<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-51919
Prospectus Supplement to Prospectus dated May 19, 1998.
22,500,000 Shares
[Logo]
MONSANTO COMPANY
Common Stock
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The Common Stock is listed on the New York Stock Exchange under the symbol
"MTC". The last reported sale price of the Common Stock on November 23, 1998
was $41.00 per share.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price........................... $40.00 $900,000,000
Underwriting discount................................... $1.20 $27,000,000
Proceeds, before expenses, to Monsanto Company.......... $38.80 $873,000,000
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 2,456,250 shares of Common Stock from Monsanto Company at the
public offering price less the underwriting discount.
---------------
The underwriters are severally offering the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New
York on November 30, 1998.
Joint Book-Running Managers
GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
---------------
Prospectus Supplement dated November 23, 1998.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial information appearing elsewhere
in or incorporated by reference into this prospectus.
THE COMPANY
Monsanto is a life sciences company, committed to finding solutions to the
growing global needs for food and health by applying common forms of science
and technology among agriculture, nutrition and health. The 26,500 employees of
Monsanto make and market high-value agricultural products, pharmaceuticals and
food ingredients.
Monsanto was an early innovator in agricultural biotechnology, and its
Agricultural Products segment is a leading worldwide developer, producer and
marketer of crop protection products and of products enhanced by biotechnology.
Monsanto markets its technology through its seed companies and through
licensing its technology to third-party seed companies.
The Nutrition and Consumer Products segment of the Company manufactures and
markets sweeteners (including NutraSweet brand sweetener and Equal and Canderel
tabletop sweeteners), alginates, biogums and other food ingredients. This
segment also is investing in a science-based nutrition research program for
future life sciences products.
The Company's wholly-owned subsidiary, G.D. Searle & Co., focuses its
pharmaceutical product portfolio and research efforts to solve unmet medical
needs in four major therapeutic areas: arthritis/pain; cardiovascular; women's
health; and oncology.
The Company was incorporated in 1933 under Delaware law and is the
successor to a Missouri corporation, Monsanto Chemical Works, organized in
1901. The Company's principal executive offices are located at 800 North
Lindbergh Boulevard, St. Louis, Missouri 63167 (telephone number (314) 694-
1000) and its internet address is http://www.monsanto.com.
STRATEGY
Monsanto is a life sciences company that creates value by advancing and
applying the rapid innovations in biosciences and genomics to agriculture,
nutrition and health. By considering agriculture, nutrition and health as a
system rather than as isolated businesses, the Company expects to develop more
powerful approaches to medical and agricultural needs. The sharing of these
technologies across businesses can result in reduced time and cost of research
and development (known as "R&D") and also allows the Company to focus on the
most promising candidates in its product pipeline.
While the life sciences industry is relatively young, Monsanto expects the
recent trends of consolidation and alliances in the industry to continue. The
Company has assembled a unique network of relationships among technology
companies and traditional providers of agriculture, food, and human and animal
health during the past several years in order to compete effectively in this
emerging industry. Specifically, Monsanto:
. Has acquired, or agreed to acquire, several seed companies. These
investments are the foundation for Monsanto's continued success in quickly
bringing new biotech traits to market worldwide. The integration of seeds,
biotechnology and agricultural chemicals allows Monsanto to offer better
solutions to customers. Further, Monsanto expects this integration to
transform its seed companies from commodity-based operations to value-added
businesses. In the near term, the Company is focusing on the successful
integration of its seed assets.
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. Is collaborating with several genomics companies and has created a wholly-
owned subsidiary devoted to applying genomics technologies to the discovery
and development of plant and agricultural products. These collaborations
are expected to increase the speed and precision with which Monsanto can
discover and bring to market new life sciences products.
. Has forged partnerships and alliances with pharmaceutical companies to
speed the worldwide development and marketing of several promising products
in the Monsanto pipeline. The Company expects to continue this kind of
partnering for certain of its pharmaceutical pipeline products. In
addition, Searle has recently broadened its geographic presence with
strategic acquisitions in key countries, including Brazil, Argentina, Italy
and Switzerland.
. Has agreed with Cargill Incorporated ("Cargill") to form a joint venture to
create new and better products for animal feed and grain processing that
are expected to give growers more options and choices in raising crops
geared for those markets.
COMPANY STRENGTHS
The Company believes its competitive strengths include the following:
. Broad life sciences platform--Monsanto's portfolio includes products in
each of its key business sectors that provide a solid platform for its
efforts in furthering the enterprise as a life sciences company. The
Company has been recognized for its strong product stewardship--developing
and commercializing key products such as Roundup herbicide and NutraSweet
brand sweetener, and then maximizing their potential. Searle is currently
the No. 1 prescription arthritis treatment provider in the United States,
and a leading provider worldwide, driven by the success of the Daypro and
Arthrotec arthritis treatments. Arthrotec is also the No. 1 prescription
arthritis brand in Canada, Sweden and the United Kingdom. The Company's
product management capabilities have created the foundation for its life
sciences strategy and generated the cash flow that has allowed Monsanto to
fund its growth programs to date.
. Leadership position among agricultural biotechnology firms--Monsanto began
commercializing crops that are herbicide-or insect-resistant in 1995. In
1998, there were more than 50 million acres of crops planted with seeds
containing Monsanto biotechnology traits. This represents a clear
leadership position in this market. Such acreage is expected to grow
substantially as the Company continues to commercialize these products
around the world and as Monsanto traits are bred into more varieties. In
many growing regions, the demand for these products has exceeded supply,
and the satisfaction among growers planting these products indicates
continued growth potential.
. Strong near-term product pipeline--Monsanto has more than two dozen
products in its near-term product pipeline with expected commercialization
dates ranging from 1999 through 2002. The Company believes that the overall
expected value of this near-term portfolio exceeds $10 billion and that the
product candidates support each of the Company's major business segments
(Agricultural Products, Nutrition and Consumer Products and
Pharmaceuticals). See the product pipeline section below for additional
information.
. Leading-edge technology--The Company invested early on in agricultural
biotechnology, which has led to its strong position in agricultural
biotechnology products. Within the past two years, Monsanto has
collaborated with several genomics companies, and has created a wholly-
owned subsidiary to apply genomics technologies to the discovery and
development of plant and agricultural products. Genomics is expected to
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<PAGE>
contribute to an exponential increase in the number of new life sciences
products which can be created and brought to market. The Company believes
its biotechnology and genomics capabilities are unparalleled in the life
sciences industry.
. Marketplace presence, sales and distribution strength--Monsanto has well-
established relationships with a significant number of industry leaders in
its target markets, and is adding new relationships through its partnering
arrangements and alliances. This additional presence will position the
Company well as it continues to grow its life sciences franchise.
RECENT TRANSACTIONS
Agricultural Products Segment
The addition of seed companies to Monsanto's life sciences portfolio is
expected to speed the development and commercialization of seeds that: (1)
allow growers to use fewer insecticides or other inputs and allow for growing
crops in a more environmentally friendly manner; (2) have greater yields; or
(3) contain an improved quality (for example, a healthier oil) for human or
animal consumption.
Monsanto is focusing its agricultural biotechnology efforts and related
seed products on the major row crops (wheat, corn, soybeans, cotton, canola and
rice). As the Company has aggressively pursued its life sciences strategy, it
has entered into the following transactions during 1998:
DEKALB Genetics Corporation. On May 11, 1998, Monsanto announced a
definitive agreement to acquire the remaining shares of DEKALB Genetics
Corporation ("DEKALB") that Monsanto did not already own for a purchase price
of approximately $2.3 billion. This transaction is subject to regulatory
approvals and other customary conditions. DEKALB is a worldwide leader in
agricultural genetics and a top hybrid seed corn company in the United States.
DEKALB also has a strong presence in Latin America, plus seed interests in
Europe and Southeast Asia. DEKALB currently offers its customers Monsanto
traits for YieldGard insect-protected corn and Roundup Ready herbicide-tolerant
corn.
Delta and Pine Land Company. On May 11, 1998, Monsanto announced a
definitive agreement with Delta and Pine Land Company ("Delta Pine") to merge
Delta Pine with Monsanto. Under the terms of the agreement, Monsanto will issue
approximately 33 million shares of its Common Stock to Delta Pine shareowners.
The merger is subject to regulatory approvals, shareowner consent and other
customary conditions. Delta Pine is a leading breeder, producer and marketer of
cotton seed. It currently sells Monsanto's Bollgard and Ingard insect-protected
cotton in the United States, Mexico, Australia and China, and Roundup Ready
cotton in the United States. Delta Pine's international experience in
commercializing crops developed through biotechnology has allowed it to quickly
bring these new seeds to global markets.
Plant Breeding International Cambridge Limited. On July 16, 1998, Monsanto
acquired Plant Breeding International Cambridge Limited ("PBIC") for a purchase
price of approximately $525 million. PBIC breeds and produces new and improved
varieties of winter wheat and other crops. PBIC's principal operations are in
the United Kingdom, France and Germany.
Cargill International Seed Operations. In October 1998, Monsanto announced
the acquisition of the international seed operations of Cargill in Central and
Latin America, Europe (excluding certain operations in the United Kingdom),
Asia and Africa for a purchase price of approximately $1.4 billion. Cargill's
international seed businesses specialize in the development and marketing of
corn, rapeseed and sunflower seeds.
Cargill Joint Venture. On September 25, 1998, Monsanto and Cargill signed
an agreement to form a worldwide joint venture to create and market new
products enhanced through biotechnology for the grain processing and animal
feed markets. The 50-50 joint venture is expected to draw from Monsanto's
capabilities in genomics, biotechnology and
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<PAGE>
seeds and Cargill's global agricultural input, processing and marketing
infrastructure to develop new products with traits aimed at improving the
processing efficiencies and animal nutrition qualities of major crops.
Pharmaceuticals Segment
The Pharmaceuticals segment has entered into agreements designed to enhance
its ability to develop and commercialize its products and broaden its
geographical presence, including the following transactions:
. On January 19, 1998, Searle and Yamanouchi Pharmaceutical Co., Ltd.
announced an alliance to develop and commercialize key compounds from the
Searle product pipeline for the Japanese market.
. On February 18, 1998, Searle and Pfizer Inc. ("Pfizer") announced that they
had entered into definitive agreements covering the promotion in the United
States of Searle's novel COX-2 inhibitors under development for the
treatment of arthritis and pain. On March 24, 1998, Searle and Pfizer
expanded their collaboration agreement covering Searle's COX-2 arthritis
product to include all world areas except Japan.
Other Segments
The Company has focused on divesting certain non-core businesses, including
the following transactions:
. On June 25, 1998, Monsanto announced that it had signed a letter of intent
to sell its lawn-and-garden business exclusive of its Roundup herbicide
products for residential use to The Scotts Company for $300 million. Under
a separate, long-term, exclusive agreement, Monsanto will continue to make
Roundup for residential use, and The Scotts Company will market the
product.
. During the course of 1998, the Company completed the sale or restructuring
of several small, non-core businesses. This effort is expanding to include
a number of other non-core initiatives with potential gross proceeds of up
to $700 million.
PRODUCT PIPELINE
The Company's near-term product pipeline, defined as products that are
expected to be commercialized during the 1999-2002 period, includes significant
products in major markets. The expected productivity of the Company's R&D
investment represented in the near-term pipeline is 13:1, or for every dollar
of expected R&D and market launch costs, Monsanto estimates receiving $13 in
value.
Highlights of Monsanto's near-term pipeline include:
. Celebrex, a COX-2 inhibitor currently undergoing priority review at the
U.S. Food and Drug Administration (known as the "FDA") for acute or chronic
use in the treatment of the signs and symptoms of osteoarthritis and
rheumatoid arthritis and for the management of pain. Celebrex is designed
to treat arthritis without gastrointestinal side effects, which are common
in arthritis sufferers using non-steroidal anti-inflammatory medications
currently on the market.
. Other COX-2 candidates under development include: a once-a-day dosing
product for arthritis sufferers; an injectable COX-2 compound formulated
for the management of acute pain in a hospital setting; a treatment of
certain cancers; a dental analgesic; and, in the medium-term pipeline, a
COX-2 compound that may lessen the severity of Alzheimer's disease.
. Other near-term pharmaceutical pipeline products include: leridistim, a
blood cell growth factor expected to help prevent infections in cancer
patients after chemotherapy; daniplestim, another oncology compound
designed to help protect patients from infections and bleeding episodes;
and xemilofiban, an oral anti-platelet agent designed to prevent blood-clot
formation after coronary angioplasty.
. Neotame is an important product in the Nutrition and Consumer Products
segment's pipeline that can build on the
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<PAGE>
market leadership created by NutraSweet brand sweetener. Monsanto filed a
limited-use food additive petition with the FDA for this unique, no-
calorie, high-intensity sweetener in December 1997. The Company plans to
file for general use in the near future.
. The near-term agricultural pipeline includes products that will strengthen
Monsanto's already strong portfolio. The near-term pipeline currently
includes two herbicides and one seed treatment that address specific weed
and disease problems in wheat, which is planted on more acres worldwide
than any other crop. In addition, the pipeline includes: a biotechnology-
based product that will give corn growers protection against the corn
rootworm, a pest that costs U.S. growers $1 billion annually in lost
yields; and next-generation agricultural biotechnology products that will
incorporate insect and herbicide resistance traits in corn and cotton
seeds.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered............................ 22,500,000 shares
Common Stock outstanding after the offering(1).. 626,500,000 shares
Use of proceeds................................. The Company plans to use the
net proceeds of the offering
to finance or refinance seed
company acquisitions,
including to refinance its
outstanding commercial paper
as it becomes due, and for
working capital purposes.
NYSE symbol..................................... MTC
</TABLE>
(1) Excludes (a) approximately 85 million shares reserved for outstanding
stock options, (b) approximately 33 million shares to be issued in
connection with the Delta Pine merger and (c) 2,456,250 shares issuable
pursuant to the underwriters' over-allotment option.
OTHER OFFERINGS
Concurrently, the Company is also offering approximately $700 million in
Adjustable Conversion-rate Equity Security Units (which we will refer to in
this prospectus as "ACES") in a separate public offering. In a subsequent
private debt offering, the Company expects to offer $2.5 billion in aggregate
principal amount of senior unsecured long-term debt. The offerings of Common
Stock, ACES and debt securities together are referred to as the "Financings."
None of the offerings is conditioned upon the consummation of any other
offering. This prospectus relates only to the offering of Common Stock and no
other securities.
---------------
Trademarks and service marks owned or licensed by Monsanto and its
subsidiaries are indicated by special type throughout this prospectus.
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<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data of the
Company. The interim financial data have been derived from the unaudited
financial statements of the Company. The Company believes that the financial
statements reflect all adjustments necessary for a fair presentation of the
financial data. The results of the nine months do not necessarily indicate the
results to be expected for the full year. The year-end financial data have been
derived from the Company's audited financial statements. The data set forth are
based on, and should be read together with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
financial statements, the notes thereto and the other financial data and
statistical information included or incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
AS OF AND
FOR THE
NINE MONTHS
ENDED AS OF AND FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------------------
1998(1) 1997(2) 1997(3) 1996(4) 1995(5) 1994(6) 1993(7)
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net Sales............... $6,500 $5,694 $7,514 $6,348 $5,410 $4,679 $4,304
Operating Income........ 805 445 499 595 698 643 485
As a Percent of Net
Sales................. 12% 8% 7% 9% 13% 14% 11%
Income from Continuing
Operations............. 353 289 294 413 461 454 298
As a Percent of Net
Sales................ 5% 5% 4% 7% 9% 10% 7%
Income (Loss) from
Discontinued
Operations(8).......... 176 176 (28) 278 168 196
Net Income.............. 353 465 470 385 739 622 494
BASIC EARNINGS PER
SHARE:(9)
Income from Continuing
Operations............. 0.59 0.49 0.50 0.71 0.81 0.79 0.50
Net Income.............. 0.59 0.79 0.80 0.66 1.30 1.09 0.83
DILUTED EARNINGS PER
SHARE:(9)
Income from Continuing
Operations............. 0.56 0.47 0.48 0.69 0.79 0.78 0.50
Net Income.............. 0.56 0.76 0.77 0.64 1.27 1.06 0.82
FINANCIAL POSITION:
Total Assets............ 12,866 10,375 10,774 11,237 10,731 9,103 8,788
Working Capital......... 1,158 593 727 939 1,493 1,448 1,377
Property, Plant and
Equipment:
Gross.................. 5,206 4,570 4,701 4,428 4,111 3,748 3,687
Net.................... 2,729 2,263 2,400 2,095 1,893 1,673 1,669
Long-Term Debt.......... 2,506 1,507 1,979 1,608 1,667 1,405 1,502
Shareowners' Equity..... 4,686 3,963 4,104 3,690 3,732 2,948 2,855
Current Ratio........... 1.3 1.2 1.2 1.3 1.5 1.6 1.6
Percent of Total Debt to
Total Capitalization... 50% 47% 47% 38% 35% 37% 38%
</TABLE>
(1) Income from continuing operations for the nine months ended September 30,
1998 included $200 million, or $0.32 per share-diluted, primarily for the
write-off of acquired in-process research and development, and other
unusual items.
(2) Income from continuing operations for the nine months ended September 30,
1997 included $405 million, or $0.67 per share-diluted, for the write-off
of acquired in-process research and development.
(3) Income from continuing operations for 1997 included $455 million, or $0.75
per share-diluted, for the write-off of acquired in-process research and
development.
(4) Income from continuing operations for 1996 included restructuring and other
unusual charges of $257 million, or $0.43 per share-diluted, associated
with the closure or rationalization of certain facilities, asset write-offs
and work force reductions.
(5) Income from continuing operations for 1995 included net restructuring
expenses and other unusual items of $63 million, or $0.11 per share-
diluted.
(6) Income from continuing operations for 1994 included a net after tax gain
for restructuring and other unusual items of $20 million, or $0.03 per
share-diluted.
(7) Income from continuing operations for 1993 included a net after-tax loss
for restructuring and other unusual items of $11 million, or $0.02 per
share-diluted.
(8) Includes sale of styrenics plastics business in 1995 and the spinoff of the
Company's chemical businesses in 1997.
(9) Per share amounts were restated to reflect the May 1996 five-for-one stock
split.
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<PAGE>
UNAUDITED SUPPLEMENTAL PRO FORMA INFORMATION
During May 1998, Monsanto entered into agreements (1) to acquire the
remaining shares of DEKALB that Monsanto did not already own for a purchase
price of approximately $2.3 billion and (2) to issue approximately 33 million
shares of Common Stock in connection with the merger of Delta Pine with
Monsanto. On July 16, 1998, Monsanto acquired PBIC for a purchase price of
approximately $525 million. In October 1998, Monsanto announced the acquisition
of the international seed operations of Cargill in Central and Latin America,
Europe (excluding certain operations in the United Kingdom), Asia and Africa
for a purchase price of approximately $1.4 billion. Outlined below, as
supplemental information, is unaudited pro forma financial information as if
the DEKALB, Delta Pine, PBIC, and Cargill transactions (hereinafter
collectively referred to as the "Monsanto Transactions") had occurred at the
beginning of the earliest period presented. The Company will account for the
Monsanto Transactions under the purchase method of accounting.
The unaudited supplemental pro forma information is presented for illustrative
purposes only and does not necessarily indicate the operating results or
financial position that would have occurred had the Company completed the
Monsanto Transactions at the dates indicated, nor does it necessarily indicate
future operating results or financial position.
<TABLE>
<CAPTION>
FOR THE NINE FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(IN MILLIONS, EXCEPT FOR
PER SHARE AMOUNTS)
<S> <C> <C>
NET SALES
Monsanto................................. $6,500 $7,514
Monsanto Transactions.................... 798 836
------ ------
Monsanto supplemental pro forma.......... $7,298 $8,350
====== ======
INCOME (LOSS) FROM CONTINUING OPERATIONS
Monsanto................................. $ 353 $ 294
Monsanto Transactions.................... 29 25
Pro forma net interest and amortization
of intangible assets.................... (316) (435)
------ ------
Monsanto supplemental pro forma.......... $ 66 $ (116)
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING--
BASIC
Monsanto................................. 600 590
Delta Pine effect(1)..................... 31 31
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Total.................................... 631 621
====== ======
BASIC EARNINGS (LOSS) PER SHARE--
CONTINUING OPERATIONS
Monsanto................................. $ 0.59 $ 0.50
Monsanto supplemental pro forma.......... 0.10 (0.19)
------ ------
Supplemental pro forma dilution.......... $(0.49) $(0.69)
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING--
DILUTED(2)
Monsanto................................. 627 611
Delta Pine effect(1)..................... 33 32
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Total.................................... 660 643
====== ======
DILUTED EARNINGS (LOSS) PER SHARE--
CONTINUING OPERATIONS(2)
Monsanto................................. $ 0.56 $ 0.48
Monsanto supplemental pro forma.......... 0.10 (0.19)
------ ------
Supplemental pro forma dilution.......... $(0.46) $(0.67)
====== ======
</TABLE>
(1) Represents the historical weighted average shares of Delta Pine, excluding
shares already owned by Monsanto, multiplied by the merger exchange ratio.
(2) When calculating Monsanto's diluted earnings per share--continuing
operations for the year ended December 31, 1997, weighted average shares
outstanding--diluted of 611 million is used. However, because the pro forma
effects of the Monsanto Transactions result in a loss from continuing
operations for the year ended December 31, 1997, common share equivalents
are anti-dilutive. Therefore, when calculating the Monsanto supplemental
pro forma diluted loss per share--continuing operations for the year ended
December 31, 1997, weighted average shares outstanding--basic of 590
million and 31 million for Monsanto and the Delta Pine effect,
respectively, are used.
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<PAGE>
The estimated excess of the purchase price over the acquired net assets of
DEKALB, Delta Pine, PBIC and Cargill has been assigned to acquired in-process
R&D, goodwill and other intangible assets. The unaudited supplemental pro forma
information reflects the amortization of goodwill and other intangible assets
over lives ranging from 7 to 20 years. The write-offs for acquired in-process
R&D, currently estimated to be between $900 million and $1.2 billion (pre-tax),
have not been included in the unaudited supplemental pro forma information. Pro
forma interest expense is computed using a weighted average rate of 7.0 percent
for the year ended December 31, 1997, and a weighted average rate of 6.5
percent for the nine months ended September 30, 1998. The net assets, the
acquired in-process R&D and the acquired intangibles of DEKALB, Delta Pine,
PBIC and Cargill were valued using preliminary estimates of fair values which
are subject to change.
The Monsanto supplemental pro forma loss from continuing operations for the
year ended December 31, 1997 includes an after-tax special charge of $455
million related to acquired in-process R&D for Monsanto. Excluding this special
charge, the Monsanto supplemental pro forma income from continuing operations
for the year ended December 31, 1997 would total $339 million, or $0.55 per
share-basic and $0.53 per share-diluted.
The Monsanto supplemental pro forma income from continuing operations for
the nine months ended September 30, 1998, includes an after-tax special charge
of $200 million for the write-off of acquired in-process R&D, and other unusual
items for Monsanto. Excluding this special charge, the Monsanto supplemental
pro forma income from continuing operations for the nine months ended September
30, 1998 would total $266 million, or $0.42 per share-basic and $0.40 per
share-diluted.
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<PAGE>
USE OF PROCEEDS
The Company estimates that the net proceeds to the Company from this Common
Stock offering (after deducting estimated expenses) will be approximately $872
million (or $968 million assuming full exercise of the underwriters' over-
allotment option). The Company plans to use the net proceeds of this offering
to finance or refinance seed company acquisitions, including to refinance its
outstanding commercial paper as it becomes due, and for working capital
purposes.
The Company also plans to sell (1) ACES in a separate public offering and
(2) senior unsecured long-term debt securities in a private placement. The
Company plans to use the net proceeds from the sale of ACES and the debt
securities (assuming completion of the private placement) to finance or
refinance seed company acquisitions, including to refinance its outstanding
commercial paper as it becomes due, and for working capital purposes.
Assuming completion of the private placement of debt securities, the
Company estimates that it will receive net proceeds of approximately $4.03
billion from the Financings. None of the offerings is conditioned upon the
consummation of any other offering.
The Company will use a portion of the net proceeds from the Financings,
including this offering, to reduce the outstanding amount of its commercial
paper, which was used primarily in connection with prior acquisitions. Such
commercial paper has an average maturity of 43 days and a weighted average
interest rate of 5.24%, both as of November 23, 1998.
Pending the use of the net proceeds of the Financings for the purposes
described above, the Company plans to invest such proceeds in short-term
investment grade marketable securities or money market obligations.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the New York Stock Exchange under the symbol
"MTC". The following table sets forth, for the periods indicated, the high and
low sales prices per share for the Common Stock, reported by the New York Stock
Exchange.
<TABLE>
<CAPTION>
MONSANTO COMMON STOCK
---------------------------
HIGH(1) LOW(1) DIVIDENDS(2)
------- ------ ------------
<S> <C> <C> <C>
1996
First Quarter..................................... $31.75 $23.00 $0.138
Second Quarter.................................... 34.50 28.13 0.150
Third Quarter..................................... 37.88 26.13 0.150
Fourth Quarter.................................... 43.25 36.50 0.150
1997
First Quarter..................................... $42.25 $34.75 $0.150
Second Quarter.................................... 46.50 37.00 0.160
Third Quarter..................................... 52.31 36.38 0.160
Fourth Quarter.................................... 45.75 38.00 0.030
1998
First Quarter..................................... $53.06 $38.31 $0.030
Second Quarter.................................... 60.38 51.31 0.030
Third Quarter..................................... 63.94 50.50 0.030
Fourth Quarter (through November 23, 1998)........ 55.88 33.75 0.030
</TABLE>
- --------
(1) Market prices prior to September 1997 were not restated to reflect the
spinoff of Monsanto's chemical businesses.
(2) In the fourth quarter of 1997, following the spinoff of Monsanto's chemical
businesses, Monsanto's Board of Directors re-evaluated its dividend policy
and reduced the quarterly dividend on Common Stock.
Monsanto has paid quarterly dividends on its common shares without
interruption since 1928. In 1997, following the spinoff of its chemical
businesses, the Company's Board of Directors re-evaluated the dividend policy
and reduced the quarterly dividend on its Common Stock. The lower dividend
payout was chosen to reflect the desire to fund the Company's growth
opportunities appropriately to create long-term economic value for shareowners.
Monsanto's dividend policy reflects the Company's expectations of future
growth, profitability, financial position, acquisitions, working and fixed
capital needs, scheduled debt repayments, and economic conditions, including
inflation. The Company has declared a dividend of $0.03 per share payable on
December 11, 1998 to holders of record on November 16, 1998. The shares of
Common Stock sold pursuant to this offering are not eligible to receive this
dividend. Dividends are declared and paid at the discretion of the Company's
Board of Directors.
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<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1998 (1) the historical
capitalization of the Company; (2) the capitalization of the Company giving pro
forma effect to the Monsanto Transactions; and (3) such pro forma amounts as
adjusted to give effect to the Financings and the application of the estimated
net proceeds as described in "Use of Proceeds." The table should be read in
conjunction with the Company's financial statements, the notes thereto and the
other financial data and statistical information included or incorporated by
reference in this prospectus. See "Summary Historical Financial Data" and "Un-
audited Supplemental Pro Forma Information."
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
(MILLIONS OF DOLLARS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
<S> <C> <C> <C>
SHORT-TERM DEBT:
Commercial paper....................... $ 1,754 $ 5,113 $ 1,013
Other short-term debt.................. 415 930 930
-------- ------- -------
Total short-term debt................ 2,169 6,043 1,943
LONG-TERM DEBT:
Commercial paper(3).................... 1,000 1,000 1,000
Senior debt............................ 1,506 1,667 4,167 (4)
Subordinated debt...................... 700 (5)
-------- ------- -------
Total long-term debt................. 2,506 2,667 5,867
SHAREOWNERS' EQUITY: (6)
Common stock, par value $2.00 per
share................................. 1,644 1,711 1,756
Additional paid-in capital............. 518 1,821 2,649
Reinvested earnings.................... 5,272 4,538 4,538
Other shareowners' equity.............. (248) (248) (248)
Treasury stock......................... (2,500) (2,500) (2,500)
-------- ------- -------
Total shareowners' equity............ 4,686 5,322 6,195
-------- ------- -------
Total Capitalization..................... $ 9,361 $14,032 $14,005
======== ======= =======
</TABLE>
(1) Reflects pro forma adjustments giving effect to the Monsanto Transactions
as of September 30, 1998 as described in the "Unaudited Supplemental Pro
Forma Information" and the notes thereto.
(2) Reflects pro forma adjustments giving effect to the Financings and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds."
(3) These amounts have been classified as long-term as Monsanto has the ability
and intent to renew these obligations beyond a one-year period.
(4) Reflects the issuance of $2.5 billion in aggregate principal amount of
senior unsecured long-term debt, assuming completion of the private
placement of debt securities.
(5) Reflects the issuance of $700 million of junior subordinated deferrable
debt due 2003, relating to the sale of ACES.
(6) Excluding 85 million shares reserved for issuance under employee stock
options and 2.5 million shares issuable pursuant to the underwriters' over-
allotment option.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
I. SELECTED NINE MONTH DISCUSSION
RESULTS OF OPERATIONS--FIRST NINE MONTHS OF 1998 COMPARED WITH FIRST NINE
MONTHS OF 1997
Net income and income from continuing operations totaled $353 million, or
$0.56 per share, for the first nine months of 1998 compared with net income of
$465 million, or $0.76 per share, and income from continuing operations of $289
million, or $0.47 per share, for the first nine months of 1997. However,
results for both years included unusual items. Net income and income from
continuing operations for the first nine months of 1998 included an aftertax
net charge of $13 million, or $0.02 per share, for the net cost of exiting the
Company's optical products business and a restructuring reserve reversal, and
an aftertax charge of $187 million, or $0.30 per share, for the write-off of
in-process R&D primarily related to the acquisition of PBIC. Prior-year income
from continuing operations included aftertax charges totaling $405 million, or
$0.67 per share, for the write-off of in-process R&D, principally related to
the acquisitions of Asgrow Agronomics ("Asgrow"), Calgene, Inc. ("Calgene"),
Holden's Foundation Seeds ("Holden's") and Corn States Hybrid Service ("Corn
States"). Excluding the unusual items in 1998 and 1997, income from continuing
operations would have totaled $553 million, or $0.88 per share, in 1998, versus
$694 million, or $1.14 per share, in 1997, a decrease of $141 million, or $0.26
per share. The decrease in income from continuing operations, excluding unusual
items, was primarily attributable to increased operating expenses and interest
costs, which more than offset the effect of higher sales. Year-to-date sales
grew $806 million, or 14 percent, led by substantially higher sales in the
Agricultural Products segment. Selling, general and administrative ("SG&A") and
technological expenses rose in the first nine months of 1998 compared with
expenses in the year-ago period, driven by increased expenses in the
Agricultural Products and Pharmaceuticals segments. The increase in
amortization of intangible assets was caused by the increase in intangible
assets related to seed company acquisitions made in 1997 and the acquisition of
PBIC, and by the write-off of goodwill related to the Company's exit from the
optical products business. Year-to-date interest expense increased because of a
greater amount of debt outstanding during the first nine months of 1998 versus
the prior-year nine-month period. The decline in other income was principally
caused by decreased income from equity affiliates in the 1998 period and small
gains from asset sales that were included in the 1997 period. The effective tax
rate of 41.5 percent for the nine months ended September 30, 1998 was higher
than the effective tax rate of 21.7 percent for the year-ago period primarily
because of the effect of the PBIC acquisition and changes in the mix of pretax
income outside the United States.
Strong sales for the family of Roundup herbicides led to a substantial
increase in year-to-date net sales for the Agricultural Products segment.
Segment sales grew $566 million, or 22 percent, in the first nine months of
1998 versus sales in the comparable prior-year period. The increase in sales of
Roundup was caused by substantial growth in worldwide sales volumes, which more
than offset the year-to-date worldwide average price decline. The higher sales
volumes, led by increases in the United States, Latin America and Canada, were
primarily driven by increased use of Roundup herbicide in conservation tillage
applications and with Roundup Ready crops. Economic conditions in Southeast
Asia caused sales volumes and prices of Roundup to decline in that region. Net
sales for the Agricultural Products segment also benefited from the inclusion
of sales from seed companies Monsanto acquired during 1997; from higher
licensing revenues from crops developed through biotechnology, principally
Roundup Ready soybeans and canola; and from increased sales of Posilac bovine
somatotropin. Year-to-date operating income for the Agricultural Products
segment increased $329 million in 1998 versus 1997. However, results for both
years included unusual items.
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<PAGE>
Operating income for the first nine months of 1998 included a $189 million
pretax charge for the write-off of in-process R&D related to the PBIC
acquisition, and operating income for the first nine months of 1997 included
$558 million of pretax charges for the write-off of in-process R&D principally
related to the Asgrow, Calgene, Holden's and Corn States acquisitions. If these
unusual charges were excluded, operating income would have decreased $40
million, or 5 percent, in period-to-period comparisons, as the effect of higher
sales was more than offset by increased SG&A, technological and amortization
expenses. SG&A expenses rose primarily because of the inclusion in 1998 of SG&A
expenses from the acquired seed companies. Technological expenses grew primarily
because of higher spending on crop biotechnology initiatives, including
genomics, and the inclusion of technological expenses from the acquired seed
companies. Amortization of intangible assets increased principally because of
the increase in intangible assets related to seed company acquisitions made in
1997.
Year-to-date net sales for the Nutrition and Consumer Products segment rose
slightly compared with sales in the comparable 1997 period. Segment sales
reflected $32 million in payments received as part of the agency agreement with
The Scotts Company to market Roundup herbicide for residential uses. While
sales volumes of Equal sweetener increased, the effect of the increase was more
than offset by decreased sales volumes of bulk aspartame. Operating income for
the Nutrition and Consumer Products segment increased $64 million in the first
nine months of 1998 compared with operating income in the first nine months of
1997. However, operating income for the 1997 period included $51 million of
pretax charges for the write-off of in-process R&D related to the acquisition
of Calgene. Excluding these charges, year-to-date 1998 operating income would
have increased $13 million, or 7 percent, as the effect of higher sales was
partially offset by higher expenses, particularly technological expenses which
grew due to increased spending for science-based nutrition programs.
Net sales for Pharmaceuticals totaled $1,903 million in the first nine
months of 1998 compared with sales of $1,633 million in the prior-year period,
an increase of $270 million, or 17 percent. Net sales for the 1998 period
included partnering revenues of $240 million related to an alliance for the co-
promotion of Celebrex, Searle's new arthritis treatment currently under
development, while net sales for the 1997 period included the sale of certain
product rights totaling $49 million. In addition, the increase in sales in
period-to-period comparisons reflected a significant increase in sales volumes
of Arthrotec arthritis treatment. Year-to-date sales of Arthrotec more than
tripled, primarily because of successful 1998 launches in the United States and
France. Sales of Ambien short-term treatment for insomnia also increased.
Ambien continued to be the leader in the U.S. sleep-aid market, as its total
market share increased to 51.4 percent and its share of new prescriptions
increased to 52.7 percent in August 1998. The increases in partnering revenues
and in sales of Arthrotec and Ambien were partially offset by lower sales
volumes of Cytotec ulcer-preventive medication and verapamil calcium channel
blockers. Sales for the family of Calan calcium channel blockers continued to
decline, but were partially offset by higher sales of Covera-HS. Year-to-date
operating income for the Pharmaceuticals segment totaled $186 million compared
with operating income of $147 million in the year-ago period. However, operating
income for the nine months ended September 30, 1998 included a $35 million gain
from the reversal of past restructuring reserves. Excluding this unusual gain,
year-to-date 1998 operating income would have totaled $151 million, a 3 percent
increase over the prior year, as the growth in sales was nearly offset by
increased expenses. SG&A expenses rose primarily because of increased spending
associated with the Arthrotec launches and higher expenses related to the sales
force which continued to expand during 1998 in anticipation of the launch of new
products from the strong pharmaceutical pipeline. Technological expenses grew as
Searle continued to develop its six new product candidates which continued to
move through the final, more expensive
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<PAGE>
stages of the R&D approval process.
Year-to-date net sales for the Corporate and Other segment declined 14
percent in year-over-year comparisons primarily because of the absence of sales
of divested businesses and a decrease in sales at Enviro-Chem, primarily caused
by economic conditions in Asia. The
year-to-date operating losses of $181 million in 1998 increased $72 million
from the operating loss of $109 million in the comparable 1997 period. The
increased operating loss primarily resulted from charges related to the
Company's exit from the optical products business in the second quarter of
1998.
OUTLOOK FOR AGRICULTURAL PRODUCTS--UPDATE
Monsanto completed the acquisition of PBIC and announced several other
strategic transactions involving agricultural seed companies in the first nine
months of 1998.
OUTLOOK FOR NUTRITION AND CONSUMER PRODUCTS--UPDATE
On June 25, 1998, Monsanto announced that it had signed a letter of intent
to sell its lawn-and-garden business exclusive of its Roundup herbicide
products for residential use to The Scotts Company for $300 million. Under a
separate, long-term, exclusive agreement, Monsanto will continue to make
Roundup herbicide for residential use, and The Scotts Company will market the
product.
OUTLOOK FOR PHARMACEUTICALS--UPDATE
Ambien, a short-term treatment for insomnia, is licensed to a joint venture
in which Searle, Monsanto's pharmaceutical subsidiary, is a general partner. On
May 26, 1998, Monsanto announced that it had signed an agreement with the other
joint venture partner to continue the joint venture until April 16, 2002, at
which time the other partner will acquire Searle's 51 percent interest in the
joint venture. The buy-out price will be calculated on the basis of a
progressive percentage of the sales achieved by the joint venture in the 12
months preceding the acquisition, and is not likely to exceed three-fourths of
the sales during that period. Searle's share of profits will be reduced from 90
percent to 82 percent in 1999, 60 percent in 2000, 53 percent in 2001 and 51
percent from January 1 to April 15, 2002.
On November 4, 1998, Searle announced that it ended further enrollment into
a Phase III clinical trial for orbofiban, after preliminary data showed an
unexpected excess of early (30 day) mortality in one of two active treatment
arms. Researchers were unable to interpret the discrepancy between the two
groups of patients, and variables other than the study drug may explain this
unexpected finding. Orbofiban is one of Searle's antiplatelet drugs currently
under development, and the trial is designed to assess the long-term safety and
efficacy of orbofiban therapy. The trial will continue with approximately 8,000
patients who have been part of the trial longer than 30 days.
CHANGES IN FINANCIAL CONDITION--SEPTEMBER 30, 1998 COMPARED WITH DECEMBER 31,
1997
Working capital at September 30, 1998 increased to $1,158 million from $727
million at December 31, 1997, primarily because of a seasonal increase in trade
receivables in the Agricultural Products segment partially offset by higher
short-term debt primarily used to fund the PBIC acquisition. The current ratio
was 1.3 at September 30, 1998 and 1.2 at year-end 1997. The percent of total
debt to total capitalization was 50 percent at September 30, 1998 compared with
47 percent at December 31, 1997. The total amount of debt outstanding at
September 30, 1998 versus December 31, 1997 increased $970 million principally
because of the acquisition of PBIC and the seasonal increase in trade
receivables of the Agricultural Products segment. During the second quarter of
1998, Monsanto reclassified $475 million of outstanding commercial paper from
short-term to long-term debt because Monsanto has the ability and intent to
renew these obligations.
Cash provided by continuing operations totaled a net $216 million for the
nine months ended September 30, 1998, compared with $101 million for the same
period in 1997. The increase in cash provided by continuing operations resulted
primarily from the collection in 1998 of miscellaneous receivables related to
1997 Pharmaceutical licensing and product rights sales. In addition, cash
provided by continuing operations for the prior-year nine-
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<PAGE>
month period included higher employee incentive payouts for the final payment
of a three-year incentive plan. These positive effects on cash provided by
continuing operations for the first nine months of 1998 compared with the first
nine months of 1997 were partially offset by an increase in accounts
receivable. Year-to-date 1998 investing activities used $1,204 million compared
with $2,081 million in the comparable prior-year period. Major investing
activities included the purchase of PBIC in 1998 and the purchases of Asgrow,
Calgene, Holden's and Corn States in 1997. Financing activities provided $1,069
million in 1998 versus $2,107 in 1997. Financing activities in 1998 included
the issuance of $100 million of fixed-rate, medium-term notes with an average
interest rate of 6.2 percent, due from 2005 to 2018, and the issuance of $100
million of variable-rate notes with an average interest rate of 4.6 percent at
September 30, 1998, due 2003.
On July 16, 1998, Monsanto acquired PBIC for a purchase price of
approximately $525 million. In October 1998, Monsanto acquired certain
international seed operations of Cargill for a purchase price of approximately
$1.4 billion. Also, in May 1998, Monsanto entered into an agreement to acquire
the remaining shares of DEKALB for approximately $2.3 billion and a merger
agreement with Delta Pine. Approximately 33 million shares of Monsanto common
stock are expected to be issued to Delta Pine shareowners which would result in
an increase in the number of Monsanto common shares outstanding. Monsanto
initially financed the PBIC and Cargill acquisitions through the issuance of
short-term debt.
As announced on November 11, 1998, Monsanto is in the process of
implementing plans to fund these acquisitions over the longer term. The plans
include a series of financing transactions, a combination of divestitures, and
cost reductions. Monsanto plans to raise up to $4 billion through the issuance
of approximately $1 billion of common stock, approximately $500 million of
adjustable conversion-rate equity security units, and approximately $2.5
billion of long-term, unsecured debt. The plans also include the divestitures
of certain non-core assets and businesses which are expected to generate
approximately $1 billion pretax. These financing plans, together with the cash
flow from the Company's businesses, are expected to provide sufficient
liquidity for the Company's estimated financing needs for the next twelve
months. Additional divestitures also are under consideration. When a decision
to dispose of an asset or business is approved, that asset or business would
then be classified as held for sale. This could result in impairment charges.
In addition to the financing transactions and divestitures, Monsanto is
planning to simplify its management structure. Monsanto expects this
restructuring to eliminate between 700 and 1,000 positions beginning in the
first quarter of 1999. In addition, the Company expects an additional 1,300 to
1,500 position reductions in entities to be divested. Monsanto expects to
record pretax restructuring and special charges ranging from $400 million to
$600 million in the fourth quarter of 1998 for these actions. The cash outlays
associated with these charges are expected to be fully offset by cost savings
within eighteen months.
Given current market conditions and financing requirements, in October
1998, Monsanto mandated Citibank, N.A. and Salomon Smith Barney Inc. to arrange
an additional $2 billion 364-day revolving credit facility. The facility is
expected to be used to support the issuance of commercial paper.
On June 16, 1998, Monsanto announced that it had rescinded and terminated
its existing share repurchase program.
II. SELECTED 1997 DISCUSSION
GENERAL
In 1997, Monsanto achieved record results, if unusual items were excluded,
and sharpened its focus on life sciences following the spinoff of its chemical
businesses on September 1, 1997. As a life sciences company, Monsanto has
focused its efforts in three areas--agriculture, nutrition and health. Income
from continuing operations totaled $294 million, or $0.48 per share, in 1997.
Results included after-tax charges of $455 million, or $0.75 per share, for
write-offs of in-process R&D related to strategic acquisitions. If these
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<PAGE>
unusual write-offs were excluded, income from continuing operations would have
totaled a record $749 million, or a record $1.23 per share. The Company's core
businesses delivered strong results in 1997, as sales of key products continued
to grow. Monsanto also made several strategic acquisitions, investments and
alliances in 1997 to strengthen the core capabilities necessary to be the first
to invent important new life sciences products and bring them to customers
worldwide.
NET SALES
Net sales were a record $7.5 billion in 1997, topping last year's net sales
of $6.3 billion by 18 percent. The increase came primarily from continued
strong performances by the Agricultural Products and Pharmaceuticals segments.
Net sales for Agricultural Products set another record in 1997, led by
significant sales volume increases for the family of Roundup herbicides.
Increases in the use of conservation tillage; increases in over-the-top
applications of Roundup on Roundup Ready soybeans, cotton and canola;
and an increase in the acres of major row crops planted worldwide drove sales
of Roundup herbicide to a new high. The increase in 1997 net sales for the
Agricultural Products segment also reflected the inclusion of sales from
Asgrow, a seed company Monsanto acquired in 1997. Higher sales volumes of
Posilac bovine somatotropin and Harness herbicide also contributed to the sales
growth. In addition, net sales benefited from increased demand for crops
developed through biotechnology, including Roundup Ready soybeans, cotton and
canola, Bollgard insect-protected cotton and YieldGard insect-protected corn.
Net sales for the Pharmaceuticals segment also reached record levels,
increasing $412 million, or 21 percent, from 1996 net sales. The increase is
attributable primarily to higher sales volumes of Ambien short-term treatment
for insomnia and Daypro and Arthrotec arthritis treatments. Sales of these key
growth products grew 26 percent from sales in the prior year. Sales also
benefited from licensing revenues of $75 million related to a collaborative
partnership, and from sales of product rights, which totaled $117 million.
Lower sales of verapamil calcium channel blockers partially offset these
increases. Sales for the family of Calan calcium channel blockers continued to
decline, but that decrease was partially offset by growing sales of Covera-HS,
Searle's newest verapamil product.
Sales for the Corporate and Other segment in 1997 increased significantly
compared with year-ago sales, primarily because of the inclusion in 1997 of
sales from the produce business of Calgene. Monsanto acquired a controlling
interest in Calgene in November 1996. Prior to that time, Calgene was accounted
for as an equity affiliate, and its results were not consolidated.
Lower net sales for the Nutrition and Consumer Products segment partially
offset the sales increases in the other segments. Nutrition and Consumer
Products' sales declined 3 percent in 1997 vs. sales in 1996 primarily because
of lower sales volumes of Equal and Canderel tabletop sweeteners. These
decreases were partially offset by higher sales volumes of biogums and Roundup
herbicide for lawn-and-garden use. Sales of NutraSweet, the company's trademark
aspartame product, were essentially flat compared with sales in the prior year.
Monsanto's net sales in markets outside the United States represented 44
percent of 1997 net sales, compared with 45 percent in 1996.
UNUSUAL ITEMS
During 1997, Monsanto acquired several seed companies specializing in
various stages of seed production. These acquisitions included Asgrow, a global
leader in soybean research and seeds; Holden's, a global leader in the
development and growth of corn germplasm and a supplier of parent seed to
retail seed companies; Corn States, the exclusive marketer and distributor for
Holden's products; and Sementes Agroceres S.A., the leading seed corn company
in Brazil. Monsanto also acquired the remaining interest in Calgene, which has
done significant biotechnology research in oils, cotton and produce.
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<PAGE>
The Company recorded pretax charges of $684 million ($455 million aftertax,
or $0.75 per share) for the write-off of acquired in-process R&D related to
these acquisitions. This is an accounting treatment that values and immediately
writes off research that is under way at the time of an acquisition but that
has not resulted in commercial products and has no alternative future use.
In December 1996, the Board of Directors approved pretax restructuring
charges and other unusual items of $376 million ($257 million aftertax, or
$0.43 per share) for the closure or rationalization of certain facilities,
asset write-offs, and work force reductions. Approximately 940 of the 1,520
positions expected to be eliminated by the restructuring had been eliminated by
the end of 1997.
Without the unusual events in 1997 and 1996, income from continuing
operations would have been $749 million for 1997, an increase of 12 percent
from $670 million for the prior year. Earnings per share from continuing
operations in 1997 would have been $1.23 vs. $1.12 for 1996, an increase of 10
percent.
OPERATING RESULTS
Operating income totaled $499 million in 1997, $96 million, or 16 percent,
lower than operating income of $595 million in 1996. If the net pretax unusual
charges of $684 million in 1997 and $407 million in 1996 were excluded,
operating income would have increased $181 million, or 18 percent, in 1997. The
increase primarily resulted from higher sales volumes, licensing revenues and
sales of product rights. These increases were partially offset by increased
SG&A expenses and higher technological spending.
If unusual charges in 1997 and 1996 were excluded from segment results,
operating income would have increased in 1997 for both the Agricultural
Products and Pharmaceuticals segments. The increase in operating income for
Agricultural Products was driven by record sales, partially offset by increased
SG&A expenses and technological spending. Selling expenses for Agricultural
Products rose primarily because of higher selling expenses from seed companies
Monsanto acquired in 1997. The segment's technological expenses rose
principally because of higher spending on crop biotechnology initiatives and
the inclusion of expenses from the acquired seed companies. The increase in
operating income for the Pharmaceuticals segment resulted from higher sales
volumes of key products, licensing revenues, and sales of product rights,
partially offset by increased selling and technological expenses. SG&A expenses
for Pharmaceuticals were higher because of an expansion in the sales force and
because of preparations for new product launches in 1998. The segment's
technological expenses increased markedly as new product candidates advanced to
later, more expensive phases of development. If unusual items were excluded,
operating income for the Nutrition and Consumer Products segment would have
declined in 1997, primarily because of lower sales volumes of tabletop
sweeteners and increased technological spending. Technological expenses for
Nutrition and Consumer Products rose principally because of the continuing
development of a new no-calorie sweetener called neotame.
Total SG&A expenses increased $163 million, or 9 percent, in 1997 compared
with expenses in 1996, principally because of the spending increases in the
Agricultural Products and Pharmaceuticals segments. Total technological
expenses increased $342 million, or 49 percent, compared with those in 1996.
Technological expenses rose for all segments, as Monsanto's focus on developing
new products continued.
Amortization of intangible assets increased in 1997 compared with
amortization in the prior year, principally because of the increase in
intangible assets related to current-year seed company acquisitions. The
increase in interest expense in year-to-year comparisons was caused by a
greater amount of debt outstanding during 1997. If $31 million of unusual
income in 1996 were excluded, "Other income (expense)--net" would have shown a
small decline in 1997. This decrease was caused by significantly higher
exchange losses partially offset by increased income from equity affiliates,
primarily from European aspartame
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<PAGE>
joint ventures and DEKALB. The currency exchange losses stemmed primarily from
southeast Asia, particularly Indonesia and Malaysia. The 1997 effective tax
rate of 20 percent was lower than the 1996 effective tax rate of 25 percent,
primarily because of the decrease in pretax income, which gave tax benefits a
greater relative effect in 1997. If the unusual items in 1997 and 1996 were
excluded, the effective tax rate would have been 29 percent in 1997 vs. 28
percent in 1996.
COST SAVINGS
In prior years, Monsanto took steps to make worldwide operations more
focused, productive and cost-effective. The effect of these actions benefited
operating income by more than $400 million in 1997. The Company invests the
savings in its core businesses, new product development, and strategic
acquisitions and investments to enhance its long-term profitability. These
savings are in line with original expectations, and they are expected to
continue. Business redesign and other productivity efforts have yielded
significant benefits as well. These initiatives will continue as the Company
responds to increased global competition and higher customer expectations.
NEW PRODUCTS
New product development and commercialization continue to be strategic
priorities for Monsanto. Recent efforts include insect-protected and herbicide-
tolerant crops, a novel arthritis treatment, and a new sweetener. Monsanto's
R&D expenditures were $939 million in 1997, or 12 percent of net sales, a level
that reflects management's strong, long-term commitment to R&D. The discovery
and development of pharmaceutical, agricultural and science-based nutritional
products continue to be the focus of most of these expenditures. Significant
R&D efforts in existing product technologies and new product applications also
continue across all business sectors. Additionally, Monsanto's research program
includes new technologies and proprietary information obtained through
licensing and strategic acquisitions. As a result, Monsanto has numerous
products in the R&D pipeline. Many of them are expected to be commercialized in
the next few years.
SEGMENT INFORMATION
In 1997, Monsanto redefined its segments. The principal factors that
accounted for the segments' performances in 1997 and 1996, along with the
factors that are expected to affect operating results in the near term, are
described on the following pages.
AGRICULTURAL PRODUCTS SEGMENT
The Agricultural Products segment is a leading worldwide developer,
producer and marketer of crop protection products. This group also develops and
markets products enhanced by biotechnology. These products improve the
efficiency of food production and preserve environmental quality for
agricultural and industrial uses. More than half of the unit's herbicide net
sales are made outside the United States. Weather conditions in agricultural
markets worldwide affect sales volumes.
Net sales for Agricultural Products totaled a record $3.1 billion in 1997,
surpassing the 1996 record by $571 million, or 22 percent. The increase in net
sales was fueled by higher worldwide sales volumes for the family of Roundup
herbicides, led by strong sales in Brazil, Argentina and the United States.
Sales volumes of Roundup herbicide were driven to a new high by increases in
the use of conservation tillage, an increase in the acres of major row crops
planted worldwide, and applications of Roundup on Roundup Ready soybeans,
cotton and canola. Selling price reductions, principally in markets outside the
United States, made Roundup more cost effective for weed control in a broader
range of crop and industrial uses. The effect of generic competition,
especially in certain foreign markets, dampened selling prices modestly.
However, the effect of increased sales volumes more than offset the effect of
lower selling prices.
Sales from seed companies Monsanto acquired in 1997, particularly Asgrow,
also added to sales. Net sales for the Agricultural Products segment also
benefited from record sales of Posilac bovine somatotropin, which increased 25
percent from sales in the prior year; increased demand for crops developed
through biotechnology, including Roundup
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<PAGE>
Ready soybeans, cotton and canola, Bollgard insect-protected cotton and
YieldGard insect-protected corn; and higher sales volumes of acetanilide-based
herbicides, particularly Harness herbicide.
Operating income for Agricultural Products in 1997 decreased $408 million
from operating income in 1996, while operating contribution increased $123
million, or 19 percent. Operating income was affected by unusual items in both
years. In 1997, operating income included $633 million of pretax charges for
the write-off of in-process R&D, primarily associated with the acquisitions of
Asgrow, Calgene's cotton business, Holden's and Sementes. In 1996, the unusual
items included $106 million in charges for restructuring and other actions,
principally related to the cost of work force reductions. If these unusual
items in 1997 and 1996 were excluded, operating income for
Agricultural Products would have increased $119 million, or 19 percent, in
year-to-year comparisons. Higher sales volumes and increased licensing fees
from biotechnology products contributed to the increase. These positive effects
were partially offset by increased operating expenses. SG&A expenses increased
primarily because of higher selling expenses from the seed companies Monsanto
acquired in 1997. Technological expenses grew primarily because of higher
spending on crop biotechnology initiatives and the inclusion of seed company
expenses. Amortization of intangible assets rose principally because of the
acquisition of Holden's.
NUTRITION AND CONSUMER PRODUCTS SEGMENT
The Nutrition and Consumer Products segment manufactures and markets
sweeteners (including NutraSweet brand sweetener and Equal and Canderel
tabletop sweeteners), alginates, biogums and other food ingredients. It also
develops, produces and markets Ortho brand lawn-and-garden products, and
Roundup herbicide for residential use.
Net sales for the Nutrition and Consumer Products segment declined 3
percent in 1997 from sales in 1996 primarily because of lower sales volumes of
tabletop sweeteners. The sales decrease was caused by a continued decline in
market share in the United States and Europe because of lower-priced generic
competition, as well as a decline in the overall U.S. grocery market for
tabletop sweeteners. Sales of NutraSweet, the Company's trademark aspartame
product, were essentially flat compared with sales in the prior year. Higher
sales volumes of biogums and lawn-and-garden products partially offset the
tabletop sweetener sales decreases. Biogum sales grew 14 percent because of
record customer demand. The increase in lawn-and-garden sales resulted from
higher sales of Roundup for residential use, partially offset by lower sales of
the Ortho line of products. A global initiative implemented at the end of 1996
boosted sales of Roundup for residential use in 1997, despite poor weather in
several key markets.
Operating income for the Nutrition and Consumer Products segment in 1997
increased 9 percent from 1996 operating income, while operating contribution
declined 10 percent. Unusual items affected operating income in both years.
Operating income in 1997 included $51 million in pretax charges for in-process
research and development related to the acquisition of Calgene's oils business.
In 1996, operating income included restructuring charges of $103 million,
principally for the cost of work force reductions and facility rationalizations.
If these unusual items were excluded, 1997 operating income for the Nutrition
and Consumer Products segment would have totaled $262 million, an 11 percent
decline from 1996 operating income of $296 million. The decrease was caused
primarily by lower sales volumes of tabletop sweeteners and increased
technological spending related to the development of a new no-calorie sweetener,
called neotame, and other nutrition products. These effects were partially
offset by lower selling expenses.
PHARMACEUTICALS SEGMENT
The Pharmaceuticals segment reflects the operations of Searle. Searle
develops, produces and markets prescription pharmaceuticals. Its major products
include medications to relieve the symptoms of arthritis, to control high blood
pressure, to relieve
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<PAGE>
insomnia, to prevent the formation of ulcers, and to provide better health care
for women.
In 1997, net sales for Pharmaceuticals grew to a record $2.4 billion, $412
million, or 21 percent, higher than 1996 net sales. Higher sales volumes of
Ambien short-term treatment for insomnia, and Daypro and Arthrotec arthritis
treatments contributed nearly $170 million to the sales increase. Ambien
continued to be the leader in the U.S. sleep-aid market. Its sales rose 31
percent in 1997, and its market share increased to 50 percent. Daypro and
Arthrotec also gained market share, with increased sales of 20 percent and 25
percent, respectively. Segment net sales also benefited from licensing revenues
of $75 million related to a collaborative partnership and from sales of product
rights totaling $117 million. Lower sales of verapamil calcium channel blockers
partially offset these increases. Sales for the family of Calan calcium channel
blockers continued to decline, but the decrease was partially offset by growing
sales of Covera-HS, introduced in 1996 as the first calcium channel blocker with
a unique delivery system that provides 24 hours of blood pressure control.
Operating income for the Pharmaceuticals segment totaled $318 million in
1997, compared with $79 million in 1996. However, 1996 operating results
included $125 million in restructuring and other unusual charges. Operating
income would have increased $114 million, or 56 percent, in 1997, if the
unusual items were excluded from 1996 operating income. The improvements in
operating income and operating contribution primarily resulted from higher
sales volumes of key products, licensing revenues and sales of product rights.
Increased technological and selling expenses partially offset the strong sales
growth. Technological spending rose in 1997, as new product candidates advanced
to later, more expensive phases of development.
At the end of 1997, the following five new product candidates were in Phase
III clinical trials, the final stage before submission for regulatory approval:
Celebra(/1/), Searle's proposed trademark for celecoxib, an arthritis treatment
that is designed to treat arthritis and pain selectively without
gastrointestinal side effects; xemilofiban and orbofiban, drugs for the
treatment of cardiovascular conditions; daniplestim, a compound that stimulates
the replenishment of white blood cells and platelets in chemotherapy patients;
and hormone replacement therapy patches, hormone replacement therapy for
menopausal symptoms. Technological expenses increased in year-to-year
comparisons also because of an absence of cost-sharing payments from alliances
and licensing agreements in 1997 compared with the level of such payments in
1996. Selling expenses rose in 1997 because of an expansion in Searle's sales
force and new product launch preparations. The product launch preparations
primarily were related to oxaprozin potassium and Arthrotec arthritis
treatments, both of which will be introduced in the United States in 1998.
Searle's investment in R&D continues to be significant. R&D expenditures
were 24 percent of the segment's net sales in 1997 and 22 percent in 1996, if
cost-sharing payments from alliances in 1996 were excluded. Future R&D spending
also is expected to be significant. This investment reflects the segment's
commitment to the continuing discovery and development of innovative new
products.
CORPORATE AND OTHER SEGMENT
The Corporate and Other segment comprises various smaller businesses, as
well as certain corporate items that are not allocated to the segments. Segment
sales increased significantly in 1997 compared with sales in 1996, primarily
because of the inclusion in 1997 of sales from Calgene's produce business.
Monsanto acquired a controlling interest in Calgene in November 1996. Before
that time, Calgene was accounted for as an equity affiliate, and its results
were not consolidated. If unusual items of $73 million in 1996 were excluded,
the 1997 operating loss for the Corporate and Other segment would have
increased $18 million, primarily because of increased technological spending
related to
- --------------
(1) The Company now uses the name Celebrex for this product.
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genomics. Genomics, which is the study of all the genes in an organism and
their organization into chromosomes, is an important enabling technology. This
technology will allow Monsanto to develop, at a faster pace, more and better
life sciences products in the areas of agriculture, health and nutrition.
III. YEAR 2000 UPDATE
Beginning in 1996, Monsanto initiated the Global Year 2000 Program (the
"Y2K Program") to ensure that its business would not be adversely affected by
the inability of many existing computer systems to distinguish between the year
1900 and the year 2000. The Y2K Program covers more than 100 Company sites in
33 countries.
DESCRIPTION AND STATUS OF THE Y2K PROGRAM
INTERNAL SYSTEMS
Monsanto's Y2K Program encompasses all areas of Monsanto's internal systems
including conventional information technology ("IT") business applications, IT
infrastructure, and embedded systems. The remediation process applied to each
area consists of four steps: identification of the systems or components that
need to be replaced or fixed; assessment of the extent of the work required;
prioritization of the work; and successful completion of the required
remediation activity.
Each of the approximately 1,260 applications in Monsanto's IT applications
portfolio has been assessed for Y2K compliance and this portfolio is currently
42% compliant. An additional 13% of the portfolio is believed to be compliant,
but is awaiting testing for confirmation. On-schedule replacement and upgrade
initiatives will remediate another 27% of this portfolio and 3% of the
applications in the portfolio will be retired. The remaining applications in
this portfolio are at various stages of renovation, redevelopment, or testing.
The IT applications portfolio is anticipated to be compliant by the third
quarter of 1999.
Almost 600 IT infrastructure products have been defined and are being
assessed for compliance. This process is approximately 44% complete. The IT
infrastructure assessment and remediation phases are expected to be complete by
the third quarter of 1999.
Embedded systems include process control/manufacturing and laboratory
automation systems and site-specific facility management systems. An inventory
of embedded systems has been completed and approximately 7,000 unique process
control systems and attached devices from nearly 1,200 manufacturers and 4,250
laboratory automation products from over 700 vendors have been identified.
These systems are currently under Y2K compliance review which is approximately
40% complete. Compliance information is obtained from purchased commercial
databases and from manufacturers. If such information indicates that an
embedded system is not Y2K compliant, appropriate remediation plans are
implemented. Current findings, as well as industry experience, indicate that a
relatively small percentage of these items are subject to Y2K problems. The
embedded device research phase of the Y2K Program is expected to be completed
by December 1998, with any necessary remediation of embedded devices expected
to be completed by the third quarter of 1999.
SUPPLIERS
Monsanto has contacted its major suppliers to assess their preparations for
the Year 2000. Over 650 key corporate suppliers have been identified and
contacted in addition to thousands of suppliers critical to individual
locations. Approximately 56% of the Company's key corporate suppliers have been
identified as likely to be Y2K compliant. The status of another 14% of these
key suppliers is of concern and further action is being taken by managers
responsible for these suppliers or supplier contracts. At present,
approximately 30% of the key suppliers have not informed the Company of their
compliance status or plans. Where appropriate, Monsanto representatives may
conduct an in-depth investigation of a particular supplier's ability to be
compliant and site visits may be made.
CONTINGENCY PLANS
The Company's contingency plans are continuously evolving as it proceeds
with the Y2K Program. The Company will begin a major initiative to finalize its
contingency plans in the fourth quarter of 1998, with a target of having
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all such plans in place no later than the third quarter of 1999. Where a
supplier's performance is in doubt, the Company's contingency plans may include
the stockpiling of raw materials or a switch to a different supplier. The
Company will increase testing of pharmaceutical and nutrition products as the
Year 2000 nears and may also increase production of critical product inventory.
COSTS
The Company continues to evaluate the estimated costs associated with Y2K
compliance based on actual experience. The current estimated total cost is
expected to be approximately $25 million, with $13 million expended through
September 30, 1998. Such costs encompass only the Company's Y2K remediation
efforts and do not include expenses such as overtime wages, additional
warehouse space or increased finance costs which may be incurred upon
implementation of the Company's contingency plans. Monsanto does not expect the
costs associated with its Year 2000 efforts to be materially adverse to the
Company's business operations, financial position, profitability or liquidity.
RISKS
Monsanto believes that its Y2K Program follows both prudent and best
demonstrated practices (including contingency planning) and makes use of
appropriate internal and external skills at the proper level and in the proper
amount to minimize the impact of any failures. However, since the Year 2000
problem is unprecedented in scope or complexity, no complete assurance of risk
avoidance can be given. In the Company's case, failure to correct a material
Year 2000 problem could result in lost profits or breach of contract claims in
the event Monsanto is unable to deliver its products pursuant to the terms of
its agreements or such products fail to meet contract specifications as well as
claims for personal injury or property damage at its facilities. Monsanto may
also experience lost revenues in the event any of its customers experience Y2K
problems which cause them to order less product from Monsanto or which cause
financial difficulties resulting in a breach of their payment obligations to
Monsanto.
IV. EURO CONVERSION
On January 1, 1999, more than two-thirds of the member countries of the
European Union are scheduled to establish fixed conversion rates between their
existing sovereign currencies and the euro as common legal currency. During the
transition period from January 1, 1999 until June 30, 2002, both the existing
sovereign currencies of the participating countries and the euro will be legal
currency. Beginning July 1, 2002, the existing sovereign currencies of the
participating countries will no longer be legal tender for any transactions.
In September 1997, Monsanto formed a cross-functional team and has engaged
a consultant to address issues associated with the euro conversion. Monsanto
expects to be able to engage in euro-denominated transactions and to be legally
compliant by January 1, 1999, and to have all affected information systems
fully converted by April 2001. Monsanto does not expect the euro conversion to
have a material effect on its competitive position, business operations,
financial position or results of operations.
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
Under the Private Securities Litigation Reform Act of 1995, companies are
provided a "safe harbor" for making forward-looking statements about the
potential risks and rewards of their strategies. Monsanto believes it is in the
best interest of its shareowners to use these provisions in discussing future
events, as it does in this prospectus and other communications. These forward-
looking statements include Monsanto's plans for growth, the potential for the
development, regulatory approval and public acceptance of new products from its
pipelines, and other factors that could affect Monsanto's future
S-22
<PAGE>
operations or financial position and may be preceded by, followed by or include
the words "believes," "expects," "anticipates," "intends," "plans," "estimates"
or similar expressions.
Monsanto's ability to achieve its goals depends on many known and unknown
risks and uncertainties, as well as on changes in general economic and business
conditions. These factors could cause the anticipated performance and results
of the Company to differ materially from those described or implied in forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below.
FACTORS IMPACTING THE AGRICULTURAL PRODUCTS SEGMENT
GENERIC COMPETITION. Roundup and other glyphosate-based herbicides are
major products for Monsanto's Agricultural Products segment and are likely to
face increasing competition from generic products. Patents protecting Roundup
in various countries expired in 1991, while compound per se patent protection
for the active ingredient in Roundup herbicide expires in the United States in
September 2000.
Monsanto believes its pricing strategy will aid it in compensating for
increased generic competition in the United States. Monsanto recently
significantly reduced the price of Roundup herbicide brands in the United
States based on its prior experience in numerous markets worldwide that price
reductions on Roundup have stimulated volume growth via price elasticity. This
pricing strategy is expected to also result in increased demand for Roundup
herbicide in the United States because the lower prices will make Roundup more
economical, encouraging both new uses of the product and growers to expand the
number of acres treated. If Monsanto's experience with price elasticity in non-
United States markets does not hold true in the United States, and the
increased demand for Roundup products does not fully compensate for the price
decreases, Monsanto will experience an associated loss of revenue.
Monsanto also believes that increased volumes and technological innovations
will lead to improved manufacturing and cost efficiencies, thus reducing the
production cost of glyphosate. Such cost reductions will be dependent on the
realization of such increased volumes and innovations and the Company's ability
to secure the additional resources required to expand its production of
Roundup.
GOVERNMENTAL AND CONSUMER ACCEPTANCE. The commercial success of genetically
engineered agricultural and food products will depend in part on governmental
and public acceptance of their cultivation, distribution and consumption.
Public attitudes may be influenced by media and opponents' claims that
genetically engineered plant products are unsafe for consumption or pose
unknown risks to the environment or to social or economic practices. The
Company has expended significant efforts to foster governmental and consumer
acceptance of nutritional and agricultural biotechnology products, in the
latter case particularly in Europe where securing governmental approvals for,
and achieving consumer confidence in, such products is posing numerous
challenges. For instance, France has instituted a moratorium on the planting of
certain genetically modified seeds and similar bans exist in some other member
states. Many countries also have significant labeling requirements. The market
success of Monsanto's genetically altered products may be delayed or impaired
in certain geographical areas due to such existing or future regulatory,
legislative or public acceptance issues or related litigation.
TECHNOLOGICAL CHANGE AND COMPETITION. A number of companies are engaged in
research related to plant biotechnology. Technological advances by others could
render Monsanto's products less competitive. Monsanto believes that competition
will intensify, particularly from agricultural biotechnology firms and major
agrichemical, seed and food companies with biotechnology laboratories. Some of
Monsanto's agricultural
S-23
<PAGE>
competitors have substantially greater financial, technical and marketing
resources than Monsanto.
IMPACT OF, AND ABILITY TO INTEGRATE, TRANSACTIONS. Monsanto has completed
or entered into agreements for significant acquisitions, mergers and joint
ventures involving seed, agricultural biotechnology and grain processing
companies. These transactions are designed to strengthen Monsanto's capability
to bring important new life sciences products to customers worldwide, and to
contribute to Monsanto's long-term growth. The DEKALB and Delta Pine
transactions are each subject to regulatory approvals and the Delta Pine
transaction is also subject to Delta Pine shareowner consent and other
customary conditions. It is anticipated that the pending DEKALB and Delta Pine
transactions, when consummated, and the recently consummated PBIC and Cargill
transactions will result in significant dilution to Monsanto's results of
operation for the next several years. Long term, Monsanto must integrate these
companies into its business, realize projected synergies and fit such
acquisitions, mergers and joint ventures into its growth strategy in order to
realize sufficient value to justify their cost. Mergers, acquisitions and joint
ventures also present integration and implementation challenges including,
among other things, the necessity of coordinating geographically separated
organizations, integrating personnel with diverse business backgrounds and
integrating corporate cultures. The process of integrating operations could
cause an interruption of, or loss of momentum in, Monsanto's business and the
loss of key personnel. There can be no assurance that the diversion of
management's attention and any delays or difficulties encountered in connection
with completing and implementing these transactions and integrating the
acquired, merged or joint venture companies' operations will not have an
adverse effect on Monsanto's business, results of operations or financial
condition.
The Company plans to continue to frequently explore the potential benefits
of possible strategic alliances, joint ventures and divestitures. However,
despite its efforts, the Company may be unable to divest assets at an
acceptable price or to reach agreement with third parties with whom it desires
to enter into a joint venture or other alliance.
PLANTING DECISIONS; WEATHER. The Company's Agricultural Products segment is
highly seasonal and subject to weather conditions and natural disasters, which
affect commodity prices, seed yields and decisions by farmers regarding
planting and herbicides. Commodity prices also affect farmers' decisions on the
types and amounts of crops to plant. The results of these factors will
influence sales of Monsanto's herbicide and seed products.
FACTORS IMPACTING THE PHARMACEUTICALS SEGMENT
ABILITY TO REALIZE POTENTIAL OF EXISTING PHARMACEUTICAL PIPELINE PRODUCTS.
Pharmaceutical research and development is subject to inherent uncertainty,
difficulties and delays including, but not limited to, successful completion of
clinical trials and the ability to obtain and maintain regulatory approval for
the compounds in the United States as well as other countries. Failure to
timely receive and to maintain government approvals could preclude or
substantially delay commercialization of products in the Company's R&D
programs.
DEVELOPMENT AND COMMERCIALIZATION OF NEW PHARMACEUTICAL PRODUCTS. The
Pharmaceuticals segment's long-term success will depend in great part on its
ability to develop and commercialize new products. Such efforts require
substantial funding of R&D and launch expenses. If Monsanto is unable to
generate sufficient revenues or otherwise acquire sufficient resources to fund
such expenses, its ability to develop new products will suffer. Further, the
results of the research and development of new pharmaceutical products is
inherently difficult to predict. Anticipated research results may never
materialize or may be insufficiently promising. Even if new pharmaceutical
products are developed, there can be no guarantees of their commercial success
because of consumer demand and competitive factors (including the availability
of
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<PAGE>
treatment alternatives and the indications, adverse event and other information
contained on the labels for such products). In addition, the timing of
completion and the results of research and development of new pharmaceutical
products are difficult to forecast and to coordinate with the marshaling and
deployment of the commercialization resources necessary to realize the full
value of the products successfully completing development.
PRODUCT LIABILITY AND CONSUMER ACCEPTANCE. The development, manufacture and
sale of pharmaceutical products involves a risk of product liability claims and
associated adverse publicity. Substantial damage awards have been made against
certain pharmaceutical companies in past years based upon claims for injuries
allegedly caused by the use of their products. In addition, unexpected safety
or efficacy concerns arising with respect to marketed products, whether or not
scientifically justified, could lead to product recalls, withdrawals or
declining sales.
COMPETITION. Research in the field of pharmaceuticals is intense, highly
competitive and characterized by rapid technological change. Depending on the
product involved, various types of competition are encountered, including
price, delivery, service, performance, innovation, recognition and quality.
Many of Monsanto's pharmaceuticals competitors have greater research,
financial, marketing and other resources than the Company. Further, some of
Monsanto's trademarked pharmaceuticals products face increasing pressures from
producers of lower-priced generic products and from new products entering the
marketplace.
PRICING ABILITY. Managed care groups, institutions and government agencies,
both within the United States and abroad, actively seek price discounts or to
otherwise lower prices. Monsanto's challenge is to negotiate prices with such
institutions which allow it to profit at acceptable levels.
FACTORS IMPACTING THE NUTRITION AND CONSUMER PRODUCTS SEGMENT
Monsanto's Nutrition and Consumer Products segment faces many challenges
which are similar to those faced by the Agricultural Products and
Pharmaceuticals segments. These challenges include, among others, increased
competition from generic substitutes for its aspartame-based tabletop and
ingredient sweeteners, the need to keep pace with rapid technological change,
realize the potential of its pipeline products, develop new products and
negotiate favorable pricing terms with its major customers. Each of these
challenges is subject to comparable risks and uncertainties to those described
above.
FACTORS IMPACTING EACH OF THE COMPANY'S SEGMENTS
FINANCIAL REQUIREMENTS. Monsanto's recent and planned acquisitions will
require a significant commitment of the Company's financial resources and will
also require the Company to seek financing from outside sources. In addition,
new technological innovations generally require a significant investment for
R&D and product launch. Insufficient funds available for investment in these
areas could hinder the Company's ability to make technological innovations and
introduce and distribute new products. Monsanto anticipates generating required
capital by maintaining revenues of its core businesses, seeking sufficient
outside financing and containing costs. Its ability to do so will depend on the
result of the factors listed elsewhere in this section and capital market
conditions generally.
INTELLECTUAL PROPERTY. Monsanto has devoted significant resources to its
efforts to obtain and maintain patent protection, both in the United States and
in other countries, for its products, to preserve its trade secrets and to
operate without infringing the proprietary rights of third parties. Monsanto's
patents and trademarks are of material importance in the operation of its
business, particularly in the Agricultural Products and Pharmaceuticals
segments. Intellectual property positions will become increasingly important
within the agricultural biotechnology and pharmaceutical industries as
genetically engineered products become a larger part of the product landscape.
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<PAGE>
The Company generally relies upon patent and trademark laws in the United
States and other countries to establish and maintain its proprietary rights in
its technology and products, although there is some uncertainty about the value
of available patent protection in some countries outside the United States.
Moreover, the patent positions of biotechnology and pharmaceuticals companies
involve complex legal and factual questions and, because of rapid technological
advances and the number of companies performing research in these areas,
involve an uncertain environment. Patent applications in the United States are
maintained in secret and outside the United States such applications are
published 18 months after filing. Accordingly, patents belonging to competitors
may issue from time to time without any prior warning to Monsanto which may
decrease the value of similar technologies currently being developed by
Monsanto. Also because of this rapid pace of change, some of the Company's
products may unknowingly rely on key technologies developed by others. In such
event, the Company may be required to obtain licenses to such technologies in
order to continue to use them.
Certain of Monsanto's germplasm and other genetic material, patents and
licenses are currently the subject of litigation as disclosed in this
prospectus, and additional future litigation can be anticipated. While the
outcome of such litigation cannot be predicted with certainty, Monsanto will
continue to vigorously defend and litigate its positions and believes it has
meritorious defenses and claims in the pending suits.
FOREIGN MARKETS. Monsanto intends to continue to actively explore sales
opportunities outside of the United States which made up approximately 44% of
the Company's 1997 revenues. Challenges the Company may face in international
markets include changes in foreign currency exchange rates, changes in a
specific country's or region's political or economic conditions, trade
protection measures, import or export licensing requirements and unexpected
changes in regulatory requirements. In particular, the decline in the value of
southeast Asian and Brazilian currencies may, if not reversed, adversely affect
future income. Also, future sales may decrease because the decline in southeast
Asian and Brazilian economies could cause customers to purchase fewer goods in
general, and also because Monsanto products may become more expensive for
customers to purchase in their local currency.
YEAR 2000 READINESS. The dates on which Monsanto believes the Y2K Program
will be completed are based on management's best estimates, which were derived
utilizing numerous assumptions of future events. There can be no guarantee that
these estimates will be achieved, or that there will not be a delay in, or
increased costs associated with, the implementation of the Y2K Program. Factors
which may cause delays in the Y2K Program or increased costs in connection
therewith include, but are not limited to, the continued availability and cost
of personnel and consultants trained in these areas, the ability to locate and
correct all relevant computer code and embedded systems and the success of
similar programs conducted by suppliers and other third parties.
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<PAGE>
UNDERWRITING
The Company and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each underwriter has severally agreed to
purchase the number of shares indicated in the following table. Goldman, Sachs
& Co. and Salomon Smith Barney Inc. are the representatives of the
underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co................................... 8,425,000
Salomon Smith Barney Inc.............................. 8,425,000
BancBoston Robertson Stephens Inc..................... 350,000
Bear, Stearns & Co. Inc............................... 350,000
Deutsche Bank Securities Inc.......................... 350,000
Donaldson, Lufkin & Jenrette Securities Corporation... 350,000
A.G. Edwards & Sons, Inc.............................. 350,000
EVEREN Securities, Inc................................ 350,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.... 350,000
J.P. Morgan Securities Inc............................ 350,000
Morgan Stanley & Co. Incorporated..................... 350,000
Schroder & Co. Inc.................................... 350,000
SG Cowen Securities Corporation....................... 350,000
Robert W. Baird & Co. Incorporated.................... 225,000
Arnhold and S. Bleichroeder, Inc...................... 225,000
J.C. Bradford & Co.................................... 225,000
Gruntal & Co., L.L.C.................................. 225,000
Edward D. Jones & Co., L.P............................ 225,000
McDonald Investments Inc.............................. 225,000
Neuberger Berman, LLC................................. 225,000
Stifel, Nicolaus & Company, Incorporated.............. 225,000
----------
Total................................................ 22,500,000
==========
</TABLE>
----------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
2,456,250 shares from the Company to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters by the Company. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by the Company
-------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $1.20 $1.20
Total................................................. $27,000,000 $29,947,500
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $0.70 per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $0.10 per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
The Company has agreed with the underwriters not to dispose of or hedge any
of its Common Stock or securities convertible into or exchangeable for shares
of Common Stock (other than the securities offered in the Financings) during
the period from the date of this prospectus continuing through the date 90 days
after the date of this prospectus, except with the prior written consent of
Goldman, Sachs & Co. and Salomon Smith Barney Inc.
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<PAGE>
This agreement does not apply to any existing employee benefit plans or the
Delta Pine merger.
In connection with the offering, the underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Common
Stock while the offering pursuant to this prospectus is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Common Stock. As a result, the price of the
Common Stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the NYSE, in
the over-the-counter market or otherwise.
The Company estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $1.0
million.
The Company has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Goldman, Sachs & Co. and Salomon Smith Barney Inc. have in the past
performed investment banking services for the Company and have received
compensation for these services. In October 1998, Citibank, N.A. and Salomon
Smith Barney Inc., affiliates of Citigroup, Inc., agreed to serve as
administrative agent and arranger, respectively, for a $2 billion revolving
credit facility for the Company. In addition, the Company currently has a $1
billion credit facility with Citibank, N.A. acting as the administrative agent.
Citibank, N.A. has received, and Citibank, N.A. and Salomon Smith Barney Inc.
will receive, compensation for these services. Goldman, Sachs & Co. and Salomon
Smith Barney Inc. or their affiliates may in the future provide banking and
other financial services to Monsanto or its affiliates for which they will
receive compensation. John S. Reed, a Director of the Company, is Co-Chairman
and Co-Chief Executive Officer of Citigroup Inc., the parent company of Salomon
Smith Barney Inc. and Citibank, N.A. Mr. Reed owns 40,872 shares of Common
Stock, has options to purchase 23,030 shares of Common Stock and owns 3,512
stock equivalent units of the Company, representing shares which Mr. Reed will
receive upon retirement.
VALIDITY OF SHARES
The validity of the Common Stock will be passed upon for the Company by
Winston & Strawn and for the underwriters by Sullivan & Cromwell.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996 and for each of the three years in the period ending December 31, 1997
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is also incorporated
herein by reference. Such statements are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
S-28
<PAGE>
$2,000,000,000
MONSANTO COMPANY
Common Stock, Preferred Stock, Depositary Shares, Debt Securities, Warrants
to Purchase Common Stock, Warrants to Purchase Preferred Stock, Warrants to
Purchase Debt Securities, Warrants to Purchase Depositary Shares and Stock
Purchase Contracts
Monsanto Company, a Delaware corporation (the "Company"), may from time to
time offer (i) shares of Common Stock, $2.00 par value per share ("Common
Stock"), (ii) whole or fractional shares of Preferred Stock, no par value per
share (collectively, "Preferred Stock"), (iii) Preferred Stock represented by
Depositary Shares ("Depositary Shares"), (iv) debt securities ("Debt
Securities"), which may be senior debt securities ("Senior Debt Securities")
or subordinated (including junior subordinated) debt securities ("Subordinated
Debt Securities"), and which may be secured or unsecured, (v) warrants to
purchase Common Stock ("Common Stock Warrants"), (vi) warrants to purchase
Preferred Stock ("Preferred Stock Warrants"), (vii) warrants to purchase Debt
Securities ("Debt Warrants"), (viii) warrants to purchase Depositary Shares
("Depositary Share Warrants" and, together with the Common Stock Warrants,
Preferred Stock Warrants and Debt Warrants, the "Warrants") and (ix) contracts
to purchase Common Stock or Preferred Stock ("Stock Purchase Contracts"), with
an aggregate public offering price of up to $2,000,000,000, on terms to be
determined at the time or times of offering. The Common Stock, Preferred
Stock, Depositary Shares, Debt Securities, Common Stock Warrants, Preferred
Stock Warrants, Debt Warrants, Depositary Share Warrants and Stock Purchase
Contracts (collectively referred to herein as the "Securities") may be
offered, separately or together, in separate classes or series, in amounts, at
prices and on terms to be set forth in one or more supplements to this
Prospectus (each, a "Prospectus Supplement").
All specific terms of the offering and sale of the Securities in respect of
which this Prospectus is being delivered will be set forth in the applicable
Prospectus Supplement and will include, when applicable: (i) in the case of
Common Stock, the maximum aggregate number of shares offered and any public
offering price; (ii) in the case of Preferred Stock, the specific class,
series, title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, any dividend payment dates, any sinking
fund provisions, the maximum aggregate number of shares offered and any public
offering price; (iii) in the case of Depositary Shares, the aggregate number
of shares offered, the shares of whole or fractional Preferred Stock
represented by each such Depositary Share and any public offering price; (iv)
in the case of Debt Securities, the specific title, aggregate principal
amount, denomination, form, maturity, interest rate and time of payment,
currency, ranking as Senior or Subordinated Debt Securities, redemption,
repayment or sinking fund provisions, terms for conversion into Common Stock
or Preferred Stock and any public offering price; (v) in the case of Common
Stock Warrants, the duration, offering price, exercise price and detachability
features; (vi) in the case of Preferred Stock Warrants, description of the
Preferred Stock for which each warrant will be exercisable and the duration,
offering price, exercise price and detachability features, (vii) in the case
of Debt Warrants, description of the Debt Securities for which each warrant
will be exercisable and the duration, offering price, exercise price and
detachability features; (viii) in the case of Depositary Share Warrants, the
duration, offering price, exercise price and detachability features; and (ix)
in the case of Stock Purchase Contracts, the designation and number of shares
of Preferred Stock or Common Stock issuable thereunder, the purchase price of
the Preferred Stock or Common Stock, the date or dates on which the Preferred
Stock or Common Stock is required to be purchased by the holders of the Stock
Purchase Contracts, any periodic payments required to be made by the Company
to the holders of the Stock Purchase Contract or vice versa, and the terms of
the offering and sale thereof. If any Securities are offered together in the
form of Units, the specific terms of any such Units will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will also contain information, when
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by that Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities,
their names and any applicable purchase price, fee, commission or discount
arrangement between or among them will be set forth in or will be calculable
from the information set forth in the applicable Prospectus Supplement. No
Securities may be sold without delivery of the applicable Prospectus
Supplement describing the method and terms of the offering of those
Securities. See "Plan of Distribution" for possible indemnification
arrangements with underwriters, dealers and agents.
The Common Stock is traded on the New York Stock Exchange under the symbol
"MTC."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of the Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is May 19, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission (the "Commission") with respect to the Securities.
This Prospectus which constitutes part of the Registration Statement does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of any documents are not necessarily complete and, in each
instance, reference is made to the copy of such documents filed as an exhibit
to the Registration Statement, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information filed by the Company with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices of the Commission: Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048;
and Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained
from the Public Reference Section of the Commission, at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company is subject to
the electronic filing requirements of the Commission. Accordingly, pursuant to
the rules and regulations of the Commission, certain documents, including
annual and quarterly reports and proxy statements, filed by the Company with
the Commission have been or will be filed electronically. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. The Company's Common
Stock is listed on the New York Stock Exchange under the symbol MTC, and such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which the Company has filed with
the Commission under the Securities Act.
INFORMATION INCORPORATED BY REFERENCE
The following documents, each of which has been filed with the Commission,
are incorporated by reference in this Prospectus:
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
the Company's Current Report on Form 8-K dated January 23, 1998;
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A dated April 16, 1953; and
the description of the Company's preferred share purchase rights
("Rights") associated with the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on January 31, 1990.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
registered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any
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<PAGE>
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified and superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the information that has been incorporated by reference in
this Prospectus, excluding exhibits. Such requests should be directed to
Monsanto Company, 800 North Lindbergh Boulevard, St. Louis, Missouri 63167,
Attention: Corporate Secretary, Telephone: (314) 694-1000.
THE COMPANY
The Company and its subsidiaries are engaged in the worldwide manufacture
and sale of a diversified line of agricultural products, nutrition and
consumer products, pharmaceuticals, and other products. The Company was
incorporated in 1933 under Delaware law and is the successor to a Missouri
corporation, Monsanto Chemical Works, organized in 1901. Unless otherwise
indicated by the context, "Monsanto" means Monsanto Company and consolidated
subsidiaries, and the "Company" means Monsanto Company only. The Company's
principal executive offices are located at 800 N. Lindbergh Boulevard, St.
Louis, Missouri 63167.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Securities will be
used for general corporate purposes, which may include capital expenditures,
acquisitions, reducing short-term borrowings, and meeting working capital
needs. Pending such uses, the Company may temporarily invest the net proceeds
in interest-bearing securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratio of earnings to
fixed charges of the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
4.55 7.35 2.42 4.44 4.60 5.50 3.87
</TABLE>
The ratio of earnings to fixed charges represents the number of times fixed
charges (interest expense, capitalized interest, and other fixed charges) are
covered by income from continuing operations before income taxes,
extraordinary credits and fixed charges (other than capitalized interest), but
excluding undistributed earnings of affiliated companies. Income from
continuing operations before income taxes included charges for acquired in-
process research and development of $101 million for the three months ended
March 31, 1997, and $684 million for the year ended December 31, 1997, and
charges for restructuring and other unusual items of $376 million and $90
million for the years ended December 31, 1996 and 1995, respectively.
Excluding these unusual items, the ratio of earnings to fixed charges would
have been 9.70 for the three months ended March 31, 1997, and 5.32, 6.60 and
5.10 for the years ended December 31, 1997, 1996 and 1995, respectively.
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<PAGE>
The ratio was not materially affected by the restructuring and other unusual
items in 1994 and 1993. The ratio of earnings to fixed charges for Preferred
Stock has not been separately presented because such ratio is identical to the
ratio presented above.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 1,000,000,000 shares
of Common Stock, $2.00 par value per share, and 10,000,000 shares of Preferred
Stock, no par value per share, of which 595,284,668 shares of Common Stock
(exclusive of treasury shares) were issued and outstanding on December 31,
1997. No shares of Preferred Stock were outstanding at that date.
COMMON STOCK
Subject to the rights of holders of any outstanding Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to share ratably in
dividends declared out of assets legally available therefor at such time and
in such amounts as the Board of Directors may from time to time lawfully
determine.
Each holder of Common Stock is entitled to one vote for each share held and,
except as otherwise required by law or provided with respect to any series of
Preferred Stock, the holders of Common Stock will exclusively possess all
voting power. Holders of Common Stock are not entitled to cumulate votes for
the election of directors. The Common Stock is not entitled to conversion or
preemptive rights and is not subject to redemption or assessment. Subject to
the rights of holders of any outstanding Preferred Stock, upon liquidation,
dissolution or winding up of the Company, any assets legally available for
distribution to shareholders as such are to be distributed ratably among the
holders of the Common Stock at that time outstanding. The Common Stock
presently outstanding is, and the Common Stock issued upon conversion of the
Debt Securities, exercise of the Common Stock Warrants (upon payment in full
of the Common Stock Warrant exercise price) or conversion of any convertible
Preferred Stock offered hereby, as the case may be, will be, fully paid and
nonassessable. The Common Stock is listed on the New York Stock Exchange under
the symbol "MTC" and any Common Stock offered will be listed, subject to
notice of issuance, on such exchange.
PREFERRED STOCK
The following summary of the Preferred Stock does not purport to be complete
and is qualified in its entirety by reference to the Charter or the applicable
Certificate of Designations of Preferred Stock (each a "Preferred Stock
Designation"), the form of which is filed as, or will be incorporated by
reference as, an exhibit to the Registration Statement of which this
Prospectus is a part in connection with the issuance of such series of
Preferred Stock. The particular terms of any series of Preferred Stock will be
described in the applicable Prospectus Supplement.
The authorized shares of Preferred Stock are issuable, without further
shareholder approval, in one or more series as determined by the Board of
Directors, with such rights, privileges and preference as are fixed by the
Board of Directors, including dividend, liquidation, redemption, voting and
other rights preferred over the Common Stock, subject to the restrictions in
the Preferred Stock Designation or the Indentures referred to below. The
Preferred Stock issuable upon exercise of any Preferred Stock Warrants (upon
payment in full of the Preferred Stock Warrant exercise price), conversion of
any Depositary Shares, exercise of any Depositary Share Warrants and
subsequent conversion of any Depositary Shares received thereby or conversion
of any Debt Securities convertible into Preferred Stock will be fully paid and
nonassessable. The Preferred Stock may be convertible and, if so convertible,
may be converted into one or both of Common Stock and Debt Securities. The
Preferred Stock may also be exchangeable, at the option of the Company, for
Debt Securities (see "Description of Debt Securities"). If Preferred Stock,
Preferred Stock Warrants, Depositary Shares or Depositary
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<PAGE>
Share Warrants are being offered or if the Preferred Stock is exchangeable for
Debt Securities, the accompanying Prospectus Supplement will describe the
rights, privileges, preferences and restrictions of such Preferred Stock
(including, without limitation, the designation, the number of authorized
shares of the series in question, the dividend rate (or method of
calculation), any voting rights, conversion rights, anti-dilution protections,
exchangeability provisions and terms of the Debt Securities that are
exchangeable for the Preferred Stock, any redemption provisions, liquidation
preferences and any sinking fund provisions). If fractional interests in
shares of Preferred Stock may be issued, such interests may be issued in the
form of Depositary Shares. See "Description of Depositary Shares."
No shares of Preferred Stock are currently outstanding. Shares of Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. The liquidation preference of any series of
Preferred Stock is not indicative of the price at which shares of such series
of Preferred Stock will actually trade on or after the date of issuance.
DESCRIPTION OF RIGHTS
In January 1990, the Company's Board of Directors declared a dividend of one
Preferred Stock purchase right on each then-outstanding share of the Common
Stock. If a person or group acquires beneficial ownership of 20 percent or
more, or announces a tender offer that would result in beneficial ownership of
20 percent or more, of the Company's outstanding Common Stock, the rights
become exercisable and, as a result of two subsequent stock splits, for every
10 rights held, the owner will be entitled to purchase one one-hundredth of a
share of a new series of Preferred Stock for $450. If Monsanto is acquired in
a business combination transaction while the rights are outstanding, for every
10 rights held, the holder will be entitled to purchase, for $450, common
shares of the acquiring company having a market value of $900. In addition, if
a person or group acquires beneficial ownership of 20 percent or more of the
Company's outstanding Common Stock, for every 10 rights held, the holder
(other than such person or members of such group) will be entitled to
purchase, for $450, a number of shares of Common Stock having a market value
of $900. Furthermore, at any time after a person or group acquires beneficial
ownership of 20 percent or more (but less than 50 percent) of the Company's
outstanding Common Stock, the Board of Directors may, at its option, exchange
part or all of the rights (other than rights held by the acquiring person or
group) for shares of Common Stock on a one-share-for-every-10-rights basis. At
any time prior to the acquisition of such a 20 percent position, the Company
can redeem each right for $0.001. The Board of Directors also is authorized to
reduce the aforementioned 20 percent thresholds to not less than 10 percent.
The rights expire in January 2000.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York and for the Preferred Stock will be set forth in the
applicable Prospectus Supplement.
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN CHARTER AND BY-LAWS PROVISIONS AND THE
RIGHTS
GENERAL. The Certificate of Incorporation (the "Charter") and the By-Laws of
the Company contain provisions that will make more difficult the acquisition
of control of the Company by means of a tender offer, open market purchases, a
proxy fight or other means that are not approved by the Board. The purposes of
such provisions of the Charter and the By-Laws are to discourage certain types
of transactions which may involve an actual or threatened change of control of
the Company and to encourage persons seeking to acquire control of the Company
to negotiate the terms of any proposed business combination or offer with the
Board. Set forth below is a general description of such provisions in the
Charter and the By-Laws which is qualified in its entirety by reference to
such documents. Capitalized terms used and not defined herein are defined in
the Charter or the By-Laws, as the case may be.
5
<PAGE>
CLASSIFIED BOARD OF DIRECTORS. The Charter provides for the Board to be
divided into three classes serving staggered terms. Therefore, at least two
annual meetings of stockholders will generally be required to effect a change
in a majority of the Board.
NUMBER OF DIRECTORS; REMOVAL; FILING VACANCIES. The Charter provides that
the number of directors will be fixed from time to time exclusively by the
Board and that, subject to any rights of the holders of Preferred Stock, only
a majority of the Board of Directors then in office shall have the authority
to fill any vacancies on the Board of Directors. Moreover, the Company Charter
provides that directors may be removed only for cause and only by the
affirmative vote of holders of at least 80% of the voting power of all the
then-outstanding shares of Common Stock voting together as a single class.
LIMITATIONS ON STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. The
Charter and By-Laws provide that stockholder action can be taken only at an
annual or special meeting of stockholders, and prohibit stockholder action by
written consent in lieu of a meeting. The By-Laws provide that, subject to the
rights of holders of any series of the relevant preferred stock, special
meetings of stockholders can be called only by the Chairman of the Board of
Directors of the Company, the President or pursuant to resolution of the Board
of Directors. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the purpose or purposes of the meeting
as stated in the notice of the meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS. The By-Laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors,
of candidates for election as directors and with regard to certain matters to
be brought before an annual meeting of stockholders.
PREFERRED STOCK. The Charter authorizes the Board to establish series of
Preferred Stock and to determine, with respect to any series of Preferred
Stock, the voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or otherwise
special rights and such qualifications, limitations or restrictions thereof as
are stated in the board resolutions providing for such series. The number of
authorized shares of Preferred Stock is 10,000,000. Although the Board does
not have any intention at the present time of doing so, it could issue a
series of Preferred Stock that could, subject to certain limitations imposed
by applicable securities laws and stock exchange rules, depending on the terms
of such series, impede the completion of a merger, tender offer or other
takeover attempt. For instance, such series of Preferred Stock might impede a
business combination by including class voting rights that would enable the
holder to block such a transaction.
AMENDMENT OF CERTAIN CHARTER PROVISIONS AND THE BY-LAWS. The Charter
contains provisions requiring the affirmative vote of the holders of at least
80% of the outstanding Common Stock to amend the provisions pertaining to
classification of the Board, the number of directors, filling vacancies in the
Board of Directors, removal of directors and the requirement that stockholders
can act only at annual or special meetings and not by written consent. The
Charter also requires the vote of at least 80% of the outstanding Common Stock
for stockholders to adopt, amend or repeal any provision of the By-Laws.
PREFERRED SHARE PURCHASE RIGHTS. The Rights described above may have certain
antitakeover effects. The Rights will cause substantial dilution to a person
or group that attempts to acquire the Company and thereby effect a change in
the composition of the Board on terms not approved by the Board, including by
means of a tender offer at a premium to the market price, other than an offer
conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or business combination approved by the
Board since the Rights may be redeemed by the Company at the applicable
redemption price prior to the time that a person or group triggers the
exercise of the Rights.
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<PAGE>
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The following summary of each of the Deposit Agreement, the Depositary
Shares and the Depositary Receipts (each as defined below) does not purport to
be complete and is qualified in its entirety by reference to the Deposit
Agreement and Depositary Receipts with respect to the Depositary Shares
relating to any particular series of Preferred Stock, the forms of which are
filed as, or will be incorporated by reference as, exhibits to the
Registration Statement of which this Prospectus is a part in connection with
the issuance of such Depositary Shares.
The following summary of the Deposit Agreement, the Depositary Shares and
the Depositary Receipts relates to certain terms and conditions applicable to
such Securities generally. The particular terms of any series of Depositary
Shares will be described in the applicable Prospectus Supplement. If so
indicated in such Prospectus Supplement, the terms of any such series may
differ from the terms set forth below.
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. If the
Company elects to do so, it will provide for the issuance by a Depositary (as
described below) to the public of receipts for Depositary Shares, each of
which will represent a fractional interest (to be set forth in the applicable
Prospectus Supplement) of a share of Preferred Stock.
The shares of any series of the Preferred Stock underlying any Depositary
Shares will be deposited under a separate Deposit Agreement (each, a "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company with respect to such series, having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000 (with
respect to such series, the "Depositary"). The applicable Prospectus
Supplement relating to a series of Depositary Shares will set forth the name
and address of the Depositary. Subject to the terms of the applicable Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fractional interest in a share of the Preferred Stock
underlying such Depositary Share, to all the rights, preferences or privileges
of such Preferred Stock (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
Depositary Shares will be evidenced by depositary receipts issued pursuant
to the applicable Deposit Agreement (the "Depositary Receipts").
The Depositary will distribute all cash dividends or other cash
distributions received by the Depositary in respect of the Preferred Stock to
the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the respective numbers of such Depositary Shares held by such
holders on the relevant record date; provided, however, that in the case the
Company or Depositary shall be required to withhold and shall withhold from
any cash dividend or other cash distribution an amount on account of taxes,
the amount made available for distribution shall be reduced accordingly. The
Depositary will distribute only such amount, however, as can be distributed
without attributing to any holder of Depositary Shares a fraction of one cent,
and any balance not so distributed will be added to and treated as part of the
next succeeding distribution to record holders of such Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute securities or property received by it to the record holders of
Depositary Shares entitled thereto in proportion to the respective numbers of
such Depositary Shares held by such holders on the relevant record date,
unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the Company's approval,
adopt such method as it deems equitable and practicable for the
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<PAGE>
purpose of effecting such distribution, including the public or private sale
of such securities or property. The net proceeds from any such sale shall be
distributed to such holders as provided in the case of a distribution received
in cash.
Each Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Company to holders
of the Preferred Stock of the applicable series will be made available to
holders of Depositary Shares.
Upon surrender of Depositary Receipts at the office of the Depositary
(unless the related Depositary Shares have previously been called for
redemption), the holder of the Depositary Shares evidenced thereby will be
entitled to delivery at such office, to or upon such holder's order, of the
number of whole shares of the related series of Preferred Stock and all money
and other property, if any, underlying such Depositary Shares. Holders of
Depositary Shares will be entitled to receive whole shares of the related
series of Preferred Stock on the basis set forth in the applicable Prospectus
Supplement, but holders of such whole shares of such Preferred Stock will not
thereafter be entitled to deposit such Preferred Stock or to receive receipts
evidencing Depositary Shares therefor. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of whole shares of the related
series of Preferred Stock or Series A Junior Preferred Stock to be withdrawn,
the Depositary will deliver to such holder or upon such holder's order at the
same time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
The terms, if any, on which the Depositary Shares relating to the Preferred
Stock of any series may be redeemed will be set forth in the applicable
Prospectus Supplement.
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock of any series are entitled to vote, the applicable Depositary will mail
the information contained in such notice of meeting to the record holders of
the Depositary Shares relating to such series of Preferred Stock. Each record
holder of such Depositary Shares on the record date (which will be the same
date as the record date for the Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights pertaining to the
number of shares of Preferred Stock underlying such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the
number of whole shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
action that may be deemed necessary by the Depositary in order to enable the
Depositary to do so. To the extent the Depositary does not receive specific
instructions from the holders of Depositary Shares relating to such Preferred
Stock, it will abstain from voting such shares of Preferred Stock, unless
otherwise indicated by the holders of such Depositary Shares.
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the applicable Deposit Agreement may at any time be amended by
agreement between the Company and the Depositary. However, no amendment that
materially and adversely alters the rights of the existing holders of
Depositary Shares will be effective unless such amendment has been approved by
the record holders of at least a majority of the Depositary Shares then
outstanding. A Deposit Agreement may be terminated by the Company or the
Depositary only if (i) all outstanding Depositary Shares relating thereto have
been redeemed and any accumulated and unpaid dividends on the Preferred Stock
represented by the Depositary Shares, together with all other moneys and
property, if any, to which holders of Depositary Receipts are entitled, have
been paid or distributed, (ii) all Preferred Stock has been withdrawn or (iii)
there has been a final distribution in respect of the Preferred Stock of the
applicable series in connection with any liquidation, dissolution or winding
up of the Company and such distribution has been distributed to the holders of
Depositary Receipts.
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of any depositary arrangements. The Company
will pay all charges of each Depositary in connection with the initial deposit
of the Preferred Stock of any series, any redemption of such
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Preferred Stock and any withdrawals of such Preferred Stock by holders of
Depositary Shares. Holders of Depositary Shares will be required to pay any
other transfer and other taxes and governmental charges and such other charges
as are expressly provided in the Deposit Agreement to be for their accounts.
Each Depositary will forward to the holders of the applicable Depositary
Shares all notices, reports and communications from the Company which are
delivered to such Depositary and which the Company is required to furnish the
holders of the Depositary Receipts or Preferred Stock of the applicable
series.
Neither any Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under any Deposit Agreement. Neither any Depositary nor the
Company will assume any obligation or be subject to any liability under any
Deposit Agreement other than for its negligence or willful misconduct, and
they will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or Preferred Stock unless indemnity
satisfactory to them is furnished. The Depositary will agree to perform its
duties as are specifically set forth in the Deposit Agreement using its
reasonable best efforts and in good faith. Any Depository or the Company may
rely upon written advice of counsel or accountants, or information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Shares
or other persons believed by it to be competent and on documents believed by
them to be genuine.
A Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove a Depositary,
and such resignation or removal will take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered
Debt Securities and the extent to which such general provisions may apply will
be described in a Prospectus Supplement relating to such Offered Debt
Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will constitute senior, senior subordinated or subordinated
(including, if applicable, junior subordinated) debt of the Company and will
be issued under a Senior Debt Indenture (the "Senior Debt Indenture") or a
Subordinated Debt Indenture (the "Subordinated Debt Indenture"). The Chase
Manhattan Bank (the "Trustee") will serve as the trustee under the Senior Debt
Indenture. The Senior Debt Indenture and the Subordinated Debt Indenture are
sometimes referred to below individually as an "Indenture" and collectively as
the "Indentures." If and to the extent set forth in the applicable Prospectus
Supplement, the Debt Securities may be convertible into Preferred or Common
Stock of the Company or issued as part of Units of Debt Securities and other
Securities. If Debt Securities are to be issued as part of Units of Debt
Securities and other Securities or are to be issued in exchange for Preferred
Stock, the Prospectus Supplement will describe any applicable material federal
income tax consequences.
The following summaries of certain provisions of the Indentures and the Debt
Securities do not purport to be complete. Except to the extent set forth in
the Prospectus Supplement with respect to a particular issue of Debt
Securities, the Indentures are substantially identical, except for the
provisions relating to subordination, including the fact that Senior Debt
Securities will rank senior to the Subordinated Debt Securities.
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GENERAL
The Indentures for the Debt Securities will not limit the amount of
additional indebtedness the Company or any of its subsidiaries may incur,
except as may be provided in the applicable Prospectus Supplement. The Debt
Securities will be senior or subordinated obligations of the Company, as set
forth in the accompanying Prospectus Supplement.
The applicable Prospectus Supplement will contain the following terms of and
information relating to any Debt Securities (to the extent such terms are
applicable to such Debt Securities and have not been otherwise disclosed): (a)
the specific title, aggregate principal amount, denomination and form; (b) the
date of maturity; (c) the interest rate or rates (or the method by which such
rate will be determined), if any; (d) the date from which interest will
accrue, the dates on which any such interest will be payable and the record
date for any interest payable on the interest payment date; (e) if other than
the corporate trust office of the trustee for such Debt Securities, the place
or places where the principal of, premium, if any, and interest, if any, on
the Debt Securities will be payable; (f) the portion of the principal amount
of Debt Securities of the series payable upon certain declarations of
acceleration or the method by which such portion shall be determined; (g) the
currency, currencies or currency unit in which payments will be made, if other
than U.S. dollars; (h) whether the Debt Securities are senior or subordinated
Debt Securities; (i) any redemption, repayment or sinking fund provisions,
including the period or periods within which, the currency, currencies or
currency units in which and the other terms and conditions upon which Debt
Securities may be redeemed; (j) whether the Debt Securities are convertible
into Common Stock or Preferred Stock and the terms of the security into which
they are convertible (see "Description of Capital Stock"), the conversion
price, other terms related to conversion and any anti-dilution protections;
(k) whether the Debt Securities will be sold as part of Units consisting of
Debt Securities and other Securities; (l) if the amount of payments of
principal of or any premium or interest on any Debt Securities of the series
may be determined with reference to an index, formula or other method, the
index, formula or other method by which such amounts shall be determined; (m)
whether and by what method the Debt Securities of the series (or certain
covenants under the related Indenture) may be defeased and discharged by the
Company; (n) whether the Debt Securities of the series shall be issued in
whole or in part as book-entry securities; (o) any applicable material federal
income tax consequences; and (p) any other material specific terms of the Debt
Securities, including any material additional events of default or covenants
provided for with respect to the Debt Securities and any material terms that
may be required by or advisable under applicable laws or regulations.
Debt Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate or as part of Units consisting of
Debt Securities and other Securities may be sold or deemed to be sold at a
discount below their stated principal amount. With respect to any Debt
Securities as to which the Company has the right to defer interest, the
holders of such Debt Securities may be allocated interest income for federal
and state income tax purposes without receiving equivalent, or any, interest
payments. Any material federal income tax considerations applicable to any
such discounted Debt Securities or to certain Debt Securities issued at par
that are treated as having been issued at a discount for federal income tax
purposes will be described in the applicable Prospectus Supplement.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Any Subordinated Debt Securities will be subordinate and junior in right of
payment, to the extent and in the manner to be set forth in the Indenture, to
all "Senior Debt" of the Company. "Senior Debt" means, without duplication,
the principal, premium (if any) and unpaid interest on all present and future
(i) indebtedness of the Company for borrowed money, (ii) obligations of the
Company evidenced by bonds, debentures, notes or similar instruments, (iii)
indebtedness incurred, assumed or guaranteed by the Company in connection with
the acquisition by it or a Subsidiary of any business, properties or
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assets (except purchase-money indebtedness classified as accounts payable
under generally accepted accounting principles), (iv) obligations of the
Company as lessee under leases required to be capitalized on the balance sheet
of the lessee under generally accepted accounting principles, (v)
reimbursement obligations of the Company in respect of letters of credit
relating to indebtedness or other obligations of the Company that qualify as
indebtedness or obligations of the kind referred to in clauses (i) through
(iv) above, and (vi) obligations of the Company under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to
in clauses (i) through (v) above, in each case unless in the instrument
creating or evidencing the indebtedness or obligation or pursuant to which the
same is outstanding it is provided that such indebtedness or obligation is not
superior in right of payment to Senior Debt Securities.
CERTAIN COVENANTS OF THE COMPANY
RESTRICTION ON LIENS. The Senior Debt Indenture provides that the Company
will not, nor will it permit a Restricted Subsidiary to, secure indebtedness
for money borrowed by placing a Lien on any Operating Property owned or leased
by the Company or any Restricted Subsidiary or on any shares of stock or Debt
of any Restricted Subsidiary without equally and ratably securing the Debt
Securities, unless (i) the principal amount of such indebtedness plus (ii) the
Attributable Debt in respect of Sale and Leaseback Transactions (other than
Sale and Leaseback Transactions the proceeds of which are applied as provided
under (b) of the following paragraph) does not exceed 10% of the Consolidated
Net Assets of the Company and its consolidated subsidiaries. This restriction
will not apply to, and there shall be excluded in computing secured
indebtedness for purposes of this restriction, certain permitted liens,
including (a) liens existing as of the date of the Indenture, (b) liens
existing at the time any corporation becomes a Restricted Subsidiary, (c)
liens on property existing at the time of acquisition and certain purchase
money or similar liens, (d) liens to secure certain development, operation,
construction, alteration, repair or improvement costs, (e) liens securing
indebtedness owing to the Company or another Restricted Subsidiary by a
Restricted Subsidiary, (f) liens in connection with either government
contracts, including the assignment of moneys due or to become due thereon or
obligations issued by a state or a commonwealth or certain other governmental
entities, (g) certain liens in connection with legal proceedings or arising in
the ordinary course of business and not in connection with the borrowing of
money and (h) extensions, substitutions, replacements or renewals of the
foregoing. (Section 1007)
RESTRICTION ON SALE AND LEASEBACK TRANSACTIONS. The Senior Debt Indenture
further provides that the Company will not, nor will it permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction unless either (a)
the Attributable Debt in respect thereto and all other sale and leaseback
transactions entered into after the date of the Senior Debt Indenture (other
than those the proceeds of which are applied to reduce indebtedness under (b)
following), plus the aggregate amount of then outstanding secured indebtedness
not otherwise permitted or excepted without equally and ratably securing the
Debt Securities, does not exceed 10% of the Consolidated Net Assets of the
Company and its consolidated subsidiaries, or (b) an amount equal to the fair
value of the Operating Property leased is applied within 120 days to (i) the
purchase of any asset or any interest in an asset which would qualify after
purchase, as an Operating Property or (ii) the retirement of the Debt
Securities or other indebtedness maturing more than one year thereafter.
(Section 1008)
CERTAIN DEFINITIONS. Attributable Debt, in respect of the sale and leaseback
transactions described above, means, as of the time of determination, the
total obligation (discounted to present value at the rate per annum equal to
the discount rate which would be applicable to a capital lease obligation with
like term in accordance with generally accepted accounting principles) of the
lessee for rental payments (other than amounts required to be paid on account
of property taxes, maintenance, repairs, insurance, water rates and other
items which do not constitute payments for property rights)
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during the remaining portion of the initial term of the lease included in such
sale and leaseback transaction. (Section 101)
Consolidated Net Assets is the aggregate amount of assets (less applicable
reserves and other properly deductible items) after deducting therefrom all
current liabilities (excluding certain renewable or extendible indebtedness)
as shown on the latest balance sheet of the Company and its consolidated
subsidiaries and computed in accordance with generally accepted accounting
principles. (Section 101)
An Operating Property is any real property or equipment located within the
United States and used primarily for manufacturing by the Company or any of
its Subsidiaries that has a net book value (after deduction of accumulated
depreciation) in excess of 2.0% of Consolidated Net Assets, other than any
such property or equipment (i) which is financed by obligations issued by a
state, commonwealth, territory or possession of the United States of America,
or any political subdivision or governmental authority of any of the
foregoing, or (ii) which, in the opinion of the Company's Board of Directors,
is not of material importance to the total business conducted by the Company
and its Restricted Subsidiaries taken as a whole. (Section 101)
A Restricted Subsidiary is any Subsidiary of the Company that owns any
Operating Property.
A Sale and Leaseback Transaction is any arrangement with any bank, insurance
company or other lender or investor (other than the Company or another
Restricted Subsidiary) providing for the leasing by the Company or any
Restricted Subsidiary of any Operating Property (except a lease for a
temporary period not to exceed three years by the end of which it is intended
that the use of such Operating Property by the lessee will be discontinued),
which was or is owned or leased by the Company or a Restricted Subsidiary and
which has been or is to be sold or transferred, more than 120 days after the
acquisition or the completion of construction and commencement of full
operation thereof, by the Company or such Restricted Subsidiary to such lender
or investor or to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such Operating Property.
REDEMPTION
If and to the extent set forth in the applicable Prospectus Supplement, the
Company will have the right to redeem the Debt Securities, in whole or from
time to time in part, after the date and at the redemption prices set forth in
the applicable Prospectus Supplement.
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series is
defined in the Indentures as: default in payment of principal of or premium,
if any, on any Debt Security of that series at Maturity; default for 30 days
in payment of interest on any Debt Security of that series; default for 30
days in the deposit of any sinking fund payment when due in respect of that
series; failure by the Company in the performance of any other of the
covenants or warranties in the Indentures continued for 90 days after due
notice by the Trustee or by Holders of at least 25% in principal amount of the
Outstanding Debt Securities of that series; certain events of bankruptcy,
insolvency or reorganization of the Company; and any other Event of Default
provided with respect to Debt Securities of that series. (Section 501)
The Indentures provide that, if any Event of Default with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing,
either the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed
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Securities (as defined in the Indentures), such portion of the principal
amount of such Debt Securities as may be specified in the terms thereof) of
all Debt Securities of that series to be due and payable immediately, but upon
certain conditions such declaration may be annulled and past defaults (except,
unless theretofore cured, a default in payment of principal of or premium, if
any, or interest, if any, on the Debt Securities of that series and certain
other specified defaults) may be waived by the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series on behalf
of the Holders of all Debt Securities of that series. (Sections 502 and 513)
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indentures provide that the Trustee will, within 90 days after the
occurrence of a default with respect to Debt Securities of any series at the
time Outstanding, give to the Holders of the Outstanding Debt Securities of
that series notice of such default known to it if uncured or not waived,
provided that, except in the case of default in the payment of principal of or
premium, if any, or interest on any Debt Security of that series, or in the
deposit of any sinking fund payment which is provided for, such notice shall
not be given until 30 days after the occurrence of a default with respect to
Outstanding Debt Securities of such series. The term default with respect to
any series of Outstanding Debt Securities for the purpose only of this
provision means the happening of any of the Events of Default specified in the
Indenture and relating to such series of Outstanding Debt Securities,
excluding any grace periods and irrespective of any notice requirements.
(Section 602)
The Indentures contain a provision entitling the Trustee, subject to the
duty of the Trustee during default to act with the required standard of care,
to be indemnified by the Holders of any series of Outstanding Debt Securities
before proceeding to exercise any right or power under the Indenture at the
request of the Holders of such series of Debt Securities. (Section 603) The
Indentures provide that the Holders of a majority in principal amount of
Outstanding Debt Securities of any series may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or other power conferred on the Trustee, with respect to
the Debt Securities of such series provided that the Trustee may decline to
act if such direction is contrary to law or the Indentures or would expose it
to personal liability. (Section 512)
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
DEFEASANCE AND DISCHARGE. Unless otherwise provided in the applicable
Prospectus Supplement, the terms of any series of Debt Securities will provide
that the Company will be discharged from any and all obligations in respect of
the Debt Securities of such series (except for certain obligations to register
the transfer or exchange of Debt Securities of such series, to replace stolen,
lost or mutilated Debt Securities of such series, to maintain paying agencies
and hold moneys for payment in trust) upon the deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations which, through the payment
of interest and principal thereof in accordance with their terms, will provide
money in an amount sufficient to pay and discharge the principal of (and
premium, if any) and interest on, and any mandatory sinking fund payments
applicable to, the Debt Securities of such series on the stated maturity of
such payments in accordance with the terms of the Indenture and such Debt
Securities. Such discharge may only occur if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the
Company has received from, or there has been published by, the United States
Internal Revenue Service a ruling, or there has been a change in tax law, in
either case to the effect that such a discharge will not be deemed, or result
in, a taxable event with respect to Holders of the Debt Securities of such
series. (Article Thirteen of the Senior Debt Indenture; Article Fifteen of the
Subordinated Debt Indenture)
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DEFEASANCE OF CERTAIN COVENANTS. Unless otherwise provided in the applicable
Prospectus Supplement, the terms of any series of Debt Securities will provide
the Company with the option to omit to comply with certain restrictive
covenants, including those described in Sections 801, 1007 and 1008 of the
Senior Debt Indenture. The Company, in order to exercise such option, will be
required to deposit with the Trustee money and/or U.S. Government Obligations,
which, through the payment of interest and principal thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of (and premium, if any) and interest on, and mandatory sinking fund
payments applicable to the Debt Securities of such series on the stated
maturity of such payments in accordance with the terms of the Indentures and
such Debt Securities. The Company will also be required to deliver to the
Trustee an opinion of counsel to the effect that the deposit and related
covenant defeasance will not cause the Holders of the Debt Securities of such
series to recognize income, gain or loss for federal income tax purposes. In
the event the Company exercises this option and the Debt Securities of such
series are declared due and payable because of the occurrence of any Event of
Default, the amount of money and U.S. Government Obligations, as the case may
be, on deposit with the Trustee will be sufficient to pay amounts due on the
Debt Securities of such series at the time of their Stated Maturity but may
not be sufficient to pay amounts due on the Debt Securities of such series at
the time of the acceleration resulting from such Event of Default. However,
the Company shall remain liable for such payments.
The Prospectus Supplement will state if any defeasance provision will apply
to Debt Securities offered in connection therewith.
MODIFICATION OF THE INDENTURE AND WAIVER OF COVENANTS
The Indentures contain provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in principal
amount of Outstanding Debt Securities of each series affected thereby, to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the Indentures or modifying the rights of
the Holders of Outstanding Debt Securities of such series, except that no such
supplemental indenture may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity, or
reduce the principal amount, the premium, if any, thereon or the rate of
payment of interest thereon, of any Debt Security of any series, (b) reduce
the aforesaid percentage of Outstanding Debt Securities of any series, the
consent of the Holders of which is required for any supplemental indenture or
for waiver of compliance with certain provisions of the Indenture or certain
defaults thereunder or (c) effect certain other changes. (Section 902) The
Indentures also permit the Company to omit compliance with certain covenants
in the Indentures with respect to Debt Securities of any series upon waiver by
the Holders of a majority in principal amount of Outstanding Debt Securities
of such series.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures contain a provision permitting the Company, without the
consent of the Holders of any of the Outstanding Debt Securities under the
Indenture, to consolidate with or merge into any other corporation or transfer
or lease its assets substantially as an entirety to any person provided that:
(i) the successor is a corporation organized under the laws of any domestic
jurisdiction; (ii) the successor corporation assumes the Company's obligations
on the Debt Securities and under the Indentures; (iii) after giving effect to
the transaction no Event of Default, and no event which, after notice or lapse
of time, would become an Event of Default, shall have happened and be
continuing; and (iv) certain other conditions are met. (Sections 801 and 802)
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Senior Debt Indenture.
Monsanto maintains deposit accounts and banking relationships with The Chase
Manhattan Bank. It is one of Monsanto's
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principal commercial banks and has extended substantial credit facilities to
Monsanto. The Chase Manhattan Bank is a participant in revolving credit
agreements with the Company and is the tender agent and paying agent for
various industrial revenue bonds of the Company. The Trustee also serves as
trustee under an indenture relating to the 7.09% Guaranteed Amortizing ESOP
Notes and 8.13% Guaranteed Amortizing ESOP Debentures of the Monsanto Defined
Contribution and Employee Stock Ownership Trust, which are guaranteed by the
Company, and under indentures relating to the Company's Medium-Term Notes,
Series C and D, and its 8.70% Debentures and 6.75% Debentures.
GOVERNING LAW
Unless otherwise specified in the applicable Prospectus Supplement, the
Indenture for the Debt Securities and the Debt Securities will be governed by
New York law.
DESCRIPTION OF WARRANTS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Warrants will be issued in fully registered form under a Warrant Agreement
between the Company and the Warrant Agent named in the applicable Prospectus
Supplement (the "Warrant Agent"). The statements in this Prospectus relating
to the Warrants and the Warrant Agreement are summaries and do not purport to
be complete.
Each Warrant will entitle the registered owner (the "Warrantholder") to
purchase one share of Preferred Stock, one share of Common Stock, one
Depositary Share or a specified principal amount of Debt Securities, as set
forth in the applicable Prospectus Supplement, subject to the call provisions
referred to below, from the time the Warrants are separately transferable
until the date set forth in the accompanying Prospectus Supplement. The
initial exercise price of the Warrants and the date on which the Warrants
become separately transferable will be set forth in the applicable Prospectus
Supplement.
The Warrants can be exercised by surrendering to the Warrant Agent a Warrant
certificate signed by the Warrantholder or his, her or its duly authorized
agent indicating the Warrantholder's election to exercise all or a portion of
the Warrants evidenced by the certificate. Surrendered Warrant certificates
must be accompanied by a written election to purchase such Warrants and
payment of the aggregate exercise price of the Warrants to be exercised (the
"Warrant Price"), which payment may be made in the form of wire transfer or a
cashier's check equal to the exercise price or, if and to the extent set forth
in the applicable Prospectus Supplement, the surrender of Debt Securities in
denominations at least equal to the aggregate Warrant Prices or, if
applicable, any combination of cash and such denominations of Debt Securities.
Certificates evidencing duly exercised Warrants shall be delivered by the
Warrant Agent to the transfer agent or trustee for the applicable Securities.
Upon receipt thereof, the Company will be obligated to deliver or cause to be
delivered, to or upon the written order of the exercising Warrantholders,
certificates representing the number or principal amount of Securities so
purchased. If fewer than all of the Warrants evidenced by any certificate are
exercised, the Warrant Agent will be obligated to deliver to the exercising
Warrantholder a new Warrant certificate representing the unexercised Warrants.
To the extent set forth in the applicable Prospectus Supplement, the Warrant
Price and the number of Securities purchasable upon the exercise of each
Warrant are subject to adjustment in certain events, including: (i) the
issuance of a stock dividend to holders of Securities (whichever the Warrants
are exercisable for) or a combination or subdivision of the Securities
(whichever the Warrants are exercisable for); (ii) the issuance of rights,
warrants or options or securities convertible into, or exchangeable for, the
Securities (whichever the Warrants are exercisable for), that are distributed
to
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all holders of the Company's outstanding Securities (whichever the Warrants
are exercisable for) entitling them to subscribe for or purchase such
Securities; and (iii) any distribution by the Company to the holders of its
Securities (whichever the Warrants are exercisable for) of evidences of
indebtedness of the Company or of assets (excluding, if and to the extent set
forth in the applicable Prospectus Supplement, certain cash dividends or
distributions). To the extent set forth in the applicable Prospectus
Supplement, no adjustment in the number of Securities purchasable upon
exercise of the Warrants or in the Warrant Price will be required until
cumulative adjustments require an adjustment of at least one percent thereof.
Notwithstanding the foregoing, unless the applicable Prospectus Supplement
states to the contrary, in case of any merger or consolidation or sale,
transfer, lease or conveyance of all or substantially all of the assets of the
Company and its subsidiaries, including a consolidation or merger in which the
Company is the continuing corporation, the successor or assuming entity shall
succeed to and be substituted for the Company, with the same effect as if it
had been named in the Warrant Agreement and in the Warrant Certificates as the
Company.
Adjustments to the Warrant Price (and, possibly, adjustment to the number of
Securities purchasable upon the exercise of each Warrant), or the failure to
make such adjustments, may in certain circumstances result in distributions
that could be taxable as dividends under the Internal Revenue Code of 1986, as
amended, to holders of the Warrants or to holders of shares of Securities
issued upon exercise thereof. The Company will reserve the right (but will not
be obligated) to make such adjustments to the Warrant Price or in the number
of Securities purchasable upon the exercise of each Warrant, in addition to
those required in the foregoing provisions, as it shall determine to be
advisable in order that certain stock-related distributions which may
hereafter be made by the Company to its stockholders after the date of the
applicable Prospectus Supplement shall not be taxable to them.
If all or any portion of the Warrants are callable at the option of the
Company, the call provisions, including the call price and the date through
which the Warrants may be exercised, will be set forth in the applicable
Prospectus Supplement. If upon expiration the unexercised Warrants will
convert into Securities, the manner and rate of such conversion will be set
forth in the applicable Prospectus Supplement.
Holders of Warrants are not entitled, by virtue of being holders, to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, to vote at any such meeting or to exercise any rights whatsoever
as stockholders of the Company. The Warrant Agreement and the Warrants will
provide that no director, officer, employee or shareholder of the Company, as
such, will have any liability under the Warrants or the Warrant Agreement. The
Warrant Agreement and the Warrants will also each provide that each holder of
the Warrants, by accepting the Warrants, waives and releases all such
liability.
Unless otherwise specified in the applicable Prospectus Supplement, the
Warrant Agreement and the Warrants will be governed by New York law.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company may issue Stock Purchase Contracts, including contracts obligating
holders to purchase from the Company, and the Company to sell to the holders,
a specified number of shares of Common Stock or Preferred Stock at a future
date or dates. The consideration per share of Common Stock or Preferred Stock
may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by a specific
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reference to a formula set forth in the Stock Purchase Contracts. The Stock
Purchase Contracts may be issued separately or as part of Units ("Stock
Purchase Units") consisting of a Stock Purchase Contract and Debt Securities,
Preferred Securities or debt obligations of third parties, including U.S.
Treasury securities, securing the holders' obligations to purchase the Common
Stock or the Preferred Stock under the Stock Purchase Contracts. The Stock
Purchase Contracts may require the Company to make periodic payments to the
holders of the Stock Purchase Units or vice versa, and such payments may be
unsecured or prefunded on some basis. The Stock Purchase Contracts may require
holders to secure their obligations thereunder in a specified manner.
PLEDGED SECURITIES AND PLEDGE AGREEMENT. The securities related to the Stock
Purchase Contracts (collectively, the "Pledged Securities") will be pledged to
a collateral agent (the "Collateral Agent"), for the benefit of the Company,
pursuant to the Pledge Agreement to secure the obligations of holders of Stock
Purchase Contracts to purchase Common Stock or Preferred Stock under the
related Stock Purchase Contracts. The rights of holders of Stock Purchase
Contracts to the related Pledged Securities will be subject to the Company's
security interest therein created by the Pledge Agreement. No holder of Stock
Purchase Contracts will be permitted to withdraw the Pledged Securities
related to such Stock Purchase Contracts from the pledge arrangement except
upon the termination or Early Settlement of the related Stock Purchase
Contracts. Subject to such security interest and the terms of the Purchase
Contract Agreement and the Pledge Agreement, each holder of a Stock Purchase
Contract will retain full beneficial ownership of the related Pledged
Securities.
Except as described in the applicable Prospectus Supplement, the Collateral
Agent will, upon receipt of distributions on the Pledged Securities,
distribute such payments to the Company or the Purchase Contract Agent, as
provided in the Pledge Agreement. The Purchase Contract Agent will in turn
distribute payments it receives as provided in the Purchase Contract
Agreement.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not necessarily be complete and will be qualified in its
entirety by reference to the Stock Purchase Contracts, and, if applicable,
collateral arrangements and depositary arrangements, relating to such Stock
Purchase Contracts or Stock Purchase Units.
DESCRIPTION OF GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement,
Securities other than Common Stock will be issued in the form of one or more
book-entry certificates (collectively, with respect to each series or issue of
Securities, the "Global Securities") registered in the name of a depositary or
a nominee or a depositary. Unless otherwise specified in the applicable
Prospectus Supplement, the depositary will be The Depository Trust Company
("DTC"). The Company has been informed by DTC that its nominee will be Cede &
Co. ("Cede"). Accordingly, Cede is expected to be the initial registered
holder of all Securities that are issued in book-entry form. No person that
acquires a beneficial interest in such Securities will be entitled to receive
a certificate representing such person's interest in the Securities except as
set forth herein or in the applicable Prospectus Supplement. Unless and until
definitive Securities are issued under the limited circumstances described
below, all references to actions by holders of Securities issued in book-entry
form shall refer to actions taken by DTC upon instruction from its
Participants (as defined below), and all references herein to payments and
notices to holders shall refer to payments and notices to DTC or Cede, as the
registered holder of such Securities.
DTC has informed the Company that it is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing company" within the meaning of the New York
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Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Exchange Act, and that it was created to hold securities for its
participating organizations ("Participants") and to facilitate the clearance
and settlement of securities transactions among Participants through
electronic book-entry, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations, and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Persons that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants.
Under a book-entry format, Holders may experience some delay in their receipt
of payments, as such payments will be forwarded by the agent designated by the
Company to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
Holders. Holders will not be recognized by the applicable registrar, transfer
agent, Trustee, Depositary or Warrant Agent as registered holders of the
Securities entitled to the benefits of the Certificate or the applicable
Indenture, Deposit Agreement or Warrant Agreement. Beneficial owners that are
not Participants will be permitted to exercise their rights as such only
indirectly through and subject to the procedures of Participants and, if
applicable, Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations as currently in effect (the "Rules"), DTC will be required to
make book-entry transfers of Securities among Participants and to receive and
transmit payments to Participants. Participants and Indirect Participants with
which beneficial owners of Securities have accounts with respect to the
Securities similarly are required by the Rules to make book-entry transfers
and receive and transmit such payments on behalf of their respective account
holders.
Because DTC can act only on behalf of Participants, who in turn act only on
behalf of Participants or Indirect Participants, and on behalf of certain
banks, trust companies and other persons approved by it, the ability of a
beneficial owner of Securities issued in book-entry form to pledge such
Securities to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Securities, may be limited due to the
unavailability of physical certificates for such Securities.
DTC has advised the Company that DTC will take any action permitted to be
taken by a registered holder of any Securities under the Charter or the
applicable indenture, Deposit Agreement or Warrant Agreement only at the
direction of one or more Participants to whose accounts with DTC such
Securities are credited.
Unless otherwise specified in the applicable Prospectus Supplement, a Global
Security will be exchangeable for the relevant definitive Securities
registered in the names of persons other than DTC or its nominee only if (i)
DTC notifies the Company that it is unwilling or unable to continue as
depository for such Global Security or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act at a time when DTC is
required to be so registered in order to act as such depository and the
Company does not appoint a successor within 90 days, (ii) the Company executes
and delivers to the applicable registrar, transfer agent, Trustee, Depositary
and/or Warrant Agent an order complying with the requirements of the Charter
or the applicable Indenture, Deposit Agreement and/or Warrant Agreement that
such Global Security shall be so exchangeable or (iii) there has occurred and
is continuing a default in the payment of any amount due in respect of the
Securities or, in the case of Debt Securities, an Event of Default or an event
that, with the giving of notice or lapse of time, or both, would constitute an
Event of Default with respect to such Debt Securities. Any Global Security
that is exchangeable pursuant to the preceding sentence will be exchangeable
for Securities registered in such names as DTC directs.
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Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all Participants of the
availability through DTC of definitive Securities. Upon surrender by DTC of
the Global Security representing the Securities and delivery of instructions
for re-registration, the registrar, transfer agent, Trustee, Depositary or
Warrant Agent, as the case may be, will reissue the Securities as definitive
Securities, and thereafter such persons will recognize the holders of such
definitive Securities as registered holders of Securities entitled to the
benefits of the Certificate or the applicable Indenture, Deposit Agreement
and/or Warrant Agreement.
Except as described above a Global Security may not be transferred except as
a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depositary appointed by the Company. Except
as described above, DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a Global Security evidencing all or part of any
Securities unless such beneficial interest is in an amount equal to an
authorized denomination for such Securities.
None of the Company, the Trustees, any registrar and transfer agent, any
Warrant Agent or any Depositary, or any agent of any of them, will have any
responsibility or liability for any aspect of DTC's or any Participant's
records relating to, or for payments made on account of, beneficial interests
in a Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through one or more underwriters
or dealers or may sell the Securities to investors directly or through agents.
Any such underwriter or agent involved in the offer and sale of the Securities
will be named in the applicable Prospectus Supplement. The Company may sell
Securities directly to investors on its own behalf in those jurisdictions
where it is authorized to do so.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Company also may, from time to time, authorize dealers or agents to offer and
sell the Securities upon such terms and conditions as may be set forth in the
applicable Prospectus Supplement. In connection with the sale of the
Securities, underwriters may receive compensation from the Company in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell the Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for which they may act as
agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Securities, and any discounts or
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions. Underwriters, dealers and agents may
be entitled, under agreements entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
The Common Stock is listed on the New York Stock Exchange under the symbol
"MTC." The Depositary Shares, Debt Securities, the Preferred Stock and the
Warrants will be new issues of securities with no established trading market.
Any underwriters or agents to or through which
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Securities are sold by the Company may make a market in such Securities, but
such underwriters or agents will not be obligated to do so and any of them may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or trading market for any Depositary Shares, Debt
Securities, Preferred Stock or Warrants.
LEGAL MATTERS
The validity of the Common Stock, Preferred Stock, Depositary Shares, Debt
Securities, Common Stock Warrants, Preferred Stock Warrants, Debt Warrants,
Depositary Share Warrants and Stock Purchase Contracts covered by this
Prospectus will be passed upon for the Company by Winston & Strawn, Chicago,
Illinois. The validity of the Securities offered by this Prospectus may be
passed on for any underwriters or agents by counsel named in the Prospectus
Supplement.
EXPERTS
The consolidated financial statements of Monsanto at December 31, 1997 and
1996 and for each of the three years in the period ending December 31, 1997
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein
by reference. Such statements are incorporated herein by reference in reliance
upon such report given upon the authority of Deloitte & Touche LLP as experts
in accounting and auditing.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... S-1
Use of Proceeds.......................................................... S-9
Price Range of Common Stock and Dividend Policy.......................... S-10
Capitalization........................................................... S-11
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... S-12
Disclosure Regarding Forward-Looking Information......................... S-22
Underwriting............................................................. S-27
Validity of Shares....................................................... S-28
Experts.................................................................. S-28
Prospectus
Available Information.................................................... 2
Information Incorporated by Reference.................................... 2
The Company.............................................................. 3
Use of Proceeds.......................................................... 3
Ratio of Earnings to Fixed Charges....................................... 3
Description of Capital Stock............................................. 4
Description of Depositary Shares......................................... 7
Description of Debt Securities........................................... 9
Description of Warrants.................................................. 15
Description of Stock Purchase Contracts and Stock Purchase Units......... 16
Description of Global Securities......................................... 17
Plan of Distribution..................................................... 19
Legal Matters............................................................ 20
Experts.................................................................. 20
</TABLE>
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22,500,000 Shares
MONSANTO COMPANY
Common Stock
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[Logo]
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Joint Book-Running Managers
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
Representatives of the Underwriters
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