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Exhibit 10(a)
EMPLOYEE
BENEFITS
AND
COMPENSATION ALLOCATION AGREEMENT
BETWEEN
MONSANTO COMPANY
AND
SOLUTIA INC.
DATED AS OF SEPTEMBER 1, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS.................................................................1
1.1 General........................................................................1
ARTICLE II. U.S. PLANS AND STOCK PLANS.................................................8
2.1 Retirement Plans...............................................................8
2.2 The SIP........................................................................9
2.3 Welfare Plans.................................................................11
2.4 Stock Plans...................................................................12
2.5 Stock Purchase Plans..........................................................14
2.6 Nonqualified Plans and Programs...............................................16
ARTICLE III. FOREIGN PLANS AND TCN POLICY.............................................16
3.1 General Principles............................................................16
3.2 Exceptions to General Principles..............................................17
3.3 TCN Policy....................................................................17
ARTICLE IV. GENERAL PROVISIONS........................................................17
4.1 Employment Transfers; Severance Pay...........................................17
4.2 Other Liabilities.............................................................18
4.3 Recognition of Monsanto Employment Service, Etc...............................18
4.4 Indemnification...............................................................19
4.5 Transition Services...........................................................19
4.6 Workers Compensation Excluded.................................................19
4.7 P4 Joint Venture..............................................................19
ARTICLE V. MISCELLANEOUS..............................................................19
5.1 Guarantee of Subsidiaries' Obligations........................................19
5.2 Audits and Disputes...........................................................19
5.3 Sharing of Information........................................................20
5.4 Termination...................................................................21
5.5 Rights to Amend or Terminate Plans; No Third Party Beneficiaries..............21
5.6 Complete Agreement............................................................21
5.7 Governing Law.................................................................21
5.8 Notices.......................................................................21
5.9 Amendment and Modification....................................................21
5.10 Successors and Assigns.......................................................21
5.11 Counterparts.................................................................22
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5.12 Interpretation...............................................................22
5.13 Legal Enforceability.........................................................22
5.14 References; Construction.....................................................22
Schedule I
Schedule II
Schedule III
Exhibit A
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EMPLOYEE BENEFITS AND COMPENSATION
ALLOCATION AGREEMENT
EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION
AGREEMENT, dated as of September 1, 1997, by and between Monsanto Company, a
Delaware corporation ("Monsanto"), and Solutia Inc., a newly formed Delaware
corporation ("Solutia").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Monsanto has determined that it is
appropriate and desirable to separate Monsanto and its subsidiaries into two
publicly traded organizations by: (1) consolidating into Solutia and its newly
formed subsidiaries certain of the businesses currently conducted by Monsanto
directly and through certain of its other subsidiaries and (2) distributing to
the holders of the issued and outstanding shares of common stock, par value
$2.00 per share, of Monsanto ("Monsanto Common Stock") all of the issued and
outstanding shares of common stock, par value $.01 per share, of Solutia
("Solutia Common Stock") (the "Distribution");
WHEREAS, the Distribution is intended to qualify as a tax-free spin-off
under Section 355 of the Internal Revenue Code of 1986, as amended;
WHEREAS, Monsanto and Solutia are entering into a Distribution Agreement of
even date herewith (the "Distribution Agreement"), which, among other things,
sets forth the principal corporate transactions required to effect the
Distribution and sets forth other agreements that will govern certain other
matters prior to and following the Distribution; and
WHEREAS, in connection with the Distribution and pursuant to the
Distribution Agreement, Monsanto and Solutia desire to provide for the
allocation of assets and liabilities and other matters relating to employee
benefit plans and compensation arrangements;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
1.1. GENERAL. Any capitalized terms that are used in this Agreement but not
defined herein (other than the names of Monsanto employee benefit plans) shall
have the meanings set forth in the Distribution Agreement, and, as used herein,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
Agreement: this Employee Benefits and Compensation Allocation Agreement,
including the Schedules and Exhibit hereto.
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Alternate Payee: an alternate payee under a domestic relations order which
has been determined by the appropriate Plan administrator to be qualified under
Section 414(p) of the Code and Section 206(d) of ERISA and which creates or
recognizes an alternate payee's right to, or assigns to an alternate payee, all
or a portion of the benefits payable to a participant under any Plan, or an
alternate recipient under a medical child support order which has been
determined by the appropriate Plan administrator to be qualified under Section
609(a) of ERISA and which creates or recognizes the existence of an alternate
recipient's right to, or assigns to an alternate recipient the right to, receive
benefits for which a participant or beneficiary is eligible under any Plan.
Assigned Split Dollar Policies: defined in Section 2.3(c).
Audit Liability: defined in Section 5.2(a)(i).
Beneficiary: a beneficiary, dependent or Alternate Payee of a participant
in a Plan or the estate of a deceased participant in a Plan, in each case, in
his, her or its capacity as such a beneficiary, dependent, Alternate Payee or
estate.
Benefit Uplift: as defined in Section 4.2.
Cash Incentive Plan: a Plan providing annual and/or long-term cash
incentive compensation.
Code: defined in the recitals.
Distribution: defined in the recitals.
Distribution Agreement: defined in the recitals.
Employee: with respect to any entity, an individual who is considered,
according to the payroll and other records of such entity, to be employed by
such entity, regardless of whether such individual is, at the relevant time,
actively at work or on leave of absence (including vacation, holiday, sick
leave, family and medical leave, disability leave, military leave, jury duty,
layoff with rights of recall, and any other leave of absence or similar
interruption of active employment that is not considered, according to the
policies or practices of such entity, to have resulted in a permanent
termination of such individual's employment).
Employer Securities: shares of Monsanto Common Stock that are held in the
Monsanto SIP immediately before the Distribution Date and the shares of Solutia
Common Stock distributed with respect thereto in the Distribution.
Enrolled Actuary: with respect to all U.S. Plans, Towers ▇▇▇▇▇▇, and, with
respect to all Foreign Plans, an enrolled actuary or other party making
actuarial or similar determinations pursuant to this Agreement with respect to
assets or Liabilities relating to
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a particular employee benefit plan selected by Monsanto with the approval of
Solutia, which approval shall not be unreasonably withheld.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or
any successor legislation, and the regulations promulgated thereunder.
ESOP Shares: shares of Employer Securities that were acquired with the
proceeds of any loans or are otherwise governed by the terms of Section 19 of
the Monsanto SIP or the corresponding provisions of the Solutia SIP.
Existing Monsanto ESOP Security: each of the Monsanto ESOP Notes, the
Monsanto ESOP Debentures and the Monsanto ESOP Loans.
Foreign Plan: any Plan maintained outside of the United States primarily
for the benefit of individuals substantially all of whom are nonresident aliens
with respect to the United States other than the TCN Policy.
Fraction: the ratio of the aggregate unpaid principal amount of the Solutia
ESOP Securities, determined immediately after the restructuring provided for in
Section 2.02(c), to the aggregate unpaid principal amount of the Existing
Monsanto ESOP Securities, determined immediately before such restructuring.
Hourly Pension Plan: the Monsanto Company Hourly-Paid Employees' Pension
Plan.
Improving Party: defined in Section 4.2(a).
Monsanto: defined in the preamble.
Monsanto Common Stock: defined in the recitals.
Monsanto Employee: any individual who is, as of the Distribution Date,
identified on the records of Monsanto as being an Employee of any member of the
Monsanto Group, other than those individuals working through the Retiree
Resources Corps.
Monsanto ESOP: the Monsanto Employee Stock Ownership Plan component of the
Monsanto SIP.
Monsanto ESOP Debentures: the 8.13% Guaranteed Amortizing ESOP Debentures
issued by the Monsanto SIP Trust.
Monsanto ESOP Loans: the $50,000,000 promissory note entered into on
December 16, 1991 between Monsanto and the Monsanto SIP Trust and the $3,675,800
promissory note entered into on December 27, 1996 between Monsanto and the
Monsanto SIP Trust.
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Monsanto ESOP Notes: the 7.09% Guaranteed Amortizing ESOP Notes due
December 15, 2000 issued by the Monsanto SIP Trust.
Monsanto ESOP Suspense Account: the ESOP Suspense Account established
pursuant to Section 19 of the Monsanto SIP.
Monsanto Foreign Plan: a Foreign Plan provided by, contributed to or
sponsored by one or more members of the Monsanto Group.
Monsanto Former Employee: any individual who was, at any time before the
Distribution Date, an Employee of any member of the Pre-Distribution Group, and
who is not a Monsanto Employee, a Solutia Employee or a Solutia Former Employee;
provided that, if at any time on or before December 31, 1997, Solutia and
Monsanto determine that any one or more individuals were identified as Monsanto
Former Employees in error and should have been identified as Solutia Former
Employees, and agree to correct such error, such individuals shall be considered
Solutia Former Employees, and Solutia and Monsanto shall use their reasonable
best efforts to implement the terms of this Agreement as they apply to such
individuals as if such individuals had been correctly identified as of the
Distribution Date.
Monsanto Incentive Plans: the Monsanto Company Management Incentive Plan of
1984, the ▇▇▇▇▇▇ Monsanto Stock Option Plan of 1986, the Monsanto Company
Management Incentive Plan of 1988/I, the Monsanto Company Management Incentive
Plan of 1988/II, the NutraSweet/Monsanto Stock Plan of 1991, the Monsanto
Company Management Incentive Plan of 1994, the ▇▇▇▇▇▇/Monsanto Stock Plan of
1994, the NutraSweet/Monsanto Stock Plan of 1994, the Monsanto Management
Incentive Plan of 1996 and the Monsanto Shared Success Stock Option Plan.
Monsanto Option: an option to purchase shares of Monsanto Common Stock
granted pursuant to any of the Monsanto Incentive Plans.
Monsanto Participant: any individual who is a Monsanto Employee, a Monsanto
Former Employee, or a Beneficiary of such an individual.
Monsanto Pension Plan: the Monsanto Company Pension Plan.
Monsanto Ratio: the amount obtained by dividing (i) the average of the
daily high and low trading prices on the NYSE Composite Tape, as reported in The
Wall Street Journal, for the Monsanto Common Stock with due bills on each of the
five trading days prior to the Distribution Date, by (ii) the excess of (A) the
amount described in clause (i) over (B) one-fifth of the average of the daily
high and low trading prices on the NYSE Composite Tape, as reported in The Wall
Street Journal, for the Solutia Common Stock on a when-issued basis on each of
such five trading days.
Monsanto Restricted Stock: restricted shares of Monsanto Common Stock
granted pursuant to, and subject to forfeiture under, any of the Monsanto
Incentive Plans.
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Monsanto SAR: a stock appreciation right with respect to Monsanto Common
Stock granted pursuant to any of the Monsanto Incentive Plans.
Monsanto SIP: the Monsanto Savings and Investment Plan.
Monsanto SIP Trust: the Monsanto Defined Contribution and Employee Stock
Ownership Trust.
Monsanto U.S. Welfare Plan: any Monsanto Welfare Plan that is a U.S. Plan.
Monsanto Welfare Plan: any Welfare Plan of one or more members of the
Monsanto Group.
New Monsanto ESOP Security: defined in Section 2.2(c).
New Monsanto Option: defined in Section 2.4(b).
New Monsanto SAR: defined in Section 2.4(b).
Other Party: defined in Section 4.2(a).
Pension Plan Agreement: defined in Section 2.1(b)(i).
Plan: any written or unwritten plan, policy, program, payroll practice,
ongoing arrangement, trust, fund, contract, insurance policy or other agreement
or funding vehicle provided by, contributed to or sponsored by one or more
members of the Monsanto Group or the Solutia Benefits Group, providing benefits
to Monsanto Participants or Solutia Participants, regardless of whether it is
mandated under local law or negotiated or agreed to as a term or condition of
employment or otherwise, and regardless of whether it is governmental, private,
funded, unfunded, financed by the purchase of insurance, contributory or
noncontributory.
Pre-Adjustment Option: defined in Sections 2.4(c) and (d).
Pre-Adjustment SAR: defined in Sections 2.4(c) and (d).
Pre-Distribution Group: the Monsanto Group and the Solutia Benefits Group.
Qualified Plan: a Plan that is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA that constitutes, or is intended in good faith
to constitute, a qualified plan under Section 401(a) of the Code.
Retained Solutia Inactive Participant: any Solutia Former Employee who is
(i) a retired or terminated vested salaried participant in the Monsanto Pension
Plan whose termination under the Monsanto Pension Plan occurred after December
31, 1985 or (ii) a retired or terminated vested hourly participant in the
Monsanto Pension Plan whose
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termination under the Monsanto Pension Plan occurred after December 31, 1996, or
a Beneficiary of any such Solutia Former Employee.
Solutia: defined in the preamble.
Solutia Benefits Group: the Solutia Group, Advanced Elastomers Systems,
L.P. (U.S. operations) and Flexsys America L.P. (U.S. operations).
Solutia Common Stock: defined in the recitals.
Solutia Employee: any individual who is, as of the Distribution Date,
identified on the records of Solutia as being an Employee of any member of the
Solutia Benefits Group.
Solutia ESOP Loan: defined in Section 2.2(c).
Solutia ESOP Security: defined in Section 2.2(c).
Solutia Foreign Plan: a Foreign Plan provided by, contributed to or
sponsored by one or more members of the Solutia Benefits Group.
Solutia Former Employee: any individual who is, as of the Distribution
Date, identified on the records of Monsanto as being a Solutia Former Employee,
which identification shall have been made based upon a good faith determination
by Monsanto and Solutia that (i) such individual was, at any time before the
Distribution Date, an employee of any member of the Pre-Distribution Group, (ii)
such individual is not a Monsanto Employee or a Solutia Employee, and (iii) such
individual's most recent active employment with any such member was with a
Solutia Business or a Former Solutia Business; provided that, if at any time on
or before December 31, 1997, Solutia and Monsanto determine that any one or more
individuals were identified as Solutia Former Employees in error and should have
been identified as Monsanto Former Employees and agree to correct such error,
such individuals shall be considered Monsanto Former Employees and Solutia and
Monsanto shall use their reasonable best efforts to implement the terms of this
Agreement as they apply to such individuals as if such individuals had been
correctly identified as of the Distribution Date.
Solutia Option: an option to purchase from Solutia shares of Solutia Common
Stock provided to a Solutia Participant or Monsanto Participant pursuant to
Section 2.4.
Solutia Participant: any individual who is a Solutia Employee, a Solutia
Former Employee, or a Beneficiary of such an individual.
Solutia Ratio: the amount obtained by dividing (i) the average of the daily
high and low trading prices on the NYSE Composite Tape, as reported in The Wall
Street Journal, for the Monsanto Common Stock with due bills on each of the five
trading days prior to the Distribution Date by (ii) the average of the daily
high and low trading prices
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on the NYSE Composite Tape, as reported in The Wall Street Journal, for the
Solutia Common Stock on a when-issued basis on each of such five trading days.
Solutia Restricted Stock: defined in Section 2.4(f).
Solutia SAR: a stock appreciation right with respect to shares of Solutia
Common Stock provided to a Solutia Participant or Monsanto Participant pursuant
to Section 2.4.
Solutia SIP: a Qualified Plan established by Solutia pursuant to Section
2.2(a).
Solutia SIP Trust: defined in Section 2.2(a).
Solutia U.S. Welfare Plan: a Solutia Welfare Plan that is a U.S. Plan.
Solutia Welfare Plan: a Welfare Plan sponsored by one or more members of
the Solutia Benefits Group.
Special Effective Date: defined in Section 2.1(c)(ii).
Split Dollar Life Insurance Program: the Monsanto Executive Life Insurance
Program, including all individual life insurance contracts, split dollar
agreements and collateral assignments thereunder.
Successor Plan: defined in Section 2.1(b)(i).
Supplemental Retirement Agreement: any agreement between any member of the
Pre-Distribution Group and any single Monsanto Employee, Monsanto Former
Employee, Solutia Employee or Solutia Former Employee providing for
post-retirement income, pension or welfare benefits (other than pursuant to a
Welfare Plan, a Qualified Plan, a Supplemental Retirement Plan or the TCN
Policy).
Supplemental Retirement Plan: a U.S. Plan that is (i) an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA but is not a Qualified
Plan, or (ii) an excess benefit plan under ERISA, including the Monsanto Company
ERISA Parity Pension Plan, the Monsanto Company ERISA Parity Savings and
Investment Plan and the Monsanto Company Supplemental Retirement Plan.
TCN Policy: The Monsanto Company Third Country National Policy.
Transition Services Employee: defined in Section 4.5.
U.S. Deferred Compensation Plan: a U.S. Plan, other than a Qualified Plan
or a Supplemental Retirement Plan, providing deferred compensation.
U.S. Plan: any Plan that is not a Foreign Plan, other than the TCN Policy.
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Welfare Plan: any Foreign Plan or U.S. Plan that is an "employee welfare
benefit plan" as defined in Section 3(1) of ERISA (whether or not such plan is
subject to ERISA).
ARTICLE II.
U.S. PLANS AND STOCK PLANS
2.1. RETIREMENT PLANS. Monsanto and Solutia shall take all steps necessary
or appropriate so that the provisions of this Section 2.1 are implemented in a
timely fashion, as more fully set forth below.
(a) ASSUMPTION OF HOURLY PENSION PLAN BY SOLUTIA. Effective no later than
as of the Distribution Date, and subject to Section 5.2(a): (i) all Liabilities
to or with respect to Monsanto Participants under the Hourly Pension Plan shall
be transferred from the Hourly Pension Plan to the Monsanto Pension Plan, and
the Monsanto Pension Plan shall assume and be solely responsible for such
Liabilities; (ii) there shall be transferred from the master trust account for
the Hourly Pension Plan to the master trust account for the Monsanto Pension
Plan a pro rata portion thereof, representing the amount of assets required to
be transferred as a result of such transfer and assumption of Liabilities, as
reasonably and equitably determined by the Enrolled Actuary in accordance with
Section 414(l) of the Code; and (iii) Solutia shall assume sponsorship of the
Hourly Pension Plan. The steps taken pursuant to the foregoing shall include the
appointment or reappointment by Solutia (by action of its Board of Directors or
its delegee after the Distribution Date to approve or ratify such appointment or
reappointment) of all trustees, custodians, recordkeepers and other fiduciaries
and service providers to the Hourly Pension Plan, and the replacement of the
existing named fiduciary of the Hourly Pension Plan.
(b) SUCCESSOR PLAN.
(i) Monsanto and Solutia shall enter into, on or before the Distribution
Date, one or more written agreements (the "Pension Plan Agreement") providing
for the transfer to and assumption by a defined benefit pension plan that is a
Qualified Plan (the "Successor Plan") of certain assets and liabilities of the
Monsanto Pension Plan, as set forth in Section 2.1(b)(ii) below. The Successor
Plan shall consist of one or more Plans sponsored exclusively by Solutia and/or
any other member of the Solutia Benefits Group. All matters relating to
Liabilities and obligations with respect to the Successor Plan shall be governed
by the Pension Plan Agreement, except as otherwise specified below.
(ii) Except as specifically set forth in Section 5.2(a), subject to the
completion of the asset transfer described in the next sentence, and effective
as of the Distribution Date: (A) the Monsanto Pension Plan shall transfer to the
Successor Plan, and the Successor Plan and the members of the Solutia Benefits
Group shall assume and be responsible for, (I) all Liabilities of the Monsanto
Pension Plan with respect to benefits accrued by Solutia Employees through the
Distribution Date, and (II) all Liabilities of the Monsanto Pension Plan with
respect to Solutia Former Employees, other than Retained Solutia Inactive
Participants; and (B) the members of the Monsanto Group shall have no
responsibility for such Liabilities. As
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soon as practicable after the Distribution Date, there shall be transferred from
the trust funding the Monsanto Pension Plan to the trust designated to fund the
Successor Plan a pro rata portion of each of the assets thereof, representing
the amount of assets required to be transferred as a result of such transfer and
assumption of Liabilities, as reasonably and equitably determined by the
Enrolled Actuary in accordance with Section 414(l) of the Code.
(c) IMPLEMENTATION. Solutia and Monsanto shall, in connection with the
actions taken pursuant to this Section 2.1, cooperate in making any and all
appropriate filings required under the Code or ERISA, and the regulations
thereunder and any applicable securities laws, implementing all appropriate
communications with participants, transferring appropriate records, and taking
all such other actions as may be necessary and appropriate to implement the
provisions of this Section 2.1 in a timely manner.
2.2. THE SIP.
(a) Effective as of the Distribution Date, Solutia shall establish the
Solutia SIP and a related, separate trust (the "Solutia SIP Trust"), qualified
in accordance with Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code, which Plan shall include an employee stock ownership
plan qualified as such under Section 4975 of the Code, to assume Liabilities of
and receive the transfer of assets from the Monsanto SIP and the Monsanto SIP
Trust as provided for in this Section 2.2.
(b) Monsanto and Solutia shall take all actions as may be necessary or
appropriate in order to effect the transfer to the Solutia SIP and the Solutia
SIP Trust, on or as soon as practicable after the Distribution Date, of the
balances of all accounts established pursuant to and/or governed by the Monsanto
SIP of the participants in the Monsanto SIP who are, as of the date of transfer,
Solutia Participants other than Retained Solutia Inactive Participants. The
transfer of such accounts shall be made (i) in kind, to the extent the assets
thereof consist of Employer Securities, and (ii) otherwise in cash, securities,
other property or a combination thereof, as agreed by Monsanto and Solutia, but
shall be effected, where practicable, in kind, so as to preserve each such
participant's investment elections as in effect on the date of such transfer. To
the extent the assets transferred to the Solutia SIP in accordance with the
foregoing consist of Employer Securities, the portion of such Employer
Securities that shall be ESOP Shares shall equal the number of such Employer
Securities multiplied by a fraction, the numerator of which is the number of
ESOP Shares held in the Monsanto SIP immediately before the Distribution Date
and the denominator of which is the number of Shares of Employer Securities held
in the Monsanto SIP immediately before the Distribution Date.
(c) Effective as of or as soon as practicable after the Distribution Date,
one or more of the Existing Monsanto ESOP Securities shall be restructured into
two separate obligations, with one of such obligations (each, a "Solutia ESOP
Security") being assumable or issued by the Solutia SIP and the remainder
thereof (each, a "New Monsanto ESOP Security") being issued by the Monsanto SIP.
The aggregate principal amount of the Solutia ESOP Securities shall be as nearly
as possible equal to 20 percent of the aggregate principal amount of the
Existing Monsanto ESOP Securities immediately before such restructuring, and the
aggregate
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ Securities and any Existing Monsanto
ESOP Securities that are not so restructured shall equal the excess of (i) the
aggregate principal amount of the Existing Monsanto ESOP Securities immediately
before such restructuring over (ii) the aggregate principal amount of the
Solutia ESOP Securities. The Solutia ESOP Securities may include one or more
loans from Solutia and/or one or more loans from Monsanto that are assignable to
Solutia (collectively, the "Solutia ESOP Loan"). Monsanto and Solutia shall use
their reasonable best efforts to cause the terms of the Solutia ESOP Securities
and New Monsanto ESOP Securities to be as favorable to Solutia and the Solutia
SIP Trust and to Monsanto and the Monsanto SIP Trust, respectively, as the terms
of the Existing Monsanto ESOP Securities, to the extent possible. As soon as
practicable after the Distribution Date: (i) the Solutia SIP Trust shall assume
all obligations of the Monsanto SIP Trust (if any) under the Solutia ESOP
Securities; (ii) Monsanto shall be released from any guarantees it has given
with respect to the Solutia ESOP Securities, and Solutia shall provide such
guarantees; and (iii) Monsanto shall assign all of its rights (if any) under the
Solutia ESOP Loan to Solutia. Subject to and upon the completion of the
restructuring, assumption, release and assignment described in the preceding
sentences of this Section 2.2(c), the trustee of the Monsanto SIP Trust shall
transfer to the Solutia SIP Trust a pro rata portion of each of the assets held
in each of the ESOP Interim Account, the ESOP Payment Account and the Monsanto
ESOP Suspense Account, representing a percentage of such assets equal to the
Fraction, and such accounts shall be accepted by such plan and trust; provided
that the cash reserves held in the Monsanto ESOP Suspense Account shall be so
transferred and accepted only if, and to the extent that, (i) the amount of cash
determined by multiplying the Fraction times the total such cash reserves,
determined after the payment of any amounts attributable to interest with
respect to Existing Monsanto ESOP Securities that are restructured into Solutia
ESOP Securities in connection with such restructuring, exceeds (ii) the amount
paid from such cash reserves that is attributable to the premium paid in
connection with such restructuring.
(d) Solutia and Monsanto shall cooperate in making all appropriate filings
required under the Code or ERISA, and the regulations thereunder and any
applicable securities laws, implementing all appropriate communications with
participants, maintaining and transferring appropriate records, and taking all
such other actions as may be necessary and appropriate to implement the
provisions of this Section 2.2 and to cause the transfers of assets pursuant to
Sections 2.2(b) and 2.2(c) to take place as soon as practicable after the
Distribution Date; provided, however, that such transfers shall not take place
until as soon as practicable after the receipt of an opinion of counsel
satisfactory to Monsanto to the effect that the Solutia SIP is in form qualified
under Section 401(a) of the Code, the employee stock ownership plan portion
thereof is qualified under Section 4975 of the Code and the related trust is in
form exempt under Section 501(a) of the Code.
(e) Except as specifically set forth in this Section 2.2 or in Section
5.2(a), subject to the completion of the transfer provided for in Section
2.2(a), and effective as of the Distribution Date, the members of the Solutia
Benefits Group and the Solutia SIP shall assume or retain, as the case may be,
and shall be solely responsible for, all Liabilities of the Pre-Distribution
Group to or with respect to Solutia Participants other than Retained Solutia
Inactive Participants under the Monsanto SIP. The members of the Solutia
Benefits Group and the
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Solutia SIP shall be solely responsible for all Liabilities arising out of or
relating to the Solutia SIP.
2.3. WELFARE PLANS.
(a) Except as specifically set forth in this Section 2.3, Solutia shall
take, and shall cause the other members of the Solutia Benefits Group to take,
all actions necessary or appropriate to establish, on or before the Distribution
Date, Solutia U.S. Welfare Plans to provide each Solutia Participant in the
United States with benefits substantially similar to the benefits provided to
him or her under the Monsanto U.S. Welfare Plans. From and after the
Distribution Date, except as specifically set forth in Section 5.2(a), the
members of the Solutia Benefits Group shall assume or retain, as the case may
be, and shall be solely responsible for, all Liabilities of the Pre-Distribution
Group in connection with claims by or in respect of Solutia Participants in the
United States for benefits under the Monsanto U.S. Welfare Plans and the Solutia
U.S. Welfare Plans, whether incurred before, on or after the Distribution Date.
Monsanto agrees to provide Solutia or its designated representative with such
information (in the possession of a member of the Monsanto Group and not already
in the possession of a member of the Solutia Benefits Group) as may be
reasonably requested by Solutia in order to carry out the requirements of this
Section 2.3.
(b) Prior to the Distribution Date, Solutia shall establish a flexible
spending account Plan to assume Liabilities of and receive the transfer of
assets from the Monsanto Flexible Spending Account Plan, and Monsanto and
Solutia shall take all other action necessary or appropriate so that, effective
as of the Distribution Date, Solutia shall assume and be solely responsible for
all Liabilities to Solutia Employees under the Monsanto Flexible Spending
Account Plan.
(c) Monsanto and Solutia shall take all actions necessary or appropriate to
assign to Solutia, effective as of the Distribution Date, all of the rights and
interests of the Pre-Distribution Group in the split dollar life insurance
policies insuring the lives of Solutia Participants pursuant to the Split Dollar
Life Insurance Program (such policies, the "Assigned Split Dollar Policies").
Such actions shall include Solutia's acceptance of any collateral assignments,
policy endorsements or such other documentation executed by or on behalf of such
Solutia Participants or any trustee of any trust to which any Solutia
Participant's policy rights or incidents of ownership under the Assigned Split
Dollar Policies have been assigned, and Solutia's entering into such agreements
as may be necessary to fulfill any obligations of Monsanto to any insurance
company or insurance agent or broker under the Assigned Split Dollar Policies.
From and after the date of the assignment of any Assigned Split Dollar Policy to
Solutia, Solutia shall assume and be solely responsible for all Liabilities, and
shall be entitled to all benefits, of the Pre-Distribution Group to the
applicable Solutia Participant under the Split Dollar Life Insurance Program,
including under such policy and any related agreements entered into by such
Solutia Participant or any such trustee.
(d) Monsanto and Solutia shall take all action necessary or appropriate to
cause Metropolitan Life Insurance Company to partition between Monsanto and
Solutia, effective as of
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the Distribution Date, the rate stabilization reserves maintained in connection
with the Monsanto Company Salaried and Non-Union Hourly Employees' Term Life
Insurance Plan, the Monsanto Company Salaried and Non-Union Employees' Dependent
Term Life Insurance Plan, the Monsanto Company Hourly-Paid Employees' Group Life
Insurance and Sickness Plan -- Union, and the Monsanto Company Optional Life
Insurance Plan -- Union, based upon the relative dollar amount of premiums to be
paid by each of them with respect to the coverage to which such reserves relate,
determined immediately after the Distribution Date.
2.4. STOCK PLANS. Monsanto and Solutia shall take all action necessary or
appropriate so that each Monsanto Option or Monsanto SAR is adjusted and/or
replaced as set forth below.
(a) This Section 2.4(a) sets forth the treatment in the Distribution of
each Monsanto Option and Monsanto SAR granted during calendar year 1997 that is,
as of the Distribution Date, outstanding and held by a Solutia Employee. Each
such Monsanto Option and Monsanto SAR shall be replaced with a Solutia Option or
Solutia SAR, as applicable, (i) with respect to a number of shares of Solutia
Common Stock equal to the number of shares subject to such Monsanto Option or
Monsanto SAR, as applicable, immediately before such replacement, times the
Solutia Ratio (and then, if any resultant fractional share of Solutia Common
Stock exists, rounded up to the nearest whole share), and (ii) with a per-share
exercise price equal to the per-share exercise price of such Monsanto Option or
Monsanto SAR, as applicable, immediately before such replacement, divided by the
Solutia Ratio (and then, if necessary, rounded down to the nearest whole cent).
(b) This Section 2.4(b) sets forth the treatment in the Distribution of
each of the following Monsanto Options and Monsanto SARs: (i) each Monsanto
Option and Monsanto SAR granted during calendar year 1997 that is, as of the
Distribution Date, outstanding and held by a Monsanto Participant; (ii) each
other Monsanto Option and Monsanto SAR held by a Monsanto Participant who is an
Employee of a member of the Monsanto Group other than Monsanto; and (iii) each
Monsanto Option that is held by a Monsanto Former Employee, a Solutia Former
Employee or a Beneficiary of a Monsanto Former Employee or a Solutia Former
Employee. Each such Monsanto Option and Monsanto SAR shall be adjusted to
constitute an option (a "New Monsanto Option") or stock appreciation right (a
"New Monsanto SAR"), as applicable, (i) with respect to a number of shares of
Monsanto Common Stock equal to the number of shares subject to such Monsanto
Option or Monsanto SAR, as applicable, immediately before such adjustment, times
the Monsanto Ratio (and then, if any resultant fractional share of Monsanto
Common Stock exists, rounded up to the nearest whole share), and (ii) with a
per-share exercise price equal to the per-share exercise price of such Monsanto
Option or Monsanto SAR, as applicable, immediately before such adjustment,
divided by the Monsanto Ratio (and then, if necessary, rounded down to the
nearest whole cent).
(c) This Section 2.4(c) sets forth the treatment in the Distribution of
each Monsanto Option and Monsanto SAR granted before calendar year 1997 that is,
as of the Distribution Date, outstanding and held by (i) a Monsanto Participant
who is an Employee of Monsanto, (ii) a Solutia Employee who is not listed on
Schedule I hereto, or (iii) an individual
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listed on Schedule II hereto. Each such Monsanto Option or Monsanto SAR (each a
"Pre-Adjustment Option" or "Pre-Adjustment SAR," as applicable) shall be
replaced with two options or stock appreciation rights, as applicable (one a New
Monsanto Option or New Monsanto SAR, as applicable, and the other a Solutia
Option or Solutia SAR, as applicable), as follows. With respect to each such New
Monsanto Option or New Monsanto SAR, as applicable, (i) the number of shares of
Monsanto Common Stock subject to such New Monsanto Option or New Monsanto SAR,
as applicable, shall equal the number of shares of Monsanto Common Stock subject
to the Pre-Adjustment Option or Pre-Adjustment SAR, as applicable, and (ii) the
per-share exercise price of such New Monsanto Option or New Monsanto SAR, as
applicable, shall equal the per-share exercise price of such Pre-Adjustment
Option or Pre-Adjustment SAR, as applicable, divided by the Monsanto Ratio (if
necessary, rounded down to the nearest whole cent). With respect to each such
Solutia Option or Solutia SAR, as applicable, (i) the number of shares of
Solutia Common Stock subject to such Solutia Option or Solutia SAR, as
applicable, shall equal one-fifth of the number of shares of Monsanto Common
Stock subject to the Pre-Adjustment Option or Pre-Adjustment SAR, as applicable
(if necessary, rounded up to the nearest whole share), and (ii) the per-share
exercise price of such New Solutia Option or New Solutia SAR, as applicable,
shall equal the per-share exercise price of such Pre-Adjustment Option or
Pre-Adjustment SAR, as applicable, divided by the Solutia Ratio (and then, if
necessary, rounded down to the nearest whole cent).
(d) This Section 2.4(d) sets forth the treatment in the Distribution of
each Monsanto Option and Monsanto SAR granted before calendar year 1997 that is,
as of the Distribution Date, outstanding and held by a Solutia Employee listed
on Schedule I hereto. Each such Monsanto Option or Monsanto SAR (each a
"Pre-Adjustment Option" or "Pre-Adjustment SAR," as applicable) shall be
replaced with two options or stock appreciation rights, as applicable (one a New
Monsanto Option or New Monsanto SAR, as applicable, and the other a Solutia
Option or Solutia SAR, as applicable), as follows. With respect to each such New
Monsanto Option or New Monsanto SAR, as applicable, (i) the number of shares of
Monsanto Common Stock subject to such New Monsanto Option or New Monsanto SAR,
as applicable, shall equal the number of shares of Monsanto Common Stock subject
to such Pre-Adjustment Option or Pre-Adjustment SAR, as applicable, times the
Monsanto Ratio times 0.76 (and then, if any resultant fractional share of
Monsanto Common Stock exists, rounded up to the nearest whole share) and (ii)
the per-share exercise price of such New Monsanto Option or New Monsanto SAR, as
applicable, shall equal the per-share exercise price of such Pre-Adjustment
Option or Pre-Adjustment SAR, as applicable, divided by the Monsanto Ratio (and
then, if necessary, rounded down to the nearest whole cent). With respect to
each such Solutia Option or Solutia SAR, as applicable, (i) the number of shares
of Solutia Common Stock subject to such Solutia Option or Solutia SAR, as
applicable, shall equal the number of shares of Monsanto Common Stock subject to
such Pre-Adjustment Option or Pre-Adjustment SAR, as applicable, times the
Solutia Ratio times 0.24 (and then, if any resultant fractional share of Solutia
Common Stock exists, rounded up to the nearest whole share), and (ii) the
per-share exercise price of such New Solutia Option or New Solutia SAR, as
applicable, shall equal the per-share exercise price of such Pre-Adjustment
Option or Pre-Adjustment SAR, as applicable, divided by the Solutia Ratio (and
then, if necessary, rounded down to the nearest whole cent).
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(e) The terms and conditions of each New Monsanto Option, New Monsanto SAR,
Solutia Option and Solutia SAR issued pursuant to this Section 2.4 shall be the
same as those of the Monsanto Option or Monsanto SAR it replaces, except as
otherwise specifically provided in this Section 2.4 and except that (i) in the
case of such options and SARs issued to Solutia Employees, references to
employment with or termination of employment with Monsanto and its affiliates
shall be changed to references to employment with or termination of employment
with Solutia and its affiliates, and (ii) other references to Monsanto and its
affiliates shall be changed to references to Solutia and its affiliates as
appropriate. Solutia may, in its discretion, adjust any associated performance
goals as may be appropriate to reflect the effects of the Distribution.
(f) Effective as of the Distribution Date, (i) Solutia shall assume and be
solely responsible for all Liabilities (whether accrued, contingent or
otherwise) of the Pre-Distribution Group with respect to dividend equivalent
units on New Monsanto Options, New Monsanto SARs and awards of Monsanto
Restricted Stock held by Solutia Participants (although such dividend equivalent
units shall continue to accrue based upon the payment of dividends by Monsanto),
and (ii) Monsanto shall assume or retain, as applicable, and be solely
responsible for all Liabilities (whether accrued, contingent or otherwise) of
the Pre-Distribution Group with respect to dividend equivalent units on Solutia
Options and Solutia SARs issued to Monsanto Participants pursuant to this
Section 2.4 and shares of Solutia Stock distributed with respect to awards of
Monsanto Restricted Stock ("Solutia Restricted Stock") held by Monsanto
Participants (although such dividend equivalent units shall accrue based upon
the payment of dividends by Solutia). Except as provided in the preceding
sentence, effective as of the Distribution Date, Solutia shall assume and be
solely responsible for all Liabilities of the Pre-Distribution Group with
respect to Solutia Options, Solutia SARs and Solutia Restricted Stock, and
Monsanto shall retain and be solely responsible for all Liabilities of the
Pre-Distribution Group to or with respect to Monsanto Options, Monsanto SARs and
Monsanto Restricted Stock and New Monsanto Options and New Monsanto SARs.
(g) Notwithstanding the foregoing provisions of this Section 2.4, the
number of shares subject to a Solutia Option, Solutia SAR, New Monsanto Option
or New Monsanto SAR issued to an individual listed on Schedule III hereto shall
be rounded to the nearest whole share (whether up or down) rather than up to the
nearest whole share.
(h) Notwithstanding the foregoing provisions of this Section 2.4, if either
Monsanto or Solutia determines that because of legal, accounting, tax, and/or
regulatory rules or requirements applicable to options, stock appreciation
rights or restricted stock in any jurisdiction outside the United States,
compliance with any of its obligations under this Section 2.4 with respect to
options, stock appreciation rights or restricted stock held by or to be issued
to any individual employed outside the United States would be impossible,
illegal, impracticable or unreasonably expensive, it shall so notify the other
party, and Solutia and Monsanto shall use their best efforts to agree to
appropriate alternative arrangements.
2.5. STOCK PURCHASE PLANS.
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(a) Monsanto has taken, or shall take as soon as practicable after the date
hereof, such actions as may necessary or appropriate to accomplish the following
with respect to the Monsanto Employee Stock Purchase Plan.
(i) Monsanto has suspended the acceptance of applications by Monsanto
Employees and Solutia Employees to participate in the Monsanto Employee Stock
Purchase Plan as of July 18, 1997, pending completion of the Distribution.
(ii) Each Monsanto Employee and each Solutia Employee who has any
outstanding application under the Monsanto Employee Stock Purchase Plan
immediately before the record date for the Distribution shall be given the
opportunity to choose among the following alternatives with respect to such
application: (A) such application may be settled in full before the record date
for the Distribution if such Employee pays the purchase price for the remaining
unpurchased shares of Monsanto Common Stock thereunder in full before the record
date, in which event such Employee shall become the owner of such Monsanto
Common Stock before the record date and will, accordingly, be entitled to
receive the Distribution with respect thereto (assuming such Employee remains
the owner of such Monsanto Common Stock as of the record date for the
Distribution); (B) such application may be cancelled without penalty before the
Distribution Date; or (C) such application may continue in effect following the
Distribution Date, subject to adjustment as provided in the next sentence. Each
application under the Monsanto Employee Stock Purchase Plan that is outstanding
as of the Distribution Date shall be adjusted, immediately after the
Distribution Date, so that it (I) covers a number of shares of Monsanto Common
Stock equal to the number of shares covered by such application immediately
before such adjustment, times the Monsanto Ratio (and then, if necessary,
rounded up to the nearest one-thousandth of a whole share), and (II) has a
per-share purchase price equal to the per-share purchase price of such
application, immediately before such adjustment, divided by the Monsanto Ratio
(and then, if necessary, rounded down to the nearest whole cent).
(iii) From and after the Distribution Date, Solutia Employees shall be
permitted to complete the purchase of Monsanto Common Stock pursuant to
applications under the Monsanto Employee Stock Purchase Plan that continue in
effect pursuant to clause (C) of Section 2.5(a)(ii), in accordance with the
terms and conditions of such applications and the Monsanto Employee Stock
Purchase Plan, except that (A) such terms and conditions shall be adjusted
pursuant to the last sentence of said Section 2.5(a)(ii) and (B) employment with
any member of the Solutia Benefits Group shall be treated as if it were
employment with Monsanto. From and after the Distribution Date, Solutia shall
make all payroll deductions required with respect to such applications of
Solutia Employees and shall remit such deductions to Monsanto on their behalf in
satisfaction of the purchase price of shares of Monsanto Common Stock after the
Distribution Date.
(b) Notwithstanding any other provision of this Agreement, for purposes of
the Monsanto Executive Stock Purchase Incentive Plan, the Distribution shall be
considered to result in a termination of the employment of Solutia Employees
effective as of the Distribution Date, and Monsanto shall retain and be solely
responsible for all Liabilities under such Monsanto Executive Stock Purchase
Incentive Plan.
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2.6. NONQUALIFIED PLANS AND PROGRAMS.
(a) Except as specifically set forth in Section 5.2(a) and effective as of
the Distribution Date, the members of the Solutia Benefits Group shall assume
and be solely responsible for all Liabilities of the Pre-Distribution Group to
or relating to Solutia Participants under all Cash Incentive Plans. Solutia and
Monsanto shall cooperate in taking all actions necessary or appropriate to
adjust the performance goals and other terms and conditions of awards under the
Cash Incentive Plans for performance periods that begin before and end after the
Distribution Date as appropriate to reflect the Distribution, including amending
any Cash Incentive Plan or grant thereunder, and obtaining any necessary
consents of affected participants.
(b) Except as specifically set forth in Section 5.2(a) and effective as of
the Distribution Date, Solutia shall assume and be solely responsible for all
Liabilities of the Pre-Distribution Group to or relating to (i) Solutia
Participants under the Supplemental Retirement Plans, except for Liabilities
with respect to benefits under the Monsanto Company ERISA Pension Parity Plan
and the Monsanto Company ERISA Parity Savings and Investment Plan of Retained
Solutia Inactive Participants, and (ii) Supplemental Retirement Agreements with
Solutia Employees. Solutia and Monsanto shall cooperate in taking all actions
necessary or appropriate to implement the foregoing, including amending any
Supplemental Retirement Plan or Supplemental Retirement Agreement and obtaining
any necessary consents of affected individuals.
(c) Except as specifically set forth in Section 5.2(a) and effective as of
the Distribution Date, Solutia shall assume and be solely responsible for all
Liabilities of the Pre-Distribution Group to or relating to Solutia Participants
under all U.S. Deferred Compensation Plans.
ARTICLE III.
FOREIGN PLANS AND TCN POLICY
3.1. GENERAL PRINCIPLES. This Section 3.1 sets forth certain general
principles relating to Foreign Plans; however, exceptions may be made to those
general principles as set forth in Section 3.12. Monsanto and Solutia shall take
all actions necessary or appropriate so that, effective no later than the
Distribution Date, all Foreign Plans have been divided and/or new Foreign Plans
established (to the extent necessary) so that all benefits of Monsanto
Participants under Foreign Plans (whether accrued or payable before, on or after
the Distribution Date) are provided by Monsanto Foreign Plans, and all benefits
of Solutia Participants under Foreign Plans (whether accrued or payable before,
on or after the Distribution Date) are provided by Solutia Foreign Plans. If any
Foreign Plan that is separated into a Monsanto Foreign Plan and a Solutia
Foreign Plan in connection with or in anticipation of the Distribution is funded
through a trust, insurance contract or other funding vehicle, then such funding
vehicle shall be divided between such Monsanto Foreign Plan and Solutia Foreign
Plan in proportion to the relative projected benefit obligations of such two
Plans, determined immediately after such separation takes place. Except as
specifically provided in Section 5.2(a), from and after the Distribution Date:
(i) the
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members of the Monsanto Group and the Monsanto Foreign Plans shall
assume or retain, as applicable, and shall be solely responsible for, all
Liabilities of the Pre-Distribution Group arising out of or relating to the
Monsanto Foreign Plans; and (ii) the members of the Solutia Benefits Group and
the Solutia Foreign Plans shall assume or retain, as applicable, and shall be
solely responsible for, all Liabilities arising out of or relating to the
Solutia Foreign Plans.
3.2. EXCEPTIONS TO GENERAL PRINCIPLES. Monsanto and Solutia recognize that
it is possible that, in certain cases, applicable law may prohibit the
implementation of the general principles set forth in Section 3.1, or that there
may be special circumstances making such implementation inadvisable or
impractical. In all such cases, such general principles shall not be implemented
and Monsanto and Solutia shall use best efforts to develop and implement an
alternative approach, and shall enter into such additional agreements as may be
necessary or appropriate in connection therewith. Exhibit A hereto also sets
forth certain exceptions to the general principles set forth in Section 3.1.
3.3. TCN POLICY. From and after the Distribution Date, the members of the
Solutia Benefits Group shall assume and be solely responsible for all
Liabilities of the Pre-Distribution Group to or relating to benefits accrued
through the Distribution Date by or with respect to Solutia Employees under the
TCN Policy, and the members of the Monsanto Group shall retain and be solely
responsible for all other Liabilities under the TCN Policy.
ARTICLE IV.
GENERAL PROVISIONS
4.1. EMPLOYMENT TRANSFERS; SEVERANCE PAY.
(a) Solutia and Monsanto shall take all steps necessary and appropriate so
that, on or immediately after the Distribution Date, all individuals who have
been selected to be Solutia Employees are employed, or (where employment does
not continue by operation of law) are offered employment, by a member of the
Solutia Benefits Group, and all individuals who have been selected to be
Monsanto Employees are employed, or (where employment does not continue by
operation of law) are offered employment, by a member of the Monsanto Group.
Such steps shall include, where necessary or appropriate under local law, making
employment offers and/or transferring contracts of employment.
(b) Solutia and Monsanto agree that, except as specifically provided by law
or otherwise in this Agreement, individuals who, in connection with the
Distribution, cease to be Monsanto Employees and become Solutia Employees shall
not be deemed to have experienced a termination or severance of employment from
Monsanto and its subsidiaries for purposes of any Monsanto Plan that provides
for the payment of severance, redundancy, salary continuation or similar
benefits.
(c) Solutia and the other members of the Solutia Benefits Group shall
assume and be solely responsible for all Liabilities of the Pre-Distribution
Group in connection with claims
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made by or on behalf of the following individuals in respect of severance,
redundancy and similar pay, salary continuation and similar obligations relating
to the termination or alleged termination of any such individual's employment
before, on or after the Distribution Date: (i) Solutia Employees and Solutia
Former Employees; and (ii) Employees who have been designated as employed in the
Solutia Business who do not become Solutia Employees because they exercise their
rights, under local law, to refuse to transfer to the employment of a member of
the Solutia Benefits Group. Notwithstanding any other provision of this
Agreement, individuals described in clause (ii) of the preceding sentence shall
be considered to be Solutia Former Employees from and after the date they cease
to be Employees of Monsanto and/or the other members of the Monsanto Group.
4.2. OTHER LIABILITIES. If at any time after the Distribution Date, as a
result of any increase or improvement by the Monsanto Group or the Solutia Group
(the "Improving Party") after the Distribution Date to the benefits that it
provides to any Monsanto Former Employees or Solutia Former Employees or any
Beneficiaries thereof pursuant to any Plan (other than such an increase or
improvement required by any agreement in effect on the Distribution Date or by
applicable law or regulation) (a "Benefit Uplift"), any Solutia Participant or
Monsanto Participant asserts a claim that he or she is entitled to a
corresponding Benefit Uplift for which the Solutia Group or the Monsanto Group
(the "Other Party") would, absent this Section 4.2, be responsible pursuant to
this Agreement, then notwithstanding any other provision of this Agreement, the
Improving Party shall indemnify the Other Party and hold it harmless from and
against any Liabilities resulting from such claim, which Liabilities shall be an
Indemnifiable Loss governed by Article IV of the Distribution Agreement;
provided that the Improving Party and the Other Party shall cooperate in
satisfying any such Liabilities and accomplishing such indemnification in a
reasonable, tax-efficient manner while at the same time keeping the Other Party
whole on a net after-tax basis, taking into account the effect of any tax
benefits and tax detriments to the Improving Party and the Other Party as a
result of the manner in which such Liabilities are satisfied and such
indemnification is accomplished.
4.3. RECOGNITION OF MONSANTO EMPLOYMENT SERVICE, ETC. The Solutia Plans
shall, to the extent permitted by applicable law, recognize service before the
Distribution with the Pre-Distribution Group as service with the Solutia
Benefits Group. Each Solutia Welfare Plan shall, to the extent permitted by
applicable law, provide benefits to Solutia Participants without interruption or
change solely as a result of the transition from the corresponding Monsanto
Welfare Plans, and, without limiting the generality of the foregoing: (i) shall,
to the extent applicable, recognize all amounts applied to deductibles,
out-of-pocket maximums and lifetime maximum benefits with respect to Solutia
Participants under the corresponding Monsanto Welfare Plan for the plan year
that includes the Distribution Date and for prior periods (if applicable); (ii)
shall, to the extent applicable, not impose any limitations on coverage of
preexisting conditions of Solutia Participants except to the extent such
limitations applied to such Solutia Participants under the corresponding
Monsanto Welfare Plan immediately before such Solutia Welfare Plan became
effective; and (iii) shall not impose any other conditions (such as proof of
good health, evidence of insurability or a requirement of a physical
examination) upon the participation by Solutia Participants who were
participating in the corresponding Monsanto Welfare Plan immediately before such
Solutia Welfare Plan became effective.
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4.4. INDEMNIFICATION. All Liabilities retained or assumed by or allocated
to Solutia or any other members of the Solutia Benefits Group pursuant to this
Agreement shall be deemed to be Solutia Liabilities pursuant to the Distribution
Agreement, and all Liabilities retained or assumed by or allocated to Monsanto
or any other members of the Monsanto Group pursuant to this Agreement shall be
deemed to be Monsanto Liabilities pursuant to the Distribution Agreement, and,
in each case, shall be subject to the indemnification provisions set forth in
Article IV of the Distribution Agreement.
4.5. TRANSITION SERVICES. Certain Monsanto Employees and certain Solutia
Employees ("Transition Services Employees") will be employed, after the
Distribution, in providing transition services to the Solutia Benefits Group and
the Monsanto Group, respectively, pursuant to certain transition services
agreements between Monsanto and Solutia. If any Transition Services Employee
terminates employment with Monsanto or Solutia, as applicable, during or at the
expiration of the term of the applicable transition services agreement as a
result of the elimination of his or her position, and becomes an employee of any
member of the Solutia Benefits Group or any member of the Monsanto Group, as
applicable, within 90 days after such termination of employment, then Monsanto
and Solutia shall use reasonable best efforts to provide such Transition
Services Employee with a smooth transition with respect to such Transition
Services Employee's employee benefits. Without limiting the generality of the
foregoing, Section 4.3 shall apply to each Transition Services Employee
described in the preceding sentence as if he or she had been a Solutia Employee
or a Monsanto Employee, as applicable.
4.6. WORKERS COMPENSATION EXCLUDED. Notwithstanding any other provision of
this Agreement, this Agreement shall have no application to, and shall not
govern the allocation of, any Liabilities for or relating to workers'
compensation, which are governed by the Distribution Agreement.
4.7. P4 JOINT VENTURE. To the extent that any provision of this Agreement
is inconsistent with the provisions of the P4 Joint Venture Agreement as it
relates to Employees or former Employees of the P4 Joint Venture and their
compensation and benefits under Plans, the P4 Joint Venture Agreement shall
prevail.
ARTICLE V.
MISCELLANEOUS
5.1. GUARANTEE OF SUBSIDIARIES' OBLIGATIONS. Each of the parties hereto
shall cause to be performed, and hereby guarantees the performance and payment
of, all actions, agreements, obligations and liabilities set forth herein to be
performed or paid by any subsidiary of such party which is contemplated by the
Distribution Agreement to be a subsidiary of such party on or after the
Distribution Date.
5.2. AUDITS AND DISPUTES.
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(a) (i) If any audit, examination or similar proceeding with respect to any
Monsanto Plan by the U.S. Internal Revenue Service, the U.S. Department of Labor
or any other governmental authority, or any litigation arising out of such an
audit, examination or similar proceeding, that pertains (in whole or in part) to
a period before the Distribution Date results in the imposition of any
Liability, then the portion of such Liability that pertains to a period before
the Distribution Date (an "Audit Liability") shall be allocated between Solutia
and Monsanto as set forth in this Section 5.2, provided that the term "Audit
Liability" shall not include any portion of such a Liability that results from
the loss of any compensation deduction or any related interest or penalties
(which shall be governed by the Tax Sharing Agreement).
(ii) To the extent that an Audit Liability takes the form of a
payment to any Solutia Participant or of a benefit under a Plan or a
contribution to a trust or other funding vehicle relating to a Plan, or interest
on such a payment or contribution, there shall be allocated to Solutia the
portion of such Audit Liability that is attributable to Solutia Participants.
(iii) Any Audit Liability that takes the form of a penalty, fine or
other liability imposed as a result of the manner in which a Plan was
administered (including as a result of the failure to make a required filing or
participant communication) and that is not described in Section 5.2(a)(ii) shall
be allocated between Solutia and Monsanto in accordance with their past practice
before the Distribution.
(iv) If an Audit Liability arises, the allocation of which is not
addressed in Section 5.2(a)(ii) or (iii), or if there arises any other dispute
concerning the allocation of Audit Liabilities, such allocation or dispute shall
be subject to Article VII of the Distribution Agreement.
(b) In any case in which Solutia or Monsanto shall disagree with the
determination of an amount which this Agreement requires to be made by the
Enrolled Actuary, each such disagreeing party shall have the right, within 30
days after receipt of notice of such determination, to engage, at its own
expense, an independent expert to make the determination of such amount. If the
amount determined by such independent experts should differ, such amount shall
be reasonably and equitably determined by another independent expert selected by
agreement between or among the Enrolled Actuary and such independent experts.
(c) Any other dispute, controversy or claim arising out of or relating to
this Agreement shall be governed by Article VII of the Distribution Agreement.
5.3. SHARING OF INFORMATION. Each of Monsanto and Solutia shall, and shall
cause each of the other members of their respective Groups to, provide to the
other all such information in its possession as the other may reasonably request
to enable it to administer its employee benefit plans and programs, and to
determine the scope of, and fulfill, its obligations under this Agreement. Such
information shall, to the extent reasonably practicable, be provided in the
format and at the times and places requested, but in no event shall the party
providing such information be obligated to incur any direct expense not
reimbursed by the party making such request, nor to make such information
available outside its normal business hours and premises. The right of the
parties to receive information hereunder shall, without limiting the generality
of
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the foregoing, extend to any and all reports, and the data underlying such
reports, prepared by the Enrolled Actuary in making any determination under this
Agreement or by any third party engaged pursuant to Section 5.2, and to
information necessary to determine whether performance goals and other terms and
conditions relating to awards adjusted pursuant to Section 2.4 have been
satisfied after the Distribution.
5.4. TERMINATION. This Agreement shall be terminated in the event that the
Distribution Agreement is terminated and the Distribution abandoned prior to the
Distribution Date. In the event of such termination, neither party shall have
any liability of any kind to the other party.
5.5. RIGHTS TO AMEND OR TERMINATE PLANS; NO THIRD PARTY BENEFICIARIES. No
provision of this Agreement shall be construed (i) to limit the right of
Monsanto, any other member of the Monsanto Group, Solutia or any other member of
the Solutia Benefits Group to amend any Plan or terminate any Plan, or (ii) to
create any right or entitlement whatsoever in any Employee, former Employee or
Beneficiary, including a right to continued employment or to any benefit under a
Plan or any other compensation. This Agreement is solely for the benefit of the
parties hereto and their respective subsidiaries and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, claim of
action or other right in excess of those existing without reference to this
Agreement.
5.6. COMPLETE AGREEMENT. This Agreement, the Schedules hereto and the
agreements and other documents referred to herein shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter.
5.7. GOVERNING LAW. Subject to applicable U.S. federal law, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware (other than the laws regarding choice of laws and conflicts of laws) as
to all matters, including matters of validity, construction, effect, performance
and remedies.
5.8. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be given in accordance with the provisions of
Section 10.5 of the Distribution Agreement.
5.9. AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or
supplemented only by a written agreement signed by both of the parties hereto.
5.10. SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their successors and permitted assigns, but neither this Agreement nor any of
the rights, interests and obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party (which consent shall
not be unreasonably withheld or delayed).
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5.11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.12. INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
5.13. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Each party acknowledges
that money damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
5.14. REFERENCES; CONSTRUCTION. References to any "Article," "Schedule,"
"Section" or "Exhibit" without more, are to Articles, Schedules, Sections and
Exhibits to or of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and in no way limit
the generality of the matters thus exemplified.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
MONSANTO COMPANY
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman
SOLUTIA INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Title: President