5) Under the terms of his option grant from P&U, Mr. Rothwell received reloaded
options upon a stock-for-stock option exercise pursuant to the terms of an
option grant he received from P&U.
AGGREGATED OPTION EXERCISES IN 2000 AND
OPTION VALUES ON DECEMBER 31, 2000
The following table shows the number of stock options exercised and the value
realized by the named executive officers in 2000 and the number of unexercised
stock options remaining at year-end and the potential value thereof based on the
year-end closing market price of the Company's Common Stock of $61.00.
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 2000(#) DECEMBER 31, 2000
ACQUIRED ON VALUE -------------------- -----------------------
EXERCISE REALIZED EXERCISABLE EXERCISABLE
NAME (#) ($)(1) (UNEXERCISABLE)(2) (UNEXERCISABLE)(2)(3)
---- ----------- ---------- -------------------- -----------------------
F. Hassan.............. 0 0 2,023,000(500,000) 49,710,763(4,703,125)
R.B. Shapiro........... 670,000 20,069,850 1,898,174(0) 59,178,831(0)
P. Needleman........... 145,000 6,715,575 958,393(133,104) 31,448,534(1,175,781)
H.A. Verfaillie........ 544,890 23,940,109 1,008,399 (48,633) 28,466,450(0)
T.G. Rothwell.......... 54,111 1,293,348 401,448(125,000) 8,668,357(1,175,781)
G.A. Ando.............. 250,000 5,418,200 285,500(125,000) 5,448,859(1,175,781)
-------------------------
(1) The amount in column (c) reflects the value of shares received on the
exercises of options less the exercise price.
(2) Unexercised options shown in columns (d) and (e) include grants received by
the named executive officer over an extended period of time by P&U and
former Monsanto, as applicable, and Pharmacia. With the exception of certain
options granted to Messrs. Needleman and Verfaillie, all unvested stock
options granted to the named executive officers prior to the Merger by P&U
or former Monsanto became exercisable upon the Merger.
(3) Information presented for Messrs. Hassan and Rothwell and Dr. Ando includes
options granted by P&U prior to the Merger which were converted into options
to purchase Company Common Stock effective as of the Merger.
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LONG-TERM INCENTIVE PLAN AWARDS IN 2000
The following table shows awards of "Founders Performance Contingent Share"
units after the Merger under the Company's Long-Term Incentive Plan. There is no
assurance the named individuals will receive any payout from these awards since
actual payouts will be based on the Company's performance over a five-year
period measured by the Company's total shareholder return ranking as compared to
its compensation peer group and the Company's achievement of its targeted
five-year compounded shareholder return. Actual payouts can be in the range of
0% to 125% of the target.
ESTIMATED FUTURE PAYOUTS UNDER
NONSTOCK PRICE-BASED PLANS
NUMBER OF UNITS PERFORMANCE OR OTHER -----------------------------------
(PERFORMANCE PERIOD UNTIL MATURATION TARGET MAXIMUM
NAME CONTINGENT SHARES) OR PAYOUT(1) THRESHOLD (# SHARES) (# SHARES)
---- ------------------ ----------------------- --------- ---------- ----------
F. Hassan............ 300,000 1/1/00-12/31/04 0 300,000 375,000
R.B. Shapiro......... 0
P. Needleman......... 100,000 1/1/00-12/31/04 0 100,000 125,000
H.A. Verfaillie...... 0
T.G. Rothwell........ 100,000 1/1/00-12/31/04 0 100,000 125,000
G.A. Ando............ 100,000 1/1/00-12/31/04 0 100,000 125,000
-------------------------
(1) The Founders Performance Contingent Share units will be payable if and to
the extent the Company attains the performance goals over the five-year
performance period, or upon a change-in-control. A target award stated as a
number of stock units has been established for each participant.
PENSION PLAN
The Company established the Key Executive Pension Plan ("KEPP") in 2000 which
harmonized the pension benefits provided to certain key executives. All of the
named executive officers other than Messrs. Shapiro and Verfaillie are eligible
for retirement benefits under the KEPP upon retirement. The benefit payable
under the KEPP at normal retirement age is offset by the following other
retirement income: benefits payable from other home country Company qualified
and nonqualified defined benefit plans, including cash balance and PPS1 plans;
national or governmental schemes, including social security; prior employer
qualified and nonqualified defined benefit plans; and certain benefits payable
from prior employer qualified and nonqualified defined contribution plans.
The benefit amount payable under the KEPP at age 65 is computed on a straight
annuity basis and is equal to 65% of an individual's final average annual
compensation (before deduction for social security benefits and benefits payable
from other retirement plans). Average annual compensation under the KEPP is
calculated based on the highest paid 36 consecutive months of an employee's last
120 months of employment. The amounts in the salary and bonus columns of the
Summary Compensation Table would be included in computing remuneration for KEPP
purposes.
The estimated annual benefits payable under the KEPP as a single life annuity
beginning at age 65 before deduction for social security benefits and benefits
payable from other retirement plans (assuming that each executive officer
remains employed by the Company until age 65) are as follows: Mr. Hassan,
$2,237,000; Mr. Rothwell, $1,528,000; Dr. Needleman, $982,000; and Dr. Ando,
$1,268,000. These amounts represent the total pension benefit the named
executive officers will receive upon retirement from all retirement income
sources.
Messrs. Shapiro and Verfaillie are eligible for retirement benefits payable
under former Monsanto's tax-qualified and nonqualified defined benefit pension
plans, consisting of a prior plan account and a cash balance account. For each
year of the executive's continued employment with
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the Company or new Monsanto after 1996, 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. The cash balance account will be credited with 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). In addition,
the executive's cash balance account will be credited each year (for up to 10
years based on prior years of service with the Company) during which the
executive is employed after 1996, with an amount equal to a percentage (based on
age) of annual compensation. The estimated annual benefit payable to Mr. Shapiro
as a single life annuity beginning at age 65 is $773,110. The estimated annual
benefit payable to Mr. Verfaillie as a single life annuity beginning at age 65
(assuming that he remains employed by the Company or new Monsanto until age 65
and receives 4% annual compensation increases) is $799,352.
Mr. Shapiro will also be provided with supplemental retirement benefits to
recognize his experience prior to employment by the Company. The Company will
provide Mr. Shapiro with supplemental retirement benefits equal to 12% of
average final compensation. The estimated annual supplemental benefits payable
to Mr. Shapiro upon retirement at age 65 is $271,365. Mr. Shapiro will also
receive the same Company contribution to the retiree medical plan as an eligible
retiree with 30 years of service.
In addition to the retirement benefits for Mr. Verfaillie based on his years
of service as an employee in the United States, Mr. Verfaillie is also eligible
for regular retirement benefits based on his years of service as an employee
outside the United States. In addition, Mr. Verfaillie participates in the
Company's regular, nonqualified pension plan designed to protect retirement
benefits for employees serving in more than one country. However, his total
retirement benefit from all Company plans, including these supplemental plans,
when considering his total service, is expected to be generally comparable to
the benefit amount described above.
CERTAIN AGREEMENTS
In connection with the Merger, the Company assumed the employment agreement
Mr. Hassan entered into with P&U, which, in addition to the provisions described
on page 15, provides that in the event his employment is terminated by the
Company without cause or by him with good reason prior to expiration of the
agreement, he will receive (i) severance pay equal to three times his annualized
base pay and annual target incentive compensation, (ii) a prorated portion of
his target annual incentive compensation award; (iii) retirement and other
employee benefits as if he had continued to be employed until expiration of the
agreement, (iv) medical and other welfare benefits for three years offset by any
alternative coverage available, and (v) immediate vesting of all outstanding
restricted stock and stock options. The Company will also provide a tax grossup
to Mr. Hassan should any payment be determined to be a parachute payment under
the U.S. Internal Revenue Code, and if the termination follows or is in
contemplation of a change-in-control of the Company (as defined in his
employment agreement), the Company will pay him an amount by which the gain on
his original stock options does not equal at least $15 million. Mr. Hassan's
employment agreement also provides that he will receive a retirement benefit
equal to the greater of the benefit he would have received had he remained in
the pension plan of his former employer or a benefit under P&U's Global Officer
Pension Plan equal to 60% of his highest annual total compensation at age 60,
unless his employment is terminated by the Company with Cause or by him without
Good Reason. Mr. Hassan may not compete with the Company for a period of two
years following his termination of employment.
The Company also entered into employment agreements effective June 1, 2000
with Mr. Rothwell, Dr. Needleman, and Dr. Ando. The agreements provide for the
payment of annual base salary, subject to annual review, of $797,000 for Mr.
Rothwell, $750,000 for Dr. Needleman, and $733,430 for Dr. Ando. The agreements
provide for initial annual incentive compensation targets equal to 75% of base
salary for Mr. Rothwell, 75% of base salary for Dr. Needleman, and 70% of base
salary for
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Dr. Ando. Under the agreements, each executive was granted a stock option for
125,000 shares which vests at a rate of 33 1/3% per year and 100,000 performance
shares that will vest based on the Company's attainment of certain performance
goals.
In the event the Company terminates the executive's employment other than for
cause or the executive terminates employment with good reason (as such terms are
defined in the employment agreements), Mr. Rothwell and Dr. Ando will be
entitled to the following: (i) severance pay equal to three times the
executive's base pay and annual target incentive compensation; (ii) a prorated
portion of his target annual incentive compensation award; (iii) immediate
vesting of all outstanding stock options; (iv) retirement benefits calculated as
if he continued employment for an additional three years; and (v) continuation
of certain other benefits for three years. The severance benefits are
conditional on the executive's agreement not to compete with the Company for a
two-year period after termination of employment. In addition, if Dr. Ando
voluntarily terminates his employment for any reason other than good reason
prior to June 1, 2002, he will receive a lump sum payment equal to two times the
sum of his annual rate of base salary as of June 1, 2000 plus his target annual
incentive bonus for the year 2000, and he will receive certain benefits for 24
months. The Company will provide a tax grossup to the executives should any
payments be considered parachute payments under the U.S. Internal Revenue Code.
If Dr. Needleman's employment terminates as a result of death, disability, or
for any reason other than cause, he will receive a severance payment of
$4,764,006 if terminated prior to December 31, 2002, $3,176,004 if terminated
prior to December 31, 2003, and $1,588,002 if terminated prior to December 30,
2004, and he will also receive the same benefits described above for Mr.
Rothwell. If Dr. Needleman's employment is terminated by the Company without
cause or if he voluntarily terminates his employment with good reason on or
after January 1, 2003, Dr. Needleman will receive a severance payment equal to
the sum of his base salary and annual target incentive compensation plus
$3,176,004 if termination occurs before December 31, 2003, the sum of two times
his base salary and annual target incentive compensation plus $1,588,002 if
termination occurs between January 1, 2004 and December 30, 2004, and an amount
equal to three times his base salary and annual target incentive compensation if
termination occurs after December 31, 2004. He will also receive the same
benefits described above.
Mr. Shapiro, the former chairman and chief executive officer of former
Monsanto, had a change-in-control employment agreement with former Monsanto that
became effective upon the Merger. Due to Mr. Shapiro's retirement effective as
of the Merger, Mr. Shapiro received $8,800,799 pursuant to his agreement. Mr.
Shapiro, entered into a new agreement with the Company in connection with the
Merger pursuant to which he agreed to serve as an advisor to Mr. Hassan until
December 31, 2003 for a fee of $480,000 per year plus health care benefits,
security protection and certain other services. In addition, Mr. Shapiro
received an annual fee of $60,000 for his service as Chairman of the Board and
Chairman of the Executive Committee, in addition to his annual Board retainer of
$50,000.
The new Monsanto entered into a change-in-control employment agreement with
Mr. Verfaillie. The agreement has a term that initially ends on June 30, 2001
and is automatically extended for one year at a time, unless new Monsanto gives
notice that no extension will occur. If a change-in-control of new Monsanto
occurs during the term of the agreement, or if a change-in-control of the
Company occurs during the term at a time when the Company owns more than 50
percent of new Monsanto's Common Stock, then the agreement becomes operative for
a fixed period.
The agreement provides generally that Mr. Verfaillie'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-in-control.
If during the three-year period, new Monsanto terminates Mr. Verfaillie's
employment other than for cause, death or disability, or the executive
terminates for good reason, or if new Monsanto terminates the executive's
employment without
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cause in connection with or in anticipation of a change-in-control, Mr.
Verfaillie is generally entitled to receive:
- three times Mr. Verfaillie's annual base salary plus an annual bonus amount
and an amount to reflect new Monsanto's matching contributions under various
savings plans,
- accrued but unpaid compensation,
- continued welfare benefits for three years,
- a lump-sum payment having an actuarial present value equal to the additional
retirement plan benefits Mr. Verfaillie would have received if he had
continued to be employed by new Monsanto for a specified number of years,
- if Mr. Verfaillie 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.
In addition, Mr. Verfaillie is generally entitled to receive a payment in an
amount sufficient to make him whole for any federal excise tax on excess
parachute payments.
On September 1, 2000, Mr. Verfaillie became the chief executive officer of new
Monsanto and entered into a phantom share agreement with new Monsanto which
nullified his prior change-in-control employment agreement entered into with
former Monsanto. Pursuant to the agreement, new Monsanto credited 361,550
phantom shares to a phantom share account for Mr. Verfaillie. The phantom share
account will also be credited with dividend equivalents, 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 Monsanto's
stock.
According to the agreement, the phantom share account will vest on October 1,
2002 subject to new Monsanto's achievement of performance goals and Mr.
Verfaillie remaining employed by new Monsanto or an affiliate through the same
date. The phantom share account will also vest if (i) Mr. Verfaillie's
employment is terminated before December 31, 2001, without cause, for good
reason or because of death or disability (as such terms are defined in the
agreement), whether or not the performance goal is met, or (ii) Mr. Verfaillie's
employment is terminated after December 31, 2001, without cause, for good
reason, or because of death or disability and the performance goals are met.
If a new Monsanto change-in-control (as defined in the phantom share
agreement) occurs before December 31, 2001 and Mr. Verfaillie remains an
employee of new Monsanto or an affiliate as of the date of the
change-in-control, the balance in the phantom share account will vest on the
date of the new Monsanto change-in-control. If a Pharmacia change-in-control (as
defined in the phantom share agreement) occurs before December 31, 2001 and a
second trigger (as defined in the agreement) occurs within one year thereafter,
then the phantom share account will vest, provided that Mr. Verfaillie remains
an employee of new Monsanto or an affiliate.
When the balance of the phantom share account vests, new Monsanto will pay Mr.
Verfaillie a lump sum cash payment in an amount equal to the number of phantom
shares credited to his account times the Monsanto share value, determined as of
the vesting date. The amount of such payment will in no event be less than
$7,231,000. Payment to Mr. Verfaillie under the agreement is subject to approval
of the agreement by the shareholders of new Monsanto; provided, that shareholder
approval will not be required if a change-in-control occurs before the 2001
annual Monsanto shareholder meeting.
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OTHER INFORMATION REGARDING MANAGEMENT
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires all Company executive officers, directors, and persons owning more than
10% of any registered class of Company stock to file reports of ownership and
changes in ownership with the U.S. Securities and Exchange Commission. Based on
our records and other information, the Company believes that in 2000 the
directors and executive officers met all applicable SEC filing requirements.
INDEBTEDNESS
The following executive officers received full-recourse, interest bearing
loans in the amounts shown for the purchase price of Company Common Stock
purchased pursuant to the former Monsanto Executive Stock Purchase Incentive
Plan. This plan was terminated as a result of the Merger. 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 executives had a three-year period from the Merger to pay back
the loans but they have prepaid the loan balances in full as of March 5, 2001.
The largest amount of indebtedness outstanding at any time during the period
beginning January 1, 2000 and ending December 31, 2000 is set forth below:
AGGREGATE AMOUNT OF AGGREGATE
INDEBTEDNESS AS OF INDEBTEDNESS AS OF
NAME YEAR OF LOAN INTEREST RATE DECEMBER 31, 2000 MARCH 5, 2001
---- ------------ ------------- ------------------- ------------------
P. Needleman...................... 1996 6.36 459,755 0
H.A. Verfaillie................... 1996 6.36 2,497,005 0
ITEM 2 -- MANAGEMENT PROPOSAL
APPROVAL OF THE 2001 LONG-TERM INCENTIVE PLAN
GENERAL
The 2001 Long-Term Incentive Plan (referred to as the "2001 Plan") provides
for the grant of incentive stock options, nonqualified stock options, stock
appreciation rights, stock awards and other stock-based awards to employees,
consultants and advisors of the Company or its subsidiaries and affiliates and
nonemployee directors of the Company.
The Company's Board of Directors (referred to as the "Board") has approved the
2001 Plan and is submitting the 2001 Plan for shareholder approval. Shareholder
approval is being sought (i) so that the compensation attributable to grants
under the 2001 Plan may qualify as "qualified performance-based compensation"
for purposes of section 162(m) of the U.S. Internal Revenue Code of 1986, as
amended (referred to as the "Code") (see "Section 162(m)" under "Federal Income
Tax Consequences" below), (ii) in order for incentive stock options to meet the
requirements of the Code, and (iii) in order to meet New York Stock Exchange
requirements.
The following is a summary of the material terms of the 2001 Plan.
PURPOSE OF THE 2001 PLAN
The 2001 Plan is intended to provide a means by which the Company's employees,
consultants, advisors, and directors can acquire and maintain stock ownership,
thereby strengthening their commitment to the success of the Company. The 2001
Plan will provide an incentive for employees, consultants, advisors, and
directors to focus their attention on managing the Company as equity owners and
will align their interests with those of the Company's shareholders.
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DESCRIPTION OF THE 2001 PLAN
Administration: The 2001 Plan will be administered by the Compensation
Committee of the Board (referred to as the "Committee"). However, the Board may
ratify or approve any grants as it deems appropriate, and the Committee may
delegate any or all of its powers under the 2001 Plan to an individual or a
subcommittee, with respect to grants to persons who are not executive officers.
The Committee has the sole authority to (i) determine the individuals to whom
grants shall be made under the 2001 Plan, (ii) determine the type, size and
terms of each grant, (iii) determine the time when grants will be made and the
duration of any applicable exercise or restriction period, (iv) amend the terms
of any previously issued grant, and (v) deal with any other matters arising
under the 2001 Plan.
Shares: The maximum number of shares of the Company's Common Stock that may
be issued under the 2001 Plan is 55,000,000 shares of which no more than
1,000,000 stock awards or other stock-based awards can be granted under the
plan. The maximum number of shares of Company Common Stock that may be granted
to any individual during any calendar year is 2,500,000. The maximum share
limits are subject to adjustment in the event of a stock dividend, spinoff,
recapitalization, stock split, combination, exchange of shares,
reclassification, change in par value, merger, reorganization, or consolidation,
or other corporate change. If any grant expires, is forfeited or cancelled or
otherwise terminates without having been exercised, the shares subject to the
grant will again become available for grant under the 2001 Plan.
Eligibility: All employees of the Company and its subsidiaries and affiliates
and the nonemployee directors of the Company are eligible to participate in the
2001 Plan. Consultants and advisors who perform services for the Company or its
subsidiaries or affiliates (referred to as consultants) are also eligible to
participate in the 2001 Plan if the consultants render bona fide services, the
services are not in connection with the offer and sale of securities in a
capital-raising transaction and the consultants do not directly or indirectly
promote or maintain a market for the Company's securities. The Committee will
select the employees, nonemployee directors, and consultants who are eligible
for grants under the 2001 Plan. As of March 5, 2001, approximately 45,000
employees, 14 nonemployee directors, and 50 consultants are eligible to
participate in the 2001 Plan.
Options: The Committee will determine the number of shares of stock that will
be subject to each grant of stock options. The Committee may grant nonqualified
stock options ("NQSOs") or incentive stock options ("ISOs") provided that ISOs
may only be granted to employees of the Company or a subsidiary corporation as
defined in the Code.
The exercise price per share of an option granted under the 2001 Plan will be
determined by the Committee at the time of grant, provided that the exercise
price of NQSOs and ISOs may not be less than 100% of the fair market value of
the underlying shares of Company Common Stock on the date of grant (110% in the
case of an ISO granted to a person who holds more than 10% of the combined
voting power of all classes of outstanding stock of the Company or a
subsidiary).
Each option shall be exercisable and shall terminate as determined by the
Committee provided that the term of each stock option shall not exceed ten years
(five years in the case of an ISO granted to a 10% owner). The Committee may
accelerate the exercisability of any or all outstanding options at any time for
any reason. The Committee may also permit a grantee to elect to exercise part or
all of an option before it otherwise has become exercisable. Any shares so
purchased will be restricted shares and will be subject to a repurchase right in
favor of the Company during a specified restriction period, with the repurchase
price equal to the exercise price, or such other restrictions as the Committee
deems appropriate. Options may be exercised while the grantee is an employee,
director or consultant of the Company or a subsidiary or affiliate, or within a
period specified by the Committee after the termination of employment or
service.
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Grantees may pay the exercise price (i) in cash, (ii) with the approval of the
Committee, by delivering shares of Company Common Stock owned by the grantee and
having a fair market value on the date of exercise equal to the exercise price
of the option, (iii) payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board, or (iv) by such other
method as the Committee may approve. The Committee may authorize loans by the
Company to grantees in connection with the exercise of an option, upon such
terms and conditions as the Committee deems appropriate.
The Committee may provide for the grant of reload options in connection with
an option grant. Reload options will be granted with an exercise price as
established by the Committee (but no less than fair market value of Company
Common Stock on the date of grant of such additional options) and will have a
term not longer than the unexpired term of the original option.
Stock Awards: The 2001 Plan permits the grant of a maximum of 1,000,000 stock
awards subject to restrictions or no restrictions, as determined by the
Committee. The Committee may establish conditions under which restrictions on
stock awards will lapse. Unless the Committee determines otherwise, during the
restriction period, the grantee will have the right to vote shares of stock
awards and to receive any dividends or other distributions paid on such shares,
subject to any restrictions deemed appropriate by the Committee. If the
grantee's employment or service terminates during the restriction period or if
any other conditions are not met, unless the Committee determines otherwise, the
stock award will terminate with respect to all of the shares of Company Common
Stock covered by the stock award as to which the restrictions have not lapsed,
and those shares of Company Common Stock will be forfeited and if issued,
immediately returned to the Company.
Stock Appreciation Rights: The 2001 Plan permits the grant of stock
appreciation rights ("SARs") separately or in tandem with any option. An SAR
permits a grantee to receive upon exercise, cash and/or Company Common Stock, as
determined by the Committee, in an amount equal to the excess, if any, of the
fair market value of the underlying Company Common Stock on the date of exercise
over the base amount of the SAR. Unless the Committee determines otherwise, the
base amount of each SAR will be equal to the per share exercise price of the
related option, if applicable, or no less than the fair market value of a share
of Company Common Stock on the date of grant of the SAR. An SAR will be
exercisable during the period specified by the Committee provided that a tandem
SAR will not be exercisable beyond the term of the related option. The Committee
will determine the vesting and other restrictions applicable to an SAR grant and
may accelerate the exercisability of any outstanding SARs.
Other Stock-Based Awards: The Committee may grant employees, nonemployee
directors and consultants other awards of Company Common Stock or awards that
are valued in whole or in part by reference to Company Common Stock with such
terms and conditions as the Committee deems appropriate.
Dividend Equivalents: The Committee may grant dividend equivalents in
connection with grants under the 2001 Plan. Dividend equivalents may be paid
currently or accrued as contingent cash obligations and may be payable in cash
or shares of Company Common Stock, as determined by the Committee.
Employees Subject to Taxation Outside the United States: The Committee may
make grants on terms different from those specified in the 2001 Plan (including
granting options with a term longer than ten years if appropriate to assure
favorable tax treatment) with respect to persons who are subject to taxation
outside the United States as necessary to achieve the purposes of the Plan.
Deferrals: The Committee may permit or require a grantee to defer receipt of
cash or shares that would otherwise be due to the grantee in connection with any
grant.
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Transferability of Grants: Grants are not transferable by the grantee except
by will or the laws of descent or, in the case of a grant other than an ISO,
with Committee consent, pursuant to a domestic relations order. The Committee
may allow a grantee to transfer a NQSO to family members or trust or other
entity for the benefit of family members.
Consequences of a Change-in-Control: Upon a change-in-control of the Company
(as defined in the 2001 Plan), all outstanding options and SARs will
automatically accelerate and become fully exercisable, and any restrictions on
outstanding stock awards or stock-based awards will immediately lapse. Upon a
change-in-control, the Committee may (i) determine that outstanding options and
SARs that are not exercised will be assumed by, or replaced with comparable
options or rights by the surviving corporation, and other outstanding grants
will be converted to similar grants of the surviving corporation; (ii) require
that grantees surrender their outstanding options and SARs in exchange for
payment of the amount by which the then fair market value of the stock exceeds
the exercise price; (iii) after giving grantees an opportunity to exercise their
options and SARs, terminate any or all of the unexercised options and SARs; or
(iv) determine that grantees will receive a payment in settlement of their stock
awards or stock-based awards, in an amount and form determined by the Committee.
Amendment and Termination of the Plan: The 2001 Plan will terminate on April
17, 2011. The Board may sooner terminate or amend the 2001 Plan at any time;
provided, however, that the Board will not amend the 2001 Plan without
shareholder approval if such approval is required in order to comply with the
Code or applicable laws, or to comply with applicable stock exchange
requirements.
FEDERAL INCOME TAX CONSEQUENCES
The following description of the federal income tax consequences of grants
under the 2001 Plan is a general summary. State, local and other taxes may also
be imposed in connection with grants.
Incentive Stock Options: In general, a grantee will not recognize taxable
income upon the grant or exercise of an ISO, and the Company and its
subsidiaries and affiliates will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value of the shares received
on the date of exercise over the exercise price of the option will be included
as an adjustment for purposes of the alternative minimum tax.
If a grantee holds the shares acquired upon exercise of an ISO for at least
two years after the date of grant and for at least one year after the date of
exercise, when the grantee disposes of the shares, the difference, if any,
between the sale price of the shares and the exercise price of the option will
be treated as long-term capital gain or loss. If a grantee disposes of the
shares prior to satisfying these holding period requirements (referred to as a
disqualifying disposition), the grantee will recognize ordinary income at the
time of the disqualifying disposition, generally in an amount equal to the
excess of the fair market value of the shares at the time the option was
exercised over the exercise price of the option (or the gain on the disposition,
if less). The balance of the gain realized, if any, will be short-term or
long-term capital gain, depending on the length of the time that the shares have
been held after the date of exercise. In general, the Company and its
subsidiaries and affiliates will be allowed a business expense deduction to the
extent a grantee recognizes ordinary income.
Nonqualified Stock Options: In general, a grantee who receives an NQSO will
recognize no income at the time of the grant of the option. Upon exercise of an
NQSO, a grantee will recognize ordinary income in an amount equal to the excess
of the fair market value of the shares on the date of exercise over the exercise
price of the option. The basis in shares acquired upon exercise of an NQSO will
equal the fair market value of such shares at the time of exercise, and the
holding period of the shares (for capital gain purposes) will begin on the date
of exercise. In general, the Company
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and its subsidiaries and affiliates will be entitled to a business expense
deduction in the same amount and at the same time as the grantee recognizes
ordinary income.
Stock Awards: A grantee who receives a stock award generally will not
recognize taxable income until the stock is transferable by the grantee or no
longer subject to a substantial risk of forfeiture for federal tax purposes,
whichever occurs first. When the stock is either transferable or is no longer
subject to a substantial risk of forfeiture, the grantee will recognize ordinary
income in an amount equal to the fair market value of the shares (less any
amounts paid for the shares) at that time. The Company and its subsidiaries and
affiliates generally will be entitled to a business expense deduction in the
same amount.
A grantee may elect to recognize ordinary income when a restricted stock award
is granted in an amount equal to the fair market value of the shares (less any
amount paid for the shares) at the date of grant, determined without regard to
the restrictions. The Company and its subsidiaries and affiliates generally will
be entitled to a corresponding business expense deduction in the same year.
Stock Appreciation Rights, Other Stock-Based Awards and Dividend
Equivalents: There are generally no federal income tax consequences to a
grantee upon the grant of an SAR, or other stock-based grant. Instead, when
payments are made to the grantee, the grantee will recognize ordinary income in
an amount equal to the cash received and the fair market value of any shares
received. Dividend equivalents are taxed to grantees as ordinary income when
they are paid to the grantees. The Company and its subsidiaries and affiliates
generally will be entitled to a corresponding business expense deduction when
the grantees recognize ordinary income.
Excise Taxes: Under certain circumstances, the accelerated vesting of grants
in connection with a change-in-control could be deemed an "excess parachute
payment" under Section 280G of the Code. To the extent it is so considered, a
grantee could be subject to a 20% excise tax and the Company and its
subsidiaries and affiliates could be denied a tax deduction.
Section 162(m): Section 162(m) of the Code generally disallows a federal
income tax deduction for compensation paid in excess of $1 million in any
taxable year to the chief executive officer or any of the four other most highly
compensated executive officers who are employed by the Company on the last day
of the taxable year. The Code has an exception to the deduction limit for
"qualified performance-based compensation," if, among other requirements, the
material terms of the plan are disclosed to and approved by the shareholders.
The Company has structured the 2001 Plan so that compensation resulting from the
grant of stock awards, stock options and SARs may qualify as "qualified
performance-based compensation" and be deductible.
Benefits under the 2001 Plan: The benefits that will be received by grantees
under the 2001 Plan are not determinable at this time because grants are based
on various criteria established by the Committee, which have not yet been
established.
MARKET PRICE OF SHARES
The closing price of the Company's Company Common Stock, as reported in the
Wall Street Journal, New York Stock Exchange -- Composite Transactions, on March
5, 2001 was $54.05.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2001 PLAN
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ITEM 3 -- MANAGEMENT PROPOSAL
APPROVAL OF THE OPERATIONS COMMITTEE INCENTIVE PLAN
GENERAL
The Pharmacia Corporation Operations Committee Incentive Plan (referred to as
the "OCIP") will provide cash awards to selected management employees of the
Company and its subsidiaries, if preestablished performance goals are met. The
OCIP is intended to encourage results-oriented actions on the part of management
and to align closely financial rewards with the achievement of specific
performance objectives.
The Company's Board of Directors has approved the OCIP and is submitting the
OCIP for shareholder approval. Shareholder approval is being sought so that the
awards under the OCIP may qualify as "qualified performance-based compensation"
for purposes of Section 162(m) of the Code (as described in "Tax Deductibility
under Code sec.162(m)" below).
The following is a summary of the material terms of the OCIP.
DESCRIPTION OF THE OCIP
Administration: The OCIP will be administered by the Compensation Committee
of the Board of Directors (referred to as the "Committee") with respect to
employees who are elected officers of the Company, and the OCIP shall be
administered by the Chief Executive Officer of the Company with respect to all
other employees. The Chief Executive Officer may delegate his authority to
administer the OCIP to an individual or other committee. The term
"administrator" means the committee, as applied to elected officers, and the
Chief Executive Officer or an individual or committee to which authority has
been delegated, as applied to all other employees. The administrator will have
authority to establish the rules and regulations relating to the OCIP, to
interpret the OCIP and those rules and regulations, to select participants for
the OCIP, to determine each participant's target award, performance goals and
final award, and to make all other determinations in connection with the OCIP.
Only the committee will take the foregoing actions with respect to elected
officers.
Eligibility: All management employees of the Company and its subsidiaries who
are "Pharma" members of the Operations Committee are eligible to participate in
the OCIP. The administrator will select the management employees who will
participate in the OCIP. As of March 1, 2001, approximately 27 management
employees are eligible to participate in the OCIP.
Target Awards: At the beginning of each year, the administrator will
establish a target incentive award for each participant, which will be expressed
as a dollar amount, a percentage of salary or otherwise. The target award will
be based on a number of factors, including: (i) market competitiveness of the
position, (ii) job level, (iii) base salary level, (iv) past individual
performance, and (v) expected contribution to future Company performance and
business impact.
For each elected officer, the administrator must establish the target awards
and performance goals no later than the earlier of ninety days after the
beginning of the year, the date on which 25% of the year has been completed, or
such other date as may be permitted under the Code. The administrator will
establish for each elected officer a maximum award that may be paid for the
year, which will remain fixed for the entire year. The maximum award that any
participant may receive for a plan year is $12,000,000.
Performance Goals: At the beginning of each year, the administrator will
establish for each participant performance goals that must be met in order for
an award to be payable for the year. The administrator will establish in writing
(i) the performance goals that must be met, (ii) the threshold, target and
maximum amounts that may be paid if the performance goals are met, and (iii) any
other
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conditions that the administrator deems appropriate and consistent with the OCIP
and, in the case of elected officers, Section 162(m) of the Code.
The administrator will establish objective performance goals for each
participant related to the participant's business unit or the performance of the
Company and its subsidiaries and affiliates as a whole, or any combination of
the foregoing. The administrator may also establish subjective performance goals
for participants; provided that, for elected officers, the subjective
performance goals may only be used to reduce, and not increase, the award
otherwise payable under the OCIP. The objectively determinable performance goals
will be based on one or more of the following criteria: stock price, earnings
per share, net earnings, operating or other earnings, profits, revenues, net
cash flow, financial return ratios, return on assets, shareholder return, return
on equity, growth in assets, unit volume, sales, market share, drug discovery or
other scientific goals, preclinical or clinical goals, regulatory approvals, or
strategic business criteria consisting of one or more objectives based on
meeting specified revenue goals, market penetration goals, geographic business
expansion goals, cost targets, goals relating to acquisitions or divestitures,
or strategic partnerships.
Determination of Award: Each participant will earn an award for a plan year
based on the achievement of the performance goals established by the
administrator. The administrator may adjust, upward or downward, the award for
each participant who is not an elected officer based on the participant's
achievement of personal and other performance goals established by the
administrator and other factors as determined by the administrator. The
administrator may reduce, but not increase, the amount of any award of an
elected officer.
Payment of Awards: The Company will pay awards earned for a year in a single
lump sum cash payment within 120 days after the close of the year. Participants
must be employed on the last day of the year to be eligible for an award from
the OCIP, except as the administrator may otherwise determine. Special rules
apply to participants who terminate employment prior to the last day of the year
as a result of death, retirement, disability or otherwise under a
Company-approved program.
Changes to Performance Goals and Target Awards: At any time prior to the
final determination of the awards, the administrator may adjust the performance
goals and target awards for participants who are not elected officers to reflect
changes in corporate capitalization, changes in corporate transactions, the
occurrence of any extraordinary event, any change in accounting rules or
principles, any change in the Company's method of accounting, any change in
applicable law, or any other change of similar nature. With respect to elected
officers, such adjustments may be made to the extent the administrator deems
appropriate considering the requirements of Section 162(m) of the Code.
Amendment and Termination: The Board may from time to time amend or terminate
the OCIP, provided that no amendment that requires shareholder approval in order
to comply with Section 162(m) of the Code will be effective unless the amendment
is approved by the Company's shareholders.
Assignment: A participant's right and interest under the OCIP may not be
assigned or transferred, except as permitted upon death.
Tax Deductibility under Code sec.162(m): See "Section 162(m)" under the
"Approval of the 2001 Long-Term Incentive Plan" above for a description of
qualified performance-based compensation under Section 162(m) of the Code. The
OCIP is intended to enable awards to qualify as "qualified performance-based
compensation."
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Benefits under the OCIP: The information contained in the following table
represents the benefits that management employees would have received in 2000
under the OCIP (but no such awards were actually granted in 2000) based on the
current year's target awards and performance goals.
OCIP BENEFITS
NAME AND POSITION DOLLAR VALUE($)
----------------- ---------------
F. Hassan, Chief Executive Officer.......................... $1,903,200
P. Needleman, Senior Executive Vice President and Chief
Scientific Officer........................................ $ 647,700
H.A. Verfaillie, Executive Vice President and CEO, Monsanto
Agricultural Operations................................... N/A
T.G. Rothwell, EVP and President GCO........................ $ 767,100
G.A. Ando, EVP and President R&D............................ $ 588,800
Executive Group............................................. $6,859,800
NonExecutive Director Group................................. N/A
NonExecutive Officer Employee Group......................... $3,314,300
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE OCIP.
ITEM 4 -- MANAGEMENT PROPOSAL
APPROVAL OF GLOBAL EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Company plans to implement the Pharmacia Corporation Employee Stock
Purchase Plan (referred to as the "ESPP") in 2002 in connection with the
implementation of a revised benefit structure designed to harmonize the benefits
of P&U and former Monsanto. The ESPP is a broad-based plan that will permit
employees of the Company and its eligible subsidiaries to buy shares of the
Company's Common Stock at a fixed price which, at the discretion of the Company,
may be discounted up to 15%. The ESPP is intended to qualify as an "Employee
Stock Purchase Plan" within the meaning of Code sec.423.
The Company's Board of Directors has approved the ESPP and is submitting the
ESPP for shareholder approval. Shareholder approval is being sought so that the
transfer of shares to employees under the ESPP will qualify for favorable tax
treatment under Sections 423 and 421(a) (as described in "Federal Income Tax
Consequences" below).
The following is a summary of the material terms of the ESPP.
DESCRIPTION OF THE ESPP
Purpose: The ESPP is intended to encourage employees to acquire an ownership
interest in the Company (and thus align the interests of employees with the
interests of shareholders) by providing employees with the opportunity to
purchase Company Common Stock at a discount through voluntary systematic payroll
deductions.
Administration: The ESPP will be administered by the Compensation Committee
of the Board of Directors or such other individual or individuals (including,
without limitation, another subcommittee of the Board) to whom the Compensation
Committee may delegate any or all of its ESPP administrative duties (referred to
as the "Administrator"). In addition to its general administrative duties under
ESPP, the Administrator has the sole authority to (i) interpret the ESPP, (ii)
determine the eligibility of employees to participate in the ESPP, and (iii)
adopt rules and regulations for administering the ESPP.
Shares: The maximum number of shares of Company Common Stock that may be
issued under the ESPP is 70,000,000 shares. The maximum share limit is subject
to adjustment in the event of a
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stock dividend, stock split, combination of shares or other similar event that
results in a proportionate increase or decrease in the number of shares of
Company Common Stock issued and outstanding. Shares issued under the ESPP will
be acquired by the Company in open market transactions.
Eligibility: Prior to the start of the Enrollment Period (as described in
"Offerings" below), the Company will designate the subsidiaries whose employees
will be eligible to participate in the ESPP for that Offering. Initially, it is
expected that only employees of U.S. subsidiaries will be eligible, although it
is intended that participation will be opened to employees of foreign
subsidiaries some time in the future. Generally, all employees of the Company
and its subsidiaries that have been designated as eligible subsidiaries for an
Offering will be eligible to participate in the ESPP for that Offering, although
any employee who owns 5% or more of the Company Common Stock at the time of an
Offering will be barred from participating in the Offering. In addition, if the
Company desires, it may determine prior to the applicable Enrollment Period that
the following classes of employees will be excluded from participating in that
Offering: employees who (i) have been employed for less than a designated period
of time not to exceed 2 years, (ii) customarily work for less than 20 hours a
week or 5 months a year, or (iii) are highly compensated employees.
Offerings: From time to time the Company will offer eligible employees the
option to purchase shares of Company Common Stock (referred to as an "Offering")
through systematic payroll deductions at a fixed price (referred to as the
"Purchase Price") during a predetermined period (referred to as the "Offering
Period"). The Offering Period will be divided into one or more Purchase Periods,
with the last day of each Purchase Period being the Purchase Date for that
Purchase Period. The number of shares purchased on behalf of a participant on
each Purchase Date will be determined by dividing the amount of payroll
deductions (as described in "Enrollment" below) that have accumulated in the
participants account during the applicable Purchase Period by the applicable
Purchase Price. The Company will set the terms and conditions of each Offering
prior to the Enrollment Period for the Offering. Unless the Company determines
otherwise for an Offering, the following terms and conditions will apply to each
Offering:
- The Enrollment Period will be the 45 day period commencing 60 days prior to
the Enrollment Date.
- The Offering Period for each Offering will be the 24-month period commencing
on the Enrollment Date;
- Each Offering Period will be divided into four 6-month Purchase Periods,
with the last day of each Purchase Period being the Purchase Date for that
Purchase Period;
- On each Purchase Date, the Company shall use the payroll deductions that
have accumulated in a participant's plan account during the Purchase Period
to purchase shares of Company Common Stock on behalf of the participant at
the predetermined Purchase Price;
- The Purchase Price will be the lesser of 85% of the fair market value of a
share of Company Common Stock (i) on the Enrollment Date or (ii) on the
Purchase Date.
The Purchase Price for an Offering will be subject to adjustment in the event
of a stock dividend, stock split, combination of shares or other similar event
that results in a proportionate increase or decrease in the number of shares of
Company Common Stock issued and outstanding.
Enrollment: To participate in an Offering, an eligible employee must complete
and return an Enrollment Form before the end of the applicable Enrollment
Period, designating the portion of the employee's annualized base salary that
will be deducted and withheld from his or her pay for each pay period during the
Offering Period, subject to a $25,000 maximum payroll deduction per calendar
year. A participant may also designate on the Enrollment Form a beneficiary who,
in the event of the participant's death, will receive a refund of the
participant's accumulated payroll deductions or the
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delivery of any shares held under the ESPP on behalf of the participant. Amounts
deducted and withheld from a participant's paychecks under the ESPP will be
accumulated, without interest, during each Purchase Period and credited to a
recordkeeping account under the ESPP in the name of the participant. Payroll
deductions accumulated during a Purchase Period will be used to purchase shares
of Company Common Stock on behalf of the participant on the Purchase Date
falling at the end of the Purchase Period (as described in "Offerings" above).
Changes in Deduction Elections: The Company has the discretion to allow
participants to prospectively change, at any time during an Offering Period, the
amount of annualized base pay that will be deducted from his or her paychecks,
or to suspend payroll deductions altogether, provided that such discretion is
uniformly applied to all participants.
Withdrawals From Offering: Each participant in an Offering has the absolute
right to withdraw from the Offering at any time. If a participant withdraws from
an Offering, all payroll deductions will cease and all accumulated payroll
deductions that have not already been used to purchase Company Common Stock will
be returned to the participant without interest. The participant will not be
allowed to reenroll in the Offering, but will be eligible to participate in
subsequent Offerings.
Termination of Employment: If a participant terminates employment during an
Offering Period for any reason (including death), the termination will be
treated as a withdrawal from the Offering; except, however, if the termination
occurs within 30 days prior to a Purchase Date, the termination may, at the
Company's discretion, be treated as a suspension of deferrals and amounts
accumulated in the participant's account during the applicable Purchase Period,
but prior to employment termination, will be used to purchase Company Common
Stock on the Purchase Date. In the event a participant's termination of
employment is due to his or her death, any cash or shares owed to the
participant as a result of the termination will be paid or delivered to the
beneficiary designated on the participant's Enrollment Form or, if there is no
such beneficiary, to the participant's estate.
Transferability: Rights granted under the ESPP are not transferable other
than by will, the laws of descent and distribution or, if applicable, to the
participant's designated beneficiary (as described in "Termination of
Employment" above). If the Company desires, it may treat any other attempted
transfer of rights as a withdrawal from the Offering.
Amendment and Termination: The Compensation Committee may amend or terminate
the ESPP at any time, provided that no amendment that requires shareholder
approval in order to comply with Section 423 of the Code will be effective
unless the amendment is approved by the Company's shareholders.
Effective Date: If the ESPP is approved by the Company's shareholders, the
effective date of the ESPP will be January 1, 2002 or such later date as the
Administrator may determine.
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences of participation
in the ESPP is a general summary. State, local and other taxes may also be
imposed as a result of participation. The ESPP is intended to qualify for
favorable income tax treatment under Sections 421 and 423 of the Code.
Payroll Deductions: Payroll deductions will be made on an after-tax basis.
Thus, participants will have to pay income and employment taxes on the amounts
deducted and withheld from their paychecks under the ESPP.
Purchase of Shares: No income will be recognized by a participant when
accumulated payroll deductions are used to purchase Company Common Stock at a
discount, and the Company and its eligible subsidiaries will not be entitled to
a business expense deduction with respect to a participant's purchase of
discounted shares. However, upon the purchase of discounted shares
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under the ESPP, the excess of the fair market value of the shares received on
the Purchase Date over the Purchase Price of the shares will be included as an
adjustment for purposes of the alternative minimum tax.
Subsequent Sale: If a participant holds the shares acquired under an Offering
for at least two years after the Enrollment Date and one year after the Purchase
Date, when the participant subsequently sells the shares acquired under an
Offering, he or she will realize taxable gain or loss equal to the difference
between the selling price and the Purchase Price. If the shares are sold at a
gain, the participant will recognize ordinary income equal to the lesser of (i)
the actual gain on the sale, or (ii) the excess of the fair market value of the
shares on the Enrollment Date over the Purchase Price as of the Enrollment Date
(that is, the Purchase Price that would have applied had the Enrollment Date
been the Purchase Date). The balance of the gain, if any, will be treated as
long-term capital gain. If the shares are sold at a loss, then no ordinary
income is realized and the entire loss will be treated as long-term capital
loss. The Company and its eligible subsidiaries will not be entitled to a
business expense deduction with respect to the amount of ordinary income
recognized by the participant.
If the participant sells the shares prior to holding the shares for at least
two years after the Enrollment Date and one year after the Purchase Date, then,
regardless of whether there is a profit or loss on the sale, the discount
received when the shares were purchased (that is, the excess of the fair market
value of the shares on the Purchase Date over the Purchase Price) will be taxed
as ordinary income to the participant in the year of the sale and the Company
will be entitled to a business expense deduction in an amount equal to the
amount of ordinary income recognized by the participant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ESPP.
SHAREHOLDER PROPOSALS
Certain shareholders have submitted the two proposals set forth below. These
proposals have been carefully considered by the Board, which has concluded that
their adoption would not be in the best interests of the Company and its
shareholders. For the more specific reasons stated after each proposal and its
supporting statement, the Board recommends a vote AGAINST each proposal. The
Company will furnish, orally or in writing as requested, the names, addresses
and share ownership positions of the proponents promptly upon written or oral
request directed to the Secretary of Pharmacia Corporation, 100 Route 206 North,
Peapack, NJ 07977, telephone number: 1-877-552-7257.
ITEM 5 -- SHAREHOLDER PROPOSAL
PRICE RESTRAINTS ON PRESCRIPTION DRUGS
Whereas: Important as prescription drugs are, not everyone has access to them.
Millions of Americans have inadequate or no insurance coverage for drugs;
Most people without drug coverage purchase their needed drugs at a retail
pharmacy;
A Report prepared for the President by the Department of Health and Human
Services (Prescription Drug Coverage, Spending, Utilization, and Prices, April
2000) found that:
- Individuals without drug coverage pay a higher price at the retail pharmacy
than the total price paid on behalf of those with drug coverage.
- In 1999, excluding the effects of rebates, the typical cash customer paid
nearly 15% more than the customer with third-party coverage. For a quarter
of the most common drugs, the price difference between cash and third
parties was even higher -- over 20%.
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- For the most commonly prescribed drugs, the price difference between cash
customers and those with third-party coverage grew substantially larger
between 1996 and 1999.
This same Report found that the markup added by the wholesaler, after purchase
from the manufacturer, is "generally small, perhaps 2%-4%." (ch.3, p.101);
The literature cited in the Report suggests that pharmacy margins have been
falling in recent years (p.103);
Pharmaceutical manufacturers spent $1.9 billion on advertising in
1999 -- double the amount spent in 1997 (Business Week, May 22, 2000);
RESOLVED: Shareholders request the Board of Directors to:
1. Create and implement a policy of price restraint on prescription drugs,
utilizing a combination of approaches to keep drug prices at reasonable
levels.
2. Report to shareholders by September, 2001 on changes in policies and
pricing procedures for prescription drugs (withholding any competitive
information, and at reasonable cost).
SUPPORTING STATEMENT FROM SHAREHOLDER
We suggest that the policy include a restraint on each individual drug and
that it not be based on averages which can mask tremendous disparities; a low
price increase for one compound and a high price increase for another; one price
for a "favored customer" (usually low) and another for the retail customer
(usually high).
We understand the need for ongoing research and appreciate the role that our
company has played in the development of new medicines. We are also aware that
the cost of research is only one determinant for the final price of a drug.
Advertising is another significant company expenditure. Thus, we believe that
price restraint can be achieved without sacrificing necessary research efforts.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE SHAREHOLDER PROPOSAL FOR
THE FOLLOWING REASONS
The Company is focused on meeting the needs of medical professionals and
patients through the discovery and development of innovative medicines. We are
committed to saving and improving people's lives, and we do this through an
investment in research and development of more than $2 billion every year. The
Company has a long and rich tradition in many fields of research and has been
successful in this endeavor. Our therapies improve the lives of arthritis
sufferers, help prevent blindness in those who suffer from glaucoma, fight
deadly infections that are resistant to traditional antibiotics and combat
cancer.
U.S.-based pharmaceutical companies have generated 45 percent of the 152 major
global drugs developed between 1975 and 1994 now available to people around the
world, exceeding by three times the next highest country, the U.K., which was
responsible for 14 percent. Moreover, in many circumstances, prescription drug
options are more accessible and affordable by patients and healthcare systems
than other forms of medical intervention. All of this is made possible by the
competitive marketplace in America, which permits recovery of the research costs
incurred to develop innovative therapies and pharmaceuticals that improve the
quality of patient care. Constraints on free market pricing could impair
recovery of a company's research costs, resulting in reduced research efforts
and threatening the continued improvement in healthcare patients have come to
expect. The average cost to discover and develop a drug (introduced in 1990) was
about a half-billion dollars, with only one in between 5,000 and 10,000
compounds screened making it onto the market. As reported in a Duke University
study, only 30 percent of pharmaceuticals introduced between 1980 and 1984
recouped their after-tax R&D costs.
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The Company recognizes and is sensitive to the issues raised in the
shareholder proposal, which highlight the need for drug coverage for the
uninsured. More than 14 million Medicare beneficiaries are without
pharmaceutical coverage, and others are at risk of losing the coverage they
have. In addition, more than 42 million Americans have no health insurance,
including almost 14 million under 18 years old. Our society must do better to
serve the elderly, the near-poor, and the children of people who have no
insurance.
The Company has for a number of years taken positions and made decisions to
address these issues. The Company's patient support program enables doctors to
access the Company's drugs free-of-charge for needy patients. The Company has
provided discounts to government purchasers and to community healthcare
organizations. On a broader scale, the Company supported Federal legislation
that created "Medicare+Choice" in 1998, which enables Medicare beneficiaries to
enroll in managed care organizations that provide pharmaceutical benefits.
The Company believes that coverage is both the primary issue and the best
solution to the problem of making affordable medicines available, and we are
committed to working with all interested parties toward such a solution. To help
achieve this goal, the Company supports the addition of a Medicare drug benefit
founded on the proposal of the National Bipartisan Commission on the Future of
Medicare. Such a benefit should be part of an overall modernization of Medicare,
which was created decades ago and is now outdated in many respects.
At the same time, however, management needs pricing flexibility to respond to
changes in the market and to continue our strong investment in research and
development. The Company's investment in research and development ultimately
improves health care options for everyone, and is fundamental to the success of
the Company. The proposal to restrain prices would increase the already
tremendous risks associated with the development of pharmaceutical therapies for
today's patients and future generations and would severely limit the Company's
ability to carry out its mission.
ACCORDINGLY, WE RECOMMEND THAT STOCKHOLDERS VOTE AGAINST THIS PROPOSAL.
ITEM 6 -- SHAREHOLDER PROPOSAL
REDUCTION IN NUMBER OF DIRECTORS
IMPROVED BOARD OF DIRECTORS BY REDUCING THE NUMBER OF DIRECTORS, POSSIBLY BY
CHANGING THE BOARD COMPOSITION
Pharmacia currently has a Board of Directors that has 15 directors (effective
February 21, 2001, Reed and Shapiro resigned; previously there were 17 when this
proposal was submitted) with one who is an inside director (Pharmacia employee)
and 14 outside directors (nonPharmacia employees), of whom six (almost half)
have provided or do provide services to or receive funds from Pharmacia,
directly or indirectly.
A total of 15 directors seems excessive due to the increased costs and other
factors,
Inside directors can have a vested interest in voting for their own best
interests rather than the shareholders' interest, and
Those outside directors who provide services to Pharmacia may have a potential
conflict of interest.
RESOLVED: Shareholders Request Pharmacia To Implement The Proposal Below By
Means Of By-Law Changes And/Or Other Necessary Procedures:
Change the Board of Directors by reducing the actual number of incumbent
directors from the current 15 (too large and too expensive) to 12 that
has been recommended as the ideal number. This proposal would be
effective for nominees for director at meetings subsequent
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to the 2001 Annual Meeting and need, therefore, not affect the unexpired
terms of the existing directors.
If you agree with this proposal, please mark your proxy FOR. Please vote,
since an abstention or nonvote may be considered the same as a negative vote.
SUPPORTING STATEMENT FROM SHAREHOLDER
In order to reduce operating costs and allow a more efficient board, there
should be fewer directors. Many organizations have 12 Board members. As has been
noted in the press, "small boards can more easily discuss issues" and
"individuals in small groups take responsibility more personally."
To have the Board of Directors more responsive to the shareholders, there
should only be independent outside directors (who do not provide services to
Pharmacia). Even the National Association of Corporate Directors "discourages
members from serving on the boards of companies that are their clients." As
noted in last year's Proxy Statement on pages 19 and 24, Eickhoff, Kantor,
Leder, Parfet, Robson, and Samuelsson provided services to Pharmacia and/or
Monsanto or their companies/institutions received funds during 2000. (Reed and
Shapiro were in this group in 2000.)
Providers of services do not need to be members of the Board of Directors to
provide their knowledge and understanding to the Board.
Although Pharmacia has their Board of Directors provide information that they
have no conflict of interest, there has been much litigation against directors,
especially for conflict of interest.
Last year the Board of Directors seemed arrogant with their statement against
my proposal on cumulative voting (approved by more than 30% of the votes). They
stated that even if the shareholders approved the proposal, that they had the
final say in order to discharge their "fiduciary duty." It sounded like they are
in complete control.
FOR THESE REASONS, I STRONGLY ENCOURAGE YOU TO VOTE
AND TO MARK YOUR BALLOT FOR THIS PROPOSAL. THANKS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE SHAREHOLDER PROPOSAL FOR
THE FOLLOWING REASONS
Prior to the Merger of former Monsanto and P&U, the two companies had a total
of 22 directors. At the time of the Merger, the Company's Board had 18 members.
After the Merger, the Board discussed the size of the Board. While acknowledging
that the size of the Board was initially larger than what should eventually
become the appropriate size, the Board felt that this reduction should be
accomplished through natural attrition rather than an arbitrary reduction. The
Board felt that it was critical to the success of the Merger that as many of the
original Directors as possible be retained for a transitional period after the
Merger. These Directors provide the continuity necessary for a smooth
integration of the prior businesses and implementation of the vision, strategy
and structure for the new Pharmacia. Given the importance of quickly and
effectively integrating the prior companies and delivering the promised benefits
of the Merger to shareholders, the Board decided not to force Directors to
resign but to retain the collective experience, expertise and understanding of
the Board through the Merger integration period. To date, the Board has
functioned effectively, which is evidenced by, among other things, a total
shareholder return of 73% during 2000.
The size of the Board will naturally be reduced over time through attrition.
Three directors have already resigned from the original Board, reducing its size
from 18 to the current size of 15 members. The expectation is that Board
membership will be further reduced by voluntary resignations. Contrary to the
suggestion in the shareholder's supporting statement, the size of the
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Board has enhanced rather than compromised the deliberations of the Board. The
Company believes that, if adopted, the proposal would impose an arbitrary
reduction without corresponding benefits.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
GENERAL 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 properly come before the meeting or any adjournment, the persons
designated to vote the proxies will vote in accordance with their best judgment
on such matters. Should any nominee for election as a director be unwilling or
unable to serve at the time of the meeting or any adjournment thereof, the
persons designated to vote in the proxies will vote for the election of such
other person 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 listed in this Proxy Statement
will be unwilling or unable to serve as a director.
SHAREHOLDER PROPOSALS
PROPOSALS INCLUDED IN PROXY STATEMENT
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's 2002 Annual Meeting and that shareholders
desire to have included in the Company's proxy materials relating to such
meeting must be received by the Company 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 shareholder 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 shareholder 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 mailing address,
which is Pharmacia Corporation, 100 Route 206 North, Peapack, NJ 07977 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 17, 2002 and not
earlier than December 18, 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 which such written notices must satisfy. Copies of those
requirements will be forwarded to any shareholder upon written request.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit and Finance
Committee, has appointed PricewaterhouseCoopers LLP as the principal independent
accountants to examine the consolidated financial statements and reports of the
Company for the year 2001.
Representatives from PricewaterhouseCoopers LLP will be present at the Annual
Meeting of Shareholders and will be given an opportunity to make a statement, if
so desired, and will be available to respond to appropriate questions.
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INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference into any
other filing by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, the sections of this Proxy Statement entitled "Report of
the Compensation Committee," "Report of the Audit and Finance Committee" (to the
extent permitted by the rules of the SEC) and "Stock Price Performance Graph",
as well as the Audit and Finance Committee Charter attached as Annex A, will not
be deemed incorporated, unless specifically provided otherwise in such filing.
DON W. SCHMITZ
Secretary
March 16, 2001
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ANNEX A
CHARTER OF THE AUDIT AND FINANCE COMMITTEE
1. The Audit and Finance Committee's composition 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 (1) the Company's financial
reporting processes and systems of internal accounting and financial controls;
(2) the selection of the Company's independent accountants; (3) the independence
and performance of the Company's independent accountants and internal audit
staff; (4) the scope and effectiveness of the annual independent audit of the
Company's financial statements; (5) the integrity of the Company's financial
statements and financial reports; and (6) the compliance by the Company with
applicable legal and regulatory requirements and the Company'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 its
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 of the Company's
financial statements or to provide independent assurance of the Company's
compliance with applicable legal and regulatory requirements and the Company'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 Committee are to represent the Company's shareholders, the
Company's independent accountants are accountable to the Board and the
Committee. The Audit and Finance Committee may request that any officer or
employee of the Company or of the Company's independent accountants attend
Committee meetings.
5. The Committee shall do the following with respect to performing its
financial reporting oversight responsibilities:
a. Review and assess the adequacy of the 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.
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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 Accounting Standards No. 61.
i. Prior to the filing of each quarterly report on Form 10-Q or annual
report on Form 10-K, the Chair of the Committee or the full Committee shall
review and consider with the independent accountants the Company's financial
results to be included in such quarterly or annual report and any matters
required to be discussed by Statement of Accounting Standards No. 61.
j. Review and discuss nonaudit 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.
6. The Committee shall do the following with respect to discharging its
compliance oversight responsibilities:
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 the Company'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 the
Company'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.
7. The Committee shall do the following with respect to discharging its
finance oversight responsibilities:
a. Review and discuss the Company's financial policies to insure their
adequacy and soundness in providing for the Company's current operations and
long-term growth.
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b. Review and discuss any proposed equity, debt or other securities
offerings and private placements.
c. Review and make recommendations to the Board concerning the level of
dividend payout.
d. Act, or appoint a management committee to act, as the "Named Fiduciary"
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") for purposes of the management and control of the assets of the
Company's pension plans, Savings and Investment Plan, and any other qualified
employee benefit plans for which such a Named Fiduciary is required under
ERISA for purposes of management and control of such plans' assets
(collectively referred to as "Plans"), but not for purposes of the
administration or management of such Plans. The Named Fiduciary shall have
such duties as may be prescribed by ERISA or otherwise directed by the
Committee, including, without limitation to establish basic funding methods
and policies consistent with the objectives of the Plans; select or change,
when appropriate, the trustees and investment managers for the Plans, which
shall act as fiduciaries and have the exclusive responsibility for the
investment of assets of the Plans entrusted to their custody and/or
management; delegate authority to any Officer of the Company to sell or
otherwise liquidate assets from the Plans to satisfy benefit payment
obligations consistent with the terms of the Plans; and select or change, when
appropriate, any actuaries required for any Plan in accordance with the terms
of the Plan.
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[PHARMACIA LOGO]
LOGO
48
Appendix provided
pursuant to Instruction
3 of Item 10 of Schedule 14A
PHARMACIA CORPORATION
2001 LONG-TERM INCENTIVE PLAN
The purpose of the Pharmacia Corporation 2001 Long-Term Incentive Plan
(the Plan) is to provide (i) designated employees of Pharmacia Corporation (the
Company) and its parents, subsidiaries and affiliates, (ii) certain consultants
and advisors who perform services for the Company or its parents, subsidiaries
or affiliates and (iii) non-employee members of the Board of Directors of the
Company (the Board) with the opportunity to receive grants of incentive stock
options, nonqualified stock options, stock appreciation rights, stock awards,
and other stock-based awards. The Company believes that the Plan will encourage
the participants to contribute materially to the growth of the Company, thereby
benefiting the Company's stockholders, and will align the economic interests of
the participants with those of the stockholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee appointed by the Board (the Committee), which may consist of two or
more persons who are outside directors as defined under section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code), and related Treasury
regulations and non-employee directors as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the Exchange Act). However, the
Board may ratify or approve any grants as it deems appropriate. The Committee
may delegate any or all of its powers under the Plan to an individual or
subcommittee, with respect to grants to persons who are not executive officers
of the Company. To the extent that the Board or an individual or subcommittee
administers the Plan, references in the Plan to the Committee shall be deemed to
refer to the Board, individual, or subcommittee.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, and (v) deal with any other matters
arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
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2. Grants
Awards under the Plan may consist of grants of incentive stock options
as described in Section 5 (Incentive Stock Options), nonqualified stock options
as described in Section 5 (Nonqualified Stock Options) (Incentive Stock Options
and Nonqualified Stock Options are collectively referred to as Options), stock
awards as described in Section 6 (Stock Awards), stock appreciation rights as
described in Section 7 (SARs) and other stock-based awards as described in
Section 8 (all of the foregoing are hereinafter collectively referred to as
Grants). All Grants shall be subject to the terms and conditions set forth
herein and to such other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the individual in a grant instrument or an amendment to the grant instrument
(the Grant Instrument). The Committee shall approve the form and provisions of
each Grant Instrument. Grants under a particular Section of the Plan need not be
uniform as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company (Company Stock) that
may be issued or transferred under the Plan is 55,000,000 shares of which only
1,000,000 shares may be subject to Stock Awards or other stock-based awards. The
maximum aggregate number of shares of Company Stock that shall be subject to
Grants made under the Plan to any individual during any calendar year shall be
2,500,000 shares, subject to adjustment as described below. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options or SARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised or if any other Grants are forfeited, the shares subject
to such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation, (iii) by reason of a
reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without the Company's receipt of consideration, or if the value of
outstanding shares of Company Stock is substantially reduced as a result of a
spinoff or the Company's payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock that any individual participating in the Plan
may be granted in any year, the number of shares covered by outstanding Grants,
the kind of shares issued under the Plan, and the price per share or the
applicable market value of such Grants may be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants; provided,
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however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its Parents,
Subsidiaries and Affiliates (as defined below) (Employees), including Employees
who are officers or members of the Board, and members of the Board who are not
Employees (Non-Employee Directors) shall be eligible to participate in the Plan.
Consultants and advisors who perform services for the Company or any of its
Parents, Subsidiaries or Affiliates (Consultants) shall be eligible to
participate in the Plan if the Consultants render bona fide services to the
Company or its Parents, Subsidiaries or Affiliates, the services are not in
connection with the offer and sale of securities in a capital-raising
transaction and the Consultants do not directly or indirectly promote or
maintain a market for the Company's securities.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Consultants to receive Grants and shall determine the
number of shares of Company Stock subject to a particular Grant in such manner
as the Committee determines. Employees, Consultants and Non-Employee Directors
who receive Grants under this Plan shall hereinafter be referred to as Grantees.
(c) Definitions.
(i) The term "Parent" means any corporation (or partnership,
joint venture, or other enterprise) in an unbroken chain ending with the Company
if each of the entities, other than the last entity in the unbroken chain, owns
or controls, directly or indirectly, 50% or more of the outstanding shares of
stock normally entitled to vote for the election of directors of one or more of
the other entities in the chain (or comparable equity participation and voting
power).
(ii) The term "Subsidiary" means any corporation (or partnership,
joint venture, or other enterprise) of which the Company, a Parent or a
Subsidiary owns or controls, directly or indirectly, 50% or more of the
outstanding shares of stock normally entitled to vote for the election of
directors (or comparable equity participation and voting power).
(iii) The term "Affiliate" means any corporation (or partnership,
joint venture, or other enterprise) of which the Company, a Parent or a
Subsidiary owns or controls, directly or indirectly, 10% or more, but less than
50%, of the outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting power).
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5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Consultants.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as incentive stock options within the meaning of section 422
of the Code or Nonqualified Stock Options that are not intended so to qualify or
any combination of Incentive Stock Options and Nonqualified Stock Options, all
in accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees of the Company or a parent or
subsidiary corporation as defined in sections 424(e) and 424(f) of the Code.
Nonqualified Stock Options may be granted to any Employees, Non-Employee
Directors and Consultants.
(ii) The purchase price (the Exercise Price) of Company Stock
subject to an Option shall be determined by the Committee; provided, however,
that (x) the Exercise Price of an Option shall be equal to, or greater than, the
Fair Market Value (as defined below) of a share of Company Stock on the date the
Option is granted and (y) an Incentive Stock Option may not be granted to an
Employee who, at the time of grant, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or any
parent or subsidiary of the Company (as defined in sections 424(e) and 424(f) of
the Code), unless the Exercise Price per share is not less than 110% of the Fair
Market Value of Company Stock on the date of grant.
(iii) The Fair Market Value per share of Company Stock shall mean
the average of the highest and lowest prices per share of the Company Stock on
the New York Stock Exchange (the "NYSE"), or such other national securities
exchange as may be designated by the Committee, on the applicable date, or, if
there are no sales of Company Stock on the NYSE on such date, then the average
of the highest and lowest prices of the Company Stock on the last previous day
on which a sale on the NYSE is reported.
(c) Option Term. The Committee shall determine the term of each Option.
The term of an Option shall not exceed ten years from the date of grant (except
as provided in Section 22(c)). An Incentive Stock Option that is granted to an
Employee who, at the time of grant, owns stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company, or
any parent or subsidiary of the Company (as defined in sections 424(e) and
424(f) of the Code), may not have a term that exceeds five years from the date
of grant.
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(d) Exercisability of Options.
(i) Options shall become exercisable in accordance with such terms
and conditions, consistent with the Plan, as may be determined by the Committee
and specified in the Grant Instrument. Unless the Committee determines
otherwise, no Option may become exercisable before the first anniversary of the
date of grant (except as provided in Section 14(a)). The Committee may
accelerate the exercisability of any or all outstanding Options at any time for
any reason.
(ii) The Committee may provide in a Grant Instrument that the
Grantee may elect to exercise part or all of an Option before it otherwise has
become exercisable. Any shares so purchased shall be restricted shares and shall
be subject to a repurchase right in favor of the Company during a specified
restriction period, with the repurchase price equal to the Exercise Price, or
such other restrictions as the Committee deems appropriate.
(e) Grants to Non-Exempt Employees. Notwithstanding the foregoing,
Options granted to persons who are non-exempt employees under the Fair Labor
Standards Act of 1938, as amended, shall have an Exercise Price not less than
100% of the Fair Market Value of the Company Stock on the date of grant, and may
not be exercisable for at least six months after the date of grant (except that
such Options may become exercisable, as determined by the Committee, upon the
Grantee's death, Disability or Retirement, or upon a Change in Control (in
accordance with Section 14(a)) or other circumstances permitted by applicable
regulations).
(f) Termination of Employment, Retirement, Disability or Death.
Notwithstanding the following, in all cases (except as provided in
Section 14(a)), upon the termination of a Grantee's employment or service with
the Company for any reason, any Option granted to such Grantee less than one
year prior to the Grantee's date of termination of employment or service with
the Company shall terminate as of such date of termination, unless the Committee
determines otherwise. Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company (as
defined below) as an Employee, Consultant or member of the Board.
(i) In the event that a Grantee ceases to be employed by, or
provide service to, the Company on account of an involuntary termination of the
Grantee's employment or service by the Company for any reason other than for
Cause (as defined below), any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after the date on which
the Grantee ceases to be employed by, or provide service to, the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.
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(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the Company,
any Option held by the Grantee shall terminate as of the date the Grantee ceases
to be employed by, or provide service to, the Company, unless the Committee
determines otherwise. In addition, notwithstanding any other provisions of this
Section 5, and unless the Committee determines otherwise, if the Committee
determines that the Grantee has engaged in conduct that constitutes Cause at any
time while the Grantee is employed by, or providing service to, the Company or
after the Grantee's termination of employment or service, any Option held by the
Grantee shall immediately terminate and the Grantee shall automatically forfeit
all shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a forfeiture.
In addition to the foregoing, the Committee may impose such other conditions and
restrictions as it deems appropriate in the event a Grantee engages in conduct
that constitute Cause.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of Retirement, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within three years
after the date on which the Grantee ceases to be employed by, or provide service
to, the Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Except as otherwise provided by the Committee, any of the Grantee's
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall immediately
vest and become exercisable as of such date.
(iv) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is Disabled, any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within
three years after the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Except as otherwise provided by the Committee,
any of the Grantee's Options which are not otherwise exercisable as of the date
on which the Grantee ceases to be employed by, or provide service to, the
Company shall immediately vest and become exercisable as of such date.
(v) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Grantee ceases to
be employed or provide service on account of a termination specified in Section
5(f)(i) above (or within such other period of time as may be specified by the
Committee), any Option that is otherwise exercisable by the Grantee shall
terminate unless exercised within three years after the date on which the
Grantee ceases to be employed by, or provide service to, the Company (or within
such other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee, any of the Grantee's
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Options that are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall immediately
vest and become exercisable as of such date.
(vi) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of voluntary termination by the Grantee, any
Option which is otherwise exercisable by the Grantee shall terminate unless
exercised within 90 days after the date on which the Grantee ceases to be
employed by, or provide service to, the Company (or within such other period of
time as may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the Grantee's Options which are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by, or provide service
to, the Company shall terminate as of such date.
(vi) For purposes of this Section 5(f) and Sections 6, 7, and 8:
(A) The term Company shall mean the Company and its Parents,
Subsidiaries and Affiliates, except as otherwise determined by the
Committee.
(B) The term "employed by, or provide service to, the Company"
shall mean employment or service with the Company or a Parent,
Subsidiary or Affiliate, as described in Section 9.
(C) Disability shall mean a Grantee's permanent and total
disability within the meaning of section 22(e)(3) of the Code or the
Grantee becomes entitled to receive long-term disability benefits under
the Company's long-term disability plan applicable to the Grantee, or
such other definition of Disability as the Committee shall determine.
(D) Cause shall mean, except to the extent specified otherwise by
the Committee, a finding by the Committee that the Grantee (i) has
breached his or her employment or service contract with the Company,
(ii) has engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty, (iii) has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such
information, (iv) has breached any written confidentiality,
non-competition or non-solicitation agreement between the Grantee and
the Company or (v) has engaged in such other behavior detrimental to
the interests of the Company as the Committee determines.
(E) Retirement shall mean a Grantee's termination of employment or
service with the Company after the Grantee attains age 50, or such
other definition of Retirement as the Committee shall determine.
(g) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the
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Committee (w) in cash, (x) with the approval of the Committee, by delivering
shares of Company Stock owned by the Grantee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions as
the Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price or by attestation (on a form prescribed by
the Committee) to ownership of shares of Company Stock having a Fair Market
Value on the date of exercise equal to the Exercise Price, (y) payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board, or (z) by such other method as the Committee may approve. The
Committee may authorize loans by the Company to Grantees in connection with the
exercise of an Option, upon such terms and conditions as the Committee, in its
sole discretion, deems appropriate. Shares of Company Stock used to exercise an
Option shall have been held by the Grantee for the requisite period of time to
avoid adverse accounting consequences to the Company with respect to the Option.
The Grantee shall pay the Exercise Price and the amount of any withholding tax
due (pursuant to Section 11) at the time of exercise.
(h) Reload Options. The Committee may provide in a Grant Instrument
that if the Grantee uses shares of Company Stock to exercise an Option, and the
Grantee is then in the employment or service of the Company and is eligible to
receive grants under the Plan, the Grantee will receive a Grant of additional
Options to purchase a number of shares of Company Stock equal to the number of
whole shares used to exercise the Option and, if the Grant Instrument so
designates, the number of whole shares, if any, withheld in payment of any
taxes. Such additional Options shall be granted with an Exercise Price equal to
the Fair Market Value of the Company Stock on the date of grant of such
additional Options, or at such other Exercise Price as the Committee may
establish, for a term not longer than the unexpired term of the exercised Option
and on such other terms as the Committee shall determine. A Grantee may only
receive reload Options if the Grant Instrument specifically provides for such
Options.
(i) Dividend Equivalents. The Committee may grant dividend equivalents
in connection with Options granted under the Plan. Dividend equivalents may be
paid currently or accrued as contingent cash obligations and may be payable in
cash or shares of Company Stock, and upon such terms as the Committee may
establish.
(j) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of sections 424(e) and (f) of the Code).
6. Stock Awards
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The Committee may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Consultant under a Stock Award, upon such
terms as the Committee deems appropriate. The following provisions are
applicable to Stock Awards:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Stock Awards may be issued or transferred for consideration or for
no consideration, and subject to restrictions or no restrictions, as determined
by the Committee. The Committee may, but shall not be required to, establish
conditions under which restrictions on Stock Awards shall lapse over a period of
time or according to such other criteria as the Committee deems appropriate. The
period of time during which the Stock Awards will remain subject to restrictions
will be designated in the Grant Instrument as the Restriction Period.
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Stock Award
and the restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(f))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Stock Award shall terminate as to
all shares covered by the Grant as to which the restrictions have not lapsed,
and those shares of Company Stock must be immediately returned to the Company.
The Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) Restrictions on Transfer. During the Restriction Period, a Grantee
may not sell, assign, transfer, pledge or otherwise dispose of the shares of a
Stock Award except to a Successor Grantee under Section 12(a). The Committee may
hold Stock Awards in escrow until all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Stock Awards and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Stock Awards
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Stock Awards, that the restrictions shall lapse
without regard to any Restriction Period.
(g) Stock Award Units. The Committee may also grant Stock Awards that
are expressed as units, or hypothetical shares, of Company Stock, on such terms
as the Committee deems appropriate. These Stock Award units may be paid in cash
or in shares of Company Stock, as the Committee determines.
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7. Stock Appreciation Rights
(a) General Requirements. The Committee may grant stock appreciation
rights (SARs) to an Employee, Non-Employee Director or Consultant separately or
in tandem with any Option (for all or a portion of the applicable Option).
Tandem SARs may be granted either at the time the Option is granted or at any
time thereafter while the Option remains outstanding; provided, however, that,
in the case of an Incentive Stock Option, SARs may be granted only at the time
of the Grant of the Incentive Stock Option. The Committee shall establish the
base amount of the SAR at the time the SAR is granted. Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option, an
amount equal to or greater than the Fair Market Value of a share of Company
Stock on the date of Grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs granted
to a Grantee that shall be exercisable during a specified period shall not
exceed the number of shares of Company Stock that the Grantee may purchase upon
the exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Company Stock covered by such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by, or providing service to, the Company or during the applicable
period after termination of employment or service as described in Section 5(f).
A tandem SAR shall be exercisable only during the period when the Option to
which it is related is also exercisable.
(d) Grants to Non-Exempt Employees. Notwithstanding the foregoing, SARs
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, shall have a base amount not less than 100% of the Fair
Market Value of the Company Stock on the date of grant, and may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the Grantee's
death, Disability or Retirement, or upon a Change in Control (in accordance with
Section 14(a)) or other circumstances permitted by applicable regulations).
(e) Value of SARs. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock or
a combination thereof. The stock appreciation for an SAR is the amount by which
the Fair Market Value of the underlying Company Stock on the date of exercise of
the SAR exceeds the base amount of the SAR as described in Subsection (a), or
such other amount as the Committee may determine.
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(f) Form of Payment. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company Stock
to be received, shares of Company Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Company Stock are to be
received upon exercise of an SAR, cash shall be delivered in lieu of any
fractional share.
8. Other Stock-Based Awards. The Committee may grant to Employees,
Non-Employee Directors and Consultants other awards of Company Stock or awards
that are valued in whole or in part by reference to, or are otherwise based on,
Company Stock, with such terms and conditions as the Committee deems
appropriate.
9. Employment or Service With the Company. For purposes of the Plan,
employment or service with the Company shall mean employment or service as an
Employee or Consultant of the Company, a Parent, Subsidiary or Affiliate, or
service as a member of the Board, unless the Committee determines otherwise. For
purposes of exercising Options and SARs and satisfying conditions with respect
to other Grants, a transfer of a Grantee among the Company and its Parents,
Subsidiaries and Affiliates shall not be considered a termination of employment
or service, unless the Committee determines otherwise. Without limiting the
foregoing, the Committee shall have the right at any time to determine that a
Grantee's transfer of employment or service to an Affiliate will not be
considered continued employment or service with the Company for purposes of a
particular Grant under the Plan.
10. Deferrals
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of shares that would otherwise be due to such
Grantee in connection with any Grant. If any such deferral election is permitted
or required, the Committee shall, in its sole discretion, establish rules and
procedures for such deferrals.
11. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options, Stock Awards and other Grants paid in Company Stock, the Company may
require that the Grantee or other person receiving or exercising Grants pay to
the Company the amount of any federal, state or local taxes that the Company is
required to withhold with respect to such Grants, or the Company may deduct from
other wages paid by the Company the amount of any withholding taxes due with
respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to Grants paid in Company
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Stock by having shares withheld up to an amount that does not exceed the
Grantee's minimum applicable withholding tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and may be subject to the prior approval of the
Committee.
12. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee, pursuant to a
domestic relations order or otherwise as permitted by the Committee. When a
Grantee dies, the personal representative or other person entitled to succeed to
the rights of the Grantee (Successor Grantee) may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of an Option and the transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
transfer.
13. Change in Control of the Company
A Change in Control shall mean:
(a) The acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 33% or more of either (i) the then
outstanding shares of Common Stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions of Outstanding Company Common Stock or Outstanding
Company Voting Securities shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (C) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (c) of this Section shall
be satisfied; and provided further that, for purposes of
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clause (A), if any Person (other than the Company or any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of 33% or more of
the Outstanding Company Common Stock or 33% or more of the Outstanding Company
Voting Securities by reason of any acquisition of Outstanding Company Common
Stock or Outstanding Company Voting Securities by the Company and such Person
shall, after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Company Common Stock or any additional
Outstanding Voting Securities and such beneficial ownership is publicly
announced, such additional beneficial ownership shall constitute a Change in
Control;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of the
Company subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least
three-quarters of the directors then comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be deemed to have been a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall be deemed to have been a member
of the Incumbent Board;
(c) Approval by the stockholders of the Company of a reorganization,
merger or consolidation involving the Company unless, in any such case,
immediately after such reorganization, merger or consolidation, (i) more than
50% of the then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation and more than 50% of the
combined voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals or
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation and in substantially the
same proportions relative to each other as their ownership, immediately prior to
such reorganization, merger or consolidation, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled by the
Company), or any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 33% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 33%
or more of the then outstanding shares of common stock of such corporation or
33% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
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corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or
(d) (i) Approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company other than
to a corporation with respect to which, immediately after such sale or other
disposition, (A) more than 50% of the then outstanding shares of common stock
thereof and more than 50% of the combined voting power of the then outstanding
securities thereof entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such sale or other disposition and in
substantially the same proportions relative to each other as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(B) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or such corporation (or any
corporation controlled by the Company), or any Person which beneficially owned,
immediately prior to such sale or other disposition, directly or indirectly, 33%
or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 33% or more of the then outstanding shares of common stock thereof
or 33% or more of the combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of directors and (C) at least
a majority of the members of the board of directors thereof were members of the
Incumbent board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition (or were approved
directly or indirectly by the Incumbent Board).
14. Consequences of a Change in Control
(a) Notice and Acceleration. Upon a Change in Control, (i) the Company
shall provide each Grantee with outstanding Grants written notice of such Change
in Control, (ii) all outstanding Options and SARs shall automatically accelerate
and become fully exercisable, and (iii) the restrictions and conditions on all
outstanding Stock Awards or other stock-based awards shall immediately lapse.
(b) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (c) below, in the event of a Change in Control, the Committee may
take any of the following actions with respect to any or all outstanding Grants:
the Committee may (i) determine that outstanding Options and SARs that are not
exercised shall be assumed by, or replaced with comparable options or rights by,
the surviving corporation (or a parent or subsidiary of the surviving
corporation), and that other outstanding Grants shall be converted to similar
grants of the surviving corporation (or a parent or subsidiary of the surviving
corporation), (ii) require that Grantees surrender their outstanding Options and
SARs in exchange for a payment by the Company, in cash or Company Stock as
determined by the Committee, in an amount equal to the
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amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's unexercised Options and SARs exceeds the Exercise Price
of the Options or the base amount of the SARs, as applicable, (iii) after giving
Grantees an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised Options and SARs at such time as the Committee
deems appropriate, or (iv) determine that Grantees shall receive a payment in
settlement of Stock Awards and other stock-based awards, in such amount and form
as may be determined by the Committee. Such surrender, termination or settlement
shall take place as of the date of the Change in Control or such other date as
the Committee may specify.
(c) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change in Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in Subsection (b) above) that would make the Change in Control
ineligible for pooling of interests accounting treatment or that would make the
Change in Control ineligible for desired tax treatment if, in the absence of
such right, the Change in Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change in Control.
15. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
16. Amendment and Termination of the Plan
(a) Amendment. The Board or its delegate may amend or terminate the
Plan at any time; provided, however, that the Board or its delegate shall not
amend the Plan without stockholder approval if such approval is required in
order to comply with the Code or applicable laws, or to comply with applicable
stock exchange requirements.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of
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a Grantee unless the Grantee consents or unless the Committee acts under Section
22(b) or otherwise as specifically permitted by the Plan or Grant Instrument.
The termination of the Plan shall not impair the power and authority of the
Committee with respect to an outstanding Grant. Whether or not the Plan has
terminated, an outstanding Grant may be terminated or amended under Section
22(b) or may be amended by agreement of the Company and the Grantee consistent
with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
17. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
18. Rights of Participants
Nothing in this Plan shall entitle any Employee, Consultant,
Non-Employee Director or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
19. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
20. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
21. Effective Date of the Plan.
Subject to approval by the Company's stockholders, the Plan shall be
effective on April 18, 2001.
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22. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any Parent, Subsidiary or
Affiliate in substitution for a stock option or stock awards grant made by such
corporation. The terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Options and SARs and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition,
it is the intent of the Company that the Plan and applicable Grants under the
Plan comply with the applicable provisions of section 162(m) of the Code and
section 422 of the Code. To the extent that any legal requirement of section 16
of the Exchange Act or section 162(m) or 422 of the Code as set forth in the
Plan ceases to be required under section 16 of the Exchange Act or section
162(m) or 422 of the Code, as applicable, that Plan provision shall cease to
apply. The Committee may revoke any Grant if it is contrary to law or modify a
Grant to bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion, agree
to limit its authority under this Section.
(c) Employees Subject to Taxation Outside the United States. With
respect to Grantees who are subject to taxation in countries other than the
United States, the Committee may make Grants on such terms and conditions
different from those specified in this Plan (including without limitation
granting Options with a term longer than ten years if appropriate to assure
favorable tax treatment) as may in the judgment of the Committee be necessary or
desirable to foster and promote achievement of the purposes of the Plan, and, in
furtherance of such purposes, the Committee may make such modifications and
amendments, and establish such procedures and subplans, as may be necessary or
advisable to comply with provisions of laws in other countries in which the
Company or its Parent, Subsidiaries or Affiliates operate or have employees;
provided, however, that, except as described above, any such modification,
amendment, procedure or subplan shall not be inconsistent with the terms of the
Plan.
-17-
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(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions thereof.
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Appendix provided
pursuant to Instruction
3 of Item 10 of Schedule 14A
PHARMACIA CORPORATION OPERATIONS COMMITTEE INCENTIVE PLAN
1. PLAN OBJECTIVE
The Pharmacia Corporation Operations Committee Incentive Plan (alternatively
referred to as the "OCIP" or the "Plan") is designed to encourage
results-oriented actions on the part of members of the Operations Committee
("OC") of Pharmacia Corporation (the "Company"). The Plan is intended to align
closely financial rewards with the achievement of specific performance
objectives.
2. ELIGIBILITY
All management employees of the Company and its subsidiaries who are "Pharma"
members of the OC are eligible to participate in the Plan. The Administrator (as
defined in Section 3 below) shall select the management employees who shall
participate in the Plan (the "Participants").
3. ADMINISTRATION
(A) The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee") with respect to employees who are elected
officers of the Company ("Elected Officers"), and the Plan shall be administered
by the Chief Executive Officer of the Company ("CEO") with respect to all other
employees. The CEO may delegate his authority to administer the Plan to an
individual or other committee. The term "Administrator" shall mean the
Committee, as applied to Elected Officers, and the CEO or an individual or
committee to which authority has been delegated, as applied to all other
employees.
(B) The Administrator shall have full power and authority to establish
the rules and regulations relating to the Plan, to interpret the Plan and those
rules and regulations, to select Participants for the Plan, to determine each
Participant's target award, performance goals and final award, to make all
factual and other determinations in connection with the Plan, and to take all
other actions necessary or appropriate for the proper administration of the
Plan, including the delegation of such authority or power, where appropriate.
Only the Committee shall take the foregoing actions with respect to Elected
Officers.
(C) All powers of the Administrator shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals. The Administrator's administration of the Plan, including
all such rules and regulations, interpretations, selections, determinations,
approvals, decisions, delegations, amendments, terminations and other actions,
shall be final and binding on the Company and all employees of the Company,
including the Participants and their respective beneficiaries.
4. TARGET AWARDS AND PERFORMANCE GOALS
(A) At the beginning of each plan year designated by the Administrator
(a "Plan Year"), the Administrator shall establish for each Participant a target
incentive award, which shall be expressed as a dollar amount, a percentage of
salary or otherwise. The Administrator shall establish for each Elected Officer
a maximum award that may be paid for the Plan Year. The maximum award amount for
Elected Officers will remain fixed for the entire Plan Year and may not be
increased based on an increase in salary during the Plan Year or otherwise. The
target awards will be based on a number of factors, including but not limited
to:
- Market competitiveness of the position
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- Job level
- Base salary level
- Past individual performance
- Expected contribution to future Company performance and business impact
(B) At the beginning of each Plan Year, the Administrator shall
establish for each Participant performance goals that must be met in order for
an award to be payable for the Plan Year. The Administrator shall establish in
writing (i) the performance goals that must be met, (ii) the threshold, target
and maximum amounts that may be paid if the performance goals are met, and (iii)
any other conditions that the Administrator deems appropriate and consistent
with the Plan and, in the case of Elected Officers, Section 162(m) of the Code.
The Administrator shall establish objective performance goals for each
Participant related to the Participant's business unit or the performance of the
Company and its parents, subsidiaries and affiliates as a whole, or any
combination of the foregoing. The Administrator may also establish subjective
performance goals for Participants; provided that, for Elected Officers, the
subjective performance goals may only be used to reduce, and not increase, the
award otherwise payable under the Plan. The Company shall notify each
Participant of his or her target award and the performance goals for the Plan
Year.
(C) The objectively determinable performance goals shall be based on
one or more of the following criteria related to the Participant's business unit
or the performance of the Company and its parents, subsidiaries and affiliates
as a whole, or any combination of the foregoing: stock price, earnings per
share, net earnings, operating or other earnings, profits, revenues, net cash
flow, financial return ratios, return on assets, stockholder return, return on
equity, growth in assets, unit volume, sales, market share, drug discovery or
other scientific goals, pre-clinical or clinical goals, regulatory approvals, or
strategic business criteria consisting of one or more objectives based on
meeting specified revenue goals, market penetration goals, geographic business
expansion goals, cost targets, goals relating to acquisitions or divestitures,
or strategic partnerships.
(D) For Elected Officers, the Administrator must establish the target
awards and performance goals no later than the earlier of (i) 90 days after the
beginning of the Plan Year or (ii) the date on which 25% of the Plan Year has
been completed, or such other date as may be required or permitted under
applicable regulations under section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The performance goals for each Elected Officer
for each Plan Year are intended to satisfy the requirements for "qualified
performance-based compensation" under section 162(m) of the Code, including the
requirement that the achievement of the performance goals be substantially
uncertain at the time they are established and that the performance goals be
established in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the performance goals have been
met.
(E) Each Participant will earn an award for a Plan Year based on the
achievement of the performance goals established by the Administrator. The
Administrator may adjust, upward or downward, the award for each Participant who
is not an Elected Officer, based on the Administrator's determination of the
Participant's achievement of personal and other performance goals established by
the Administrator and other factors as the Administrator determines. The
Administrator may reduce (but not increase) the award for each Elected Officer
based on the Administrator's determination of the Participant's achievement of
personal and other performance goals established by the Administrator and other
factors as the Administrator determines. The Administrator shall not be
authorized to increase the amount of any award of an Elected Officer that would
otherwise be payable pursuant to the terms of the Plan.
(F) The maximum award that a Participant may receive for any Plan Year
is $12,000,000.
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5. PAYMENT OF INCENTIVE AWARDS
(A) The Administrator shall certify and announce to the Participants
the awards that will be paid by the Company as soon as practicable following the
final determination of the Company's financial results for the Plan Year.
Payment of the awards certified by the Administrator shall be made in a single
lump sum cash payment as soon as practicable following the close of the Plan
Year, but in any event within 120 days after the close of the Plan Year.
(B) Participants must be employed on the last day of the Plan Year to
be eligible for an award from the Plan, except as described in subsections (c)
and (d) below.
(C) Participants who terminate employment prior to the last day of the
Plan Year will not be eligible for any award payment for that Plan Year, except
as the Administrator may otherwise determine. Unless the Administrator
determines otherwise:
(I) Participants who die or who retire under a
Company-sponsored retirement program during the Plan Year will be eligible for a
prorated award based on the achievement of the performance goals for the Plan
Year and appropriate adjustment as described in Section 4. The prorated award
will be calculated from the date when they became eligible for the Plan to the
date of death or retirement. Payment will be made in a single payment at the
same time as all other incentive awards for the Plan Year are distributed. In
the case of the death of a Participant, any award payable to the Participant
shall be paid to his or her beneficiary. For this purpose, the Company will use
the beneficiary named under the Company-sponsored life insurance plan. If no
life insurance beneficiary is designated, the beneficiary will be the decedent's
estate.
(II) Participants who leave the Company under a
Company-sponsored disability program, separation program (other than in the case
of termination for cause) or other program approved by the Management Committee
will be eligible for a prorated award based on achievement of the performance
goals for the year and appropriate adjustment as described in Section 4. The
awards will be calculated from the date when they became eligible for the Plan
to the effective date of separation. Payment will be made in a single payment at
the same time as all other incentive awards for the Plan Year are distributed.
(D) The Administrator may establish appropriate terms and conditions to
accommodate newly hired and transferred employees, consistent, in the case of
Elected Officers, with Section 162(m) of the Code.
6. CHANGES TO PERFORMANCE GOALS AND TARGET AWARDS
At any time prior to the final determination of awards, for Participants other
than Elected Officers, the Administrator may adjust the performance goals and
target awards to reflect a change in corporate capitalization (such as a stock
split or stock dividend), or a corporate transaction (such as a merger,
consolidation, separation, reorganization or partial or complete liquidation),
or to reflect equitably the occurrence of any extraordinary event, any change in
applicable accounting rules or principles, any change in the Company's method of
accounting, any change in applicable law, any change due to any merger,
consolidation, acquisition, reorganization, stock split, stock dividend,
combination of shares or other changes in the Company's corporate structure or
shares, or any other change of a similar nature. The Administrator may make the
foregoing adjustments with respect to Elected Officers' awards to the extent the
Administrator deems appropriate, considering the requirements of Section 162(m)
of the Code.
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7. AMENDMENTS AND TERMINATION
(A) The Company may at any time amend or terminate the Plan by action
of the Committee; provided, however, that the Committee shall not amend the Plan
without stockholder approval if such approval is required by Section 162(m) of
the Code. Without limiting the foregoing, the Company, by action of the
Administrator, shall have the right to modify the terms of the Plan as may be
necessary or desirable to comply with the laws or local customs of countries in
which the Company operates or has employees.
(B) The Plan must be reapproved by the stockholders no later than the
first stockholders meeting that occurs in the fifth year following the year in
which the stockholders previously approved the Plan, if required by Section
162(m) of the Code or the regulations thereunder.
8. MISCELLANEOUS PROVISIONS
(A) This Plan is not a contract between the Company and the
Participants. Neither the establishment of this Plan, nor any action taken
hereunder, shall be construed as giving any Participant any right to be retained
in the employ of the Company or any of its subsidiaries. Nothing in the Plan,
and no action taken pursuant to the Plan, shall affect the right of the Company
to terminate a Participant's employment at any time and for any or no reason.
The Company is under no obligation to continue the Plan.
(B) A Participant's right and interest under the Plan may not be
assigned or transferred, except as provided in Section 5(c) of the Plan upon
death, and any attempted assignment or transfer shall be null and void and shall
extinguish, in the Company's sole discretion, the Company's obligation under the
Plan to pay awards with respect to the Participant. The Company's obligations
under the Plan may be assigned to any corporation which acquires all or
substantially all of the Company's assets or any corporation into which the
Company may be merged or consolidated.
(C) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, or to make any other segregation of
assets, to assure payment of awards. The Company's obligations hereunder shall
constitute a general, unsecured obligation, awards shall be paid solely out of
the Company's general assets, and no Participant shall have any right to any
specific assets of the Company.
(D) The Company shall have the right to deduct from awards any and all
federal, state and local taxes or other amounts required by law to be withheld.
(E) It is the intent of the Company that the Plan and awards under the
Plan for Elected Officers comply with the applicable provisions of sections
162(m) of the Code. To the extent that any legal requirement of Section 162(m)
of the Code as set forth in the Plan ceases to be required under Section 162(m)
of the Code, that Plan provision shall cease to apply.
(F) The Company's obligation to pay compensation as herein provided is
subject to any applicable orders, rules or regulations of any government agency
or office having authority to regulate the payment of wages, salaries, and other
forms of compensation.
(G) The validity, construction, interpretation and effect of the Plan
shall exclusively be governed by and determined in accordance with the laws of
the State of Delaware.
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Appendix provided
pursuant to Instruction
3 of Item 10 of Schedule 14A
PHARMACIA CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE. The Plan is designed to encourage employee stock
ownership in the Company by providing Employees of the Company and Eligible
Subsidiaries with an opportunity to purchase Common Stock through voluntary
systematic payroll deductions. It is the purpose and policy of the Plan to
foster ownership interest among Employees, thus aligning the interests of
Employees with the interests of stockholders. The Company intends that the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended and the Plan shall be construed in accordance
with such intent.
SECTION 2. DEFINITIONS. The following terms, when used in the Plan,
shall have the following meanings:
a. "Administrator" means the Compensation Committee of the Board and
any individual or individuals (including without limitation,
another subcommittee of the Board) to whom the Compensation
Committee has delegated any or all of its administrative powers
and duties under the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Business Day" means mean a day on which the New York Stock
Exchange is open for trading.
d. "Common Stock" means the common stock of the Company.
e. "Company" means Pharmacia Corporation.
f. "Compensation" means annualized base salary paid by the Company or
an Eligible Subsidiary.
g. "Eligible Subsidiary" means a Subsidiary that has been designated
by the Administrator to participate in an Offering.
h. "Employee" means any individual who is treated on the Enrollment
Date as an employee of the Company or an Eligible Subsidiary for
tax purposes.
i. "Enrollment Date" means the first Business Day of an Offering
Period.
j. "Enrollment Form" means a subscription agreement for an Offering,
on a form prescribed by the Administrator, authorizing the Company
to make payroll deductions for purposes of the Plan and
designating the beneficiary who will receive payments due to the
participant in the event of the participant's death.
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k. "Enrollment Period" means the period prior to the Enrollment Date
during which Employees may enroll in an Offering.
l. "Offering" means the grant of an option to purchase Common Stock
under the Plan, as described in Section 6(a).
m. "Offering Period" means the period during which an option granted
pursuant to an Offering may be exercised via voluntary payroll
deductions.
n. "Plan" means this Pharmacia Corporation Employee Stock Purchase
Plan, as may be amended from time to time.
o. "Purchase Date" means the date or dates that Common Stock is
purchased under an Offering, which date(s) shall be the last
Business Day of each Purchase Period.
p. "Purchase Period" means the period between Purchase Dates, except
that the first Purchase Period of any Offering Period shall be the
period between the Enrollment Date and the first Purchase Date of
the Offering Period.
q. "Purchase Price" means the purchase price per share of Common
Stock under an Offering, as fixed by the Administrator in
accordance with Section 6(e) of the Plan.
r. "Subsidiary" means a corporation (other than the Company), whether
domestic or foreign, in an unbroken chain of corporations
beginning with the Company, of which not less than 50% of the
total combined voting power of all classes of stock in such
corporation is held by the Company or another corporation (other
than the last corporation) in such chain. For purposes of
determining which entities are Subsidiaries, a partnership that
has elected to be taxed as a corporation shall be treated as a
corporation during the period for which such election applies.
SECTION 3. COMMON STOCK SUBJECT TO THE PLAN. The shares that may be
offered under the Plan shall be issued and outstanding shares of Common Stock
that are acquired by the Company from time to time in open market transactions.
The number of shares of Common Stock that may be purchased by participants under
the Plan may not exceed 70,000,000 shares, except as such number may be adjusted
pursuant to Section 11. All shares offered under the Plan that are not
purchased, and any previously unoffered shares, will be available for subsequent
Offerings.
SECTION 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by the Administrator. The Administrator shall serve at the pleasure of the Board
and shall have such powers, duties and discretions as set out in the Plan and as
the Board may from time to time confer upon it. The Administrator shall have
sole and absolute discretion to interpret the Plan, to make determinations as to
the eligibility of Employees to participate in the Plan and to adopt rules and
regulations for administering the Plan. Any decision or action by the Board or
the Administrator arising out of or in connection with the construction,
administration, interpretation
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and effect of the Plan shall be conclusive and binding upon all Employees
participating in the Plan and any person claiming under or through any such
Employee.
SECTION 5. ELIGIBILITY. Only eligible Employees of the Company or an
Eligible Subsidiary may participate in an Offering.
a. Eligible Subsidiaries. Prior to the commencement of the Enrollment
Period, the Administrator shall designate the Subsidiaries that
shall be the Eligible Subsidiaries for the Offering.
b. Eligible Employees. All Employees of the Company or any Eligible
Subsidiary shall be eligible to participate in an Offering;
except, however, that the Administrator may, in its discretion and
on a uniform basis, exclude from any Offering or Offerings
Employees who, as of the Enrollment Date for the Offering:
(i) Have not completed a minimum period of employment that may
be fixed from time to time by the Administrator, in its
discretion and on a uniform basis; provided, however, that
in no event may such minimum employment period exceed
twenty-four (24) months in length;
(ii) Are customarily employed for less than twenty (20) hours per
week;
(iii) Are customarily employed for not more than five (5) months
in any calendar year; or
(iv) Are "highly compensated employees," within the meaning of
Section 414(q) of the Internal Revenue Code of 1986, as
amended.
All Employees participating in an Offering shall have the same
rights and privileges to purchase Common Stock under the Plan;
except that the amount of Common Stock that may be purchased by
any Employee under an Offering may bear a uniform relationship to
the total Compensation of Employees.
c. Limitations on Participation. Notwithstanding the foregoing, no
Employee shall be eligible to participate in an Offering to the
extent that:
(i) Such Employee owns, or would own immediately after such
Offering, stock possessing five percent (5%) or more of the
combined voting power or value of all classes of stock of
the Company or any Subsidiary; or
(ii) Such Employee's rights to purchase stock under all employee
stock purchase plans (within the meaning of Section 423 of
the Code) of the Company and its Subsidiaries accrues at a
rate that exceeds $25,000 worth of stock (determined at the
fair market value of the shares at the time such rights are
granted) for each calendar year during which the rights to
purchase such stock are outstanding at any time.
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SECTION 6. OFFERINGS UNDER THE PLAN. The terms and conditions of each
Offering shall be determined by the Administrator prior to the commencement of
the Enrollment Period for the Offering in accordance with this Section 6.
a. Grant and Exercise of Options. On the Enrollment Date of each
Offering, each eligible Employee shall be granted an option to
purchase during the Offering Period (at the applicable Purchase
Price) up to the number of shares of Common Stock determined by
dividing such Employee's payroll deductions accumulated during
each Purchase Period in the Offering Period by the applicable
Purchase Price. Unless a participant withdraws from the Offering
in accordance with Section 8(c) prior to the Purchase Date, the
option will be automatically exercised on each Purchase Date with
respect to the number of shares subject to the option that can be
purchased with payroll deductions accumulated during the
applicable Purchase Period in accordance with Section 9.
b. Enrollment Date. The Enrollment Date for each Offering shall be
fixed by the Administrator prior to the announcement of the
Offering.
c. Offering Period. Unless the Administrator, in its discretion,
determines that a different Offering Period shall apply to an
Offering, the Offering Period shall be the twenty-four (24) month
period commencing on the Enrollment Date. In no event shall any
Offering Period under the Plan exceed twenty-seven (27) months.
Offering Periods under the Plan may overlap.
d. Purchase Periods. Each Offering Period shall consist of one or
more Purchase Periods. Unless the Administrator, in its
discretion, determines otherwise with respect to an Offering, each
24-month Offering Period shall be divided into four 6-month
Purchase Periods.
e. Purchase Price. The per share Purchase Price of the Common Stock
available for purchase under an Offering shall be fixed by the
Administrator prior to the Enrollment Date. In no event shall the
Purchase Price applicable to an Offering be fixed at a price lower
than the lesser of:
(i) 85% of the fair market value of a share of Common Stock on
the Enrollment Date; and
(ii) 85% of the fair market value of a share of Common Stock on
the applicable Purchase Date.
The Purchase Price fixed for an Offering shall be subject to
adjustment pursuant to Section 11 of the Plan.
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SECTION 7. ENROLLMENT AND PARTICIPATION.
a. Enrollment. An eligible Employee shall become a participant in an
Offering by filing a properly completed Enrollment Form with the
designated Plan representative before the end of the applicable
Enrollment Period.
b. Enrollment Period. Unless the Administrator determines otherwise
with respect to an Offering, the Enrollment Period for each
Offering shall be the forty-five (45) day period commencing sixty
(60) days prior to the Enrollment Date of the Offering. Although
the Administrator may, in its discretion, determine that a longer
or shorter Enrollment Period may apply to an Offering, in no event
shall any Enrollment Period extend past a date that is less than
fifteen (15) days prior to the Enrollment Date of the Offering.
SECTION 8. PAYROLL DEDUCTION ELECTIONS, WITHDRAWAL RIGHTS, BENEFICIARY
DESIGNATIONS.
a. Deduction Election. An eligible Employee who desires to
participate in an Offering shall elect on the Enrollment Form to a
have a portion of his or her Compensation, not exceeding in the
aggregate $25,000 for any calendar year, deducted from his or her
pay for each pay period during the Offering Period. At the
discretion of the Administrator, the Enrollment Form may provide
that the portion of Compensation deducted be expressed as either
(i) a percentage of Compensation only, (ii) a flat dollar amount
only or (iii) either a percentage of Compensation or a flat dollar
amount, as elected by the participant. All amounts deducted from a
participant's pay shall be credited to a recordkeeping account
established under the Plan on behalf of the participant for the
Offering. Payroll deductions shall commence on the first pay
period after the Enrollment Date and shall continue until the last
pay period in the Offering Period, unless deductions are suspended
by the participant as provided in Section 8(b) or the participant
withdraws from the Offering as provided in Section 8(c).
b. Change in Elections. The Committee may, in its discretion, permit
participants in an Offering to increase (subject to the maximum
annual dollar limitation) or decrease the percentage of
Compensation deducted from pay, or suspend payroll deductions
entirely, by completing and filing with the designated Plan
representative a new Enrollment Form authorizing a change in
payroll deduction rate. The Committee may, in its discretion,
limit the number of deduction rate changes that participants may
make during an Offering Period and may designate specific times
during an Offering Period when such rate changes may be made. At
the discretion of the Committee, a participant who suspends
payroll deductions, but does not withdraw from the Offering, may
be permitted to reinstate payroll deductions by completing and
filing a new Enrollment Form. Any change in deduction rate or
suspension of deductions made pursuant to this Section 4(c) shall
have prospective effect only. Any determination of the
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Committee to permit changes in the deduction rates elected by
participants shall apply to all participants on a uniform basis.
c. Withdrawal From Offering. Each participant in an Offering shall
have the absolute right to withdraw from the Offering at any time
during the Offering Period by completing and filing with the
designated Plan representative a withdrawal notice on a form
prescribed by the Administrator. In the event that a participant
withdraws from an Offering, all payroll deductions shall cease and
any amounts credited to the participant's recordkeeping account
that have not already been applied to the purchase of Common Stock
shall be returned to the participant in cash, without interest, as
soon as practicable after receipt of the withdrawal notice. A
participant who withdraws from an Offering shall not be permitted
to participate again in such Offering, but may be permitted to
participate in any subsequent Offerings under the Plan.
d. Termination of Employment or Death. Upon a participant's
termination of employment for any reason (including death) during
an Offering Period, the participant shall be deemed to have
elected to withdraw from the Offering in accordance with Section
8(c) and the payroll deductions credited to such participant's
account during the Offering Period, but not yet used to purchase
Common Stock, shall be returned to the participant, without
interest, or in the case of the participant's death, to the
participant's beneficiary designated in accordance with Section
8(e). Notwithstanding the foregoing, in the event of a termination
of employment that occurs within thirty (30) days prior to a
Purchase Date, the Committee may (in its discretion, but on a
uniform basis) treat the termination of employment as an election
to suspend deductions under Section 8(b) and the payroll
deductions credited to the participant's account as of the date of
employment termination will be used to purchase Common Stock on
the Purchase Date in accordance with Section 9. In such case, if
the termination of employment was due to the participant's death,
any Common Stock purchased under this Section 8(d) shall be issued
and delivered to the beneficiary designated by the participant
under Section 8(e).
e. Designation of Beneficiary. A participant may designate on the
Enrollment Form a beneficiary who is to receive any cash or shares
of Common Stock from the participant's account in the event of the
participant's death. Such designation may be changed by the
participant at any time by filing a new Enrollment Form. In the
event that a valid beneficiary designation is not on file at the
time of a participant's death, or if the participant's designated
beneficiary predeceases the participant, the participant's
designated beneficiary shall be deemed to be the participant's
estate.
SECTION 9. PURCHASE AND DELIVERY OF COMMON STOCK. On each Purchase Date
during an Offering Period, the payroll deductions that have accumulated in a
participant's account during the applicable Purchase Period shall automatically
be applied toward the purchase of Common Stock on behalf of the participant in
accordance with this Section 9.
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a. Number of Shares Purchased. The number of whole shares of Common
Stock that will be purchased on behalf of a participant on any
given Purchase Date shall be determined by dividing the amount of
such participant's accumulated payroll deductions that have been
credited to the participant's account during the applicable
Purchase Period by the applicable Purchase Price. No fractional
shares shall be purchased; any payroll deductions credited to a
participant's account that are not sufficient to purchase a full
share of Common Stock shall be retained in the account and applied
to the subsequent Purchase Period. If there is no subsequent
Purchase Period, amounts remaining in a participant's account
after the Purchase Date shall be returned to the participant,
without interest.
b. Issuance of Shares. Unless otherwise requested by a participant,
shares purchased under the Plan shall be issued and held on behalf
of a participant in street name by a nationally recognized
securities firm chosen by the Administrator.
c. Conditions Upon Issuance of Shares. No shares shall be issued
under the Plan unless the purchase of such shares and the delivery
and issuance of the shares complies with all applicable provisions
of law, domestic or foreign, including without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which
the shares may be listed, and shall be further subject to the
approval of counsel to the Company with respect to such
compliance.
d. Stockholder Rights. No participant shall have any rights as a
stockholder with respect to shares of Common Stock unless and
until such shares are issued on behalf of the participant in
accordance with this Section 9.
SECTION 10. TRANSFERABILITY. The rights of a participant under the Plan
shall not be transferable by the participant other than by will, the laws of
descent and distribution or to a participant's designated beneficiary as
provided in Section 8(e). Any attempt at transfer will be without effect, except
that the Committee may treat any such attempted transfer as an election to
withdraw from an Offering under Section 8(c).
SECTION 11. ADJUSTMENT OF SHARES AND PURCHASE PRICE. If at any time the
Company takes any action, whether by stock dividend, stock spilt, combination of
shares or otherwise, which results in a proportionate increase or decrease in
the number of shares of Common Stock theretofore issued and outstanding, then
(i) the number of shares subject to the Plan shall be increased or decreased
proportionately, (ii) the Purchase Price fixed by the Administrator pursuant to
Section 6(e) shall be adjusted accordingly and (iii) such other adjustments may
be made that the Administrator deems equitable.
SECTION 12. AMENDMENT AND DISCONTINUANCE. The Compensation Committee of
the Board may amend or discontinue the Plan at any time. No such amendment,
however, may increase the maximum number of shares that may be offered under the
Plan, decrease the
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minimum Purchase Price under Section 6(e) or change the class of eligible
Employees under the Plan (other than to designate additional Eligible
Subsidiaries) without the approval of a majority of the holders of Common Stock.
SECTION 13. EFFECTIVE DATE; SHAREHOLDER APPROVAL. The Plan shall become
effective as of January 1, 2002 or such later date as the Administrator may
determine, subject to the approval of a majority of the holders of the shares of
Common Stock present and represented at any special or annual meeting of the
Company's shareholders duly held within twelve (12) months after adoption of the
Plan. If the Plan is not so approved, the Plan shall not become effective.
SECTION 14. NO EMPLOYMENT RIGHTS. The Plan does not, directly or
indirectly, create in any person any right with respect to continuation of
employment by the Company or any Subsidiary, and it shall not be deemed to
interfere in any way with the right of the Company or any Subsidiary to
terminate, or otherwise modify, any Employee's employment at any time.
SECTION 15. GOVERNING LAWS. The laws of the State of Delaware shall
govern all matters relating to the Plan, except to the extent such laws are
superceded by the federal laws of the United States.
8
78
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2, 3 AND 4 AND Please mark
AGAINST ITEMS 5 AND 6. your votes as
indicated in [X]
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
ITEM 1-Election of Director Nominees: ITEM 2-MANAGEMENT PROPOSAL ITEM 3-MANAGEMENT PROPOSAL ITEM 4-MANAGEMENT PROPOSAL
REGARDING APPROVAL OF THE REGARDING APPROVAL OF THE REGARDING APPROVAL OF THE
FOR all nominees WITHHOLD 2001 LONG-TERM INCENTIVE PLAN OPERATIONS COMMITTEE INCEN- GLOBAL EMPLOYEE STOCK PUR-
listed below AUTHORITY TIVE PLAN CHASE PLAN
(except as marked to vote for
to the contrary) all nominees FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
listed below
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
01 M. Kathryn Eickhoff, 02 Fred Hassan, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 5 AND 6.
03 Philip Leder, 04 Berthold Lindqvist,
05 William D. Ruckelshaus ITEM 5-SHAREHOLDER PROPOSAL REGARDING ITEM 6-SHAREHOLDER PROPOSAL REGARDING
PRICE RESTRAINTS ON PRESCRIPTION DRUGS REDUCTION IN THE NUMBER OF DIRECTORS
FOR, except vote withheld from the FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
following nominee(s):
------------------------------------ [ ] [ ] [ ] [ ] [ ] [ ]
If you plan to attend the Annual Meeting, please mark WILL
the WILL ATTEND box. ATTEND
[ ]
By checking the box to the right, I consent to future [ ]
delivery of annual reports, proxy statements,
prospectuses and other materials and share- holder
communications electronically via the Internet at a
webpage which will be disclosed to me. I understand
that the Company may no longer distribute to me
printed materials sent to shareholders 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 07660. I agree that any costs
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.
If you wish to receive all future shareholder
materials only in electronic form, please mark the
box to the right.
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.
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*FOLD AND DETACH HERE *
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.PROXYVOTING.COM/PHA 1-800-840-1208
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You will OR and
site. You will be prompted to enter be prompted to enter your control return it in the
your control number, located in number, located in the box below, enclosed postage-paid
the box below, to create and sub- and then follow the directions given. envelope.
mit an electronic ballot.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT: WWW.PHARMACIA.COM
HTTP://WWW.PHARMACIA.COM
79
PHARMACIA
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Fred Hassan, Christopher J. Coughlin and Don W.
Schmitz, and each of them, with power of substitution, as proxies to represent
and vote all the shares of Pharmacia Corporation Common Stock which the
undersigned is entitled to vote in the manner designated on the other side and
in the proxies' discretion upon any other business that may properly come before
the Annual Meeting of Shareholders of the Company to be held April 17, 2001, and
any adjournments thereof, with all powers which the undersigned would possess if
personally present at the Meeting.
This proxy shall also provide voting instructions for shares held in the
Company's dividend reinvestment plan, and, if registrations are identical,
shares held in the Company's various employee benefit plans noted in the proxy
statement.
TO VOTE BY TELEPHONE OR INTERNET, PLEASE FOLLOW THE INSTRUCTIONS SET FORTH
BELOW. TO VOTE BY MAIL, PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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*FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
OR
2. Call TOLL FREE 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
3. Vote by Internet at our Internet Address: http://www.proxyvoting.com/pha
PLEASE VOTE