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Exhibit 99.1
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 2
1.1 General 2
ARTICLE II. U.S. PLANS AND STOCK PLANS 10
2.1 Retirement Plans 10
2.2 The SIP 11
2.3 Welfare Plans 14
2.4 Stock Plans 15
2.5 Stock Purchase Plans 19
2.6 Nonqualified Plans and Programs 21
ARTICLE III. FOREIGN PLANS AND TCN POLICY 21
3.1 General Principles 22
3.2 Exceptions to General Principles 22
3.3 TCN Policy 22
ARTICLE IV. GENERAL PROVISIONS 23
4.1 Employment Transfers; Severance Pay 23
4.2 Other Liabilities 24
4.3 Recognition of Monsanto Employment Service, Etc. 24
4.4 Indemnification 25
4.5 Transition Services 25
4.6 Workers Compensation Excluded 25
4.7 P4 Joint Venture 26
ARTICLE V. MISCELLANEOUS 26
5.1 Guarantee of Subsidiaries' Obligations 26
5.2 Audits and Disputes 26
5.3 Sharing of Information 27
5.4 Termination 28
5.5 Rights to Amend or Terminate Plans; No Third Party
Beneficiaries 28
5.6 Complete Agreement 28
5.7 Governing Law 28
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5.8 Notices 29
5.9 Amendment and Modification 29
5.10 Successors and Assigns 29
5.11 Counterparts 29
5.12 Interpretation 29
5.13 Legal Enforceability 29
5.14 References; Construction 29
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:
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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.
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.
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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 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
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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.
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.
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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
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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.
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.
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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 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
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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 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).
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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
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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 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.
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(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 principal amount of
the New Monsanto ESOP 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
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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.
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(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 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
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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 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
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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 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),
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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
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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).
(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
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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.
(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
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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
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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.
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
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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 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
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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 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
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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
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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.
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
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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.
(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
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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.
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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).
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/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman
SOLUTIA INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Title: President
