Solutia Solution

CHAPTER 11

Monsanto has reached an agreement in principle with Solutia and unsecured creditors that could soon bring Solutia out of bankruptcy reorganization and give Monsanto more than 50% of the shares of the chemical businesses it spun out in 1997.

Solutia, Monsanto, and unsecured creditors expect to submit a plan to the bankruptcy court this summer that envisions a full payment to Solutia's secured debtors. Unsecured debtors would receive all the stock in the reorganized firm that Monsanto would not own. Existing shareholders would get nothing. A Solutia spokesman says the firm could be out of bankruptcy by year-end.

Jeffry N. Quinn, Solutia's CEO, called the agreement "a major milestone" that would "provide significant relief from the historic liabilities that were a driving factor in our Chapter 11 filing" in December 2003.

Monsanto, which saddled Solutia with a legacy of environmental litigation and liabilities along with pension obligations to retirees nearly eight years ago, will benefit, too. Monsanto Chief Financial Officer Terrell K. Crews says the agreement will "help create a viable Solutia and allow Monsanto to continue to focus on our agricultural businesses."

Subject to bankruptcy court approval, Monsanto would receive at least 29.8% of Solutia's common stock when it emerges from bankruptcy in exchange for funds spent or committed by Monsanto to help bring Solutia out of bankruptcy.

But Monsanto could end up owning another 22.7% of Solutia in exchange for an additional $250 million investment in a reorganized Solutia. If unsecured creditors agree to provide all or part of the additional investment--which would fund retiree benefits and clean up contaminated sites in Anniston, Ala., and Sauget, Ill.--Monsanto's stock ownership would be reduced proportionately.