MONSANTO COMPANY | 2003 FORM 10-K |
FORM 10-K
(MARK ONE)
OR
þ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
MONSANTO COMPANY
Delaware
43-1878297
(State or other jurisdiction of incorporation
or organization)
(I.R.S. Employer Identification No.)
800 North Lindbergh Blvd.,
63167
St. Louis, MO
(Zip Code)
(Address of principal executive
offices)
Registrants telephone number, including area code
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
|
Name of each exchange on which registered | |
Common Stock $0.01 par value
|
New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o
State the aggregate market value of the voting common stock held by nonaffiliates computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of June 30, 2003, the last business day of the registrants most recently completed second fiscal quarter: approximately $5.7 billion.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date: 261,995,541 shares of Common Stock, $0.01 par value, outstanding at Nov. 10, 2003.
Documents Incorporated by Reference
Portions of Monsanto Companys definitive proxy statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than Dec. 29, 2003.
MONSANTO COMPANY | 2003 FORM 10-K |
TABLE OF CONTENTS
PART I
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Page | ||||||
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Item 1.
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Business | 4 | |||||
Principal Products | 5 | ||||||
Principal Equity Affiliates | 5 | ||||||
Competition | 6 | ||||||
Customers; Distribution of Products | 6 | ||||||
Employee Relations | 7 | ||||||
Environmental Matters | 7 | ||||||
International Operations | 7 | ||||||
Patents, Trademarks, Licenses, Franchises and Concessions | 7 | ||||||
Raw Materials and Energy Resources | 8 | ||||||
Research and Development | 9 | ||||||
Seasonality and Working Capital | 9 | ||||||
Legal Proceedings | 9 | ||||||
Other Information | 12 | ||||||
Relationships Among Monsanto Company, Pharmacia Corporation and Solutia Inc. | 12 | ||||||
Available Information | 15 | ||||||
Item 2.
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Properties | 15 | |||||
Item 3.
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Legal Proceedings | 15 | |||||
Item 4.
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Submission of Matters to a Vote of Security Holders | 15 |
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MONSANTO COMPANY | 2003 FORM 10-K |
PART II
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Item 5.
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Market for the Registrants Common Equity and Related Stockholder Matters | 16 | |||||
Item 6.
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Selected Financial Data | 17 | |||||
Item 7.
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Managements Discussion and Analysis of Financial Condition and Results of Operations | 18 | |||||
Background | 18 | ||||||
Change in Fiscal Year End | 18 | ||||||
Financial Measures | 18 | ||||||
Results of Operations | 19 | ||||||
Results of Operations Seeds and Genomics Segment | 23 | ||||||
Results of Operations Agricultural Productivity Segment | 25 | ||||||
Restructuring and Other Special Items | 28 | ||||||
Financial Condition, Liquidity, and Capital Resources | 30 | ||||||
Outlook | 33 | ||||||
Critical Accounting Policies and Estimates | 36 | ||||||
New Accounting Standards | 38 | ||||||
Cautionary Statements: Risk Factors Regarding Forward-Looking Statements | 38 | ||||||
Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk | 41 | |||||
Item 8.
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Financial Statements and Supplementary Data | 42 | |||||
Management Report | 42 | ||||||
Independent Auditors Report | 43 | ||||||
Statement of Consolidated Operations | 44 | ||||||
Statement of Consolidated Financial Position | 45 | ||||||
Statement of Consolidated Cash Flows | 46 | ||||||
Statement of Consolidated Shareowners Equity | 47 | ||||||
Statement of Consolidated Comprehensive Income (Loss) | 48 | ||||||
Notes to Consolidated Financial Statements | 49 | ||||||
Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 82 | |||||
Item 9A.
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Controls and Procedures | 82 | |||||
PART III
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Item 10.
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Directors and Executive Officers of the Registrant | 83 | |||||
Item 11.
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Executive Compensation | 84 | |||||
Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 84 | |||||
Item 13.
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Certain Relationships and Related Transactions | 84 | |||||
Item 14.
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Principal Accounting Fees and Services | 84 | |||||
PART IV
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Item 15.
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Exhibits, Financial Statement Schedules and Reports on Form 8-K | 85 | |||||
FINANCIAL STATEMENT SCHEDULE | |||||||
SIGNATURES | |||||||
EXHIBIT INDEX | |||||||
EXHIBITS |
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MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 1. | BUSINESS. |
| Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Seeds and Genomics Segment the segment description | |
| Item 7 MD&A Agricultural Productivity Segment the segment description, and the tabular information regarding net sales of Roundup and other glyphosate-based herbicides | |
| Item 8 Note 23 Segment and Geographic Data the segment information |
4
PRINCIPAL PRODUCTS
MONSANTO COMPANY
2003 FORM 10-K
SEEDS AND GENOMICS
Major Products
End-Use Products and Applications
Roundup Ready
trait
in soybeans, corn, canola and cotton
(1)
Weed control system for crops tolerant of
Roundup
and other glyphosate-based herbicides
Bollgard
and
Bollgard II
traits in cotton;
(1)
YieldGard
Corn Borer and
YieldGard
Rootworm
traits in corn
(1)
Crops protected against certain insects
Agroceres, Asgrow
and
DEKALB
branded seeds;
Holdens Foundation Seeds;
Monsoy
foundation seed
Corn hybrids and foundation seed; soybean
varieties and foundation seed; sunflower hybrids; sorghum grain
hybrids and forage hybrids; wheat varieties and foundation seed;
oilseed rape and canola varieties; barley varieties; alfalfa
varieties
(1) | Monsanto also offers growers stacked-trait products, where more than one trait is combined in a single seed product. |
AGRICULTURAL PRODUCTIVITY | ||||
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Major Products | End-Use Products and Applications | |||
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Roundup herbicide and other glyphosate-based herbicides | Nonselective agricultural, industrial, ornamental and turf applications for weed control | |||
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Harness, Degree and Guardian acetanilide-based herbicides | Control of pre-emergent annual grass and small seeded broadleaf weeds in corn | |||
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Other selective herbicides, such as: Lasso acetanilide-based herbicides; Leader, Monitor, Maverick, Sundance, Outrider and Apyros sulfosulfuron herbicides; Permit, Manage and Sempra halosulfuron herbicides; and Machete butachlor herbicide | Control of specific weeds in wheat, corn, grain sorghum, turf, cotton, sugarcane, rice, and barley; and control of specific weeds on roadsides | |||
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Lawn-and-garden herbicides | Residential lawn-and-garden applications for weed control | |||
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Posilac bovine somatotropin | Increase efficiency of milk production in dairy cows | |||
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Monsanto Choice Genetics swine genetics lines | Increase productivity and meat quality of swine | |||
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Enviro-Chem engineering, procurement and construction management (EPC) services; proprietary equipment and process technologies | EPC services for processing plants for fertilizer producers, basic metals production, oil refining and ethanol production; proprietary equipment and process technologies related to sulfuric acid catalysts, mist eliminators, air pollution abatement and heat exchangers | |||
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Elemental Phosphorus (produced by P4 Production, LLC, an entity 99 percent owned by, and operated by, Monsanto (P4 Production)) | Production of high quality food, pharmaceutical, and agricultural phosphorus compounds | |||
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Products may be sold under different brand names in different countries.
PRINCIPAL EQUITY AFFILIATES
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MONSANTO COMPANY | 2003 FORM 10-K |
period, $41 million in the 12-month periods ended Dec. 31, 2002 and 2001, and $31 million in the 12-month period ended Dec. 31, 2000, all of which is reflected in Other Expense Net in our Statement of Consolidated Operations. See information regarding Renessen in Item 8 Note 25 Equity Affiliates and in the Schedule to this Form 10-K as filed with the U.S. Securities and Exchange Commission (SEC).
COMPETITION
CUSTOMERS; DISTRIBUTION OF PRODUCTS
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MONSANTO COMPANY | 2003 FORM 10-K |
three largest U.S. agricultural distributors and their affiliates represented, in aggregate, 16 percent of our worldwide net sales in the eight-month period ended Aug. 31, 2003, and 27 percent of our net sales in the United States. During this period, one major U.S. distributor and its affiliates represented approximately 11 percent of the net sales for our Agricultural Productivity segment, and approximately 7 percent of the net sales for our Seeds and Genomics segment.
EMPLOYEE RELATIONS
ENVIRONMENTAL MATTERS
INTERNATIONAL OPERATIONS
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
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MONSANTO COMPANY | 2003 FORM 10-K |
Patents protecting the active ingredient in Roundup herbicide expired in the United States in 2000, and have expired in all other countries. Monsanto has several patents on its glyphosate formulations and manufacturing processes in the United States and other countries, some of which extend until 2015 and beyond.
RAW MATERIALS AND ENERGY RESOURCES
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MONSANTO COMPANY | 2003 FORM 10-K |
In general, where we have limited sources of raw materials or fuels, we have developed contingency plans to minimize the effect of any interruption or reduction in supply. These include supplier inventories, consigned inventories, dedicated excess manufacturing capacity, substitute materials and approved alternate sources of supply. While temporary shortages of raw materials may occasionally occur, these items are generally sufficiently available to cover current and projected requirements. Global sourcing strategies for key materials help ensure that new capacity is installed by our suppliers in time to meet our requirements at competitive prices. However, to some extent availability and price are subject to unscheduled plant interruptions caused by shortages of energy and petrochemical supplies.
RESEARCH AND DEVELOPMENT
SEASONALITY AND WORKING CAPITAL
LEGAL PROCEEDINGS
Patent and Commercial Proceedings
| On May 19, 1995, Mycogen Plant Science filed suit against the former Monsanto Company in the U.S. District Court in California alleging infringement of its patent involving synthetic Bt genes, and seeking unspecified damages and injunctive relief. Monsanto prevailed on summary judgment in dismissing all claims. On May 30, 2001, the U.S. Court of Appeals for the Federal Circuit affirmed the summary judgment finding that current products of Monsanto do not infringe the Mycogen Plant Science patent. The appellate court also determined that certain factual issues prevented complete entry of summary judgment on the issue of prior invention by Monsanto and remanded the matter to District Court. Monsanto is defending the litigation on the basis of patent invalidity, prior invention and other defenses including collateral estoppel. We believe that a prior judgment won by the former Monsanto Company against Mycogen Plant Science, in U.S. District Court in Delaware, is dispositive of all claims asserted by Mycogen Plant Science. The District Court in California has scheduled a pretrial conference on this matter for Feb. 24, 2004, at which time it is expected to set a trial date. | |
| Monsanto is also involved in interference proceedings against Mycogen Plant Science in the U.S. Patent and Trademark Office to determine the first party to invent certain inventions related to the synthetic Bt technology at issue in the California case. Under U.S. law, patents issue to the first to invent, not the first to file for a patent on, a subject invention. If two or more parties seek patent protection on the same invention, as is the case with our synthetic Bt technology, the U.S. Patent and Trademark Office must hold interference proceedings to identify the party who first invented the particular invention in dispute. In prior litigation between the parties Monsanto has been determined to be the prior inventor of patent claims associated with synthetic Bt technology. The Board of Patent Appeals held its final hearing on this interference on Sept. 26, 2003, and is expected to issue its decision in December 2003. |
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MONSANTO COMPANY | 2003 FORM 10-K |
The following proceedings involve Bayer CropScience AG (formerly Aventis CropScience S.A., previously Rhone Poulenc Agrochimie S.A.) (Bayer CropScience), a subsidiary of Bayer AG, and its affiliates:
| On Oct. 14, 2003, Monsanto announced the settlement of a number of lawsuits involving affiliates of Bayer CropScience. This settlement included a lawsuit filed on Jan. 10, 2003, by Bayer BioScience N.V. (Bayer BioScience) in the U.S. District Court for the District of Delaware (subsequently transferred to the U.S. District Court for the Eastern District of Missouri), contending that a patent assigned to it by PGS and Bayer CropScience was infringed by Monsantos development and potential future sale of corn protected from corn rootworm. Monsanto filed suit the same day in the U.S. District Court for the Eastern District of Missouri to declare this patent invalid, non-infringed and unenforceable. Dismissal papers have been filed with the court. | |
| On Nov. 20, 1997, Bayer CropScience filed suit in U.S. District Court in North Carolina against the former Monsanto Company and DEKALB Genetics Corporation (subsequently acquired by us) (DEKALB Genetics), alleging that because DEKALB Genetics had failed to disclose a research report involving the testing of plants to determine glyphosate tolerance, Bayer CropScience had been induced by fraud to enter into a 1994 license agreement relating to technology incorporated into a specific type of herbicide-tolerant corn. Jury trial of the fraud claims ended April 22, 1999, with a verdict against DEKALB Genetics for $15 million in actual damages and $50 million in punitive damages. The damage awards have been paid in full. DEKALB Genetics appealed the jury verdict and the U.S. Court of Appeals for the Federal Circuit upheld the judgment. The U.S. Supreme Court vacated the punitive damage award and remanded the case to the Court of Appeals for the Federal Circuit to reconsider the issue in light of the Supreme Courts punitive damages decision in State Farm Mutual Automobile Insurance Co. v. Campbell . On Sept. 29, 2003, the Federal Circuit once again affirmed the judgment of the District Court, stating that the central holding of State Farm had no bearing on the case. Monsanto will again request that the U.S. Supreme Court overturn the decision of the Federal Circuit. | |
| On Dec. 4, 2000, in view of threats of patent infringement made by Bayer CropScience against Monsantos licensees for its YieldGard corn, Monsanto filed suit in the U.S. District Court for the Eastern District of Missouri, for a declaratory judgment against Bayer CropScience to invalidate four patents that had been assigned to Bayer CropScience by Plant Genetics Systems, N.V. (PGS). Monsanto successfully maintained that the patents, which involve claims to truncated Bt technology, were invalid and not infringed by MON810 in YieldGard corn. Bayer CropScience counterclaimed to request royalties for prior sales of YieldGard corn and injunctive relief. On Dec. 27, 2002, Monsantos motion for summary judgment was granted. Bayer CropScience has appealed the District courts judgment to the U.S. Court of Appeals for the Federal Circuit and oral argument is scheduled for Dec. 4, 2003. Monsanto has requested award of its substantial legal fees in this matter in light of the District Courts finding of inequitable conduct against Bayer CropScience. |
The following proceedings involve affiliates of Syngenta AG:
| On July 25, 2002, Syngenta Biotechnology, Inc. (Syngenta Biotechnology) filed suit against Monsanto and Delta and Pine Land Company (Delta and Pine Land) in the U.S. District Court for Delaware alleging infringement of a patent issued in April 2000, under which Syngenta Biotechnology is a licensee, and which allegedly relates to certain agro-transformed cotton technology products, including all of our current biotechnology cotton traits. Monsanto also is defending Delta and Pine Land, and will indemnify Delta and Pine Land for any damages, pursuant to its license agreement. Syngenta Biotechnology seeks injunctive relief and monetary damages. Trial is scheduled for Oct. 4, 2004. Monsanto has substantial defenses to the claims, including Syngenta Biotechnologys inequitable conduct in securing the patent, non-infringement and invalidity of the patent on multiple bases, including failure to invent or make the subject matter claimed in the patent. | |
| On July 25, 2002, Syngenta Seeds, Inc. (Syngenta Seeds) also filed a suit against Monsanto, DEKALB Genetics, Pioneer Hi-Bred International, Inc. (Pioneer), and Dow Agrosciences, L.L.C., Mycogen Plant Science and Agrigenetics, Inc., collectively d.b.a. Mycogen Seeds, in the U.S. District Court for Delaware alleging infringement of three patents issued between June 2000 and June 2002. The patents allegedly pertain to insect resistant transgenic corn, including our insect-resistant corn traits. Syngenta Seeds seeks injunctive relief and monetary damages. The defendants have substantial defenses to the claims, including non-infringement, non-enforceability of the patents due to inequitable conduct before the U.S. Patent Office during the procurement of the patents, and invalidity of the various patents. Trial is scheduled for Nov. 29, 2004. |
Monsanto is defending several lawsuits which allege that, beginning in 1988, Monsanto and the former Monsanto Company conspired with competitors, through a series of negotiations and legal settlements, to fix the price of glyphosate-based herbicides and paraquat-based herbicides at prices higher than the market would otherwise bear. These
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MONSANTO COMPANY | 2003 FORM 10-K |
lawsuits all seek monetary damages. The following two cases have been consolidated and are currently pending in U.S. District Court for the Eastern District of Missouri, and were filed alleging claims on behalf of all direct purchasers of glyphosate-based herbicides or paraquat-based herbicides in the United States from March 1, 1988, to the present: (i) a suit filed by S&M Farm Supply, Inc. on Nov. 21, 2001, in U.S. District Court for the Northern District of California; and (ii) a suit filed by Orange Cove Ag-Chem and Sidehill Citrus Grove, Inc., on March 11, 2002, in U.S. District Court for the Eastern District of California. On Oct. 16, 2003, the District Court denied plaintiffs motion to certify these actions as class actions. Plaintiffs have asked for immediate appellate review of the District Courts decision. In addition, three other purported class action lawsuits alleging the same facts have been filed by individuals, and are pending in state courts in California and Tennessee.
Grower Lawsuits
Proceedings Related to Delta and Pine Land Company
Agent Orange
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MONSANTO COMPANY | 2003 FORM 10-K |
Three separate complaints filed in October 1999 are being handled collectively and currently involve approximately 16,700 plaintiffs. The complaints fail to assert any specific causes of action but seek damages of 300 million won (approximately $250,000) per plaintiff. On May 23, 2002, the Seoul District Court ruled in favor of the manufacturers and dismissed all claims of the plaintiffs on the basis of lack of causation and statutes of limitations. Plaintiffs have filed an appeal de novo with the Seoul High Court and the parties have started the briefing process required by that Court. Other ancillary actions are also pending in Korea, including a request for provisional relief pending resolution of the main action.
Activities of Foreign Affiliates
Environmental Proceedings
OTHER INFORMATION
RELATIONSHIPS AMONG MONSANTO COMPANY, PHARMACIA CORPORATION AND SOLUTIA INC.
12
MONSANTO COMPANY
2003 FORM 10-K
Date of
Event
Description of Event
Sept. 1, 1997
Pharmacia (then known as Monsanto
Company) entered into a Distribution Agreement with Solutia
related to the transfer of the operations, assets and
liabilities of the Chemical Business from Pharmacia (then known
as Monsanto Company) to Solutia.
Pursuant to the Distribution
Agreement, Solutia assumed and agreed to indemnify Pharmacia
(then known as Monsanto Company) for certain liabilities related
to the Chemicals Business.
Dec. 19, 1999
Pharmacia (then known as Monsanto
Company) entered into an agreement with Pharmacia & Upjohn,
Inc. (PNU) relating to a merger (the Merger).
Feb. 9, 2000
We were incorporated in Delaware as
a wholly owned subsidiary of Pharmacia (then known as Monsanto
Company) under the name Monsanto Ag Company.
March 31, 2000
Effective date of the Merger.
In connection with the Merger,
(1) PNU became a wholly owned subsidiary of Former Monsanto
(now Pharmacia); (2) Former Monsanto changed its name from
Monsanto Company to Pharmacia
Corporation; and (3) we changed our name from
Monsanto Ag Company to Monsanto Company.
Sept. 1, 2000
We entered into a Separation
Agreement with Pharmacia related to the transfer of the
operations, assets and liabilities of the Ag Business from
Pharmacia to us.
Pursuant to the Separation
Agreement, we were required to indemnify Pharmacia for any
liabilities primarily related to the Ag Business or the
Chemicals Business, and for liabilities assumed by Solutia
pursuant to the Sept. 1, 1997 Distribution Agreement, to
the extent that Solutia fails to pay, perform or discharge those
liabilities.
Oct. 23, 2000
We completed an initial public
offering in which we sold approximately 15 percent of the shares
of our common stock to the public. Pharmacia continued to own
220 million shares of our common stock.
July 1, 2002
We, Pharmacia and Solutia amended
the Sept. 1, 1997 Distribution Agreement, to provide that
Solutia will indemnify us for the same liabilities for which it
had agreed to indemnify Pharmacia, and to clarify the
parties rights and obligations.
We and Pharmacia amended the
Sept. 1, 2000 Separation Agreement, to clarify our
respective rights and obligations relating to our
indemnification obligations.
Aug. 13, 2002
Pharmacia distributed the 220
million shares of our common stock that it owned to its
shareowners via a tax-free stock dividend (the Monsanto Spinoff).
As a result of the Monsanto Spinoff,
Pharmacia no longer owns any equity interest in Monsanto.
April 16, 2003
Pursuant to a merger transaction,
Pharmacia became a wholly owned subsidiary of Pfizer.
The liabilities for which we were required to indemnify Pharmacia, pursuant to the Sept. 1, 2000, Separation Agreement, include the liabilities that Solutia assumed from Pharmacia in connection with the spinoff of Solutia on Sept. 1, 1997, to the extent that Solutia fails to pay, perform or discharge those liabilities. In general, this indemnification obligation applies to Pharmacia liabilities that were assumed by Solutia and which Pharmacia would otherwise be required to pay. These liabilities may include, among others, litigation, environmental remediation, and certain retiree liabilities relating to individuals who were employed by Pharmacia prior to the Solutia spinoff. These include liabilities that were Pharmacia liabilities prior to the spinoff of Solutia, and from which Pharmacia could not be released, either by operation of law, because of the unavailability of third-party consents, or otherwise. Solutia has agreed to indemnify both Pharmacia and us for any liabilities that we incur in connection with the liabilities that Solutia assumed.
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MONSANTO COMPANY | 2003 FORM 10-K |
Monsanto Company, et al. , in state court in Alabama; and Antonia Tolbert, et al. v. Monsanto Company, et al. , in the U.S. District Court for the Northern District of Alabama. In September 2003, the state and federal courts approved a global settlement of the Abernathy and Tolbert cases. Solutia will provide $50 million over time, and Solutia and Pfizer Inc., the parent company of Pharmacia, will also participate in an array of community initiatives. We provided $150 million to the settlement fund during August 2003, and $400 million during September 2003, and expect to receive approximately $155 million in reimbursement from Pharmacias commercial insurance. We and the insurer responsible for approximately $140 million of the reimbursement have agreed to mediation of a dispute regarding the amount due. The finalization of the settlement is contingent upon receipt of releases from plaintiffs in the Abernathy case, in numbers satisfactory to Solutia, Pharmacia and us.
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MONSANTO COMPANY | 2003 FORM 10-K |
AVAILABLE INFORMATION
ITEM 2. | PROPERTIES. |
ITEM 3. | LEGAL PROCEEDINGS. |
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
EXECUTIVE OFFICERS OF THE REGISTRANT
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MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. |
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1st | 2nd | 3rd | 4th | Total | ||||||||||||||||
Dividends Per Share | Quarter | Quarter | Quarter | Quarter | Year | |||||||||||||||
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2003
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$ | 0.12 | $ | 0.12 | N/A | (1) | N/A | N/A | ||||||||||||
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2002
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$ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.48 | ||||||||||
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2001
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$ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.48 | ||||||||||
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1st | 2nd | 3rd | 4th | Total | ||||||||||||||||||
Common Stock Price | Quarter | Quarter | Quarter | Quarter | Year | |||||||||||||||||
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2003
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High | $ | 19.88 | $ | 22.60 | N/A | (2) | N/A | N/A | |||||||||||||
Low | 13.55 | 15.69 | N/A | (2) | N/A | N/A | ||||||||||||||||
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2002
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High | $ | 33.13 | $ | 33.29 | $ | 19.10 | $ | 20.47 | $ | 33.29 | |||||||||||
Low | 28.30 | 17.27 | 13.01 | 13.55 | 13.01 | |||||||||||||||||
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2001
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High | $ | 35.680 | $ | 38.470 | $ | 38.800 | $ | 37.900 | $ | 38.800 | |||||||||||
Low | 26.875 | 28.800 | 30.900 | 28.600 | 26.875 | |||||||||||||||||
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(1) | During the period from July 1, 2003 through Aug. 31, 2003, Monsanto paid a dividend of $0.13 per share. |
(2) | During the period from July 1, 2003 through Aug. 31, 2003, the high and low sales prices of Monsanto stock were $26.35 and $20.86, respectively. |
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MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 6. | SELECTED FINANCIAL DATA. |
SELECTED FINANCIAL DATA (UNAUDITED)
Eight Months | |||||||||||||||||||||||||||||
Ended Aug. 31, | Year Ended Dec. 31, | ||||||||||||||||||||||||||||
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(Dollars in millions, except per share and pro forma share amounts) | 2003 | 2002 | 2002 | 2001 | 2000 | 1999 | 1998 | ||||||||||||||||||||||
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Operating Results:
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Net sales
(1)
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$ | 3,373 | $ | 3,110 | $ | 4,673 | $ | 5,462 | $ | 5,493 | $ | 5,248 | $ | 4,448 | |||||||||||||||
Income from operations
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471 | 136 | 319 | 659 | 567 | 610 | 55 | ||||||||||||||||||||||
Income (loss) before cumulative effect of
accounting change
|
(11 | ) | 37 | 129 | 295 | 175 | 150 | (125 | ) | ||||||||||||||||||||
Cumulative effect of a change in accounting
principle
(1,2,3)
|
(12 | ) | (1,822 | ) | (1,822 | ) | | (26 | ) | | | ||||||||||||||||||
Net income (loss)
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(23 | ) | (1,785 | ) | (1,693 | ) | 295 | 149 | 150 | (125 | ) | ||||||||||||||||||
Diluted Earnings (Loss) per Share and per Pro
Forma Share:
(4)
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Income (loss) before cumulative effect of
accounting change
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$ | (0.04 | ) | $ | 0.14 | $ | 0.49 | $ | 1.12 | $ | 0.68 | $ | 0.58 | $ | (0.48 | ) | |||||||||||||
Net income (loss)
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(0.09 | ) | (6.78 | ) | (6.45 | ) | 1.12 | 0.58 | 0.58 | (0.48 | ) | ||||||||||||||||||
Financial Position at end of Period:
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Total assets
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$ | 9,461 | $ | 9,151 | $ | 8,890 | $ | 11,429 | $ | 11,726 | $ | 11,101 | $ | 10,891 | |||||||||||||||
Working capital
(5)
|
3,018 | 2,846 | 2,614 | 2,420 | 2,216 | 2,323 | 1,879 | ||||||||||||||||||||||
Current ratio
(5)
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2.55:1 | 2.66:1 | 2.44:1 | 2.02:1 | 1.80:1 | 2.36:1 | 2.01:1 | ||||||||||||||||||||||
Long-term debt
|
1,258 | 1,148 | 851 | 893 | 962 | 4,278 | 4,388 | ||||||||||||||||||||||
Debt-to-capital
(6)
|
23% | 27% | 19% | 19% | 19% | 48% | 53% | ||||||||||||||||||||||
Other Data (applicable for periods subsequent
to IPO):
(7)
|
|||||||||||||||||||||||||||||
Dividends per share
(8)
|
$ | 0.37 | $ | 0.36 | $ | 0.48 | $ | 0.48 | $ | 0.09 | N/A | N/A | |||||||||||||||||
Stock price per share:
|
|||||||||||||||||||||||||||||
High
|
$ | 26.35 | $ | 33.29 | $ | 33.290 | $ | 38.800 | $ | 27.380 | N/A | N/A | |||||||||||||||||
Low
|
$ | 13.55 | $ | 13.01 | $ | 13.010 | $ | 26.875 | $ | 19.750 | N/A | N/A | |||||||||||||||||
End of period
|
$ | 25.71 | $ | 18.37 | $ | 19.130 | $ | 33.800 | $ | 27.060 | N/A | N/A | |||||||||||||||||
Diluted shares outstanding
|
261.7 | 263.2 | 262.6 | 263.6 | 258.5 | N/A | N/A | ||||||||||||||||||||||
Employees (at end of period)
|
13,200 | 14,000 | 13,700 | 14,600 | 14,700 | N/A | N/A | ||||||||||||||||||||||
|
|
(1) | In 2000, Monsanto adopted the Securities and Exchange Commissions Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements . Monsantos adoption of SAB 101 primarily affected its recognition of license revenues from biotechnology traits sold through third-party seed companies. Monsanto adopted the provisions of SAB 101 as an accounting change, recognizing as a cumulative effect of a change in accounting principle a loss of $26 million ($0.10 per pro forma share) effective Jan. 1, 2000. Assuming SAB 101 is applied retroactively, net income and diluted earnings per pro forma share would have been higher by these amounts in 2000, and lower by these same amounts in 1999. |
(2) | In 2002, Monsanto adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets . In connection with the adoption of this new accounting standard, Monsanto recognized a transitional goodwill impairment charge of $1.8 billion aftertax ($6.94 per share) effective Jan. 1, 2002. |
(3) | In 2003, Monsanto adopted SFAS No. 143, Accounting for Asset Retirement Obligations . In connection with the adoption of this new accounting standard, Monsanto recorded a pretax cumulative effect of accounting change of $12 million aftertax ($0.05 per share) effective Jan. 1, 2003. |
(4) | Diluted earnings per pro forma share for 2000 were calculated using 258 million weighted-average common shares outstanding plus the effect of dilutive common share equivalents totaling 0.5 million, consisting of outstanding stock options. For all periods prior to 2000, diluted earnings per pro forma share were calculated using 258 million weighted-average common shares, the number of common shares outstanding immediately after the IPO in October 2000. |
(5) | Working capital is total current assets less total current liabilities; current ratio represents total current assets divided by total current liabilities. |
(6) | Debt-to-capital is the total of short-term and long-term debt, divided by the sum of short-term and long-term debt and shareowners equity. Fluctuations in our debt-to-capital ratio from December 31 to August 31 were affected by the seasonality of our business. |
(7) | Prior to Sept. 1, 2000, Monsanto was the agricultural business of Pharmacia Corporation and was not a separate corporate entity with shares outstanding or employees. |
(8) | The dividend of $0.09 per share on the companys common stock declared in the fourth quarter of calendar year 2000 is prorated. It was based on a quarterly dividend rate of $0.12 per share, which reflected a policy adopted by the board of directors following Monsantos IPO. During 2003, the quarterly dividend amount was increased to $0.13 per share. |
17
MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
BACKGROUND
CHANGE IN FISCAL YEAR END
FINANCIAL MEASURES
18
MONSANTO COMPANY | 2003 FORM 10-K |
The presentation of EBIT and free cash flow
information is intended to supplement investors
understanding of our operating performance and liquidity. Our
EBIT and free cash flow measures may not be comparable to other
companies EBIT and free cash flow measures. Furthermore,
these measures are not intended to replace net income (loss),
cash flows, financial position, or comprehensive income (loss),
as determined in accordance with accounting principles generally
accepted in the United States.
RESULTS OF OPERATIONS
Overview of Financial Performance
(transition period compared with eight months ended
Aug. 31, 2002)
We recognized a net loss of $23 million
during the transition period, and a net loss of
$1.8 billion during the comparable period last year. The
following factors affected the eight-month comparison:
2003:
2002:
On an ongoing business basis, our results in 2003
were affected by lower volumes and average net selling prices of
Roundup
herbicides in the United States. However,
stronger sales of our seeds and traits in the United States
mitigated this shortfall. During the transition period, our
Seeds and Genomics segment delivered a greater gross profit
contribution than that of the
Roundup
and other
glyphosate-based herbicides. This milestone demonstrates the
increasing contribution of that segment to our results.
Net sales
for the
transition period increased 8 percent over the comparable
period last year. Both of our operating segments benefited from
improved performance in Latin America. In the eight-month period
last year, net sales were negatively affected by difficult
economic conditions in that region, as well as the operational
changes we made to our business to address the uncertainties
there. In the Seeds and Genomics segment, U.S. seed and
trait sales continued their strong growth in 2003, with seed and
trait sales for all crops increasing during the eight-month
period. Sales in the Agricultural Productivity segment declined
because of the continued shift toward lower-priced
Roundup
and other glyphosate-based herbicides and lower
U.S.
Roundup
volumes in the postpatent glyphosate
market. Sales of our selective herbicides also declined. For a
more detailed discussion of the factors affecting the net sales
comparison, please see Seeds and Genomics Segment
and Agricultural Productivity Segment.
Gross profit
for the
transition period increased 9 percent, which was consistent
with the 8 percent increase in net sales. Increases in
Seeds and Genomics gross profit were partly offset by declines
in Agricultural Productivity gross profit, as the continued
growth of our Seeds and Genomics segment improved our margins
this year. Better financial results in Latin America also
improved the margin comparison this year, as the market factors
in Latin America and our actions in response to those factors
negatively affected our margins in 2002. Collectively, these
items have improved the eight-month
19
gross profit comparison. They have more than
mitigated the effect of the shift in
Roundup
and other
glyphosate-based herbicide sales in the United States to
lower-priced products. During the eight-month period, the gross
profit of our seeds and traits business surpassed the gross
profit contribution of our glyphosate business. We expect this
trend to continue in fiscal year 2004 and beyond. As a
percent of net sales, gross profit gained one point to
47 percent.
Operating expenses
decreased 15 percent for the eight-month comparison. In
June 2002, we increased our allowance for doubtful trade
receivables by $154 million because of the economic turmoil
and related market conditions in Argentina. We also recorded
$63 million of net operating expenses related to the
restructuring plan approved in 2002. These and other operating
expenses last year were partially offset by a $25 million
reduction in selling, general and administrative (SG&A)
costs stemming from the sale of certain Monsanto herbicide
assets in Japan to Nissan Chemical Industries (Nissan). SG&A
expenses in 2003 also reflected a reduction, to a lesser extent,
in costs related to agreements that are part of our ongoing
business. During the transition period, our bad-debt expense was
significantly lower, and our operating expenses were reduced by
$5 million in restructuring reversals related to our past
restructuring plans. However, higher employee-related costs,
primarily accrued incentive compensation, drove SG&A
expenses higher in 2003. Continued cost management helped offset
some of this increase and also decreased R&D expenses by
5 percent. We are also continuing to see the benefits from
our restructuring programs through lower R&D expenses.
Other expense
net
increased to $67 million
during the transition period. Net other expense in 2003
consisted primarily of equity affiliate expense and
foreign-currency transaction losses. Our equity affiliate
expense of $26 million is primarily related to our Renessen
LLC (Renessen) joint venture. This joint venture is owned and
funded 50-50 with Cargill Incorporated. It was formed to develop
and market products for the grain processing and animal feed
industries. During the eight months ended Aug. 31, 2002, we
recorded approximately $20 million of other income related
to sales of certain herbicide assets for use in
ex-U.S. markets, including the Nissan transaction in Japan
and a smaller transaction with Nufarm Australia Ltd. (Nufarm) in
the Australia and New Zealand markets. We also recognized
$10 million of other income during the 2002 eight-month
period related to gains that were realized upon the sale of
equity securities. These gains were slightly offset by net
currency losses reflecting the devaluation of our net assets
denominated in Argentine pesos.
Net interest expense
increased $11 million to $46 million during the
transition period. Although our debt levels during the
transition period were significantly lower than debt levels
during the comparable period last year, higher interest rates
associated with our long-term senior notes led to overall higher
interest expense. With the issuance of these notes, our debt mix
has shifted from primarily commercial paper toward longer-term
borrowings, which carry higher interest rates.
Review of Calendar Year Financial Performance
(calendar year 2002 compared to calendar year 2001, and
calendar year 2001 compared to calendar year 2000)
20
Review of Calendar Year 2002
21
items. In 2002, these factors included the
following: currency losses from net assets in Argentina, only
partially offset by currency gains in Brazil; approximately
$20 million of other income related to the Nissan and
Nufarm transactions; and other expense related to a settlement
of litigation matters with DuPont and DuPonts Pioneer
subsidiary. In 2001, we recognized $127 million of other
expense (net), as discussed below.
Income taxes in 2002 decreased significantly from
2001, though the effective tax rate remained unchanged at
36 percent. The decline in income taxes was consistent with
the lower pretax income in 2002. The absence of goodwill
amortization had a favorable effect on the effective tax rate in
2002 because the majority of our historical goodwill
amortization was not deductible for tax purposes. This
improvement was offset by higher tax expense in certain ex-U.S.
jurisdictions, particularly in Latin America, and an increase in
the relative cost of state income taxes.
Review of Calendar Year 2001
22
A number of factors affected other expense (net)
in 2001. It increased substantially to $127 million,
compared with $49 million in 2000. Three separate legal
matters affected other expense in 2001, resulting in a net
charge of $60 million, as described in
Note 24 Other Expense Net. In
addition to these legal matters, we recognized $15 million
of other expense in 2001 to reflect the devaluation of the
Argentine peso. Other expense in 2001 also included a loss of
$4 million related to the early retirement of ESOP debt.
Other expense in 2001 also included impairments of equity
investments; other expense in 2000 reflected a write-down of an
investment in marketable equity securities. Equity affiliate
expense in 2001 related to our Renessen joint venture increased
approximately $10 million from equity affiliate expense in
the prior year. The effects of these higher expenses were
slightly offset in 2001 by other income from a deferred payout
provision related to a past business divestiture and gains on
the sale of equity securities.
SEEDS AND GENOMICS SEGMENT
Seeds and Genomics Financial Performance for
the Transition Period
23
reflect improved Latin American operations in
2003, they also demonstrate the Seeds and Genomics
segments increasing contribution to Monsantos
results. Segment EBIT for the eight months ended
Aug. 31, 2002, included charges for restructuring and
additional bad-debt expense related to Argentine receivables.
The transition period EBIT reflected higher SG&A expenses,
as the effects of higher incentive accruals and other
employee-related costs were partially offset by reductions in
other SG&A and R&D costs.
Seeds and Genomics Financial Performance for
Calendar Year 2002
Seeds and Genomics Financial Performance for
Calendar Year 2001
24
revenues from third-party seed companies from the
first half of 2002 to the last half of 2001, and contributed
approximately $90 million, or $0.34 per share, to 2001 net
income. This change from a technology fee system to a royalty
system in the United States was intended to simplify the
purchase of seed with our traits, and to allow seed companies to
have more flexibility in pricing their products. Net sales in
2001 also included trait revenues received from Pioneer upon
resolution of issues related to our MON810
YieldGard
products. These revenues reflected royalties related to
MON810
YieldGard
products sold during 2001. Stronger
cotton revenue reflected higher demand for and use of
biotechnology traits, particularly our stacked
Bollgard
and
Roundup Ready
traits. Conventional soybean seed
sales also increased, as more U.S. acres were planted in
soybeans in 2001. More than 70 percent of the U.S. planted
soybean acres contained our
Roundup Ready
trait in 2001.
Worldwide, the number of acres planted with our biotechnology
traits increased approximately 14 percent to
118 million acres in 2001, from 103 million acres in 2000.
AGRICULTURAL PRODUCTIVITY SEGMENT
Agricultural Productivity Financial
Performance for the Transition Period
25
we continue to experience competitive pressures
and a shift of sales volumes to our lower-priced branded and
non-branded glyphosate products. As a result, the average net
selling price of
Roundup
branded products in the United
States during the transition period was about 24 percent
lower than it was during the comparable period in the previous
year. In addition, volumes sold to distributors during the
transition period were less than end-user usage, which also
reduced net sales. Volumes of branded
Roundup
declined
9 percent for the transition period. In 2002, adverse
weather conditions reduced the amount of glyphosate used in the
U.S. over-the-top market. In the near term, we continue to
expect lower market share and lower average net selling prices
and market share for
Roundup
in the postpatent
environment.
Our Agreement with Scotts
Agricultural Productivity Financial
Performance for Calendar Year 2002
26
2002, we successfully began the launch of
Roundup WeatherMAX,
a new high-performance formulation of
Roundup
that provides consistent weed control in a
variety of less-than-ideal weather conditions.
Agricultural Productivity Financial
Performance for Calendar Year 2001
27
in 2000. Gross profit for the segment declined
approximately 11 percent, and gross profit as a percent of
sales declined 4 percentage points. Lower
Roundup
prices, including the effects of foreign currency exchange
rates and mix of products sold, were the primary contributors to
this decline. In addition, 2001 results included sales and cost
of goods sold related to the previously unconsolidated
investment discussed above. Although we reduced glyphosate unit
manufacturing costs in 2001, gross profit was adversely affected
by our actions to streamline manufacturing facilities. An EBIT
improvement for the animal agriculture business can be
attributed to increased sales of
Posilac
and more
efficient manufacturing performance. Operating expenses declined
1 percent, partially attributable to lower employee-related
costs. Operating expenses as a percent of sales increased by one
percentage point, primarily because of lower sales. Other
expense (net) increased by approximately $50 million,
as a result of a litigation settlement and the devaluation of
the Argentine peso.
RESTRUCTURING AND OTHER SPECIAL
ITEMS
2002 Restructuring Plan (charges recorded
in calendar 2002):
In 2002,
Monsantos management approved a restructuring plan. Under
this plan, various R&D programs and sites were shut down in
the United States and Europe. This restructuring plan also
involved the closure and downsizing of certain agricultural
chemical manufacturing facilities in Asia-Pacific and the United
States as a result of more efficient production capacity
installed at other Monsanto manufacturing sites. Certain seed
sites were consolidated and certain U.S. swine facilities
were exited. Finally, the plan included work force reductions in
addition to those related to the facility closures. These
additional reductions were primarily marketing and
administrative positions in Asia-Pacific, Europe-Africa, and the
United States.
2000 Restructuring Plan (charges recorded
in calendar 2001 and 2000):
In
2000, Monsantos management formulated a plan as part of
our overall strategy to focus on certain key crops and to
streamline operations. Restructuring and other special items,
primarily associated with the implementation of this plan, were
recorded in 2000 and 2001. These charges totaled
$474 million pretax, with $261 million recorded in
2000, and $213 million recorded in 2001.
28
manufacturing facilities to eliminate duplicate
manufacturing capacity to formulate and package herbicides. Due
to geographical location and cost considerations, improved
technologies were installed at other Monsanto manufacturing
sites. These sites, by incorporating technological advancements,
have been able to increase their production capacity to meet
current and expected future demand for
Roundup
herbicide
and other herbicides. The pretax charge of $213 million was
partially offset by the reversal of $8 million of
restructuring liabilities recorded during 2000 and 2001,
primarily because severance expenses were lower than originally
estimated. In addition, reversals of $4 million were
recorded in 2001 primarily because severance expenses relating
to the 1998 restructuring plan were lower than originally
estimated.
October 2003
Announcement:
In October 2003, we
announced plans to continue to reduce the costs associated with
our agricultural chemistry business as that segment matures
globally in a postpatent environment. In addition, we will
further concentrate our R&D efforts on certain projects.
More specifically, these plans include: (1) reducing costs,
particularly those associated with our
Roundup
herbicide
business, (2) exiting our European breeding and seed
business for wheat and barley; and (3) discontinuing our
plant-made pharmaceuticals program. These plans are expected to
produce aftertax savings of approximately $80 million to
$95 million in fiscal year 2005, and approximately
$90 million to $105 million in fiscal year 2006,
with continuing savings going forward. These actions will
require charges of up to $155 million aftertax in fiscal
year 2004. We estimate that this restructuring will require
approximately $90 million of cash. Our decisions about the
European wheat and barley business will also require a
reevaluation for potential impairment of goodwill related to our
global wheat business. Goodwill for our wheat businesses was
recorded at approximately $80 million pretax as of
Aug. 31, 2003; we currently anticipate $69 million of
this goodwill will be written off in the first quarter of fiscal
year 2004, resulting in a $0.26 per share impairment charge to
net income. We expect that these actions will lower our SG&A
costs as a percent of sales.
29
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL
RESOURCES
Transition period analysis:
Our balance sheet as of Aug. 31, 2003,
reflects working capital of $3 billion. The August 2003
working capital grew from working capital levels as of December
2002 year end, consistent with the seasonality of our business.
While trade accounts receivable balances are typically higher at
this point in the U.S. growing season, certain liabilities
are lower. For example, balances relating to deferred revenue
and grower liabilities as of Aug. 31, 2003, were lower than
balances as of Dec. 31, 2002.
These working capital increases were partially
offset by these factors:
Inventories of finished goods, goods in process,
and raw materials are maintained to meet customer requirements
and our scheduled production. Consistent with the nature of the
seed industry, we generally produce in one growing season the
seed inventories we expect to sell in the following season. In
general, we do not manufacture our products against a backlog of
firm orders; production is geared primarily to projections of
demand.
Calendar year analysis:
30
established in the second quarter of 2002, and a
relatively high proportion of sales on cash terms in Argentina.
In addition, aggressive collection efforts, particularly in
Latin America, and higher customer prepayments contributed to
the receivables decline.
Customer Financing
Program
: Monsanto refers certain of
its interested U.S. distributors to a third-party specialty
lender administered by Bank One, N.A., which can fund their
purchases of Monsanto products at attractive interest rates. In
connection with this financing option, we collected
approximately $120 million during the transition period,
and approximately $90 million during the comparable period
last year. This $500 million revolving credit and liquidity
facility allows certain U.S. customers to finance product
purchases, and allows us to reduce our reliance on commercial
paper borrowings. The company originates these loans on behalf
of the third-party specialty lender using Monsantos credit
guidelines approved by the lender, a special purpose entity. The
loans are sold to multiseller commercial paper conduits through
a nonconsolidated qualifying special purpose entity (QSPE). We
have no ownership interest in the lender, the QSPE, or the
loans. We service the loans and provide a first loss guarantee
of up to $100 million. We have not issued, nor are we
obligated to issue, any debt or equity securities in connection
with this arrangement.
Cash Flow
Transition Period Analysis:
Free cash flow, which represents the
total of net cash provided or required by operations and
provided or required by investing activities, was a negative
$338 million for the transition period. Our negative free
cash flow for the first eight months of 2003 and 2002 is
consistent with our historical experience, as we use cash to
fund the seasonal fluctuations in our business.
31
Calendar Year Analysis:
Free cash flow totaled
$639 million in 2002. This was a more than threefold
increase from 2001 free cash flow of $183 million. Though
net income was lower in 2002 than in 2001, our operations
generated almost twice as much cash in 2002. This improvement
was primarily a result of careful management of our investments
in trade receivables and inventories. Capital expenditures
declined 41 percent from 2001 to 2002, as we completed a
number of significant capital projects during 2001. Cash
required by investing activities increased slightly, to
$469 million, reflecting the $250 million investment
of excess cash, partially offset by the lower capital
expenditures and by proceeds from asset sales. In 2002, we
received $72 million of proceeds from the disposal of
property and investments. This amount included the sale of
herbicide assets to Nissan. We also received approximately
$50 million from the long-term supply agreement with
Nissan, which was included in cash flow from operations.
Capital Resources and Liquidity
A major source of our liquidity is operating cash
flows, which are derived from net income. This cash-generating
capability provides us with the financial flexibility we need to
meet operating, investing and financing needs. To the extent
that cash provided by operations was not sufficient to fund our
cash needs, generally during the first half of the calendar
year, short-term commercial paper borrowings were used to
finance these requirements.
32
Contractual Obligations
Seasonality
OUTLOOK
Focused Strategy
33
Our financial strategy will continue to emphasize
both earnings and cash, and we believe that Monsanto is
positioned to sustain earnings growth and cash flow. We remain
committed to returning cash to shareowners. We have begun to
implement a new share repurchase program, under which we are
authorized to purchase up to $500 million of our stock
during the next three years. Our board of directors also
authorized an increase to our dividend rate in 2003. During the
transition period, we applied our strong cash position to
participate in a settlement of Solutias PCB litigation and
to make voluntary contributions to our pension plan.
Seeds and Genomics
At the same time, we expect to continue to reduce
seed production costs through higher yields on seed production
acres and careful management of our seed product portfolio.
34
United States and Japan.
YieldGard
Plus
technology is currently under review by the Japanese regulatory
authorities. We are currently developing the first triple-stack
product,
YieldGard
Plus corn with
Roundup Ready.
Another source of growth in the near term is the
commercialization of second-generation traits, such as
Bollgard II
cotton.
Agricultural Productivity
35
Roundup Ready
trait
and the
Roundup
used on these acres are significantly
higher than the lost selective herbicide sales.
Other Information
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
Allowance for Doubtful Trade
Receivables:
We maintain an allowance
for doubtful trade receivables. This allowance represents our
estimate of accounts receivable that, subsequent to the time of
sale, we have estimated to be of doubtful collectibility because
our customers may not be able to pay. In determining the
adequacy of the allowance for doubtful accounts, we consider
historical bad-debt experience, customer creditworthiness,
market conditions, and economic conditions. We perform ongoing
evaluations of our allowance for doubtful accounts, and we
increase the allowance as required. Increases in this allowance
will reduce the recorded amount of our net trade receivables and
shareowners equity, and increase our bad-debt expense. For
example, in June 2002 we increased our allowance for estimated
uncollectible trade receivables in Argentina by
$154 million. This increase in the allowance was required
because of the economic turmoil and market conditions there.
Allowances for Returns and Inventory
Obsolescence:
Where the right of
return exists in our seed business, sales revenues are reduced
at the time of sale to reflect expected returns. In order to
estimate the expected returns, management analyzes historical
returns, economic trends, market conditions, and changes in
customer demand. In addition, we establish allowances for
obsolescence of inventory equal to the difference between the
cost of inventory and the estimated market value, based on
assumptions about future demand and market conditions. We
regularly evaluate the adequacy of our return allowances and
inventory obsolescence reserves. If economic and market
conditions are different from those we anticipated, actual
returns and inventory obsolescence could be materially different
from the amounts provided for in our consolidated financial
statements. If seed returns are higher than anticipated, our net
sales, net trade receivables and shareowners equity for
future periods will be reduced. If inventory obsolescence is
higher than expected, our cost of goods sold will be increased,
and our inventory valuations and shareowners equity
reduced. Higher-than-anticipated seed returns have recently
affected our results of operations and financial condition. In
calendar year 2002, results were affected by
higher-than-anticipated seed returns (primarily corn seed) in
Argentina because of the economic crisis that originated at the
end of 2001 and the flooding in that same year. In 2001, we
experienced higher-than-anticipated returns of high-priced corn
seed, primarily in Brazil because of an extremely unusual change
in market conditions there.
36
Deferred Income Tax
Assets:
Management regularly assesses
the likelihood that deferred tax assets will be recovered from
future taxable income. To the extent management believes that it
is more likely than not that a deferred tax asset will not be
realized, a valuation allowance is established. When a valuation
allowance is established or increased, an income tax charge is
included in the consolidated financial statements and net
deferred tax assets are adjusted accordingly. As of
Aug. 31, 2003, Monsanto has recorded a valuation allowance
totaling $90 million against Brazilian loss carryforwards,
an increase of $14 million from Dec. 31, 2002. This
increase is a result of foreign-currency fluctuations. Changes
in tax laws, statutory tax rates, and estimates of the
companys future taxable income levels could result in
actual realization of the deferred tax assets being materially
different from the amounts provided for in the consolidated
financial statements. If the actual recovery amount of the
deferred tax asset is less than anticipated, we would be
required to write off the remaining deferred tax asset and
increase the tax provision, resulting in a reduction of net
income and shareowners equity.
Goodwill:
A majority
of our goodwill relates to our seed company acquisitions. We are
required to assess whether any of our goodwill is impaired. In
order to do this, we apply judgment in determining our reporting
units, which represent distinct parts of our business. The
definition of our reporting units affects the results of our
goodwill impairment analysis. Our annual goodwill impairment
assessment involves estimating the fair value of a reporting
unit and comparing it with its carrying amount. If the carrying
value of the reporting unit exceeds its fair value, additional
steps are required to calculate a potential impairment loss.
Calculating the fair value of the reporting units requires
significant estimates and long-term assumptions. Any changes in
key assumptions about the business and its prospects, or any
changes in market conditions, interest rates or other
externalities, could result in an impairment charge. We estimate
the fair value of our reporting units by applying discounted
cash flow methodologies. In connection with the adoption of
SFAS 142 in 2002, we recorded a $2 billion pretax
transitional impairment charge relating to our corn and wheat
reporting units. This charge reduced the carrying amount of our
goodwill, and it resulted in a cumulative effect of accounting
change, which reduced net income and shareowners equity.
Future changes in the fair value of our reporting units could
affect our goodwill and operating expenses and reduce
shareowners equity. As discussed in Restructuring
and Other Special Items, our October 2003 decision to exit
our European wheat and barley business required us to reevaluate
our global wheat business for potential goodwill impairment.
Pensions and Other Postretirement
Benefits:
The actuarial valuation of
our pension and other postretirement benefit costs, assets and
obligations affects our financial position, results of
operations and cash flow. These valuations require the use of
assumptions and long-range estimates. These assumptions include,
among others: assumptions regarding interest and discount rates,
assumed long-term rates of return on pension plan assets, and
projected rates of salary increases. We regularly evaluate these
assumptions and estimates as new information becomes available.
Changes in assumptions (caused by conditions in the debt and
equity markets, changes in asset mix, and plan experience, for
example) could have a material effect on our pension obligations
and expenses, and can affect our net income, intangible assets,
liabilities, and shareowners equity. In addition, changes
in assumptions such as rates of return, fixed income rates used
to value liabilities or declines in the fair value of plan
assets, may result in voluntary decisions or mandatory
requirements to make additional contributions to our qualified
pension plan. Because of the design of our postretirement health
care plans, our liabilities associated with these plans are not
highly sensitive to assumptions regarding health care cost
trends.
37
experience and expected future performance of the
plan assets, as well as the current and expected allocation of
the plan assets. The U.S. qualified pension plans asset
allocation as of Aug. 31, 2003, was approximately
60 percent equity investments, 35 percent fixed-income
investments and 5 percent other investments, in line with
policy ranges. We periodically evaluate the allocation of plan
assets among the different investment classes to ensure that
they are within policy guidelines and ranges. While we do not
currently expect to further reduce the assumed rate of return in
the near term, holding all other assumptions constant, we
estimate that a half-percent decrease in the expected return on
plan assets would lower Monsantos fiscal year 2004 pretax
income by approximately $5 million.
NEW ACCOUNTING STANDARDS
CAUTIONARY STATEMENTS: RISK FACTORS REGARDING
Competition for Roundup Herbicides:
We expect to face continued
competition for our branded
Roundup
herbicide product
line. The extent to which we can realize cash and gross profit
from these products will depend on our ability to predict and
respond effectively to competitor pricing, to provide marketing
programs meeting the needs of our customers and of the farmers
who are our end-users, to maintain an efficient distribution
system, to control manufacturing and marketing costs without
adversely affecting sales, and to develop new formulations with
features attractive to our end-users.
Regulation and Public Acceptance of Seed
Biotechnology:
Regulatory and
legislative requirements affect the testing and planting of
seeds containing our biotechnology traits, and the import of
crops grown from those seeds. Obtaining testing, planting and
import approvals can be lengthy and costly, with no guarantee of
success. Planting approvals may also include significant
regulatory requirements that can limit our sales.
38
Lack of approval to import crops containing
biotechnology traits into key markets affects sales of our
traits, even in jurisdictions where planting has been approved.
Legislation or regulation may also require the tracking of
biotechnology products and the labeling of food or feed products
with ingredients grown from seeds containing biotechnology
traits. Such traceability and labeling requirements may cause
food processors and food companies to avoid biotechnology and
select non-biotechnology crop sources, which can affect grower
seed purchase decisions and the sale of our products. Some
opponents of the technology publicly express concern about
potential effects of our biotechnology traits on other plants
and on the environment, and about potential effects of crops
containing these traits on animals and human health. Such
concerns can affect government approvals and may adversely
affect sales of our traits, even after approvals are granted. In
addition, violent opponents of agricultural biotechnology have
attacked facilities used by agricultural biotechnology
companies, and may launch future violent attacks against our
field testing sites, research, production, or other facilities.
Adventitious Presence of Biotechnology Traits:
The detection of unintended but
unavoidable trace amounts (sometimes called adventitious
presence) of commercial biotechnology traits in
conventional (non-biotechnology) seed, or in the grain or
products produced from seeds containing these traits, may
negatively affect our business or results of operations. The
detection of adventitious presence of traits not approved in the
country where detected may result in the withdrawal of seed lots
from sale, or in compliance actions such as crop destruction or
product recalls. Some growers of organic and conventional crops
have claimed that the adventitious presence of any biotechnology
traits in their crops will cause them commercial harm. The
potential for adventitious presence of biotechnology traits is a
factor in general public acceptance of these traits. Concern
about adventitious presence may also lead to more stringent
regulation, which may include: requirements for labeling and
traceability; financial protection such as surety bonds,
liability or insurance; and/or restrictions or moratoria on
testing, planting or use of biotechnology traits.
Regulation and Legislation Affecting
Agricultural Products:
In addition to
regulation and legislation specifically affecting our seed
biotechnology products, agricultural products and their
manufacturers are subject to other government regulation, which
affects our sales and profitability. These regulations affect
the development, manufacture and distribution of our products,
and non-compliance could affect our sales and profitability.
Farm legislation encouraging or discouraging the planting of
specific crops can affect our sales. In addition, claims that
increased use of glyphosate herbicides increases the potential
for the development of glyphosate-resistant weeds could result
in restrictions on the use of glyphosate and of seeds containing
our
Roundup Ready
traits, and thereby reduce our sales.
Intellectual Property:
Intellectual property rights are
crucial to our business, and we endeavor to obtain and protect
these rights in jurisdictions in which our products are produced
or used, and in jurisdictions into which our products are
imported. Intellectual property rights are particularly
important with respect to our seeds and genomics segment.
However, we may be unable to obtain protection for our
intellectual property in key jurisdictions. Even if protection
is obtained, competitors, growers, or others in the chain of
commerce may illegally infringe on our rights, and such
infringement may be difficult to prevent or detect. For example,
the practice of saving seeds from non-hybrid crops (including,
for example, soybeans, canola and cotton) containing our
biotechnology may prevent us from realizing the full value of
our intellectual property, particularly outside the United
States. We must also protect our intellectual property against
legal challenges by competitors. Efforts to protect our
intellectual property rights against infringement and legal
challenges can increase our costs, and will not always succeed.
In addition, because of the rapid pace of technological change,
and the confidentiality of patent applications in some
jurisdictions, competitors may be issued patents from
applications that were unknown to us prior to issuance. These
patents could reduce the value of our commercial or pipeline
products. Because of the rapid pace of change and the complexity
of the legal and factual issues involved, we could unknowingly
rely on key technologies that are or become patent-protected by
others, which would require that we seek to obtain licenses or
cease using the technology, no matter how valuable to our
business.
Research and Development:
The continued development and
commercialization of pipeline products is key to our growth. The
ability to develop and bring new products to market, especially
agricultural biotechnology products, requires adequately funded,
efficient and successful research and development programs.
Inadequate availability of funds, failure to focus R&D
efforts efficiently, or lack of productivity in R&D, would
hurt our future growth.
Competition in Plant Biotechnology:
Many companies engage in plant
biotechnology research. Their success could render our existing
products less competitive. In addition, a companys speed
in getting its new product to market can be a significant
competitive advantage. We expect to see more competition, from
agricultural biotechnology firms and from major agrichemical,
seed and food companies, some of which have substantially
greater financial and marketing resources than we do.
Weather, Natural Disasters and Accidents:
Our sales and profitability are
subject to significant risk from weather conditions and natural
disasters that affect commodity prices, seed yields, and grower
decisions about purchases of our products. Natural disasters or
industrial accidents could also affect our own manufacturing
facilities, our major suppliers, or our major customers.
39
Manufacturing:
Because we use hazardous and other
regulated materials in our product development programs and
manufacturing processes, we are subject to risks of accidental
environmental contamination, personal injury claims and fines.
We are also subject to regulation of air emissions, waste water
discharges and solid waste. Compliance may be costly, and
failure to comply may result in penalties and remediation
obligations. In addition, lapses in quality control could affect
our sales and result in claims for defective products.
Short-Term Financing:
We regularly extend credit to our
customers in certain areas of the world so that they can buy
agricultural products at the beginning of their growing seasons.
Because of these credit practices and the seasonality of our
sales, we may need to issue short-term debt at certain times of
the year to fund our cash flow requirements. The amount of
short-term debt will be greater to the extent that we are unable
to collect customer receivables when due, to repatriate funds
from ex-U.S. operations, and to manage our costs and expenses.
Any downgrade in our credit rating, or other limitation on our
access to short-term financing or refinancing, would increase
our interest cost and adversely affect our profitability.
Litigation and Contingencies:
We are involved in major lawsuits
concerning contracts, intellectual property, biotechnology,
antitrust allegations, and other matters. Adverse outcomes could
subject us to substantial damages or limit our ability to sell
our products. In addition, in connection with the separation of
our businesses from those of Pharmacia on Sept. 1, 2000, we
were required to indemnify Pharmacia for liabilities that
Solutia had assumed from Pharmacia in connection with the
spinoff of Solutia on Sept. 1, 1997, to the extent that
Solutia fails to pay, perform or discharge those liabilities.
Additional information about our risks related to Solutia may be
found in other sections of this report.
Product Distribution:
To market our products successfully,
we must estimate growers future needs, and match our
production and the level of product at our distributors to those
needs. However, growers decisions are affected by market
and economic conditions that are not known in advance. Failure
to provide distributors with enough inventory of our products
will reduce our current sales. However, high product inventory
levels at our distributors may reduce sales in future periods,
as those distributor inventories are worked down. Large
distributor inventories also diminish our ability to react to
changes in the market, and increase the risk of obsolescence and
seed returns. In addition, inadequate distributor liquidity
could affect distributors ability to pay for our products.
Cost Management:
We
have recently announced strategic initiatives that include cost
reductions in our
Roundup
business. Inability to
implement these cost reductions while maintaining sales, or
unanticipated increases in our costs, could reduce our
profitability.
Commodity Prices:
Fluctuations in commodity prices can
affect our costs and our sales. We purchase our seed inventories
from production growers at market prices, and retain the seed in
inventory until it is sold. We use hedging strategies to
mitigate the risk of changes in these prices. In addition, the
prices of our seeds and traits could be affected by commodity
prices. Farmers income, and therefore their ability to
purchase our herbicides, seeds and traits, is also affected by
commodity prices.
Accounting Policies and Estimates:
Changes to our accounting policies
could affect future results. In addition, changes to generally
accepted accounting principles could require adjustments to
financial statements for prior periods and changes to our
policies for future periods. In addition, if actual experience
differs from the estimates, judgments and assumptions that we
used in order to prepare our financial statements, adjustments
will need to be made in future periods, which may affect
revenues and profitability. Finally, changes in our business
practices may result in changes to the way we account for
transactions, and may affect comparability between periods.
Operations Outside the United States:
Sales outside the United States
represent more than 40 percent of our revenues. In
addition, we engage in manufacturing, seed production, sales,
and/or research and development in many parts of the world.
Although we have operations in virtually every region, our
ex-U.S. sales are principally to external customers in
Argentina, Brazil, Canada, France and Mexico. Accordingly,
developments in those parts of the world generally have a more
significant effect on our operations than developments in other
places. Operations outside the United States are subject to
special risks and limitations, including: fluctuations in
currency values and foreign-currency exchange rates; exchange
control regulations; changes in local political or economic
conditions; import and trade restrictions; import or export
licensing requirements and trade policy; restrictions on the
ability to repatriate funds; and other potentially detrimental
domestic and foreign governmental practices or policies
affecting U.S. companies doing business abroad. Acts of terror
or war may impair our ability to operate in particular countries
or regions, and may impede the flow of goods and services
between countries. Customers in weakened economies may be unable
to purchase our products, or we may be unable to collect
receivables; and imported products could become more expensive
for customers to purchase in their local currency. Changes in
exchange rates may affect our earnings, the book value of our
assets outside the United States, and our equity.
40
An aftertax charge of $12 million effective
Jan. 1, 2003, upon adoption of a new accounting standard
relating to asset retirement obligations
An aftertax charge of $252 million in 2003
related to the settlement of Solutias polychlorinated
biphenyl (PCB) litigation
A $1.8 billion aftertax transitional
goodwill impairment charge, upon adoption of a new accounting
standard relating to goodwill
Establishment of a $100 million aftertax
bad-debt reserve in 2002 related to Argentine receivables
Actions in 2002 to reduce risks in Latin America,
due to economic and market uncertainties, that negatively
affected results
Charges relating to our 2002 restructuring plan
A gain from sales of certain herbicide assets for
use in certain ex-U.S. markets
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
2003
2002
2002
2001
2000
$1,165
$
845
$
1,585
$
1,707
$
1,608
625
377
838
869
729
18
(271
)
(105
)
(240
)
(581
)
(1)
Earnings (loss) before cumulative effect of
accounting change, interest and income taxes. See Note 23 to our
consolidated financial statements for further details.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
(1)
Earnings (loss) before cumulative effect of
accounting change, interest and income taxes. See Note 23 to our
consolidated financial statements for further details.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
2003
2002
2001
2000
$
$
(88
)
$
(99
)
$
(70
)
8
13
(1)
8
4
(12
)
(6
)
(45
)
(60
)
(45
)
(57
)
(22
)
(2
)
(88
)
(3
)
(3
)
(9
)
2
(6
)
(10
)
$
8
$
(124
)
$
(213
)
(2)
$
(261
)
(2)
(1)
Of this amount, $8 million of the 2002
reversals related to the 2000 restructuring plan. The
remaining $5 million was related to the
2002 restructuring plan.
(2)
These components represent the net charges for
the 2000 restructuring plan. The total for the two-year
plan is $474 million.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
As of Aug. 31,
2003
2002
$ 281
$
137
230
1
2,296
2,451
1,230
1,284
925
683
4,962
4,556
269
771
290
291
1,385
648
$1,944
$
1,710
$3,018
$
2,846
2.55:1
2.66:1
(1)
Includes miscellaneous receivables, deferred tax
assets and other current assets.
(2)
Includes Solutia PCB litigation settlement
liability, accrued compensation and benefits, accrued marketing
programs, deferred revenues, and miscellaneous short-term
accruals.
(3)
Working capital is total current assets less
total current liabilities; current ratio represents total
current assets divided by total current liabilities.
Our cash position reflects the strength of our
balance sheet. As of Aug. 31, 2003, we had more than
$280 million of cash on hand. We have also had more than
$200 million invested in short-term debt securities since
last December. We used a mix of cash and short-term borrowings
to fund the Solutia PCB litigation settlement payments made in
September 2003.
Short-term debt levels declined from year-ago
levels. Our strong cash position has allowed us to reduce our
reliance on short-term financing. The decline in short-term debt
also reflects the change in our debt mix to longer-term
borrowings.
The effect of the Solutia PCB settlement
decreased our August 2003 working capital levels, as increased
accrued liabilities were largely offset by a receivable due from
commercial insurance and deferred tax assets.
Improved operational performance drove accrued
liabilities higher because of accruals for customer incentive
programs, employee incentives, and income taxes. Our strong
working capital management led to lower trade
receivables despite higher sales levels
and lower inventories, which also decreased net working capital
levels.
As of Dec. 31,
2002
2001
$
2,614
$
2,420
2.44:1
2.02:1
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Eight Months Ended
Aug. 31,
Year Ended Dec. 31,
2003
2002
2002
2001
2000
$
(214
)
$
(233
)
$
1,108
$
616
$
671
(124
)
(112
)
(469
)
(433
)
(935
)
(338
)
(345
)
639
183
(264
)
191
175
(518
)
(7
)
369
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Aug. 31,
Dec. 31,
2003
2002
2002
2001
$
269
$
771
$
393
$
817
(1)
1,258
1,148
851
893
23%
27%
19%
19%
(1)
Includes related-party borrowings.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Payments Due in Fiscal Year Ending Aug. 31,
2009 and
Total
2004
2005
2006
2007
2008
beyond
$
1,258
$
$
201
$
18
$
1
$
243
$
795
89
32
20
12
8
4
13
10
10
393
258
35
33
25
18
24
410
45
45
52
45
45
178
272
63
62
58
52
37
285
51
51
51
51
21
60
18
5
5
5
3
$
2,735
$
464
$
419
$
229
$
185
$
368
$
1,070
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Continued growth in Monsantos branded and
licensed seed market shares, through successful breeding of
high-performance germplasm and continuous improvement in the
quality of our seeds;
Continued growth in licensing of seed germplasm
and biotechnology traits to other seed companies through our
Holdens/ Corn States business and the newly established
Cotton States business; and,
Expansion of existing traits, especially in corn,
and stacking of additional traits in current biotechnology
products.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
FORWARD-LOOKING STATEMENTS
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Changes in Interest Rates : Because the companys short-and long-term debt exceeds cash and investments, Monsantos interest-rate risk exposure pertains primarily to the debt portfolio. To the extent that we have cash available for investment to ensure liquidity, we will invest that cash only in short-term instruments. The majority of our debt as of Aug. 31, 2003, consisted of fixed-rate, long-term obligations.
Foreign Currency Fluctuations: In managing foreign currency risk, Monsanto focuses on reducing the volatility in consolidated cash flow and earnings caused by fluctuations in exchange rates. We use foreign-currency forward exchange contracts and foreign-currency options to manage the net currency exposure, in accordance with established hedging policies. Monsanto hedges recorded commercial transaction exposures, intercompany loans, net investments in foreign subsidiaries, and forecasted transactions. The companys significant hedged positions included the Argentine peso, the euro, Canadian dollar, the Brazilian real, and the South African rand. Unfavorable currency movements of 10 percent would negatively affect the fair market values of the derivatives held to hedge currency exposures by $60 million.
Changes in Commodity Prices: Monsanto uses futures contracts to protect itself against commodity price increases, mainly in the Seeds and Genomics segment. The majority of these contracts hedge the committed or future purchases of, and the carrying value of payables to growers for, soybean and corn inventories. A 10 percent decrease in the prices would have a negative effect on the fair value of those futures of less than $2 million for soybeans and less than $4 million for corn. We also use natural gas swaps to manage energy input costs. A 10 percent decrease in price of gas would have a negative effect on the fair value of the swaps of $1 million.
Changes in Equity Prices: The company also has investments in equity securities. All such investments are classified as long-term available-for-sale investments. The fair market value of these investments is $51 million. These securities are listed on a stock exchange or quoted in an over-the-counter market. If the market price of the traded securities should decrease by 10 percent, the fair value of the equities would decrease by $5 million. See Note 10 Investments for further details.
41
MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Management Report
Monsanto Companys management is responsible for the fair presentation and consistency, in accordance with generally accepted accounting principles, of all the financial information included in this Form 10-K. Where necessary, the information reflects managements best estimates and judgments.
Terrell K. Crews
42
MONSANTO COMPANY | 2003 FORM 10-K |
Independent Auditors Report
We have audited the accompanying statement of consolidated financial position of Monsanto Company and subsidiaries as of Aug. 31, 2003, Dec. 31, 2002, and Dec. 31, 2001, and the related statements of consolidated operations, cash flows, shareowners equity, and comprehensive income (loss) for the eight months ended Aug. 31, 2003, and each of the three years in the period ended Dec. 31, 2002. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
St. Louis, Missouri
43
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions, except per share and per pro forma share amounts)
2003
2002
2001
2000
$3,373
$
4,673
$
5,462
$
5,493
1,796
2,493
2,817
2,770
1,577
2,180
2,645
2,723
741
1,023
1,141
1,195
40
208
42
58
330
527
560
588
121
212
(5
)
103
122
103
1,106
1,861
1,986
2,156
471
319
659
567
57
81
99
214
11
22
26
30
396
67
58
127
49
(38
)
202
459
334
(27
)
73
164
159
(11
)
129
295
175
(12
)
(1,822
)
(26
)
$
(23
)
$
(1,693
)
$
295
$
149
$(0.04
)
$
0.49
$
1.14
$
0.68
(0.05
)
(6.99
)
(0.10
)
$(0.09
)
$
(6.50
)
$
1.14
$
0.58
$(0.04
)
$
0.49
$
1.12
$
0.68
(0.05
)
(6.94
)
(0.10
)
$(0.09
)
$
(6.45
)
$
1.12
$
0.58
44
Statement of Consolidated Financial Position
MONSANTO COMPANY
2003 FORM 10-K
As of Aug. 31,
As of Dec. 31,
(Dollars in millions, except share amounts)
2003
2002
2001
$
281
$
428
$
307
230
250
2,296
1,752
2,307
437
389
449
30
44
430
260
251
1,230
1,272
1,357
58
73
52
4,962
4,424
4,797
71
69
68
899
925
947
3,091
3,042
3,127
267
258
233
283
292
362
4,611
4,586
4,737
2,331
2,247
2,110
2,280
2,339
2,627
768
757
2,748
571
643
691
880
727
566
$
9,461
$
8,890
$
11,429
$
269
$
393
$
563
254
290
275
457
87
400
140
73
136
396
312
197
17
148
72
98
104
432
511
507
1,944
1,810
2,377
1,258
851
893
837
817
365
266
232
311
Shares issued: 262,681,253 in 2003, 261,412,808 in 2002 and
258,112,408 in 2001
3
3
3
8,077
8,050
8,056
(1,733
)
(1,645
)
173
(1,168
)
(1,202
)
(716
)
(23
)
(26
)
(33
)
5,156
5,180
7,483
$
9,461
$
8,890
$
11,429
45
Statement of Consolidated Cash Flows
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions)
2003
2002
2001
2000
$ (23
)
$
(1,693
)
$
295
$
149
19
1,984
42
302
460
554
546
40
208
42
58
(2
)
50
122
195
(132
)
(258
)
5
179
(59
)
(16
)
2
26
43
41
34
22
28
20
245
(14
)
(647
)
221
(224
)
(653
)
85
74
(187
)
118
24
(3
)
(194
)
28
(111
)
(20
)
2
(46
)
161
(35
)
2
11
42
(26
)
20
(26
)
46
(3
)
8
(214
)
1,108
616
671
(230
)
(250
)
250
(35
)
(97
)
(81
)
(148
)
(114
)
(224
)
(382
)
(582
)
5
72
10
30
20
(205
)
(124
)
(469
)
(433
)
(935
)
97
(934
)
372
(993
)
(254
)
(226
)
635
253
856
57
(77
)
(104
)
(94
)
(58
)
(2
)
(10
)
(8
)
(10
)
24
63
(96
)
(125
)
(116
)
723
62
191
(518
)
(7
)
369
(147
)
121
176
105
428
307
131
26
$ 281
$
428
$
307
$
131
46
Statement of Consolidated Shareowners Equity
MONSANTO COMPANY
2003 FORM 10-K
Additional
Parent
Retained
Accumulated Other
Common
Contributed
Company Net
Earnings
Comprehensive
Reserve for
(Dollars in millions, except per share amounts)
Stock
Capital
Investment
(Deficit)
Income (Loss)
(1)
ESOP Debt
Total
$
$
$
4,926
$
$
(281
)
$
$
4,645
124
124
318
(104
)
214
2
5,366
(5,368
)
1,765
(15
)
(38
)
1,712
1
722
723
Dec. 31, 2000
25
25
(23
)
(23
)
(107
)
(107
)
27
27
1
1
$
3
$
7,853
$
$
2
$
(479
)
$
(38
)
$
7,341
295
295
201
(13
)
188
2
2
(124
)
(124
)
(197
)
(197
)
(24
)
(24
)
(8
)
(8
)
5
5
5
5
$
3
$
8,056
$
$
173
$
(716
)
$
(33
)
$
7,483
(1,693
)
(1,693
)
(83
)
(83
)
3
3
63
63
11
11
(125
)
(125
)
(273
)
(273
)
(202
)
(202
)
(11
)
(11
)
7
7
$
3
$
8,050
$
$
(1,645
)
$
(1,202
)
$
(26
)
$
5,180
(23
)
(23
)
1
1
24
24
2
2
(65
)
(65
)
105
105
(71
)
(71
)
6
6
(6
)
(6
)
3
3
$
3
$
8,077
$
$
(1,733
)
$
(1,168
)
$
(23
)
$
5,156
(1) | See Note 19 Comprehensive Income (Loss) for further details of the components of accumulated other comprehensive income (loss). |
(2) | Includes adjustments to reflect determination of the historical amounts of net assets related to accumulated foreign currency translation adjustments. |
(3) | In September 2000, Monsanto shares were split; Pharmacia received 219,999 shares for each share held. After the separation, Pharmacia held 220 million shares, which were distributed to Pharmacia shareowners via a tax-free dividend on Aug. 13, 2002. |
(4) | Includes adjustments to reflect determination of deferred tax assets and accumulated foreign currency translation adjustments. |
(5) | Includes adjustment primarily associated with the assumed net pension liabilities and related deferred tax assets. |
47
Statement of Consolidated Comprehensive Income (Loss)
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions)
2003
2002
2001
2000
$(23
)
$
(1,693
)
$
295
$
149
105
(273
)
(197
)
(107
)
6
(4
)
(20
)
23
(7
)
(4
)
4
(14
)
(8
)
(8
)
8
8
(71
)
(202
)
5
1
34
(486
)
(224
)
(79
)
$ 11
$
(2,179
)
$
71
$
70
48
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
49
MONSANTO COMPANY | 2003 FORM 10-K |
Use of Estimates
Revenue Recognition
50
MONSANTO COMPANY | 2003 FORM 10-K |
Income Taxes
Marketing and Advertising Costs
Cash and Cash Equivalents
Short-Term Investments
Accounts Receivable
Long-Term Investments
Fair Values of Financial Instruments
Inventory Valuation
| Seeds and Genomics : Actual cost is used to value raw materials such as treatment chemicals and packaging, as well as goods in process. Finished goods, which include the cost of carry-over crops from the previous year, are valued at weighted-average actual cost. Weighted-average actual cost includes field growing and harvesting costs, plant conditioning and packaging costs, and manufacturing overhead costs. |
51
MONSANTO COMPANY | 2003 FORM 10-K |
| Agricultural Productivity : Actual cost is used to value raw materials and supplies. Standard cost, which approximates actual cost, is used to value finished goods and goods in process. Standard cost includes direct labor and raw materials, and manufacturing overhead based on practical capacity. The cost of certain inventories (approximately one-third of total inventories as of Aug. 31, 2003, Dec. 31, 2002, and Dec. 31, 2001) is determined by using the last-in, first-out (LIFO) method, which generally reflects the effects of inflation or deflation on cost of goods sold sooner than other inventory cost methods. The cost of other inventories in this segment generally is determined by the first-in, first-out (FIFO) method. Inventories at FIFO approximate current cost. |
Goodwill
Other Intangible Assets
Property, Plant and Equipment
Environmental Remediation Liabilities
Foreign Currency Translation
52
MONSANTO COMPANY | 2003 FORM 10-K |
Significant translation exposures include the euro, the Brazilian real, and the Canadian dollar. For all periods presented, Monsanto designated the U.S. dollar as the functional currency in Argentina. In January 2002, Argentina formally abandoned the fixed exchange rate regime between the Argentine peso and the U.S. dollar, and the peso subsequently was devalued by approximately 70 percent. Argentina simultaneously imposed various banking and exchange controls, and the government has instituted additional controls since that time. Included in the net transaction loss were losses of $11 million for the transition period, $34 million for calendar year 2002, and $15 million for calendar year 2001. These amounts reflect the effect of this devaluation on Argentine peso-denominated transaction exposures (primarily value-added taxes and other taxes due to or recoverable by Monsanto). See Note 22 Commitments and Contingencies for further details on the Argentine devaluation. Currency restrictions, with a possible exception in Argentina, are not expected to have a significant effect on Monsantos cash flow, liquidity, or capital resources.
Derivatives and Other Financial Instruments
Stock-Based Compensation
53
MONSANTO COMPANY | 2003 FORM 10-K |
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As permitted by both SFAS 148 and SFAS 123, Monsanto has elected to follow the guidance of APB Opinion No. 25, Accounting for Stock Issued to Employees, in measuring and recognizing its stock-based transactions with employees. Accordingly, no compensation expense was recognized in the transition period or in calendar years 2002, 2001, and 2000 for any of the Monsanto or Pharmacia option plans in which Monsanto employees participate, as all stock options granted under those plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant.
Compensation expense for restricted stock is based on the market price of Monsantos common stock at the grant date; this expense is recognized over the vesting period.
Commitments and Contingencies
Reclassifications
NOTE 3. NEW ACCOUNTING STANDARDS
54
MONSANTO COMPANY | 2003 FORM 10-K |
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities . SFAS 146 replaced EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) . SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are actually incurred, rather than on the date the company commits itself to the exit or disposal plan. This statement is effective for any exit or disposal activities initiated after Dec. 31, 2002. Monsanto will follow the guidance of SFAS 146 for the actions to be taken in connection with the fiscal year 2004 restructuring plan. Refer to Note 29 Subsequent Event for details of the fiscal year 2004 restructuring plan. The adoption of SFAS 146 had no effect on Monsantos 2002 and 2000 restructuring plans, which were both initiated prior to Dec. 31, 2002.
NOTE 4. CHANGE IN FISCAL YEAR END
(1) | Unaudited |
55
NOTE 5. RESTRUCTURING
AND OTHER SPECIAL ITEMS
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions)
2003
2002
2001
2000
$3
$
(21
)
$
(82
)
$
(60
)
(2
)
(88
)
(1
)
5
(103
)
(122
)
(103
)
(6
)
(10
)
8
(124
)
(213
)
(261
)
3
(43
)
(76
)
(64
)
$5
$
(81
)
$
(137
)
$
(197
)
(1) | Net of reversals of $13 million, $8 million, and $4 million, in calendar years 2002, 2001, and 2000, respectively. Of the calendar year 2002 reversals, $8 million were related to the 2000 restructuring plan, and $5 million were related to the 2002 restructuring plan. |
2002 Restructuring Plan (charges recorded in calendar year 2002)
56
Activities related to the 2002 restructuring plan
were as follows:
MONSANTO COMPANY
2003 FORM 10-K
Work Force
Facility
Asset
(Dollars in millions)
Reductions
Closures
Impairments
Other
Total
$
64
$
24
$
51
$
(2
)
$
137
(1
)
(4
)
(5
)
(34
)
(3
)
(37
)
(6
)
(6
)
(45
)
(45
)
2
2
$
29
$
17
$
$
$
46
(24
)
(7
)
(31
)
(7
)
(7
)
(3
)
(2
)
(5
)
2
2
$
2
$
3
$
$
$
5
2000 Restructuring Plan (charges recorded in calendar years 2000 and 2001)
The work force reduction charges in calendar years 2001 and 2000 included involuntary separation costs for approximately 1,500 employees worldwide (805 in calendar year 2001 and 695 in calendar year 2000), including positions in administration, R&D, and manufacturing. The affected employees were entitled to receive severance benefits pursuant to established company severance policies or government labor regulations. As of Dec. 31, 2000, 460 of the planned employee separations had been completed; 358 of these employees received cash severance payments totaling $28 million during calendar year 2000, and 102 employees elected deferred payments of $9 million, which were paid during the first quarter of calendar year 2001. Planned separations were completed for 526 employees during calendar year 2001, including 27 employees who elected deferred payments of $3 million, which were paid during the first quarter of calendar year 2002. Planned employee separations were completed for 400 employees during calendar year 2002; 399 of them received cash severance payments totaling $25 million during calendar year 2002, and one employee elected deferred payments of less than $1 million, which was paid during the first quarter of calendar year 2003. The cost to carry out certain of these work force reductions has been lower than originally anticipated. Accordingly, the work force reduction reserves were reduced by reversals of $1 million, $2 million, and $8 million in the transition period, calendar year 2002, and calendar year 2001, respectively. These reversals were required primarily because of attrition and severance payouts that were lower than originally estimated.
57
MONSANTO COMPANY | 2003 FORM 10-K |
equipment dismantling and disposal costs ($2 million), and other shutdown costs ($2 million). Facility closures and other exit costs in calendar year 2001 included contract termination costs ($28 million), property, plant and equipment dismantling and disposal costs ($18 million), and other shutdown costs ($3 million). The inventory write-offs in calendar year 2000 related to laureate oil, seed, and other inventories. The inventory write-offs in calendar year 2001 were for discontinued seed hybrids ($31 million), unused raw materials at closed agricultural chemical manufacturing facilities ($6 million), and other inventories, including certain discontinued agricultural chemical products ($8 million). Inventory write-offs for both years, as well as $37 million in property, plant and equipment impairments in calendar year 2001, were recorded in cost of goods sold. The remaining $20 million in property, plant and equipment impairments in calendar year 2001, recorded in restructuring charges, was related to the consolidation of agricultural chemical distribution sites and various corporate assets. The intangible asset impairment in calendar year 2000 included a $79 million goodwill impairment associated with the decision to terminate certain nutrition programs. These asset dispositions and other exit activities are expected to be completed in fiscal year 2004. The remaining restructuring actions will be funded from operations; these actions are not expected to affect the companys liquidity significantly. In calendar year 2002, $6 million of restructuring reversals were recorded, primarily because facility closing costs were lower than originally estimated and proceeds from disposed assets were higher than originally estimated. In the transition period, restructuring reversals of $1 million were recorded upon release of the companys obligation to perform under a contract and $1 million because the proceeds from disposed assets were higher than originally estimated.
58
MONSANTO COMPANY | 2003 FORM 10-K |
During calendar year 2000, costs charged against prior established reserves were $21 million, primarily for work force reductions. These charges were partially offset by the reversal of $4 million of the calendar year 1998 restructuring liability, primarily because severance costs were lower than originally estimated.
NOTE 6. TRADE RECEIVABLES
In the second quarter of calendar year 2002, Monsanto increased its allowance for doubtful trade receivables by $154 million pretax for estimated uncollectible trade receivables in Argentina, of which approximately $120 million has been written off against receivables as of Aug. 31, 2003. See Note 22 Commitments and Contingencies for further discussion of Argentina.
NOTE 7. CUSTOMER FINANCING PROGRAM
59
NOTE 8. INVENTORIES
MONSANTO COMPANY
2003 FORM 10-K
As of Aug. 31,
As of Dec. 31,
(Dollars in millions)
2003
2002
2001
$ 491
$
637
$
700
489
398
357
269
250
329
1,249
1,285
1,386
(19
)
(13
)
(29
)
$1,230
$
1,272
$
1,357
Monsanto uses commodity futures and options contracts to hedge the price volatility of certain commodities, primarily soybeans and corn. This hedging activity is intended to manage the price paid to production growers for corn and soybean seeds. As of Aug. 31, 2003, the excess of FIFO over LIFO cost increased by $6 million over Dec. 31, 2002, unfavorably affecting the transition period income, primarily because of $5 million in higher costs and $1 million as a result of the liquidation of certain LIFO inventory layers carried at higher costs which prevailed in prior years.
NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS
Information regarding the companys other intangible assets is as follows:
The increase in acquired biotechnology intellectual property during the transition period and calendar year 2002 was primarily due to the collaboration with Ceres, Inc. (Ceres). This product discovery and development collaboration focuses on applying genomics technologies to provide improvements in, as well as to accelerate the time to commercialization of, certain agricultural crops. Under the 2002 collaboration, Monsanto acquired rights to certain of Ceres existing technologies in exchange for vendor financing totaling $40 million, to be paid over five years. This existing technology has a weighted-average useful life of 10 years. Ceres will receive additional payments if it meets specified objectives for developing additional related technology, as part of its continuing commitment to genomics-based product discovery. In 2002, Monsanto made a minority equity investment in Ceres. Monsanto also will fund a jointly implemented research
60
MONSANTO COMPANY | 2003 FORM 10-K |
program. Including the $40 million for vendor financing, total payments to Ceres under the 2002 collaboration (subject to performance by Ceres) are expected to approximate $137 million over five years, plus potential royalties. Monsanto paid Ceres $15 million in the transition period and $40 million in calendar year 2002.
|
||||
Year ending Aug. 31, | Amount | |||
|
||||
2004
|
$ | 115 | ||
2005
|
100 | |||
2006
|
65 | |||
2007
|
50 | |||
2008
|
25 | |||
|
SFAS 142 did not require Monsanto to restate prior periods. The following table sets forth what the earnings and earnings per share would have been on an aftertax pro forma basis if the provisions of SFAS 142 had been applied in calendar years 2001 and 2000.
61
MONSANTO COMPANY | 2003 FORM 10-K |
If the new accounting standard had been adopted effective Jan. 1, 2000, Monsanto would not have recorded pretax goodwill amortization of $119 million in calendar year 2001 and $124 million in calendar year 2000. Pretax R&D expenses would have been $8 million higher in calendar years 2001 and 2000 because of the reassessment of useful lives and classifications. As a result of these changes, the income tax provision would have been $5 million higher in calendar year 2001 and $7 million higher in calendar year 2000.
NOTE 10. INVESTMENTS
Long-Term Investments
Equity Securities Available for Sale
|
||||||||||||||||
Gross | Gross | |||||||||||||||
(Dollars in millions) | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | (Losses) | Value | |||||||||||||
|
||||||||||||||||
Aug. 31, 2003
|
$ | 34 | $ | 17 | $ | 0 | $ | 51 | ||||||||
Dec. 31, 2002
|
34 | 10 | (4 | ) | 40 | |||||||||||
Dec. 31, 2001
|
37 | 27 | (3 | ) | 61 | |||||||||||
|
Net unrealized gains on long-term investments
(net of deferred taxes) included in shareowners equity
amounted to $10 million as of Aug. 31, 2003,
$4 million as of Dec. 31, 2002, and $15 million
as of Dec. 31, 2001. Proceeds from sales of equity
securities were $10 million in calendar year 2002 and in
calendar year 2001. Realized gains of $7 million, net of
$5 million tax expense in calendar year 2002, and
$5 million, net of $3 million tax expense in calendar
year 2001, were determined using the specific identification
method, and were included in net income. Realized losses of
$1 million, net of $1 million of tax benefit in
calendar year 2001, and $4 million, net of $3 million
tax benefit in calendar year 2000, were included in net income,
respectively, and were determined using the specific
identification method.
NOTE 11. INCOME
TAXES
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions)
2003
2002
2001
2000
$(143
)
$
453
$
631
$
333
105
(251
)
(172
)
1
$ (38
)
$
202
$
459
$
334
The components of income tax provision (benefit) were:
Factors causing Monsantos income taxes to differ from the U.S. federal statutory rate were:
Deferred income tax balances are related to:
62
MONSANTO COMPANY | 2003 FORM 10-K |
As of Aug. 31, 2003, Monsanto had available approximately $881 million in net operating loss carryforwards, the majority of which relate to Brazilian and Argentine operations. Monsanto has recorded a valuation allowance totaling $90 million against the Brazilian tax loss carryforwards, which do not expire. This is an increase of $14 million in the transition period resulting from currency fluctuation in Brazil. Monsanto has not recorded a valuation allowance on the Argentine tax loss carryforwards, most of which expire in 2007. Realization of net deferred tax assets depends on generating taxable income in future periods. Both the amount of the net deferred tax asset considered realizable and the allowance could be adjusted in the future if the estimates of taxable income change.
NOTE 12. DEBT AND OTHER CREDIT ARRANGEMENTS
Short-Term Debt
|
|||||||||||||
As of Aug. 31, | As of Dec. 31, | ||||||||||||
|
|
||||||||||||
(Dollars in millions) | 2003 | 2002 | 2001 | ||||||||||
|
|
||||||||||||
Commercial Paper
|
$ | $ | | $ | 320 | ||||||||
Current Maturities of Long-Term Debt
|
133 | 358 | 95 | ||||||||||
Notes Payable to Banks
|
31 | 24 | 39 | ||||||||||
Bank Overdrafts
|
105 | 11 | 109 | ||||||||||
|
|
||||||||||||
Subtotal
|
$269 | $ | 393 | $ | 563 | ||||||||
|
|
||||||||||||
Related-Party Short-Term Loans
Payable Pharmacia (see Note 26
Related-Party Transactions)
|
| | 254 | ||||||||||
|
|
||||||||||||
Total Short-Term Debt
|
$269 | $ | 393 | $ | 817 | ||||||||
|
|
|
||||||||||||
As of Aug. 31, | As of Dec. 31, | |||||||||||
|
|
|||||||||||
2003 | 2002 | 2001 | ||||||||||
|
|
|||||||||||
Weighted-Average Interest Rate on Short-Term
Borrowings (excluding related-party borrowings) at End of Period
|
9.1% | 11.0% | 3.2% | |||||||||
|
|
63
MONSANTO COMPANY | 2003 FORM 10-K |
There was a significant increase in the
weighted-average interest rate on short-term borrowings as of
Aug. 31, 2003, and Dec. 31, 2002. At the end of the
transition period and calendar year 2002, the company did not
have any outstanding commercial paper, but it had several
short-term borrowings to support ex-U.S. operations, which had a
weighted-average interest rate of 9.1 percent and
11 percent, respectively. Certain of these bank loans also
act to limit exposure to changes in foreign currency exchange
rates.
Long-Term Debt
As of Aug. 31,
As of Dec. 31,
(Dollars in millions)
2003
2002
2001
$795
$
795
$
243
500
172
336
48
56
57
$1,258
$
851
$
893
(1) | In connection with this debt, the company entered into certain interest rate hedging contracts, which effectively exchange the fixed interest rate to variable interest at the six-month London Interbank Offered Rate (LIBOR), less a weighted-average spread of 0.39 percent. |
(2) | Commercial paper was classified as long-term debt because Monsanto had the ability and intent to renew these obligations beyond one year. |
(3) | In connection with this debt, the company entered into certain interest rate hedging contracts, which effectively exchange the fixed interest rate to variable interest at the six-month LIBOR, less a weighted-average spread of 1.169 percent. |
(4) | The interest rate for borrowings under these agreements is the Brazil Development Bank funding interest rate, as adjusted quarterly, plus a 4 percent spread, and the long-term interest rate, as set quarterly by the Central Bank of Brazil, plus a 3 percent spread. |
In May 2002, Monsanto filed a $2 billion shelf registration with the SEC. As of Aug. 31, 2003, $950 million remains available for future debt issuances. On Aug. 14, 2002, Monsanto issued $600 million of 7 3/8% Senior Notes under this shelf registration. On Aug. 23, 2002, the aggregate principal amount of the outstanding notes was increased to $800 million. These 7 3/8% Senior Notes are due on Aug. 15, 2012. On May 5, 2003, Monsanto issued $250 million of 4% Senior Notes under the shelf registration. These 4% Senior Notes are due on May 15, 2008. The net proceeds from the sale of the 7 3/8% Senior Notes were used to reduce commercial paper borrowings and to repay short-term debt owed to Pharmacia. The net proceeds from the sale of the 4% Senior Notes were used to reduce commercial paper borrowings.
64
NOTE 13. FINANCIAL
INSTRUMENTS
MONSANTO COMPANY
2003 FORM 10-K
As of Aug. 31,
As of Dec. 31,
2003
2002
2001
Notional
Carrying
Fair
Notional
Carrying
Fair
Notional
Carrying
Fair
(Dollars in millions)
Amount
Amount
Value
Amount
Amount
Value
Amount
Amount
Value
$139
$
$
$
154
$
(3
)
$
(3
)
$
469
$
(6
)
$
(6
)
419
(5
)
(5
)
489
(4
)
(4
)
110
(1
)
(1
)
53
1
1
49
5
5
23
(2
)
(2
)
146
(11
)
(11
)
42
8
10
250
(6
)
(6
)
269
269
393
393
817
817
1,258
1,361
851
920
893
893
Monsantos business and activities expose it to a variety of market risks, including risks related to changes in commodity prices, foreign-currency exchange rates, interest rates and, to a lesser degree, security prices. These financial exposures are monitored and managed by the company as an integral part of its market risk management program. This program recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effects that market volatility could have on operating results.
Foreign-Currency Hedges
65
MONSANTO COMPANY | 2003 FORM 10-K |
The company hedges a portion of its net investment in Brazilian subsidiaries, and recorded an aftertax loss of $19 million in the transition period, an aftertax gain of $19 million in calendar year 2002, and an aftertax loss of $7 million in calendar year 2001, all of which are included in accumulated foreign currency translation.
Fair-Value Hedges
Cash-Flow Hedges
66
MONSANTO COMPANY | 2003 FORM 10-K |
to the extent the swap is effective, is recognized in other comprehensive loss until the hedged interest costs are recognized in earnings. As of Aug. 31, 2003, $14 million of aftertax deferred net losses on the interest rate lock accumulated in other comprehensive loss are expected to be reclassified into earnings during the next nine years, which is the term of the underlying debt.
Credit Risk Management
NOTE 14. POSTRETIREMENT BENEFITS PENSIONS
67
MONSANTO COMPANY | 2003 FORM 10-K |
assets of $1 million, and amortization of unrecognized net loss of $1 million.
Recent poor equity returns (prior to the transition period) have resulted in declines in pension plan asset performance. Market interest rates have also fallen, and the company reduced its discount rate and salary increase assumptions as of Aug. 31, 2003, to reflect current economic conditions. As a result of these changes and the return to a full 12-month fiscal year, pension expense, which will be determined using Aug. 31, 2003, assumptions, is expected to increase by approximately $22 million in fiscal year 2004 compared with pension expense in the transition period.
68
The funded status of the pension plans in which
Monsanto employees participated as of Aug. 31, 2003,
Dec. 31, 2002, and Dec. 31, 2001 was as follows:
MONSANTO COMPANY
2003 FORM 10-K
Eight Months
Ended Aug. 31,
Year Ended Dec. 31,
(Dollars in millions)
2003
2002
2001
Plan Sponsor
Monsanto
Monsanto
Pharmacia
Monsanto
Monsanto
Pharmacia
Monsanto &
Monsanto &
Monsanto &
Plan Participants
Monsanto
Monsanto
Pharmacia
Monsanto
Pharmacia
Pharmacia
$
1,566
$
220
$
1,638
$
152
$
75
$
1,725
20
32
5
43
67
103
11
119
1
1
1
(1
)
129
147
7
(61
)
(5
)
(107
)
(144
)
(20
)
(188
)
1,208
(1,208
)
73
(73
)
(430
)
(4
)
(2
)
$
1,676
$
1,566
$
$
220
$
$
1,638
$
894
$
114
$
1,264
$
25
$
106
$
1,594
107
(110
)
(1
)
(142
)
119
35
10
1
1
1
(5
)
(107
)
(144
)
(20
)
(188
)
998
(998
)
104
(104
)
(266
)
(2
)
$
1,014
$
894
$
$
114
$
$
1,264
$
662
$
672
$
$
106
$
$
374
(24
)
(27
)
(8
)
(37
)
(530
)
(439
)
(2
)
(86
)
$
108
$
206
$
$
96
$
$
251
The projected benefit obligation (PBO), the accumulated benefit obligation (ABO), and the fair value of the plan assets for pension plans with ABOs in excess of plan assets for Monsanto-sponsored plans as of Aug. 31, 2003, Dec. 31, 2002, and Dec. 31, 2001, were as follows:
|
||||||||||||
Aug. 31, | Dec. 31, | |||||||||||
|
|
|||||||||||
(Dollars in millions) | 2003 | 2002 | 2001 | |||||||||
|
|
|||||||||||
PBO
|
$1,487 | $1,372 | $90 | |||||||||
ABO
|
1,414 | 1,287 | 84 | |||||||||
Fair Value of Plan Assets with ABOs in Excess of
Plan Assets for Monsanto-sponsored Plans
|
908 | 797 | | |||||||||
|
|
(Asset) Liability
69
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 15. POSTRETIREMENT BENEFITS HEALTH CARE AND OTHER
Monsanto determined postretirement costs using the preceding year-end rate assumptions. The following assumptions, calculated on a weighted-average basis, were used for the principal plans as of the periods indicated:
A 1 percent increase or decrease in the assumed trend rate for health care costs would have had less than $1 million effect on Monsantos transition period cost for postretirement health care benefits. It would have increased or decreased the accumulated postretirement benefit obligation by $7 million as of Aug. 31, 2003.
For Aug. 31, 2003, Dec. 31, 2002, and Dec. 31, 2001, amounts recognized in the Statement of Consolidated Financial Position were as follows:
|
||||||||||||
Aug. 31, | Dec. 31, | |||||||||||
|
|
|||||||||||
(Dollars in millions) | 2003 | 2002 | 2001 | |||||||||
|
|
|||||||||||
Miscellaneous Accruals
|
$ | 25 | $ | 23 | $ | 17 | ||||||
Postretirement Liabilities
|
248 | 242 | 236 | |||||||||
|
|
70
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 16. EMPLOYEE SAVINGS PLANS
NOTE 17. STOCK-BASED COMPENSATION PLANS
71
MONSANTO COMPANY | 2003 FORM 10-K |
options granted under the Director Plan is 10 years, and the options vest in installments over the life of the directors term. The Director Plan is administered by a committee of company executives. Compensation expense recognized for the stock-based component of the Director Plan was $561,000 for the transition period. Compensation benefit recognized for the stock-based component of the Director Plan was $44,000 in calendar year 2002. Compensation expense recognized for the stock-based component of the Director Plan was $774,000 in calendar year 2001 and $359,000 in calendar year 2000.
(1) | The number of options exercisable and weighted-average exercise price thereof were 9,256,582 and $21.31 as of Dec. 31, 2002; 22,819,158 and $20.99 as of Dec. 31, 2001; and 22,566,820 and $20.07 as of Dec. 31, 2000. The following table contains this information for Aug. 31, 2003. |
(2) | In accordance with the provisions of the plans, shares exercised related to those of former employees who were separated. |
72
MONSANTO COMPANY | 2003 FORM 10-K |
Monsanto stock options outstanding as of Aug. 31, 2003, are summarized as follows:
As permitted by SFAS 123 and SFAS 148, the company has elected to follow the guidance of APB Opinion 25, for measuring and recognizing its stock-based transactions with employees. Accordingly, no compensation expense was recognized in relation to any of the Monsanto or Pharmacia option plans in which Monsanto employees participate. Note 2 Significant Accounting Policies shows what the pro forma net income (loss) and net income (loss) per share would have been if compensation expense for these plans had been based on the fair value at the grant dates for awards under these plans, consistent with the method of SFAS 123 and SFAS 148. Pro forma compensation expense for years presented may not be representative of compensation expense that will be incurred on a pro forma basis in future years.
Certain Monsanto employees received stock appreciation rights as part of Monsantos and Pharmacias stock compensation plans. These rights entitle those employees to receive a cash amount determined by the appreciation in the fair market value of the companys common stock between the date of the award and the date of exercise. Upon the merger of Pharmacia & Upjohn, Inc. with the former Monsanto Company on March 31, 2000, the rights from the Pharmacia plan vested. For the transition period, the company recognized $537,000 in compensation expense associated with these rights. The company recognized net compensation benefit of $415,000 in calendar year 2002 and $4 million in calendar year 2001 associated with these rights. The company recognized compensation expense of $13 million in calendar year 2000 associated with these rights.
NOTE 18. CAPITAL STOCK
73
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 19. COMPREHENSIVE INCOME (LOSS)
NOTE 20. EARNINGS (LOSS) PER SHARE AND PER PRO FORMA SHARE
NOTE 21. SUPPLEMENTAL CASH FLOW INFORMATION
|
||||||||||||
Eight Months | Year | |||||||||||
Ended Aug. 31, | Ended Dec. 31, | |||||||||||
|
|
|||||||||||
(Dollars in millions) | 2003 | 2002 | 2001 | |||||||||
|
|
|||||||||||
Interest
|
$ | 73 | $ | 81 | $ | 113 | ||||||
Taxes
|
70 | 75 | 174 | |||||||||
|
|
Monsanto made no cash payments for interest or taxes during the eight months ended Aug. 31, 2000, because all interest and tax payments during this period were made for it by Pharmacia. For the last four months of calendar year 2000, cash payments for interest and taxes were $21 million and $8 million, respectively.
74
NOTE 22. COMMITMENTS
AND CONTINGENCIES
MONSANTO COMPANY
2003 FORM 10-K
Payments Due by (12-Month) Fiscal Year Ending Aug. 31,
2009 and
(Dollars in millions)
Total
2004
2005
2006
2007
2008
beyond
$
1,258
$
$
201
$
18
$
1
$
243
$
795
89
32
20
12
8
4
13
10
10
393
258
35
33
25
18
24
410
45
45
52
45
45
178
272
63
62
58
52
37
285
51
51
51
51
21
60
18
5
5
5
3
$
2,735
$
464
$
419
$
229
$
185
$
368
$
1,070
Rent expense was $53 million for the 2003 transition period, $87 million for calendar year 2002, and $99 million for calendar year 2001.
Guarantees: In November 2002, FIN 45 was issued. FIN 45 elaborates on the disclosures a guarantor must make in its interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after Dec. 31, 2002.
75
MONSANTO COMPANY | 2003 FORM 10-K |
Monsanto may provide and has provided guarantees on behalf of its consolidated subsidiaries for obligations incurred in the normal course of business. Where appropriate, an obligation for such guarantees would be recorded as a liability; nothing was recorded as of Aug. 31, 2003. Because these are guarantees of obligations of consolidated subsidiaries, Monsantos consolidated financial position is not affected by the issuance of these guarantees.
Customer Concentrations in Gross Trade Receivables: The following table sets forth by significant customer concentrations Monsantos gross trade receivables as of Aug. 31, 2003, Dec. 31, 2002, and Dec. 31, 2001:
(1) | Represents customer receivables within the specified geography. |
Gross trade receivables as of Aug. 31, 2003, may vary from gross trade receivables as of Dec. 31, 2002 and 2001, due to the seasonality of Monsantos businesses. Historically, Monsanto has recorded its highest levels of sales and income in the first half of the calendar year. For further details on the allowance for doubtful trade receivables see Note 6 Trade Receivables. The companys receivables focus continues to center on the key agricultural markets of Argentina and Brazil. Net trade receivables in Argentina and Brazil were:
|
||||||||||||
Aug. 31, | Dec. 31, | |||||||||||
|
|
|||||||||||
(Dollars in millions) | 2003 | 2002 | 2001 | |||||||||
|
|
|||||||||||
Argentina
|
$229 | $ | 332 | $ | 573 | |||||||
Brazil
|
256 | 196 | 437 | |||||||||
|
|
As a result of the economic crisis and related reforms in Argentina throughout 2002 and the devaluation of the Argentine peso, Monsanto established an allowance of $154 million pretax in the second quarter of calendar year 2002 for estimated uncollectible receivables in Argentina. Of that amount, approximately $120 million had been written off against receivables as of Aug. 31, 2003. Although the company cannot determine how government actions and economic conditions in Argentina will affect the value of net receivables
76
MONSANTO COMPANY | 2003 FORM 10-K |
outstanding, the company continues to pursue customer collections aggressively to minimize exposure. Managements current assessment of the situation is that the allowance balance for Argentine receivables is adequate.
Remediation Obligations: Monsantos Statement of Consolidated Financial Position includes accrued liabilities of $15 million as of Aug. 31, 2003, $12 million as of Dec. 31, 2002, and $12 million as of Dec. 31, 2001, for the remediation of existing and former manufacturing facilities and certain off-site disposal and formulation facilities. There is currently no material range of loss in excess of the amount recorded for these sites. It is possible that new information about the sites for which the accrual has been established, such as results of investigations by regulatory agencies, Monsanto, or other parties, could require Monsanto to reassess its potential exposure related to environmental matters. Monsantos future remediation expenses are affected by a number of uncertainties. These uncertainties include, but are not limited to, the method and extent of remediation, the percentage of material attributable to Monsanto at the sites relative to that attributable to other parties, and the financial capabilities of the other potentially responsible parties. Monsanto does not expect the resolution of such uncertainties to have a material adverse effect on its financial position, profitability, or liquidity.
Litigation and Indemnification: Monsanto is defending and prosecuting litigation in its own name. In addition, Monsanto is defending and prosecuting certain cases that were brought in Pharmacias name and for which Monsanto assumed responsibility upon the separation of its businesses from those of Pharmacia. Such matters relate to a variety of issues. Some of the lawsuits seek damages in very large amounts, or seek to restrict the companys business activities. The litigation that Monsanto is defending and prosecuting does not include litigation that Solutia assumed from Pharmacia, which is discussed below. Although the results of litigation cannot be predicted with certainty, it is managements belief that the final outcome of the lawsuits that Monsanto is defending or prosecuting (which do not include the Solutia matters discussed below), will not have a material adverse effect on Monsantos financial position, profitability, or liquidity.
77
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 23. SEGMENT AND GEOGRAPHIC DATA
(1) | As discussed in Note 2 Significant Accounting Policies Monsanto changed its marketing approach for certain trait fees, which resulted in certain trait revenue being recognized earlier in the second half of calendar year 2001 rather than in the first half of calendar year 2002. |
(2) | Earnings (loss) before cumulative effect of accounting change, interest, and income taxes; see the following table for reconciliation. |
Although inflation is relatively low in most of Monsantos major markets, it continues to affect operating results. To mitigate the effect of inflation, Monsanto implemented measures to control costs, to improve productivity, to manage capital expenditures and working capital, and to raise selling prices when government regulations and competitive conditions permit. In addition, the current costs of replacing certain assets are estimated to be greater than the historical costs presented in the financial statements. Accordingly, the depreciation expense reported in the Statement of Consolidated Operations would be greater if it were stated on a current-cost basis.
78
MONSANTO COMPANY | 2003 FORM 10-K |
Net sales and long-lived assets are attributed to the geographic areas of the relevant Monsanto legal entities. For example, a sale from the United States to a customer in Latin America is reported as a U.S. export sale.
NOTE 24. OTHER EXPENSE NET
|
||||||||||||||||
Eight Months | ||||||||||||||||
Ended Aug. 31, | Year Ended Dec. 31, | |||||||||||||||
|
|
|||||||||||||||
Dollars in millions | 2003 | 2002 | 2001 | 2000 | ||||||||||||
|
|
|||||||||||||||
Litigation Matters Net
|
$ | | $ | 17 | $ | 60 | $ | | ||||||||
Equity Affiliate Expense Net (see
Note 25 Equity Affiliates)
|
26 | 43 | 41 | 34 | ||||||||||||
Foreign-Currency Transaction Losses
Net
|
21 | 36 | 32 | 22 | ||||||||||||
Loss (Gain) on Sale of Businesses and Assets
|
(1 | ) | (24 | ) | | 2 | ||||||||||
Gains Realized Upon Sale of Equity Securities
|
| (12 | ) | (8 | ) | | ||||||||||
Deferred Payout Provision Related to Past
Business Divestiture
|
| | (8 | ) | | |||||||||||
Impairments of Equity Investments and Securities
|
| | 8 | | ||||||||||||
Early Extinguishment of Debt
|
| | 4 | | ||||||||||||
Banking and Other Related Fees
|
11 | 10 | 8 | 5 | ||||||||||||
Other Miscellaneous Expense (Income)
|
10 | (12 | ) | (10 | ) | (14 | ) | |||||||||
|
|
|||||||||||||||
Other Expense Net
|
$ | 67 | $ | 58 | $ | 127 | $ | 49 | ||||||||
|
|
Other miscellaneous expense for the transition period comprises numerous items that are less than $5 million individually.
| In November 2001, a federal appeals court upheld a 1999 judgment against DEKALB Genetics (now a wholly owned subsidiary of Monsanto) in a licensing dispute brought by Aventis CropScience S.A. (now Bayer CropScience). As a result, a reserve of $50 million for punitive damages was recorded in other expense in 2001. The reserve was included in miscellaneous short-term accruals in the Statement of Consolidated Financial Position as of Dec. 31, 2001, and it was paid during calendar year 2002. | |
| In January 2002, Monsanto and Central Garden and Pet (Central Garden) announced the settlement of all litigation related to Central Gardens distributorship of lawn-and-garden products during the 1990s for a divested business of the former Monsanto. As a result, the company recorded a net pretax charge of $32 million in other expense in calendar year 2001; Central Garden has paid Monsanto $5.5 million for products shipped to Central Garden under the distribution agreement; and, Central Gardens Pennington subsidiary also agreed to purchase $2 million of Monsantos glyphosate material under an existing supply agreement with Monsanto. | |
| In October 2001, Monsanto and DuPont announced the resolution of issues related to Monsantos MON810 YieldGard insect-protected corn trait used in corn hybrids sold by Pioneer. The resolution includes the dismissal of several lawsuits regarding the development, licensing and sale of MON810 YieldGard products. Under |
79
MONSANTO COMPANY | 2003 FORM 10-K |
this agreement, Pioneer will continue to sell MON810 YieldGard insect-protected corn hybrids under a royalty-bearing license from Monsanto. In addition, Monsanto received a one-time fee of approximately $56 million. The major components of this fee relate to Pioneers past use of Monsantos MON810 YieldGard product and to royalties related to Pioneers sales of MON810 YieldGard products during calendar year 2001. The portion of the fee related to Pioneers past use of the product and to the settlement of other issues ($22 million) was recorded as other income. The royalties related to MON810 YieldGard products sold during calendar year 2001 were recorded as trait revenues in the fourth quarter of calendar year 2001. |
PCB Litigation Settlement: As discussed in Note 22 Commitments and Contingencies Monsanto participated in a global settlement, which included Solutia and Pharmacia, relating to certain Solutia PCB litigation in Alabama. Monsanto paid $150 million of its share of the $550 million cash settlement in August 2003, and the remaining $400 million was paid in September 2003. Receivables of $155 million have been recorded for the insurance proceeds, the majority of which Monsanto expects to receive during fiscal year 2004. As a result, Monsanto recorded a pretax charge of $396 million ($252 million aftertax, reflecting a tax benefit of $144 million) in August 2003. The net charge of $396 million includes $1 million of related legal expenses.
NOTE 25. EQUITY AFFILIATES
|
||||||||||||||||
As of Aug. 31, | As of Dec. 31, | |||||||||||||||
|
|
|||||||||||||||
Dollars in millions | 2003 | 2002 | 2001 | 2000 | ||||||||||||
|
|
|||||||||||||||
Current Assets
|
$ 3 | $ | 6 | $ | | $ | | |||||||||
Noncurrent Assets
|
3 | 3 | 3 | 3 | ||||||||||||
Current Liabilities
|
13 | 13 | 11 | 12 | ||||||||||||
Noncurrent Liabilities
|
1 | 1 | | | ||||||||||||
|
|
NOTE 26. ADVERTISING COSTS
NOTE 27. RELATED-PARTY TRANSACTIONS
80
MONSANTO COMPANY | 2003 FORM 10-K |
counterparty to some of Monsantos foreign-currency exchange contracts. Since Aug. 13, 2002, Monsanto has maintained its foreign-currency exchange strategies by working with third-party banks. As of Dec. 31, 2001, the fair value of the companys outstanding foreign-currency exchange contracts with Pharmacia was a loss of $7 million. In addition, Monsanto pays a fee to Pharmacia because Pharmacia is the named party on a guarantee of debt of a Monsanto subsidiary issued prior to Monsantos separation from Pharmacia on Sept. 1, 2000. Fees for these services are comparable to those that Monsanto would have incurred with a third party.
NOTE 28. QUARTERLY DATA (UNAUDITED)
(1) | Because of the quarterly changes in the effects of dilutive stock options in 2002, correlated with the average quarterly stock price, quarterly earnings (loss) per share do not total to the full-year amount. Additionally, because Monsanto reported a loss before cumulative effect of accounting change in the third and fourth quarters of 2001, generally accepted accounting principles required diluted loss per share to be calculated using weighted-average common shares outstanding, excluding common stock equivalents. As a result, the quarterly earnings (loss) per share do not total to the full-year amount. |
(2) | Historically, Monsanto generates the majority of its sales during the first half of the year, primarily because of the timing of the planting season in the Northern Hemisphere. |
81
MONSANTO COMPANY | 2003 FORM 10-K |
NOTE 29. SUBSEQUENT EVENT
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND |
ITEM 9A. | CONTROLS AND PROCEDURES. |
82
MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. |
| information appearing under the heading Information Regarding Board of Directors and Committees Composition of Board of Directors, including biographical information regarding nominees for election to, and members of, the Board of Directors | |
| information appearing under the heading Certain Other Information Regarding Management Section 16(a) Beneficial Ownership Reporting Compliance | |
| information appearing under the heading Board Meetings and Committees Audit and Finance Committee, regarding the membership and function of the Audit and Finance Committee, and the financial expertise of its members. |
Monsanto has adopted a Code of Ethics for Chief Executive and Senior Financial Officers (Code), which applies to its Chief Executive Officer and the senior leadership of its finance department, including its Chief Financial Officer and Controller. This Code is available on our Internet Web site at http://www.monsanto.com , at the tab Our Pledge. Any amendments to, or waivers from, the provisions of the Code will be posted to that same location within five business days, and will remain on the Web site for at least a 12-month period.
83
MONSANTO COMPANY
2003 FORM 10-K
Year First
Became
Present Position
an Executive
Name Age
with Registrant
Officer
Other Business Experience since Jan. 1, 1998*
Mark J. Leidy,
47
Executive Vice President, Manufacturing
2001
Director of Manufacturing,
Roundup
Pharmacia Corporation, 1996-1998;
Director of Manufacturing, Global Seed Supply
Monsanto Company, 1998-2000; Vice President, Manufacturing,
2/01-6/03; present position, 6/03
Cheryl P. Morley,
49
Senior Vice President, Corporate Strategy
2000
President, Animal Agricultural Group
Pharmacia Corporation, 1997-2000; President of Animal
Agricultural Group Monsanto Company, 8/00-6/03;
present position, 6/03
Robert A. Paley,
55
Vice President and Treasurer
2002
Director of Asia-Pacific Monsanto Company
Entities Monsanto Company, 1997-2000; Assistant
Treasurer Monsanto Company, 2000-2002; present
position, 9/02
Gerald A. Steiner,
43
Executive Vice President, Commercial Acceptance
2001
Director, Global Chemistry Strategy
Pharmacia Corporation, 1996-1998; General Manager, Europe-Africa
Ag Business Pharmacia Corporation, 1998-2000; Senior
Vice President, Ag & Pharma Discovery Services
Celera Genomics, 2000-2001; Vice President, Strategy
Monsanto Company, 2001-6/03; present position, 6/03
* | Prior to Sept. 1, 2000, the businesses of the current Monsanto Company were the agricultural division of Pharmacia Corporation. |
ITEM 11. | EXECUTIVE COMPENSATION. |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. |
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
84
MONSANTO COMPANY | 2003 FORM 10-K |
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. |
1. | The following financial statements appearing in Item 8: Statement of Consolidated Operations; Statement of Consolidated Financial Position; Statement of Consolidated Cash Flows; Statement of Consolidated Shareowners Equity; and Statement of Consolidated Comprehensive Income (Loss). | |
2. | Financial Statement Schedules: Consolidated Financial Statements of Renessen LLC. This Schedule will be filed with the SEC but will not be included in the printed version of the Annual Report to Shareowners. | |
3. | Exhibits: The list of exhibits in the Exhibit Index to this Report is incorporated herein by reference. The following Exhibits are management contracts and compensatory plans or arrangements required to be filed as exhibits to this Form 10-K: Exhibits 10.15 through 10.29. The exhibits will be filed with the SEC but will not be included in the printed version of the Annual Report to Shareowners. |
(b) Reports on Form 8-K during the quarter ended Aug. 31, 2003:
85
SCHEDULE
Consolidated Financial Statements of Renessen LLC
(A Development Stage Company)
TABLE OF CONTENTS
Page | |||||
|
|||||
INDEPENDENT AUDITORS REPORT
|
1 | ||||
|
|||||
CONSOLIDATED FINANCIAL STATEMENTS FOR THE EIGHT MONTHS ENDED
AUGUST 31, 2003 AND FOR THE EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 2002 AND THE CUMULATIVE PERIOD FROM JANUARY 7, 1999
(DATE OPERATIONS COMMENCED) THROUGH AUGUST 31, 2003:
|
|||||
|
|||||
Consolidated Balance Sheets
|
2 | ||||
|
|||||
Consolidated Statements of Operations
|
3 | ||||
|
|||||
Consolidated Statements of Members Interest (Deficiency)
|
4 | ||||
|
|||||
Consolidated Statements of Cash Flows
|
5 | ||||
|
|||||
Notes to Consolidated Financial Statements
|
6-13 |
R-1
INDEPENDENT AUDITORS REPORT
To the Members of Renessen LLC
We have audited the accompanying consolidated balance sheets of Renessen LLC (A
Development Stage Company) (the Company) as of August 31, 2003, December 31,
2002 and 2001 and the related consolidated statements of operations, members interest (deficiency) and cash flows for the
eight months ended August 31, 2003 and for each of the three years in the
period ended December 31, 2002, and the cumulative period from January 7, 1999
(date operations commenced) through August 31, 2003. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at August 31, 2003,
December 31, 2002 and 2001, and the results of its operations and its cash
flows for the eight months ended August 31, 2003 and for each of the three
years in the period ended December 31, 2002, and the cumulative period from
January 7, 1999 (date operations commenced) through August 31, 2003 in
conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As described in Note 2, the
Companys recurring losses from development stage activities and the Members
minimum funding commitment expiring on January 31, 2004 raise substantial doubt
about its ability to continue as a going concern. Managements plans
concerning these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ DELOITTE & TOUCHE LLP
Chicago,
Illinois
R-2
Bannockburn, Illinois
September 25, 2003
Table of Contents
RENESSEN LLC
CONSOLIDATED BALANCE SHEETS
See notes to consolidated financial statements.
R-3
RENESSEN LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
See notes to consolidated financial statements.
R-4
RENESSEN LLC
CONSOLIDATED STATEMENTS OF MEMBERS INTEREST (DEFICIENCY)
See notes to consolidated financial statements.
R-5
RENESSEN LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
See notes to consolidated financial
statements.
R-6
RENESSEN LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
R-7
R-8
R-9
R-10
R-11
R-12
R-13
* * * * * *
R-14
Date: Nov. 25, 2003
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
EXHIBIT INDEX
(A Development Stage Company)
AUGUST 31, 2003, DECEMBER 31, 2002 AND 2001
Table of Contents
(A Development Stage Company)
EIGHT MONTHS ENDED AUGUST 31, 2003 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND THE CUMULATIVE PERIOD FROM
JANUARY 7, 1999 (DATE OPERATIONS COMMENCED) THROUGH AUGUST 31, 2003
Period from
Eight Months
January 7, 1999
Ended
through
August 31,
August 31,
2003
2002
2001
2000
2003
$
6,132,233
$
2,212,717
$
836,644
$
175,000
$
9,356,594
6,112,392
3,307,398
1,248,672
333,291
11,001,753
19,841
(1,094,681
)
(412,028
)
(158,291
)
(1,645,159
)
39,890,740
61,301,567
63,846,056
49,390,781
232,047,830
4,731,627
6,810,708
5,244,896
4,117,292
24,256,797
8,240,524
12,027,698
12,248,798
8,975,420
49,370,342
52,862,891
80,139,973
81,339,750
62,483,493
305,674,969
(52,843,050
)
(81,234,654
)
(81,751,778
)
(62,641,784
)
(307,320,128
)
63,406
(558,439
)
(495,033
)
(113,018
)
(182,177
)
(295,195
)
9,630
42,333
51,622
142,879
(23,317
)
(127,985
)
(40,400
)
(191,702
)
(39,982
)
(763,933
)
(85,652
)
11,222
(839,051
)
(52,883,032
)
(81,998,587
)
(81,837,430
)
(62,630,562
)
(308,159,179
)
(52,883,032
)
(81,998,587
)
(81,837,430
)
(62,630,562
)
(308,159,179
)
42,654
58,265
100,919
$
(52,840,378
)
$
(81,940,322
)
$
(81,837,430
)
$
(62,630,562
)
$
(308,058,260
)
Table of Contents
(A Development Stage Company)
EIGHT MONTHS ENDED AUGUST 31, 2003 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND THE CUMULATIVE PERIOD FROM
JANUARY 7, 1999 (DATE OPERATIONS COMMENCED) THROUGH AUGUST 31, 2003
Members
Total
Interest (Deficiency)
Members
Monsanto
Cargill
Interest
Company
Incorporated
(Deficiency)
$
500,000
$
500,000
$
1,000,000
11,549,453
11,549,453
23,098,906
12,049,453
12,049,453
24,098,906
(14,404,784
)
(14,404,784
)
(28,809,568
)
(2,355,331
)
(2,355,331
)
(4,710,662
)
29,315,090
29,315,090
58,630,180
(31,315,281
)
(31,315,281
)
(62,630,562
)
(4,355,522
)
(4,355,522
)
(8,711,044
)
41,038,513
41,038,513
82,077,026
(40,918,715
)
(40,918,715
)
(81,837,430
)
(4,235,724
)
(4,235,724
)
(8,471,448
)
40,146,872
45,296,872
85,443,744
(40,970,161
)
(40,970,161
)
(81,940,322
)
(5,059,013
)
90,987
(4,968,026
)
27,133,889
21,983,890
49,117,779
(26,420,189
)
(26,420,189
)
(52,840,378
)
$
(4,345,313
)
$
(4,345,312
)
$
(8,690,625
)
Table of Contents
(A Development Stage Company)
EIGHT MONTHS ENDED AUGUST 31, 2003 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND THE CUMULATIVE PERIOD FROM
JANUARY 7, 1999 (DATE OPERATIONS COMMENCED) THROUGH AUGUST 31, 2003
Period from
Eight Months
January 7, 1999
Ended
through
August 31,
August 31,
2003
2002
2001
2000
2003
$
(52,840,378
)
$
(81,940,322
)
$
(81,837,430
)
$
(62,630,562
)
$
(308,058,260
)
353,127
585,657
586,311
468,978
2,121,406
(367
)
324,588
4,538
(296
)
328,463
23,317
127,985
40,400
191,702
(42,654
)
(58,265
)
(100,919
)
(482,054
)
(362,335
)
(844,389
)
127,264
(2,097,476
)
(310,255
)
(240,159
)
(2,526,416
)
(186,600
)
536,285
349,685
(720,276
)
1,067,459
153,724
509,707
1,131,216
831,919
(1,803,324
)
1,171,525
1,972,159
5,519,551
113,057
681,583
436,644
1,231,284
(52,846,962
)
(83,042,833
)
(79,666,958
)
(59,879,773
)
(300,656,677
)
(379,544
)
(275,583
)
(304,071
)
(1,118,220
)
(4,110,659
)
4,056
4,056
(200,000
)
(200,000
)
404,133
404,133
(375,488
)
128,550
(304,071
)
(1,318,220
)
(3,902,470
)
176,829
1,490,672
(2,028,495
)
2,291,599
4,905,172
(263,441
)
226,330
(67,095
)
(87,717
)
405,487
59,797
150,000
209,797
47,945
47,945
80,000
80,000
27,133,889
40,146,872
41,038,513
29,315,090
149,683,817
21,983,890
45,296,872
41,038,513
29,315,090
149,683,818
49,138,909
87,390,746
79,981,436
60,834,062
305,016,036
(4,083,541
)
4,476,463
10,407
(363,931
)
456,889
4,540,430
63,967
53,560
417,491
$
456,889
$
4,540,430
$
63,967
$
53,560
$
456,889
Table of Contents
(A Development Stage Company)
EIGHT MONTHS ENDED AUGUST 31, 2003 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002 AND THE CUMULATIVE PERIOD FROM
JANUARY 7, 1999 (DATE OPERATIONS COMMENCED) THROUGH AUGUST 31, 2003
1.
ORGANIZATION
Business Formation and Structure
Renessen LLC, a Delaware Limited Liability
Company (Renessen or the Company), was formed on January 4, 1999 as a
joint venture of Cargill Incorporated (Cargill) and Monsanto Company
(Monsanto), collectively, the Members. The Company began operations on
January 7, 1999.
The Company has three wholly owned Delaware limited liability companies,
Renessen Holdings LLC (Renessen Holdings), Renessen Holdings II LLC
(Renessen Holdings II) and Renessen Holdings III LLC. Renessen Holdings
and Renessen Holdings II were established in 2000, in preparation for the
formation of the Companys Argentine and Brazilian affiliates. Renessen
Argentina S.R.L. (Renessen Argentina) was formed in 2001 and is an
Argentine limited liability company owned by Renessen Holdings and Renessen
Holdings II. Renessen do Brasil, Ltda. was formed in 2002 and is a
Brazilian limited liability company owned by Renessen Holdings and Renessen
Holdings II. During 2003, the Company established Renessen III LLC for the
purpose of developing the China market outside of Liaoning Province. All
material intercompany accounts and transactions have been eliminated.
During 2000, the Company invested $200,000 in Zhangwu Cargill Renessen
Specialty Grains Company Ltd. (the China Joint Venture) for the purpose of
developing the market in Liaoning Province, China. Under the terms of the
original China Joint Venture Agreement, the ownership percentage interests
for the investors were (i) 40% for Renessen, (ii) 40% for Cargill Asia
Pacific. (Cargill Asia Pacific), and (iii) 20% for Zhangwu Jin Di Yuan Co.
Ltd. On March 21, 2002, Renessen purchased an additional 35% ownership
interest from Cargill Asia Pacific for $1 and Cargill Asia Pacific sold the
remainder of its ownership interest to Cargill Fertilizer, Inc. (Cargill
Fertilizer). As a result of this transaction, Renessen owns a controlling
75% interest in the China Joint Venture, and Cargill Fertilizer and Zhangwu
Jin Di Yuan Co. Ltd. have a 5% and 20% ownership interest in the China Joint
Venture, respectively.
In accordance with the Formation Agreement, the Members initially each
contributed $500,000 in cash and intellectual property at an agreed value of
$15,300,000 to the Company. Such intellectual property is not included in
the consolidated balance sheet as it was transferred to the Company at each
Members carrying basis of zero. Also pursuant to the Formation Agreement,
the Members are required to make certain additional cash contributions in
accordance with the annual budget approved by the Governance Board (the
Board). Minimum funding commitments for each Member, as provided in the Joint
Venture Agreement, were $41.5 million in 2003 and $45 million in 2002 and
$40.5 million in 2001. Member commitments in future years are $75 million
for each Member. During October 2003, the Board approved a partial business
plan and related funding through January 31, 2004 and the remainder of the
fiscal year 2004 business plan is subject to Board approval at the Boards
next meeting scheduled in January 2004.
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Monsanto and Cargill each have a 50% ownership interest in the Company.
Income or losses of the Company are shared equally by the Members and both
Members have equal representation and participation on the Board of the
Company. In the event of termination, liquidation or dissolution, all
assets and liabilities of the Company would be distributed to the Members in
the ratio of the investment balances as provided by the terms of the
Formation Agreement.
Nature of the Business
Renessens objective is to transform the way that
crops are grown, traded and processed around the world, resulting in an
increased value and choice for farmers, livestock and poultry feeders, feed
mills, grain processors and consumers. Renessen expects to achieve this
objective by drawing upon Monsantos global capabilities in biotechnology,
crop seed production and agricultural inputs, and by drawing upon Cargills
global capabilities in animal nutrition, agricultural inputs, grain
handling, grain processing and risk management.
Risks Involved in Renessens Activities
Success of genetically enhanced crops in the food supply is
dependent on public acceptance and, in some cases, regulatory approval.
The Companys success is dependent on developing profitable
products that meet the technical, functional, and economic requirements
of farmers, animal feeders, feed mills, and grain processors.
The Company is actively involved in the monitoring and management of these
risks.
Since 1999, the Company has engaged in limited commercial activities. In
2000, 2001, and 2002, the Company began to arrange for the production and
sale of high oil corn in Argentina and China, for the production and sale of
high oil corn in Brazil and for the production and sale of high protein
soybeans and products derived therefrom in the United States of America,
respectively. Since the Company has not derived significant revenues from
its commercial activities, the Company is a development stage company, as
defined by Statement of Financial Accounting Standards (SFAS) No. 7,
Accounting and Reporting by Development Stage Enterprises
.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company has incurred significant operating losses
since its inception which raise substantial doubt about the ability to
continue as a going concern. The Company expects that significant operating
expenditures will be necessary to successfully implement its business plan
and reach profitability. Additional financing or contributions by its
Members beyond January 2004 is required for the Company to continue as a
going concern. The Company is in the process of preparing a business plan
for the remainder of fiscal year 2004 and will be presented to the Board for
approval. Management believes that if the business plan is approved by its
Members, there will be sufficient financial resources available to fund the
Companys anticipated expenditures during the next twelve months. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Effective June 2003, Renessen changed its fiscal year-end from December 31
to August 31. The accompanying most recent financial statements are for the
eight-month period ended August 31, 2003.
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Business Segment Information
The Financial Accounting Standards Board (the
FASB) issued Statement No. 131,
Disclosures about Segments of an
Enterprise and Related Information
(SFAS No. 131), in June of 1997. SFAS
No. 131 requires disclosure of certain operating and financial data with
respect to separate business activities within an enterprise. The primary
business of Renessen and its consolidated affiliates is to transform the way
crops are grown, traded and processed around the world, resulting in an
increased value and choice for farmers, livestock and poultry feeders, feed
mills, grain processors and consumers. Accordingly, Renessen has concluded it has a single reportable segment. For the eight months ended August
31, 2003, two customers accounted for 24% and 22% of total revenues. During
2002 and 2001, one customer accounted for 20% and 25%, respectively, of
total revenues. During 2000, no customer had more than 10% of total revenues. For the cumulative period from January 7, 1999 (date
operations commenced) through August 31,
2003, two customers accounted for 15% and 14% of total revenues.
Basis of Consolidation
On March 21, 2002, the Company acquired an additional
35% interest in the China Joint Venture, which required the Company to
consolidate the China Joint Venture for financial reporting purposes as the
Company now has a controlling 75% interest in the China Joint Venture.
Prior to March 21, 2002, the Company accounted for its 40% interest in the
China Joint Venture under the equity method of accounting because the
Company did not have control of the China Joint Venture. All material
intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. To date, available cash has been invested daily in an
overnight investment account managed by one of the Members.
Inventories
Inventories are stated at the lower of cost or market, with cost
being determined using the first-in, first-out (FIFO) method. Costs
included in inventories primarily consist of materials which are related to
the purchase and production of grain inventories.
Property, Plant and Equipment
Property, plant, and equipment are stated at
cost. The Companys policy is to depreciate or amortize the cost of
property, plant, and equipment over the estimated useful lives of the
assets, as indicated in the following table, by use of the straight-line
method. Leasehold improvements are amortized over the lesser of the lease
term or the useful life of the assets. Maintenance and repairs are charged
to expense as incurred.
Classification
Useful Life
Leasehold improvements
10 years
Office equipment and furniture and fixtures
5 to 8 years
Computer equipment
3 to 5 years
When facts and circumstances indicate that the carrying value of a
long-lived asset may be impaired, an evaluation of recoverability is
performed. In such an evaluation, the estimated future undiscounted cash
flows associated with the asset are compared to the assets carrying value
to determine if a write-down is required. During the periods presented,
there was no such impairment.
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Revenue Recognition
Revenue is recognized when the earning process is
complete and persuasive evidence of an arrangement exists in the form of a
sales invoice, the trait premium is fixed and determinable, the risks and
rewards of ownership have transferred to a third-party customer,
which has occurred upon shipment of the finished product (seed or
grain) and collectibility is reasonably assured.
Research and Development Costs
Research and development costs are charged to
expense as incurred.
Member Expense Reimbursement
The Company reimburses costs incurred by the
Members on behalf of the Company on a monthly basis.
Income Taxes
The Company is treated as a partnership for U.S. federal and
state income tax purposes. Members are taxed individually on their
proportionate share of the Companys taxable income or loss, which is
allocated among the Members in accordance with the Companys operating
agreement. Beginning September 1, 2003, the Companys foreign operations
are subject to foreign income taxes.
Fair Value of Financial Instruments
The carrying amounts of cash and cash
equivalents, receivables, accounts payable, and accrued liabilities
approximate fair value because of the short maturity of these instruments.
The carrying amount of short-term borrowings at August 31, 2003 and 2002
approximates fair value, as a result of the variable interest rates paid on
the Companys borrowings.
Use of Derivatives
The Company uses derivatives designed to hedge the
changes in fair value of the trait premium, as well as the price volatility
of certain commodities. Given that the asset (seed enhanced with Renessen
trait) does not have a readily available market and measures of
effectiveness are difficult, management has not applied hedge accounting.
Therefore, in accordance with SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities
, as amended, the hedges are marked to
market with the resulting difference being included in current operations.
At August 31, 2003, Renessen had 20 outstanding futures contracts whose
value was not significant. For the years ended December 31, 2002 and
2001, the Company recorded losses totaling $14,193 and $62,593,
respectively in research and development expense. During the eight months ended August 31, 2003
and the year ended December 31, 2002, the Company recorded losses totaling
$206,145 and $156,715, respectively, and a gain of $129,988 for the year
ended December 31, 2001 in costs of goods sold. For the cumulative period from January 7, 1999 (date
operations commenced) through August 31, 2003, the Company recorded losses
totaling $233,335 and $76,786, respectively, in costs of goods sold and
research and development expense.
Foreign Currency Translation
For international operations with functional
currencies other than the U.S. dollar, asset and liability accounts are
translated at current exchange rates; income and expenses are translated
using average exchange rates. Resulting translation adjustments, if any,
are reported in a separate component of Members Interest (Deficiency).
New Accounting Pronouncements
In November 2002, the FASB issued
Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others
. This interpretation expands the disclosures to be made by a
guarantor in its financial statements about its obligations under certain
guarantees and requires the guarantor to recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 clarifies the
requirements of SFAS No. 5,
Accounting for Contingencies
, relating to
guarantees. In general, FIN 45 applies to contracts or indemnification
agreements that contingently require the guarantor to make payments to the
guaranteed party. The disclosure requirements of FIN 45 are
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effective as of December 31, 2002, and require disclosure of the nature of
the guarantee, the maximum potential amount of future payments that the
guarantor could be required to make under the guarantee, and the current
amount of the liability, if any, for the guarantors obligation under the
guarantee. The recognition requirements of FIN 45 are to be applied
prospectively to guarantees issued or modified after December 31, 2002. The
Company does not expect the requirements of FIN 45 to have a material impact
on results of operations, financial position, or liquidity.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities
. This
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements
, addresses consolidation by
business enterprises of variable interest entities (VIE),
also commonly referred to as special purpose entities
(SPE). The objective of this
interpretation is to provide guidance on how to identify a VIE and determining when the assets, liabilities, noncontrolling
interests, and results of operations of a VIE need to be included in a
Companys consolidated financial statements. A company that holds variable
interests in an entity will need to consolidate the entity if the companys
interest in the VIE is such that the company will absorb a majority of the
VIEs expected losses and/or receive a majority of the entitys expected
residual returns, if they occur. FIN 46 also requires additional disclosure
by primary beneficiaries and other significant variable interest holders.
The provisions of this interpretation became effective upon issuance. As of
August 31, 2003, the Company does not have any VIEs.
On May 15, 2003, the FASB issued Statement No. 150,
Accounting for certain
Financial Instruments with Characteristics of both Liabilities and Equity,
(SFAS No. 150). The issuance of SFAS No. 150 was intended to improve the
accounting for certain financial instruments that, under previous guidance,
issuers could account for as equity. SFAS No. 150 requires that those
instruments be classified as liabilities in statements of financial position
and also requires disclosures about alternative ways of settling the
instruments and the capital structure of entities, all of whose shares are
mandatorily redeemable. The Company does not expect the requirements of
SFAS No. 150 to have a material impact on results of operations, financial
position, or liquidity.
Reclassifications
Certain reclassifications have been made to the prior year
balances to conform with the current year presentation.
3.
RELATED-PARTY TRANSACTIONS
The Company purchases most of its services (including, but not limited to,
cash management, payables processing, research and development, internal
audit, regulatory and risk management) at agreed-upon prices pursuant to
established contracts with the Members. The Company reimburses the Members
in accordance with Research & Development, Administrative Services and other
agreements. The Members fund the Companys cash operating requirements on a
monthly basis. Due to member, Monsanto Company, as of August 31, 2003,
December 31, 2002 and 2001 were $4,905,172, $4,728,343, and $3,237,671,
respectively. Due to member, Cargill Incorporated, as of August 31, 2003,
December 31, 2002 and 2001, were $405,487, $668,928, and $442,598,
respectively.
The Company has amounts payable to its Members that represent services
purchased from and payments made on behalf of the Company by the Members.
Total expense related to these contracted services for the eight months
ended August 31, 2003 and for each of the three years in the period ended
December 31, 2002 was $36,727,570, $54,699,062, $55,540,166, and
$49,260,182, respectively, and was $220,381,388 for the cumulative period
from January 7, 1999 (date operations commenced) through August 31, 2003.
Account payable and accrued expenses as of August 31, 2003, December 31,
2002 and 2001 include $86,345, $319,475 and $1,629,441, respectively, due to
related affiliates of the Members, net of $1,012,782, $1,372,860 and
$1,082,210, respectively, due from related affiliates of the Members.
Table of Contents
During December 2002, Cargill made an additional $5,150,000 cash
contribution to the Company to fund future expenses.
4.
PROPERTY, PLANT AND EQUIPMENT
2003
2002
2001
$
957,949
$
957,949
$
972,894
1,157,539
1,147,565
934,744
1,365,092
1,362,740
1,232,167
363,031
50,397
309,859
3,843,611
3,518,651
3,449,664
(2,051,866
)
(1,749,634
)
(1,180,996
)
$
1,791,745
$
1,769,017
$
2,268,668
5.
INVESTMENT IN SPECIALTY GRAINS COMPANY
As discussed in Note 1, since March 2002, Renessen owns a controlling 75%
interest in the China Joint Venture and, accordingly, has consolidated the
operations of the China Joint Venture since that date and recorded a 25%
minority interest in its consolidated financial statements since acquiring a
controlling interest.
In June 2002, Renessen contributed additional cash totaling $320,000 to the
China Joint Venture and Zhangwu Jin Di Yuan Co. Ltd contributed $80,000.
Subsequent to August 31, 2003, the Joint Venture decided to wind down its operations due to continuing
inability to contract, grow and collect projected quantities of high
oil corn in Liaoning Province. The circumstances leading
to this short fall include a very prolonged and severe drought and low grain collection percentages.
6.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The line of credit used by the China Joint Venture bears interest at LIBOR
(1.05%, 1.38%, and 2.44% at August 31, 2003, December 31, 2002 and 2001,
respectively) plus 55 basis points and is payable on demand. Outstanding
borrowings at August 31, 2003, December 31, 2002 and 2001 were $1,549,804,
$1,649,828 and $1,150,000, respectively. Additionally, Renessen has entered
into an agreement with the financial institution to guarantee repayment of
the line of credit on behalf of the China Joint Venture.
At August 31, 2003, Renessen do Brasil, Ltda. had short-term borrowings from
Cargill Agricola S.A. of $159,821 which bears interest at Interbank Deposit
Certificate (21.69% at August 31, 2003).
The China Joint Venture leases equipment from Foss Tecator AB. The lease
payable at August 31, 2003 is $47,945, which is due in 5 years.
7.
COMMITMENTS AND CONTINGENCY
Lease Obligations
The Company leases office space under a noncancelable
operating lease terminating on August 31, 2009. This lease has been
guaranteed by the Members. Rent expense, including Renessens pro rata
share of the buildings operating expenses for the eight months ended August
31, 2003 and for each of the three years in the period ended December 31,
2002 was $378,110, $576,474, $571,166, $492,695, respectively, and
$2,221,852 for the cumulative period from January 7, 1999 (date operations
commenced) through August 31, 2003.
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Future minimum lease payments under the noncancelable operating lease are as
follows:
Year Ending
August 31
Amount
$
431,308
444,261
457,428
471,244
485,492
499,955
$
2,789,688
8.
EMPLOYEE BENEFITS
All of the Companys employees were seconded from the Members prior to
January 1, 2001. On January 1, 2001, the majority of the seconded employees
became employees of Renessen and began participating in Renessen-sponsored
employee benefit plans. The majority of the remaining seconded employees
will become Renessen employees before December 31, 2003.
4
01(k)
Plan
The Renessen 401(k) Plan (the Plan) is a defined contribution
plan. Employees voluntarily make contributions to the Plan in amounts based
upon a percentage of their total compensation, up to a maximum of 16%,
subject to limitations imposed by the Internal Revenue Service. Renessen
matches 60% of the first 7% of the participants annual compensation
contributed to the Plan. Renessen also makes a yearly contribution equal to
3% of each employees eligible compensation. Renessen incurred expense of
$235,069, $516,837, $456,306, and $1,208,212 related to contributions to the
Plan for the eight months ended August 31, 2003 and each of the three years
in the period ended December 31, 2002, and for the period from January 7,
1999 (date operations commenced) through August 31, 2003, respectively.
Supplemental Executive Retirement Plan
The Company has a Supplemental
Executive Retirement Plan (SERP) which is a defined contribution plan
available to certain key employees who exceed their 401(k) contribution
limit. Renessen matches 60% of the first 7% of the participants annual
compensation contributed to the SERP. Renessen also makes a yearly
contribution equal to 3% of each employees eligible compensation
contributed to the SERP. During the eight months ended August 31, 2003 and
for each of the three years in the period ended December 31, 2002,
Renessen incurred expense of $445,918, $463,629, $194,506, respectively,
related to contributions to the SERP. Additionally, the SERP provides
transition benefits for certain employees who worked for the Members prior
to the formation of Renessen. These transition payments totaled $253,519
and $242,138 in 2002 and 2001, respectively. For the period from January 7,
1999 (date operations commenced) through August 31, 2003, total
contributions to the SERP totaled $916,924. These amounts, in addition to
participant contributions and investment returns, totaling $1,231,284,
$1,118,227 and $436,644 have been included in other noncurrent assets and
accrued retirement costs on the consolidated balance sheets at August 31,
2003, December 31, 2002 and 2001, respectively.
Annual Incentive Plan
The Company has an annual incentive plan in place for
its employees. Payments under the plan were based on performance and have
been approved by the Board. During the eight months ended August 31, 2003,
and for each year in the period ended December 31, 2002, 2001,
and 2000 and the cumulative period from January 7, 1999 (date operations
commenced) through August 31, 2003, the Company paid $2,599,956, $2,596,746,
$2,753,327, and $3,006,504 and $10,956,533, respectively.
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Long-term Incentive Plan
The Renessen Long-term Incentive Plan (the Plan)
was approved by the Board effective July 1999. The Plan is designed for
participants to share in the growth in enterprise value created by Renessen.
Participants annually receive unit grants with specified vesting and
exercise requirements. The units have a minimum term of 10 years from date
of grant and at least five years from date of first valuation. An
independent appraiser will value Renessens equity from time to time, and
the Board will approve the value. The Company plans to obtain an
independent appraisal during 2004. There are 216,250 units approved for
participants, of which 135,883 units have been awarded through August 31,
2003. Of the total units issued, 52,560, 29,616, and 15,862 units were exercisable at
August 31, 2003, December 31, 2002 and 2001, respectively. The Plan is accounted for under SFAS
No. 123,
Accounting for Stock-Based Compensation,
and the Company records the estimated
fair value of the Plans liability at each reporting period as it will ultimately
settle the units for cash and changes in the fair value of the liability are
recorded in general administrative expense on the statements of operations.
The Company has recorded an expense of $667,000 and $1,000,000 for 2003 and
2002, respectively. No expense has been recognized by Renessen prior to
2001 for this Plan due to managements belief that the enterprise value of
Renessen did not exceed the level that would cause amounts to be shared with
the participants. The Company has used internal valuations, which considers
future cash flows and related risks and uncertainties, to estimate
enterprise value and the related Plan expense.
9.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was $28,075 and $59,935 for the eight months ended
August 31, 2003 and for the period from January 7, 1999 (date operations
commenced) through August 31, 2003. There was no interest paid prior to
2002.
Cash and non-cash investing activities related to the consolidation of the
China Joint Venture during 2002 was:
Amount
$
1
9,319
1,499,828
14,526
1,523,673
410,915
575,343
5,476
127,807
1,119,541
$
404,133
There were no cash and non-cash investing activities related to the consolidation of the China Joint Venture during the eight months
ended August 31, 2003 and prior to January 1, 2002.
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
MONSANTO COMPANY
_______________________________________
(Registrant)
By:
/s/ RICHARD B. CLARK
______________________________________
Richard B. Clark
Vice President and Controller
(Principal Accounting Officer)
Signature
Title
Date
*
(Frank V. AtLee III)
Director
Nov. 25, 2003
*
(Hugh Grant)
Chairman of the Board, President and Chief
Executive
Officer, Director (Principal Executive Officer)
Nov. 25, 2003
*
(Gwendolyn S. King)
Director
Nov. 25, 2003
*
(Sharon R. Long)
Director
Nov. 25, 2003
*
(C. Steven McMillan)
Director
Nov. 25, 2003
*
(William U. Parfet)
Director
Nov. 25, 2003
*
(George Poste)
Director
Nov. 25, 2003
*
(Robert J. Stevens)
Director
Nov. 25, 2003
*
(Terrell K. Crews)
Executive Vice President, Chief Financial
Officer (Principal Financial Officer)
Nov. 25, 2003
/s/ RICHARD B. CLARK
(Richard B. Clark)
Vice President and Controller
(Principal Accounting Officer)
Nov. 25, 2003
*
Charles W. Burson, by signing his name hereto,
does sign this document on behalf of the above noted
individuals, pursuant to powers of attorney duly executed by
such individuals which have been filed as an Exhibit to this
Report.
/s/ CHARLES W. BURSON
_______________________________________
Charles W. Burson
Attorney-in-Fact
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Exhibit
No.
Description
2
1.
Separation Agreement, dated as of Sept. 1,
2000, between the company and Pharmacia (incorporated by
reference to Exhibit 2.1 of Amendment No. 2 to
Registration Statement on Form S-1, filed Sept. 22,
2000, File No. 333-36956).
2.
First Amendment to Separation Agreement, dated
July 1, 2002, between Pharmacia and the company
(incorporated by reference to Exhibit 99.2 of
Form 8-K, filed July 30, 2002, File No. 1-16167).
3
1.
Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 of Amendment
No. 1 to Registration Statement on Form S-1, filed
Aug. 30, 2000, File No. 333-36956).
2.
Amended and Restated By-Laws effective Oct. 14,
2003.
4
Form of Indenture between the company and The
Bank of New York, as Trustee (incorporated by reference to
Exhibit 4.1 of Registration Statement on Form S-3,
filed May 17, 2002, File No. 333-88542).
9
Omitted Inapplicable.
10
1.
Tax Sharing Agreement, dated July 19, 2002,
between the company and Pharmacia (incorporated by reference to
Exhibit 10.4 of Form 10-Q for the period ended
June 30, 2002, File No. 1-16167).
2.
Employee Benefits and Compensation Allocation
Agreement between Pharmacia and the company, dated as of
Sept. 1, 2000 (incorporated by reference to
Exhibit 10.7 of Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
2.1.
Amendment to Employee Benefits and Compensation
Allocation Agreement between Pharmacia and the company, dated
Sept. 1, 2000 (incorporated by reference to
Exhibit 2.1 of Form 10-K for the period ended
Dec. 31, 2001, File No. 1-16167).
3.
Intellectual Property Transfer Agreement, dated
Sept. 1, 2000, between the company and Pharmacia
(incorporated by reference to Exhibit 10.8 of Amendment
No. 2 to Registration Statement on Form S-1, filed
Sept. 22, 2000, File No. 333-36956).
4.
Services Agreement, dated Sept. 1, 2000,
between the company and Pharmacia (incorporated by reference to
Exhibit 10.9 of Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
5.
Corporate Agreement, dated Sept. 1, 2000,
between the company and Pharmacia (incorporated by reference to
Exhibit 10.10 of Amendment No. 2 to Registration
Statement on Form S-1, filed Sept. 22, 2000, File
No. 333-36956).
6.
Distribution Agreement between Pharmacia and
Solutia, as of Sept. 1, 1997 (incorporated by reference to
Exhibit 2.1 of the Form 8-K filed by Pharmacia
Corporation (f/k/a Monsanto Company) on Sept. 16, 1997,
File No. 1-2516).
6.1.
Amendment to Distribution Agreement, dated
July 1, 2002, among Pharmacia, Solutia and the company
(incorporated by reference to Exhibit 99.1 of
Form 8-K, filed July 30, 2002, File No. 1-16167).
7.
Protocol Agreement, dated July 1, 2002,
among Pharmacia, Solutia and the company, relating to litigation
in Alabama (incorporated by reference to Exhibit 99.3 of
Form 8-K, filed July 30, 2002, File No. 1-16167).
8.
Protocol Agreement dated Nov. 15, 2002,
among Pharmacia, Solutia and the company (the Pennsylvania
Agreement) (incorporated by reference to Exhibit 99.1 of
Form 8-K, filed Nov. 18, 2002, File No. 1-16167).
8.1.
Amendment to Protocol Agreement, dated
March 3, 2003, among Pharmacia, Solutia and the company,
amending the Pennsylvania Agreement (incorporated by reference
to Exhibit 10.8.1 of Form 10-K for the period ended
Dec. 31, 2002, File No. 1-16167).
8.2
Second Amendment to Protocol Agreement, dated
Aug. 4, 2003, further amending the Pennsylvania Agreement
(incorporated by reference to Exhibit 10.8.2 of
Form 10-Q for the period ended June 30, 2003, File
No. 1-16167).
9.
U.S. $150,000,000 Promissory Note issued by the
company to Pharmacia, dated Aug. 13, 2002 (incorporated by
reference to Exhibit 10.5 of Form 10-Q for the period
ended June 30, 2002, File No. 1-16167).
10.
Letter Agreement between the company and
Pharmacia, effective Aug. 13, 2002 (incorporated by
reference to Exhibit 10.6 of Form 10-Q for the period
ended June 30, 2002, File No. 1-16167).
11.
Creve Coeur Campus Lease between the company and
Pharmacia, dated Sept. 1, 2000 (incorporated by reference
to Exhibit 10.22 of Form 10-K for the period ended
Dec. 31, 2001, File No. 1-16167).
12.
Chesterfield Village Campus Lease between
Pharmacia and the company, dated Sept. 1, 2000
(incorporated by reference to Exhibit 10.23 of
Form 10-K for the period ended Dec. 31, 2001, File
No. 1-16167).
13.
364-Day Credit Agreement dated July 2, 2003
(incorporated by reference to Exhibit 10.13 of
Form 10-Q for the period ended June 30, 2003, File
No. 1-16167).
14.
Five Year Credit Agreement (incorporated by
reference to Exhibit 10.12 of Amendment No. 1 to
Registration Statement on Form S-1, filed Aug. 30, 2000,
File No. 333-36956).
15.
Monsanto Non-Employee Director Equity Incentive
Compensation Plan, amended Dec. 18, 2002, and effective
Sept. 19, 2002 (incorporated by reference to
Exhibit 10.15 of Form 10-K for the period ended
Dec. 31, 2002, File No. 1-16167).
16.
Monsanto Company Long-Term Incentive Plan,
amended and restated effective April 24, 2003 (formerly
known as Monsanto 2000 Management Incentive Plan) (incorporated
by reference to Appendix C to Notice of Annual Meeting and
Proxy Statement dated March 13, 2003, File
No. 1-16167).
Table of Contents
MONSANTO COMPANY
2003 FORM 10-K
Exhibit
No.
Description
17.
2003 Annual Incentive Plan Summary, as approved
by the People and Compensation Committee of the Board of
Directors on Dec. 17, 2002 (incorporated by reference to
Exhibit 10.17 of Form 10-K for the period ended
Dec. 31, 2002, File No. 1-16167).
18.
2004 Annual Incentive Plan Summary, as approved
by the People and Compensation Committee of the Board of
Directors on Oct. 27, 2003.
19.
Annual Incentive Program for certain executive
officers (incorporated by reference to the description appearing
under the sub-heading Annual Incentive Program on
pages 10 through 11 of Notice of Annual Meeting and Proxy
Statement dated March 16, 2001).
20.
Form of Change-of-Control Employment Security
Agreement, amended effective Dec. 18, 2002 (incorporated by
reference to Exhibit 10.20 of Form 10-K for the period
ended Dec. 31, 2002, File No. 1-16167).
21.
Letter Agreement with Frank V. AtLee III
(incorporated by reference to Exhibit 10.4 of Amendment
No. 1 to Registration Statement on Form S-1, filed
Aug. 30, 2000, File No. 333-36956).
21.1.
Amendment to Letter Agreement with Frank V.
AtLee III, effective Dec. 18, 2002 (incorporated by
reference to Exhibit 10.22.1 of Form 10-K for the
period ended Dec. 31, 2002, File No. 1-16167).
21.2
Amendment to Letter Agreement with Frank V.
AtLee III, effective May 29, 2003 (incorporated by
reference to Exhibit 10.22.2 of Form 10-Q for the
period ended June 30, 2003, File No. 1-16167).
22.
Severance and Consulting Agreement and General
Release between the Company and Hendrik A. Verfaillie,
effective Feb. 20, 2003 (incorporated by reference to
Exhibit 10.23 of Form 10-K for the period ended
Dec. 31, 2002, File No. 1-16167).
23.
Supplemental Retirement Plan Letter Agreement for
Charles W. Burson, dated April 7, 2001 (incorporated
by reference to Exhibit 10.20 of Form 10-K for the
period ended Dec. 31, 2001, File No. 1-16167).
24.
Supplemental Retirement Plan Letter Agreement for
Steven L. Engelberg, dated April 22, 1994
(incorporated by reference to Exhibit 10.19 of
Form 10-K for the period ended Dec. 31, 2000, File
No. 1-16167).
25.
Form of Employment Agreement for Executive
Officers (incorporated by reference to Exhibit 10.7 of the
Pharmacia Corporation (f/k/a Monsanto Company) Form 10-Q
for the period ended Sept. 30, 1997, File No. 1-2516).
26.
Amendment to Vesting Schedule of Previously
Approved Supplemental Retirement Benefits, approved by the
People Committee of Pharmacia, Oct. 23, 1997 (incorporated
by reference to Exhibit 10.20 of the companys
Form 10-K for the period ended Dec. 31, 2000, File
No. 1-16167).
27.
Executive (Split Dollar) Life Insurance Program
of Pharmacia Corporation (incorporated by reference to
Exhibit 10.11 of the companys Form 10-K for the
period ended Dec. 31, 2000, File No. 1-16167).
28.
Excerpt of a resolution adopted by the People and
Compensation Committee of the Board of Directors on
Sept. 18, 2002, terminating Split-Dollar Life Insurance
arrangements for certain key executives (incorporated by
reference to Exhibit 10.11.1 of Form 10-Q for the
period ended Sept. 30, 2002, File No. 1-16167).
29.
Form of Phantom Share Agreement (incorporated by
reference to Exhibit 10.3 of Amendment No. 2 to
Registration Statement on Form S-1, filed Sept. 22,
2000, File No. 333-36956).
30.
Agreement among Solutia, Pharmacia and the
company, relating to settlement of certain litigation.
31.
Global Settlement Agreement, executed
Sept. 9, 2003, in the U.S. District Court for the Northern
District of Alabama, and in the Circuit Court of Etowah County,
Alabama.
11
Omitted Inapplicable; see
Item 8 Note 20 Earnings (Loss)
per Share and per Pro Forma Share.
12
Omitted Inapplicable.
13
Omitted Inapplicable.
14
Omitted Inapplicable. Monsantos
Code of Ethics for Chief Executive and Senior Financial Officers
is available on our Internet Web site at http://www.monsanto.com.
16
Omitted Inapplicable.
18
Omitted Inapplicable.
21
Subsidiaries of the Registrant.
22
Omitted Inapplicable.
23
1.
Consent of Independent Auditors (Monsanto
Company).
2.
Consent of Independent Auditors (Renessen LLC).
24
1.
Powers of Attorney.
2.
Certified copy of Board resolution authorizing
Form 10-K filing utilizing powers of attorney.
31.
1
Rule 13a-14(a)/15d-14(a) Certification
(pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
executed by Chief Executive Officer).
2.
Rule 13a-14(a)/15d-14(a) Certification
(pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
executed by Chief Financial Officer).
32
Section 1350 Certifications (pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, executed by
Chief Executive Officer and the Chief Financial Officer).
99
Computation of Ratio of Earnings to Fixed Charges.
EXHIBIT 3.2
MONSANTO COMPANY
AMENDED AND RESTATED BY-LAWS
Amended October 14, 2003
Offices
1. Registered
The name of the registered agent of the Company is The Corporation Trust
Company and the registered office of the Company shall be located in the City
of Wilmington, County of New Castle, State of Delaware.
2. Other
The Company shall have its General Offices in the County of St. Louis,
State of Missouri, and may also have offices at such other places both within
or without the State of Delaware as the Board of Directors may from time to
time designate or the business of the Company may require.
Stockholders Meetings
3. Annual Meeting
An annual meeting of stockholders shall be held on such day and at such
time as may be designated by the Board of Directors for the purpose of electing
Directors and for the transaction of such other business as properly may come
before such meeting. Any previously scheduled annual meeting of the
stockholders may be postponed by resolution of the Board of Directors upon
public notice given on or prior to the date previously scheduled for such
annual meeting of stockholders.
4. Business to be Conducted at Annual Meeting
(a) At an annual meeting of stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
Companys notice of the meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Company who is a stockholder of
record at the time of giving of the notice provided for in this By-Law, who
shall be entitled to vote at such meeting and who shall have complied with the
notice procedures set forth in this By-Law.
(b) For business to be properly brought before an annual meeting by a
stockholder pursuant to Section (a)(iii) of this By-Law, notice in writing must
be delivered or mailed to the Secretary and received at the General Offices of
the Company, not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding years annual meeting; provided, however, that in
the event that the date of the meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary date, notice by
the stockholder must be received not earlier than the 120th day prior to such
annual meeting and not later than the close of business on the later of the
90th day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of the annual meeting is first made.
Such stockholders notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business to be brought before the annual meeting and the reasons for conducting
such business at such meeting; (ii) the name and address, as they appear on the
Companys books, of the stockholder proposing such business, and the name and
address of the beneficial owner, if any, on whose behalf the proposal is made;
(iii) the class and number of shares of the Companys stock which are
beneficially owned by the stockholder, and by the beneficial owner, if any, on
whose behalf the proposal is made; and (iv) any material interest of the
stockholder, and of the beneficial owner, if any, on whose behalf the proposal
is made, in such business. For purposes of these By-Laws, public
announcement shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable news service or in a
document publicly filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(b) of the Securities Exchange Act
of 1934, as amended (the Exchange Act).
(c) Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the
procedures set forth in this By-Law. The chairman of the meeting may, if the
facts warrant, determine that the business was not properly brought before the
meeting in accordance with the provisions of this By-Law; and if the chairman
should so determine, the chairman shall so declare to the meeting, and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this By-Law, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth in this
By-Law. Nothing in this By-Law shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Companys proxy statement
pursuant to Rule 14a-8 under the Exchange Act. The provisions of this Section
4 shall also govern what constitutes timely notice for purposes of Rule
14a-4(c) of the Exchange Act.
5. Special Meetings
Special meetings of stockholders, unless otherwise provided by the law of
Delaware, may be called pursuant to resolution of the Board of Directors. The
Board of Directors shall have the sole right to determine the proper purpose or
purposes of such meeting. Business transacted at a special meeting of
stockholders shall be confined to the purpose or purposes of the meeting as
stated in the notice of such meeting. Any previously scheduled special meeting
of the stockholders may be postponed by resolution of the Board of Directors
upon notice by public announcement given on or prior to the date previously
scheduled for such special meeting of stockholders.
6. Place of Meetings
All meetings of stockholders shall be held at the General Offices of the
Company in the County of St. Louis, State of Missouri, unless otherwise
determined by resolution of the
-2-
Board of Directors; provided that the Board may, in its sole discretion,
determine that the meeting shall not be held at any place, but may instead be
held solely by means of remote communication as authorized by Section 211(a)(2)
of the General Corporation Law of the State of Delaware (the General
Corporation Law of Delaware).
7. Notice of Meetings
(a) Except as otherwise required by the law of Delaware, notice of each
meeting of the stockholders, whether annual or special, shall be given, by or
at the direction of the Secretary or Chief Executive Officer, except that (i)
it shall not be necessary to give notice to any stockholder who properly waives
notice before or after the meeting, whether in writing or by electronic
transmission or otherwise, and (ii) no notice of an adjourned meeting need be
given except when required under these By-Laws or by law. Such notice shall
state the place, date and hour of the meeting, and in the case of a special
meeting, shall also state the purpose or purposes thereof. Each notice of a
meeting shall be given, personally or by mail or, as provided below, by means
of electronic transmission, not less than ten (10) nor more than sixty (60)
days before the meeting and shall state the time and place of the meeting, or
if held by remote communications, the means of remote communications by which
stockholders and proxyholders may be deemed to be present in person and vote at
such meeting, and unless it is the annual meeting, shall state at whose
direction or request the meeting is called and the purposes for which it is
called. The attendance of any stockholder at a meeting, without protesting at
the beginning of the meeting that the meeting is not lawfully called or
convened, shall constitute a waiver of notice by him or her. Any previously
scheduled meeting of stockholders may be postponed, and (unless the Amended and
Restated Certificate of Incorporation, as amended (the Certificate of
Incorporation), otherwise provides) any special meeting of stockholders may be
canceled, by resolution of the Board upon public announcement (as defined in
Section 4 of these By-Laws) given on or prior to the date previously scheduled
for such meeting of stockholders.
(b) Without limiting the manner by which notice otherwise may be given
effectively to stockholders, any notice to a stockholder given by the Company
may be given by a form of electronic transmission consented to by the
stockholder to whom the notice is given. Any such consent shall be revocable
by the stockholder by written notice to the Company. Any such consent shall be
deemed revoked (i) if the Company is unable to deliver by electronic
transmission two consecutive notices given by the Company in accordance with
such consent and (ii) such inability becomes known to the Secretary or an
Assistant Secretary of the Company or to the transfer agent or other person
responsible for the giving of notice; provided, however, the inadvertent
failure to treat such inability as a revocation shall not invalidate any
meeting or other action. For purposes of these By-Laws, electronic
transmission means any form of communication, not directly involving the
physical transmission of paper, that creates a record that may be retained,
retrieved and reviewed by a recipient thereof, and that may be directly
reproduced in paper form by such a recipient through an automated process.
(c) Notice shall be deemed given, if mailed, when deposited in the United
States mail with postage prepaid, if addressed to a stockholder at his or her
address on the Companys records. Notice given by electronic transmission
shall be deemed given (i) if by facsimile, when directed to a number at which
the stockholder has consented to receive notice; (ii) if by electronic
-3-
mail, when directed to an electronic mail address at which the stockholder
has consented to receive notice; (iii) if by posting on an electronic network
together with separate notice to the stockholder of such specific posting, upon
the later of (A) such posting and (B) the giving of such separate notice; and
(iv) by any other form of electronic transmission, when directed to the
stockholder.
(d) An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent or other agent of the Company that the notice has been given,
whether by a form of electronic transmission or otherwise, shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
8. Nominations of Directors
(a) Only persons who are nominated in accordance with the procedures set
forth in these By-Laws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors may be made at a
meeting of stockholders (i) by or at the direction of the Board of Directors or
(ii) by any stockholder of the Company who is a stockholder of record at the
time of giving of the notice provided for in this By-Law, who shall be entitled
to vote for the election of Directors at the meeting and who complies with the
notice procedures set forth in this By-Law.
(b) Nominations by stockholders shall be made pursuant to notice in
writing, delivered or mailed to the Secretary and received at the General
Offices of the Company (i) in the case of an annual meeting, not less than 90
days nor more than 120 days prior to the first anniversary of the preceding
years annual meeting, provided, however, that in the event that the date of
the meeting is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, notice by the stockholder must be received not
earlier than the 120th day prior to such annual meeting and not later than the
close of business on the later of the 90th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of the
meeting is first made; or (ii) in the case of a special meeting at which
Directors are to be elected, not earlier than the 120th day prior to such
special meeting and not later than the close of business on the later of the
90th day prior to such special meeting or the tenth day following the day on
which public announcement of the date of the meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting is first made.
In the case of a special meeting of stockholders at which Directors are to be
elected, stockholders may nominate a person or persons (as the case may be) for
election only to such position(s) as are specified in the Companys notice of
meeting as being up for election at such meeting. Such stockholders notice
shall set forth (i) as to each person whom the stockholder proposes to nominate
for election or reelection as a Director, all information relating to such
person that would be required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such persons written consent
to being named as a nominee and to serving as a Director if elected); (ii) as
to the stockholder giving the notice, the name and address, as they appear on
the Companys books, of such stockholder and the class and number of shares of
the Companys stock which are beneficially owned by such stockholder; and (iii)
as to any beneficial owner on whose behalf the nomination is made, the name and
address of such person and the class and number of shares of
-4-
the Companys stock which are beneficially owned by such person. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary that
information required to be set forth in a stockholders notice of nomination
which pertains to the nominee. Notwithstanding anything in this By-Law to the
contrary, in the event that the number of Directors to be elected to the Board
of Directors of the Company is increased and there is no public statement
naming all the nominees for Director or specifying the size of the increased
Board of Directors made by the Company at least 100 days prior to the first
anniversary of the preceding years annual meeting, a stockholders notice
required by this By-Law shall also be considered timely, but only with respect
to nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal offices of the Company not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Company.
(c) No person shall be eligible for election as a Director of the Company
unless nominated in accordance with the procedures set forth in these By-Laws.
The chairman of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the procedures prescribed in this
By-Law; and if the chairman should so determine, the chairman shall so declare
to the meeting, and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this By-Law, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth in this
By-Law.
9. List of Stockholders
(a) Not less than ten (10) days prior to the date of any meeting of
stockholders, the Secretary of the Company shall prepare a complete list of
stockholders entitled to vote at the meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of such stockholder; provided, that the Company shall not be
required to include electronic mail addresses or other electronic contact
information on such list. For a period of not less than ten (10) days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (1) on a reasonably accessible
electronic network, provided that the information required to gain access to
such list is provided with the notice of the meeting or (2) during ordinary
business hours, at the principal place of business of the Company. If the
Company determines to make the list available on an electronic network, the
Company may take reasonable steps to ensure that such information is available
only to stockholders of the Company. If the meeting is to be held at a place,
then the list shall be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. If the meeting is to be held solely by means of remote communication,
then the list shall also be open to the examination of any stockholder during
the whole time of the meeting on a reasonably accessible electronic network,
and the information required to access such list shall be provided with the
notice of the meeting.
(b) The stock ledger of the Company shall be the only evidence as to the
identity of the stockholders entitled (i) to vote in person or by proxy at any
meeting of
-5-
stockholders, or (ii) to exercise the rights in accordance with Delaware
law to examine the stock ledger, the list required by this By-Law or the books
and records of the Company, or for any other purpose permitted under Delaware
law.
10. Quorum; Adjournment
The holders of a majority of the voting power of the shares of capital
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of any
business at all meetings of the stockholders, except as otherwise provided by
the law of Delaware, by the Certificate of Incorporation or by these By-Laws.
The stockholders present at any duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of sufficient
stockholders to render the remaining stockholders less than a quorum. Whether
or not a quorum is present, either the chairman of the meeting or the holders
of a majority of the voting power of the shares of capital stock entitled to
vote thereat, present in person or by proxy, shall have power to adjourn the
meeting from time to time to another time or place or means of remote
communications, without notice other than announcement at the meeting of the
time and place, if any, and the means of remote communications, if any, by
which stockholders and proxy holders may be deemed to be present in person and
vote at such adjourned meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting. At such adjourned meeting at which
the requisite amount of voting stock shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed.
11. Voting and Required Vote
(a) Subject to the provisions of the Certificate of Incorporation, each
stockholder shall, at every meeting of stockholders, be entitled to one vote
for each share of capital stock held by such stockholder. Subject to the
provisions of the Certificate of Incorporation and Delaware law, Directors
shall be chosen by the vote of a plurality of the shares present in person or
represented by proxy at the meeting; and all other questions shall be
determined by the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting. In all matters,
votes cast in accordance with any method adopted by the Company shall be valid
so long as such method is permitted under Delaware law.
(b) Any stockholder entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares
or, except when the matter is the election of directors, may vote the remaining
shares against the proposal; but if the stockholder fails to specify the number
of shares which the stockholder is voting affirmatively or otherwise indicate
how the number of shares to be voted affirmatively is to be determined, it will
be conclusively presumed that the stockholders approving vote is with respect
to all shares which the stockholder is entitled to vote.
(c) Voting need not be by ballot unless requested by a stockholder at the
meeting or ordered by the chairman of the meeting; however, all elections of
directors shall be by written
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ballot, unless otherwise provided in the Certificate of Incorporation;
provided, that if authorized by the Board, a written ballot may be submitted by
electronic transmission, provided that any such electronic transmission must
either set forth or be submitted with information from which it can be
determined that the electronic transmission was authorized by the stockholder
or proxyholder.
12. Proxies
(a) Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by proxy, in
any manner permitted by law, including, without limitation, in the form of a
telegram, cablegram or other means of electronic transmission which sets forth
or is submitted with information from which it can be determined that the
telegram, cablegram or other means of electronic transmission was authorized by
the stockholder. No proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. The revocability of a proxy that states on its face that it
is irrevocable shall be governed by the provisions of Section 212(e) of the
General Corporation Law of Delaware. A stockholder may revoke any proxy which
is not irrevocable by attending the meeting and voting in person or by filing
an instrument in writing revoking the proxy or by filing another duly executed
proxy bearing a later date with the Secretary of the Company.
(b) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the Secretary of the Company.
13. Inspectors of Election; Polls
Before each meeting of stockholders, the Chairman of the Board, the
President or another officer of the Company designated by resolution of the
Board of Directors shall appoint one or more inspectors of election for the
meeting and may appoint one or more inspectors to replace any inspector unable
to act. If any of the inspectors appointed shall fail to attend, or refuse or
be unable to serve, substitutes shall be appointed by the chairman of the
meeting. Each inspector, who may be an employee of the Company, shall have
such duties as are provided by law, and shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to
the best of such persons ability. The chairman of the meeting shall fix and
announce at the meeting the date and time of the opening and closing of the
polls for each matter upon which the stockholders will vote at the meeting.
14. Organization
(a) The Chairman of the Board of Directors, or in the Chairmans absence,
(i) the President, if a member of the Board of Directors, (ii) one of the Vice
Chairmen of the Board who is a member of the Board of Directors, if any, in
such order as may be designated by the
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Chairman of the Board, in that order, or (iii) in the absence of each of
them, a chairman chosen by a majority of the Directors present, shall act as
chairman of the meetings of the stockholders.
(b) The Board shall be entitled to make such rules or regulations for the
conduct of meetings of stockholders as it shall deem appropriate. Subject to
such rules and regulations of the Board, if any, the person presiding over the
meeting shall have the right and authority to convene and adjourn the meeting,
to prescribe such rules, regulations and procedures and to do all such acts as,
in the judgment of the person presiding over the meeting, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the
meeting, rules and procedures for maintaining order at the meeting and the
safety of those present, limitations on participation in such meeting to
stockholders of record of the Company and their duly authorized and constituted
proxies and such other persons as the person presiding over the meeting shall
permit, restrictions on entry to the meeting after the time fixed for the
commencement thereof, limitations on the time allotted to questions or comments
by participants and regulation of the opening and closing of the polls for
balloting and matters which are to be voted on by ballot. The person presiding
over the meeting, in addition to making any other determinations that may be
appropriate to the conduct of the meeting, shall, if the facts warrant,
determine and declare to the meeting that a matter or business was not properly
brought before the meeting and if the person presiding over the meeting should
so determine and declare, any such matter or business shall not be transacted
or considered.
(c) Without limiting the generality of the foregoing, if a stockholder
(or qualified representative) does not appear at the meeting of stockholders of
the Company to present a nomination or business pursuant to Section 4 or
Section 8 of these By-Laws, such nomination shall be disregarded and such
proposed business shall not be transacted, even though proxies in respect of
such vote may have been received by the Company.
15. No Stockholder Action by Written Consent
Any action required or permitted to be taken by the stockholders of the
Company must be effected at a duly called annual or special meeting of
stockholders of the Company and may not be effected by any consent in writing
in lieu of a meeting of such stockholders.
Board of Directors
16. General Powers, Number, Term of Office
(a) The business of the Company shall be managed under the direction of
its Board of Directors. Subject to the rights of the holders of any series of
preferred stock, par value $0.01 per share, of the Company (Preferred Stock)
to elect additional Directors under specified circumstances, the number of
Directors of the Company which shall constitute the whole Board shall be not
less than five nor more than 20. The exact number of Directors within the
minimum and maximum limitation specified in the preceding sentence shall be
fixed from time to time exclusively by resolution of a majority of the whole
Board.
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(b) At the first annual meeting of stockholders after August 13, 2002 (the
First Meeting) , the Directors, other than those who may be elected by the
holders of any outstanding series of Preferred Stock or any other series or
class of stock as set forth in the Certificate of Incorporation, shall be
divided into three classes, as nearly equal in number as possible and
designated Class I, Class II and Class III. Class I shall be initially elected
for a term expiring at the first annual meeting of stockholders following the
First Meeting, Class II shall be initially elected for a term expiring at the
second annual meeting of stockholders following the First Meeting, and Class
III shall be initially elected for a term expiring at the third annual meeting
of stockholders following the First Meeting. Members of each class shall hold
office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Company, the successors of the class
of Directors whose term expires at that meeting shall be elected for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. In case of any increase or decrease, from time to
time, in the number of Directors, other than those who may be elected by the
holders of any outstanding series of Preferred Stock or any other series or
class of stock as set forth in the Certificate of Incorporation, the number of
Directors in each class shall be apportioned as nearly equal as possible.
(c) Directors need not be stockholders of the Company or residents of the
State of Delaware.
17. Vacancies
Subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock, newly created directorships resulting from any increase in the
authorized number of Directors or any vacancies in the Board resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of the
Board. Any Director so chosen shall hold office until his or her successor
shall be elected and qualified and, if the Board at such time is classified,
until the next election of the class for which such Directors shall have been
chosen. No decrease in the number of Directors shall shorten the term of any
incumbent Director.
18. Regular Meetings
The Board of Directors by resolution may provide for the holding of
regular meetings and may fix the times and places at which such meetings shall
be held. Notice of regular meetings shall not be required, provided that
whenever the time or place of regular meetings shall be fixed or changed,
notice of such action shall be given promptly to each Director, as provided in
Section 19 below, who was not present at the meeting at which such action was
taken.
19. Special Meetings
Special meetings of the Board of Directors shall be held whenever called
by the Chairman of the Board of Directors or the President, or in the absence
of each of them, by any Vice Chairman of the Board, or by the Secretary at the written request of
a majority of the Directors.
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20. Notices
Notice of any special meeting of the Board of Directors shall be addressed
to each Director at such Directors residence or business address and shall be
sent to such Director by mail, electronic mail, telecopier, telegram or telex
or telephoned or delivered to such Director personally. If such notice is sent
by mail, it shall be sent not later than three days before the day on which the
meeting is to be held. If such notice is sent by electronic mail, telecopier,
telegram or telex, it shall be sent not later than 12 hours before the time at
which the meeting is to be held. If such notice is telephoned or delivered
personally, it shall be received not later than 12 hours before the time at
which the meeting is to be held. Such notice shall state the time, place and
purpose or purposes of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Director or to a person at the
office of the Director who the person giving the notice has reason to believe
will promptly communicate it to the Director.
21. Quorum
One-third of the total number of Directors constituting the whole Board,
but not less than two, shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
required number of Directors for a quorum is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice. Except as otherwise specifically provided by the law of
Delaware, the Certificate of Incorporation or these By-Laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
22. Organization
At each meeting of the Board of Directors, other than meetings of the
non-management Directors in executive session, the Chairman of the Board or, in
the Chairmans absence, (i) the President, if a member of the Board of
Directors, (ii) one of the Vice Chairmen of the Board who is a member of the
Board of Directors, if any, in such order as may be designated by the Chairman
of the Board, in that order, or (iii) in the absence of each of them, a
chairman chosen by a majority of the Directors present, shall act as chairman
of the meeting, and the Secretary or, in the Secretarys absence, an Assistant
Secretary or any employee of the Company appointed by the chairman of the
meeting, shall act as secretary of the meeting. The non-management Directors
shall choose a non-management Director to preside at meetings of the
non-management Directors in executive session.
23. Resignations
Any Director may resign at any time by giving notice in writing or by
electronic transmission to the Chairman of the Board, the President or the
Secretary of the Company. Such resignation shall take effect upon receipt
thereof or at any later time specified therein; and, unless
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otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
24. Removal
Subject to the rights of the holders of any outstanding series of
Preferred Stock or any other series or class of stock as set forth in the
Certificate of Incorporation to elect additional Directors under specified
circumstances, any Director or the entire Board may be removed from office only
for cause and only by the affirmative vote of the holders of at least 70
percent of the voting power of the outstanding stock of the Company entitled to
vote, voting together as a single class.
25. Action Without a Meeting
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting
if all members of the Board or committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
26. Location of Books
Except as otherwise provided by resolution of the Board of Directors and
subject to the law of Delaware, the books of the Company may be kept at the
General Offices of the Company and at such other places as may be necessary or
convenient for the business of the Company.
27. Dividends
Subject to the provisions of the Certificate of Incorporation and the law
of Delaware, dividends upon the capital stock of the Company may be declared by
the Board of Directors at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the Companys capital stock.
28. Compensation of Directors
Directors shall receive such compensation and benefits as may be
determined by resolution of the Board for their services as members of the
Board and committees. Directors shall also be reimbursed for their expenses of
attending Board and committee meetings. Nothing contained herein shall
preclude any Director from serving the Company in any other capacity and
receiving compensation therefor.
29. Additional Powers
In addition to the powers and authorities by these By-Laws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Company and do all such
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lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Committees of Directors
30. Designation, Power, Alternate Members
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate an Executive Committee and one or more
additional committees, each committee to consist of one or more of the
Directors of the Company. Any such committee, to the extent provided in said
resolution or resolutions and subject to any limitations provided by law, shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Company. The Board of Directors may designate
one or more Directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. The term of
office of the members of each committee shall be as fixed from time to time by
the Board; provided, however, that any committee member who ceases to be a
member of the Board shall automatically cease to be a committee member.
31. Quorum, Manner of Acting
At any meeting of a committee, the presence of one-third, but not less
than two, of its members then in office (or, in the case of a committee
consisting of one director, its sole member) shall constitute a quorum for the
transaction of business; and the act of a majority of the members present at a
meeting at which a quorum is present shall be the act of the committee;
provided, however, that in the event that any member or members of the
committee is or are in any way interested in or connected with any other party
to a contract or transaction being approved at such meeting, or are themselves
parties to such contract or transaction, the act of a majority of the members
present who are not so interested or connected, or are not such parties, shall
be the act of the committee. Each committee may provide for the holding of
regular meetings, make provision for the calling of special meetings and,
except as otherwise provided in these By-Laws or by resolution of the Board of
Directors, make rules for the conduct of its business.
32. Minutes
The committees shall keep minutes of their proceedings and report the same
to the Board of Directors when required; but failure to keep such minutes shall
not affect the validity of any acts of the committee or committees.
Advisory Directors
33. Advisory Directors
The Board of Directors may, by resolution adopted by a majority of the
whole Board, appoint such number of senior executives of the Company as
Advisory Directors as the Board may from time to time determine. The Advisory
Directors shall have such advisory
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responsibilities as the Chairman of the Board may designate and the term
of office of such Advisory Directors shall be as fixed by the Board.
Officers
34. Designation
The officers of the Company shall be a Chairman of the Board, a Chief
Executive Officer, a President, a Chief Financial Officer, one or more Vice
Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors
may also elect one or more Vice Chairmen of the Board, one or more Vice
Chairmen of the Company, one or more Executive Vice Presidents, Senior Vice
Presidents, Group Vice Presidents, Deputy and Assistant Secretaries, Deputy and
Assistant Treasurers, Deputy and Assistant Controllers and such other officers
as it shall deem necessary. Any number of offices may be held by the same
person. The Chairman of the Board of Directors shall be chosen from among the
Directors.
35. Election and Term
At least annually, the Board of Directors of the Company shall elect the
officers of the Company and at any time thereafter the Board may elect
additional officers of the Company and each such officer shall hold office
until the officers successor is elected and qualified or until the officers
earlier death, resignation, termination of employment or removal.
36. Removal
Any officer shall be subject to removal or suspension at any time, for or
without cause, by the affirmative vote of a majority of the whole Board of
Directors.
37. Resignations
Any officer may resign at any time by giving written notice to the
Chairman of the Board, the President or to the Secretary. Such resignation
shall take effect upon receipt thereof or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
38. Vacancies
A vacancy in any office because of death, resignation, removal or any
other cause may be filled for the unexpired portion of the term by the Board of
Directors.
39. Chairman of the Board
The Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors, except as may be otherwise required
under the law of Delaware. The Chairman of the Board shall also preside at all
meetings of the Board of Directors except, if the Chairman is an employee of
the Company, at meetings of the non-management Directors in executive session.
The Chairman, alone or with the President, one or more of the Vice Chairmen
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of the Board, and/or the Secretary shall sign and send out reports and
other messages which are to be sent to stockholders from time to time. The
Chairman shall also perform such other duties as may be assigned to the
Chairman by these By-Laws or the Board of Directors.
40. Chief Executive Officer
The Chief Executive Officer shall have the general and active management
and supervision of the business of the Company. The Chief Executive Officer
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The Chief Executive Officer shall also perform such other duties
as may be assigned to the Chief Executive Officer by these By-Laws or the Board
of Directors. The Chief Executive Officer shall designate who shall perform
the duties of the Chief Executive Officer in the Chief Executive Officers
absence.
41. President
The President, if a member of the Board of Directors, shall, in the
absence of the Chairman of the Board, preside at all meetings of the
stockholders and of the Board of Directors, except at meetings of the
non-management Directors in executive session. The President shall perform
such other duties as may be assigned to the President by these By-Laws, the
Board of Directors or the Chief Executive Officer.
42. Vice Chairmen of the Board; Vice Chairmen
The Vice Chairmen of the Board, if a member of the Board of Directors,
shall, in the absence of the Chairman of the Board and the President, and in
such order as may be designated by the Chairman of the Board, preside at all
meetings of the stockholders and of the Board of Directors, except at meetings
of the non-management Directors in executive session. The Vice Chairmen of the
Board and the Vice Chairmen shall perform such other duties as may be assigned
to them by these By-Laws, the Board of Directors or the Chief Executive
Officer.
43. Chief Financial Officer
The Chief Financial Officer shall act in an executive financial capacity.
The Chief Financial Officer shall assist the Chairman of the Board and the
President in the general supervision of the Companys financial policies and
affairs.
44. Executive, Senior, Group and other Vice Presidents
Each Executive Vice President, Senior Vice President, Group Vice President
and each other Vice President shall perform the duties and functions and
exercise the powers assigned to such officer by the Board of Directors or the
Chief Executive Officer.
45. Secretary
The Secretary shall attend all meetings of the Board of Directors and of
the stockholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders
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and special meetings of the Board of Directors and, when appropriate,
shall cause the corporate seal to be affixed to any instruments executed on
behalf of the Company. The Secretary shall also perform all duties incident to
the office of Secretary and such other duties as may be assigned to the
Secretary by these By-Laws, the Board of Directors, the Chairman of the Board
or the Chief Executive Officer.
46. Assistant Secretaries
The Assistant Secretaries shall, during the absence of the Secretary,
perform the duties and functions and exercise the powers of the Secretary.
Each Assistant Secretary shall perform such other duties as may be assigned to
such Assistant Secretary by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer or the Secretary.
47. Treasurer
The Treasurer shall have the custody of the funds and securities of the
Company and shall deposit them in the name and to the credit of the Company in
such depositories as may be designated by the Board of Directors or by any
officer or officers authorized by the Board of Directors to designate such
depositories; disburse funds of the Company when properly authorized by
vouchers prepared and approved by the Controller; and invest funds of the
Company when authorized by the Board of Directors or a committee thereof. The
Treasurer shall render to the Board of Directors, the Chief Executive Officer,
or the Chief Financial Officer, whenever requested, an account of all
transactions as Treasurer and shall also perform all duties incident to the
office of Treasurer and such other duties as may be assigned to the Treasurer
by these By-Laws, the Board of Directors, the Chief Executive Officer, or the
Chief Financial Officer.
48. Assistant Treasurers
The Assistant Treasurers shall, during the absence of the Treasurer,
perform the duties and functions and exercise the powers of the Treasurer.
Each Assistant Treasurer shall perform such other duties as may be assigned to
the Assistant Treasurer by the Board of Directors, the Chief Executive Officer,
the Chief Financial Officer or the Treasurer.
49. Controller
The Controller shall serve as the principal accounting officer of the
Company and shall keep full and accurate account of receipts and disbursements
in books of the Company and render to the Board of Directors, the Chief
Executive Officer, or the Chief Financial Officer, whenever requested, an
account of all transactions as Controller and of the financial condition of the
Company. The Controller shall also perform all duties incident to the office
of Controller and such other duties as may be assigned to the Controller by
these By-Laws, the Board of Directors, the Chief Executive Officer, or the
Chief Financial Officer.
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50. Assistant Controllers
The Assistant Controllers shall, during the absence of the Controller,
perform the duties and functions and exercise the powers of the Controller.
Each Assistant Controller shall perform such other duties as may be assigned to
such officer by the Board of Directors, the Chief Executive Officer, the Chief
Financial Officer or the Controller.
51. Other Officers
The Board of Directors may appoint such other officers as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
Company Checks, Drafts and Proxies
52. Checks, Drafts
All checks, drafts or other orders for the payment of money by the Company
shall be signed by such person or persons as from time to time may be
designated by the Board of Directors or by any officer or officers authorized
by the Board of Directors to designate such signers; and the Board of Directors
or such officer or officers may determine that the signature of any such
authorized signer may be facsimile.
53. Voting of Interests in Other Companies or Entities
Except as otherwise provided by resolution of the Board of Directors, the
Chairman of the Board, the President, any Vice Chairman of the Board, the Chief
Financial Officer, any Vice President, the Treasurer and any Assistant
Treasurer, the Controller and any Assistant Controller, the Secretary and any
Assistant Secretary of the Company, shall each have full power and authority,
on behalf of the Company, to vote, represent and exercise any and all rights of
the Company incident to its ownership of shares or other interests in any other
company or entity of any type, foreign or domestic (including without
limitation corporations, limited liability companies and partnerships),
including without limitation the authority to vote at any meeting of
shareholders, members or partners of such other company or entity, to execute
and deliver proxies, and to consent in writing to action without a meeting.
Capital Stock
54. Stock Certificates and Transfers
The interest of each stockholder of the Company shall be evidenced by
certificates or by registration in book-entry accounts without certificates for
shares of stock in such form as the appropriate officers of the Company may
from time to time prescribe. The shares of the stock of the Company shall be
transferred on the books of the Company by the holder thereof in person or by
his attorney, upon surrender for cancellation of certificates for the same
number of shares, with an assignment and power of transfer endorsed thereon or
attached thereto, duly executed, with such proof of the authenticity of the
transfer and payment of any applicable
transfer taxes as the Company or its agents may reasonably require or by
appropriate book-entry procedures.
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Certificates of stock shall be signed by, or in the name of the Company
by, the Chairman of the Board, the President, any Vice Chairman of the Board,
any Executive Vice President, any Senior Vice President, any Group Vice
President or any other Vice President, and by the Treasurer or any Assistant
Treasurer, or the Secretary or any Assistant Secretary, of the Company,
certifying the number of shares owned by such holder in the Company. Any of or
all the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Company with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
55. Record Ownership
The Company shall be entitled to treat the person in whose name any share,
right or option is registered as the owner thereof, for all purposes, and shall
not be bound to recognize any equitable or other claim to or interest in such
share, right or option on the part of any other person, whether or not the
Company shall have notice thereof, except as otherwise provided by the law of
Delaware.
56. Record Dates
In order that the Company may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors and which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action.
57. Lost, Stolen or Destroyed Certificates
The Board of Directors may authorize a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Company alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or the owners legal representative, to
give the Company a bond sufficient to indemnify it against any claim that may
be made against the Company on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
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58. Terms of Preferred Stock
The provisions of these By-Laws, including those pertaining to voting
rights, election of Directors and calling of special meetings of stockholders,
are subject to the terms, preferences, rights and privileges of any then
outstanding class or series of Preferred Stock as set forth in the Certificate
of Incorporation and in any resolutions of the Board of Directors providing for
the issuance of such class or series of Preferred Stock; provided, however,
that the provisions of any such Preferred Stock shall not affect or limit the
authority of the Board of Directors to fix, from time to time, the number of
Directors which shall constitute the whole Board as provided in Section 16
above, subject to the right of the holders of any class or series of Preferred
Stock to elect additional Directors as and to the extent specifically provided
by the provisions of such Preferred Stock.
Indemnification
59. Indemnification
(a) The Company shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as it presently exists or may hereafter be amended,
any person who was or is made or is threatened to be made a party or is
otherwise involved in any claim, action, suit, or proceeding, whether civil,
criminal, administrative or investigative (a proceeding) by reason of the
fact that the person, or a person for whom he or she is the legal
representative, is or was a Director or officer of the Company or is or was
serving at the request of the Company as a director, officer or fiduciary of
another corporation or of a partnership, joint venture, trust, non-profit
entity, or other enterprise, including service with respect to employee benefit
plans, against all expense, liability and loss (including attorneys fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person. The right
to indemnification conferred in this By-Law shall be a contract right. Except
as provided in paragraph (c) of this By-Law with respect to proceedings seeking
to enforce rights to indemnification, the Company shall indemnify a person in
connection with a proceeding initiated by such person or a claim made by such
person against the Company only if such proceeding or claim was authorized by
the Board of Directors of the Company.
(b) Subject to applicable law, the Company shall pay the expenses incurred
in defending any proceeding in advance of its final disposition, provided,
however, that if and to the extent required by law the payment of expenses
incurred by any person covered hereunder in advance of the final disposition of
the proceeding shall be made only upon receipt of an undertaking by or on
behalf of the affected person to repay all amounts advanced if it should
ultimately be determined that such person is not entitled to be indemnified
under this By-Law or otherwise.
(c) If a claim for indemnification or payment of expenses under this
By-Law is not paid in full within thirty days, or such other period as might be
provided pursuant to contract, after a written claim therefor has been received
by the Company, the claimant may file suit to recover the unpaid amount of such
claim or may seek whatever other remedy might be provided pursuant to contract.
In any such action the Company shall have the burden of proving
-18-
that the claimant was not entitled to the requested indemnification or
payment of expenses under applicable law. If successful in whole or in part,
claimant shall be entitled to be paid the expense of prosecuting such claim.
Neither the failure of the Company (including its Directors, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because the claimant has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the Company (including its Directors, independent legal
counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(d) Any determination regarding whether indemnification of any person is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in the General Corporation Law of the State of Delaware
shall be made by independent legal counsel selected by such person with the
consent of the Company (which consent shall not unreasonably be withheld).
(e) The Company may, but shall not be required to, indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any claim, action,
suit, or proceeding, whether civil, criminal, administrative or investigative
(a proceeding) by reason of the fact that the person, or a person for whom he
or she is the legal representative, is or was an employee or agent of the
Company or is or was serving at the request of the Company as an employee or
agent of another corporation or of a partnership, joint venture, trust,
non-profit entity, or other enterprise, including service with respect to
employee benefit plans, against all expense, liability and loss (including
attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such
person.
(f) The rights conferred on any person by this By-Law shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(g) Any repeal or modification of the foregoing provisions of this By-Law
shall not adversely affect any right or protection hereunder of any person with
respect to any act or omission occurring prior to or at the time of such repeal
or modification.
Miscellaneous
60. Corporate Seal
The seal of the Company shall be circular in form, containing the words
Monsanto Company and the word Delaware on the circumference surrounding the
word Seal. Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
-19-
61. Fiscal Year
The fiscal year of the Company shall end on the last day of August in each
year.
62. Auditors
The Audit and Finance Committee of the Board of Directors, or any
successor audit committee, shall select certified public accountants to audit
the books of account and other appropriate corporate records of the Company
annually and at such other times as the Board shall determine by resolution.
63. Waiver of Notice
Whenever notice is required to be given pursuant to the law of Delaware,
the Certificate of Incorporation or these By-Laws, a written waiver thereof,
signed by the person entitled to notice, or a waiver by electronic transmission
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting of stockholders or the Board of Directors or a committee thereof shall
constitute a waiver of notice of such meeting, except when the stockholder or
Director attends such meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders or the Board of Directors or committee thereof need be specified
in any written waiver of notice or any waiver by electronic transmission unless
so required by the Certificate of Incorporation or by these By-Laws.
64. Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these By-Laws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, the term person includes a natural person, a
corporation or any other entity of any type, and the masculine gender includes
the feminine gender and vice versa.
65. Provisions Additional to Provisions of Law
All restrictions, limitations, requirements and other provisions of these
By-Laws shall be construed, insofar as possible, as supplemental and additional
to all provisions of law applicable to the subject matter thereof and shall be
fully complied with in addition to the said provisions of law unless such
compliance shall be illegal.
66. Provisions Contrary to Provisions of Law
Any article, section, subsection, subdivision, sentence, clause or phrase
of these By-Laws which upon being construed in the manner provided in Section
65 hereof, shall be contrary to or inconsistent with any applicable provisions
of law, shall not apply so long as said
-20-
provisions of law shall remain in effect, but such result shall not affect
the validity or applicability of any other portions of these By-Laws, it being
hereby declared that these By-Laws would have been adopted and each article,
section, subsection, subdivision, sentence, clause or phrase thereof,
irrespective of the fact that any one or more articles, sections, subsections,
subdivisions, sentences, clauses or phrases is or are illegal.
Amendment to By-Laws
67. Amendments
Notwithstanding any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
series of Preferred Stock of the Company required by law, the Certificate of
Incorporation or any Preferred Stock designation, the affirmative vote of the
holders of at least 70 percent of the voting power of all of the
then-outstanding shares of the Companys voting stock, voting together as a
single class, shall be required for the stockholders to amend or repeal the
By-Laws or to adopt new By-Laws. The By-Laws may also be amended or repealed,
and new By-Laws may be adopted, by the affirmative vote of a majority of the
whole Board of Directors at any regular or special meeting of the Board of
Directors.
(By-Laws)
-21-
EXHIBIT 10.18
2004 Annual Incentive Plan Summary
(January 1 through August 31, 2004 Performance Period)
General :
| The 2004 Annual Incentive Plan (Plan) will cover the performance period January 1 through August 31, 2004 (Performance Period) |
Ø | Any payout, as determined by the Board People and Compensation Committee (Committee), is made in November 2004 |
| Eligibility includes regular employees who do not participate in a local sales or manufacturing annual incentive plan |
| Funding of the Plan is determined by the Companys attainment of certain financial goals and the Committees determination that such attainment satisfies certain subjective performance criteria as determined by the Committee. In addition, regardless of the attainment of any one or more of the Plans financial goals, the Committee, in its sole discretion, shall determine whether the incentive pool should be funded and the amount of such funding, if any |
| A Target Annual Incentive Opportunity, expressed as a percentage of base pay, is established for each participant with respect to the Performance Period |
| Various performance levels are approved by the Committee with a payout level associated with each level of performance: |
Potential Payout | ||||
As a Percent of Target Annual | ||||
Performance Level | Incentive Opportunity | |||
|
|
|||
Threshold
|
20 | % | ||
Budget
|
100 | % | ||
Outstanding
|
200 | % |
| The cost at the Budget Performance Level for the eight-month Performance Period is as follows: |
Financial Goals
:
$
2.2 M
$
25.0 M
$
6.0 M
$
33.2 M
The Committee approves Threshold, Budget and Outstanding levels
of performance for the Performance Period relating to:
Ø
Sales Growth
(10% weighting)
Ø
Earnings Per Share
(50% weighting)
Ø
Cash Flow
(40% weighting)
| In connection with the transition of the Companys annual incentive plan performance year to coincide with the change of the Companys fiscal year end to August 31, the Committee establishes the Plans financial goals for the Performance Year as follows: |
Ø | Full Fiscal Year (September 1, 2003 August 31, 2004) goals are determined by the Committee in October 2003 |
Ø | To establish the Earnings Per Share and Sales Growth financial goals for the Performance Year, the Committee shall subtract the actual financial results for Company performance for the September 1- December 31, 2003 period (the first four months of the Full Fiscal Year) from the Full Fiscal Year goals to determine the specific dollar amount of the Earnings Per Share and Sales Growth financial goals for the eight-month Performance Period at Budget Level Performance |
º | In January 2004 the Committee shall set specific Threshold and Outstanding performance levels for the Earnings Per Share and Sales Growth financial goals by subtracting the actual results for the September 1-December 31, 2003 time period from the Full Fiscal Year goals approved in October 2003 |
Ø | During October 2003, the Committee shall establish specific Cash Flow financial goals with respect to the Performance Period such that Company performance for the Performance Period generates sufficient cash flow to attain specified Cash Flow financial goals with respect to the Full Fiscal Year |
| Sales Growth, Earnings Per Share and Cash Flow are determined in accordance with the Definition of Performance Metrics" |
2
| Following the end of the Performance Period, the Committee evaluates Company performance for the Performance Period relative to the financial goals |
Ø | The Committee may consider subjective criteria in determining whether or not any financial goal has been attained and the amount of incentive pool funding with respect to any financial goal |
Process: Funding of Incentive Pool and Payout of Awards:
| A Target incentive award pool, equal to the sum of base salaries of all Plan participants at the end of the Performance Year multiplied by their respective Target Annual Incentive Opportunities is calculated |
Ø | Because of the transition to the new fiscal year, this amount will be pro-rated for the 2004 Performance Period by multiplying the Full Fiscal Year Target incentive pool by 8/12ths |
| After the end of the Performance Period, the Committee determines the actual funding of the incentive pool for the Plan based upon the Companys performance for the Performance Period, measured against the Plans financial goals and other subjective performance factors |
Ø | The Committee may, in its judgment, consider subjective factors, in determining to what extent, if any, the incentive pool will be funded |
| The amount of money available for awards (i.e. the funding of the incentive pool) is determined by multiplying the value of the Target incentive award pool by the percentage of overall Company performance achieved, as determined by the Committee |
Ø | Special Considerations Regarding Attainment of Financial Goals and Funding of Incentive Pool : |
º | The incentive pool will be funded at no less than 20% of Budget level funding in the event Monsanto pays dividends with respect to each of its financial quarters ending during the Performance Year |
º | In the event Monsanto does pay dividends with respect to each of the Companys fiscal quarters ending during the Performance Period, but the Company does not attain the Threshold level of performance with respect to the Earnings Per Share financial goal (considering the financial goal metrics for Earnings Per Share and other subjective performance factors), |
3
the incentive pool may not fund at greater than 20% of Budget level funding |
º | If the Company exceeds the Outstanding level of performance with respect to any one or more financial goals, the incentive pool may be funded above the Outstanding level |
| Individual awards are determined based on team and individual performance |
Ø | People Managers: 50% of award based on development of people, team and personal development; 50% based on business results |
Ø | Non-managers: 75% of award based on business results; 25% on personal development |
| The payment and amount of any award are subject to the sole discretion of the Committee or its delegate |
Events Affecting Payout of Individual Performance Year Incentives:
| If an employee commences employment during the Performance Period, he/she is eligible for an award reflecting actual months of participation to the nearest whole month |
| If a participants Target Annual Incentive Opportunity changes during the Performance Period, he/she is eligible for an award reflecting the Target Annual Incentive Opportunity on the last day of the Performance Period |
| If a participants pay changes during the Performance Period, any incentive award received is based on base pay on the last day of the Performance Period |
| If a participant transfers within the Company, his/her award will come from the unit in which he/she is working on the last day of the Performance Period, but performance for the entire Performance Period will be considered |
| A participant who: |
Ø | voluntarily resigns may be considered for an award only if the resignation occurs after the end of the Performance Period |
Ø | involuntarily separates without cause, is eligible for an award reflecting participation to the nearest whole month if he/she has already worked more than three months in the Performance Period |
4
Ø | retires, dies, or becomes permanently disabled, is eligible for an award reflecting actual participation to the nearest whole month. (Retirement is defined as termination at or after age 50.) |
Ø | terminates for cause, forfeits all rights to any award |
Any award would be paid in November 2004
5
EXHIBIT 10.30
AGREEMENT
THIS AGREEMENT (Agreement) dated as of August , 2003, is made and entered into by and among SOLUTIA INC., a Delaware corporation (Solutia), PHARMACIA CORPORATION, a Delaware corporation (Pharmacia), and MONSANTO COMPANY, a Delaware corporation (Monsanto). Each of Solutia, Pharmacia and Monsanto are referred to herein individually as a Party and collectively as the Parties.
WHEREAS, Pharmacia (formerly known as Monsanto Company and sometimes referred to herein as Old Monsanto) and Solutia are parties to that certain Distribution Agreement dated as of September 1, 1997 (the Distribution Agreement, which was entered into in connection with the distribution of the common stock of Solutia to the stockholders of Old Monsanto;
WHEREAS, pursuant to the Distribution Agreement, among other things, Old Monsanto assigned and transferred the Chemical Assets (as defined in the Distribution Agreement) to Solutia and Solutia assumed all of the Chemical Liabilities (as defined in the Distribution Agreement) of Old Monsanto;
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of December 19, 1999 (the Merger Agreement), by and among Old Monsanto, MP Sub, Incorporated (Merger Sub) and Pharmacia & Upjohn, Inc. (PNU), the parties agreed that Merger Sub would be merged with and into PNU with PNU surviving as a wholly owned subsidiary of Old Monsanto in the merger (the Merger);
WHEREAS, on February 9, 2000, the new Monsanto Company (which is the Delaware corporation identified in the introductory paragraph of this Agreement as Monsanto Company and which is referred to herein as either New Monsanto or Monsanto, as the context requires) was incorporated as a wholly owned subsidiary of Old Monsanto under the name Monsanto Ag Company
WHEREAS, on March 31, 2000, (i) the Merger was effective, (ii) Old Monsanto changed its name from Monsanto Company to Pharmacia Corporation, and (iii) New Monsanto changed its name from Monsanto Ag Company to Monsanto Company;
WHEREAS, on September 1, 2000, New Monsanto and Pharmacia entered into certain agreements, including that certain Separation Agreement, dated as of September 1, 2000 (the Separation Agreement), pursuant to which, among other things, Pharmacia assigned and transferred certain assets related to its agriculture products business and certain other assets to New Monsanto and New Monsanto assumed certain liabilities relating thereto and all liabilities that were assumed by Solutia or any of its subsidiaries in connection with the Distribution Agreement to the extent that Solutia fails to pay, perform, or discharge such liabilities;
WHEREAS, Pharmacia and Solutia are named as defendants in each of Sabrina Abernathy et. al. v. Monsanto Company et. al., Case No. CV01832 (Abernathy Litigation) and Payton et. al. v. Monsanto Company et. al. (Payton Litigation) in which the plaintiffs claim to
have sustained personal injuries and/or property damage as a result of the alleged release of polychlorinated biphenyls (PCBs) from Old Monsantos (now Solutias) plant in Anniston, Alabama;
WHEREAS, each of Solutia, Monsanto and Pharmacia are defendants in Antonia Tolbert et. al., v. Monsanto Company, et. al., Case No. CV-01-C-1407-W (the Tolbert Litigation, and referred to herein together with the Abernathy Litigation as the Litigation) in which the plaintiffs also claim to have sustained personal injuries and/or property damage as a result of the alleged release of PCBs from Old Monsantos (now Solutias) plant in Anniston, Alabama;
WHEREAS, on July 1, 2002, (i) the Parties entered into a certain Amendment to the Distribution Agreement (the Distribution Agreement Amendment) pursuant to which the assignment from Pharmacia to Monsanto of certain assets and liabilities contemplated pursuant to the Separation Agreement (including certain of Pharmacias rights and obligations under the Distribution Agreement) was effectuated and the relationship among the Parties was preserved as nearly as possible with the original intent and terms of the Distribution Agreement, (ii) the Parties entered into that certain Protocol Agreement (the Anniston Protocol Agreement) related to the Abernathy Litigation and pursuant to which the Parties agreed on certain matters pertaining to the posting of an appeal bond with respect to, and control of decisions regarding settlement of, the Abernathy litigation, and (iii) Pharmacia and Monsanto entered into that certain First Amendment to Separation Agreement (the Separation Agreement, as so amended, being referred to as the Amended Separation Agreement) pursuant to which those parties clarified their respective rights and obligations relating to Monsantos indemnification obligations under the Separation Agreement;
WHEREAS, pursuant to the terms of the Distribution Agreement, as amended by the Distribution Agreement Amendment (the Amended Distribution Agreement), Solutia is required to manage the Litigation and indemnify, defend and hold harmless Pharmacia and Monsanto for certain costs, expenses and judgments arising from the Litigation;
WHEREAS, Solutia, Pharmacia and Monsanto have reached agreement on the settlement of the Litigation (Settlement) and desire to set forth herein the respective settlement obligations of the Parties (the term Settlement Agreement as used herein shall mean the definitive written settlement agreement which is approved by an order of the court having jurisdiction over the Litigation).
WHEREAS, Pfizer Inc. (Pfizer), which is not a party to the litigation, has agreed to make a contribution to the Settlement (Pfizer Contribution); and
NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, the adequacy and sufficiency of which is hereby acknowledged, Solutia, Pharmacia and Monsanto, intending to be legally bound, each agree as follows:
1. Settlement Obligations.
(a) In consideration for Solutias entering into the Settlement Agreement and the
2
performance by Solutia of its obligations hereunder and thereunder, Monsanto hereby agrees to (i) enter into the Settlement Agreement upon court approval thereof and to pay the Monsanto Settlement Amount (as defined on Exhibit A hereto) promptly and in accordance with the terms of the Settlement Agreement; (ii) fully perform all other Monsanto Obligations (as defined on Exhibit A hereto) under the Settlement Agreement; and (iii) in accordance with the terms of the Settlement Agreement, absolutely, fully, finally and irrevocably release, waive and discharge any and all actions, causes of action, judgments, executions, suits, claims, counterclaims, demands, defenses, liabilities, obligations and expenses (including attorneys fees and expenses) of any and every character or kind, whether known or unknown, direct or indirect, liquidated or unliquidated, disputed or undisputed, fixed or contingent, matured or unmatured, arising at law or in equity, or heretofore or hereafter arising (collectively, Claims), that it ever had, now has, or hereafter can, shall or may have or assert against Solutia and its subsidiaries, affiliates, predecessors, successors and assigns and any of its respective directors, officers, stockholders, members, partners, agents, employees, representatives, attorneys, accountants and financial and other advisors, for or by any reason or any cause, matter, thing, occurrence, event, action, act, or omission to act arising or occurring on or prior to the date of the Settlement Agreement, but in each case only to the extent relating to or arising from the Litigation, whether it arises from the Amended Distribution Agreement (including, without limitation, the indemnification provisions thereof) or otherwise.
(b) In consideration for Solutias entering into the Settlement Agreement and the performance by Solutia of its obligations hereunder and thereunder, Pharmacia hereby agrees to (i) enter into the Settlement Agreement upon court approval thereof; and (ii) absolutely, fully, finally and irrevocably release, waive and discharge any and all Claims that it ever had, now has, or hereafter can, shall or may have or assert against Solutia and its subsidiaries, affiliates, predecessors, successors and assigns and any of its respective directors, officers, stockholders, members, partners, agents, employees, representatives, attorneys, accountants and financial and other advisors, for or by reason of the Pfizer Contribution to the Settlement Agreement.
(c) In consideration for Monsantos and Pharmacias entering into the Settlement Agreement and the performance by Monsanto and Pharmacia of their respective obligations hereunder and thereunder, Solutia hereby agrees to (i) enter into the Settlement Agreement upon court approval thereof and pay the Solutia Settlement Amount including the Pfizer Contribution (as defined on the attachment to Exhibit A hereto) promptly and in accordance with the terms of the Settlement Agreement; (ii) perform all other Solutia Obligations (as defined on Exhibit A hereto) under the Settlement Agreement; (iii) issue to Monsanto the Solutia Common Stock Warrants on substantially the terms described on Exhibit B hereto; (iv) fully perform all obligations of Solutia under the Settlement Agreement relating to the Payton Litigation; (v) acknowledge Monsantos rights to access and receive direct reimbursement from the insurance policies related to coverage for claims which are the subject of the Litigation as described on Exhibit C hereto and the proceeds thereof (collectively, the Insurance Policies), excluding the following: all Solutia claims against the Insurance Policies which are outstanding as of the date of the Settlement Agreement relating to reimbursement for expenses previously incurred by Solutia, and all claims filed by Solutia against the Insurance Policies after the date of the Settlement Agreement for reimbursement of expenses that have been, or will be incurred by Solutia in connection with the defense of the Litigation and the defense and settlement of the
3
Payton Litigation, upon the court approval of the respective settlement agreements; and (vi) in accordance with the terms of the Settlement Agreement, absolutely, fully, finally and irrevocably release, waive and discharge any Claims that it ever had, now has, or hereafter can, shall or may have or assert against Monsanto and Pharmacia and its parent, subsidiaries, affiliates, predecessors, successors and assigns and any of their respective directors, officers, stockholders, members, partners, agents, employees, representatives, attorneys, accountants and financial and other advisors, for or by any reason or any cause, matter, thing, occurrence, event, action, act, or omission to act arising or occurring on or prior to the date of the Settlement Agreement, but in each case only to the extent relating to or arising from the Litigation.
2. Representations and Warranties. Each Party hereto represents and warrants that it is duly authorized to enter into this Agreement.
3. Successors and Assigns. The provisions of this Agreement shall be binding upon the Parties and their respective successors and assigns and subsidiaries, and each of the respective officers, directors, employees, agents and attorneys of such persons.
4. Cooperation. The Parties agree that, to the extent reasonably requested, each will cooperate with the others in connection with any public statement, press release or similar announcement regarding the settlement of the Litigation.
5. Miscellaneous. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the Settlement Agreement constitute the entire agreement among the Parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
6. Governing Law/Forum. This Agreement shall be governed in all respects by the laws of the State of New York without regard to its conflict-of-laws rules. Each Party consents to the non-exclusive jurisdiction of the courts of the State of New York in the event of any dispute hereunder.
7. Knowingly and Voluntarily. Each Party hereby verifies that (a) it has read and understood the provisions of this Agreement and the releases executed pursuant hereto, (b) it is knowingly and voluntarily entering into this Agreement, and (c) it has not been coerced or threatened into signing this Agreement.
8. Limited Waiver. Other than as specifically provided herein with respect to the waiver of Claims that either Pharmacia or Monsanto may have against Solutia for or by any reason or any cause, matter, thing, occurrence, event, action, act, or omission to act arising or occurring on or prior to the date of the Settlement Agreement, but in each case only to the extent relating to or arising from the Litigation, neither Pharmacia not Monsanto has waived or compromised any of their respective rights under the Amended Distribution Agreement (including, without limitation, the indemnification provisions thereof).
4
IN WITNESS WHEREOF, the undersigned have made and entered into this Agreement as of the date first shown above.
SOLUTIA INC | ||||||
By: | /s/ Jeffry N. Quinn | |||||
|
||||||
Name: Jeffry N. Quinn | ||||||
Title: Sr. V.P. | ||||||
MONSANTO COMPANY | ||||||
By: | /s/ Robert A. Paley | |||||
|
||||||
Name: Robert A. Paley | ||||||
Title: Vice President & Treasurer | ||||||
PHARMACIA CORPORATION | ||||||
By: | /s/ Steven C. Kany | |||||
|
||||||
Name: Steven C. Kany | ||||||
Title: General Counsel |
5
Exhibit A
Monsanto, Pharmacia and Solutia Settlement Amounts and Settlement Obligations
Solutia Settlement Amount:
$50 million payable over not less than eleven years
Pfizer Contribution:
Attached
Monsanto Settlement Amount:
All payment due under the Litigation
Settlement Agreement less the Solutia
Settlement Amount and Pharmacia Settlement
Amount
6
Exhibit B
Solutia Inc. Common Stock Warrants
Issuer
:
Solutia Inc.
Recipient:
Monsanto Company
Type of Security:
Warrants to purchase up to 10,000,000 shares
of Solutia Common Stock, at a per share
purchase price equal to the average closing
price for the Common Stock on the New York
Stock Exchange for the five trading days
immediately prior to the announcement of a
settlement of the Litigation. The conditions
precedent to the exercise of the warrant
being either a signed Solutia change in
control agreement (as defined in the
Indenture governing Solutias 2009 Notes) or
when Solutias average closing stock price
over a 30 day period exceeds $10 per share.
Issuance:
Upon court approval of Settlement Agreement.
Expiration Date of Warrants
:
The earlier of (i) the date which is ten
years after the date of issuance of the
warrants and (ii) the date which is seven
days after a Change in Control.
Other:
The warrants will have no rights associated
with the Common Stock into which they are
exercisable, including, without limitation,
rights to dividends, proceeds upon
liquidation of Solutia or voting rights.
The Common Stock issuable upon exercise of
the warrants will not be registered under the
Securities Act of 1933, until such time that
a registration statement is filed pursuant to
registration rights to be negotiated in good
faith by the parties.
The warrants will not be transferable without
the prior written consent of Solutia, which
will not unreasonably be withheld.
7
Exhibit C
Description of Insurance Policies
All policies of insurance applicable to the Litigation issued by AIG-related Companies as described in an Agreement effective November 4, 2002 and by Travelers Indemnity Company as described in an Agreement of Settlement Compromise and Release dated December 28, 1993 as amended October 5, 2001.
8
EXHIBIT 10.31
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ANTONIA TOLBERT, et al.,
)
)
Plaintiffs,
)
)
Civil Action No. 01-C-1407-S
)
v.
)
)
)
)
MONSANTO COMPANY, et al.,
)
)
Defendants.
)
IN THE CIRCUIT COURT
ETOWAH COUNTY, ALABAMA
SABRINA ABERNATHY, et al.,
)
)
Plaintiffs,
)
)
Civil Action No. CV-01-832
)
(Etowah County)
)
and related and consolidated cases
)
v.
)
)
)
)
MONSANTO COMPANY, et al.,
)
)
Defendants.
)
GLOBAL SETTLEMENT AGREEMENT
On August 20, 2003, the parties in the above referenced matters appeared before the Honorable U.W. Clemon, Chief Judge, United States District Court, Northern District of Alabama, and the Honorable R. Joel Laird, Jr., Presiding Judge, Circuit Court of Calhoun County, Alabama, and announced a global settlement of approximately 21,000 filed and unfiled claims against Pharmacia Corporation, Solutia Inc., and Monsanto Company. The overall intent of the Settling Parties (Solutia Inc., Pharmacia
Corporation, and Monsanto Company) was to obtain a comprehensive and final global resolution of the pending litigation associated with the manufacture of PCBs at Anniston, Alabama. This litigation is exemplified by the Abernathy and Tolbert lawsuits, which include approximately 21,000 total plaintiffs (including plaintiffs for whom the Tolbert parties reached a tolling agreement) comprised of property owners, residents and nonresidents of Anniston, Alabama. The Settling Parties have offered a comprehensive global settlement and unified cleanup and community benefit remedy to resolve the disputes pending before the respective federal and state courts.
Under the direction and oversight of the United States District Court for the Northern District of Alabama and the Circuit Court for Calhoun County, Alabama, assisted by a settlement mediator, the parties have structured and allocated this overall global settlement offer to resolve the pending litigation in the respective federal and state courts on a comprehensive and global basis. Counsel in the Tolbert and Abernathy matters have included and sought to resolve all claims and potential claims represented by their respective law offices with respect to the Anniston litigation. It is understood and agreed that this global settlement of Anniston-related litigation is interdependent upon the reasonably concurrent signing of settlement documents provided to resolve all Abernathy and Tolbert claims.
A copy of the Settlement Agreement for the Abernathy and related cases is attached hereto as Exhibit A. A copy of the Settlement Agreement for the Tolbert and related cases and unfiled claims is attached hereto as Exhibit B. Those agreements are incorporated herein.
2
The Settling Parties and counsel for plaintiffs and the respective Courts placed on the record an agreement in principle to complete a global settlement on August 20, 2003. At that time, the settlement was a conditional settlement.
The Settling Parties and counsel for plaintiffs have now completed the task of setting various undertakings and obligations in separate settlement agreements in order to effectuate the agreed upon global settlement. While there are different elements included within each settlement agreement based upon various distinctions and differences among the plaintiffs and the nature and extent of their claims, counsel for plaintiffs acknowledge and agree that the settlement of the federal lawsuits was conditioned upon the reasonably concurrent signing of settlement agreements for the state lawsuits and vice versa. Counsel for plaintiffs further acknowledge and agree that while the settlement includes the payment of Six Hundred Million Dollars ($600,000,000.00) in cash, not all of such funds will be paid directly to named plaintiffs under the terms of each of the attached settlement agreements. The parties further agree and acknowledge that the overall benefits of the settlement will inure not only to the plaintiffs but also to non-plaintiff residents of Anniston and surrounding areas, the various local and county governments and the State of Alabama. The parties further agree that the overall value of this global settlement to the various stakeholders exceeds the costs associated with the implementation of the global settlement.
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS GLOBAL SETTLEMENT AGREEMENT AND THE ATTACHED SETTLEMENT AGREEMENTS TO BE EXECUTED ON THIS THE 9th DAY OF SEPTEMBER 2003.
/s/ Jere L. Beasley
Jere L. Beasley Counsel for Plaintiffs in Tolbert matter |
3
OF COUNSEL:
Jere L. Beasley
Rhon E. Jones
J. Mark Englehart
David B. Byrne, III
Larry A. Golston, Jr.
Beasley, Allen, Crow, Methvin,
Portis & Mites, P.C.
218 Commerce Street
Post Office Box 4160
Montgomery, AL 36103-4160
(334) 269-2343
D. Frank Davis
John E. Norris
Charles Tyler Vail
Davis & Norris
2151 Highland Avenue, Suite 100
Birmingham, Alabama 35205
(205) 930-9900
Robert B. Roden
Sherry H. Thomas
Shelby, Roden & Cartee
2956 Rhodes Circle
Birmingham, Alabama 35205
(205) 933-8383
/s/ Donald W. Stewart
Donald W. Stewart Counsel for Plaintiffs in Abernathy and related matters |
OF COUNSEL:
Donald W. Stewart
P.O. Box 2274
1131 Leighton Avenue
Anniston, AL 36202
(256) 237-9311
4
Daniel R. Benson
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
1633 Broadway
New York, NY 10019-6799
(212) 506-1700
/s/ William S. Cox III
William S. Cox III Counsel for Defendants and related entities |
OF COUNSEL:
Jere F. White, Jr.
Adam K. Peck
Harlan I. Prater IV
William S. Cox III
Jackson R. Sharman III
Kevin E. Clark
Suzanne Alldredge Fleming
LIGHTFOOT, FRANKLIN & WHITE, L.L.C.
The Clark Building
400 North 20th Street
Birmingham, Alabama 35203
(205) 581-0700
Michael E. Kelly
SMITH, MOORE LLC
300 North Greene Street, Suite 1400
Greensboro, NC 27401
(336) 378-5400
J. Mark White
Julia S. Stewart
WHITE, DUNN & BOOKER
2025 3rd Avenue North, Suite 600
Birmingham, Alabama 35203-5400
(205) 323-1888
5
George P. Ford
FORD & HOWARD, P.C.
645 Walnut Street, Suite 5
Gadsden, AL 35902
(256) 546-5432
Eddie Newsom
Larry Meyers
SMITH, MOORE, LLC
1355 Peachtree Street, N.E., Suite 750
Atlanta, GA 30309
(404) 962-1000
6
IN THE CIRCUIT COURT ETOWAH COUNTY, ALABAMA
SABRINA ABERNATHY, ET AL.,
)
)
Plaintiffs,
)
)
Civil Action No. CV-01-832
)
v.
)
)
)
)
MONSANTO COMPANY, ET AL.,
)
)
Defendants.
)
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into by, between and among the aggregated plaintiffs and each and every individual plaintiff, by and through their counsel of record, in the matters styled Abernathy, et al v. Monsanto Company, et al., Civil Action No. CV-01-832, Circuit Court of Etowah County, Alabama (which is a consolidated action composed of matters styled Abernathy, et al. v. Monsanto Company, et al., Civil Action No. CV-96-269, Abbott, et al. v. Monsanto Company, et al., Civil Action No. CV-97-967, Nelson, et al. v. Monsanto Company, et. al., Civil Action No. CV- 99-502, Long v. Monsanto Company, et al., Civil Action No. CV-96-268), Margie Suggs, et al. v. Monsanto Company, et al., Civil Action No. CV-01-0874, Circuit Court of Calhoun County, Alabama)), and Brown v. Monsanto Company, et al., Civil Action No. 97-ETC-1618-E, United States District Court, Northern District of Alabama, and amici curiae and each individual amicus curie in United States v. Pharmacia Corporation. et al., Civil Action No. 02-C-07409-E, United States District Court, Northern District of Alabama (collectively referred to herein as plaintiffs), and Solutia Inc. (Solutia), Pharmacia Corporation, formerly known as Monsanto Company (Pharmacia), and new Monsanto Company (Monsanto) (collectively referred to herein as the Interested Parties).
This Settlement Agreement is being entered into concurrently with a Global Settlement Agreement among the parties to this Settlement Agreement and the parties to a Settlement Agreement in the matter styled Tolbert et al. v. Monsanto Company, et al., Civil Action No. CV-01-C-1407-S, and other cases described in that Settlement Agreement for the Tolbert matter and its related actions and claims (Tolbert Settlement Agreement). The parties agree that the agreements and obligations set forth and described in this Settlement Agreement are conditional and contingent upon the parties to the Tolbert settlement signing the Tolbert Settlement Agreement and the entry of an Order and Judgment by the Honorable U. W. Clemon approving the Global Settlement Agreement and the Tolbert Settlement Agreement. The purpose of this Settlement Agreement is to effectuate the Global Settlement Agreement which is incorporated herein.
1. The Interested Parties, jointly and severally, agree to pay the total sum of Three Hundred Million Dollars ($300,000,000.00) into the various settlement funds to be established as set forth below. All monies due under this Settlement Agreement shall be deposited by wire transfer pursuant to the following schedule:
a. | On or before 5:00 p.m. CDT on August 26, 2003, the sum of Seventy-Five Million Dollars ($75,000,000.00) shall be wire transferred to SouthTrust Bank to an interest bearing account of the Circuit Court of Calhoun County (the Honorable R. Joel Laird) (the Court) as follows: State of Alabama, Ted Hooks, Clerk, CV-2001-874, Account Number 69530631, Routing Number 062000080 (the Settlement Account); |
2
b. | On or before 5:00 p.m. CDT on the seventh day (or the next business day thereafter if the seventh day falls on a Saturday or Sunday) following the execution and filing of this Settlement Agreement with the Court, the sum of Two Hundred Million Dollars ($200,000,000.00) shall be wire transferred to the Settlement Account; |
c. | On or before 5:00 p.m. CDT on August 26, 2004, and on each August 26 of each year thereafter (or the next business day thereafter if August 26 falls on a Saturday or Sunday) up to and including August 26, 2013, the sum of Two Million, Five Hundred Thousand Dollars ($2,500,000.00) shall be wire transferred in accordance with paragraph 3.h. of this Settlement Agreement. |
2. The funds described in paragraph 1 above shall not be distributed from the Settlement Account in accordance with the provisions of this Settlement Agreement until all the following conditions have been met:
a. | the Court has entered an order approving this Settlement Agreement in substantially the form set forth in Exhibit A; |
b. | the Court has approved the settlement of the claims of the plaintiffs who are minors as set forth below; |
c. | Plaintiffs counsel notifies the Court and counsel of record for the Interested Parties that the Relocation/Property Adjustment Fund account and the corporation, foundation, trust, or other entity described in paragraph 3.d. have been established or selected. |
3
3. The funds in the Settlement Account shall he distributed as follows once all conditions of paragraph 2 are satisfied:
a. | Each plaintiff who is an adult, a representative of the estate of a deceased plaintiff (including any administrator ad litem appointed by the Court), or is a church, business or other entity (hereinafter collectively referred to as the adult plaintiffs), as a condition of receiving any payment to or on behalf of such plaintiff from any of the separately available funds established under this paragraph 3, shall be required to sign a general release of all claims in the form of the release document attached hereto as Exhibit B (the Release). The term Released Parties, as used in this Settlement Agreement, shall mean all persons and entities defined as Released Parties in the Release, including without limitation, the Interested Parties and their past, present and future affiliates, and their respective officers, directors, employers and agents. |
b. | Within ninety days after the signing of this Settlement Agreement (which period will be extended for 30 days upon request of plaintiffs counsel (and thereafter upon mutual agreement of the parties hereto)) (such 90-day period, together with any extensions, being hereinafter referred to as the Release Period), plaintiffs counsel shall use diligent efforts to secure signed Releases from the adult plaintiffs, which Releases plaintiffs counsel shall hold in escrow. Plaintiffs counsel shall also use diligent efforts during the |
4
Release Period to obtain Court approval of the settlement of the claims of the plaintiffs who are minors. Plaintiffs counsel may, prior to the end of such 90-day period, together with any extensions, notify the Court and the Interested Parties that they have completed such diligent efforts. If such notice is given, the Release Period shall end on the date of such notice. |
c. | When plaintiffs counsel have obtained signed Releases from at least 75% of the adult plaintiffs, plaintiffs counsel shall so certify to the Court and the Interested Parties. Immediately upon such certification, all funds in the Settlement Account, including any interest accrued during the time such money was on deposit in the Settlement Account, shall be wire transferred to an interest bearing plaintiffs attorneys escrow account (Escrow Account) designated by plaintiffs counsel and approved by the Court. |
After plaintiffs counsel have obtained court approval of the settlement of the claims of the plaintiffs who are minors and plaintiffs counsel have obtained signed Releases from the adult plaintiffs and those minor and adult plaintiffs (counting each estate represented by any court-appointed administrator ad litem separately) total at least 97% of the plaintiffs on the Plaintiff List described in paragraph 7, plaintiffs counsel shall so certify to the Court and the Interested Parties and shall release such signed |
5
Releases from escrow and shall deliver such signed Releases to the Interested Parties. The Interested Parties shall have three business days from the receipt of the Releases to verify the number, content and execution of the Releases, to verify the number of minor plaintiffs whose claims have been settled through the Court approval process, and to raise any issues relating to the Releases or the minors settlement with plaintiffs counsel. Any dispute relating to the Releases or to the count of the Releases or the minors whose claims have been settled by Court approval shall be resolved by the Court. |
At the end of this three day verification period or following the resolution by the Court of any disputes brought to the Court under this subparagraph, if plaintiffs counsel have obtained signed Releases from the adult plaintiffs and court approval of the claims of the minor plaintiffs that total at least 97% of the plaintiffs on the Plaintiff List, plaintiffs counsel shall distribute the funds in the Escrow Account as set forth in paragraphs 3.d. through 3.h. The Releases and the Court approval of the settlement of the claims of minors shall not be enforceable until such distribution of funds commences. |
d. | Seventy-Five Million Dollars ($75,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid directly from the Escrow Account to plaintiffs counsel and to plaintiffs as follows: |
6
i. | Thirty Million Dollars ($30,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid to plaintiffs counsel for attorneys fees. |
ii. | The remaining Forty-Five Million Dollars ($45,000,000.00), plus any interested accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid from the Escrow Account to pay the claims of each settling plaintiff |
e. | Fifteen Million Dollars ($15,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid directly to plaintiffs counsel, such amount being assessed as costs in the above referenced matter. |
f. | One Hundred and Fifty Million Dollars ($150,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid directly from the Escrow Account to plaintiffs counsel and to a fund or funds established by plaintiffs counsel for relocation/property adjustment payments to plaintiffs as follows: |
i. | Sixty Million Dollars ($60,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid to plaintiffs counsel for attorneys fees; |
7
ii. | The remaining Ninety Million Dollars ($90,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid to a Relocation/ Property Adjustment Fund Account or Accounts designated by plaintiffs counsel for payments for the benefit of the approximately 920 plaintiff property owners and other plaintiff residents for property relocation/adjustment. The Relocation/Property Adjustment Fund shall be used for the payment of monies for the benefit of plaintiff property owners and/or plaintiff residents in accordance with a matrix to be developed by plaintiffs counsel in their sole discretion. Such matrix will consider such factors as, among other things, jury verdicts, proximity to the Anniston facility and drainage pathways or waterways, including Snow Creek and Choccolocco Creek, sampling results, fair market value of property, size of property, and use of property. |
g. | Thirty-Five Million Dollars ($35,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid directly from the Escrow Account to plaintiffs counsel and to a corporation, foundation, trust or other appropriate entity designated by plaintiffs counsel as follows: |
8
i. | Fourteen Million Dollars ($14,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be paid to plaintiffs counsel for attorneys fees; |
ii. | Twenty-One Million Dollars ($21,000,000.00), plus any interest accrued on such amount during the time such money was on deposit in the Settlement Account and the Escrow Account, shall be used by the corporation, foundation, trust or other appropriate entity for the following general purposes, and the corporation, foundation, trust or other entity will have the authority to expend funds for such purposes, but will not be required to perform every such purpose: |
(1) | To provide primary health care and/or to assist in gaining access to primary health care and other health care services (including but not limited to lab, dental, outreach, prenatal care; radiology, case management, pharmacy, preventive medicine, holistic medicine and other health care programs) by making grants or payments for the actual benefit of persons meeting the criteria of the corporation, foundation, trust or other entity; |
9
(2) | To provide educational grants, scholarships or loans to persons meeting the criteria of the corporation, foundation, trust or other entity for purposes including but not limited to those described in subparagraph (5) below; |
(3) | To provide health education and instruction to or on behalf of persons meeting criteria of the corporation, foundation, trust or other entity; |
(4) | To provide such other programs or payments relating to health, education and community welfare that would benefit such persons meeting the criteria of the corporation, foundation, trust or other entity; and |
(5) | To create an educational trust fund to endow scholarships, grants or loans for purposes including but not limited to the evaluation of and development of personal education plans, pre-kindergarten program participation, after-school program participation, tutoring, participation in remedial programs or individual enrichment programs, computer training programs, SAT/ACT or other examination preparation programs, and participation in technical training, vocational, GED, college or adult educational programs. |
10
h. | The annual payments of Two Million, Five Hundred Thousand Dollars ($2,500,000.00) shall be paid directly from the Interested Parties to plaintiffs counsel and to the corporation, foundation, trust or other appropriate entity designated by plaintiffs counsel pursuant to paragraph 3.g. as follows: |
i. | One Million Dollars ($1,000,000.00) shall be paid to plaintiffs counsel for attorneys fees; |
ii. | One Million Five Hundred Thousand Dollars ($1,500,000.00) shall be paid to the corporation, foundation, trust or other appropriate entity established or selected in accordance with paragraph 3.g. hereof for the purposes outlined in paragraph 3.g, hereof. |
4. Within seven (7) days of the signing of this Settlement Agreement, plaintiffs counsel shall deliver to the Court and to the Interested Parties a list (Plaintiff List) of the names of all plaintiffs, with a designation of which plaintiffs are minors, who are subject to the Release provisions or Court approval of the claims of minors under this Settlement Agreement. The Plaintiff List shall not include (a) plaintiffs who died more than two years prior to the date of this Settlement Agreement and for whom Suggestions of Death have been on file for at least six months and for whom there has been no substitution as plaintiff, or (b) plaintiffs who, prior to and including August 31,2003, have moved to withdraw from the actions included within this Settlement Agreement. Within seven days of delivery of the Plaintiff List, the Interested Parties shall deliver to plaintiffs counsel a
11
list of any additions or changes to the Plaintiff List they may propose based in good faith on their records. Any dispute as to the Plaintiff List shall be resolved by the Court.
5. | At the end of the Release Period, plaintiffs counsel shall deliver to the Court and the Interested Parties a list of all adult plaintiffs, if any, who have not signed their respective Releases (Unsigned Plaintiffs) and all minor plaintiffs who have not had their claims included within and resolved through the Court approval process (Unresolved Minor Plaintiffs), and the following provisions shall apply: |
a. | If fewer than all of the adult plaintiffs have signed Releases and/or fewer than all of the minor plaintiffs have had their claims included within and resolved through court approval of the settlement of the minors claims, the amounts to be distributed pursuant to paragraph 3 hereof shall be reduced by: |
i. | any payments that would otherwise be made to the Unsigned Plaintiffs and the Unresolved Minor Plaintiffs, if any, representing the net settlement proceeds from the fund established in paragraph 3.d.; |
ii. | any payments or grants that would otherwise be made to or for the benefit of the Unsigned Plaintiffs, if any, from the Property Relocation/Adjustment Fund established under paragraph 3.f; |
iii. | any payments or grants that would otherwise be made to or for the benefit of the Unsigned Plaintiffs and the Unresolved Minor Plaintiffs, if any, from the funds described in paragraphs 3.g. and h. |
12
b. | If the adult plaintiffs who have signed Releases and the minor plaintiffs covered by the court approval of the minors settlement total fewer than 97% of the plaintiffs on the Plaintiff List, then the Interested Parties, at their sole discretion and election, may, during the period thirty-one (31) to sixty (60) days after the end of the Release Period except as provided in paragraph c.iii. below, give written notice to plaintiffs counsel that this Settlement Agreement is null and void. If the Interested Parties give such written notice, plaintiffs counsel shall have sixty (60) days to return any and all monies provided for hereunder to the Interested Parties. In that event, the plaintiffs reserve their right to file a motion with the Court requesting that the jury trial in the Abernathy case be resumed from the point at which it was stayed. If the Interested Parties do not give such written notice, plaintiffs counsel shall distribute the funds in the Escrow Account as set forth in this Settlement Agreement. |
c. | Notwithstanding paragraphs 5.a. and 5.b. hereof, if the Court dismisses the claims of the Unsigned Plaintiffs and the Unresolved Minor Plaintiffs, if any, with prejudice, no later than thirty (30) days after the end of the Release Period, then: |
i. | if the claims of all Unsigned Plaintiffs and the Unresolved Minor Plaintiffs are dismissed with prejudice and no notice of appeal from such dismissal is filed within forty-two (42) |
13
days (Appeal Period) of such dismissal, this Settlement Agreement shall remain in full force and effect and there shall be no reduction in the amounts provided for in paragraph 3 hereof; |
ii. | with respect to Unsigned Plaintiffs or Unresolved Minor Plaintiffs, if any, who file such notices of appeal within their respective Appeal Periods and Unsigned Plaintiffs and Unresolved Minor Plaintiffs, if any, whose claims are not so dismissed, the reduction provided for in 5.a. shall remain in effect, with respect to the amounts payable to such Unsigned Plaintiffs or Unresolved Minor Plaintiffs. |
iii. | if the number of Unsigned Plaintiffs or Unresolved Minor Plaintiffs, if any, who file such notices of appeal within their respective Appeal Periods plus the number of Unsigned Plaintiffs and Unresolved Minor Plaintiffs, if any, whose claims are not so dismissed amount to more than 3% of the plaintiffs on the Plaintiff List, then the Interested Parties shall retain their right to cancel this Settlement Agreement under paragraph 5.b. hereof by written notice during the period thirty (30) days after the end of the last respective Appeal Period. |
6. No payments may be made to or for the benefit of any minor plaintiffs from any of the separately available funds established under paragraph 3 hereof until the Court approves the settlement of the minors claims. No payments may be made to minors from the Property Relocation/Adjustment Fund.
14
7. Within sixty (60) days after the end of the Release Period (or, if claims of Unsigned Plaintiffs or Unresolved Minor Plaintiffs are dismissed under paragraph 5.c. hereof, within sixty (60) days of the end of the Appeal Period), plaintiffs counsel shall return to the Interested Parties from the Escrow Account the amounts, if any, by which the amounts to be distributed pursuant to paragraph 3 are reduced under the terms hereof on account of Unsigned Plaintiffs and Unresolved Minor Plaintiffs. Within thirty (30) days after the end of the Release Period, plaintiffs counsel shall also provide the following reports to the Interested Parties:
a. | a report for each such Unsigned Plaintiff or Unresolved Minor Plaintiff of the amounts calculated for payments and/or grants to or for the benefit of that Plaintiff for the purposes of paragraphs 5.a.i., ii. and iii; and |
b. | with respect to each Unsigned Plaintiff or Unresolved Minor Plaintiff, if any, who, despite plaintiffs counsels good faith efforts, cannot be located, a report of the good faith efforts to locate such plaintiff. |
8. Any dispute regarding the amount of the monies, if any, to be returned to the Interested Parties pursuant to paragraphs 5 and 7 above shall be referred to Resolutions LLC for resolution, and the decision of Resolutions LLC shall be binding upon the parties to this Settlement Agreement.
15
9. Plaintiffs acknowledge that the remediation obligations of the Interested Parties and the obligations, if any, of their affiliates and other persons or entities designated in Exhibit B as Released Parties are governed by the Revised Partial Consent Decree entered August 4, 2003. Upon delivery of the Releases from the adult plaintiffs pursuant to paragraph 3.c. hereof, plaintiffs agree to withdraw as amici curiae in the matter styled United States of America v. Pharmacia Corporation, et al.,Civil Action No. 02-C-0749-E, and to forego any right to appeal any decision of the United States District Court regarding the Revised Partial Consent Decree.
10. It is specifically acknowledged and agreed that the agreements and obligations of the Interested Parties under this Settlement Agreement are conditioned upon the concurrent execution of the Global Settlement Agreement and the execution of the Tolbert Settlement Agreement and entry of the Order and Judgment in Tolbert.
11. Upon delivery of the Releases from the adult plaintiffs pursuant to paragraph 3.c. hereof, and the Courts approval of the minors settlement, the plaintiffs and the Interested Parties shall jointly file motions for dismissal with prejudice, along with proposed orders, to effectuate the dismissal of all released claims in the cases referenced in the first paragraph of the preamble to this Settlement Agreement other than United States v. Pharmacia Corporation, et al. The orders in the state cases shall provide that the Honorable R. Joel Laird, Jr., Calhoun County Circuit Court, retains continuing jurisdiction in those cases for the purpose of enforcing this Settlement Agreement.
12. The parties make no representations or warranties of any kind to each other except as specifically set out in the Global Settlement Agreement and this Settlement Agreement and on the record before the Honorable U. W. Clemon and the Honorable R. Joel Laird, Jr., on August 20, 2003.
16
13. The Global Settlement Agreement and this Settlement Agreement and the attached Exhibits supersede all prior discussions, negotiations and agreements between the parties with respect to the settlement of the litigation. The Global Settlement Agreement, this Settlement Agreement and the attached Exhibits, and the representations made on the record on August 20, 2003, before the Honorable U. W. Clemon and the Honorable R. Joel Laird, Jr. contain the sole and entire agreement between the parties with respect to the settlement of the plaintiffs claims.
14. This Settlement Agreement shall not be modified or amended except by an instrument in writing signed by or on behalf of the parties hereto and approved by the Court. No such modification or amendment shall modify or amend any Release without the written consent of the affected released party or parties.
15. It is understood and agreed by plaintiffs that the Global Settlement Agreement and this Settlement Agreement are a complete resolution, settlement and compromise of disputed claims, and neither the Global Settlement Agreement, this Settlement Agreement, the consideration, nor or any discussions regarding the Global Settlement Agreement and this Settlement Agreement shall constitute an admission of liability or wrongdoing on the part of the Released Parties. It is expressly acknowledged by plaintiffs that the Released Parties deny any liability or wrongdoing whatsoever.
16. The parties agree that upon payment to or on behalf of the plaintiffs of the amounts (as they may be adjusted) set forth in paragraph 3d. through g. hereof and the agreement to pay the amounts set forth in paragraph 3.h. hereof, any liability for punitive
17
damages or penalties against Pharmacia Corporation, Solutia Inc., Monsanto Company, or any of the Released Parties relating to the manufacture, use, release or disposal of polychlorinated biphenyls at or from the Anniston plant or Anniston property owned or controlled by the Released Parties is extinguished and that an assessment of punitive damages or penalties against Pharmacia Corporation, Solutia Inc., Monsanto Company, or any of the Released Parties relating to the manufacture, use, release or disposal of polychlorinated biphenyls at or from the Anniston plant or Anniston property owned or controlled by the Released Parties would not be warranted.
17. The Global Settlement Agreement and this Settlement Agreement shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of Alabama.
18. Plaintiffs, by and through their counsel of record, represent and warrant that plaintiffs counsel have express authority to enter into the Global Settlement Agreement and this Settlement Agreement. The Interested Parties, by and through their undersigned counsel, represent and warrant that their undersigned counsel have express authority, pursuant to their respective Articles of Incorporation, By-Laws, Board of Directors resolutions, or other governing corporate policy or procedure, to enter into the Global Settlement Agreement and this Settlement Agreement on behalf of the Interested Parties.
19. The Global Settlement Agreement and this Settlement Agreement shall apply to, be binding upon, and inure to the benefit of all of the plaintiffs and the Released Parties as well as their respective heirs, legal representatives, successors in interest and assigns. Nothing in this Settlement Agreement shall provide any rights to, or be enforceable by, any person or entity other than the plaintiffs and the Released Parties.
18
20. The parties to this Settlement Agreement and their counsel shall use best efforts to effectuate the terms and purposes of this Settlement Agreement.
21. All notices or other communications to any party to this Settlement Agreement shall be in writing (and shall include facsimile or similar writing) and shall be given to the respective parties hereto at the following addresses. Plaintiffs counsel and the Interested Parties may change the name and address of the person(s) designated to receive notice on behalf of such party by notice given as provided in this paragraph.
Plaintiffs:
Donald W. Stewart, Esq.
1131 Leighton Avenue P. O. Box 2274 Anniston, Alabama 36202 Facsimile: (256) 237-0713 |
Daniel R. Benson, Esq.
Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 Facsimile: (212) 506-1800 |
Interested Parties:
William S. Cox, III, Esq.
Lightfoot, Franklin & White, L.L.C. The Clark Building 400 20th Street North Birmingham, AL 35203-3200 |
19
22. All obligations of the Interested Parties pursuant to this Settlement Agreement (including, but not limited to, all payment obligations) are intended to be, and shall remain, joint and several.
23. Except as otherwise provided in the Global Settlement Agreement or this Settlement Agreement, all parties shall bear their own expenses of litigation and attorneys fees which have arisen or will arise in connection with the litigation referenced in the preamble to this Settlement Agreement, the Global Settlement Agreement, this Settlement Agreement, or any other matters or documents related thereto.
24. This Settlement Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall comprise a single instrument.
Dated: | 9/9 | , 2003 | /s/ Donald W. Stewart | |||
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Attorneys for Plaintiffs | ||||||
Dated: | 9/9 | , 2003 | /s/ William S. Cox | |||
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Attorneys for Monsanto Company | ||||||
Dated: | 9/9 | , 2003 | /s/ William S. Cox | |||
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Attorneys for Solutia Inc. | ||||||
Dated: | 9/9 | , 2003 | /s/ William S. Cox | |||
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Attorneys for Pharmacia Corporation |
20
IN THE CIRCUIT COURT
ETOWAH COUNTY, ALABAMA
SABRINA ABERNATHY, ET AL.,
)
)
Plaintiffs,
)
)
Civil Action No. CV-01-832
)
v.
)
)
)
)
MONSANTO COMPANY, ET AL.,
)
)
Defendants.
)
ORDER APPROVING SETTLEMENT
This matter came before the Court upon the Joint Motion of the Parties for Approval of the Global Settlement Agreement, entered into on September , 2003, and the Settlement Agreement, entered into on September , 2003, both of which were attached to such motion. Based upon the information provided by the parties and the experience of the Court during the course of the pretrial and trial proceedings, including the information provided during the joint hearing before the United States District Court, Northern District of Alabama and this Court on August 20, 2003, IT IS HEREBY ORDERED, ADJUDGED, and DECREED:
1. | The Global Settlement Agreement and the Settlement Agreement were the product of good faith negotiations among the parties to these actions with the assistance of Resolutions LLC as mediator. |
2. | The terms and conditions of the Global Settlement Agreement and the Settlement Agreement are fair and reasonable, including the payment of attorneys fees and expenses as set forth in the Settlement Agreement. |
3. | The Settlement Agreement is incorporated herein, and the Court retains continuing jurisdiction of this matter for the purpose of enforcing the Settlement Agreement. |
4. | The Court specifically finds that upon entry of this Order and the payment to or on behalf of the plaintiffs of the amounts set forth in paragraph 3.d. through g. of the Settlement Agreement and the agreement to pay the amounts set forth in paragraph 3.h. of the Settlement Agreement, there will be no further need for punishment of or penalties against Pharmacia Corporation, Solutia Inc., Monsanto Company, or any officer, director, employee, agent, representative or affiliate thereof relating to the use, manufacture, release or disposal of polychlorinated biphenyls at or from the Anniston plant or Anniston property owned or controlled by the parties released under the terms of the Settlement Agreement. The Court further finds that an assessment of punitive damages or penalties against Pharmacia Corporation, Solutia Inc., Monsanto Company, or any officer, director, employee, agent, representative or affiliate thereof relating to the use, manufacture, release or disposal of polychlorinated biphenyls at or from the Anniston plant or Anniston property owned or controlled by the parties released under the terms of the Settlement Agreement would not be warranted. |
5. | The Court hereby approves Account No. 53505264 at Citibank, N.A., Private Bank, 153 East 53rd Street, New York, New York 10043, ABA # 021 000 089, For the Account of Kasowitz, Benson, Torres & Friedman LLP, as Escrow Agent for the Abernathy Plaintiffs, as the Escrow Account designated by plaintiffs counsel in accordance with the provisions of the Settlement Agreement. |
6. | In accordance with paragraph 3.b of the Settlement Agreement, the Court hereby assesses fifteen million dollars ($15,000,000.00) in costs against the defendants to be paid to plaintiffs counsel in accordance with the terms and conditions of the Settlement Agreement. |
DONE and ORDERED this day of August, 2003.
|
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R. Joel Laird, Jr.
Calhoun County Circuit Court |
GENERAL RELEASE
In consideration of the payments made by or on behalf of Pharmacia Corporation, Monsanto Company and Solaria Inc. and the obligations undertaken by Pfizer Inc., the receipt of which are hereby acknowledged, I completely release and forever discharge Pharmacia Corporation, Monsanto Company, Solutia Inc. and Pfizer Inc., their past, present, and future officers, directors, stockholders, attorneys, agents, servants, representatives, employees, contractors, distributors, dealers, subsidiaries, affiliates, insurance companies, partners, predecessors and successors in interest, and assigns and all other persons, firms or corporations with whom any of the foregoing parties have been, are now or may hereafter be affiliated (referred to herein as the Released Parties) from any and all legal or equitable claims, whether currently known or unknown, which I now have or may have in the future, resulting from any matter, thing, or event occurring or failing to occur at any time in the past up to and including the date of the signing of this General Release related to the operations or activities of the plant in Anniston, Alabama that has been operated and currently is operated by one or more of the Released Parties (the Anniston Plant), (including any and all legal or equitable claims that were or could have been brought by me for losses of services of minors, claims for medical or other expenses incurred on behalf of minors, and any other such claims of mine which are personal to me and which were or could have been brought by me against one or more of the Released Parties solely because I am a parent or next friend of any minor), and more particularly, but without in any way limiting the generality of the foregoing, any and all legal or equitable claims, whether currently known or unknown, which I now have or may have in the future arising from or related to contamination of property or person from, or exposure of property or person to, PCBs manufactured, used or handled at the Anniston Plant or disposed of or released by or at the Anniston Plan, or emanating from the Anniston Plant or other property on which PCBs that relate to the operations or activities of the Anniston Plant are present, and without in any way limiting the generality or being bound by
the particularity of the foregoing, any claims that were or could have been asserted by me in the actions included in the consolidated action in the Circuit Court of Etowah County, Alabama styled Abernathy, et al. v. Monsanto Company, et al., Civil Action No. CV-01-832, (the Lawsuit).
In further consideration of the payments herein recited to have been made or to be made to me or on my behalf, and for other good and valuable consideration, I acknowledge and agree that the Released Parties do not now and have not at any time heretofore admitted liability to me or to anyone else for the claims herein released. To the contrary, the Released Parties expressly deny any such liability to any plaintiff. Based on my independent judgment, I expressly consent to the dismissal with prejudice of the claims asserted against the Released Parties in the Lawsuit.
I represent and warrant that I intend by signing this Release to bind my heirs, administrators, successors or assigns by this Release; that I am agreeing to be bound by this Release having received the advice of counsel of my choosing; that no other person or entity has or has had any interest in the claims, demands, obligations or causes of action referred to in this Release except as otherwise set forth herein; that I have the sole right and exclusive authority to negotiate any check and receive the sum specified in it; and that I have not sold, assigned, transferred, conveyed or otherwise disposed of any of the claims, demands, obligations or causes of action referred to in this Release.
Executed at , this day of , 2003.
CAUTION: READ BEFORE SIGNING BELOW
STATE OF ALABAMA
)
)
COUNTY OF
)
BEFORE ME, the undersigned, duly authorized to take acknowledgments in the State and County aforesaid, personally appeared known to me to be the person designated in the foregoing Release and he acknowledged before me that he executed the same freely and voluntarily for the purposes described therein.
NOTARY PUBLIC
State of Alabama at Large
County of
My Commission Expires:
UNITED STATES DISTRICT COURT
NOTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ANTONIA TOLBERT, et al.,
)
)
Plaintiffs,
)
)
)
vs.
)
CIVIL ACTION NO. CV-01-C-1407-S
)
)
)
MONSANTO COMPANY,
)
PHARMACIA, INC. and
)
SOLUTIA, INC.,
)
)
Defendants.
)
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into by, between and among the aggregated plaintiffs as defined below (collectively Plaintiffs), by and through their counsel of record, in the matters styled Tolbert, et al., v. Monsanto Company, et al., Civil Action No. CV-01-C-1407-S, United States District Court, Northern District of Alabama and Oliver v. Monsanto Company, et al., Civil Action No. 02-C-836-S, United States District Court, Northern District of Alabama, and Solutia Inc., Pharmacia Corporation (formerly known as Monsanto Company), and Monsanto Company, collectively referred to herein as the Defendants. This Settlement Agreement is being entered into concurrently with a Global Settlement Agreement between the parties to this Settlement Agreement and the parties to a Settlement Agreement in the matter styled Abernathy, et al. v. Monsanto Company, et al., Civil Action No. 01-832, Circuit Court, Etowah County, Alabama and other cases described in that Settlement Agreement. The parties agree that the agreements and obligations set forth and described in this Settlement Agreement are conditional and contingent upon the concurrent settlement of
Abernathy and other actions and claims included within the Global Settlement Agreement. The purpose of this Settlement Agreement is to effectuate the Global Settlement Agreement that is incorporated herein.
1. | As used in this Agreement, the term Plaintiffs means all persons named as plaintiffs in any complaint or amended complaint filed in these actions to date, together with any person not so named but subject to the tolling agreement between the parties. All persons subject to such tolling agreement shall be identified in an amended complaint specifically naming each person subject to the tolling agreement as an additionally named plaintiff within thirty (30) days after entry of the Final Judgment and Order. Plaintiffs may also dismiss certain plaintiffs or specified claims of certain plaintiffs, with the written agreement of Defendants, and by order of the Court. |
2. | The Defendants have agreed to pay the total sum of Three Hundred Million Dollars ($300,000,000.00) in accordance with the proposed Final Judgment and Order attached hereto as Exhibit A and incorporated herein. As of August 28, 2003, the sum of seventy-five million dollars ($75,000,000.00) was transferred to the Tolbert QSF pursuant to the Order Regarding Good Faith Settlement Payment, entered August 27, 2003. Two Hundred Million Dollars ($200,000,000.00), plus interest, shall be deposited by wire transfer to the Tolbert QSF in accordance with the Final Judgment and Order as follows: the sum of one hundred and eighty million dollars ($180,000,000.00), plus interest thereon, to AmSouth Bank, |
Wealth Management Operations Department, ABA #: 062000019, Account #: 0017541387, For Further Credit to Tolbert Qualified Settlement Fund, Account #: 1060001574. Attn. Laura Wainwright and the sum of twenty million dollars ($20,000,000.00), plus interest thereon, to Sterling Bank, Scott McCall, Tolbert QSF, Account Number 01414348, Routing Number 061100606. Beginning on August 26, 2004 and continuing on each August 26 up to and including August 26, 2013, the Defendants shall wire transfer the sum of two million, five hundred thousand dollars ($2,500,000.00) to an account other than an account held by the Tolbert QSF to be agreed to by the parties and approved by the Court and to be used to fund the medical clinic to be established in west Anniston in accordance with this Settlement Agreement and the Final Judgment and Order. |
3. | Attorneys fees shall be paid by the Tolbert QSF in accordance with paragraph 4 of the Final Judgment and Order. The parties agree that the term final in paragraph 4 of the Final Judgment and Order means that the Final Judgment and Order has been entered by the Court, and (i) if no appeal has been taken from the Final Judgment and Order, that the time to appeal therefrom under the Federal Rules of Appellate Procedure has expired; or (ii) if any appeal has been taken from the Final Judgment and Order, that all appeals therefrom, including petitions for certiorari or any other form of review have been finally disposed of in a manner that affirms the Final Judgment and Order as to the judgment amount of Three |
Hundred Million Dollars ($300,000,000.00) referenced in paragraph 2 of the Final Judgment and Order, and that the time for any further appeal, rehearing or review has expired; provided, however, that if no appeal taken from the Final Judgment and Order seeks review of the judgment amount of Three Hundred Million Dollars ($300,000,000.00), Plaintiffs, through counsel, may immediately petition the District Court, through that Courts retained jurisdiction over this Settlement Agreement and the Final Judgment and Order, for an order directing and approving payment of attorneys fees from the Tolbert QSF before disposition of the appeal(s). |
4. | The other funds in the Tolbert QSF shall be distributed by the Settlement Administrator pursuant to paragraph 7 of the Final Judgment and Order. |
5. | Any checks made payable directly to any plaintiff or authorized plaintiff representative shall contain release language as follows: |
By endorsing this check, and after being informed fully by my lawyer, I hereby release, for myself and my heirs and representatives, all claims against Monsanto Company, Solutia Inc., and Pharmacia Corporation and their affiliates to the full extent permitted under federal or state law pursuant to the Settlement Agreement and Final Judgment and Order in Tolbert, et al. v. Monsanto Company, et al., Case No. CV-01-C-1407-S, United States District Court, Northern District of Alabama. In addition, I hereby release, for myself and my heirs and representatives, all claims against the Tolbert Qualified Settlement Fund, the Settlement Administrator of that Qualified Settlement Fund, and my lawyer(s) and their affiliates to the full extent permitted under federal or state law.
The parties to this agreement hereby agree and acknowledge that the creation of the Tolbert QSF (and the funding thereof) and other good and valuable consideration, the receipt of which is acknowledged, this Agreement and the Final Judgment and Order extinguish all claims of plaintiffs to the full extent permitted by state or federal law against Pharmacia Corporation, Monsanto Company, Solutia Inc., and their related and affiliated companies, including Pfizer Inc., and their officers, |
directors, stockholders, attorneys, agents, servants, representatives, employees, contractors, distributors, dealers, subsidiaries, affiliates, and insurance companies and who are hereby completely released and forever discharged (referred to herein as the Released Parties). The Released Parties are hereinafter released and relieved from any and all legal or equitable claims, whether currently known or unknown, which any plaintiff now has or may have in the future resulting from any matter, thing, or event occurring or failing to occur at any time in the past up to and including the date hereof, and more particularly, but without in any way limiting the generality of the foregoing, any and all legal or equitable claims, which any plaintiff has arising from or related to contamination of property or person from or exposure of property or person to PCBs manufactured or handled by, disposed of, under the control of, or emanating from property owned or controlled, either in the past, present, or future, by one or more of the Released Parties and any and all legal or equitable claims, whether known or unknown, which he or she now has or may have in the future resulting or arising from any act or omission of any of the Released Parties related to the operations and activities at the plant that has been operated and currently is operated by one or more of the Released Parties in Anniston, Alabama, and more particularly, but without in any way limiting the generality of the foregoing, any claims that were or could have been asserted by him or her in the action in the United States District Court for the Northern District of Alabama styled Tolbert v. |
Monsanto Co., Civil Action No. CV-01-C-1407-S and any and all legal or equitable claims that were or could have been brought by or on behalf of any plaintiff against one or more of the Released Parties. |
6. | The costs, including the fees and expenses, of the Settlement Administrator shall be paid in accordance with the terms and conditions of the Final Judgment and Order and the order appointing the Settlement Administrator. |
7. | Payments to minor plaintiffs shall be determined by the Settlement Administrator consistent with the Final Judgment and Order, subject to further approval by the Court. |
8. | The annual payments required to be paid pursuant to paragraph 2 of this Settlement Agreement shall be used solely to operate the health clinic to be established pursuant to the Final Judgment and Order. |
9. | It is specifically acknowledged and agreed that the obligations of Defendants under this Agreement are conditioned upon the concurrent entry of the Global Settlement Agreement and the Settlement Agreement in the Abernathy related matters. |
10. | The parties make no representations or warranties of any kind to each other except as specifically set out in the Global Settlement Agreement, this Settlement Agreement, and the Abernathy Settlement Agreement, and on the record before the Honorable U. W. Clemon and the Honorable R. Joel Laird, Jr. on August 20, 2003 (including the Proposed Order of that date). The transcript of the hearing on August 20, 2003, the Pfizer Inc., |
letter to Solutia general counsel Jeff Quinn dated August 20, 2003, and the Proposed Order of August 20, 2003 are attached hereto as composite Exhibit B. |
11. | The Global Settlement Agreement, this Settlement Agreement, the Final Judgment and Order, and the representations made on the record on August 20, 2003 (including the Proposed Order of that date), before the Honorable U. W. Clemon and the Honorable R. Joel Laird, Jr. contain the sole and entire agreement between the parties with respect to the settlement of the Plaintiffs claims. |
12. | Neither the Global Settlement Agreement nor this Settlement Agreement shall be modified or amended except by an instrument in writing signed by or on behalf of the parties hereto and approved by the Court. |
13. | It is expressly acknowledged by Plaintiffs that the Defendants deny any liability or wrongdoing whatsoever, and that Monsanto Company specifically reserves its argument that it is not a proper party to this matter and that Monsanto Companys participation in this Agreement is without prejudice to its arguments regarding its status as a party defendant. |
14. | The Global Settlement Agreement, this Settlement Agreement, and the Final Judgment and Order shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of Alabama. All issues relating to the Global Settlement Agreement, this Settlement Agreement, and the Final Judgment and Order or any related agreement shall be presented to the Honorable U. W. Clemon, United States District Court, Northern District of Alabama, for resolution. |
15. | Plaintiffs, by and through their counsel of record, represent and warrant that Plaintiffs Counsel have authority to enter into the Global Settlement Agreement and this Settlement Agreement and to consent to the entry of the Final Judgment and Order. The Defendants, by and through their counsel, represent and warrant that Defendants Counsel have express authority, pursuant to their respective Articles of Incorporation, By-Laws, Board of Directors resolutions, or other governing corporate policy or procedure, to enter into the Global Settlement Agreement and this Settlement Agreement, and to consent to the entry of the Final Judgment and Order on behalf of the Defendants. |
16. | The Global Settlement Agreement, this Settlement Agreement, and the Final Judgment and Order shall apply to, be binding upon, and inure to the benefit of all of the Plaintiffs (as defined in paragraph 11 of the Final Judgment and Order) and the Defendants, as well as their respective heirs, affiliates, related entities, legal representatives, successors in interest and assigns. |
17. | This Settlement Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall comprise a single instrument. |
Dated: | Sept 9 | , 2003 | ||||
|
||||||
/s/ Jere L. Beasley | ||||||
|
||||||
Attorneys for Plaintiffs | ||||||
Dated: | Sept. 9 | , 2003 | ||||
|
||||||
/s/ William S. Cox | ||||||
|
||||||
Attorneys for Monsanto Company | ||||||
Dated: | Sept 9 | , 2003 | ||||
|
||||||
/s/ William S. Cox | ||||||
|
||||||
Attorneys for Solutia | ||||||
Dated: | Sept 9 | , 2003 | ||||
|
||||||
/s/ William S. Cox | ||||||
|
||||||
Attorneys for Pharmacia Corporation |
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the Companys subsidiaries for the eight-month transition period ending August 31, 2003, except for unnamed subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as defined in Regulation S-X of the United States Securities and Exchange Commission (17 CFR 210.1-02(w)).
Asgrow Seed Company LLC (Delaware)
DEKALB Genetics Corporation (Delaware)
Holdens Foundation Seeds, L.L.C. (Iowa)
Monsanto Ag Products LLC (Delaware)
Monsanto Argentina S.A.I.C. (Argentina)
Monsanto Canada, Inc. (Canada)
Monsanto do Brasil Ltda. (Brazil)
Monsanto Europe S.A./N.V. (Belgium)
Monsanto Nordeste S.A. (Brazil)
Monsanto SAS (France)
Monsanto Technology LLC (Delaware)
Monsanto U.K. Limited (United Kingdom)
Semillas y Agroproductos Monsanto, S.A. de C.V. (Mexico)
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Monsanto Companys
Registration Statements on Form S-8 (Nos. 333-51316, 333-64076, 333-97871 and
333-104855) and on Form S-3 (No. 333-88542) of our report, dated November 14,
2003 (which report expresses an unqualified opinion and includes explanatory
paragraphs relating to the adoption of: Statement of Financial Accounting
Standards No. 143,
Accounting for Asset Retirement Obligations,
in 2003;
Statement of Financial Accounting Standards No. 142,
Goodwill and Other
Intangible Assets,
in 2002; and Staff Accounting Bulletin No. 101,
Revenue
Recognition in Financial Statements,
in 2000) on the consolidated financial
statements of Monsanto Company and subsidiaries, incorporated by reference in
this transition report on Form 10-K of Monsanto Company for the eight months
ended August 31, 2003.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 25, 2003
EXHIBIT 23.2
Deloitte ®
Deloitte & Touche LLP
Two Prudential Plaza 180 North Stetson Avenue Chicago, IL 60601-6710 USA Tel: +1 312 946 3000 Fax: +1 312 946 2600 www.deloitte.com |
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in the Registration Statement No.
333-88542 of Monsanto Company on Form S-3 and in the Registration Statement
Nos. 333-51316, 333-64076, 333-97871, and 333-104855 of Monsanto Company on
Form S-8 of our report of Renessen LLC dated September 25, 2003 contained as a
schedule to Form 10-K of Monsanto Company for the eight months ended August 31,
2003.
/s/ Deloitte & Touche LLP
November 25, 2003
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director or Officer of
Monsanto Company (the Company), a Delaware corporation with its general
offices in the County of St. Louis, Missouri, does hereby make, constitute and
appoint CHARLES W. BURSON, NANCY E. HAMILTON, SONYA M. DAVIS or MICHAEL L.
DECAMP, or any one of them acting alone, his or her true and lawful attorneys,
with full power of substitution and resubstitution, in his or her name, place
and stead, in any and all capacities, to execute and sign the Companys Annual
Report on Form 10-K, and any and all amendments thereto, and documents in
connection therewith, to be filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, giving and granting unto said attorneys full power and
authority to do and perform such actions as fully as they might have done or
could do if personally present and executing any of said documents.
Dated and effective as of the 6th of November 2003.
/s/ Frank V. AtLee III
/s/ Hugh Grant
Frank V. AtLee III, Director,
Hugh Grant, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Gwendolyn S. King
/s/ Sharon R. Long
Gwendolyn S. King, Director
Sharon R. Long, Director
/s/ C. Steven McMillan
/s/ William U. Parfet
C. Steven McMillan, Director
William U. Parfet, Director
/s/ George H. Poste
/s/ Robert J. Stevens
George H. Poste, Director
Robert J. Stevens, Director
/s/ Terrell K. Crews
/s/ Richard B. Clark
Terrell K. Crews, Executive Vice President,
Richard B. Clark, Vice President
Chief Financial Officer
and Controller (Principal Accounting
(Principal Financial Officer)
Officer)
EXHIBIT 24.2
MONSANTO COMPANY
CERTIFICATE
I, Sonya M. Davis, Assistant Secretary of Monsanto Company, hereby certify that the following is a full, true and correct copy of an excerpt from resolutions adopted by the Board of Directors of Monsanto Company on November 6, 2003, at which meeting a quorum was present and acting throughout:
. . . |
2. | Each officer and director who may be authorized or required to sign and execute the Form 10-K or any document in connection therewith (whether for and on behalf of the Company, or as an officer or director of the Company, or otherwise), be and hereby is authorized to execute a power of attorney appointing Charles W. Burson, Nancy E. Hamilton, Sonya M. Davis or Michael L. DeCamp, or any of them acting alone, his or her true and lawful attorney or attorneys, with full power of substitution and resubstitution to sign in his or her name, place and stead in any such capacity such Form 10-K and any and all amendments thereto and documents in connection therewith, and to file the same with the SEC or any other governmental body, each of said attorneys to have power to act with or without the others, and to have full power and authority to do and perform, in the name and on behalf of each of said officers and directors, every act whatsoever which such attorneys, or any one of them, may deem necessary, appropriate or desirable to be done in connection therewith as fully and to all intents and purposes as such officers or directors might or could do in person. |
. . . |
IN WITNESS WHEREOF, I have hereunto set my hand in my official capacity and affixed the corporate seal of Monsanto Company this 25th day of November 2003.
/s/ Sonya M. Davis | ||
|
||
[SEAL] | Sonya M. Davis | |
Assistant Secretary |
EXHIBIT 31.1
CERTIFICATIONS
I, Hugh Grant, Chairman, President and Chief Executive Officer of Monsanto
Company, certify that:
Date: November 25, 2003
1.
I have reviewed this transition report on Form 10-K of Monsanto Company;
2.
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)
[Reserved]
c)
Evaluated the effectiveness of the registrants disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based upon such evaluation; and
d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants
most recent fiscal quarter (the registrants fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal
control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrants auditors and the audit committee of registrants board
of directors (or persons performing the equivalent function):
a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal control over financial reporting.
/s/ Hugh Grant
Hugh Grant
Chairman, President and Chief Executive Officer
Monsanto Company
EXHIBIT 31.2
CERTIFICATIONS
I, Terrell K. Crews, Executive Vice President and Chief Financial Officer of
Monsanto Company, certify that:
Date: November 25, 2003
1.
I have reviewed this transition report on Form 10-K of Monsanto Company;
2.
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b)
[Reserved]
c)
Evaluated the effectiveness of the registrants disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based upon such evaluation; and
d)
Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants
most recent fiscal quarter (the registrants fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal
control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrants auditors and the audit committee of registrants board
of directors (or persons performing the equivalent function):
a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal control over financial reporting.
/s/ Terrell K. Crews
Terrell K. Crews
Executive Vice President and Chief Financial Officer
Monsanto Company
EXHIBIT 32
CERTIFICATION PURSUANT TO
In connection with the report of Monsanto Company (the Company) on Form
10-K for the eight-month transition period ended August 31, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the Report), and
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Company
does hereby certify that, to the best of such officers knowledge:
November 25, 2003
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Hugh Grant
Hugh Grant
President and Chief Executive
Officer
/s/ Terrell K. Crews
Terrell K. Crews
Executive Vice President and Chief
Financial Officer
EXHIBIT 99
MONSANTO COMPANY
COMPUTATION OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Eight Months Ended
August 31,
Year Ended December 31,
2003
2002
2001
2000
1999
1998
$
(38
)
$
202
$
459
$
334
$
263
$
(60
)
71
105
147
272
305
140
(4
)
(8
)
(30
)
(37
)
(23
)
(9
)
0
1
1
1
1
1
26
43
41
34
18
31
$
55
$
343
$
618
$
604
$
564
$
103
$
57
$
81
$
99
$
214
$
269
$
121
4
8
30
37
23
9
10
16
18
21
13
10
$
71
$
105
$
147
$
272
$
305
$
140
0.77
*
3.27
4.20
2.22
1.85
0.74
* | Earnings were inadequate to cover fixed charges by $16 million. |