Exhibit 10(2)
AMENDMENT TO THE
EMPLOYEE BENEFITS AND COMPENSATION
ALLOCATION AGREEMENT
AMENDMENT TO THE EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION
AGREEMENT, dated as of September 1, 2000, by and between Pharmacia Corporation,
a Delaware corporation ("Pharmacia"), and Monsanto Company, a newly formed
Delaware corporation ("AgCo"). All capitalized words not otherwise defined
herein shall have the meaning attached to each such term pursuant to the
Employee Benefits and Compensation Allocation Agreement.
W I T N E S S E T H:
WHEREAS, AgCo and Pharmacia have entered into an Employee Benefits and
Compensation Allocation Agreement, dated as of September 1, 2000 (the
"Allocation Agreement"); and
WHEREAS, AgCo and Pharmacia desire to amend the Allocation Agreement as
provided in Section 5.8 thereof;
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:
1. Section 2.1(b) of the Allocation Agreement is amended to read as
follows:
"(b) "Pharmacia Cash Balance Pension Plan.
(i) As of January 1, 2002 (the "Pension Transfer Date") Pharmacia shall
establish a cash balance defined benefit pension plan designed to be a qualified
plan under Section 401(a) of the Code (the "Pharmacia Cash Balance Pension
Plan") to provide benefits to Pharmacia Employees, and to accept the transfer of
assets and assumption of Liabilities provided for in Section 2.1(b)(ii).
Initially, the Pharmacia Cash Balance Pension Plan shall be identical in all
material respects to the Monsanto Pension Plan (excluding the DEKALB frozen
benefits structure), subject to such changes as Pharmacia may determine to be
necessary or appropriate to comply with the requirements of qualification under
Section 401(a) of the Code. Pharmacia shall seek an opinion of counsel to
Pharmacia that the Pharmacia Cash Balance Pension Plan and Trust comply, in
form, with the requirements of Section 401(a) and 501(a) of the Code, subject to
receipt of an Internal Revenue Service determination letter stating that it so
qualifies ("IRS Determination Letter"), and a representation from Pharmacia that
(A) the Pharmacia Cash Balance Pension Plan will be submitted for an IRS
Determination Letter and (B) Pharmacia will make all necessary amendments to
such Plan and Trust Agreement in order to obtain such letter and will make all
required filings and submissions to appropriate Governmental Authorities as
soon as practicable (but in no event later than twelve months) after the
Pension Transfer Date. The Pharmacia Employees shall cease to accrue benefits
under the Monsanto Pension Plan and shall begin to accrue benefits under the
Pharmacia Cash Balance Pension Plan on the Pension Transfer Date.
(ii) Except as specifically set forth in Section 2.1(b)(iii) and
Article IV, subject to the completion of the asset transfer described in the
next sentence, and effective as of the Pension Transfer Date: (A) the Monsanto
Pension Plan shall transfer to the Pharmacia Cash Balance Pension Plan, and the
Pharmacia Cash Balance Pension Plan and the members of the Pharmacia Group shall
assume and be responsible for, all Liabilities of the Monsanto Pension Plan with
respect to benefits accrued by Pharmacia Participants through the Pension
Transfer Date; (B) Pharmacia shall transfer the sponsorship of the Monsanto
Pension Plan to the members of the AgCo Group and the members of the AgCo Group
shall assume and be responsible for all Liabilities of the Monsanto Pension Plan
other than Liabilities transferred to the Pharmacia Cash Balance Pension Plan in
accordance with Paragraph (A); (C) the members of the Pharmacia Group shall have
no further responsibility for the Liabilities described in Paragraph (B); and
(D) the members of the AgCo Group shall have no further responsibility for the
Liabilities described in Paragraph (A). As soon as administratively feasible
after the Pension Transfer Date, there shall be transferred from the trust
funding the Monsanto Pension Plan to the trust designated to fund the Pharmacia
Cash Balance Pension Plan (which may have the same trustee as the former trust
and which may be part of a master trust with the former trust) assets thereof,
having a value, as of the Pension Transfer Date, equal to the Transfer Value,
but in no event less than the amount required to be transferred under Section
414(l) of the Code. The Investment Committee, or one or more "Independent
Fiduciaries" appointed by the Investment Committee, shall reasonably and
equitably determine the specific assets, or portions thereof, that will be
transferred pursuant to the preceding sentence. All other determinations
required to implement the foregoing transfer of assets shall be reasonably and
equitably made by the Enrolled Actuary in accordance with Schedule III hereto.
The Enrolled Actuary shall make an initial estimate of the Transfer Value in
advance of the Pension Transfer Date, and an initial transfer of assets equal to
such estimated Transfer Value shall be made on the Pension Transfer Date or as
soon as practicable thereafter. The final calculation of the Transfer Value
shall be completed as soon as practicable, and true-up transfer will be made
promptly following the expiration of the 30-day period provided for in Section
2.1(c) and, if applicable, the resolution of any disagreement pursuant to
Section 2.1(c). The true-up amount will include the pension fund's investment
gains or losses - from the Pension Transfer Date to the date of the transfer of
the true-up amount - on such true-up amount, as defined on Schedule III.
(iii) Notwithstanding the foregoing, if Pharmacia determines that the
transfer of liabilities and assets in the manner provided in Section 2.1(b)(ii)
would violate any applicable requirements of the Code or ERISA, or could
reasonably be expected to result in the PBGC's taking action to terminate the
Monsanto Pension Plan, then Pharmacia and AgCo shall cooperate to implement such
transfer in a manner that reaches as close as possible to the same results
without any such violation."
2. Section 6.1 of the Allocation Agreement is amended by adding thereto
the following definition:
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"Pharmacia Cash Balance Pension Plan: defined in Section 2.1(b)(i)."
3. Section 6.1 of the Allocation Agreement is amended by deleting the
following definition:
"AgCo Pension Plan."
4. Schedule III of the Allocation Agreement is amended in its entirety:
SCHEDULE III
Computation of Transfer Value
The "Transfer Value" means the sum of the assets allocated to Categories 3,4,5
and 6 for Active Employees, Vested Terminated Employees and Retired Employees
and Beneficiaries who are Pharmacia Participants in the Monsanto Pension Plan on
the Pension Transfer Date, together with a pro rata portion of any excess
assets, based on the following assumptions and procedures:
Assumptions
Interest Rate - is the rate or rates, in effect for the month including the
Pension Transfer Date, used by the PBGC - PBGC Regulation 0000 Xxxxxxxx X -
to determine the present values of annuities in the event of a plan
termination
Mortality Table - The mortality table described in PBGC Regulation 0000
Xxxxxxxx A, currently the 1983 GAM male table with a six year setback used
for females
Expected Retirement Age (XRA) for those not in payment status as of
1/1/2002
For those eligible for a lump sum, the XRA is determined by using
the High Category table under PBGC Regulation 0000 Xxxxxxxx D,
assuming the earliest retirement age is the age on the Pension
Transfer Date and the unreduced retirement age is age 65.
For those not eligible for a lump sum, the XRA is determined by
using the Medium Category table assuming the earliest retirement
age is the greater of age 55 or the age on the Pension Transfer Date,
and the unreduced retirement age is age 65
Valuation Date is 1/1/2002 and is the date as of which the Category
Liabilities defined below are determined
Benefit at XRA
To determine the benefit payable at the XRA for those with account balances, the
account balances as of 1/1/2002 will be projected to the XRA assuming no further
contributions and interest credits of
8.5% annually to age 55 and 0.0% thereafter for the Prior Plan
Account
5.32% (the rate in effect for 2002) annually for the Cash Balance
Account
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The projected balance at XRA is then converted to a life annuity using the
plan's conversion factors
Category 3 Liabilities
For those in pay status who had commenced on 1/1/1999 or earlier - the
present value (using the above assumptions) of the actual benefit in
payment status
For those in pay status who commenced between 1/1/1999 and 1/1/2002 - the
present value of the benefit that would have been in payment status had the
employee commenced on 1/1/1999
For those vested on 1/1/1999 who were eligible to begin payments on
1/1/1999 - the present value of the benefit that would have been in payment
status had the employee commenced on 1/1/1999, but assuming such benefit
begins at the employee's XRA
Category 4 Liabilities
For those in pay status who commenced between 1/1/1999 and 1/1/2002 - the
present value of the lesser of the actual benefit in payment status or the
PBGC guaranteed benefit on 1/1/2002, less the Category 3 Liabilities
For those vested as of 1/1/2002 but not in pay status - the present value
of the lesser of (a) the benefit earned through 1/1/2002 and payable at XRA
and (b) the PBGC guaranteed benefit at XRA, assuming such benefit is
payable at the employee's XRA, less the Category 3 Liabilities
Category 5 Liabilities
For those in pay status who commenced between 1/1/1999 and 1/1/2002 - the
present value of the actual benefit in payment status less the Category 3
and Category 4 Liabilities
For those vested as of 1/1/2002 but not in pay status - the present value
of the actual benefit earned through 1/1/2002 assuming such benefit is
payable at the employee's XRA, less the Category 3 and Category 4
Liabilities
Category 6 Liabilities
For those not vested as of 1/1/2002 - the present value of the actual
benefit earned through 1/1/2002 assuming such benefit is payable at the
employee's XRA
Asset Allocation
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The assets of the Monsanto Pension Plan will be determined as of the Pension
Transfer Date and allocated between the Pharmacia Cash Balance Pension Plan and
the Monsanto Pension Plan as follows
First to Category 3 Liabilities. If assets are not sufficient to cover all
Category 3 Liabilities, such assets will be allocated in proportion to
these liabilities.
Second to Category 4 Liabilities. If such remaining assets are not
sufficient to cover all Category 4 Liabilities, such remaining assets will
be allocated in proportion to these liabilities.
Third to Category 5 Liabilities. If such remaining assets are not
sufficient to cover all Category 5 Liabilities, such remaining assets will
be allocated in proportion to these liabilities.
Fourth to Category 6 Liabilities. If such remaining assets are not
sufficient to cover all Category 6 Liabilities, such remaining assets will
be allocated in proportion to these liabilities.
If assets are sufficient to cover all liabilities in Categories 3 through 6, any
remaining assets will be allocated in proportion to the total of such
liabilities.
An initial allocation of assets and Transfer Value will be estimated in advance
of the Pension Transfer Date and the initial amount will be transferred on the
Pension Transfer Date or as soon as practicable thereafter. After receiving and
reviewing final data as of the Pension Transfer Date, a true-up amount will be
calculated. This true-up amount will be transferred as soon as practicable and
will include the pension fund's investment gains or losses-from the Pension
Transfer Date to the date of the transfer of the true-up amount-on such
true-up amount.
The intent of this process is to allocate assets in accordance with PBGC Section
4044 using PBGC assumptions at the Pension Transfer Date.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers.
PHARMACIA CORPORATION
By: //Xxxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and General
Counsel
Date: July 1, 2002
MONSANTO COMPANY
By: // Xxxxxxx X. Xxxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chairman and CEO
Date: January 1, 2002
